bidding and estimating projects - new orleans

Bidding and Estimating Projects

Woodward Design+Build would like to give special thanks to Emerald Cities for their contributions to this presentation.

Rick Dupont, P.E. Director of Research and

New Initiatives

Your Instructor

For this Seminar we will walk through the steps followed to Prepare the Estimate and manage a bid. This session demonstrates the important components to consider in preparing an estimate, starting with bid strategy and procedures. For seasoned estimators, this will be a review and confirmation of your good bid practices. For contractors new to bidding, this may be eye-opening.

Seminar Overview

What does every good estimator need to know? What constitutes competence? How do you know if you have covered all the bases? Can a bid proposal really be sent out the door with confidence?

Today’s Session Answering Important Questions

Setting a firm foundation upon which to bid. How to collect and organize all the information necessary to bid any project. Document the bid process. Creating work breakdown bid structures (WBS Codes). Applying the $ $ $ $

Today’s Agenda

Your Estimating Team

The People YOU – the owner of your company Estimators Estimating Assistants Project Managers

The Plan / Process

Select which jobs to bid Establish and follow a consistent estimate Create and work through the analysis process Submit the bid Follow up with clients Evaluate your results

The Log “System” ASPE Recommends the use of Various Logs for Document Control

Key Information Logs (Plans / Specs / RFQs) Addendum Log Special Bid / Admin Requirements Log RFI Log Internal Issues Log Internal Value Engineering Ideas Log Subcontractor / Supplier Check List Log Long Lead Items Log

10

Q: The Reason for the logs?

A: To help identify and mitigate RISK

. . . There are always risk factors that are either common to the industry or

specifically inherent to the bid

What Are Some Common Corporate Risk Factors?

Who is owner? Who is contractor? Who is construction manager? Geographical location Project timing – start / weather Project viability Project finance

What Are Some Common Risk Factors? Cont…

Lack of understanding of complex work items Poor communication Schedule conflicts Long lead items Project Conditions

Access – Shift Work – Occupied Work Areas – Environmental Mitigation Trade Stacking – Latent Conditions – Over Zealous Inspectors.

Availability of key personnel and equipment (Katrina) Productivity Rates (Katrina) Scope / Trade Coverage Material price increases over life of the project (Katrina)

TO BID OR NOT TO BID

What contractors need to know Selecting The Right Jobs To Bid Questions to Ask Before / While Bidding a Job

What owners do that impact bids Quality of Bid Documents Relationship with contractors Payment Terms Division 1 Documents Schedule Demands Liquidated Damages

Selecting the Right Jobs to Bid Questions to Ask Before / While Bidding a Job

Conduct a simple RISK ANALYSIS 1. Can we afford to fund it? 2. Can we get the required bonding? 3. Can we get the required insurance? 4. Does it work into our schedule?

• Superintendents • Project Managers (PMs) • Crews • Major Equipment

5. Is it with the scope of our expertise? 6. What additional resources will we need if we get the job? 7. Weather exposure?

Selecting the Right Jobs to Bid Questions to Ask Before / While Bidding a Job

Conduct a simple RISK ANALYSIS 8. Does this client have more work in the future? 9. Will we make a reasonable profit on this project for the risk? 10. Who is our competition?

• What are their strengths / weaknesses? • How do we stack up?

11. Shall we offer the same price to all GCs (If a Sub)? 12. How well do we know the General Contractor (GC) / Owner /

Developer(s) to whom we bid?

KEY: BALANCE RESOURCES WITH POTENTIAL FOR SUCCESS

Dealing With Risk

Do

Identify risk factors Ask a thousand questions

Allow risk to be reflected in the bid • Establish contingency areas within the bid to mitigate risk • Now try to make the contingency go away

• Develop innovative construction plans • User alternative suppliers / products • Modify productivity rates

The Value of Developing Scope

PROCESS: GC sends out bid packages or Requests for Quotes to Subcontractors and/or Vendors

• In which they request a SCOPE LETTER • First and best step in defining the specific scope of work within various disciplines

Subcontractors respond by submitting a SCOPE LETTER GC compares scope letters GC refines scope in their bid

