Chapter 9 Pricing the Work

Introduction Non-computer estimates are priced in two stages: –Stage one: Prepare a recap by sorting and listing all takeoff items, usually into a trade-by-trade breakdown. –Stage two: Price the items on the recap list. The next slide shows a standard trade breakdown for a recap.

The Recap Excavation and backfill Concrete Formwork Rough carpentry Finish carpentry Exterior finishes Interior finishes Plumbing Heating, ventilating, and air conditioning Electrical

Pricing Labor Usually subcontractors will perform the work of the project. The subtrade will assume the risk of any cost over-runs resulting from failure to meet productivity. Some builders like to perform at least part of the work using their own labor and equipment. Labor and equipment are usually priced by applying unit prices to the takeoff quantities. Unit prices for labor are calculated from the base wage rates of the workers involved. Additional costs such as social security tax, unemployment tax, workers' compensation insurance, liability insurance, and fringe benefits are calculated as an add-on with the general expenses.

Pricing Equipment Equipment may be rented or owned by the builder. For calculation of ownership costs of a builder's own equipment see Chapter 10. Factors to consider regarding rental equipment: –What is the age and condition of the equipment? –Is the cost of an operator included in the rates quoted? –Is the cost of fuel included in the rental? –Will there be additional cost for transporting the items? –What taxes and/or license fees over and above the rental fee are applicable? –What insurance coverage is included in the rental agreement? –Are there any special qualifications needed before the builder can legally operate the equipment?

Productivity of Labor and Equipment The productivity is influenced by a large number of factors that can be classified into two main groups: job factors and labor and management factors. Examples of job factors: –Weather conditions expected at the site –Access to and around site –Site storage space –Project character, its size, and complexity –Distance from materials and equipment sources –Wage and price levels at the job location

Productivity: Labor and Management Factors Examples of labor and management factors –Quality of job supervision –Quality of subtrades –Motivation and morale of workers –Type and quality of tools and equipment –Experience and records of similar projects in the past

Use of Cost Records A range of unit prices can be obtained from records of historic prices for the labor or equipment. The estimator selects an appropriate unit price from this range for each work item in the job. An historic cost data base suitable for use in estimating has to be assembled systematically. It can only be developed from an accurate and consistent cost reporting system that is pursued in four key steps: –Code the estimate items to form the budget. –As the work is performed, charge labor and equipment costs to the applicable budget work items. –Measure the quantity of work done on each work item. –Keep track of labor and equipment expenditures on each work item. See following slides for a cost report example.

Information from Cost Reports To help future estimators, the final cost report on a project should be accompanied by two commentaries: –One from the project estimator describing the basis of the unit prices –A second from the project supervisor, describing the actual conditions that precipitated the unit costs realized Given this information, the estimator is far more likely to use appropriate unit prices when estimating subsequent projects.

Bill of Materials (1 of 2) A bill of materials is a list of all the materials required for a project sorted into trades. –Excavation materials – gravels and such –Concrete materials –Masonry materials –Rough carpentry materials Floors systems Wall systems Roofing systems –Finish carpentry materials Doors Windows –Other miscellaneous materials

Bill of Materials (2 of 2) The quantities listed on the bill of materials are expanded to include waste factors and the units of measurement. Also units may be converted from takeoff units to order units. –For example, plywood sheathing is measured in square feet (takeoff units) and purchased in sheets (order units). –¾” T & G floor sheathing sq. ft. (from takeoff) –Add 10% waste = = sq. ft. –Divide by 32 sq. ft.= 40 sheets

Pricing Materials Generally (1 of 2) The estimator should be able to obtain firm prices from material suppliers for the supply and delivery of materials. Volume discounts may be obtained for large orders. Obtaining firm quotes will reduce the risk of having to pay more if prices rise between the time of the estimate and the time of construction. Homebuilders who complete many projects over a year often negotiate with suppliers to provide all the materials of a certain type at fixed prices for the year.

