Estimating and Tendering for

Construction Work

Estimators need to understand the consequences of entering into a contract, often defined by
complex conditions and documents, as well as to appreciate the technical requirements of the
project. Estimating and Tendering for Construction Work, 5th edition, explains the job of the estimator
through every stage, from early cost studies to the creation of budgets for successful tenders.
This new edition reflects recent developments in the field and covers:

• new tendering and procurement methods;

• the move from basic estimating to cost-planning and the greater emphasis placed on partnering
and collaborative working;
• the New Rules of Measurement (NRM1 and 2), and examines ways in which practising
estimators are implementing the guidance;
• emerging technologies such as BIM (Building Information Modelling) and estimating systems
which can interact with 3D design models.

With the majority of projects procured using design-and-build contracts, this edition explains the
contractor’s role in setting costs, and design statements, to inform and control the development of
a project’s design.
Clearly written and illustrated with examples, notes and technical documentation, this book is
ideal for students on construction-related courses at HNC/HND and degree levels. It is also an
important source for associated professions and estimators at the outset of their careers.

Martin Brook has over 39 years’ experience as a contractor’s estimator and lecturer teaching pre-
contract studies to technician and undergraduate construction courses. He is currently Cost
Planning Consultant at Carillion Construction, working with teams tendering for design and build,
PPP projects and partnering contracts. His experience extends to tendering for construction projects
in the UK, the Middle East and Canada. He was responsible for writing the 6th edition of the
CIOB Code of Estimating Practice.
Estimating and Tendering for
Construction Work

Fifth edition

Martin Brook
First published 2017
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2017 Martin Brook
The right of Martin Brook to be identified as author of this work has been asserted by him in
accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form
or by any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without permission
in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks, and
are used only for identification and explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
Names: Brook, Martin, author.Title: Estimating and tendering for construction work / Martin Brook.
Description: 5th edition. | Abingdon, Oxon ; New York, NY : Routledge is an imprint of the Taylor
& Francis Group, an informa business, [2016] | Includes bibliographical references and index.
Identifiers: LCCN 2016003612| ISBN 9781138687165 (hardback : alk. paper) | ISBN 9781138838062
(pbk. : alk. paper) | ISBN 9781315734699 (ebook : alk. paper)
Subjects: LCSH: Building--Estimates. | Letting of contracts.Classification: LCC TH435 .B822 2016 |
DDC 692/.5--dc23
LC record available at http://lccn.loc.gov/2016003612

ISBN: 978-1-138-68716-5 (hbk)

ISBN: 978-1-138-83806-2 (pbk)
ISBN: 978-1-315-73469-9 (ebk)
Typeset in Bembo and Gill
by Saxon Graphics Ltd, Derby
Contents

Preface xi
Acknowledgements xiv
List of figures xv
Abbreviations xx

1 Introduction 1
Evolution of estimating and tendering 1
Constituents of a tender price 2
Estimating cycle 3
Top-down and bottom-up estimating 4
Formats for cost plans 6
The Public Contracts Regulations 2015 9

2 Organization of the estimating function 11

Team roles and organization 11
Estimating schedule and bidding costs 16
Quality management 18
Health, safety and welfare 19

3 Procurement paths 22
Introduction 22
Clients’ needs 23
Contractor involvement 24
Partnering 25
Apportionment of risk 26
Traditional method 28
Design and build 29
Management contracting 32
Construction management 33
Private Finance Initiative 34
vi Contents

4 Formal tender documentation 41

Introduction 41
Client’s brief 42
Coordinated project information 43
Forms of contract 51
Essentials of a valid construction contract 51
Standard forms of contract 53
Sub-contract forms 55
Understanding the contractual obligations 58
Selection of contract forms 59
Documents used as the basis of a tender 60
Formal tender submissions 62

5 Contractor selection and decision to tender 68

Introduction 68
Bundling projects 69
Competition and negotiation 70
Abuse of tendering procedures 74
Decision to tender 76
Inspection of tender documents 78
Competition legislation 79

6 Project appreciation and enquiries to suppliers and sub-contractors 82

Introduction 82
Estimate timetable 82
Pricing strategy 84
Schedules 85
The estimating team 87
Visits to consultants and site 88
Enquiries to suppliers and sub-contractors 89

7 Estimating methods 97
Introduction 97
Single-rate approximate estimating 101
Multiple-rate approximate estimating 101
Approximate quantities 106
Analytical estimating 108
Operational estimating 111
 Contents vii

