A Guide for Estimating Using Historical Bid Prices 11-6-06

7/31/2019 A Guide for Estimating Using Historical Bid Prices 11-6-06

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A GUIDE FOR COST ESTIMATING

Draft Chapter for Review

Historical Bid-Based Estimating

AASHTO Technical Committee on Cost Estimating

ADMIN DRAFT NOVEMBER 6, 2006


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A GUIDE FOR ESTIMATING USING HISTORICAL BID PRICES

I GENERAL OVERVIEW........................3

IV. USING SPREADSHEETS FORDATA ANALYSIS IN ESTIMATING

COSTS...................................................9

V. ESTIMATING LUMP SUM ITEMS...10

VI. ESTIMATING PROJECT SPECIFICOR UNIQUE ITEMS.............................14

VIII. REFERENCE MATERIAL.............16

IX. TOOLS............................................17X. SKILL SETS REQUIRED.................19

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I General Overview

Cost Estimating is a critical component of the project development process. The process is oftencomplex involving the collection of relevant data relating to the scope of a project, anticipatedresource requirements, and expected changes in resource costs. The process includes both thetechnical evaluation of the information available and the subjective side of estimating, whichincludes the evaluation of what the data truly means to the project costs.

Many different methods for developing Letting Estimates exist in practice. The most commonmethod used in developing estimates for transportation projects is historical or bid-basedestimating. This method uses data from recently awarded contracts as a basis for the unit priceson the project being estimated. Data from previously awarded projects is typically stored in adatabase for three to five years to provide the historical data to the estimator. The more data that isavailable and organized by project types, size, and locations, the better the estimate that can beproduced. Unit prices are adjusted for the specific project conditions in comparison to the previousprojects awarded. Adjustments are generally made based on the project location, size of theproject, project risks, quantities, general market conditions, and other factors.

There are many factors that need to be considered to develop an accurate letting estimate usinghistorical bid prices. These factors pose a certain level of risk in developing estimates using thismethod. However, this method is the most common in state DOTs due to the fact that it is efficientin terms of staff resources versus other methods of estimating and has proven to providereasonable estimates on typical projects.

The discussion contained herein is meant to identify factors that could be considered to have anaffect on the cost of construction for a project, and more specifically individual contract bid itemsand their unit prices. The degree to which any factor may affect the cost of any given bid item isindeterminate; i.e. there is no one correct answer in determining a cost. Common sense,experience and judgment all play a role in using historical bid prices to determine what areasonable unit bid price and overall final contract estimate may be.

The factors described below are not meant to be a comprehensive list of things that affect cost butare representative of the types of factors that could be considered as important in establishing auseful bid history database (see Chapter III Establishing, Maintaining, and Utilizing a BidHistory Database ). Other factors such as regional, local, political, and materials, etc., should beconsidered by each agency to determine if they add value to their particular situation and bidhistory database. Additional factors may also need to be considered in establishing unit bid priceestimates and overall contract costs. Samplings of some of these factors are presented below.

Geographic ConsiderationsGeographic considerations can have a profound affect on the selection of unit bid prices. Aprojects location, whether in an urban, suburban, or rural setting should be considered inestablishing bid prices. Depending on a States standard specifications, some of the costconsiderations relating to a projects location may be accounted for in the mobilization bid item.

A project in an urban setting generally has to contend with construction operations occurring inmore confined work spaces, greater volumes of traffic, limited hours of operations, night time work,etc. Some of these factors may be offset by availability of local contractors, materials, equipmentand personnel.

Projects located in rural settings have factors that affect the establishment of unit bid pricescontrary to projects located in urban settings. Construction operations may have less restrictedwork areas, less traffic to contend with, and additional hours to complete the work; all factors that

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increase productivity. On the other hand, materials, equipment and personnel may all have to bebrought in from out of the area, which may increase those costs related to transportation, support,wages, per diem, etc.

On projects that utilize large quantities of aggregates, whether for base, surface, earthwork, etc.,the location of material sources has a large impact on costs. Nearby material sources reducetrucking and material handling costs, production rates, and labor costs. On rural projects, the costof bringing in a concrete batch plant, hot mix plant, etc., may increase unit bid prices, but againdepending on a States standard specifications, those costs may be directly attributed to andreflected in the mobilization bid item.

