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Organization of the estimating function

Team roles and organization


The role of the contractors estimator is vital to the success of the organization. The estimator is responsible for predicting the most economic costs for construction in a way that is both clear and consistent. Although an estimator will have a feel for the
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Estimating and Tendering for Construction Work

prices in the marketplace, it is the responsibility of management to add an amount for general overheads, assess the risks and turn the estimate into a tender. The management structure for the estimating function tends to follow a common form with variations for the size of the company. In a small rm, the estimator might be expected to carry out some quantity surveying duties and will be involved in procuring materials and services. For large projects, the estimator may be part of a multi-disciplinary team led by a project manager. The estimating section in a medium-sized construction organization (Fig. 1.1) will often comprise a chief estimator, senior estimators and estimators at various stages of training. Larger estimating departments may have administrative and estimating assistants who can check calculations, photocopy extracts form the tender documents, prepare letters and enter data in a computer-assisted estimating system. The estimating team for a proposed project has the estimator as its coordinator and is usually made up of a contracts manager, buyer, planning engineer and quantity surveyor. The involvement of other people will vary from company to company. A project quantity surveyor is often consulted to examine amendments to conditions of contract, prepare a bill of quantities, assess commercial risks, set up design agreements and identify possible difculties which have been experienced on previous contracts. Clients sometimes like to negotiate agreements with quantity surveyors where a good working relationship has been established and follow-on work is to be based on pricing levels agreed for previous work. A planning engineer might be asked to prepare a preliminary programme so that the proposed contract duration can be checked for possible savings. He can also prepare method statements, temporary works designs,

Managing Director

Administration

Commercial

Pre-contract

Operations

Finance

Business development

Estimating Chief estimator

Purchasing

Senior estimators

Computer assistants

Junior estimators

Enquiry assistants

Fig. 1.1 Estimating staff structure for a medium-sized organization 2

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Organization of the estimating function

organizational charts and site layout drawings. Some or all of this material can be used to demonstrate to a client that satisfactory systems have been developed for the project. The purchasing ofce will provide valuable information leading to the most economic sources for the supply of materials and plant. In many organizations today, the buyer is responsible for getting quotations from suppliers and sub-contractors. At the very least, the buyer (sometimes called procurement manager or supply chain manager) helps prepare lists of suitable suppliers, keeps a library of product literature and advises on likely price trends and changes. A buyer can provide an invaluable service in managing enquiries and chasing quotations. His knowledge of local suppliers and current discounts is essential at the nal review meeting when decisions need to be taken about the availability and future costs of materials and services. The role of the site manager is to report on the technical and nancial progress of their projects so that the estimator can learn from the companys experience on site. On completion of contracts, site staff will usually contribute to tenders for larger and more complex schemes particularly for civil engineering and large-scale building work where alternative construction methods have a signicant affect on tender price. A site project manager is often used to lead the bid team and manage all aspects of the tender. The department dealing with business development and presentations can contribute in two ways: by maintaining close contacts with clients to ensure their needs are met, and by producing submission documents often using desktop publishing software. The aim of the team is to gain an understanding of the technical, nancial and contractual requirements of the scheme in order to produce a professional technical document with a realistic prediction of the cost of construction. The construction manager or director will then use the net cost estimate to produce the lowest commercial bid at which the company is prepared to tender. Figures 1.2 and 1.3 show the various stages in preparing a tender and the action needed with successful tenders. Figure 1.3 has additional tasks for a design and build contract. The work ow in an estimating department is never constant; the ideal situation is to have people available who are multi-disciplinary and can deal with administrative tasks. The cost of tendering for work in the construction industry is high and is included in the general overhead which is added to each successful tender. For one-off large projects, such as PFI contracts, bidding costs can be several millions of pounds. These costs are recovered when schemes are successful but written off against annual prots when contractors fail to win. The chief estimator needs to be sure there is a reasonable chance of winning the contract if the organization is in competition with others. The decision to proceed with a tender is based on many factors including: the estimating resources available; extent of competition; tender period; quality of tender documents; type of work; location; current construction workload and conditions of contract. With all these points to consider, a chief estimator could be forgiven for declining a high number of invitations to tender to maintain a high success rate and avoid uncompetitive bids which can lead to exclusion from approved lists.
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Send out material and s/c enquiries Select material & s/c quotations Build up rates Prepare estimators report Price preliminaries Examine documents Method statements and schedules Establish outputs for labour & plant Establish rates for labour & plant Programmes & Temporary works design Site visit PROJECT APPRECIATION & ENQUIRIES RESOURCES & PREPARATION OF THE ESTIMATE Complete bills of quantity O Check conditions of award Prepare tender documents O Prepare handover information Submit tender O Pre-contract meeting O Check contract documents O Monitor methods and costs on site TENDER SUBMISSION ACTION WITH SUCCESSFUL TENDER