Pricing Materials Generally (2 of 2) There are a number of questions that should be considered before material prices are used: –Do the materials offered by the supplier comply with the specifications? –Do the prices quoted include the delivery of the materials to the site? –Will the prices remain firm until the time when the materials are purchased for the job? –Does the supplier's price include state and/or city sales taxes? –Will there be any storage or warehousing requirements for the materials? –What are the supplier's terms of offer?

Pricing Gravels - Example A price of $15.00 per ton is offered for the supply of pit run gravel. If the weight of compacted pit run gravel is 3,650 lbs per cubic yard, the price per cubic yard can be calculated thus: –Price per cubic yard = Price per ton x 8 of compacted cubic yard (lbs) / 2000 lbs per ton –So, in this case: –Price per cubic yard (bank measure) = $15.00 x 3650 / 2000 = $27.38

Calculating Trucking Requirements Number of trucks required = Unloading time + 1 Loading time Where –Unloading time = Round-trip travel time + time to off-load the truck –Loading time = Truck capacity Loader output Both the truck capacity and the loader output have to be measured in the same units, usually compacted cubic yards.

Trucking Example Calculate a price of obtaining gravel from a pit located 6 miles from the site. There is a pit royalty of $2.50 per cubic yard. Use a track loader at the pit to load the gravel at a rate of 50 cubic yards (bank-measure) per hour and 10 cubic yards (bank measure) dump trucks to transport the gravel to the site. Rentals: loader $ per day (8-hours) and dump trucks rent $ per day Crew: 1 equipment operator at $24.00 per hour and truck drivers at $18.00 per hour

Trucking Example – Answer (1 of 2) Number of trucks required = Unloading Time + 1 Loading Time Unloading time = Round trip / Speed + 5 mins = [(2 x 6 miles) / (20 miles per hour) x 60 mins] + 5 mins = = 41 minutes Loading time = Truck capacity / loader output = (10 cu.yds. / 50 cu.yds. per hour) x 60 mins = 12 minutes Number of trucks = Unloading time / loading time + 1 = (41 / 12) + 1 = = 4.42 Therefore: 5-trucks are required.

Trucking Example – Answer (2 of 2) EquipmentLabor Gravel supply price: $ $ Track loader ($450.00/8 hours) Operator Trucks 5 x ($275.00/8 hours) Drivers 5 x $ /hr /hr Price per cubic yard: (Divide by output - 50 cubic yards/hr) = 4.56/ CY 2.28/ CY

Pricing Concrete Materials When pricing concrete materials: –Does the concrete described in the quote meet the specifications? –What are the extra charges for supplying special cements like sulfate-resisting or high-early cements? –What are the extra charges for air entrainment, calcium chloride, or any other concrete additives required to meet specifications? –Are there additional charges for cooling concrete in hot weather or heating concrete in cold weather for which to account? –If small quantities of concrete are required on a project, what are the premiums charged on small loads of concrete?

Concrete Pricing Example From the XYZ Concrete Products quote, what is the price of 3000 psi concrete, type V cement, air entrained, fiber reinforced: Basic concrete price Extra for winter heat Extra for type V Extra for air entrainment Extra for fiber reinforcing Sales tax7% 9.59 Total Price

Carpentry Materials Lumber is generally available in lengths that are multiples of 2 feet. Studs, however, can be obtained precut to the required length. When taking-off joist quantities, the estimator will usually allow for length of the joists used even though the span may not be a multiple of 2 feet. –For example, if the span of the joists is 12'-6“, the estimator will takeoff 14-foot joists. –A waste factor between 5% and 15% is still required as components such as plates, beams, headers, etc. usually require some cutting.

Pricing Subcontractor’s Work Pricing subtrade work appears to be easy. –Subtrades calculate prices for the work of their trade and submit quotes to the homebuilder. There may be problems: –Not all subtrades offer lump sum bids; many trades bid unit prices for work. –Some subtrades offer prices on an hourly basis. –The subtrade's interpretation of what is and what is not part of the work of their trade may differ from the homebuilder's interpretation. –The subcontractor whose price is used in the estimate may not perform the work as required.