Terrain may also be a consideration in establishing an items cost. Mountainous terrain and steepgrades cause production rates to fall whereas level terrain and straight roadways generally havethe opposite affect.

Other location related considerations that affect costs could occur due to local policies, taxes,restrictions, air (attainment vs. not-attainment areas) and water quality, etc. For example, in theLake Tahoe Basin located on the California-Nevada border, the Tahoe Regional Planning Agencyoversees activities within the basin. Locally specific rules and regulations governing noise,pollution, disposal of materials outside the basin, working hours and available construction seasonall increase the cost of construction within the basin. Another example of a location relatedconsideration is that of projects located on tribal lands. Tribes may impose TERO (TribalEmployment Rights Office) Taxes for projects on tribal lands. These taxes generally range from 1-4% of the cost of the construction on the tribal lands but vary from tribe to tribe.

Quantity ConsiderationsThe quantity of a given material on a project affects the unit cost of constructing and/or supplyingthat item. This is not just a supply and demand issue, but also one of production efficiency andeconomy of scale. Generally speaking, the unit price for larger quantities of a given material will beless than smaller quantities. Suppliers offer discounts for larger quantity orders, mobilization,overhead and profit are all spread out over a larger quantity, thereby reducing their affect on eachunit. Waste is also spread over a larger quantity thereby having a smaller impact on each unit.Larger quantities also give rise to efficiency by gaining experience and expertise in completing the

work.

Projects with very large quantities of certain materials may actually cause an increase to the unitbid price. For example, a project with numerous or large structures may affect the market for aparticular type of steel, availability of cement, or even tie up a regions labor resources.

Small quantities of items of work are less cost effective to construct and hence lead to higher unitprices. Not only do suppliers charge more for smaller purchases, in some instances, the lot size or the amount that has to be purchased is greater than the needed quantity. Small quantities do notgenerally allow for high production rates or other efficiencies, again causing a higher unit cost.Smaller quantity items are also frequently subcontracted out, this practice increases a contractorsoverhead and they usually apply a markup to those items.

Item AvailabilityMaterials that are readily available, or ones that are commonly used, are generally less expensiveto purchase and install/construct. The contracting community is familiar with these types of itemsand this experience is thought to reduce costs and risks. Materials that are in short supply are of course more expensive and this should be considered in establishing the unit price.

Scheduling/Lead TimeTo be efficient, a Contractor needs to schedule his resources. When a contractor can plan for andmaximize his resources, he can become more competitive in his bidding. State Highway Agenciesshould strive to let projects out early so as to allow Contractors ample lead-time in planning their

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work. This lead-time however, needs to be considered in the estimating process by estimating theproject based upon when it is expected to be built. For example a job that is two seasons long andhas the majority of its paving in the second year, should attempt to account for this fact.

II. Pros & Cons of using Historical Bid Based Estimating

Historical bid-based estimating is typically the most efficient method for developing an estimate for items that have adequate historical data available. Implementing a bid history based estimatingprocess enables an agency to estimate the cost of proposed work using a minimum of resources.Similar projects with similar items, quantities, and locations can generally be estimated quicklyutilizing historical bid data and engineering judgment.

Bid history based estimates can serve as the basis for more detailed methods of cost estimating.By establishing the procedures for collecting, retrieving and analyzing bid data; an agency hasreadily available information for other areas of concern such as contract modification agreements.The bid history information is also valuable for other reports not necessarily related to estimating.

A bid history is essential for analysis of contract bids. Maintaining a strong bid history candiscourage undesirable bidding practices. A bid history is also valuable for use in evaluatingcontractor proposed changes such as value engineering/analysis proposals. The informationnecessary for bid history based estimates is useful when preparing preliminary estimates, or comparing design alternates.

Some of the disadvantages of historical bid-based estimating are that a database of bid data mustbe maintained and consistent bid items must be utilized on all contracts. The work covered bythese bid items must be consistent as well. For example, if a trenching item that is routinely usedfor an excavation of 24 in depth is used for a different depth, the bid data becomes skewed andnot reflective of the actual work performed. Unique or seldom used items are also difficult toestimate utilizing this approach due to the lack of available historic data. This method is oftenconsidered to be least accurate from a scientific basis and most susceptible to individual projectconditions that may or may not apply to the project being estimated. Unbalanced bids can also bean issue; if not caught or handled appropriately in some manner, the submittal of unbalanced pricesby the contractor has the potential to skew or contaminate the bid history database.

