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