Today we learned about a vital part of the construction industry: cost estimation and pricing. Mr. Mohammed Naim presented this lecture detailing the process of proper cost estimation. The importance of correct pricing can not be overstated. A contractor depends heavily on this to be profitable.
We first discussed the process of tendering (bidding). When a job goes to tender, it means that a client has sent out drawings and other contract documents for contractors to review. If DCC believes that a job is of high value, they may choose to start the process of pricing it. The final price will include all of DCC’s costs (materials, labor, overhead) as well as uplift, or profit.
The process of pricing a job is difficult. Starting with all of the tender drawings and documents, DCC must check or prepare a detailed Bill of Quantities (BOQ). The BOQ lists the amount of materials that will be needed on the project from volume of concrete to the number of sinks. Careful and thorough analysis of the drawings is necessary to perform proper quantity take-offs. This makes it one of the lengthiest and most challenging parts of the cost estimation. After a detailed BOQ has been completed, DCC must contact suppliers and subcontractors to obtain quotes for different items and parts of the project. Using these prices, the unit rate must be computed for each item. The unit price takes into account all costs associated with an item, including materials and labor. The unit rate can then be used to price the BOQ and add uplift, which will comprise the selling BOQ. All of this information will then be part of the tender submission to the client.
Cost estimation and pricing is a tricky process that requires patience and attention to detail. Mr. Naim said preparing a tender for some of the larger projects may take up to two months! Clearly, this makes tendering any project a major time and resource investment for any company. It was enlightening to see how important cost estimation really is to DCC.
We first discussed the process of tendering (bidding). When a job goes to tender, it means that a client has sent out drawings and other contract documents for contractors to review. If DCC believes that a job is of high value, they may choose to start the process of pricing it. The final price will include all of DCC’s costs (materials, labor, overhead) as well as uplift, or profit.
The process of pricing a job is difficult. Starting with all of the tender drawings and documents, DCC must check or prepare a detailed Bill of Quantities (BOQ). The BOQ lists the amount of materials that will be needed on the project from volume of concrete to the number of sinks. Careful and thorough analysis of the drawings is necessary to perform proper quantity take-offs. This makes it one of the lengthiest and most challenging parts of the cost estimation. After a detailed BOQ has been completed, DCC must contact suppliers and subcontractors to obtain quotes for different items and parts of the project. Using these prices, the unit rate must be computed for each item. The unit price takes into account all costs associated with an item, including materials and labor. The unit rate can then be used to price the BOQ and add uplift, which will comprise the selling BOQ. All of this information will then be part of the tender submission to the client.
Cost estimation and pricing is a tricky process that requires patience and attention to detail. Mr. Naim said preparing a tender for some of the larger projects may take up to two months! Clearly, this makes tendering any project a major time and resource investment for any company. It was enlightening to see how important cost estimation really is to DCC.
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