8 Design to cost 114

Introduction 114
Design-to-cost aims and processes 115
Design-to-cost tools 119
Controlling areas 122
Option appraisals 124
Design-to-cost team reports 126
What can go wrong? 129

9 Tenders with cost planning 130

Introduction 130
Terminology 132
Cost plan aims 133
Funding and affordability 136
Benchmarking 136
Cost benchmarking 137
Re-basing cost data 138
The first cost plan 143
Cost plan format 145
‘Linear’ bill of quantities 145
New build and refurbishment 147
Pricing the refurbishment of buildings 148
Condition surveys 149
Furniture, equipment and ICT for a school project 149
Fixtures, fittings and medical equipment in hospitals 151
Aspects of good practice 153
Tender timetable and reviews 153
Final review 155
Value-drawdown charts 157

10 Quantification for estimating 160

Introduction 160
Standard methods of measurement 161
Level of detail and using COBie 163
Bill production for estimators 167

11 Tender planning and method statements 169

Introduction 169
The role of the planning engineer 169
Method statements 170
Logistical planning 172
Tender programmes 172
Tender planning with Building Information Modelling (BIM) 176
viii Contents

12 Resource costs: labour, materials and plant 177

Introduction 177
Labour rates 177
Material rates 181
Plant rates 182

13 Unit rate pricing 184

Introduction 184
Components of a rate 184
Method of measurement 187
Pricing notes 187
Model rate and pricing examples 187

14 Sub-contractors and market testing 227

Introduction 227
Domestic sub-contractors 227
Nominated sub-contractors 233
Market testing rates for cost planned tenders 233

15 Risk, opportunities and inflation 235

Introduction 235
High-level risk assessments 236
Risk management 237
Collaborative projects 237
Risk workshops 238
Pricing risks 239
Monte Carlo simulation 240
Fluctuations 242
Standard fluctuations clauses 243
Calculation of non-recoverable increases 244
Inflation calculations for tenders with cost planning 248

16 Provisional sums and dayworks 251

Introduction 251
Provisional sums 251
Dayworks 252
Percentages for incidental costs, overheads and profit 254
 Contents ix

17 Preliminaries 258
Introduction 258
Pricing preliminaries 258
Pricing the preliminaries bill 261
Preliminaries for tenders based on cost planning 263
Benchmark data for preliminaries 263
Preliminaries workbook for cost plans 263
Design fees and charges 264

18 Cash-flow forecasts 266

Introduction 266
Cash-flow calculations 266
Examples of contractors’ cash-flow forecasts 269

19 Completing the estimate and tender settlement 275

Completing the estimate 275
Estimator’s report 276
Comments on the tender summary form 280
Tender summary for a cost-planned tender 281
Overheads and profit 282

20 Tender submission and results 285

Introduction 285
BS 8534:2011 Construction procurement policies, strategies and procedures –
code of practice 286
Completion of priced bills 287
Tender submission for cost-planned tenders 288
Tender presentation 289
Vetting of tenders 291
Post-tender negotiations and award 292
Notification of results 292
Tendering performance and analysis of results 292
Bidding strategy 295
Tender records 295

21 Action with the successful tender 297

Introduction 297
Information transfer 297
Feedback 299
x Contents

22 Computer-aided estimating 302

Introduction 302
Aims of computer-aided estimating 303
Communications and collaborative systems 304
E-tendering 306
Online auctions 307
Reverse auctions 308
Electronic exchange of information 309
Software 311
Computer-aided estimating packages 312
General-purpose software 315
Evaluation of general-purpose and bespoke software for estimating 319
Comparison of estimating package and spreadsheet for a cost-planned tender 321
Networking 321
The future 323

Further reading 326

Index 329
Preface

My aims in this book are to introduce a practical approach to estimating and tendering from a
contractor’s point of view, and explain the estimator’s role within the construction team. The book
therefore differs from other textbooks in three main ways:

1 In general, it is assumed that it is the contractor who prepares estimates because in the majority
of cases an estimate is produced to form the basis of a tender.
2 I have introduced many typical forms used by estimators to collate data and report to
management.
3 The pricing examples given in Chapter 13 have been produced using a typical build-up sheet.
The items of work to which the prices relate are given at the top of each page. Estimating data
are given for each trade so that students will have a source of information for building up rates.
I suggest that before pricing exercises are undertaken, the first part of Chapter 13 should be
read and an understanding of estimating methods should be gained from Chapter 7. The first
pricing example is for a ‘model rate’ that gives a checklist of items to be included in a unit rate.
It should be noted that few estimators now build up prices using paper forms, which were
replaced with spreadsheets and estimating software in the 1990s.

