Introduction

Estimating is the process by which the cost of carrying out a quantified work activity can be
established by using historical data, synthesis of the activity and computer generated
software.
The estimate is a net estimated cost of carrying out the work for a given project. It
considers all items of expenditure which are likely to be required in order for the work to be
completed. Allowances must be made for wastage of materials, inclement weather, or any
other factors that may increase costs. These will need to be incorporated into the estimate.
Once these factors have been considered the estimator will produce a cost summary for the
contract and include profit and overheads; and move the process on to the tender
production stage.
The contract estimate is produced by the Estimator in conjunction with the pre-contract
Tendering team, it is their assessment of the cost of a contract; this has been derived from
the information provided by the Client to the Architect and Quantity Surveyor and research,
investigations and planning carried out by the team.
The estimating process incorporates decisions about:

equipment needs
sequence of operations
number of workers required
physical constraints at the site
conditions of contract

In this unit you will look at the pre-tender stage and the production of an
estimate to allow a tender to be submitted. It will also look at the process of
Valuation which will measure the work that has been completed in order to
enable the contractor to be paid by the client for work as the contract
progresses.

Pre-tender process

Learning outcome: On completion the learner will: Know the factors and
considerations involved with the Pre-tender process.

IMPORTANT
An assignment is being used for this Unit.
Details on how to produce the assignment is included on the form, which you
should down-load from the column on the left by clicking on "Assignment for Unit
9" and from the Submitting Assignment Page from the Student Area.

Contents
9.1.1 Types of Procurement
9.1.2 Types of Tendering
9.1.3 Tender Stage

Book

The Chartered Institute of Building, Code of Estimating

Practice, Wiley-Blackwell; Chichester, Chapter 11

9.1.1 Types of Procurement

The system that is commonly used in the construction industry for the completion of a
project is for a client to engage a company to carry out the work on its behalf.
In order to do this they will generally appoint a contractor, directly or through an Architect,
Engineer or Project Manager.
The procurement process may take a number of formats in order to select, evaluate and
appoint a contractor for a project, the choice between the various systems will be
determined by the employing authority and the constraints applicable to the contract.
The main options available are considered below.

Traditional

This method usually uses the standard form of contract by the Joint Contracts Tribunal
(JCT) or a similar. The contract requires the contractor to carry out the construction
according to the drawings and specification drawn up by the design team. All work is
supervised on behalf of the client by the design team leader, which is normally the architect
or on civil engineering projects, the Consultant Civil Engineer.

Design and Build

In this case the Contractor is responsible for the design, specification and the construction.
The contract may be on a fixed price or cost reimbursement basis, which may be either
negotiated, or subject to tender. These are normally used for repetitive types of building of
a standard type i.e. industrial unit which the contractor has constructed previously. Past
experience and familiarity of the design and construction should result in cost savings for
the client.

Management Contracting
In this, the design team specify the building requirements and specialist subcontractors are
supervised and co-ordinated by the management contractor to carry out the construction.
The management contractor receives a fee, which may be a set fee or a percentage of the
contract cost. The management contractor is responsible for providing site accommodation
for which he will be reimbursed either at cost or as a laid down lump sum in the tender
document. Generally used on complex projects that require a short contract period, though
which must have flexibility for modifications during construction.

Construction Management
Construction management is similar in most respects to management contracting except
that whereas with management contracting the contract is between the client and the
contractor (the subcontractors are engaged through the main contractor) in construction
management the contracts for the work packages are with the client. The construction
manager is employed to manage the construction work. This system tends to be used only
on large, specialist technical projects such as power stations.

Project Management
Project Management is "the overall planning, control and co-ordination of a project from
inception to completion aimed at meeting a client's requirements and ensuring completion
on time, within cost and to required quality standards".

Project management can be used on projects of any size, though it is normally used on
larger developments. The Project Manager may be an organisation or an individual who
guides the client in the selection of a suitable procurement system, appoint all members of
the construction team and controls and organises the project. Appointed on a fee basis,
which is not dependent on the cost of the contract. This tends to ensure that the project
manager works solely for the client's interest, as he earns no commission.

Partnering
Partnering is the creation of a special relationship between contracting parties in the
design/construction industry. This relationship encourages the parties to change their
traditional adversarial relationships to a more co-operative, team based approach, which
promotes the achievement of mutually beneficial goals, including the prevention of major
disputes.

The method of procurement should be selected on the basis of the priorities for the contract,
cost lead time duration of the works form of contract quality anticipated are a few of the
considerations but each contract will have its priorities defined during the feasibility and
design process.

Task 9.1.1 Procurement Methods

Suggest and justify the recommendation for a type of procurement
method for:

1. An office block
2. A industrial unit
3. A hospital
Word Guide: 300 400

9.1.2 Types of Tendering

The majority of builders still obtain much of their work by the system of tendering,
especially for new work or work of some importance as opposed to smaller or repair work.
Tendering for work takes various forms; all cost money to prepare yet many tenders are
unsuccessful. Success rates vary according to the companies tendering strategy.

Open Tendering
This usually takes the form of an advertisement in the national or local press stating that
tenders are required to carry out a construction contract. The system has disadvantages
but does give contractors new to an area or those starting new businesses the chance to
tender or establish themselves.

