The Risks and Rewards of Contractor Bids and Proposals. To Bid Or Not To Bid? The Risks and Rewards of Contractor Bids and Proposals.

Learning Objectives Learn the Intricacies behind putting a Bid or Proposal together Examine the Similarities and Differences between “Hard Bid”, “Design-Build”, and “CM at Risk” Understand what Happens when your bid is “Too Low”

The Contractor’s Bid How is an Estimate put together What Decisions have to be made on Bid Day How is a Proposal different from a Bid

The Estimate An ESTIMATE is the calculated approximation of a result which is usable even if the input data may be incomplete, uncertain, or missing.

What is an Estimate? SWAG Scientific Wild A _ _ Guess WAG Dumb A _ _ Guess

OR The estimator reads the designer’s mind and converts the drawing symbols into measurements of materials and labor-hours

Types of Estimates

The Estimating Process Deciding which project to Bid Plans and Specifications Site Visit Quantity Take-off Pricing Estimate Summary

Job Condition Factors Economic Climate Location Labor Availability Material Availability Site Access Material Storage Area Working Conditions

Job Condition Factors (cont.) Hoisting Conditions Alternates and Specialties Subcontractor Availability General Contractor Management

The Repair & Remodel Challenge Why is a repair / remodel estimate more difficult than an estimate for new construction? Every Project is Unique As-built Drawings, if they exist are not always up to date Requires more Site Visits Existing Structures Restrictions Complete Plans and Specs are sometimes not available Hidden Conditions

The Repair & Remodel Challenge (cont.) Availability of Matching Materials Access / Egress Security Disruption to Occupants Code Compliance Hazardous Materials Abatement Disposal

Types of Costs in an Estimate Direct Costs Job Overhead Indirect Costs General Overhead for a Contractor

Direct Costs Materials Labor Equipment Project (Job) Overhead

Job Overhead Architect / Engineer Fees On-site Supervision Permits / Fees Shop Drawings / Submittals Testing / Inspections Temporary Utilities Dust Protection Barricades / Fencing Security / Safety Project Signs Vehicles / Hoisting Disposal Field Office On-Site Clerical / Timekeeper Surveying Construction Photos QA / QC Temporary Construction Scaffolding Winter Protection Access Roads Storage Trailers Cleanup Punchlist

Indirect Costs General (Office) Overhead Profit

General Overhead Salaries (Executives, Project Managers, Estimators, Clerical Staff) Fees (Legal, Accounting, Marketing) Office Rent (or Building Depreciation) Utilities, Telephone Taxes Insurance, Bonds Advertising Training, Seminars Travel, Entertainment Submittals that were not accepted

Sources of Cost Information Your Own Current Cost Records (Historical Data) Current Subcontractor Quotations Current Vendor Quotations Adjusted Figures from Previous Quotes Unit Price / System Cost Books

Bid Day!

The “War Room” The Place where the Bid is put together, Strategies are Reviewed and Risks are Taken “The General” – Head Estimator running the Estimate “The Troops” – Assistant estimators and any available able-bodied persons “The Clerk” – Assistant to “The General”

The Bid Day Process “The General” sets up the Bid Day Tabulation Sheets and Runs the Estimate Subcontractors and Suppliers typically fax or call in their Quotes up until Bid Submission Time “The Troops” 1) gather up the Quotes (usually from multiple fax machines), 2)Sort the quotes by division of work, 3)Tabulate the quotes on the Tab sheets by division of work,

The Bid Day Process (cont.) 4) Review the Scope of Work stated on the Subcontractor and Supplier Quotes for Inclusions and “Exclusions” (this is the big one) and Adherence to the Project Specifications 5) Call the Subs and Suppliers with any questions or concerns 6) Determine the Lowest “Responsible” Bidder for each division of work 7) Convey this Information to “The Clerk”

The Bid Day Process (cont.) “The Clerk” Gathers together the information from “The Troops” and Presents it to “The General” in a Logical Fashion for Insertion into the Estimate “The Clerk” may also be Responsible for putting together the Bid Submission Package (The Bid Submission Forms, Bid Bond, and Subcontractor List) and Submitting the Bid Package at the required Location by the required Time Once all the Quotes have been entered into the Estimate it’s Time (if there’s any left) for Strategies and Risk Taking LUNCH! – What’s That?

Some Typical Emotions on Bid Day Frenzy Stress Exhaustion

The Different Processes Hard Bid – Discussed above, The Owner Contracts with an A/E Team and Contractor separately Design/Build – The Owner Contracts with an A/E and Contractor Team to Design and Build (hence the name) a project without resorting to a Hard Bid Process (typically done only in the private sector) CM at Risk – The Owner Contracts with an A/E Team for the Project Design and Brings a Contractor into the Loop thru an RFP Process early in the Design Process to develop a Guaranteed Maximum Price (GMP)

What Happens if Your Bid is Too Low? The First Reaction is to “Shoot the Messenger”

What Happens if Your Bid is Too Low? Question? – Can You Build the Project without “Losing Your Shirt”? If Yes – Proceed and Hope for the Best If No – What are the Options? 1) Withdraw Your Bid? (Prove a Bid Error) 2) What about the Bid Bond? 3) Get Creative during Project Buyout

What Happens if Your Bid is Too Low? 4) Lose Your Shirt and Move On

Contractor Risks & Rewards The Risks You Don’t Cover all the “Holes” in your Bid and WAG it You Cover all the “Holes” but your bid is too low You Cover all the “Holes” , Bids are close, you Win the Project, BUT, “It all goes South” The Rewards Everything Goes Right and You Make a Profit! Not only do You make a Profit, Everyone goes Home Happy!