Estimating and Tendering for Construction Work FM.Qxd 4/2/04 10:18 Page Ii
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Ketabton.com FM.qxd 4/2/04 10:18 Page i (c) ketabton.com: The Digital Library Estimating and Tendering for Construction Work FM.qxd 4/2/04 10:18 Page ii (c) ketabton.com: The Digital Library This page intentionally left blank FM.qxd 4/2/04 10:18 Page iii (c) ketabton.com: The Digital Library ESTIMATING AND TENDERING FOR CONSTRUCTION WORK Third edition Martin Brook BEng(Tech) FCIOB AMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORD PARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO FM.qxd 4/2/04 10:18 Page iv (c) ketabton.com: The Digital Library Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington, MA 01803 First published 1993 Second edition 1998 Reprinted 1999, 2001, 2002, 2003 Third edition 2004 Copyright © 2004, Elsevier Ltd. All rights reserved No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: (ϩ44) 1865 843830, fax: (ϩ44) 1865 853333, e-mail: [email protected] may also complete your request on-line via the Elsevier homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 0 7506 5864 9 For information on all Elsevier Butterworth-Heinemann publications visit our website at http://books.elsevier.com Printed and bound in Great Britain FM.qxd 4/2/04 10:18 Page v (c) ketabton.com: The Digital Library Contents Preface ix Acknowledgements xii List of figures xiii Abbreviations used in the text xvi 1 Organization of the estimating function 1 2 Procurement paths 10 Introduction 10 Clients’ needs 11 Contractor involvement 12 Partnering 13 Apportionment of risk 14 Traditional method 16 Design and build 17 Management contracting 19 Construction management 21 Private finance initiative 22 3 Forms of contract 34 Introduction 34 Essentials of a valid construction contract 34 Standard forms of contract 36 Sub-contract forms 38 Comparison of forms 43 Selection of contract forms 44 4 Tender documentation 46 Introduction 46 Coordinated project information 47 CPI and the estimator 55 Documents used as the basis of a tender 58 Formal tender documents 61 v FM.qxd 4/2/04 10:18 Page vi (c) ketabton.com: The Digital Library Contents 5 Estimating methods 66 Introduction 66 Single-rate approximate estimating 70 Multiple-rate approximate estimating 71 Approximate quantities 73 Analytical estimating 78 Operational estimating 82 6 Contractor selection and decision to tender 85 Introduction 85 Competition and negotiation 86 Abuse of tendering procedures 90 Decision to tender 92 Inspection of tender documents 95 Competition legislation 96 7 Project appreciation 100 Introduction 100 Estimate timetable 100 Pricing strategy 103 Schedules 103 The estimating team 103 Visits to consultants and site 107 8 Enquiries to suppliers and sub-contractors 109 Introduction 109 Enquiries for materials 111 Enquiries to sub-contractors 113 9 Tender planning and method statements 117 Introduction 117 The role of the planning engineer 117 Method statements 118 Tender programmes 119 10 Resource costs – labour, materials and plant 125 Introduction 125 Labour rates 125 Material rates 128 Plant rates 130 11 Unit rate pricing 132 Introduction 132 vi FM.qxd 4/2/04 10:18 Page vii (c) ketabton.com: The Digital Library Contents Components of a rate 132 Method of measurement 134 Pricing notes 134 Model rate and pricing examples 135 12 Sub-contractors and nominated suppliers 176 Introduction 176 Domestic sub-contractors 176 Nominated sub-contractors 183 Nominated suppliers 184 13 Fluctuations 185 Introduction 185 Standard fluctuations clauses 186 Calculation of non-recoverable increases 188 14 Provisional sums and dayworks 192 Introduction 192 Provisional sums for undefined work 192 Provisional sums for defined work 192 Dayworks 193 Overheads and profit 196 15 Project overheads 199 Introduction 199 Pricing project overheads 199 Pricing the preliminaries bill 202 Example of project overheads 216 16 Cashflow forecasts 217 Introduction 217 Cashflow calculations 217 Example of a contractor’s cashflow forecast 219 17 Completing the estimate and final tender review 227 Completing the estimate 227 Estimator’s report 229 Comments on Estimate Analysis form 229 Comments on Tender Summary form 234 Risks and opportunities 235 Overheads and profit 237 18 Tender submission and results 240 Introduction 240 vii FM.qxd 4/2/04 10:18 Page viii (c) ketabton.com: The Digital Library Contents Completion of priced bills 241 Tender presentation 243 Vetting of tenders 245 Post-tender negotiations and