5/14/2020 How to Prepare an Accurate Cost Estimation for your Construction Bid - Sihela Consultants

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How to Prepare an Accurate Cost Search …

Estimation for your Construction Bid
Posted by Amila Gamage Pre-Contract, Tender Stage bid, estimation
Posted on February 5, 2020

I am Amila Gamage
,the founder and
owner of Sihela
What is the secret of wining a competitive bid? While price strategy Consultants who is an
plays a major role it is also important to prepare an accurate cost experienced
estimation.If your estimation is not accurate then winning the tender is Contracts
useless and even you can end up loosing money.This is why it is Engineer/Trainer/Quan
important that you know how to prepare an accurate cost estimation for Surveyor.I provide
your construction bid. consultation,quantity
surveying services
Let’s discuss! and workshops for
construction
companies.
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5/14/2020 How to Prepare an Accurate Cost Estimation for your Construction Bid - Sihela Consultants

Preparing an accurate cost estimation for your construction bid is really FOLLOW
important due to many different reasons.First,you want to win the FREE
construction bid.After that you need to deliver the construction project COURSE
within the prepared cost estimation without losing money.Therefore you
need to have an accurate estimation for the construction project you are
bidding due to the below reasons.

1. in order to win it
2. to deliver it without much trouble within your cash flow. Thank
you!
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Construction
Disputes : What
Tendering stage is one of the competitive and important phase for any are the
construction project. At this stage, the owner or developer will be able to Common
choose a contractor who can deliver the project scope within the Causes
specification and as scheduled. What are
Liquidated
Although, it is not required to award any construction project to the Damages in
lowest bidder, submitting an accurate bid is really important to be Construction
successful in any tender. Contracts

One of the keys to be successful at competitive bidding is to prepare an Impact of

accurate cost estimation for the project. For this, both accurate quantities COVID-19 Virus
and accurate rates are required. It is also essential to understand the on Construction
project and suitable construction method in order to foresee the Projects
additional costs. When you have the right picture of the construction How to Prepare
project, you will reduce the risks of preparing inaccurate bid estimates. an Accurate
Cost Estimation
Having experience in participating in many tender submissions in for your
construction sector, below I gathered some helpful tips which every
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5/14/2020 How to Prepare an Accurate Cost Estimation for your Construction Bid - Sihela Consultants

bidder should follow in order to prepare an accurate cost estimation for Construction
their tender submission. Bid

My First
Why is it important to Teaching
Experience as a
prepare an accurate cost Trainer for

estimation for construction Certificate in

Quantity
tenders? Surveying
Course
First, what makes an estimate accurate? As a contractor, you want to win
the tender. That is number one priority for any bidder. However, by only
having an accurate estimate may not help you to win a project as there are ARCHIVES
other qualifications which you have to fulfill.These qualifications include
previous experience in similar type of projects and financial capability May 2020
and many more.
March 2020

Benefits of an accurate February 2020

October 2019
estimation September 2019
You may not be the lowest bidder. But, with an accurate cost estimate,
August 2019
you will make sure that you are not among the highest bids. You will not
submit a too low bid which is unrealistic with current market rates. April 2019

July 2018
Further, you will not forget to add costs for important items for the
project. If your cost estimate is without such mistakes, then your September 2017
company is not at risk if the project is awarded in future. You will not
August 2017
have the burden of a construction project which lose money.

How to prepare an accurate CATEGORIES

cost estimation for a Contract

construction project? Administration

Disputes
With my experience, I know that preparing an accurate cost estimate is a
challenge. You need to focus on the project, understand the scope and Events

possible construction methodology, source the material suppliers and Post-Contract

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evaluate the risks. And don’t forget to decide the overhead costs Pre-Contract
accurately which is essential to run the project.
Press Releases

However during competitive bidding,you will have really short time Projects
period to do all these.You have to take account of the addendum issued
Tender Stage
during the pre-bid period.Therefore if you do not have an idea about how
to prepare an accurate cost estimate and if you don’t know the specific Uncategorized
areas that you have to focus on,there are many chances to make mistakes.
Workshops

When you do not miss adding cost for any necessary item for the
construction and when you make sure to use current market rates for
GET IN
your estimate, you are in the right path for preparing an accurate cost
TOUCH
estimate.

+65
Below are some of the things to know before you prepare your tender
estimate. contact@sihelaconsultan

1. Make sure your quantity take off is accurate www.sihelaconsultants.c

Address

Quantity take off is really important for any tender estimate to be

accurate. This is really important in Lump Sum projects as the contractor
has to evaluate the project documents and drawings in order to prepare
his project proposal.

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If you bid using traditional bidding method where you get a BOQ to price
then you will not have the burden of taking off quantities.But most
countries use the Lump Sum contract model for most projects.In such
contracts you need to be accurate with your quantities.

2. Prepare the activity breakdown correctly

If you miss out any construction activity which is essential for the project,
you will also lose money on it. Therefore, be sure to include all
construction activities in your BOQ in order to estimate the accurate
price.

3. Understand the tender document

Although it sounds like construction estimates require a BOQ with

accurate quantities and rates, it is also essential that you understand the
project requirements. Additional costs may involve for the construction
due to complexity of the project. Therefore read and understand the
tender documents and its requirements before you prepare your cost
estimate.