The estimating function has again changed since the last edition, which was published in 2008. It
was envisaged that more duties would be fulfilled by estimating assistants. It seems that there are
now fewer junior estimators employed by contractors because there are fewer clerical functions
needed. There are no photocopying duties with the reduction in paper copies of tender documents
and letters. Documents are now filed on common drives or in the cloud, and quantities are
produced by outside practices or home-workers.
Estimators need to understand the consequences of entering into a contract, which is often
defined by a complex combination of conditions and supporting documents. They also need to
appreciate the technical requirements of a project, from tolerances in floor levels to the design of
concrete mixes, and from temporary electrical installations to piling techniques.
The Chartered Institute of Building publishes a series of guides to good practice – the Code of
Estimating Practice and its supplements. I have not duplicated their fine work in this book but
hope that my explanation and examples show how the guidelines can be used in practice.
Contractors now assume an active role in providing financial advice to their clients. The estimator
produces financial budgets for this purpose and assembles cost allowances for use during construction.
Computers are universally employed, using a combination of general-purpose and specialist
software. Computers have advanced estimating and cost planning, allowing estimators time to
enjoy a greater contribution to the development of designs. Their skills need to be developed
further to exploit exciting benefits of BIM (Building Information Modelling) systems.
xii Preface

The New Rules of Measurement – NRM1, 2 and 3 – are a leap forward in modern documentation
and quantification for building work. With the introduction of NRM1, we now have firm
guidance for the preparation of early cost estimates and cost plans. NRM2 provides rules of
measurement for detailed bills of quantities and schedules of rates. NRM3 is a new approach to
the quantification and description of maintenance works for estimates and cost planning. It also
provides advice for costing maintenance and capital replacement works. The item descriptions in
all these publications will not always align with the way estimators price work and it is recognized
that there will still be ‘contractors’ billing’, which is a hybrid form of measurement. Traditionally,
bills of quantities were used as a fair basis for preparing and comparing tenders, but increasingly,
with the widespread adoption of design and build contracting, the responsibility for quantities is
being passed to contractors.
This fifth edition has been written to reflect changes in estimating since 2008. These include the
following:

• A new Chapter 1 which explains new approaches to estimating brought about by the need for
early cost advice and a large proportion of contracts using design-and-build procurement.
• References to PFI have again been reduced because the value of work carried out using this
procurement route has fallen in the UK from a peak of about 14 per cent of government
procurement to 7.5 per cent in 2012. On the other hand, the use of various forms of Public
Private Partnerships are growing in international markets.
• The previous chapter written for tendering on the basis of cost plans has been split into two
parts: Design to Cost and Tenders with Cost Planning. There is an increasing trend for
contractors to prepare early cost models for their clients, and develop proposals according to
‘design-to-cost’ principles.
• Increases in labour and plant rates which affect rate build-ups (Chapter 12), daywork calculations
(Chapter 16) and pricing notes (Chapter 13). Pricing sheets have been updated to reflect the
NRM2 rules of measurement and correct some inconsistencies. The rates have been updated
to levels found in the period 2015/16. Increases in the period 2008–2013 were held back by a
recession across all market sectors. With that behind us, rates are again rising, particularly in the
South-East region of the UK, where there is a shortage of skilled operatives and staff which
continues to add to building costs. Across the UK, construction inflation continues to run
ahead of the UK government measures of consumer-related inflation.
• Most tables and figures have been updated, and a number of figures have been enhanced to
make them easier to read.
• Labourers and general operatives are both terms used in the text to mean workers who are not
recognized for craft or skill rates under the working rule agreements in the construction
industry.
• I have taken out processes based on hand-written calculations and notes, because manual
reporting and scheduling has been replaced by estimating software or general-purpose software.
Paper copies of tender documents are no longer issued – they are instead lodged in a data room
on a collaborative website or FTP location.
• The introduction of BIM as a formal process throughout the life of a building.