For a program based on historical bid-based estimating to be successful, the projects and bid itemsmust be consistent in regard to bid items, scope, and administration. Inconsistencies in projectsand non-typical projects are opportunities for inaccuracies in historical bid based estimates. Theinconsistencies and factors that make bid items or projects non-typical must be factored in andconsidered in the development of bid-based estimates.

Utilizing historical bid estimating techniques is difficult for lump sum items. Most lump sum itemsare very different from one project to another. For that reason, utilizing past bid history is often nota good indicator of the future bid price for lump sum items. However, if the bid history informationcan be used as a basis and tied back to the work involved, a fair estimate can be produced fromthe data. For example, if a project had a demolition item to remove 8 typical residences on a

project. The bid history could be used as a basis to establish a cost per typical residence for demolition. Of course information on the definition of typical in this instance should be noted or recorded in the database for future use.

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III. Establishing, Maintaining, and Utilizing a Bid History DatabaseIn order to prepare a historical estimate it is necessary to accumulate bid information; a veryeffective way to do this is to establish a database. The database can be as simple or elaborate asthe estimating needs dictate. It is advisable to track as many aspects of the project as practical.Many methods are available to capture the data needed to perform a historical estimate. Whenestablishing a database, consider all aspects of a project that may become necessary when

preparing an estimate. It is generally easier and more accurate to cope with too much data thannot enough. The following is a listing of items that could be considered when establishing adatabase:

File Number County District Bid Item Number Item Description Item Quantity Item Amount Unit of Work Letting Date Number of Bidders Low Bidder Amount Second Bidder Amount Third Bidder Amount Estimated Unit Price Low Bid Unit Price Second Bid Unit Price Third Bid Unit Price Length of Project Contractor Name

Contractor Address Work Type(s) Funding Completion Date Working Days Estimate Preparer NPDES Acreage Hourly Work Restrictions A+B Bidding Road/Route Project Number Warranty Staging Area R/W Restrictions (area available for

work) Urban vs. Rural Special Construction Area Project Limits

By including those aspects of a project that have an effect on the cost of the work it is possible to

retrieve and analyze the data to estimate the reasonable cost for anticipated work. It can be veryuseful to add a comment field where the estimator can add appropriate comments that may affectthe determination of a unit price.

To organize the data it is helpful to collect data by category such as: General Project Information,Bid Data, and Project Specific Information. Using a Data Entry Form to input General ProjectInformation and Project Specific Information is an effective way to collect project information. Thefollowing is an example of a Data Entry Form to input general and specific project information intothe Project Information Table of a database:

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Data Entry Form Example

Using a spreadsheet is an effective way to import bid data. The following is an example of bid dataplaced into a spreadsheet to be exported to a database:

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Once Tables for data collection have been established, using database queries is a good way toretrieve the stored information. A properly constructed query will retrieve data that is relative to thesituation for which an estimate is being prepared. The following is an example of a routine query toretrieve data for a specific bid item:

In addition to being useful for routine estimating, a well-constructed database can be very useful for ad hoc situations. Specialized queries can be devised as needed.

For example, a simple query can provide the total linear feet of the various sizes of reinforcedconcrete pipe let to contract over a certain period of time. Another query could provide the totalmileage of resurfacing projects let within a given time period or to pull data within a geographic areafor different grades of asphalt. This data could then be analyzed to determine the potential costsfor various asphalt grades on future projects in the area. Although not directly related to estimating,this type of information is valuable to management and the construction industry as well.

For a database to be effective, it needs to be routinely updated. It is recommended that thedatabase be updated at least semi-annually. During periods where costs are fluctuating rapidly(inflation or deflation) it may be advisable to update the database monthly or even in real time asbids are entered. It is imperative that estimators have the most up to date data available to them inestablishing unit bid prices. In addition during times of rapidly fluctuating prices, it is also advisableto limit the period of time that unit bid prices are analyzed from; i.e., looking at unit bid prices from

too far back in time will skew the selection of an appropriate unit bid price. Depending upon the biditems selected and the data in a given database, three months of data may be sufficient inestablishing a unit bid price.

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IV. Using Spreadsheets for Data Analysis in Estimating CostsWhile databases are very useful for storing and retrieving data, in order to perform computations,and analysis of data, a spreadsheet works much better. It is possible to perform a number of mathematical operations after data is placed in a spreadsheet.