4. Follow the specifications and drawings

It is important to understand your tender documents. While you don’t

have time to read all tender documents during the tender stage, it is
important to read and understand the drawings and specifications.

You have to include the cost for products that follows the specifications.
Depending on the quality which Employer requires, the rate can be
different.It is also necessary to understand the specific clauses applicable
for the construction contract agreement if you win the project.Such
important things to know include advance payment (if any) ,retention
money , progress claim submission,payment response ,liquidated
damages,time to completion,variation orders and variations etc.

5. Don’t forget to get quotations from Subcontractors/suppliers

During the tender stage, it is also essential to contact the potential

subcontractors and suppliers for quotations. If you receive at least 3
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quotations for each of the major items, then you can compare the current
market rates before you choose which one to use in your tender estimate.
Also, for items which you have to build up your own rates, be sure to use
accurate quantities and labour output.

6. Add machinery and equipment cost accurately

Even though your cost estimation is solely depend on the subcontractors’

quotations, don’t forget the heavy machinery and equipment that may
require for the project. Include the cost for renting such equipment
depending on your construction methodology.

Sometimes, subcontractor rates exclude machinery and they expect main

contractor to supply those during construction stage. Identify such items
in your project in order to not to miss adding costs.

7. Understand the current fluctuations in material pricing

For some materials such as steel reinforcement, price fluctuations are

allowed in some projects. However, it is important to understand the
current market trends and possible risks in price fluctuations.

8. Check the availability of materials and other resources

Scarcity of resources will directly affect the cost of such. In case if your
project require such materials, be sure to check and study how to deliver
the material to the site. Include any delivery charges, transport and other
related costs such as loading and unloading to your pricing.

In case if any material is required to import from another country, check

the custom duties and taxes which you have to include in your estimation.
For such items it is always important to request quotations from potential
suppliers.

9. Use a Master Checklist

In your tender cost estimate, you need to include possible costs for
overhead. Other than that, there will be costs for authority approvals and
permits. Depending on the projects you carry out and depending on the
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location (due to different laws and regulations), these costs can be

different. However, identify such costs for any project and include the
price for those. In order to not to miss such items, it is always better to
have a master checklist which you can check for each cost estimate. This
will avoid missing out any major item from your cost estimate.

10. Identify the risks

Before you start preparing the cost estimate for your project, understand
the nature of the project. Identify the possible project risks. All such risks
come with a cost. Therefore include such risks in your estimate in order to
avoid the burden of carrying out a project which is not profitable.

11. Use Unit Cost Estimates as Guides only for checking

purpose

Don’t use unit cost estimates to prepare your estimate. This will be a risk
at bidding stage. Usually such unit cost estimates are used during the
planning or concept stage in order to roughly estimate the project cost.

Therefore use of such unit cost per square foot (or unit cost per square
metre) by multiplying the floor area to get the final estimate is really a
bad way to prepare your bid.

However, you can use such unit cost to check the accuracy of your
estimate. This will be like a thumb rule to compare your cost estimate.
But, remember to use a similar project to obtain the unit cost for such
practice. If your current project involve different new features where
there will be higher costs involve, this method will not give a correct
idea.It is simply an approximate estimate not an accurate estimate!

12. Pay more attention to Cost Centers

Consider the whole project and identify the cost centers. These are the
areas that involve the highest percentage of overall project cost. If you do
not estimate these construction activities accurately, there is more risk of
losing more money than from any other activity include in the same
project. Therefore spend more time for such areas of the project and
estimate accurately. Add more accurate rates for resources such as
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5/14/2020 How to Prepare an Accurate Cost Estimation for your Construction Bid - Sihela Consultants

labour, material and machinery. Check sub-contractors and suppliers for

their quotations. Get help from site personal if they have experience in
similar nature of work. In such way, you will ensure these items are
correctly estimated.

Wining the Construction

Bid
Finally, preparing an accurate cost estimate is the foundation for
successful bidding. You may win or lose the project. But, you will not have
the burden of winning a project which your company lose money.

Once there is an accurate cost estimation, it is up to you or your

management team to use strategies to prepare the final bidding amount.
Adding high or low profit percentage will affect the final amount of the
bid. In this stage, there are strategies to follow in order to submit a
competitive tender bid.When you know right strategies to prepare your
tender cost estimation,wining traditional method tenders are not that
difficult.I know that with my years of experience in preparing tenders for
projects. 🙂

Do you have other ideas to share?Please comment below.

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About Author

Amila Gamage
A well experienced Contracts Engineer/
Trainer/ Quantity Surveyor with over 16

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years of industry experience in both high rise

buildings and civil engineering projects.

Comments

Azami Reply
February 5, 2020 at 5:15 pm

Very good explanation

Amila Gamage Reply

February 5, 2020 at 11:55 pm

Thanks for this comment.Glad the article

is helpful..

Javed Iqbal Reply

February 25, 2020 at 9:08 pm

Very true, i have done number of projects with nayyar

ali dada and associates pakistan.

Javed Iqbal Reply

February 25, 2020 at 9:08 pm

True

Jeanette Black Reply

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5/14/2020 How to Prepare an Accurate Cost Estimation for your Construction Bid - Sihela Consultants
April 15, 2020 at 4:22 am

As a Newbie, I am continuously browsing online for

articles that can benefit me. Thank you!

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