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Construction Engineering 221. Cost Estimating and Bidding II. 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

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Construction engineering 221 l.jpg

Construction Engineering 221

Cost Estimating and Bidding II


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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Equipment Production Rates

In regard to equipment production rates what is meant by a “50 minute hour”?

Construction Engineering 221


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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


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Markup Components

  • Profit

  • General overhead

  • Contingency

Construction Engineering 221


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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


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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


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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


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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


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Bid Ethics

  • What is meant by:

    • Bid shopping

    • Bid peddling

    • Bid rigging

Construction Engineering 221


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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


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