1 / 13

Unbalanced Bids

Unbalanced Bids. Part 04-03 – Unbalanced Bids March 1, 2001. Purpose. To acquaint students with the concept of unbalanced bids and why Contractors submit them, and why Owners allow this practice. . Learning Objectives.

daniel_millan
Download Presentation

Unbalanced Bids

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Unbalanced Bids Part 04-03 – Unbalanced Bids March 1, 2001

  2. Purpose • To acquaint students with the concept of unbalanced bids and why Contractors submit them, and why Owners allow this practice.

  3. Learning Objectives • Students should be able to compute the advantage, in terms of Net Present Value, of a simple unbalance bid example.

  4. Basic Idea • The basic idea is to “over charge” for work in the front-end of the contract. • While “under charging” a equal amount at the tail-end of the contract. • And investing the “surplus” for as long as you can “get away with it.”

  5. Lets Assume the Following “Engineers Estimate.” Work Units and Corresponding estimated $$ Amounts per contract period.

  6. Let’s Say The Project was Actually Bid and Executed like this. Engineers Estimate on Top; Contractors plan on Bottom. The $$ sums are the same.

  7. Look at the NPV at 10%

  8. Class DiscussionWhat will the Owner Say? • Is the the NPV the same? At 0%?, at 10%? • What happens if the Owner Decides to “fire” the Contractor? • Can you name any “notorious” local examples? • Do you think that you can repeat this on an Exam?

  9. Another Example: • The Engineer’s Estimate calls for 1,000,000 CY of dirt to be moved at $1.00/CY and 10,000 CY of rock to be moved at $5.00/CY for a total of $1,050,000. <- Total

  10. You Bid • You assume that the Estimate is in Error and you bid $10 for the rock and $.95 for the dirt. <- Total

  11. You just made an extra $45,250 • The estimate was in error by 5,000 CY of Rock and You made money. <- Total

  12. Class DiscussionWhat will the Owner Say or Do? • Q: How can the owner guard against this? • A: 10% renegotiation rule. • A: Better estimates? What if a consultant made the estimate? • A: Change unit price categories. • Q: Should the owner even care? • A: If the errors are accidental (random), it will all balance out.

  13. Class Assessment • Please take a minute to write 1 sentence on the “muddiest” topic.

More Related