award 246 Tendering performance and analysis of results 247 Bidding strategy 251 19 Action with the successful tender 254 Introduction 254 Information transfer 254 Feedback 256 20 Computer-aided estimating 260 Introduction 260 Aims of computer-aided estimating 261 Software 262 Electronic exchange of information 263 Reverse auctions 265 Computer-aided estimating packages 267 General purpose software 271 Hardware 280 Networking 283 Implementation 285 The future 286 Further reading 291 Index 295 viii FM.qxd 4/2/04 10:18 Page ix (c) ketabton.com: The Digital Library Preface My aims in this book are to introduce a practical approach to estimating and tendering from a contractor’s point of view, and explain the estimator’s role within the construction team. The book therefore differs from previous textbooks in three main ways: 1. In general it is assumed that it is the contractor who prepares estimates because in the majority of cases an estimate is produced to form the basis of a tender. 2. I have introduced many typical forms used by estimators to collate data and report to management. Most of the forms relate to two fictitious projects: a new lifeboat station and the construction of offices for Fast Transport Limited. 3. The pricing examples given in Chapter 11 have been produced using a typ- ical build-up sheet. The items of work to which the prices relate are given at the top of each page. Estimating data are given for each trade so that students will have a source of information for building up rates. I suggest that before pricing exercises are undertaken, the first part of Chapter 11 should be read and an understanding of estimating methods should be gained from Chapter 5.The first pricing example is for a ‘model rate’ that gives a checklist of items to be included in a unit rate. The estimating function has changed more in the last 15 years than at any time before. Many estimating duties can now be carried out by assistants using word processors, spreadsheets and computer-aided estimating systems.The estimator manages the process and produces clear reports for review by management. Estimators need to understand the consequences of entering into a contract, which is often defined by a complex combination of conditions and supporting documents.They also need to appreciate the technical requirements of a project from tolerances in floor levels to the design of concrete mixes, and from tempor- ary electrical installations to piling techniques. The Chartered Institute of Building publishes a series of guides to good practice – the Code of Estimating Practice and its supplements. I have not duplicated their fine work in this book but hope that my explanation and examples show how the guidelines can be used in practice. Contractors now assume an active role in providing financial advice to their clients.The estimator produces financial budgets for this purpose and assembles cost allowances for use during construction. Computers have been introduced ix FM.qxd 4/2/04 10:18 Page x (c) ketabton.com: The Digital Library Preface by most organizations, with a combination of general purpose and specialist soft- ware. Computers have brought many benefits during the tender period, and are seen as essential for the handover of successful tenders; adjustments can be made quickly, information can be presented clearly, and data can be transferred in a more compact form. The changes brought about by the introduction of SMM7 and the other princi- ples of Coordinated Project Information have reduced the number of items to be measured in a typical building contract. The item descriptions no longer provide information for pricing, the estimator must always refer to the specification and drawings. In practice this is time consuming for both contractors and sub- contractors, and the amount of paperwork has increased immensely. Nevertheless, contractors always need a bill of quantities, whether produced by the client’s quan- tity surveyor, by an in-house commission or by sharing the services of an independ- ent quantity surveyor. Traditionally bills of quantities were used as a fair basis for preparing and comparing tenders, but increasingly the responsibility for quantities is being passed to contractors. It is of some concern that estimators continue to have difficulty entering bills of quantities in their estimating systems and look forward to the time when a common approach to electronic data transfer is widely adopted. This third edition has been written to reflect changes in estimating since 1997.