During 2015 and early 2016 there were mixed messages about the uptake of BIM in design and
construction teams. The UK government expected to see Level 2 BIM implemented for public
sector schemes by April 2016; in practice this may loosely translate into, like the curate’s egg, good
in parts. People are on a journey and estimators have only just set out. There needs to be a greater
 Preface xiii

investment in establishing clear systems; and training needs to improve to enable the adoption of
new processes.
Estimators have experimented with information readily abstracted from a 3D model, but have
not considered this to be in the context of a COBie standard. Few estimators have been given
access to real-time data.
Will BIM do the estimator’s job for him? That is, automatically quantifying components on
drawings, checking for errors and then attaching appropriate rates to work items. Currently,
application software is being written to attempt this, but each project has unique technical and
commercial challenges that are unlikely to be programmable. Nevertheless, change will happen
organically by taking advantage of the information produced by 3D software.
A sample contractor’s cost plan can be accessed on the Routledge website at www.routledge.
com/products/9781138838062. This Excel workbook brings together many of the figures used in
the book, showing a realistic example of a cost plan used in practice.
I recognize and support the role of women in construction and ask readers to accept that the use
of the masculine pronoun is intended to refer equally to both sexes.
Martin Brook
2016
Acknowledgements

I wish to acknowledge Dr Jane Brook for the new cartoons.

Figures

1.1 What makes a good estimator? 2

1.2 Constituents of a tender price 2
1.3 The estimating cycle 3
1.4 Comparison between traditional and cost-planned tenders 4
1.5 Top-down cost plan using a client’s affordability target 5
1.6 ‘Top-down’ and ‘Bottom-up’ estimating 6
1.7 Linear bill of quantities in cost plan workbook 7
1.8 Elemental summary in cost plan workbook (data in column I using formula
‘sumif…’) 7
1.9 Package summary in cost plan workbook (data in columns G to I using formula
‘sumifs…’) 8
1.10 Internal doors sheet in a workbook with elemental cost plan tabs 9
2.1 Estimating staff structure for a medium-sized organization 12
2.2 Estimating and tendering flowchart (traditional contract) 14
2.3 Estimating and tendering flowchart (design-and-build contract) 15
2.4 Estimating schedule and budgets 17
2.5 Tender register 18
2.6 Example of the additional costs for health and safety for a £50m project 21
3.1 A guide to the apportionment of construction risk 26
3.2 Typical risk matrix for a design-and-build contract 28
3.3 ‘Traditional’ contractual links 29
3.4 Design-and-build contractual links 30
3.5 Management contracting contractual links 33
3.6 Construction management contractual links 34
3.7 PFI: UK Competitive Dialogue Process 36
3.8 PFI contractual links 38
3.9 Pricing stages used to procure a UK PFI (PF2) project 40
4.1 Client’s brief: examples of good and bad practice 42
4.2 Design standards and guidance 44
4.3 Contractor’s bill of quantities with sort codes 49
4.4 Standard forms commonly used between contractors and their sub-contractors 57
4.5 Typical contract obligations checklist 58
4.6 Simplified checklist for the selection of a contract 59
4.7 Typical formal invitation letter 63
xvi Figures

4.8 Typical form of tender 65

4.9 Example of an alternative tender 66
5.1 Preliminary enquiry information form 77
6.1 A typical estimate timetable for a small project 83
6.2 Typical pricing strategy for a design-and-build project 84
6.3 List of PC and provisional sums at project appreciation stage 85
6.4 Quantities abstract for a large hospital project 86
6.5 Coordination of the estimating team 87
6.6 Abstract form for materials or sub-contract enquiries 91
6.7 Typical enquiry for materials 92
6.8 Sample enquiry letter to domestic sub-contractors 94
6.9 Sample sub-contract documents list for structural steelwork package 95
7.1 Estimating methods in the 1930s and today 98
7.2 Example of a development budget 99
7.3 Degree of uncertainty for a typical construction project 100
7.4 Elemental headings used by BCIS Form of Cost Analysis 103
7.5 Extract from BCIS (NRM1) Detailed Elemental Cost Analysis 103
7.6 Contractor’s detailed elemental cost analysis 105
7.7 Example of ‘builder’s quantities’ 107
7.8 Example of preamble for ‘builder’s quantities’ 107
7.9 Contractor’s bill of quantities priced analytically 109
7.10 Contractor’s spreadsheet for weighbridge foundation 109
7.11 Analytical and operational pricing for a weighbridge foundation 112
8.1 Example of a design-to-cost process 116
8.2 Example of rules of engagement for a design-to-cost process 117
8.3 Example of ‘golden rules’ for a design-to-cost process 118
8.4 ‘Traffic lights’ system for designing external walls to cost 119
8.5 Design-to-cost schedule – external walls 120
8.6 Example of an elemental cost plan with design statements 121
8.7 Area requirements for various public market sectors 122
8.8 Typical schedule of accommodation for a school 123
8.9 Option appraisal for a structural frame to a teaching block – cost 125
8.10 Option appraisal for a structural frame to a teaching block – quality and cost 126
8.11 Elements allocated to design-to-cost teams 127
8.12 Design-to-cost teams or ‘clusters’ 128
8.13 Design-to-cost team report for envelope 128
9.1 Pricing methodology for tenders with cost planning 131
9.2 Flowchart for estimating with cost planning 131
9.3 Competency map for an estimator in a cost planning role 135
9.4 Table showing internal and external cost benchmarking 137
9.5 Examples of cost yardsticks for buildings and building elements 138
9.6 Tender price inflation indices produced by BCIS 139
9.7 Longer-term tender price inflation indices produced by BCIS 139
9.8 Typical factors for adjusting costs for location 140
9.9 Abnormals checklist 141
 Figures xvii

