Preparing an accurate tender estimate is a complex task. It involves examining the construction drawings and specifications to identify various items of work. It also includes conducting market surveys for labour, plant and materials.
It is important that the contracting agency follows a well-defined process for preparing and awarding contracts. This helps to ensure that bid prices are competitive and accurate.
1. Requirements
The pre tender estimate must be based on the detailed design and fully developed specification levels to ensure that it is a accurate reflection of the construction methodology. It should include a schedule of the basic costs, at the time of tender submission, of plant and equipment, labour and materials. It should also include the proposal for site overheads, staff offices, stores and accommodation. It should also include a list of proposed sub-contractors and their estimated costs as well as the description of any specialist consultants and their costs.
Research has shown that a good cost planning process will help to prevent unpleasant consequences such as delay, claims and disputes. It can also reduce the need for contract modifications (Skitmore and Picken 2000).
The group of factors related to external factors and market conditions was ranked first by both clients and consultants with RIIs of 0.7594 and 0.740 respectively. The material and closure and blockade factor is important as it explains that the availability of construction materials is critical. Any shortage of these materials would result in price escalation which in turn, could result in project delays.
2. Scope of work
A thorough analysis of the work items involved is required to prepare a pre tender estimate. This includes examining the drawings and specifications to identify the various construction activities to be undertaken, assessing rates for labour, plant, materials, sub-contractors and site overheads. Addition of these to the direct costs produces the construction cost component of the engineer’s estimate. A mark-up for overheads and profit is then decided upon and finalised to produce the tender price.
The preparing of a Bill of Quantities (BOQ) is also an important part of the pre tender estimate preparation. The BOQ is a listing of the quantities to be included in the contractor’s bid and should be prepared using standard unit values. This ensures that all items are priced on the basis of a similar structure and assists contractors to compare and assess their bids against each other.
3. Method of payment
The method of payment of a project affects its total cost. This is because contractors may increase the costs of construction work to cover their risks or as a result of changing market conditions. During the preparation of a pre tender estimate, it is necessary to consider how the project will be paid for. This will help to avoid under-estimating or overestimating.
The final price of a construction project includes several elements: Direct costs, office overheads and mark-up (margin). The former refers to the labour and plant cost of the contractor and is calculated using the bill of quantities and rates prepared for the project. The latter refers to site and office overheads as well as the profit margin, risk allowance and financial charge.
The client’s method of payment is one of the least important factors for both clients and consultants. It was ranked 61st and 62nd by both groups respectively with a RII of 0.646 and 0.637. The other least influential factors are location of the project, type of structures and size of estimating team.
4. Design
The pre tender estimate is the final cost check carried out by the quantity surveyor prior to preparing the tender documentation for seeking contractor tenders. It allows a reconciliation of the cost plan with the contract provisions and provides a basis for assessing and comparing tenders when they are received.
This should be prepared after careful examination of the drawings, specifications and site investigation. It should include an identification of the various items of work, including their relative rates of execution. It should also consider alternative methods of executing the works. Finally it should consider the overheads and margin of profit.
A questionnaire survey was undertaken to determine the opinions of clients and consultants regarding the factors influencing the accuracy of pre tender estimates. The respondents had on average 20 years of experience in tendering and estimating. The results show that both the clients and consultants considered the factors related to external factors as having little influence on the accuracy of pre tender estimates. These included impact of government regulations requirements, location of project, type of structures, size of estimating team and social and cultural impact.
5. Specifications
A pre tender estimate is a quantity surveyor’s final costing of the work before receiving tenders. It includes a thorough examination of the drawings and specifications and conducting a site investigation. It also involves obtaining quotations from suppliers and subcontractors. A good quality pre tender estimate should be accurate and include all the relevant details for the construction project. It should also be prepared using a consistent methodology to ensure consistency in the preparation and review of estimates.
It is recommended that a historical bid-based estimating technique should be used as this requires the least amount of time and resources. This estimating method matches line-item quantities from the project plans to appropriate historical unit bid prices, adjusted for project conditions. However, relying solely on historical bid data may not be appropriate as future price increases can be unpredictable and are unlikely to occur through labor negotiations and material price rises.
A questionnaire survey was undertaken to obtain the opinions of clients and consultants on factors affecting the accuracy of pre-tender estimates. The results from this indicated that both groups ranked external factors and market conditions as the highest influencing factor for a pre tender estimate. Other factors that were highly ranked included the consultant’s experience and the availability of reliable cost references, clear and detailed drawings and specifications.