Receive documents

Prepare tender enquiry form

Decision to tender

Estimate timetable

INITIAL ACTIONS & APPRAISAL

Examine resource costs

Examine methods and programme

Examine preliminaries

Complete net site cost estimate

Add overheads and profit

TENDER ADJUDICATION

Fig. 1.2 Estimating and tendering flowchart (traditional contract)

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Check and refine the schedule of accom'n Gain understanding of the affordability target Prepare estimators report Write the 'design-to-cost' statements Attend design meetings Issue documents to subs Engage with supply chain for advice on market rates PREPARATION OF THE ESTIMATE Obtain advice and Price ICT and FF+E Analyse responses from subcontractors Understand abnormals Programmes & Temporary works design Prepare prelims workbook Prepare target cost plan using historical data Agree and issue target cost plan Monitor design against target CP Agree schedule of accom with Client Measure net + gross floor areas Prepare estimate cost plan PROJECT APPRECIATION & ENQUIRIES Complete pricing pro-formas usually elemental cost schedules O O O Submit technical, financial and commercial bid documents O O Check conditions of award Prepare handover information Pre-commencement meeting Check contract documents Monitor methods and costs on site Prepare written submissions TENDER SUBMISSION ACTION WITH SUCCESSFUL TENDER

Receive + read documents

Prepare tender enquiry form

Decision to tender

Estimate timetable

Appoint design team

Start-up meeting

Appoint preferred subs

INITIAL ACTIONS & APPRAISAL

Present technical content

Examine methods and programme

Examine preliminaries

Agree the cost estimate

Add overheads and profit

Consider commercial issues

TENDER ADJUDICATION

Fig. 1.3 Estimating and tendering flowchart (design and build contract)

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Estimating and Tendering for Construction Work

On the other hand, he must recognize the goodwill which often ows from submitting competitive prices and the need to carry out work which might lead to suitable and protable contracts. There are several forms that can be used to plan, control and monitor estimating workload. The rst is a chart to show the opportunities to tender when they have been conrmed. The information for this programme usually comes from marketing personnel, who are responsible for bringing in invitations to tender for projects that are in line with company strategy. The chief estimator will prepare a bar chart (Fig. 1.4) to show how the estimators will be assigned to present and future tenders, showing the expected dates for receipt of documents and submission of tenders. Copies are sent to heads of other departments so they can plan their input; they may also wish to attend the nal review meetings. A tender register is also needed (Fig. 1.5) to record the main details of each tender such as reference number, client, price, tender date and an analysis of performance in relation to the competition. The success ratio for a construction rm is often quoted at about 1 in 4 although it can be as bad at 1 in 6 and as good as 1 in 2 where competition is limited. Since the directors of a company are more concerned with turnover and prot, then success is better measured in terms of value, and the estimating department may be given annual targets to meet. Clearly, negotiated work and two-stage tendering can save a great deal of abortive work. Estimators are drawn from two sources: direct from school with some good grades in GCSE subjects which suggest a potential to study to a higher technician or professional level, or from experienced staff where management has identied an aptitude and willingness for the job. In both cases a reasonable time must be spent on site to gain experience in construction methods, materials identication, use and practice. The skills that are needed are the ability to read and interpret technical documentation, the ability to communicate with clients, specialists and other members of the team, and the faculty to make accurate calculations. Technically an estimator must have a working knowledge of all the major trades, to identify packages of work to be carried out by sub-contractors, and the direct workforce, to foresee the time and resources that will be needed. It is also necessary to have the skills needed to take off quantities from drawings, where there are no bills of quantities. When bills of quantities are provided, the estimator will need to check the principal quantities to understand how corrections to the quantities during the contract will affect the protability of the scheme. An estimator needs to refer to many information sources either in book form or through more modern means such as microche, CD-ROM and on-line databases. The following list shows some of the basic material required:

Code of Estimating Practice (COEP) pro-formas for estimators. Code of Procedure for the Selection of Main Contractors tendering procedures. Standard Method of Measurement (SMM) explanation of item coverage.

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estimator

PM

planner

QS

buyer

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Date ESTIMATING PROGRAMME 30.5.08 ### value m 16 ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## ## 23 14 21 28 18 25 22 2500 000 2100 000 900 000 GB SS GB 1350 000 6 GB 5500 000 7 1250 000 5 ## 3 ## ## 5 ## ## 3 ## ## period June wks 2 9 July 30 7 August 4 11 September 1 8 15 tender date 16.6.08 1.7.08 17.6.07 7.7.08 30.7.08 19.8.08 GT FD JS CB FD JE BT JS BT GT FD GB JE FD GB review date 3.7.08 20.6.08 10.7.08 30.7.08 22.8.08 date due 4.8.08 8100 000 7 ## ## ## ## ## ## ## 21, 700, 000 ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### -

CB CONSTRUCTION LIMITED

no.

current tenders

335 St James School extensio 19.6.08

336 Lifeboat station

338 Access road

341 Treatment works

342 Superstore

346 Fast transport office

future tenders

Stansford College

Totals

Fig. 1.4 Estimating programme

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TENDER REGISTER page Tender title Date Price No. of tenderers Rank % over lowest % over mean Date Location received Client QS Architect Engineer Tender details Tender evaluation

CB CONSTRUCTION LIMITED

Tender no.

001

002

003

004

005

006

007

008

009

010

011

012

013

014

015

016

017

018

019

020

021

Fig. 1.5 Tender register

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Organization of the estimating function

Standard forms of contract contractual obligations. Standard specications for highways and water industries specications for pricing. National Working Rule Agreement labour rates. Denition of prime cost of daywork pricing daywork percentages. Daywork plant schedules pricing daywork percentages. Trade literature: (a) standard price lists (b) technical product information. Trade directory of suppliers and sub-contractors lists of suppliers to receive enquiries Reference data for weights of materials unit rate pricing.

Quality management
A companys quality management system must include procedures for estimating and tendering. The decisions made at tender stage will often determine the way in which the project is carried out. It is therefore important when preparing a tender to ensure that the clients requirements are understood, information is robust, and directors have approved the contractors proposals. Many organizations have adopted a standard approach to the process of estimating. Documented procedures are used that detail the preparation, review and submission of a tender. This is particularly useful for newly appointed staff as it provides a standard framework for the preparation of an estimate and ensures consistent records and reports for others. The preparation of documented procedures has come with the introduction of a British Standard, which provides a model for quality assurance. Now known as the BS EN ISO 9000 series, this standard was rst introduced to the construction industry as BS 5750 in 1979. The objective of a quality assurance system is to provide condence that a product, in this instance the tender submission, is correct, is provided on time and produces the right price. This price might be dened as that which the client can afford and deems reasonable, and is sufcient for the contractor to meet his business objectives. However, it is acknowledged that tenders are always submitted on time, but owing to time and information constraints, the price may not always be the right price. The benets of implementing quality assurance in the estimating function are: 1. 2. 3. 4. 5. 6. Protability an improvement to the protability of the organization. Accuracy a reduction of errors. Competence better trained staff. Efciency work properly planned and systematically carried out. Job satisfaction for the whole estimating team. Client satisfaction leading to likelihood of repeat business.
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Estimating and Tendering for Construction Work