9.10 Example of re-basing a similar college cost plan to a proposed project with
adjustments for inflation, location and area 142
9.11 First elemental cost plan using three similar projects 143
9.12 Example of estimator’s design guide for a school building 144
9.13 Example of a linear bill of quantities 145
9.14 Example of a linear bill of quantities for a hotel 146
9.15 Options for refurbishment and new school buildings 147
9.16 Cost plan categories for refurbishment of existing buildings 148
9.17 FF+E schedule for a secondary school 149
9.18 ICT interface schedule 150
9.19 Inputs to an equipment responsibility matrix 151
9.20 Definition of equipment required for different parts of a hospital 153
9.21 Timetable for the production of a cost planned tender showing tender reviews 154
9.22 Typical tender settlement meeting agenda 157
9.23 Typical-value drawdown chart for a PPP/PFI project 158
9.24 Typical layout for a milestone payments schedule 159
10.1 Levels of quantification 160
10.2 MasterFormat divisions used in North America 162
10.3 Levels of detail or development 164
10.4 Work items example 166
11.1 Example of tender method statement for submission to a client 171
11.2 Example of a tender programme 174
11.3 Example of a programme submitted with a tender 175
11.4 BIM levels of sophistication 176
12.1 Calculation of all-in rates for labour using spreadsheet software 178
12.2 Calculation of all-in rates for site working 50 hours/week with an extended
summer period of 35 weeks and insurances priced in preliminaries 180
13.1 Estimator’s build-up sheet for fixing ironmongery 185
13.2 Estimator’s bill of quantities 186
13.3 Model rate calculation 189
13.4 Groundworks excavation data sheet 190
13.5 Groundworks disposal and filling data sheet 191
13.6 Groundworks sample bill of quantities 192
13.7 Topsoil and bulk excavation pricing sheet 193
13.8 Excavating trenches pricing sheet 194
13.9 Excavation disposal off-site pricing sheet 195
13.10 Excavation filling pricing sheet 196
13.11 In-situ concrete data sheet 197
13.12 In-situ concrete pricing 198
13.13 In-situ concrete operational pricing sheet 199
13.14 Formwork data sheet 200
13.15 Formwork materials and equipment data sheet 201
13.16 Formwork to foundations pricing sheet 202
13.17 Formwork to soffits pricing sheet 203
13.18 Formwork to columns (operational pricing) pricing sheet 204
13.19 Bar reinforcement data sheet 205
xviii Figures

13.20 Bar reinforcement pricing sheet 206

13.21 Fabric reinforcement data sheet 207
13.22 Fabric reinforcement pricing sheet 208
13.23 Brickwork data sheet 209
13.24 Brickwork quantities data sheet 210
13.25 Brickwork sundries data sheet 211
13.26 Brickwork pricing sheet 212
13.27 Blockwork data sheet 213
13.28 Blockwork pricing sheet 214
13.29 Structural timber data sheet 215
13.30 Joinery data sheet 216
13.31 Structural timber pricing sheet 217
13.32 Windows and doors data sheet 218
13.33 Ironmongery data sheet 219
13.34 Doors and ironmongery pricing sheet 220
13.35 Painting data sheet 221
13.36 Painting pricing sheet 222
13.37 Drainage operational outputs data 223
13.38 Drainage trenches and pipe fittings data sheet 224
13.39 Drainage pricing sheet 225
13.40 Drainage manholes pricing schedule 226
14.1 Example of a sub-contract comparison sheet 229
14.2 Computer comparison system showing problem of average rate inserted
automatically 230
14.3 Sub-contract attendances checklist 231
14.4 A typical summary form for domestic sub-contractors in a tender 232
14.5 Table of package values targeting 80 per cent of net cost for a school project 234
15.1 High-level risk assessment using data from previous projects 236
15.2 Example of risk allocation for a collaborative project 238
15.3 Risk workshop agenda 239
15.4 Typical contractor’s risk register 239
15.5 Comparison of risk distributions 241
15.6 Typical risks register using Monte Carlo simulation software 242
15.7 Methods used to predict forward inflation 243
15.8 Standard fluctuation clauses using a JCT Standard Building Contract 244
15.9 Calculation of inflation for a project starting in September 246
15.10 Calculation of inflation for a project starting in March 247
15.11 Building tender price indices 249
15.12 Inflation calculation using work elements and BCIS indices 250
16.1 Estimator’s spreadsheet for calculating the prime cost of building labour for
daywork 2015/2016 254
16.2 Example bill of quantities page for dayworks 255
16.3 Items to be added to the ‘all-in’ rates for labour 257
17.1 Preliminaries checklist using NRM1 259
17.2 Typical project overheads spreadsheet 260
17.3 Preliminaries spreadsheet (Figure 17.2) converted to NRM headings 261
 Figures xix

