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  • Contractors should have a working knowledge of a variety of building codes. In¬†most cities and municipalities, there is a local building code. It also may be the¬†same as the state code.
    Local and state codes usually govern most of the construction activities of a contractor, in addition to the requirements of the plans and specifications. The contractor’s task of satisfying code regulations, however, is made more difficult because most building codes continually undergo significant changes. Consequently, contractors should be alert to such changes and have sources that provide them with information on the new regulations.
    In addition, local and state building codes provide means for enforcing compliance of contractors with code requirements. Usually, such enforcement takes the form of inspections by building inspectors, affidavits by architects and engineers that construction has been performed consistent with the code, and submission of plans, specifications, and details to building officials for their approval before construction starts.
    It is only after all code requirements have been complied with and all required approvals have been obtained that a contractor will receive a Certificate of Occupancy for a completed building. Before this, however, approval of the work may also have to be obtained from other local officials: Fire Department for sprinklers, fire alarms, and exit and elevator safety; Health Department for food-handling and kitchen equipment; Environmental Protection Agencies for boiler and incinerator emissions; Police Department for fire and sprinkler alarms.
    See also Art. 1.10.

  • There are essentially three types of commercial computer products useful in preparation¬†of cost estimates:

    Utilities. These are programs that arrange information or do arithmetic; for example, spreadsheets and report generators databases. Most estimating programs fall into the utilities category.
    Databases. These contain raw information, for example, prices of plumbing fixtures, that the estimator must analyze and choose from.
    Expert Systems. These are programs that question the estimator, then use the answers to produce an estimate. (Expert systems are sometimes referred to as artificial intelligence systems.)
    Some commercial packages may contain two or more of these.
    Computer aided estimating has now specialized with software blurring these distinctions. This goes across the construction industry where you see competitors using the same software with certain information customized. One sees a single brand of software in use by contractors and another by designers and yet another by home builders. Contractors tend to use utilities that talk to their expert system for material control and fabrication. Designers use specialized expert systems for the specific work they performed (i.e., environmental remediation), and the home builder may have sales people using an expert system that was created in a utility with pricing from window and door vendors.
    19.7.1 Utilities
    These enhance, but do not replace, the expertise and knowledge of estimators. They enable estimators to extract and summarize needed information rapidly and accurately.
    Utilities are broad based; they can be applied to almost any estimating type, approach, and technique. Use of some programs is easy to learn; for example, spreadsheets. Others are difficult; for example database report generators. In general, the more powerful a utility is, the more difficult it is to learn to use it.
    19.7.2 Databases
    Generally, databases are designed to be used with one specific utility and one specific approach, such as industry or discipline (Art. 19.2). Some are limited to a particular type of estimate and technique (Art. 19.2.2).
    The estimator should always be aware that a database responds only to specific¬†queries asked in a specific way and cannot interpolate. For instance, if a database¬†has the prices of 1‚ĀĄ2-in and 1-in bolts and the estimator requests the price of a 3‚ĀĄ4-¬†in bolt, the computer will reply that the database contains no such price. At this¬†stage, the estimator should devise the proper queries to solicit responses helpful in¬†preparing the estimate.
    19.7.3 Expert Systems
    Generally, expert systems are even narrower in application than databases. Unlike databases, however, expert systems will respond to a query as long as the estimator operates within the limits of their area of expertise. They have several drawbacks:
    They do not take into account creative solutions or project-specific problems. They do not change with changing technology. And they tend to be very expensive. As a result, they are not widely used.

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  • All estimates should be reviewed by all responsible parties at every stage. An¬†estimate review should begin with a survey of the verbal description of the work,¬†including all or most of the following: scope statement, assumptions, clarifications,¬†qualifications, and exclusions.
    As an example, the estimate is to be reviewed for a warehouse to be built in an urban area as part of a redevelopment project. The scope statement should specify the location, refer to design drawings and specifications, and list applicable building codes. The assumptions might include such data as the number of persons who will work in the warehouse. This is an indication of the number of restrooms and fixtures needed, which can be listed as a clarification. If the price quotes are valid for 90 days, this should be stated as a qualification. Handling and disposing of any existing hazardous material found on the site might be listed as an exclusion.
    This warehouse description may be reasonably complete from the viewpoint of designer and contractor and may be accurately priced. But because of the assumption regarding the number of occupants, it may not be suitable from the viewpoint of the intended users. The exclusion regarding hazardous materials may result in unacceptable financial exposure for the client. Issues such as these need to be addressed. The client may decide that the prospective tenants, or users, may employ more persons than the number assumed. Hence, either the estimate will have to allocate more money for rest rooms or the client will have to give the tenants an allowance to enable them to build the rest rooms they desire. The client may also decide that an analysis of soil samples may be necessary before any construction is done to determine the extent of contamination, if any, and cost of cleanup.
    Bearing these issues in mind, the parties should now review the quantitative part of the estimate. This review should comprise the following:
    A summary of the key quantities involved; for example, floor area, tons of steel, cubic yards of concrete.
    As a cross check, a list the key quantities‚ÄĒby discipline if the estimate has¬†been prepared with the industry approach or by industry if the estimate has been¬†prepared by the discipline approach.
    A summary of the project, by industry or discipline.
    At each step of the review, changes may be made, as required. After all parties agree to all parts of the estimate, it can be considered final. At this stage, the designer should be satisfied that enough money has been allocated to carry out the project. The client should have a clear idea as to what the project will entail and how much it will cost.

