STEPS IN THE DEVELOPMENT OF A DETAILED ESTIMATE

STEPS IN THE DEVELOPMENT OF A DETAILED ESTIMATE Prof. Awad S. Hanna

1. Study project documents 2. Develop Work Breakdown Structure (WBS) and Cost Code 3. Determine quantity take off 4. Price materials, equipment and labor 5. Define work done by others and obtain quotations Prof. Awad S. Hanna

6. Determine Job Overhead Cost Indirect Job Labor • Project manager and/or Superintendent • Project engineer • Draftsman • Timekeeper • Office manager and/or secretary • Safety engineer and/or first aid attendant • Watchmen Indirect Job Equipment • Project manager’s vehicle • Pickup truck • Site maintenance Site Facilities • Construction Sign • Job site fence • Construction access/entrance • Portable toilets • Office trailers: contractor’s, engineer’s, first aid, change room and lockers • Telephone service • Temporary electric utilities • Shop or maintenance facility • Fuel for general job vehicles Materials Handling and Storage • Material storage area & bins • Warehouse facility Subcontracted Indirect Cost • Disposal services • Soil or rock borings • Laboratory tests –Soil samples –Rock samples –Concrete samples • Surveying service • CPM scheduling services • Job photographs • Models • Artist renderings Prof. Awad S. Hanna Bonds and Insurance • Performance bond • Builders rick Insurance • Contractor’s liability insurance Permits • Building • Site improvement • Road or entrance Additions for Remote Sites • Communications • Living quarters for workmen • Kitchen and food service • Entertainment • Transportation • Temporary power • Water supply • Waste disposal

7. Determination of Markup C Markup is an allowance for: a. Home Office overhead b. Contingency c. Profit C Markup range from 5% to 20% of the total project costs Prof. Awad S. Hanna

a. Home Office Overhead Salaries • Executive staff • marketing staff • Accounting staff • Estimating staff • Legal staff • Support staff: clerical, data processing, etc. Facilities • Office purchase or rental • Furniture purchase or rental • Data processing equipment Utilities • Telephone, fax, etc. • Heating & air conditioning • Illumination • Water Taxes • Company Income • Property Insurance • Company policies not chargeable to projects Benefits • Pension & retirement program • Profit sharing & bonus plans • Health insurance plan Transportation • Company aircraft • Company automobiles • Company trucks • Commercial travel Marketing • Advertising • Estimating • Other promotional costs Maintenance • Maintenance& overhaul, not just chargeable Prof. Awad S. Hanna

b. Contingency C To cover unexpected risk, error and omission, and contract risk Prof. Awad S. Hanna

c. Profit C Profit varies from 1% to 10% or more C Factors affecting profit ^Need for work ^Contract type ^Total bid value ^Risk ^Competition ^Economic Condition Prof. Awad S. Hanna

8. Determination of Contract Bond Cost C The contract document usually requires as a minimum a “performance bond” and a “payment bond. ” C Bond cost ranges from 0. 5 % to 1% of the total contract price. Prof. Awad S. Hanna

Example of Determining Total Contract Price C Assumptions 1. Sales Tax = 6% of Direct Material Costs 2. Job Overhead Labor Costs = 25% of Direct Labor Costs 3. Job Overhead Management Costs = 10% of Direct Labor Costs 4. Markup = 20% of Total Project Costs Office O. H. = 10% Contingency = 2% Profit = 8% 5. Bond = 0. 5% of 1% of Total Project Costs Prof. Awad S. Hanna

Example of Determining Total Contract Price (cont. ) C Estimated Directed Job Costs 1. Direct Labor Costs $25, 670 2. Direct Material Costs 15, 000 3. Direct Equipment Costs 13, 000 (Owning & Operating Costs) 4. Subcontract Costs 20, 000 5. DIRECT COST SUBTOTAL $73, 670 Prof. Awad S. Hanna

Example of Determining Total Contract Price (cont. ) C Job Overhead Costs 6. Sales Tax [6% of (2)] $ 900 7. Job O. H. Labor [25% of (1)] $ 6, 418 8. Job O. H. Management $ 2, 567 9. Total Job Overhead Costs $ 9, 885 10. Total Estimated Job Costs $ 83, 555 [10% of (1)] [(5) + (9)] 11. Total Cost [(10) x 1. 2] 12. Bond [0. 005 x (11)] 13. TOTAL CONTRACT COST [(11) + (12)] Prof. Awad S. Hanna $ 100, 266 501 $ 100, 767

Example of Determining Total Contract Price (cont. ) Bid Factor = TOTAL CONTRACT COST = DIRECT COST SUBTOTAL 100, 767 73, 670 14. Markup [(11) - (10)] = 1. 368 $16, 621 Breakdown of Markup 14 a. Office O. H. [0. 10 x (10)] 14 b. Contingency [0. 02 x (10)] 14 c. Profit [0. 08 x (10)] 6, 684 Prof. Awad S. Hanna $ 8, 356 1, 671

Total Components of Cost within a bid Bid Price = markup Main Office Job Overhea d + Project Cost Job indirects Support structure Subcontract ors Salaries Testing Access road Project office Portable toilets Guard Training Office equip. Parking lot Etc. Janitors Support constr. Insurance Etc. Testing Etc. Prof. Awad S. Hanna Direct costs Main Office Job Force account executed Subcontract ors Work packages Labor Constr. Equip. Materials Installed equip.