17.4 Early costs that may be included in the first contract payment 262
17.5 Typical ranges for preliminaries 263
17.6 Typical breakdown of preliminaries 264
17.7 Design fees and surveys checklist (school project) 265
17.8 Typical payment stages for professional fees 265
18.1 Simple linear plot of cumulative value 267
18.2 Simple S-curve for cumulative value and costs, calculated at ‘one-third’ points 267
18.3 Three S-curves for a convention centre development: front-loaded, standard
and back-loaded 268
18.4a Estimator’s value drawdown programme 270
18.4b Monthly and cumulative value curves produced by estimator 271
18.5a Client’s valuations forecast produced by the estimator 272
18.5b Contractor’s cash-flow forecast using priced programme 273
18.5c Cash-flow forecast graph 274
19.1 Summary of sub-contractors (reproduced from Chapter 14) 277
19.2 Tender summary form 278
19.3 Tender summary form for a cost-planned tender 279
19.4 Agenda items for a tender settlement meeting 280
19.5 Overheads calculation for a medium-sized construction organization 283
20.1 Transfer of costs from settlement meeting totals A to a breakdown for a
submission bill of quantities B 287
20.2 Cumulative tender ratio based on number of tenders won 293
20.3 Cumulative value of tenders and awards 293
20.4 Tender results 294
20.5 Summary of tender results 294
20.6 Alternative methods for cost plan ratio analysis (relates to data given in tender
summary form) 296
21.1 Extract from the contractor’s bill of allowances 299
21.2 Comparison of sub-contracts placed with sub-contract allowances 300
21.3 Conversion of package values to elemental cost plan 301
22.1 Communication systems 304
22.2 Collaborative tools 305
22.3 Example of a COBie worksheet 310
22.4 Software used for common estimating tasks 312
22.5 Features checklist for estimating packages 314
22.6 Example of a spreadsheet template for formwork 317
22.7 Example of a spreadsheet template for drainage excavation 318
22.8 Comparison of estimating package and spreadsheet for a cost-planned tender 321
Abbreviations

3D three-dimensional
ACA Association of Consultant Architects
BCIS Building Cost Information Service
BIM Building Information Modelling
BMS Building Management Systems
BPF British Property Federation
BRE Building Research Establishment
BREEAM BRE Environmental Assessment Method
BS British Standard
BSI British Standards Institution
BWIC Builder’s Work In Connection with engineering services
CABE Commission for Architecture and the Built Environment
CAWS Common Arrangement of Work Sections
CD1 Competitive Dialogue stage 1
CD2 Competitive Dialogue stage 2
CDM Construction (Design and Management) Regulations 2015
CEN European Committee for Standardization
CESMM4 Civil Engineering Standard Method of Measurement Fourth Edition 2013
CI/SfB Construction Index – Samarbetskommitten for Byggnadsfragor
CIOB Chartered Institute of Building
CMA Construction Management Agreement
COBie Construction Operations Building information exchange
COEP Code of Estimating Practice (published by the CIOB)
Conc concrete
CPI coordinated project information
CPI Consumer Price Index
CPP construction phase plan
CSI/CSC US Construction Specifications Institute/Construction Specifications Canada
DBFO design, build, finance and operate
EU European Union
Exc excavation
FF&E furniture, fixtures (or fittings) and equipment
FIDIC International Federation of Consulting Engineers
 Abbreviations xxi

FM facilities management (or facility management)