When analyzing data to determine a unit bid price, contractor unit bid prices that are obviouslyunbalanced, either too high or too low, should not be considered. Using only the lowest unit bidprices received for each item of work on a given project to determine unit bid prices may result in aletting estimate that under predicts project costs. Whereas using only the average unit bid pricesreceived for each item of work may result in a letting estimate that over predicts project costs.However, since the successful bidder is the one that turns in the lowest bid (there are of courseexceptions) the use of the lowest unit bid prices is generally a better predictor of project costs. Themost accurate method to consider is dropping outlying data from the set and then using weightedaverages, regression analysis, etc to determine the most appropriate unit bid price.

Restraints of time and manpower at times require that estimates be prepared quickly and with aminimum of effort. Spreadsheets can optimize resource utilization by focusing on the major costitems in a project. For most projects the bulk of the cost can be accounted for in a relatively few

items (Pareto Principle or 80-20 Rule) of contract work. Using normal spreadsheet functions it ispossible to compute average prices for each item of contract work. At this point, major items canbe determined as a percentage of the total amount. Major items are those items, which comprise acertain percentage of the total amount. Eighty percent has been used effectively in typicalestimating practices. For example on a mill and overlay project, the majority of cost may be in thecold milling, plantmix, shouldering material, mobilization and traffic control items with relativelyminor costs associated with striping, guide posts, etc.

Easily available software allows computation of averages, weighted averages, standard deviation,etc. Data can be sorted, filtered, plotted, and analyzed in numerous ways. As the followingexample shows:


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In the above example, information for variable depth milling is presented for federal resurfacingprojects in a specific given geographical area that were let between February 2003 and April 2004.In addition a graph showing cost vs. quantity with a trend line fitting the data has been plotted. Theaverage price and weighted average price have been computed and a price (G:1) based on thequantity (H: 1) has been computed.

The above example is for purposes of illustration. It is possible to select data, and plot graphs todetermine relationships relative to the project being estimated in numerous ways.

Based on experience, an estimator can use easily available spreadsheet functions to select andanalyze data appropriate to the situation being estimated, to arrive at a reasonable cost for theanticipated work. It is also possible to perform multiple regressions to discern more complicatedcost relationships.

For routine items of work, using average prices, or regional prices is as effective as more detailedanalysis.

V. Estimating Lump Sum Items

The Lump Sum bid item should generally be used when an item of work can be defined by atransportation agency in general terms, i.e. the finished product can be easily defined but not all thecomponents or details can be easily determined. This fact can make estimating lump sum itemsdifficult for the estimator. The more information and breakdown of a lump sum item that anestimator has to work with, the greater the likelihood that an accurate lump sum estimate can bedeveloped. However, if the lump sum item in question could be easily quantified, then a paymentmethod other than lump sum could easily be used and estimated. In any case, an estimator shouldtry and define a lump sum in terms of its simplest, most basic components and should consider other factors that may not be easily estimated. By breaking out a lump sum item into smaller itemsof work that an estimator may have historical data on, and then applying reasonable estimatedprices to those sub units, the estimator can more accurately establish a price for the overall lumpsum item.

Since breaking out a lump sum item into smaller components is difficult and time consuming, manystate agencies apply percentages or ranges to some lump sum items based upon historical data for similar project conditions. When determining estimates in these instances, the more considerationthat can be given to an items many components, the greater confidence in determining areasonable estimated price could be realized. Estimating methods other than historical bid basedtechniques may be more applicable for lump sum items.

Different state DOTs use the lump sum method of payment for different items or types of work. Theitems of work shown below are some representative examples of what some states use the lumpsum method of payment for.

A. MobilizationMobilization is a contract pay item used to cover a Contractors pre-construction expenses and thecosts of preparatory work and operations. Since there is no clear list as to what this work effort isand each Contractor has the ability to adjust their bid as needed to cover these expenses, there areno true rules as to what percentage or value should be used per Contract. Mobilization costs aremost often dependent on the amount and size of equipment and staff the contractor will need torelocate for the project. Many projects will require that the contractor mobilize the crew andequipment multiple times.

Another major factor to consider when estimating mobilization costs is the contract specifications inregards to mobilization. Do the specifications include payment restrictions or limits? When will thecontractor receive partial or full payment for mobilization? How much of the mobilization cost will


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the contractor be required to finance? The specifications may play a significant role in determiningan estimated value for mobilization.

