Contractor prequalification is a process that agencies use to identify contractors who have the capacity and work experience to bid on projects. It includes an evaluation of a contractor’s resources, financial assets, and work history.
Construction projects are often awarded using fixed price contracts that provide the contractor a fixed percentage of the direct project cost and little incentive to reduce costs. This is especially true in times of high labor wages and higher inflation rates.
Cost Estimator
Cost estimates are the best approximation of resources required to complete a project. The more accurate the estimate, the better the chance of a successful project. Estimates are normally prepared by a team of experts that includes designers, builders and suppliers. It is advisable to include field reviews as part of the process. It is also important to consult with agency specialists, such as right-of-way personnel for right-of-way acquisition costs.
The final cost estimate is known as the Basis of Estimate (BOE). It is a single number that is created through careful analysis and intricate calculations. A good BOE allows for the creation of a detailed budget to bid on projects and execute them with confidence.
A BOE should be clear and detailed in its contents, explaining the purpose of a particular estimate, the program background and system description, its schedule, its scope in terms of time and what is and is not included, ground rules and assumptions, all data sources, the estimating methodology and rationale, and a risk assessment. It should also include quantity takeoff documentation, supporting calculations and quotes.
It is a good idea to use the cost-basedestimating technique, which uses actual performance from similar types of projects and production rates from contractors’ previous bids on projects of a similar type. This method takes into account current construction methods and equipment. It also includes a reasonable value for overhead and profit. It is also a good idea to incorporate commodity price escalation clauses into contracts to mitigate the effects of price fluctuations on materials and other items.
Bill of Quantities
The bill of quantities (BOQ) is a critical tool used in construction estimation. It clearly defines the scope of work for contractors to price, and helps prevent misunderstandings or mathematical errors. Moreover, it allows the project owner to control cost estimates and budgets.
Preparing a BoQ is an iterative process that involves checking and verifying the quantities, prices and other details. The BoQ should also take into account any variations, alternates or contingencies. The format of the BoQ should be agreed upon by all parties involved in the project, including the client, contractor and architect or engineer.
A BOQ is a comprehensive document that lists the items required for a construction project, their quantities and unit prices. It is typically prepared during the project planning phase, and is used as the basis for procurement and pricing.
Using a BoQ can help reduce costs by minimizing disputes and claims during the construction phase. It can also improve project transparency and accountability by providing a detailed picture of the requirements and costs of a construction project.
The BOQ is an essential part of the tendering process and should be carefully drafted to ensure that the contracting agency receives competitive bids. It should include a reasonable estimate of risk and be expressed in year-of-expenditure dollars. It is also important to account for inflation, but it is recommended that you use an inflation rate that is realistic and not based on past historical data.
Change Orders
In construction, there are a number of circumstances that can necessitate a change in plans. For example, when the contractor discovers that site soil conditions are more unstable than expected, they may have to alter their approach to the project or use different materials. This can add time and money to the project. For this reason, it is important to have a process in place for handling these changes. This will ensure that all parties are aware of the impact and will be able to respond quickly.
Many construction contracts have specific requirements that contractors must follow for submitting change orders. These often require a detailed analysis of the impact on the critical path and the costs associated with any time extension or delay. They also require that a side-by-side comparison be shown on the current schedule and the proposed one.
In addition, a change order should include a highly detailed description of the new terms and specifications for the work that is being performed. This will help reduce risk, improve the chances of approval, and help to get the contractor paid more quickly. The change order should also clearly show the resulting cost of the modification, including any positive and negative charges, overhead, profits, taxes, insurance, and other additional costs. This can help avoid disputes down the road.
Estimating Software
The right estimation software can flip a complicated, disorganized chore into an organized and easy process. It streamlines bids and helps clients understand actual costs. The result is better project execution and profitability for your business.
Estimating software allows you to complete estimating-related tasks in less time because the numbers and calculations are automatically generated for you. This makes it easier to focus your efforts on other important activities. It also reduces human error and miscalculations that can be costly. In addition, historical cost data is available to help you determine labor and material costs with confidence.
Using a digital estimating tool also makes it simple to collaborate with team members. It enables everyone to view the same plans simultaneously, ensuring that everyone is on the same page. It can also eliminate the need for rework and duplicate work. It also makes it easier to track and document progress.
Construction estimating software can also improve procurement efficiency by automating the process of gathering information on materials and equipment needs, calculating subcontractor bids, and documenting project-related expenses. It can also reduce the risk of a project exceeding its budget by providing accurate insights into costs throughout the lifecycle of a project.
When choosing an estimating software, consider the features that are most important to your business. Different software companies package and design their products differently, so understanding the features that will be most beneficial to your company can help you narrow down your options.