◦


PURPOSE: Establishes scope as Subs/Trades understand it Ensures GC that trade/discipline will be covered on bid day

BENEFITS: Indicates Sub’s commitment to bid Illustrates Sub’s understanding of the project s Helps get all competitors on the same page Allows the GC to see the format in which sub-bids will appear on bid day

Send Scope Letter

Cost of

Laying Pipe HERE

Compared to HERE

Tell the Story

◦


As soon as possible Mock Bid Proposal Leave $$$ Blank

Should contain Quantities (Send to trusted recipients only) Inclusions Exclusions Any info that will help get your competition on the same page Acknowledge addenda received Plans and specs being used (listed in detail) Put prices first Exclusions second Inclusions third Standard Exclusions or boiler plate last

Keys to Success

Be thorough – Spend the Time Be Consistent – In everything

Method of takeoff Pricing Fees Approach

Follow a process Gain portable knowledge Delegate Be objective, you are selling for a profit not a charity Don’t be greedy Respect your buyer / client.

◦

Every Estimator Wants to Get to the Bottom Line as Quickly as Possible

Seven Basic Elements of the Price Labor & Burden Equipment Material Subcontractors Overhead Indirect (Insurance, etc…) Profit

The non-direct portion of your company’s cost of doing business that is not directly attributable to this project.

$

PROFIT

Company Overhead

Project Overhead

WBS Crews Labor Equipment Materials

Cost Basis

Money left over after all costs to construct the project.

Job costs that cannot be “neatly” placed into a specific item of work - also called General Conditions (GC’s)

A database of what things cost that you include in your bid, inside / outside company

Work Breakdown Structure: Costs related to actual work items you do – also called “direct costs”

Creating a Bid Structure

Methods for Doing Your Calculations

Back of an envelope or napkin Yellow pad Simple cost spreadsheet (WDB ??) Database-based system (MC2)

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Sample Database-Based System (MC2)

Simple Cost Spreadsheet

Characteristics of an Effective Estimating System / Spreadsheet

A good estimating spreadsheet should: Segregate costs Summarize costs Have sufficient detail to enable accurate estimating and review Have a “slot” for all the variables Be flexible enough to make changes on the fly Allow for effective cost analysis Be reusable Be set up to catch errors (bid day summary sheet)

The Logic for Our Seminar Spreadsheet

Flexible Summary

Detail Segregate Costs

Begin by knowing what you need for your end

result

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Where do you begin?

A Look at Today’s Project

It is a building and as such . . . A bid bond may be be required by every bidder

A surety bond, cash, certified check or a cashiers check for 5% of the bid amount Submitted with the bid (always a requirement on a public project)

There will be rigid adherence to the bid documents – For example: Late bids will not be accepted The bid will be submitted as a Lump Sum Bid. So . . . We must use their bid forms We must fit our estimate into their bid items All the required forms must be present…signed and notarized The company name must be spelled correctly The envelope must be properly addressed

◦

A Look at Today’s Project (Cont.)

The bid proposals will be submitted as sealed bids Sealed in an envelope and submitted at a specified location before the time deadline

The bid proposals will be opened at a public bid opening

• Each bid is opened and evaluated for completeness and for price • The “apparent low bidder” is announced • Anyone can attend the opening

There will be no price negotiating after the bid has been submitted

The Steps of Estimating

1. Maintain an Internal Bid Board 2. Keep a simple bid log 3. Did you get a full set of plans? 4. Collect as much information as you can 5. Visit the site when appropriate 6. Log or post Key Contact Information 7. Get a firm grip on what you are bidding

(The Order of Learning: Plans, specs and Addenda) 8. Request a bid bond (if applicable) 9. Log and distribute Addenda 2-1

To Help Establish Proper Perspective …

Let’s go through the steps of construction estimating.

Some deal with technique Some with organization Others with protocol and style

All Lead to an organized, complete bid that can be submitted with confidence.

Maintain an Internal Bid Board

Date/ Time

Name Location Estimator Bond Req / Rec

Pre Bid Mtg?

Mand?

Plans In House?

