Cost Estimating and Bidding (Engineering & Construction No. 2)

Cost estimating is a function that is central and indispensable for every construction contracting business.

Estimating can be defined as the estimator’s making the best possible prediction of what the cost of performing a construction project will be, given the time and other resources available.

Construction estimating involves the determination and analysis of the many factors that influence and contribute to the cost of a construction project.

Estimating, which is done prior to the physical performance of the work, requires detailed study of the bidding documents, as well as a careful analysis of numerous factors that will have a bearing on construction costs.

Estimators apply their knowledge and skills, carefully analyze the construction documents, and examine as many other factors and influences as they can foresee, and then, through the application of their skills, produce this prediction—the cost estimate.

Construction cost estimates are prepared for a variety of purposes, and much of the credit for the success or failure of a contracting enterprise can be ascribed to the skill and astuteness, or the lack thereof, of its estimating staff.

If the contracting firm obtains its work by competitive bidding, the company must be the low bidder on a sufficient number of the projects it bids if it wishes to stay in business.

However, the construction projects the firm obtains must not be priced and bid so low that the company cannot realize a reasonable profit from their performance.

In an atmosphere of intense competition, the preparation of realistic bids requires the utmost in good judgment and estimating skill.

Although negotiated contracts frequently lack the intensity of the competitive element inherent in competitive bid contracting, the accurate estimating of construction costs nonetheless constitutes an important aspect of these contracts as well.

In this environment, the contractor is expected to provide the owner with reliable advance cost information, and the contractor’s ability to do so determines in large measure its continuing ability to attract owner-clients and to be able to enter contracts with them for the performance of their construction projects.

In design-construct and construction management contracts, the contractor and the construction manager are called upon to provide expert advice and assistance with determining construction cost as the design is developed.

The advance estimation of costs is a necessary part of any construction operation and is a key element in the conduct of a successful construction contracting business.

It must be understood that construction estimating bears little resemblance to the compilation of industrial “standard costs.”

By virtue of standardized conditions and close plant control, a manufacturing enterprise can predetermine the total cost of a unit of production in an almost exact way.

Construction estimating, by comparison, involves determining prices for an environment that is far more variable.

The absence of any appreciable standardization of conditions from one project to the next, coupled with the inherently complicating factors of weather, materials, labor, transportation, locale, and a myriad of others, makes the advance computation of exact construction costs a matter much more complex than in a more controlled environment.

Nevertheless, on the whole, construction estimators do a remarkably good job, despite the numerous variables of all kinds with which they are confronted on almost every project.

While the fundamentals of the estimating process are consistent and do not change, it shouldalso be recognized that every estimator has his or her own unique approach to the estimating process, as well as his or her own subtle variations in procedure.

In addition, the policies and procedures of the construction company or of its estimating department, will determine some aspects regarding the preparation of the estimate.

It has been said, therefore, that estimating is partly an art and partly a science.

There are probably as many different estimating procedures as there are contractors.

In any process involving such a large number of intricate determinations, innovations and variations will naturally result.

The form of the worksheets, the order of procedure, and the mode of applying costs all are subject to considerable diversity, with procedures being developed and molded by the individual estimator and the individual construction company to suit their own needs.

However, in a move designed to eventually introduce a measure of uniformity to construction estimating, two national trade groups representing estimators have agreed to produce a set of uniform standards for the practice of construction estimating.

The American Society of Professional Estimators (ASPE), representing estimators who work for contractors, and the American Association of Cost Engineers (AACE), made of up estimators working for large industrial owners, have agreed to a joint effort in this regard.

It should also be noted that computer hardware and software play an indispensable role in the estimation of construction costs in construction professional practice today and that there are numerous different elements of hardware and software in widespread usage by contractors.

However, the basic component elements of producing an estimate are the same; different computer applications simply manage the data in different ways.