Organizing a complete estimate

A complete bid estimate for a building can contain thousands of line items, quotes from forty or fifty trades and suppliers, several layers of indirect costs and markups, and a trail of addenda and clarifications. Without a clear structure, items are counted twice, others are missed entirely, and no one can check the number in the few hours before it is submitted. This lesson is about building that structure: reviewing the documents, dividing the work into packages, deciding what to self-perform, setting up the estimate summary and protecting the estimate against the most common errors.

CON-200 introduced MasterFormat, UniFormat, measurement rules and cost codes for organizing quantities. Here the focus moves up a level, from organizing a takeoff to organizing an entire bid that a team can build in parallel and a senior estimator can review in an afternoon.

Reading the bid documents as a whole

Before measuring anything, the estimating team should read the bid documents as a whole. A bid package normally includes the invitation or instructions to bidders, the bid form, the contract form and its supplementary conditions, the general requirements (Division 01), the technical specifications, the drawings, reports such as the geotechnical investigation, and any addenda. Each part affects price.

A disciplined estimator keeps a running list of questions, conflicts and assumptions while reading. Questions go to the consultant before the deadline for questions; the answers usually come back as addenda that apply to every bidder. Assumptions that cannot be resolved become clarifications or exclusions, although many public tenders forbid qualified bids, so the estimator must price the most reasonable interpretation instead of qualifying the bid (Lesson 10).

Dividing the work into packages

A building estimate is built from work packages, each of which will be priced either by the general contractor's own forces or by a subcontractor. The packages should match the way the work is normally bought in the local market: a drywall subcontractor in one city may also supply and install ceilings and insulation, while in another those are separate trades. Packages that do not match local trade practice produce quotes that overlap or leave gaps.

Each package needs a scope sheet (also called a bid package description or trade scope) that tells subcontractors exactly what to include. A good scope sheet lists the specification sections, the drawings, specific inclusions and exclusions, and interfaces with other trades such as who supplies blocking, who cores floor penetrations, who supplies access doors and who provides temporary heat. Lesson 7 covers scope sheets and the leveling of subcontractor quotes in detail.

Self-perform or subcontract?

Most general contractors self-perform only a few trades, typically concrete, carpentry, general labor and sometimes structural steel erection or masonry, and subcontract the rest. The decision for each project depends on several factors.

• Capability and capacity: whether the firm has foremen, crews and equipment available for the duration of the work.
• Control of the schedule: self-performing critical-path work such as foundations and structure gives the contractor more control.
• Price and risk: self-performed work carries productivity risk but no subcontractor markup; subcontracting transfers productivity risk but adds the subcontractor's overhead and profit and the risk of subcontractor default.
• Bonding and cash: subcontractors may be asked for bonds; self-performed work ties up the contractor's own working capital.
• Competitive position: if the firm's self-performed concrete is cheaper than the market, it gains an advantage on concrete-heavy projects.

Many contractors price their own forces and also solicit subcontract quotes for the same work, then decide on bid day which is lower once risk is considered. When comparing, the estimator must add the costs that a self-performed price carries but a subcontract price includes: supervision, small tools, equipment, safety, and the contractor's share of insurance and overhead.

The estimate summary

The estimate summary, sometimes called the recap or bid summary sheet, is the single page that rolls all the work up to the bid price. It should be set up at the start of the bid, not on bid day. A typical summary lists each package with its source (self-performed or subcontract), the amount carried, the bidder carried, and a status (quote received, plug, allowance). Below the direct costs come general conditions, contingency, overhead, profit, bonds, insurance and taxes, each calculated on a clearly defined base.

Order matters. Markups are usually applied in a set sequence: for example, overhead on the subtotal of direct costs and general conditions, profit on the subtotal including overhead, and bond and insurance premiums on the total including profit. Sales tax on materials is normally built into the direct cost of each item because in most states the contractor pays it as the consumer of the materials; Lesson 9 explains the exceptions.

# Roll up an estimate summary, applying each markup to a defined base
direct = {"Self-performed": 1_920_000, "Subcontracts": 6_480_000}
general_conditions = 690_000
rates = [("Contingency", 0.02), ("Overhead", 0.04), ("Profit", 0.035), ("Bond and insurance", 0.014)]

running = sum(direct.values()) + general_conditions
print(f"Cost of work            {running:>12,.0f}")
for name, r in rates:
    add = running * r
    running += add
    print(f"{name:22s}  {add:>12,.0f}   running total {running:>12,.0f}")
bid = round(running, -4)
print(f"Bid price (rounded to $10,000): {bid:,.0f}")
print(f"Total markup on cost of work: {bid / (sum(direct.values()) + general_conditions) - 1:.2%}")

Cost of work               9,090,000
Contingency                  181,800   running total    9,271,800
Overhead                     370,872   running total    9,642,672
Profit                       337,494   running total    9,980,166
Bond and insurance           139,722   running total   10,119,888
Bid price (rounded to $10,000): 10,120,000
Total markup on cost of work: 11.33%

Because each markup is applied to a running total, the combined effect of four modest percentages is about 11.3 %, more than their simple sum of 10.9 %. Whatever method a firm uses, it must be applied consistently and understood by everyone who touches the number, because bid-day adjustments are made on the summary sheet under time pressure.

Alternates, separate prices and unit prices

Many bid forms ask for more than a single lump sum. Alternates (also called alternative prices) ask how much the price would change if a defined change were made, such as substituting a different roofing system or deleting a canopy. Separate prices ask for the cost of a defined portion of the work, such as a parking lot that may or may not be built. Unit prices ask for rates to add or delete quantities, such as the cost per cubic meter of rock excavation if more rock is found than expected.

Each must be priced with the same care as the base bid, because owners often accept alternates and unit prices become contract rates. An alternate that deletes work should credit the full cost including its share of general conditions and markups only if those costs really go away; an alternate that adds work must include the added markups and any extra time. Unit prices for additional quantities should reflect the cost of small extra quantities, which is usually higher per unit than the average cost of the base work, while unit prices for deletions may be lower. Some owners evaluate bids on the base price plus selected alternates, so a poorly priced alternate can change who wins.

Estimating software and spreadsheets

Estimating platforms range from spreadsheets to dedicated software with digital takeoff, assemblies, cost databases, bid-day leveling and integration with accounting and scheduling. CON-200 introduced the categories; for a complete bid the important questions are whether the tool supports the firm's cost code structure, whether several estimators can work on the same estimate at once, whether trade quotes can be leveled inside it, and whether the final estimate can be exported cleanly to the project budget.

Whatever the tool, the same disciplines apply: one source of truth for each number, no hard-typed values hidden in formulas, consistent units, a change log for addenda, and a summary that ties every line back to its detail. Many bid-day disasters come from spreadsheet errors: a range that stops one row short of the last line, a markup applied twice, a quote entered in the wrong package. Simple controls catch most of them.

Managing addenda

Addenda are formal changes to the bid documents issued before closing. Late addenda are a fact of bid life, and they cause many pricing errors. Each addendum must be logged, read by every estimator whose packages it affects, forwarded to the relevant subcontractors and suppliers, and its cost impact tracked. Most bid forms require the bidder to acknowledge every addendum by number; failing to acknowledge one can make the bid non-compliant. On bid day, the estimator should confirm that every trade quote received acknowledges the latest addendum, or adjust the quote for any addendum it does not include.