Bid #

2/22 2:00 Hillsdale Park

San Diego Rick Y / 1/10 / N Y 0001

2/25 2:00 Crest Shop Ctr

Encino Bob N / 2/2 / Y Y 0002

3/15 10:00 Valley Church

Spring Valley

Carl N / 2/10 / Y N 0003

Maintain a Simple Bid Log or Numbering System

Things an Estimator Does

Delegates – Team Leader Collects Information Organizes Information Distributes Information Generates Information

Takeoff / Pricing

Also Known as Document Control

During the execution phase of a project there are thousands of documents transmitted within the project team. The ability to systematically organize this data for reliable retrieval is known as “Document Control”. The importance of Document Control should not be underestimated because much of what we do in construction has a ‘cost or deliverable’ implication. It is essential to be able to quickly locate the source document or event causing document or authorizing document to direct the outcome.

1st – Collecting Information

1. Invitation to Bid 2. Plans and Specs 3. Bid Documents 4. Contract Documents 5. Site Conditions 6. Your Own Experience 7. The Experience of Others

Collecting Information From the Notice Inviting Bids and Instructions to Bidders

Due Date and Time General Scope of Work Description of Project Where to Send the Bid Bonding and Outreach Requirements Prevailing Wage Pre-Bid and Site Visit Information Contractor License Required

Admin Assistant Responsibilities

Collecting Information From The Plans

Title Sheets and Index Key Information Legends/Symbols General Notes

Plan Views Quantities

Elevation Views/Profiles/Sections Depths, Obstructions, Perspective

Details Materials and Methods

Items Shown as Typical Quality and Completeness

Collecting Information From The Contract Documents

Soils Reports (usually in an appendix) Time to Complete Environmental Impact/Permits General Conditions Special Conditions Liquidated Damages

see Section 01010, Summary of Work Measurement and Payment

See Section 01025 You will be agreeing to the Division 01 documents in your

contract

DIVISION 01

Take Notes During Site Visit Don’t Forget your Camera

Topography Soil Conditions Site Access Nearby Utilities Site Drainage

Collecting Information From Your Own Experience

Use Your Field Experience to: Establish the Work Breakdown Structure (WBS) Apply labor and equipment production rates Recognize conflicts

Use Previous Bid and Company Cost Data to: Reduce estimating time Evaluate cost / risk exposure

Collecting Information From the Experience of Others

Use Cost Data to Compare RS Means Sweets National Construction Estimator Walkers Estimating Guide Get training in Excel and your

estimating software

Read trade journals and newspapers

Listen at Association Meetings Listen at Bid Openings Attend Seminars Watch Others Work Observe your competition

at work

2nd – Organize the Information

How do you get to a Basis of Understanding Defining / creating the work breakdown structure (WBS) Creating Bid Packages

How do you get to a Basis for your Bidding Procedure Forms/Spreadsheets/Software

How do you get to a Basis for Prioritization Bid-related activities Resources required to get the bid out the door

• Bid Calendar • Evaluate Bid (go/no go) • Special Requirements • Conditions • Invitation to Bid sent

• Bid Bond Form • Takeoff • Analysis Forms • Schedule • Quote Forms / Bid Day

Owner

Project Manager Construction Manager General Contractors Agencies Municipalities

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Organize the Information Log or Post Key Contact Information

Organize the Information Get a Firm Grip on What you are Bidding

The Order of Learning

Familiarize yourself with the plans and specifications THEN 1. Addenda 2. Specifications Emphasis on Special Conditions

3. Plans – ALL Plans

Bid Bond Request Form

Tape revisions over: Spec. Sections Material Schedules/Tables Plan Pages

That have changed Details Added

Deleted

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Organize the Information Log and Distribute the Addenda

Addendum / Bulletin Log

Item # 1 of Addendum # 1 revised / Deleted the spec sections above. This illustration shows the revised spec sections taped over the original. The original text can still be read by lifting the “flap” created by taping only the top of the revised version.