Selective Tendering
Contractors apply to be included on an approved list maintained by an employing body often
an architectural practice, local authority or statutory body. These organisations have
extensive knowledge and experience of individual contractors and regularly review
contractor performance an approved list. From such lists they are able to select contractors
most suited to the contract the number invited will vary according to the value of the
contract.
The main advantage of this system is that the contractors are known and vetted by the
employing authority and be assured as is possible that they will meet their contractual
obligations. The system of vetting usually by pretender questionnaires and the interviewing
of contractors can work against contractors who are trying to establish themselves in a
particular market or newer companies which are expanding. However the system is used
extensively throughout the construction Industry.

Serial Tendering
This type of tender the contractor is required to submit costs for carrying out work usually
not against a particular project but against sample Bills of Quantity , Works Schedule, or
price for a sample structure in the knowledge that others of a similar nature will be
undertaken. The rates given in such documents will form the basis of costing for future
work undertaken, which will be measured and valued by both parties to the contract. The
contract is usually also for a fixed period of time (often 5 years) after which the tendering
procedure will be repeated.
Some contractors specialise in this form of contract in the knowledge that once secured they
have continuity of work for their employees.

Negotiated Contract
Negotiated contracts take many forms it is very much dependent upon the type of
construction and the requirement by the client for factors such as speed, quality, repetition,
cost, desire to retain the services etc.
Generally the negotiated contract is credited with saving much of the costs arising from
selective tendering and allows early contractor involvement but other factors disadvantages
are also present it is important that the Client and contractor determine the parameters for
negotiation before commencement and that the stages at which each may withdraw are
agreed together with any associated costs at each stage.
There are three methods used to calculate a final contract price;The maintenance of positive relationships during the negotiation process is essential , trust
partnering and mutual benefit of the contract to both parties during negotiations and the
actual contract works is required.

Package Deal Tendering and Turnkey Contracts

These aim at provide the client with a complete service from enquiry to completion with the
responsibility for all design, construction and associated works being borne by the
contractor. The Turnkey option will usually include everything needed by the client to
commence work ( Desks, Chairs Computer installations etc) It is usual for the client to
approach one or more contractors y and carry out initial discussions before entering into
formal design and contractual discussions with the selected contractor, this process is
similar to the Negotiated tender process.
This type of contract is often associated with commercial and industrial structures where
simple repetitive design and speed of construction are the main criteria and with clients who
wish to retain the services of a contractor who has given good service and value in the past
and with whom a positive relationship exists.
Package deals are also popular in that they provide a service which usually involves only
two parties the client and the builder, the builder being responsible for securing and
managing other building professions which in the construction process.

Recommendation and Reputation

Much work may come to the builder through other ways other than that of tendering or the
various methods already dealt with. One of the most likely sources is of course, the
reputation of the builder, which has taken possibly many years to build up and all members
in the organisation have to play their part in achieving this, from management to operative.
Another method closely related to the firms reputation is that of receiving work on the
recommendation of a satisfied client, this can also result in work of a continuous nature

such as maintaining various properties, for example, banks, supermarkets etc., after
showing competency for work of this type. Speculative or spec. building, as it is often
termed, is now quite common and this generally means that the builder takes a gamble
(usually a very calculated one) of building houses, office blocks, etc. before having any
client. These methods of obtaining work all hold a place on the make-up of a progressive
company and to create a steady flow of work - all must be exploited to the full.

Task 9.1.2 Types of Tendering

Discuss the advantages of three of the above forms of tendering.
Word Guide: 300 400

9.1.3 The Tender Stage

The tender stage comprises of the gathering together of all resources (physical and human)
required to carry out a contract; the pretender team determining via the use of critical
analysis of information available the most efficient and cost effective process by which the
contract may be progressed and completed.
The Estimator will contribute to this process by providing advice on the overall cost of the
various constructional strategies proposed but until the method statements have been
produced the Estimator is not in a position to accurately cost the work proposed. The
production of a contract programme derived from method statements produced for the
various elements of work to be completed and encompassing health and safety assessments
is central to the estimating (and subsequently to the construction) process.
Each company tendering for a contract will have their own strategy on constructional
techniques to be used and resources available and will incorporate these into the estimating
process.
The estimating of the rates used within the tender is both an art and a science and it must
never be assumed that an Estimators role is to place predetermined unit rates derived from
historical data and synthesis into Bills of Quantity.
The estimate is only a part of the tender process and it should not be assumed that the
estimate derived by the pretender team will be the final tender figure presented to the

client. The importance of commercial awareness at adjudication to convert the estimate

into a tender cannot be overstated.

Pre-Tender and Pre- Contract Processes

The majority of work secured by a contractor is done so by some form of competitive
tendering process.
The importance of gaining as much information as possible about the proposed contract and
site cannot be overemphasised.
The contract documentation and tender drawings will provide a useful starting point but
most Estimators will need to visit the proposed site to get a feel for the contract and the
environment in which the work will take place.
The initial examination of a site may be divided into 3 stages:

The Site Visit

The Desk Top Study
Soil Exploration / insitu testing (These usually result in laboratory analysis of soil
samples and a formal report for use by the tender team).