Health, safety and welfare


Safety is high on the agenda of construction organizations. Estimators must understand the implications of current legislation for the design and procurement stages and include sufcient costs to carry out the work safely. A clients professional team contributes to the writing of a health and safety le, by assessing hazards which might be inherent in the design. These hazards include possible dangers to construction operatives, staff and the public during construction, for occupants and in carrying out repairs over the life of the building. The health and safety le tells the estimator about the project, setting out hazards associated with the design, and dangers known about the existing site. The Construction (Design and Management) regulations demand greater responsibilities on design-and-build contractors. Their tasks will often be extended by clients to include: 1. The role of CDM Co-ordinator. 2. Vetting of designers for competence in designing safely. 3. Producing the pre-tender stage health and safety le. Good health and safety systems ensure signicant long-term business benet, as follows:

less staff absence less staff turnover improved productivity and efciency less down time improved quality of work lower insurance premiums best in class.

There are some clients who remain sceptical about why they are paying for health and safety and see little benet to their business. They are forgetting that they have a moral and legal obligation to manage the safety of the overall project, and a safety culture will affect the attractiveness of the nished product. In addition, legal action following a failure in health and safety can damage a companys reputation. Many incidents are not covered by insurance. Also the policy excess may be greater than the individual amounts concerned. All other costs will have to be met by the contractor. Many costs are not covered by insurance. They can include:


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investigations lost time and production delays

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Organization of the estimating function

Heading Staff

Description CDM co-ordinator Safety manager visiting site Safety manager on site Temporary works design checks Logistics planning Signage external Signage internal Safety clothing client team Safety clothing visitors Safety clothing staff Personal protective equipment Fire equipment extinguishers etc First aid equipment First aid accommodation Safety lighting Barriers for segregated walkways Safety netting (priced with scaffolding)

35 000 15 000 85 000 30 000 25 000 4 000 9 500 8 000 2 500 11 000 Above 15 000 1 800 10 000 5 000 6 000

Equipment

Training

Safety induction CSCS cards Considerate Contractors Scheme

3 500 25 500 750

Processes

Fig. 1.6 Example of the additional costs for Health and Safety for a 50 m project

sick pay damage or loss of product and raw materials repairs to plant and equipment extra wages, overtime working and temporary labour nes loss of contracts legal costs loss of business reputation.

The Construction (Design and Management) Regulations impose certain requirements at tender stage. The following should be checked by the tender team: 1. A CDM co-ordinator has been appointed and attends team meetings. The CDM co-ordinators role is to advise the client on health and safety issues during the design and planning phases of construction work (HSE). In most design and build projects, the CDM co-ordinator will attend design meetings to encourage others to full their responsibilities.
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2. Sub-contractors have been vetted for their H&S procedures and performance. 3. Designers have been checked for the H&S procedures and performance. 4. Site accommodation, in the estimate, is of an appropriate standard to provide a safe environment for site staff and ensure a high standard of welfare. 5. Site phasing and logistics are designed to reduce the risk of accidents. 6. Designs produced are, from the start, safe to build and maintain. 7. Construction work is notied to the HSE by the CDM co-ordinator. 8. Data for the information le will be provided. 9. Planning and management of risks is improved from the start. Health and safety is priced in various parts of the estimate but is most obvious in the preliminaries. Figure 1.6 shows part of a preliminaries spreadsheet which deals with identiable items. Other issues are included in temporary works and plant sheets together with trade packages.

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