Construction Engineering 221

1. Construction Engineering 221 Cost Estimating and Bidding II

2. RPQs 1. The markup or margin is added at the close of the estimating process and is an allowance for: A. profit B. general overhead C. contingency D. all of the above 2. In what type of construction are subcontractors used the most? A = Building B = Engineering C = Industrial 3. The term “bid rigging” is also known as “price fixing”. A. True B. False Construction Engineering 221

3. RPQ Answers 1. The markup or margin is added at the close of the estimating process and is an allowance for: A. profit B. general overhead C. contingency D. all of the above Correct answer is D. all of the above Construction Engineering 221

4. RPQ Answers 2. In what type of construction are subcontractors used the most? A = Building B = Engineering C = Industrial Correct answer is A. Building Construction Engineering 221

5. RPQ Answers 3. The term “bid rigging” is also known as “price fixing”. A. True B. False Correct answer is A. True Construction Engineering 221

6. Bid Components (L.E.M.O.P.) • Labor costs • Direct costs • Indirect costs • Equipment • Material Costs • Materials that become a part of the finished structure • Material Allowance – What is it? Example? Construction Engineering 221

7. L.E.M.O.P. (cont.) • Overhead • Costs for contractor’s jobsite overhead general conditions • Costs for contractor’s general overhead • Main office expenses (rent, utilities, staff) • Profit (fee) Income – Costs = Profit Construction Engineering 221

8. Direct Labor Costs • Base hourly wages and salaries paid employees (easily known) • Productivity of labor - Highest level of uncertainty in bid • Where is the most reliable labor productivity information to found? • Contractor’s HISTORICAL COST DATA Construction Engineering 221

9. Indirect Labor Costs • What are INDIRECT labor costs? • Expenses that are additional to the basic hourly rates and are expenses paid by the employer • What are some examples of indirect labor costs? • Payroll taxes • Insurance • Employee fringe benefits – health, vacation, employee insurance, 401K • Employer contribution to social security • Unemployment insurance • Workman’s compensation insurance • Public liability and property damage insurance Construction Engineering 221

10. Equipment Cost Estimating • In what kind of work does the equipment account for a substantial portion of the total cost? • Heavy/Highway • Ownership cost • Costs to own (park it in the driveway) • Operating cost • Hourly costs: fuel, repairs, grease, lubricants Construction Engineering 221

11. Equipment Cost Rates • What is best means of projecting the cost of an item of equipment to used on a future project? • Past historical equipment cost and production records • Why is production an important part of determining equipment cost? • Efficiently use equipment to operate at lowest cost Construction Engineering 221

12. Depreciation • Depreciation is equipment expense caused by wear and obsolescence and allows for the recovery of the invested capital over the useful life of the equipment. • Why aren’t tire depreciated on large items of equipment? • Many forms of depreciation – what mode of depreciation is used for job cost accounting? • Straight-line depreciation Construction Engineering 221

13. Equipment Production Rates In regard to equipment production rates what is meant by a “50 minute hour”? Construction Engineering 221

14. Project Overhead vs General Overhead • Overhead expenses are costs that do not pertain to any give construction work item but are nevertheless necessary for the ultimate completion of the job. • Two types – project and general • Project – costs incurred at the project site • General – cost incurred by the general contractor in support of the company’s overall construction program. Construction Engineering 221

15. Markup Components • Profit • General overhead • Contingency Construction Engineering 221

16. Subcontracts • What if a subcontractor’s bid is substantially lower than any other subcontract for a particular area or unit of work within the project? What should the prime contractor do in this case? • What happens if a prime uses that same subcontractor for most if not all of this projects that a bid competitively? • Assigned and Prepurchasing of subcontractors Construction Engineering 221

17. List of Subcontractors It is a common requirement, especially on public projects that the prime contractor must submit, as a part of the bid, a list of subcontractors whose bids were use in the preparation of the prime contractor’s proposal. Why is this a requirement? Construction Engineering 221

18. Balanced vs Unbalanced What is the definition of a balanced bid? • Balanced – each bid item includes its own direct cost plus it pro rata share of the project overhead, markup, bond and tax. What is the definition of a unbalanced bid? • Unbalanced – more project overhead, markup, bond and tax is added to the early work items of a project. Why unbalanced bids? Construction Engineering 221

19. Other Bid Components • Alternates • Owner-designated • Contractor-designated • Bid Security • Bid bonds (proposal bonds) • Certified check • Two forms of bid bonds • Liquidated damages • Difference-in-price Construction Engineering 221

20. Bid Ethics • What is meant by: • Bid shopping • Bid peddling • Bid rigging Construction Engineering 221

21. Responsiveness and Withdrawal • What is meant by the statement – “An acceptable bid must be “responsive” to the invitation for bids and the instruction to bidders. (proposal form filled out correctly) • When can a general or subcontractor withdraw their bids? Construction Engineering 221