FTP file transfer protocol (internet protocol to transfer computer files)
GIA gross internal area
HSE Health and Safety Executive
ICE Institution of Civil Engineers
ICT information and communications technology
IFC Industry Foundation Classes
Inc included
ISO International Organization for Standardization
JCT Joint Contracts Tribunal Limited
LA local authority
M+E mechanical and electrical installations/contractors
MEAT most economically advantageous tender
MEP mechanical, electrical and plumbing (or public health)
NAS network attached storage
NBS National Building Specification
ne not exceeding
NEC3 A suite of contracts published by NEC, London
NRM1 Order of Cost Estimating and Cost Planning for Capital Building Works
(2nd edition 2012)
NRM2 Detailed Measurement for Building Works 2012
OBC outline business case
OFT UK Office of Fair Trading
OGC UK Office of Government Commerce
ONS UK Office of National Statistics
PAS publicly available specification (BSI)
PB preferred bidder
PC prime cost
PF2 Private Finance 2 (UK government’s new approach to PFI)
PFI Private Finance Initiative
PPD preliminary project description
PPP public–private partnership
PQQ pre-qualification questionnaire
PQS private quantity surveyor (consultant) – also project quantity surveyor
Prov provisional
PSS Public Sector Scheme
Quant quantity
RIBA Royal Institute of British Architects
RICS Royal Institution of Chartered Surveyors
SMM Standard Method of Measurement
SMM6 Standard Method of Measurement of Building Works: 6th edition 1978
SMM7 Standard Method of Measurement of Building Works: 7th edition 1988
TPI tender price index
VAT value added tax
Chapter 1

Introduction

Evolution of estimating and tendering

The role of the estimator in main and specialist contracting has not changed, but aspects of pricing
strategies and methods have. In the early 1980s, estimators began to embrace computers for the
power of building complex price models, with the facility to change inputs, with powerful results.
In the 1990s, estimators were sceptical about using historical data and cost plans as a basis of a bid.
Since the beginning of this millennium, database systems and spreadsheets have competed as the
tools of choice for estimators – sometimes both systems are used. Bespoke computer-aided
estimating systems for handling the bills of quantities and spreadsheets for cost plans, cash flows and
summary reports. We now see fewer estimating assistants in contractors’ offices because estimators
build the estimates themselves.
Batching projects in the public sector has allowed the adoption of cost plans as the route to
tenders. A contractor bidding for a succession of schools, for example, deals with repetitive building
designs which lend themselves to cost plans based on historical data. This works for the superstructure,
but site conditions can introduce significant variations in cost.
The use of priced risk registers is now the ‘norm’. Estimators record their concerns, and those of
the whole team, at tender stage. Risk workshops provide a forum for the designers to contribute
to the register. Risks and opportunities are managed from the outset of a tender so that the impact
on the tender sum (for the client’s benefit) can be reduced to a minimum.
Successful tenderers are no longer selected on price alone. All public contracts must now be
awarded on the basis of the most economically advantageous tender (MEAT). There are now some
elaborate scoring systems adopted to capture, over the life of a building, experience, designs,
quality, sustainability and price.
The building industry has been showered with advisory reports and guidance publications,
mostly aimed at producing integrated teams working efficiently and communicating electronically.
New Rules of Measurement (NRM), introduced in 2013, bring a welcome support for order-of-
cost documentation and detailed measurement principles. Also in 2013 came the new RIBA Plan
of Work providing a framework for building design and construction. Perhaps the biggest change
will be Building Information Modelling (BIM) – a catalyst for complete designs in 3D, well-
coordinated and providing data for construction and beyond. BIM is an emerging technology and
its success will depend on the steps people take towards implementation. A BIM culture will
materialize when enthusiastic staff in each discipline push forward with implementation. History
tells us that it will be slow but unavoidable.
Successful estimators are in demand throughout the construction industry in most countries.
Their primary skills are listed in Figure 1.1. In addition, they need a working knowledge of: the
selection plant, alternative materials and systems, environmental issues, soft landings, government
2 Introduction

What makes a good estimator?

Technical Commercial
Discipline Confidence
Knowledge Skills
• Establishing scope • Benchmarking • Self-motivation • Accuracy
• Evaluating risk • Calculating rates • Corporate governance • Reliable reporting
• Finding alternatives • Sub-contracting • Submit on time
• Investigating alternatives • Negotiating
• Managing risk

= a winning bid

Figure 1.1 What makes a good estimator?

initiatives, contract responsibilities and negotiation skills. It is said that an estimator who can present
a robust set of numbers in a settlement meeting – with confidence – will inspire management to
take a less cautious stance and often will be more successful in winning bids.