The extent of this investigation is in reality often limited to the site visit and desk top
information which increases the risks taken by the contractor.
The extent upon which the estimator will complete each of these stages will depend upon
the complexity of the contract, the need to secure the new work.
Thus the site visit and the recording of such information to relay back to the tender team
will have a profound effect upon the tender figure eventually arrived at and submitted to the
client.
Site visit will vary according to whether the site is Compact (Traditional enclosed area) or
Extended (sewers runs, pipelines or coastal defences).
Considerations will include:

Access and egress points to the site present

Temporary roads and access points needed
Ground conditions especially where bore hole information has not been provided
within the contract documents.
Standing surface water / ponding
Excavations which can be examined.
Water courses
Surface contamination
Existing buildings on the site
Dumped rubbish or other clearance items
Excavation challenges including machinery assessment removal of or storage of spoil
Obvious service location and type of service

Potential vandalism in the area

Security arrangements and the type of hoarding or fencing required
Temporary buildings location and type
Adjacent buildings type and proximity
Crane operation and access
Local restrictions pedestrian restrictions / police restrictions local events
Local knowledge

Many other considerations will apply on a site by site basis and most companies adopt a
standardised site visit report or check list to ensure that items are not overlooked.
The Preliminaries section is very important in establishing the overall tender costs and will
contribute a considerable percentage to the overall

Desk Top Analysis

This is basically writing e-mailing and accessing web based information to add to the on site
evaluation.
It will include:

Archive and current maps charts, geological profiles and historical data.
Ordinance Survey maps
Past use of the site
Local Authority records and Archives
Details of existing utilities NRSWA.
Covenants
Rights of Way
Archaeological evidence
Ordinance
Ownership of adjacent land.
Mining activities
Environmental considerations
Aerial photographs.
Planning constraints
SSSI
Rail track

Task 9.1.3 Pre-tender Stage

Outline the procedure which is generally used to prepare for the
submission of a tender for a contract.

Word Guide: 300 400

Section Complete
You have now completed this section of Unit 9. You may now move on to the next Section
by clicking on the 'L4-9.2 Estimating' link below.

Estimating

Learning outcome: On completion the learner will: Know the process related to producing
an estimate.

IMPORTANT
An assignment is being used for this Unit.
Details on how to produce the assignment is included on the form, which you
should down-load from the column on the left by clicking on "Assignment for Unit
9" and from the Submitting Assignment Page from the Student Area.

Contents
9.2.1
9.2.2
9.2.3
9.2.4

Book

The Estimating Process

Cost Calculations
Production of the Estimate
Turning the Cost Estimate into a Tender

The Chartered Institute of Building, Code of Estimating Practice, WileyBlackwell; Chichester, Chapter 4, 6, 7 & 8.

9.2.1 The Estimating Process

Estimating is the process by which the cost of carrying out a quantified work activity can be
established using historical data, synthesis of the activity and computer generated software
information.
The contract estimate produced by the Estimator in conjunction with the pre-contract
Tendering team is their assessment of the cost of a contract; this has been derived from the
information provided by the Client to the Architect and Quantity Surveyor and research,
investigations and planning carried out by the team. This will include processes and
document production which will assist the estimator to establish a cost to complete the
project. They include amongst others:

Risk assessments
Site investigation
Resource availability
Contract programme
Sub-contract availability
The drawings and specification
Preliminaries and individual site conditions and location
Form of Contract and requirements
Prime Costs and Provisional Sums

When the Designer/Architect has produced the drawings for a building these are passed to
the Quantity Surveyor who will prepare the Bill of Quantities. This is a document which lists
the items and describes the work that is to be done in order to construct the building. It
specifies the details of each operation and itemises the materials, parts and labour for each
operation, it will also include preliminaries, material specification details about the form of
contract, P.C. and P.S. inclusion and other factors which will affect how the work will be
carried out and the quality and allowances to be incorporated.
Once the document has been prepared it is sent to the companies who are invited to tender
for the contract. Each company who wishes to tender will then cost each of the items in
order to obtain an overall estimate.
Before a company decides to submit a tender for a contract they need to decide if they wish
to price the contract, taking into account all relevant factors, and finally determine what
profit they expect, before turning the estimate into a tender.
Estimators need to keep up to date with the factors which will influence costs such as plant,
materials and labour availability.
The estimating process incorporates decisions about:

equipment needs

sequence of operations
number of workers required
physical constraints at the site
conditions of contract

Allowances must be made for wastage of materials, inclement weather, or any other factors
that may increase costs. These will need to be incorporated into the estimate. Once these
factors have been considered the estimator will produce a cost summary for the contract
and include profit and overheads; and move the process on to the tender production stage.

