1. STEPS IN THE DEVELOPMENT OF A DETAILED ESTIMATE
DR. Nabil Dmaidi
DR. Nabil Dmaidi

2. 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
DR. Nabil Dmaidi

3. 6. Determine Job Overhead Cost
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
DR. Nabil Dmaidi

4. 7. Determination of Markup
Markup is an allowance for:
a. Home Office overhead
b. Contingency
c. Profit
Markup ranges from 5% to 20% of the total project costs
DR. Nabil Dmaidi

5. 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
DR. Nabil Dmaidi

6. b. Contingency
To cover unexpected risk, error and omission, and contract risk
DR. Nabil Dmaidi

7. 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
DR. Nabil Dmaidi

8. 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.
DR. Nabil Dmaidi

9. 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
DR. Nabil Dmaidi

10. Example of Determining Total Contract Price (cont.)
Estimated Directed Job Costs
1. Direct Labor Costs $25,670
2. Direct Material Costs ,000
3. Direct Equipment Costs 13,000
(Owning & Operating Costs)
4. Subcontract Costs ,000
5. DIRECT COST SUBTOTAL $73,670
DR. Nabil Dmaidi

11. Example of Determining Total Contract Price (cont.)
Job Overhead Costs
6. Sales Tax [6% of (2)] $ 900
7. Job O.H. Labor [25% of (1)] $ 6,418
8. Job O.H. Management $ 2,567
[10% of (1)]
9. Total Job Overhead Costs $ 9,885
10. Total Estimated Job Costs $ 83,555
[(5) + (9)]
11. Total Cost [(10) x 1.2] $ 100,266
12. Bond [0.005 x (11)]
13. TOTAL CONTRACT COST $ 100,767
[(11) + (12)]
DR. Nabil Dmaidi

12. Example of Determining Total Contract Price (cont.)
TOTAL CONTRACT COST
100,767
Bid Factor = = =
1.368
73,670
DIRECT COST SUBTOTAL
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
DR. Nabil Dmaidi

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