GC Obvious reasons

Are all the trades covered Can update and distribute plans Suppliers

Sub See GCs See competition See major vendors/suppliers

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Organize the Information Maintain a Plan Holders List

Organize the Information Log Your Special Bid Requirements

Elements of the bid that require special attention

Examples Might Include: Bid must be submitted on their form Insurance Pricing Pricing for Bonds Schedule to accompany Bid Phasing / alternates- Bid per phasing Qualification forms/letters – due prior to / or with bid Notarization

Special Insurance Requirements

Copy requirements from specs. Owner-Controlled Insurance Program Additional training on insurance requirements may

be provided Sent to internal parties of interest Accounting / Office Manager / Administrator

When in doubt ? Ask your Insurance Company

Preliminary Schedule

Many contractors who would never bid a job without an estimate consistently do not prepare a schedule for their bid

If you estimate or manage construction, you must plan and schedule

General

WHY?

1. A plan and schedule is a road map (on paper) to get from A to B

Allows focus of attention on doing the job Can be communicated to all members of

the construction team Will free your mind for creative thinking

General

2. A Schedule is a tool which does many things Allows for selecting from various

alternatives Allows WHAT – HOW – WHEN and WHO

decisions to be made Facilitate identifying problems and

opportunities, gathering facts, and follow-up It indicates commitment, task

understanding, efficiency, and control

Anticipate the Construction Schedule

Q: What is the most basic construction schedule

at our disposal?

A: Time to complete

as shown in the specifications

Q: Does the time to complete allow for optimum

pricing?

A: Yes/No

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Sample Questions & Answers

Having Access to an Approximate Construction Schedule Provides Answers to Questions

Will the project fit into our schedule?

Will additional crews and equipment be required to meet the schedule?

Will there be overtime required to meet the schedule?

Optimum Pricing Relative to “Time to Complete”

Project Start Date

Optimum “Time to Complete”

Yields Best Price

Project Time Line

Price $$ $$ Price

Optimum time to complete = The longest time necessary to complete the project for the lowest possible price

Planning is the separation of a construction job into small

parts, estimating the time and manpower to complete each

part, and arranging them in sequence in conformance with

space, manpower, and equipment requirements.

Scheduling is the assignment of dates to the parts, and

rearranging them to complete the work in the most

economical manner. Planning may also designate the

method for each portion of the work, which includes a

time-and-motion- study routine.

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Planning and Scheduling

The Gantt chart lacks detail, but is ideal for preliminary schedules.

Why?

Identify Liquidated Damages

Organize the Information Create a List of Special Work Conditions

Tight Work Space Hard Ground Wet Conditions Contaminated Soils Environmentally Sensitive

Areas Difficult Areas

Haul Routes Scheduling Conflicts Conflicts with Other Trades Security Sound / Noise Dust – Air Port Protection of project elements

Example: Site Conditions

Organize the Information Create and Maintain a Bid RFI System

Organize the Information Create and Maintain an Issues Log

Organize the Information Addressing Alternates and Special Pricing in the Bid

XYZ Construction

Pricing for Alternates and Other Special Pricing Requests Always Carry Certain Risks

• How likely is it that the work will be performed? • How much overhead and profit do you apply to this alternate? • Are you giving away profit and project overhead if the alternate work is not performed? • You will most likely have to justify this price in the future

Organize the Information Create and Maintaina Log of Value Engineering Ideas

3rd - Distributing Information

Takeoffs (Sheets/forms/software) Invitations to Bid (Bid Packages) RFQs (Requests for Material and Sub Quotes) RFI’s (Request for Information forms) The Bid Proposal (Form/format) Database of YOUR own information Budget for accounting department Data for schedules Data for Project Management Software WBS (Worksheets for developing the Work Breakdown Structure) Data for contracts

$

PROFIT

Company Overhead

Project Overhead


Cost Basis

We Need Information

CEO

CFO

EST

EST / PMs

EST / PMs

Establishing Your Cost Basis

Hourly labor rates – CFO / HR % rate for sales tax – ACCOUNTING Fuel per hour rates – EQUIPMENT MANAGER Owned equipment rates (per hr/day/week/month) including

maintenance – EQUIPMENT MANAGER/ CFO Equipment rental rates - CFO Materials and common supplies – Estimator % rate for company overhead – CEO / CFO Daily company overhead – CEO % rate for profit – CFO Insurance rates – CFO Labor Burden – CEO / CFO