  • As an example, the following illustrates preparation of an estimate for a trench¬†excavation. The estimate can be regarded as a baseline type or higher type. The¬†discipline approach and crew development technique is used.
    The estimate begins with a study of information available for the project: From the design documents, the estimator takes off such information as trench depth, length, slopes, soil conditions, and type of terrain. Wages for the locality in which the trench is to be excavated are obtained from standard handbooks, local labor unions, and the U.S. Census Bureau. The wage figures influence determination of the level of mechanization to be used for the project.
    Crew Operation Calculation Sheet. With the basic information on hand, the estimator can now prepare a crew operation calculation sheet (Fig. 19.1). This sheet indicates the work to be done, how it will be done, who will perform it, and duration of the tasks. (The crew operation calculation sheet is normally the first item developed in a cost estimate.)
    Crew Worksheet. The items, quantities, and units for the first three columns of the crew worksheet (Table 19.1) are obtained from Fig. 19.1. Unit costs for materials and subcontractors for columns four and five are obtained by direct quotations from vendors and subcontractors or from standard price lists. The worker-hours listed in Table 19.1 are based on data in Fig. 19.1. The wages in Table 19.1 are part of the basic information.
    To obtain equipment costs, the estimator either gets quotations from rental yards or performs equipment ownership and operating cost analyses (Table 19.2). These costs include labor and material costs for owning and maintaining the equipment.
    The equipment costs in Table 19.1 are assumed to be supplied by a subcontractor.
    The total cost for one hour of production is calculated as the sum of the products of the quantities and the unit prices given in Table 19.1. The estimator obtains the unit cost for materials, labor, and equipment by dividing the cost for one hour of production by the length of the trench.
    Estimate Worksheet. Table 19.3 gives the estimate for the total cost of the trench.
    The quantities and units for the trench are taken off the contract documents. The costs are derived from the crew worksheet (Table 19.1), to yield the total direct cost for the excavation. To the direct cost, the estimator adds contingency costs (for rain, striking concealed utility lines, excavating in unexpected subgrade conditions), indirects (30% of labor cost), and company-wide costs and profit (10%). The sum is the total price of the project.

    The estimator then makes two parametric checks to determine the reasonableness of the result:
    1. By trench volume. The estimator compares the estimated price with that for similar projects with similar restrictions and requirements. A review of published bids for similar projects shows unit prices of $60 to $100 per cubic yard. This indicates that the estimated price of $73.65 is within that range.

    2. By time clock. The estimator verifies that the specific equipment and personnel can be made available by the contractor. This is done by consulting the contractor’s work schedule for the equipment and personnel.

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  • Margin comprises three components: indirect costs, company-wide costs, and profit.¬†These are defined in Art. 19.1.

    Determining Indirect, or Distributable, Costs

    The techniques used to calculate indirect costs (often called indirects) resemble those used to calculate direct costs (Art. 19.2).
    Parametric Technique. The indirects calculated by this technique may be expressed in many ways, for example, as a percentage of the direct cost of a project, as a percentage of the labor cost, or as a function of the distance to the site and the volume of the construction materials that must be moved there. For a warehouse, for instance, the cost of indirects is often taken to be either one-third the labor cost or 15% of the total cost.
    Unit-Price Technique. To determine indirects by the unit-price technique, the estimator proceeds as follows: The various project activities not associated with a specific physical item are determined. Examples of such activities are project management,
    payroll, cleanup, waste disposal, and provision of temporary structures.
    These activities are quantified in various ways: monthly rate, linear feet, cubic yards, and the like. For each of the activities, the estimator multiplies the unit price by the unit quantity to obtain activity cost. The total cost of indirects is the sum of the products.
    Crew Development Technique. To determine the cost of the indirects by this technique, the estimator proceeds as follows: The various project activities not associated with a specific physical item are determined. Next, the estimator identifies the specific personnel needed (project manager, project engineer, payroll clerks) to perform these activities and determines their starting and ending dates and salaries.
    Then, the estimator computes total personnel costs. After that, the estimator identifies the specific facilities and services needed, the length of time they are required, and the cost of each and calculates the total cost of these facilities and services.
    The total cost of indirects is the sum of all the preceding costs.

    Determining Company-Wide Costs and Profit

    Company-wide costs and profit, sometimes called gross margin, are usually lumped together for calculation purposes. Gross margin is generally a function of market conditions. Specifically, it depends on locale, state of the industry and economy, and type of discipline involved, such as mechanical, electrical, or structural.
    To calculate gross margin, the estimator normally consults standard handbooks that give gross margin as a percent of project cost for various geographic areas and industries. The estimator also obtains from periodicals the market price for specific work. Then, the information obtained from the various sources is combined.
    As an example, consider the case of a general contractor preparing a bid for a project in a geographic region where the company has not had recent experience.

    At the time that the estimate is prepared, the contractor knows the direct and indirect costs but not the gross margin. To estimate this item, the estimator selects from handbooks published annually the gross margin, percent of total cost, for projects of the type to be constructed and for the region in which the building site is located.
    Then, the estimator computes the dollar amount of the gross margin by multiplying the selected percentage by the previously calculated project cost and adds the product to that cost to obtain the total price for the project. To validate this result, the estimator examines reports of recent bids for similar projects and compares appropriate bids with the price obtained from the use of handbooks. Then, the estimator adjusts the gross margin accordingly.

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