Take off
The initial take off content within any contract is vital and whilst various systems of
approximate estimating exist, none can be as accurate as using the Standard Method of
Measurement (SMM) approved and accepted by professional Quantity Surveyors and the
Royal Institute of Chartered Surveyors, (RICS).
SMM ensures that each item of measured work is divided into trade or element headings in
accordance with the rules for the use of SMM; it provides a standard method of providing
and presenting measured building works and thus allows accurate Bills of Quantity to be
produced. This means that each contractor tendering for the work is doing so with exactly
the same information.
The fact that all measured work is quantified according to the rules of SMM allows the
Estimator to accurately assess the work to be completed within the measured work section.
However it should be understood that many forms of contract and tendering procedures
exist within the construction industry and the comments within most text books and
publications refer to The JCT Form of Contract. Domestic Sub Contractors and Nominated
Sub Contractors have their own form of contract based upon the relevant JCT format used
for the main contract.
Contractors may use alternative systems to take off work content where Package Deals,
Turnkey or similar contracts are being Tendered for or negotiated but inevitably some form
of Bills of Quantity will be required for price determination and valuation purposes.
Being realistic in the form and amount of work output whether referring to machine or
person is vital if the contract is to be won and return to a profit.
The Estimator will complete the Bills of Quantity by reference to the information produce by
the Tender Team, in essence by placing a price against every work item within the Bills of
Quantity and multiplying this by the quantity of the item priced. The page is then added and
taken to the Summary where additional Bills of Quantity items such as Preliminaries, Prime
Cost, Provisional Sums, Contingency Items, etc as applicable to the individual contract are
included.

Task 9.2.1 Submission Considerations

Discuss the factors that need to be considered before a company
decides to submit a tender for a job.
Word Guide: 300 400

9.2.2 Cost Calculations

The Estimator should possess the knowledge and understanding of the work items (as detailed
within SMM) in order to be able to place accurate figures against each of the Bills of Quantity
measured work items and/or to be able to complete the costing of the preliminaries and other
such items. The Estimator will also carefully consider the information provided by the
Tendering team and incorporate this into the unit rates.
Whist computer estimating programs are available and the use of price books (such as Spons
or Wessex), historical data retained by the Estimator and company are aids and checks on
accuracy; much of the Estimators role will depend upon his experience and ability to calculate
accurately Unit Rates.

Units Rates
Units Rates are rates per unit of measured work within the Bills of Quantity, they are described
in terms of Lm, M2, M3, Tonnes, Item, etc; all complying with the rules of SMM; for each unit of
measured work the Estimator includes a price at which he/she considers that the work can be
completed.
The unit rate will include whatever the Estimator considers necessary and appropriate, it is
important that the unit rate build up is transparent to all who may wish to use the unit rate at
a later date; this could be to extract and analyse various parts of the cost build up to establish
items such as, labour content, labour output constant, material costs, waste factors etc.
The basic inclusions in the unit rate will be:

Materials
Waste on Materials
Labour in the form of an output constant multiplied by the craft persons all in rate

Plant (Specialist plant identified for a specific work item may be included within the unit
rate but may be itemised at the end of the Bills of Quantity section in which the
description of the work was present; general plant may be described within the
preliminaries)
Overheads
Profit

Price books and computer software used for estimating purpose provide an excellent source of
information, in particular to confirm or query the Estimators labour constants but all such
information should be taken as a guide only and not used without interpretation of the
constraints and opportunities identified by the Tender team as applicable to the individual
tender and contract under consideration.

Labour Constants
The establishment of accurate labour constants is vital to the accuracy of the calculation of
the unit rate; indeed the accuracy of the Estimators calculation of labour output could be
considered to be central to the accuracy of the estimate and tender figure itself. In addition to
determining the cost of the contract to the contractor the labour constant will determine
amongst other factors the programme durations for the contract and hence cash flow.
The Estimator must use all the information and expertise available to ensure the accuracy of
the labour constant as far as it reasonably practical to achieve this objective.

Cost Estimate not Tender Figure

After all the work which has gone into the production of the Estimate for a contract it should be
remembered that the Estimators price to complete the contract is not the Tender Figure/ Price
which will be submitted to the Client, it is purely the cost of carrying out the work in the view
of the Estimator and the Tendering team. The actual Tender Figure/Price; the amount to be
quoted to the Client which will secure the contract for the company will be subject to a process
usually referred to as: Completing the Estimate and Final Tender Review, Adjudication or
Settlement, a process by which the company take into account factors which will enhance their
chances of success or diminish these; it will also consider the amount of work they currently
have and the importance of gaining the contract, only then will a Tender Figure/Price be
established.

Computer Aided Estimating

Computer aided estimating has been growing in popularity since the 1980s, its use has
increased as more sophisticated systems have been developed and amended, most
incorporate systems which enable the Estimator to adapt software and performance criteria
to the specific needs of the company and to take into account the requirements of individual
contracts.

The computer aided software currently available complements and is largely derived from
traditional estimating price books; publications such as Spons, Laxtons, Luckins and Wessex
and similar reference material have been used by Estimators for many years. These contain
methods of measurement with descriptions for most trades and services together with the
calculated unit rates.
Most computer aided estimating systems operate in a similar manner allowing the Estimator
to accept the published rates or amend them to reflect the true cost of resources as
obtained from quotations received for plant, labour and materials and combine these with
their calculations and requirements for overheads and profit. The units rates may further be
amended by the Estimator to take into account individual factors and constraints affecting
the unit rate and hence the Estimators cost price.
Price books and estimating packages must always be considered as guides only; seldom
would a contract be gained by merely substituting price book or computer software unit
rates into a Bill of Quantity; and the profitability and /or desirability of such a contract
would always be most questionable. Many factors affect the Estimators price and indeed the
price calculated by the Estimator is seldom the tender price which is submitted to the client.
Computer aided estimating is undoubtedly beneficial in the calculation and extension of the
Bills of Quantity and recalculation, adding or subtracting from the rates following
adjudication meetings or in correction of errors and similar events.
Many contracts have now dispensed with the traditional format of paper based Bills of
Quantity and drawings; all information being received by the contractor in an electronic
form which is compatible with computer aided estimating techniques.
E-Tendering is becoming increasingly popular as it allows contractors to extend the use of
electronic communication and data exchange to sub-contractors and suppliers who have the
facility to deal with information exchanged in this manner. Most large organisations now
possess and use this technology but smaller sub-contractors operating in a limited discipline
could be excluded by this process and hence the competition for a contract be reduced. The
rapid exchange of information enables a speedier tendering process and allows rates quoted
by suppliers and sub-contractors to be incorporated into the unit rates and estimate
accurately.
A word of additional caution; computers used in design calculations and other areas
including estimating are capable of giving the impression that all factors have been
considered, build confidence and give assurance; in reality this is an illusion; the skill and
experience and judgement of the estimator cannot be replaced. Computer aided estimating
is an aid to the estimator not a replacement for their expertise.