Consideration should also be given to the location of a project, the complexity of a project, the needfor specialized equipment, the type of work and the working season. If the project will extend over more than one construction season, this should be considered when determining mobilization costsas the Contractor may demobilize for the winter and remobilize in the spring. Rural projects vs.urban, projects with multiply work sites, projects with a lot of preparatory removal items, projectswith large quantities of excavation or projects extending over two seasons where the Contractor would be expected to shut down operations and move out will typically require a higher mobilizationpercentage.

To adequately estimate mobilization costs on a project utilizing historical based data, the overallproject must be very comparable in size, location, and work involved. For this reason,organizations that rely on historical based estimating methods often use a parametric figure toestimate mobilization costs. This figure is normally a percentage of the overall construction itemtotal in the range from 6% to 12%. Some examples of this follow:

The typical mobilization estimates for a roadway project may be 8% based on past historyfor a state.

The typical mobilization estimate for a structures project may be 10% based on pasthistory.

The examples above illustrate the difference in mobilization costs dependent upon the resourcesand effort required. A roadway project typically involves the mobilization of several pieces of medium sized equipment to a temporary or mobile location. A structures project often involves therelocation of significant large pieces of equipment to a fixed location and most often require thatlarge pieces of equipment be mobilized and demobilized multiple times depending upon the stagingof the project. Each time equipment has to be mobilized to a project or to a different site within aproject, there is an associated cost to the contractor to relocate the equipment and resources.

Other major factors to consider when estimating mobilization are project location, multipleconstruction seasons and winter shutdowns. Projects in remote locations have higher costs torelocate equipment, labor, and other resources to the site. Adjustments for these costs need to bemade to historical data prior to applying the price to a new estimate. If a project carries over multiple construction seasons and will be shutdown for the winter or other environmentalrestrictions, the costs need to be accounted for in the estimate. Can it be anticipated that thecontractor will mobilize the equipment to another project and have to remobilize, or will theequipment and resources be idle during the shutdown. These factors need to be considered andappropriate adjustments made to accurately estimate the true mobilization costs for a project.

B. Traffic ControlThe construction of nearly all projects can be executed in numerous ways. Each contractor willattempt to determine the most efficient and economical approach based upon the given project andthe experience and resources he has available to him. No matter how much time and effort a stateagency spends in evaluating how a project will likely be constructed, contractors will have different

ideas on how to prosecute the work to their advantage. This innovation by contractors can realizecost savings for state agencies and can quickly make all their efforts in developing a usable trafficcontrol plan obsolete. That is why many states now use the lump sump method of payment for traffic control/maintenance of traffic in lieu of developing full-scale traffic control plans. The use of the lump sum item for traffic control can have a significant reduction in preliminary engineeringeffort. Even so, considerable effort on the part of the state agency needs to occur to approximatethe types and quantities of traffic control devices, the number of times an item has to be moved andthe duration that the items will be needed.


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If the state agency feels that certain limitations are of significant importance, then those limitationsneed to be identified and stated in the special provisions/specifications for that project. Items suchas when lane restrictions can be imposed, duration that a detour can be in place, maximum lengthof work zone, etc., will all have a bearing on the minimum number and type of devices that arenecessary to prosecute the work. Big-ticket items that the state agency will require such asminimum amounts of portable pre-cast concrete barrier rail, number of changeable message signs,arrow boards and truck mounted impact attenuators should all be identified. This informs thecontractor that these items have to be used in the construction of the project and that they need tobe included in their bid.

The establishment and identification of these big-ticket items, consideration of the anticipatedphasing/staging of the work along with imposed limitations, as well as approximate types andnumbers of other anticipated traffic control devices, will all aid the estimator in establishing areasonable lump sum cost. By breaking out the larger lump sum item into its anticipated corecomponents, the estimator can rely on historic bid data for those items and the given limitations tocome up with a reasonable lump sum cost.

C. Clearing & GrubbingClearing & grubbing is used to remove and dispose of all vegetation, trash, natural and manmadeobjects that need to be removed from a projects worksite in order to allow construction of theanticipated improvements. Although payment for clearing and grubbing is sometimes measured bysquare yard or acre, it is also frequently paid for on a lump sum basis. When payment is made ona lump sum basis, the estimator needs to have knowledge of the area to be cleared. The size of the area to be cleared, the type of terrain, types of obstructions to be removed or filled in, density of brush, trees, rocks, etc., will aid in estimating. By analyzing this information and comparing toprevious projects with similar characteristics, the estimator can determine a reasonable estimate.

