RICS CPD - Commercial management of construction works

Budget

Almost all construction projects require a budget. This forms the basis of the financial plan, which sets limits on the amount of money available to be spent.

How tendering and estimating pocesses affect the outcome of construction projects?

Tendering and estimating processes affect the outcome of construction projects. • Underestimating a project can lead to serious issues early on in the project • Overestimating it can push the company out of the competition (tender rejections).

How to submit competitive tender

Have a proper strategyev or process to submit a competitive tender. For a contractor, seral factors will need to be considered when preparing the estimate and subsequent tender decisions: Client requirements (desired outcomes, quality and complexity.

When producing a detailed estimate, a QS will need to use of a series of documents and information about the project. Which of the following do you think are used to produce an estimate?

Contract conditions and appendices, drawings, BoQ, dayworks, contingencies, specification, prime cost sum (PC sum), provisional sums

How to produce an estimate?

As a quantity surveyor, you can use various information sources to produce an estimate: time-based rates, professional judgement, price books, output data, general in-company data, previous contracts, etc.

Cost data bases

These databases provide historical and current cost data for construction projects and can help to estimate costs for similar projects, e.g. The Building Cost Information Service (BCIS).

General in company data

Most companies that have reliable in-house company data will use this more than any other source. If you know the source is recent and you have priced the costs, you will reduce your risks.

Historical data

Information from past construction projects, such as costs and productivity rates, can be used to estimate similar projects. This can be an invaluable source of data as tender rates can be compared with actual costs.

Labour rates

Current labour rates for skilled and unskilled workers in the construction industry are used to estimate labour costs.

Market analysis

Knowledge of the local market conditions, including the availability of materials, labour, and equipment, can help estimate costs accurately.

Material and equipment quotes

Getting quotes from suppliers and equipment rental companies helps to estimate costs for materials and equipment.

Price books

Where in-house data isn’t available, you can refer to price books, e.g. Spon's Architects' and Builders' Price Book 2023. Note that the data included may not accurately reflect what’s being built.

Professional judgment

Whatever data you use, use your professional judgement. Is it reliable? Is it up to date? Has it been updated regarding location and time?

Project drawings

These provide detailed plans, sections, and elevations of the proposed building or structure. They help estimate quantities of materials, labour, and equipment needed for construction.

Site visits

Visiting the project site provides a better understanding of the site conditions, accessibility, and potential challenges.

Specifications

These provide detailed requirements for the construction project, including the quality of materials to be used, installation methods, and performance standards.

Different procurement methods

To produce an accurate detailed estimate, the estimator needs complete contract documents including design and specifications. However, depending on the procurement route chosen by the client, a Bill of Quantities (BQ) may or may not be included.

What is a difference between budget and estimate

Budget is evolution of the estimate, updated to reflect information not available when the estimate was first produced. Estimate is approximation of the cost of a construction project or operation. Produced pre-construction and usually pre - contract.

Estimating methods - unit rate

Unit rate estimating is a method in which the prices of items on the bill of quantities are each calculated separately. To calculate a rate per unit this type of estimating uses: predetermined output rates for labour and plant, price per unit for material

Estimating methods - operational rate

Operational rate estimating is an analytical method where all the resources needed for part of the construction are considered together, i.e. a distinct group of work is priced as a package.

All in labour rates - what is included?

The all-in labour rate refers to the total cost of a worker's wages, benefits, and other employment-related costs. This includes not only the worker's hourly wage, but also all additional costs such as payroll taxes, insurance, workers' compensation

All in labour rates - making it real

Supervision costs (if applicable) Construction Industry Training Board (CITB) training levies, etc National Insurance contributions Tool allowances Employer’s liability insurance

All in labour rates - tips

The all-in labour rate can vary depending on factors such as location, type of worker, and project requirements. Different companies may also have different methods of calculating the all-in labour rate, so it's important to clarify.

Steps to estimating labour cost using the all in rate

1. Determine the productivity (number of working hours for one year). 2. Calculate the overall cost of each item. 3. Divide the total cost by the number of hours.

What else can impact labour costs?

Project specifications and issues with the project programme will usually affect labour cost.