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Pricing Subcontractors’ Work

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1 Pricing Subcontractors’ Work
Chapter 13 Pricing Subcontractors’ Work

2 Objectives Upon completion of this chapter, you will be able to:
Describe how subtrade work is usually estimated and explain the role of the contractor’s estimator in this process Identify potential problems with subcontractors on a project

3 Objectives (cont’d.) Explain how the competency of subtrades can be evaluated and list what should be considered in this evaluation Explain how surety bonds can be used to help manage subtrades Describe subtrade pre-bid proposals and explain their use with subcontractor bids Describe how subtrade bids are evaluated

4 Objectives (cont’d.) Describe the main features of bid depositories and explain their use with subcontractor bids

5 Introduction Subcontractors Building construction projects
Often perform 80% or more of the work Contractor has to rely on subtrades Good relationships Mutual trust Two-way communications Common goals

6 Potential Problems Possible reasons:
Unreliability of some subcontractors Errors in subtrade bids Overlap or underlap in scope of work Conditional bids from subcontractors Bid closing congestion Compliance with government positive action requirements regarding minorities

7 Managing Subcontract Pricing Procedures
Effective management practices Required throughout estimating process Control problems Well-organized system of dealing with subtrades Identify subtrade needs Ensure subtrade capabilities

8 List of Subtrades Complied after bid drawings and specifications are obtained Used to determine trades to be contacted Subtrades should be notified early in estimating process Design questions and problems are resolved

9 Contacting Subcontractors
Most contractors maintain a directory of subtrades Checklist on computer spreadsheet Estimator checks off or adds trades required Checklist is compiled Copy is ed to subtrades Subcontractors return checklist with name against trades they are prepared to submit prices

10 Unknown Subcontractors
Can be stressful Sometimes necessary Nominated subcontractors Deal made before bids Clause is inserted in bid documents Unsolicited subtrade bids Low price is received from unknown company

11 Evaluating Subcontractors
Main concerns: Is the subtrade capable of meeting the quality and schedule requirements? Does the subtrade have the financial capability required?

12 Evaluating Subcontractors (cont’d.)
Factors to investigate: General company reputation Quality of previous work performed Quality of company’s management Company’s disposition General cooperativeness Ease of dealing with site and personnel Financial status of company

13 Bonding of Subtrades Bonds are obtained to guarantee work performance
Surety bonds: manage construction risk Bid bonds: give prime contractor the right to damages from bonding company If subtrade fails to execute the subcontract after bid has been accepted

14 Pre-Bid Subtrade Proposals
Methods of submitting bids: Fax and Provides a hard copy Received quickly Pre-bid proposals: Copy of subtrade’s bid without prices Complete in all other details

15 Figure 13.2 Pre-Bid Proposal (Delmar/Cengage Learning)

16 Analyzing Subtrade Bids
Ensure all work required is included List inclusions detailing all the work Excluded items should be listed on the subtrade’s proposal Estimator has to lookout for items excluded from the work and not priced Complicated by multiple trade bids and discounts

17 Figure 13.3 Subtrade Analysis Spreadsheet (Delmar/Cengage Learning)

18 Bid Depositories “Bid shopping” or “bid peddling” Bid depositories
Disclosing prices to obtain an equal or better price Not illegal, but unethical Bid depositories Assemble bids from subtrades Distribute them to prime contractors

19 Scope of Work Trade scope definitions Examples:
Useful guide to what is accepted locally as the definitions of subtrades’ scope of work Enables overlap and underlap investigation Examples: Masonry scope of work Windows scope of work Glass and glazing scope of work

20 Summary Subcontractors on building construction projects
Often perform 80% or more of the work Several problems occur with subtrade bids Effective management practices Required to deal with subcontractors in the estimating process

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