If the breadth or scope of a project is unique, then breaking the item out into smaller componentsmay aid in determining an estimated cost to perform the work. By breaking the area to be clearedinto quantifiable segments that may be similar to clearing & grubbing that has been previouslyperformed, an estimator can add up the segments to produce a reasonable estimate. Similarly, if the area is broken out into smaller categories or units that historical data may be available for; the

individual units can be estimated and summed to form a reasonable estimate.

D. Structural SteelSome states pay for structural steel to be used in the construction of bridges by the lump sumpayment method. The lump sum payment will usually include the cost of all metal used in theconstruction of the bridge including nuts, bolts, washers, stud connectors, scuppers, plates,anchorages, etc., and also includes all costs of fabrication, delivery, and erection. In order todetermine a reasonable cost estimate to use for the lump sum item, the weight of material needs tobe calculated. This, however, is time consuming to calculate with a high potential for error. Whencalculating the weight of each plate, every clip has to be cut out, the weight of holes have to bededucted, and the weight of bolts added to get an accurate total weight. The main girdersthemselves are not too difficult to calculate but the cross-frames, bearings, and splices are timeconsuming and always difficult. Because of these difficulties, an approximate weight is calculated.

Once the approximate weight is calculated a cost per pound is applied to get an estimate of cost.This cost is based on historic bid price data for projects/bridges with similar characteristics. Theestimate is then adjusted for any project specific issues.

E. Moving Items An item that may be included in projects involving the development of a new corridor or thewidening of an existing corridor is lump sum moving items. Developing estimates for the costs tomove items based on historical bid data is only possible when comparable data exists. Houserelocation costs can be estimated off historical data and adjustments made to account for the


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distance of the relocation, the terrain that must be traversed, utility relocations that may be requiredto account for moving a building on a surface street, the size of the building and the structure type.In cases where relocation of items is not required for historical significance, the work may not becost effective.

F. DemolitionEstimating demolition lump sum items again requires that the estimator understand the workinvolved and the commonalities between the work proposed and the historical bid items. Manytimes demolition work is similar in nature involving an excavator and trucks with trash trailers. Thistype of operation is the most common and the difference in bid item price is determined based onthe number of days the operation will take to remove the necessary items. Special care should betaken when known environment hazards exist within the demolition area. The hazardous materialremoval and remediation needs to be accounted for in the bid item depending on what the materialis and the significance to the contractors operations.


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VI. Estimating Project Specific or Unique Items

A. First Time UsedOn occasion, items of work that an agency has little or no historical data to aid in establishing unitprices are included in a project. In these instances, similar items may provide some guidance, butadditional investigative work may be necessary. If the item is thought to be of minor significance,spending much time in determining a reasonable bid price may be of little benefit. If the item isconsidered major or is likely to be significant to the bid, research should be conducted to establisha cost. Contacting others that may be familiar in the use of the item in question can usually help indetermining a cost. Suppliers, other state Department of Transportations, the TransportationEstimators Associations List Service (See Chapter VIII Reference Material), RegionalTransportation Commissions, Port Authorities, Consultant Letting, and even contractors can be avaluable resource in establishing costs. Be wary in relying on estimates from a single contractor;multiple sources should be utilized.

If the item in question is unique in some manner, whether its innovative, new or experimental, or considered a specialty item, costs may need to be adjusted to account for the contractorsunfamiliarity with it and potential increased risk in construction. If the work is likely to be

subcontracted out, the prime contractor may also add markup to the subcontractors price.B. Force AccountForce Account is a method of payment that pays the contractor his actual expenses for all labor,materials and equipment to complete the work. To this figure, markups for materials costs, labor surcharges, and overhead & profit may be added. The force account method of payment is usedprimarily for extra work, i.e., work that is unforeseen at the time that a project is let or advertisedand is discovered during construction; or for items of work that are poorly defined and may or maynot be expected to be used during construction. This second case is the one most frequentlyencountered by the estimator. Since the contractor does not usually bid upon this work, there islittle incentive for him to reduce costs or prosecute the work diligently. Because of this, the forceaccount method of payment is discouraged.