Labor Basis Worksheet

Labor Rates – Cost Analysis Worksheet

Develop a WBS Work Breakdown Structure and / or Bid Item Take Off

What is a Bid Item? An item of work, or other cost, related to

the project for which a unit price is desired

What is a Work Breakdown Structure (WBS) A logical breakdown of various

components within those bid items that clearly reflect how the project is likely to be constructed

Masterformat

Specifications

General requirements

Division 1 General Requirements

Building Construction

Division 2 Site Conditions

Division 3 Concrete

Division 4 Masonry

Division 5 Metals

Division 6 Carpentry

Masterformat Continued

Division 7 Thermal and Moisture Protection

Division 8 Doors and windows

Division 9 Finishes

Division 10 Specialties

Division 11 Equipment

Division 12 Furnishings

Division 13 Special construction

Division 14 Conveying

Services (Previously Division 15 and 16) Division 21 Fire suppression Division 22 Plumbing Division 23 HVAC Division 25 Integrated automation Division 26 Electrical Division 27 Communications Division 28 Alarms and Surveillance Services (Previously Division 02) Division 31 Earthwork Division 32 Sitework Division 33 Utilities Division 34 Transportation Division 35 Marine construction and waterways


Process equipment (Previously Division 13) Division 40 Process integration Division 41 Material handling Division 42 Heating, cooling and drying Division 43 Fluid handling, purification and storage Division 44 Pollution control Division 45 Manufacturing equipment Division 48 Power generation


Who uses Masterformat

Architects and Engineers develop design specifications based on it.

Estimators use it during the development of the detailed estimate. Construction managers use it to track project

costs.

EVERYONE

Establishing the Work Breakdown Structure and / or Bid Item Take Off

Major Division

Catagories

Systems

Site Work

Site Grading Rough Grading Finish Grading Site Utilities Site Storm Drain Site Sewer Site Water

Establishing the Work Breakdown Structure and / or Bid Item Take Off

Line Item Activities

(Each will yield a unit price)

12” C-900 Water Main 10” C-900 Water Main 8” C-900 Water Main 6” C-900 Water Main 2” Copper Water Services Fire Hydrants 8” Fire Services (includes FDC and

PIV

Site Water

WBS (Even More Detail)

Logical Sequence of

work (Methods)

12” C-900 Water Main Layout String Pipe Excavate Lay Shade Backfill Test

WBS (Even More Detail)

More detailed sub-activity

Resources (Cost Details

Test

Chlorinate Hydrostatic Test Flush

Labor Equipment Materials Subs Other

Let’s assume there are no pre-defined bid items for our sample project. If you could create bid items to best reflect the scope of this project what would they be? Use the form above to break this project down into bid items. Remember, the WBS – Work Breakdown Structure should be a snapshot of how the project might actually be constructed. For now let’s not be concerned with quantities. Just record a logical breakdown of the work. Identifying “logical” bid items will help the entire bid process. Not only will you get better prices, you’ll probably get them faster.

The value of a detailed WBS

Use sufficient detail to allow for the assignment of risk at any given place within your bid

DUMPSTERS 01750 G DEMOLITION 02110 S FINISH CARPENTRY 06200 S CABINETRY 06400 S INSULATION 07200 S DOORS, FRAMES & HARDWARE

08000 S GLAZING 08800 S METAL FRAMING & DRYWALL

09200 S CERAMIC TILE 09300 S SUSPENDED CEILINGS 09500 S FLOORCOVERING 09600 S PAINTING 09900 S BATHROOM ACCESSORIES

10800 S WINDOW COVERINGS 12500 S MECHANICAL HV/AC 15000 S CONTROLS 15050 S MECHANICAL PLUMBING 15400 S FIRE SPRINKLERS 15500 S FIRE EXTUINGSHERS 15550 S ELECTRICAL 16000 S LIFE/SAFETY 16600 S

Develop and Maintain a Checklist for Subcontracted work

Perform Quantity Take Offs

Methods of Take Off Scale and calculator Digitizer and spreadsheet Digitizer and estimating software Hand held device

Quantity Takeoffs

Remember – Flexibility is KEY

The and red pen highlighter

Have conventional color codes within your estimating office Example: Blue = Water Green = Sewer Orange = Storm Drain Brown = Concrete

Use red pen for notations Make your highlighting significant to you

Develop and Distribute Bid Packages or Requests for Quotes to Subs

Establishing scope Request scope letter

Who develops the scope? GC? Sub? Both?