Task 9.2.2 Cost Calculations

Provide an overview of how the costs for a project can be formulated

prior to submitting a tender.

Word Guide: 300 400

9.2.3 Production of the Estimate

The first thing that needs to be done in the production of the estimate is to estimate the
costs involved with the project. Although this section deals specifically to the development
of a project the principles will apply to all construction work.

Estimating Construction Costs

The construction costs for a project will depend on the size, type of building, standard of
finish required, location (costs will vary according to the region in which the development
occurs), the economic climate of the construction industry i.e. if there is a shortage of
construction work available firms will reduce the amount of their tender in order to try and
attract work. If the opposite is the case and there is a lot of work available, firms will
increase their tenders, as they will not be too keen to obtain the contract which will stretch
their resources, unless it is worth their while financially. In a recession, construction firms
can literally buy work in order to keep their workforce and to ensure some cash flow.
Whether the rate of inflation needs to be considered will depend on the duration of the
contract and the rate of inflation.
Building Costs can vary between builders/developers. This can be due to the size or
purchasing abilities of a company or the discount that it receives from suppliers.
Professional fees must be added to the cost of construction and these will vary according to
the project. In the past, fees were based on a set scale which was a percentage of the
building cost, though in the last few years an element of competitiveness has emerged
which can result in the professions negotiating their fees. This has resulted in a reduction in
the amount paid in professional fees though if a scale is used these can be as little as 8% of
the cost of a basic industrial unit to 20% or more for more sophisticated developments with
complex mechanical, electrical and communication services installations.

The Use of Price Books

Estimators may use Price books as a means of determining unit rates; particularly where
the Estimator does not have a full understanding of the work to be executed. They are used
to complement and enhance the Estimators historical data records and experience of pricing
contracts much of which may be stored mentally and thus not available for others to access
without consultation.

Estimating price books; publications such as Spons, Laxtons, Luckins, Griffith and Wessex
and similar reference material have been used by Estimators for many years, these contain
methods of measurement with descriptions for most trades and services together with the
calculated unit rates. The essential fact to remember is that Price books are the estimate of
the unit rate by an individual or group of individuals based upon a set of assumptions
against a defined and measured item; not an exact price which must be incorporated into
an estimate; nothing could be further from the truth; even price books from differing
authors may well have differing unit rates for an identical operation.
The skill of the Estimator rests with their ability to amend the published unit rates to reflect
the true cost of resources as obtained from quotations received for plant, labour and
materials and combine these with their calculations and requirements for overheads and
profit. The units rates may further be amended by the Estimator to take into account
individual contract and contractual factors and constraints affecting the unit rate and hence
the Estimators cost price. These factors affect the Estimators price and it should be
remembered that the price calculated by the Estimator is seldom the tender price which is
submitted to the client.

Bills of Quantity
The Bill of Quantities list in standard format items of work to be completed, together with
the specification, details of the form of contract and conditions under which the work will be
carried out, plus additional contingencies and items/sums for inclusion in the tender. The
Bills of Quantity description and format may be considered as a form of shorthand
standardization of work to be completed during the contract which is understood by other
members of the construction industry.
The Bill of Quantities is in essence a method by which contractors, usually from a selected
and previously approved list are requested to forward a tender price to carry out the
contract based entirely upon the contents of the Bill of Quantities and related enclosures,
the principal documents of which will be the form of a contract, tender drawings, preambles
and specification.
Traditionally a Bill of Quantity would be produced using the current Standard Method of
Measurements by the Quantity Surveyor working for and on behalf of the Architect and
priced by the Estimator working for the contractor. Today this format is still found but
increasingly contractors and clients are using various methods to compile a Bill of Quantity;
this is particularly true where Package Deals; Design and Build and similar contractor based
tendering formats are adopted for new contracts.
Traditional methods of Bill and Quantity production were very labour intensive and including
taking off, abstracting, cut and shuffle and direct billing processes, today much of this work
has been superseded by computerized taking off; billing and estimating software of which a
very wide variety of choice exists. It should not be however be assumed that the computer
is capable of analytical thought and able to analyse and price the individual challenges
presented by a contract.