When an estimator is charged with establishing a reasonable cost for work to be paid for under theforce account item, he should try and establish the scope of work to be accomplished. Once thescope is developed, it can be compared to historic bid price data for similar items of work. If nocomparable history exists, the force account item should be broken out into its anticipated corecomponents, the estimator can then rely on historic bid data for those items and the givenlimitations to come up with a reasonable force account estimate. If no such data exists for even thesmaller core items of work, the estimator may need to estimate the amount and costs of labor,materials and equipment to execute the work, much like what is done when estimating using thecost based method of estimating.

VII. Bidding Climate

A. Time of SeasonDepending on when a project is advertised and subsequently bid has a major influence on the bidprices. Contractors typically have a time of year that is busier than others. This is normally whencontractors prefer to do the majority of their work. This is normally directly correlated with theweather and when the conditions are the most conducive for construction activities.

If a contractor has fully allocated his maximum resources for their season, they are less likely to bidon another project either competitively or at all. For this reason there is a benefit to the agency toadvertise the project as soon as possible prior to the peak season, to allow the contractor to plan,schedule and seek as many opportunities as possible to find efficiencies in their work plan. Thisalso creates a more competitive bid climate and lower bid prices.


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The estimator preparing the final engineers estimate needs to be aware of the time of theadvertisement and account for any expected fluctuations in bid prices due to the time of season.

B. Expected Competition/Contractor AvailabilityProjects that are advertised for bids late in the season or after contractors have scheduled their work for the year, can expect higher bid prices. This is due to the lack of competition or contractor availability. Projects that are bid during a period of time when a large number of contractors areavailable are bid more competitively. Contractors know that they must bid the lowest possible priceto be able to get the contract.

C. Other ContractsIn much the same way as the expected competition and availability influences bid prices, the sameinfluence can be a result of multiple projects being advertised at the same time. The contractorsonly have so many resources available to develop bids for projects. Many times in the case of large projects, a contractor does not have the resources to develop bids for more than one projectat a time. The most prudent course of action in this case is to manage the program of projects toensure that this does not become an influencing factor on the bids. If this cannot be prevented,then the estimate needs to reflect that multiple bids will be developed at the same time.Contractors will most often account for this in their bids as a risk and may adjust their bid prices byas much as 10-20%.

Another factor to consider in a multiple contract environment is the resources required for theprojects and if multiple active projects in an area will create conflicts. For example, multiple large-scale bridge projects in a given area may create a shortage in structural steel. In these cases theestimator must be aware of the ability of the market to support multiple projects.

Having multiple contracts in an area may create conflicts between the projects. These could rangefrom traffic control, labor issues, direct coordination issues, etc. These conflicts need to beconsidered in the calculation of production rates and subsequent bid item prices.

D. Specialty WorkSpecialty items are not necessarily new items or new construction methods, but are items that are

somehow different than the majority of the work on a given project. On a pavement rehabilitationproject, signal work may be classified as specialty work whereas it would not be on a project thatwas predominately signal and lighting work. Projects that include specialty work or are comprisedtotally of specialty work items need to be characterized correctly when estimating. Estimatingspecialty work or bid items requires a thorough understanding of the work involved and theresources required to accomplish the work. When estimating specialty items utilizing historical biddata, the comparisons between the work and the differences must be fully accounted for in thedevelopment of the estimate. Another factor to consider is the number of qualified contractorscapable of doing the project or elements of work. Other examples of specialty work may belandscape, guideposts, fencing or mechanical rehabilitation of moveable bridge components.


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VIII. Reference Material

AASHTOThe American Association Of State Highway and Transportation Officials (AASHTO) have createdestimating software called Trnsport. Information can be found online at http://aashtoware.org/

TEAThe Transportation Estimators Associations (TEA) website has estimating information, links toother useful sites and they also operate a list service for posting questions and announcements.The TEAs website can be found at http:// www.tea.cloverleaf.net

ASPEThe American Society of Professional Estimators (ASPE) serves construction estimators byproviding education, fellowship, and opportunity for professional development. Their website islocated at http://www.aspenational.com

AACEIThe Association for the Advancement of Cost Engineering has useful information and links for thecost estimating profession. They can be found online at http://www.aacei.org/

TRB-NCHRP Administered by the Transportation Research Board (TRB) and sponsored by the member departments (i.e., individual state departments of transportation) of the American Association of State Highway and Transportation Officials (AASHTO), in cooperation with the Federal Highway

