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Types of Estimates

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There are several different types of estimates which roughly correspond to design development.  The conceptual estimate is typically the most coarse.  The infamous "napkin sketch" is all you can hope for here.

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So this is our floor plan for the nine story office tower...wait, why are you crying?

 

I've had a few that looked more like grease stains than a plan.  These are notoriously short notice and poorly defined.  When used purely for a rough idea of cost, the conceptual estimate is very helpful.  There is a difference between a conceptual estimate and a Design-Build estimate.  Conceptual estimates should not be used for contracting purposes.  They're a courtesy to provide feedback to a client's design team.

Design Build

In a Design-Build bidding a narrative of what the client wants is provided and it's the General Contractor's (GC) responsibility to figure it all out.  In some cases, specific trades are singled out to be Design-Build when the owner has hired an Architect but would rather not hire an Engineer directly.  Design Build projects are sometimes called "Turn-key" meaning that the client has to do nothing but pay the bill and the GC will turn the keys over to them.

Unit Pricing

Unit price bidding is popular in certain market segments.  I've encountered it in Civil construction, government-funded projects, large-scale commercial developer projects, and in situations where a Landlord and their tenant(s) must split the bill.  On the surface unit pricing seems like it's an easy thing to do.  There are two reasons this can be risky.  The first is that anything you write down will be used to the owners advantage.  Unit pricing is used as often for deducting work as it is adding work.  It's common for the final arrangement to be unprofitable as a result.

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The second reason its risky is that unit pricing is rarely aligned with industry standard take offs.  For example: "Provide the unit price for a parking lot pole light."  The client is expecting a price for a working pole light.  They aren't considering that the light requires circuiting that's priced by length.  Since it doesn't tell you the length (because they don't know themselves), the unit price becomes a judgment call.  As always read the subcontractor exclusions and carry them into your proposal where appropriate.

Hard Bidding

Hard bidding is the absolute most common format.  The plans and specifications are taken as the literal minimum.  The low bidder wins, simple as that.  Everything from garden sheds to airports are bid this way.  At every level this is a stressful undertaking.  For General Contractors, they have to be able to input all of the various trades, track the low bid, figure out if the bids are complete, compile and transmit the bid to the client.  Depending on the market, the job, and the attention that's been drawn to it, this may result in a deluge of last-minute proposals any one of which will make or break your chance of being the low bidder.  It's exhilarating when everything is working, and it's desperately stressful when something breaks down.  It follows that these are the most detailed estimates.  I'll be posting with helpful tips, tools, and techniques in the future.

Negotiated Agreement

Negotiated work is a contractual relationship between the owner and the General Contractor.  The owner has agreed not to put the work out to bid in exchange for unfettered access to the bidding information.  These are often called "open book" bids.  Since the General Contractor is not concerned with beating their competition, they can focus on doing their utmost to reduce the potential for change orders, work delays, and unspecified materials being a part of the project.  Here the General Contractor is trying to fill in any gaps left by the plans and specs.  Typically the GC will be more leisurely about reviewing the bids and they often ask more questions of subcontractors.  They "have the job" but they must price it right for it to be profitable.  These estimates are not only detailed, they often go above and beyond to offer solutions to problems found in the plans.

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For my business, rule #1 is 50% up front, that weeds out so many of the design change issues, questions and fakers, I charge for estimate extra time, and also for test pieces, I don't get a lot of commisions due to this, but I also don't have the stress and frustration. The information above is excellent, that info, along with a good contract, (and understanding contract law), is vital to any business. Understanding your client base, as well.

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