The role of the Quantity Surveyor and Estimator in the production of the Bill of Quantity and
costing of the contract at all stages; pre and post contract and during the design process in
invaluable.
Once the Contract has been awarded the Bill of Quantity may be used as the basis of cash
flow forecasts, variations, valuations and final accounts and other contractual matters,
however it is important to remember that all work completed is subject to re-measure on
site.
The Bill of Quantity is a pricing mechanism and whilst every effort is made to ensure that it
is accurate it should never be assumed that all of the measured items are accurate or
indeed still present in the final contract.
The Bill of Quantity in whatever format adopted is essential to the effective and efficient
management and financial control of a contract.
Additional information on Bill of Quantities can be found by visiting the website listed below.

Producing the Estimate

The estimate is a net estimated cost of carrying out the work. It considers all items of
expenditure which are likely to be required in order for the work to be completed. On
completion the estimate is submitted to management to enable them to determine if a
tender is to be submitted and the price of the tender.
A detailed guide for the production of an estimate can be found in the CIOB Code of
Estimating Practice.

Bill of Quantities

Task 9.2.3 Bill of Quantities

Explain the structure and function of a Bill of Quantities, its format
and divisions.

Word Guide: 300 400

9.2.4 Turning the Cost Estimate into a Tender

The Estimator in co-ordination with the tender team will by this stage have completed the
task of investigating the true nature and extent of the contract under consideration and
produced documents and reference material to aid their final pricing of the contract. They
will have produced a pre-tender programme early in the tendering cycle to ensure that the
tender is completed and received by the Client by the date noted on the tender
documentation. They will be working as a team to produce that which they consider will be
the right price for the contract and the strategy by which this price will be competitive and
secure the contract.
Even at this stage the manner in which the contract and its individual elements and
operations will be completed will have been established and method statements, risk
assessment, the overall contract programme etc, produced and discussed.
The estimating team must be optimistic about their chances of winning the contract, and
the type of contract should be compatible with the Bidding Strategy of the company if the
team are to be fully motivated.
It is a reflection on some contractors that only 10% or less of contracts tendered for are
won, yet other contractors achieve success rates of 50% or more merely by targeting
certain types of contract and recruiting and retaining expertise within that field of work.
Assuming that the tendering team have worked diligently completed the required
documentation, produced the required statements and programmes, and studied the
drawings and details fully the challenge still remains. - How can the Estimators price be
converted into a tender price which can be submitted to the Client and secure the contract
for the company.
Taking the contract forward using the knowledge of the tender team and utilizing their
understanding of the project and experience from previous contracts is a process known to
some as Adjudication and to others as Settlement; some use the description of
Completing the Estimate and Final Tender Review and separate out settlement as a
separate stage.
All are terms which interact and in essence describe a process of checking what has been
produced by the tender team and taking this forward to produce a Tender Figure /Price
which will secure the contract; turning the estimators cost price to the contractor of actually
carrying out the work into a figure which will actually win the contract.
The tender team is charged with the objective of winning the contract at the highest
possible price that it is actually possible to do so; not the lowest price anyone can achieve

that feat but their company will not remain in business for any length of time. (It should be
appreciated that in the real world other factors may make the above statement seem
simplistic but the essential point is made).
The estimate should be carefully checked for errors in the bills of quantity unit rates and
extension of the rates until the Estimator is content with the price calculated.

Settlement / Adjudication Meeting

The process of settlement or adjudication involves considering amongst other factors:

The Estimators report

Contract conditions and form of contract
Site factors
Past experience of the Client
Analysing own work content
Sub-Contract allocation.
Prime cost and Provisional sum content
Discounts available
Non Standard insurance requirements
Liquidated damages applicable
Complexity of the contract
Programme constraints
Likely variations
Valuation dates
Labour availability
Profit margins required
Preliminaries
Effects on overheads
Dayworks
Contingency sums included
Preliminaries including contractual requirements
Competitors
The existing company workload
The need for the new contract.
Financial implications and cash flow analysis
Risk analysis
Health and Safety Plan.
Cash flow with the new contract
Cash flow without the new contract
Company retention on selective tendering lists.

The list is in reality extensive and many of these factors will already have been considered
by the tendering team and related to the estimator but the final settlement is in many
respects left to the senior management of the tendering company; on their shoulders rests
the continuance of the company and responsibility for its profitability.
That which turns the estimate by into the formal tender is complex and many would
consider it an art rather than a science, everyone attending the settlement meeting(s)

should contribute and much discussion will take place until a sum of money is agreed and
the Form of Tender completed and submitted.
It is not unusual for a Managing Director aware of the competition to reduce or increase the
Estimators cost prediction before submitting the tender.

