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S TEPS IN THE D EVELOPMENT OF A D ETAILED E STIMATE

Learn the process of developing a detailed estimate for a project, including studying project documents, creating a work breakdown structure, determining quantities, pricing materials and labor, obtaining quotations, defining work done by others, and determining job overhead costs.

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S TEPS IN THE D EVELOPMENT OF A D ETAILED E STIMATE

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  1. STEPSINTHE DEVELOPMENTOFA DETAILED ESTIMATE DR. Nabil Dmaidi

  2. 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 DR. Nabil Dmaidi

  3. 6. Determine Job Overhead Cost • 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 • 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 • 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 DR. Nabil Dmaidi

  4. 7. Determination of Markup • Markup is an allowance for: a. Home Office overhead b. Contingency c. Profit • Markup ranges from 5% to 20% of the total project costs DR. Nabil Dmaidi

  5. a. Home Office Overhead • 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 • 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 DR. Nabil Dmaidi

  6. b. Contingency • To cover unexpected risk, error and omission, and contract risk DR. Nabil Dmaidi

  7. c. Profit • Profit varies from 1% to 10% or more • Factors affecting profit • Need for work • Contract type • Total bid value • Risk • Competition • Economic Condition DR. Nabil Dmaidi

  8. 8. Determination of Contract Bond Cost • The contract document usually requires as a minimum a “performance bond” and a “payment bond.” • Bond cost ranges from 0.5% to1% of the total contract price. DR. Nabil Dmaidi

  9. Example of Determining Total Contract Price • 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 DR. Nabil Dmaidi

  10. Example of Determining Total Contract Price (cont.) • 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 DR. Nabil Dmaidi

  11. Example of Determining Total Contract Price (cont.) • 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 [10% of (1)] 9. Total Job Overhead Costs $ 9,885 10. Total Estimated Job Costs $ 83,555 [(5) + (9)] 11. Total Cost [(10) x 1.2] $ 100,266 12. Bond [0.005 x (11)] 501 13. TOTAL CONTRACT COST $ 100,767 [(11) + (12)] DR. Nabil Dmaidi

  12. Example of Determining Total Contract Price (cont.) TOTAL CONTRACT COST 100,767 14. Markup [(11) - (10)] $16,621 Breakdown of Markup 14a. Office O.H. [0.10 x (10)] $ 8,356 14b. Contingency [0.02 x (10)] 1,671 14c. Profit [0.08 x (10)] 6,684 Bid Factor = = = 1.368 73,670 DIRECT COST SUBTOTAL DR. Nabil Dmaidi

  13. Bid Price = markup Main Office Job Main Office Job + Project Cost Job indirects Direct costs Support structure Force account executed Overhead Subcontractors Subcontractors Salaries Testing Access road Project office Portable toilets Guard Work packages Work packages Training Office equip. Parking lot Etc. Janitors Support constr. Insurance Etc. Testing Etc. Labor Constr. Equip. Materials Installed equip. Total Components of Cost within a bid DR. Nabil Dmaidi

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