GENERALLY PRICING

CECOST 430
 INTRODUCTION

The first stage consists of preparing the takeoff for pricing

by sorting and listing all takeoff items under the trade
section breakdown, and the second stage consists of
pricing this sorted list of items, which is referred to as the
recap.
The nature of the recap breakdown depends on the type of
work involved in the project and the type of contract the
contractor will be entering into with the owner.
 TRADE BREAKDOWN OF RECAP
• 1. Excavation and backfill work
• 2. Concrete work
• 3. Formwork
• 4. Concrete finishes
• 5. Carpentry work
• 6. Miscellaneous work
 five price categories to be considered in estimating:
• 1. Labor
• 2. Equipment
• 3. Materials
• 4. Subcontractors
• 5. Job overheads
• We will consider the
When a contractor is working under the terms of a lump-
sum contract, there are three general reasons why actual
costs may exceed estimates:
1. Takeoff quantities are too low.
2. Actual productivity does not meet anticipated productivity.
3. Subcontractors or material suppliers fail to meet
obligations.
 Pricing Labor and Equipment

The first method the estimator uses productivity rates to

convert the takeoff quantities into labor- hours and
equipment- hours, and then applies wage rates and
equipment rates to the total hours to obtain the estimated
labor and equipment prices for the project.
The second method of pricing labor and equipment makes
use of unit prices that are applied to listed takeoff quantities
to calculate the total labor or equipment price for the work
involved.
 The two factors are as follows:

1. The hourly wage rate of labor or hourly cost of equipment

2. The productivity of the labor or equipment
 Wage Rates
• All of the labor unit prices used in the estimates that follow
are derived from the base wages of the labor craft
involved.
• In addition to the base wage rates, employers also have
to consider such items as Social Security tax,
unemployment tax, workers’ compensation insurance,
liability insurance, and other fringe benefits. The amount
of these additional contributions, referred to as payroll
additive
 Equipment Rates

Accurate predictions of future hourly costs of construction

equipment can be just as difficult to evaluate as future wage
rates.
Rental rates of equipment can also be difficult to tie down
because they fluctuate in response to a number of variables
including the level of economic activity in the
con_x0002_struction industry, interest rates, taxes, import
duties, and even construction labor wage rates.
 Equipment Rates

The rental rate at the time the work is executed, therefore,

can be quite different from the rate that is forecast at the
time of the estimate. The risk of rental rate
in_x0002_creases can be managed to some extent by
procuring guaranteed price quotations from rental
companies for major equipment on some projects, but these
firm price
agreements are not always obtainable.
 Productivity of Labor and Equipment

The productivity of labor and equipment is influenced by a

large number of factors that can differ greatly according to
the time and place of a project.
These factors can be classified into two main groups:
job factors and
labor and management factors.
 job factors

Examples of job factors include the following:

1. Weather conditions expected at the site
2. Access to and around site
3. Site storage space
4. Nature of the project, its size, and its complexity
5. Distance from materials and equipment sources
6. Wage and price levels at the job location
 Use of Cost Reports

If an estimator had a range of accurate historic prices for

the labor or equipment requirements of each work item on a
project, then by accounting for all the factors and variables
associated with that project, the estimator would be able to
determine the price of each item with some confidence.
 But how does an estimator come by such a range of
prices?
In order to be effective, a historic cost database for use in
estimating has to be assembled systematically; a
haphazard collection of previous project costs gathered
using different systems of measurement and costing will be
more of a hindrance to good estimating than a help.
A satisfactory cost database can only be developed
from an accurate and consistent cost-reporting system,
which is pursued in four key processes:

1. The priced takeoff items on the estimate are coded to

produce the project budget. Some of the estimate takeoff
items may be combined to provide a simpler breakdown
that is easier to use than a detailed estimate in the
cost_x0002_reporting system.
2. As the work is performed on the project, labor- hours and
equipment- hours expended are coded to the applicable
work items of the budget. This coding function is best
performed by the site supervisors who are responsible for
the work in progress as they are in the best position to
determine exactly which work item their work crews are
working on.
3. The quantity of work done in each of the work items
underway is measured in accordance with the same rules
of measurement followed by the estima_x0002_tors.
Measurements that are most consistent with the estimate
quantities will be obtained if work completed is measured by
estimators, but this is generally not possible, so site
personnel usually have to perform the task.
4. Company accountants apply wage rates and equipment
prices to the hours coded. This determines the labor cost
and equipment cost for each work item. Then these costs
are combined with the work quantities to generate
the actual unit costs of the project work items.
 Strategy for Pricing Labor and Equipment

One pricing strategy used by some contractors, especially

when producing a com_x0002_petitive bid, consists of
adjusting unit prices for job factors and management factors
that are relatively certain and then being optimistic with the
other factors. For ex_x0002_ample, the estimator may
know that access to the site is good, the size of the job is
small, and supervision and labor at the site will be good
quality; item prices are thus adjusted to reflect the effect of
these factors.
 Pricing Materials

The materials used in a construction project fall into two

broad categories:
-> materials that form part of the finished structure
such as concrete,
-> materials that are consumed in the construction
operations such as formwork and fuel oil.
When pricing any materials, there are a number of
questions that should be answered before the prices are
used in an estimate:
1. Do the materials offered by the supplier comply with the
specifications?
2. Do the prices quoted include delivery of the materials to
the site?
3. Can the contractor rely on the supplier’s prices to remain
firm until the
owner awards the contract?
4. Does the supplier’s price include state or city sales
taxes?
5. Will there be any storage or warehousing requirements
for the materials?
6. What are the vendor’s terms of offer?
 labor and management factors

Examples
1. Quality of job supervision
2. Quality of job labor
3. Motivation and morale of workers
4. Type and quality of tools and equipment
5. Experience and records of similar projects in the past
 Owner- Supplied Materials

The contractor is often told in no uncertain terms what

ma_x0002_terials are required for the project, what brands
are acceptable, and, sometimes, where
to procure the goods required.