Send Scope Letter

As soon as possible Mock Bid Proposal Leave $$$ Blank

Should contain Quantities Inclusions Exclusions Any information that will help get

your competition on the same page.

Preliminary Scope Letter

Refined / Revised Scope Letter

Compare Scope Letters

Check

Quantities Inclusions Exclusions Alternates Special pricing requirements Acknowledgement or addenda Plans and specs. being used

Compare Material Quotes

Ensure that they priced your takeoff

Answer these questions

Do prices reflect specified materials? Can materials be delivered within project schedule constraints Is tax included? Is delivery included? For how long is this price good? What are price increases likely to be? Are order constraints to secure this pricing reasonable? Can this supplier provide required and adequate submittal

materials?

The Identification of “Long Lead Items” is Another Tool for Mitigating Risk

Even if you can’t do anything about it . . . You can factor the impact into your bid. You may have to: Schedule work around late delivery

Pay more for expedited delivery

Accelerate on work items installed just after

installation of this late arrival

Apply Costs to the WBS / Quantity Takeoff

$

PROFIT

Company Overhead

Project Overhead


Cost Basis

Calculating Project Overhead

Job costs that cannot be “neatly” placed into a specific item of work. NOTE: In a unit price bid, these costs will be distributed proportionately to all bid items.

Project Overhead

Can a strategic approach to Project Overhead improve your chances of success in getting the job?

How can a different strategy help your bottom line price? Do you ever “double up” on: major equipment? field level supervision

(non working/working) foreman’s truck and tools?

A

Apply Project Overhead

$

PROFIT

Company Overhead

Project Overhead


Cost Basis

A portion of your company’s non job related cost of doing business that must be applied to this project

A Simple Company Overhead Worksheet

Can be applied on either a daily

basis or as a percentage of the

annual company wide G&A costs

that must be applied to

this project.

- Executive

Bid Day Procedures

ARE YOU READY???? Are the Agency-required documents

executed and ready to submit? When will the job start if you are the

apparent log bidder at bid time?

Preparation for the Bid Day

Bid day preparation requires the careful crafting of forms to be used, creating an order by which you can monitor the forms to summarize your bid.

Preparation for the Bid Day

Bid forms should be prepared and ready for delivery at least a day in advance with a person designated to deliver the bid. One person is designated within the bid team to compile the final number, place the phone call to the individual delivering the bid and reaffirm the number prior to submission Keep a copy of bid documents including the &

envelope transmission

Scope - Coverage

Productivity Rates Schedule

Methods Cash Flow Equipment Usage Difficult or Specialized work Compare with Historical Data

Bid Analysis

The Bid Proposal

What does the Owner / GC want to see?

Don’t forget: Standard Inclusions

Exclusions Project-Specific

Inclusions

Exclusions Standard terms and conditions

Specific terms and conditions

Period of time for which the price will be honored

Plans and specs used in arriving at price

The Bid Proposal (cont.)

Specific definitions

Anticipated schedule Required alternates

Appropriate Value Engineering Ideas

and Alternates

Contact Information

Final Bid Proposal

Submit a Rough Schedule with the Bid (CPM Scheduling is typically required on Public Works Projects and

will be the topic of a future seminar)

Follow Up for Subs

On bid day: Confirm delivery

After bid opening: Contact Authority Contract Technician and ask for bid results See if you can get a feel for where your price was

Within a few days: Touch base with all GCs Ask questions

An Overview of the Three Things An Estimator Does With Information

5

What are the most important takeaway you obtained today? –

QUESTIONS?

Thank You