Outline Tender Procedure for a Contract to be Awarded under JCT form of Contract

1. Invitation to tender Document delivery

2. Check contract documentation
3. Ensure complete
4. Bills of Quantity
5. Drawings as contract documentation
6. Conditions/Form of Tender
7. Note return date
8. Determine tender policy for this invitation
9. Yes/No (with carefully worded letter)
10. Read all documentation carefully
11. Decision to tender Positive
12. Produce Pre-tender Programme
13. Method Statements
14. Contract outline programme
15. Working methods
16. Health, safety, welfare and environmental protection requirements
17. Meeting schedule etc.
18. Assign duties to personnel
19. Carry out pre-tender site investigation assess work and site conditions
20. Determine own work content of the Bills of Quantity
21. Request quotations for plant and materials full documentation must be provided,
including specification and form of contract
22. Determine extent of the sub-contract works and request quotations full
documentation must be provided, including specification and form of contract
23. Price sections of the Bills of Quantity to be completed by the main contractor
24. Compile/price the whole of the Bills of Quantity using information gathered from
internal and external sources
25. Analyse Bills of Quantity to determine contractors own work content
26. Preliminaries
27. Domestic sub-contractors
28. Nominated sub-contractors
29. Nominated suppliers
30. Provisional sums
31. Daywork sums
32. Contingencies

33. Discounts
34. Possible additions/omissions etc.
35. Adjust rates and price in line with the findings- analysis report for adjudication
meeting
36. Determine financial viability of the contract
37. Determine work impact of success or failure of the tender report for adjudication
meeting
38. Adjudication meeting to determine tender price
39. Complete form of tender and deliver to the appointed place in good time obtain a
receipt
40. Analyse competition tender price/duration if possible and evaluate own performance
41. Commence pre-contract procedure or use information gained as feedback for future
contracts.

Task 9.2.4 Tendering Process

Discuss the factors which will have a bearing on the final tender
submission price.
Word Guide: 300 400

Section Complete
You have now completed this section of Unit 9. You may now move on to the next Section
by clicking on the L4-9.3 Valuation of Work link below.

Valuation of work

Learning outcome: On completion the learner will: Know the process related to producing an
estimate.

IMPORTANT
An assignment is being used for this Unit.
Details on how to produce the assignment is included on the form, which you
should down-load from the column on the left by clicking on "Assignment for Unit
9" and from the Submitting Assignment Page from the Student Area.

Contents
9.3.1 Valuations
9.3.2 Preparing the Valuation on site

Book

The Chartered Institute of Building, Code of Estimating Practice, WileyBlackwell; Chichester

9.3.1 Valuations

Interim Valuations for Site Managers

Most contracts have a value in excess of a few thousand pounds, under these circumstances
Contractors are usually paid as the construction work proceeds.
It would be unreasonable to expect the Contractor to provide funding for the whole of the
work, which in reality may total many millions of pounds. The tender price would be inflated
by the cost of borrowing large sums of money to fund the contract. The standard JCT forms
of contract include clauses for periodic or interim payments to be made.

Frequency of Valuations and Valuation Date

The JCT Form provides for the Client to pay the Contractor sums stated to be due in the
Interim Certificates at the periods stated in the Appendix to the Conditions of Contract. This
will in contractual terms usually mean that payments are monthly, the first Valuation being
one month after the date on which the Contractor takes possession of the site, with
subsequent payment in accordance with the form of contract agreement. The Client is
responsible for payment via the Architect but in reality the Quantity Surveyor appointed by
the Architect will normally complete the Valuation and advise the Architect of the amounts
to be certified and paid.
Some contracts will make payments at certain pre-agreed stages in place of Interim
Valuations. This form is usual in house building where the first payment may be due when
the substructure is finished, the second when superstructure walls including upper floors
are constructed, the third when the roof in finished, and so on.
It is usual for the PQS and contractors QS to meet on site to agree the Valuation though this
is not strictly necessary under the terms of the contract. It is usual for these individuals to
meet each month on a fixed date; agreed at the start of the contract to complete the
Valuation process.

General Procedure
The usual method of preparing an Interim Valuation is to value, on each occasion, the
amount of work which has been done since the beginning of the contract including the value
of other acceptable inclusions; deducting from total value at each monthly Valuation the
total of previous payments; (Valuations) to give a balance due for payment. If these rules
are followed, any previous under-valuation or over-valuation will be automatically
corrected. Most companies use their own Valuation forms which allow for subsequent entry
into software systems.

Task 9.3.1 Valuations

Discuss the need for and procedures involved in the valuation of the
completed work.
Word Guide: 300 400

9.3.2 Preparing the Valuation on site

The Quantity Surveyors first task, on visiting the site for Valuation purposes, is to make
himself known to the Site Manager and ensure that he receives a full site induction or if this
is not his first visit to the site an updating of the current site status from the Site Manager.
The QS may then tour the Works, making notes as necessary of the extent of work done
and listing the quantities of the various materials and goods stored on the site. The QS will
expect the Site Manager to have produced a list of materials and quantities on site and
other documentation to assist in the formation of the Valuation.
The PQS and Contractors QS will usually prepare and agree the Valuation before leaving the
site; subsequent disputes will thus be avoided.

Inclusions in Valuations
The Standard JCT Form provides that the amount stated as due in an Interim
Certificate.....shall be the gross Valuation of specified parts of the Works, less the retention
percentage and the total of previous Interim Certificates. Gross valuation comprises in full
or in part:

1.
2.
3.
4.
5.

Preliminaries
Main Contractors work (as billed)
Variations
Unfixed materials and goods
Statutory fees and charges

6.
7.
8.

