When preparing a bid, estimators create a general framework with cost recovery in mind. Estimators should therefore have knowledge of the technologies involved in building the project, which allows them to divide projects into individual pieces of work, namely physical subcomponents, systems, etc These work packages will naturally consume resources generating costs that must be recovered from the client.
What are the steps followed to develop the estimate?
A chart of cost accounts acts as a guide or checklist as the estimator reviews the plans and specifications to highlight which cost centres are present in the contract being estimated.
The estimator should generally follow certain steps in developing the estimate:
Break the project into cost centres.
Estimate the quantities required for most cost centres that represent physical end items which is commonly called quantity takeoff. For those cost centres that relate to nonphysical items determine an appropriate parameter for cost calculation, namely, the level of builder’s risk insurance required by the contract or the amounts of the required bonds.
Price development for physical work items may require an analysis of the production rates to be achieved based on resource analysis. The estimate should therefore:
Assume work team composition to include number of workers, skilled and unskilled, and equipment required.
Estimate an hourly production rate based on the technology being used.
Make an estimate of the efficiency to be achieved on this job, considering site conditions and other factors.
Calculate the effective unit price.
Calculate the total price for each cost centre by multiplying the required quantity by the unit price. This multiplication is called an extension and this process is called running the extensions.
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