Prof. Awad S. Hanna S TEPS IN THE D EVELOPMENT OF A D ETAILED E STIMATE

Prof. Awad S. Hanna 1. Study project documents 2. Develop Work Breakdown Structure (WBS) and Cost Code 3. Determine quantity take off 4. Price materials, equipment and labor 5. Define work done by others and obtain quotations

Prof. Awad S. Hanna Indirect Job Labor Project manager and/or Superintendent Project engineer Draftsman Timekeeper Office manager and/or secretary Safety engineer and/or first aid attendant Watchmen Indirect Job Equipment Project manager’s vehicle Pickup truck Site maintenance Site Facilities Construction Sign Job site fence Construction access/entrance Portable toilets Office trailers: contractor’s,engineer’s, first aid, change room and lockers Telephone service Temporary electric utilities Shop or maintenance facility Fuel for general job vehicles Materials Handling and Storage Material storage area & bins Warehouse facility Subcontracted Indirect Cost Disposal services Soil or rock borings Laboratory tests –Soil samples –Rock samples –Concrete samples Surveying service CPM scheduling services Job photographs Models Artist renderings Bonds and Insurance Performance bond Builders rick Insurance Contractor’s liability insurance Permits Building Site improvement Road or entrance Additions for Remote Sites Communications Living quarters for workmen Kitchen and food service Entertainment Transportation Temporary power Water supply Waste disposal 6. Determine Job Overhead Cost

Prof. Awad S. Hanna 7. Determination of Markup  Markup is an allowance for: a. Home Office overhead b. Contingency c. Profit  Markup range from 5% to 20% of the total project costs

Prof. Awad S. Hanna a. Home Office Overhead Salaries Executive staff marketing staff Accounting staff Estimating staff Legal staff Support staff: clerical, data processing, etc. Facilities Office purchase or rental Furniture purchase or rental Data processing equipment Utilities Telephone, fax, etc. Heating & air conditioning Illumination Water Taxes Company Income Property Insurance Company policies not chargeable to projects Benefits Pension & retirement program Profit sharing & bonus plans Health insurance plan Transportation Company aircraft Company automobiles Company trucks Commercial travel Marketing Advertising Estimating Other promotional costs Maintenance Maintenance& overhaul, not just chargeable

Prof. Awad S. Hanna b. Contingency  To cover unexpected risk, error and omission, and contract risk

Prof. Awad S. Hanna c. Profit  Profit varies from 1% to 10% or more  Factors affecting profit  Need for work  Contract type  Total bid value  Risk  Competition  Economic Condition

Prof. Awad S. Hanna 8. Determination of Contract Bond Cost  The contract document usually requires as a minimum a “performance bond” and a “payment bond.”  Bond cost ranges from 0.5 % to 1% of the total contract price.

Prof. Awad S. Hanna Example of Determining Total Contract Price  Assumptions 1. Sales Tax = 6% of Direct Material Costs 2. Job Overhead Labor Costs = 25% of Direct Labor Costs 3. Job Overhead Management Costs = 10% of Direct Labor Costs 4. Markup = 20% of Total Project Costs Office O.H.= 10% Contingency= 2% Profit= 8% 5. Bond = 0.5% of 1% of Total Project Costs

Prof. Awad S. Hanna Example of Determining Total Contract Price (cont.)  Estimated Directed Job Costs 1. Direct Labor Costs $25, Direct Material Costs 15, Direct Equipment Costs 13,000 (Owning & Operating Costs) 4. Subcontract Costs 20, DIRECT COST SUBTOTAL $73,670

Prof. Awad S. Hanna Example of Determining Total Contract Price (cont.)  Job Overhead Costs 6. Sales Tax [6% of (2)] $ Job O.H. Labor [25% of (1)] $ 6, Job O.H. Management $ 2,567 [10% of (1)] 9. Total Job Overhead Costs $ 9, Total Estimated Job Costs $ 83,555 [(5) + (9)] 11. Total Cost [(10) x 1.2] $ 100, Bond [0.005 x (11)] TOTAL CONTRACT COST $ 100,767 [(11) + (12)]

Prof. Awad S. Hanna 14. Markup [(11) - (10)]$16,621 Breakdown of Markup 14a. Office O.H. [0.10 x (10)] $ 8,356 14b. Contingency [0.02 x (10)] 1,671 14c. Profit[0.08 x (10)] 6,684 Example of Determining Total Contract Price (cont.) Bid Factor = DIRECT COST SUBTOTAL TOTAL CONTRACT COST 73, ,767 ==1.368

Prof. Awad S. Hanna Total Components of Cost within a bid Insurance Training Salaries Etc. Office equip. Testing Parking lot Access road Etc. Project office Testing Janitors Portable toilets Etc. Support constr. Guard Materials Labor Installed equip. Constr. Equip. markup Bid Price Project Cost Overhead Support structure Subcontractors Force account executed Work packages Work packages Work packages Work packages Direct costsJob indirects + = Main Office Job