Nominated Sub- Contractors work

Fluctuations in costs of labour, materials and/or taxes, etc.
Retention

1. Preliminaries
Preliminaries contained within the Bills of Quantity are easily quantifiable; those contracts
which do not have B of Q can prove a challenge and it is advisable to agree the costs of
identified individual preliminary items at the commencement of the contract or when
payment of individual preliminary items will become applicable.
Preliminaries items are of four kinds, namely, cost-related, time-related, single-payment or
a combination of two or more of these. The PQS and QS will agree which Preliminary items
fall into which category at the commencement of the contract. On some contracts the
parties merely agree to consider all items to be time related and simply divide the total
costs of the Preliminaries by the duration of the contract, such practice is not advisable and
should be discouraged.

2. Main Contractors work

The value of the work completed by the Contractor will be easily established using the unit
rates contained in the Bills of Quantities; in the case of Stage or Lump sum contracts the
Valuation will be formulated using agreed schedules between the contracting parties.
When valuing the Main Contractors work the Surveyor will start with the Excavation and
Earthwork section or the Demolitions of Works and proceed in B of Q order through all the
succeeding work sections which contain items of work which have been wholly or partly
carried out. Each item within each section is noted separately and a completion value
assigned to it, indicating by use of bill item references that which is included in each
amount.

3. Variations
Most projects have Variations, which present a difficulty in the context of Interim Valuations
for several reasons. The JCT Form requires that effect be given in Interim Certificates to the
measurement and Valuation of Variations. Each Variation must be valued, either
approximately or accurately, as soon as possible after issue and included within the monthly
valuation after the work has been executed; using the appropriate form of valuing the work
(this is usually the preserve of the QS).
The valuation of variations must not be left until the end of the contract this could seriously
affect cash flow and cost/value reconciliation calculations and lead to an inaccurate
prediction of contract profitability.

4. Unfixed materials and goods

The JCT Form enables the inclusion within the Valuation of materials and goods delivered to
the site which are intended for incorporation in the Works. The materials must be pertinent
to the ongoing works and the QS will need to be satisfied that the materials and goods are
actually on site and to ascertain approximately how much of each material or goods there
are at present.
Materials or goods which are - insufficiently protected materials or those which have
deteriorated or been damaged; quantities which are clearly in excess of requirements or
any materials or goods which have been delivered prematurely, that is, when the materials
are not pertinent to the continuance of the Works should not be included in the valuation.
The JCT Form also allows the inclusion in the valuation of materials and goods intended for
the Works but not yet delivered to the site to be included in the Interim Valuation, subject
to a number of extra conditions. I general these are that:

they are intended for incorporation into the Works, are in accordance with the
contract specification, are ready and fit for use.
they are stored separately from other goods or materials at the place where they are
being kept and are clearly identifiable, appropriately marked and they are properly
and adequately insured.
ownership is established in written contracts or sub-contracts for their supply.

The PQS must be sure that that all these conditions have been met in full before these
materials of goods can be included in the Valuation.

5. Statutory Fees and Charges

Any charges and/or fees paid by the Contractor to any local authority or statutory
undertaker for work executed or materials or goods supplied in the course of carrying out its
statutory obligations should be included in the next Interim Valuation after receipt of such
services.
These costs are usually included in the Bills of Quantity in the form of Provisional Sums; any
sums for profit and attendances will be applied to the authorities charges.
Sums equivalent to cash discounts to the invoiced amounts may not be added, which
invariably will be net; this exclusion only applies to fees and charges for work done or
goods supplied in discharge of the statutory obligations of the authorities.

6. Nominated Sub-Contractors work

The JCT Nominated Sub-Contract details that should be included within a Valuation in
respect of sub-contract works. The sub-contractor will make application to the Main
Contractor on completion of the whole of part of the works for inclusion into the Main
Contractors next Interim Valuation.
Nominated Sub-Contractors will be informed of the Valuation date in each month of the
main contractors Interim Valuation and provided with dates by which their application for
inclusion into this Valuation must be received.
Provided the QS is satisfied of the validity of the claim; that is that the work had been
executed and any other aspects of the application for inclusion into the main contractors
Interim Valuation such as materials on or off site, variations, fluctuations etc it will be
included in the next Interim Valuation.
Profit and attendance additions will be included by the Main Contractor on a pro-rata basis
to the appropriate items in the Bills of Quantities. The JCT Form requires the Contractor to
provide proof of payment to any nominated Sub-Contractor of any sum included in the
immediately preceding Certificate in respect of their work, materials or goods.

7. Fluctuations
Will be specified in the contract documentation, JCT 2011 Standard Building Contract with
Quantities gives options in Schedule 7 Contribution Levy and Tax Fluctuations.

8. Retention
It is usual in all forms of the standard forms of building contract for a percentage of the
Valuation total to be deducted. Thus, the sum of money deducted is said to be retained by
the Client and is called Retention.
The purpose of the retention percentage of the total value of work completed to date is
mainly to provide a degree of protection to the Client against the effects of the Contractor
defaulting,
Exclusions retention applies to certain aspects or activities within the contract and some
contracts may have a limit on the amount of retention held back from the Contractor.
These are contractual matters largely outside of the responsibility of the Site manager.
The JCT Form provides for one-half of the total then retained to be paid to the Contractor in
the next Interim Certificate after the Architect has issued a Certificate of Practical
Completion.
The second half of the retention monies is, in effect, released on issue of the Certificate of
Making Good.

Task 9.3.2 Preparing the Valuation on site

Outline the considerations involved in the process of carrying out a

valuation.
Word Guide: 300 400

Unit Complete
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