Administration (FHWA), the National Cooperative Highway Research Program (NCHRP) wascreated in 1962 as a means to conduct research in acute problem areas that affect highwayplanning, design, construction, operation, and maintenance nationwide. A recent research projectnumbered 8-49 relates specifically to cost estimating. The NCHRP website can be found athttp://www4.nas.edu/trb/crp.nsf
http://aashtoware.org/http://www.tea.cloverleaf.net/http://www.tea.cloverleaf.net/http://www.tea.cloverleaf.net/http://www.aspenational.com/http://www.aacei.org/http://www4.nas.edu/trb/crp.nsfhttp://aashtoware.org/http://www.tea.cloverleaf.net/http://www.aspenational.com/http://www.aacei.org/http://www4.nas.edu/trb/crp.nsf


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IX. ToolsThe tools for preparing historical estimates can be as simple or elaborate as the estimators needs.

A number of estimating software programs are available to help with performing bid basedestimates. The decision as to which of these tools, if any, to use depends on the situation of theestimator and the transportation agency he represents. With a measure of computing skills it ispossible to use widely available software packages to meet the needs of most estimatingcircumstances. With experience the estimator can develop databases and spreadsheets to satisfyhis individual estimating requirements.

As with any other profession, staying abreast of current literature is beneficial in pursuing theoccupation of estimating. Engineering and business publications can be a good source of information.

Using cost indexes can be very helpful when preparing estimates. Although it may be difficult todetermine specific relationships between actual costs and indexed prices, monitoring cost indexescan give the estimator an indication of cost trends. The Bureau of Labor Statistics - Consumer Price Index is a good indication of general cost trends. Steel indexes can be helpful whenestimating projects containing manufactured steel products. Liquid asphalt, fuel and aggregate

indexes are very helpful when estimating paving projects. If such indexes are not readily availableit is not very difficult to set up and maintain an index for these types of items. An example of arelatively simple liquid asphalt and fuel index follows. The monthly index shown below isestablished using the average of quotes from local suppliers of liquid asphalt. The unleaded anddiesel indexes are generated similarly.

Liquid Apshalt

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

Feb-02 May-02 Sep-02 Dec-02 Mar-03 J un-03 Oct-03 J an-04 Apr-04 Aug-04 Nov-04

Letting Date

D o l l a r s

Monthly AverageBid PriceMonthly Index


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Monthly Fuel Index

$-

$0.50

$1.00

$1.50

$2.00

J a n - 0

2

M a r - 0 2

M a y - 0

2

J u l - 0 2

S e p - 0

2

N o v - 0

2

J a n - 0

3

M a r - 0 3

M a y - 0

3

J u l - 0 3

S e p - 0

3

N o v - 0

3

J a n - 0

4

M a r - 0 4

M a y - 0

4

J u l - 0 4

D o l l a r s

Diesel

Unleaded


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X. Skill Sets Required All projects are to some degree unique in character. To accurately develop an estimate for thecosts to construct a project, an estimator must be capable of mentally constructing the project andaccounting for all the activities necessary to complete the project. For this reason an estimator must have a systematic approach to ensure that all cost items have been incorporated into theestimate, and that no duplication exists.

The quality of an estimate is directly related to the skills and abilities of the estimator. The followingskills are desirable qualifications of an estimator:

Knowledge of Construction Practices and Methods Knowledge of Construction Materials and Production Knowledge of Contract documents and administration Knowledge of Project Management Understanding of Construction business and economics Experience in Construction and Design Understanding of Environmental, Legal, and Code Requirements

These skills alone do not necessarily create a good estimator. The ability to develop goodestimates is often referred to as the art, which cannot be quantified.

Estimate preparation can be tedious. When the average project contains dozens of items andlarger projects could have hundreds, determining an appropriate unit cost for these items can bemonotonous. Reviewing the bid history database for like items with similar characteristics can takeconsiderable effort and concentration. Although there is no perfect candidate to perform thisfunction, some attributes are desirable. A degree in engineering, math, statistics, accounting or even business is desirable although it is not essential. Individuals with good analytical skills andthose with construction experience in the field are especially desirable. Individuals with a goodtemperament are also sought-after.

Documents

A Guide for Estimating Using Historical Bid Prices 11-6-06