Constituents of a tender price

A tender price is a sum of money required by a bidder to complete a construction project in
accordance with the invitation to tender requirements and commercial setting. The estimator
calculates the cost estimate, and management convert it into a tender, usually at the settlement
meeting, by applying their commercial judgement to cash flow, risks, opportunities and expected
return – overheads and profit.
Figure 1.2 shows a simple make-up of a tender. There are no longer nominated sub-contractors
and suppliers; and contractors increasingly engage with sub-contractors for the work, thus
eliminating nearly all of the direct works.

Direct Work Packages On-costs

Labour sub-contractors Preliminaries

Plant sub-cont prelims Bid costs
Materials attendances Design fees
Inflation
Provisional Sums
Dayworks
Contingencies
ESTIMATE

Risks
Opportunities
Margin
TENDER

Figure 1.2 Constituents of a tender price.

 Introduction 3

Estimating cycle
There are three parts to modern estimating, shown in Figure 1.3. Estimating traditionally started
with the receipt of tender documents in the form of drawings, bills of quantities and specifications.
Some estimating was based on drawings and specifications which required a measurement stage
before seeking market prices. With so many contracts now procured using the design-and-build
system, contractors are involved much earlier and provide cost-planning services. A measurement
exercise will still be needed, now at RIBA Stage 3 and 4.
The traditional approach to estimating is identified in Figure 1.4, and is well documented in both
editions of the CIOB Code of Estimating Practice, published in 1997 and 2009. There are many
references in this book to cost planning conducted in association with estimating, because many
forms of procurement result in a design-and-build form of agreement. In other words, estimators
are called on to advise on costs from inception to the collection of feedback data on completion
– RIBA work stages 1 (preparation of brief) to 6 (handover and close out).

Cost Planning Estimating Tendering

• Historical data
• Design-to-cost • Reports
• Design scope
• Measure • Settlement
• Target cost
plan within • Market test • Handover
affordability • Rate

1. Pipeline of opportunities 1. Feedback

2. Tender budget + sign off 2. Benchmarking

Figure 1.3 The estimating cycle.

4 Introduction

Traditional estimating Cost-planning and estimating

(see CIOB Code of Estimating Practice) (in addition to traditional estimating)
Preselection and decision to tender Collect benchmark data for similar buildings
Receipt of tender documents Understand client’s affordability – produce high-
level cost plan to meet affordability
Tender strategy Set design-to-cost targets in terms of elemental
costs and specifications
Procurement Work up designs with key sub-contractors. Obtain
market rates and cost plans
Planning and temporary works
Pricing the works Attend design meetings to advise on design
options. Check floor areas do not exceed targets.
Preliminaries Project team given cost targets to meet
Completion of estimate Benchmark data must be shown alongside the
estimate figures
Tender settlement Check that the design matches the pricing – some
designers add embellishments later
Post-tender activities Create elemental cost/specification sheet for use
on future projects
Figure 1.4 Comparison between traditional and cost-planned tenders.

Top-down and bottom-up estimating

Top-down estimating is all about meeting, and improving on, a client’s target price for a project.
This is based on two assumptions: the client is prepared to state the target price before the design
is developed, and there are reliable historical cost data available to the estimator.
If, for example, a client has a requirement for a hotel at a vacant city centre site, and can provide
the following, a contractor can develop the first cost plan (Figure 1.5) in an elemental format:

1 a budget, say £31,000,000 excluding development costs, loose furniture and VAT;
2 a brief with a schedule of accommodation;
3 the quality expected – often expressed as a star rating;
4 an outline programme for design and construction;
5 some site survey and ground investigation reports.

Using the diagram in Figure 1.6, and starting with the affordability target, in this case £31,000,000,
the estimator can first deduct a margin of 5 per cent on turnover. The figure before margin will be
£31,000,000 × 0.95 = £29,450,000. By working through each of the on-cost categories, the
estimator can establish the works cost, shown below in Figure 1.5.
Armed with this table of costs, allowances can be set for each element of the design. It can be
seen that the engineering services portion is £5,947,500, which can be shared with an MEP
(mechanical, electrical and plumbing) sub-contractor – assuming they are on the contractor’s team.
The final piece of work, at this early stage, is to agree some design statements with the design team.
For example: where plant is to be located either within or on top of the building.
 Introduction 5

Cloud Construction Services

Stannet Cole Hotel

Business Hotel 'Top-down' cost plan

1 GIA 9,150 m2
2 Bedrooms 200 Nr
3 Storeys 11 nr
3 Affordability target 31,000,000 %
4 Target excluding margin 29,450,000 5% on turnover
5 Target 29,450,000 < goal seek to get match
6 Risks and opportunities 1,000,887 4% on prelims + works costs
7 Inflation 1,251,108 5% on prelims + works costs
8 Design fees and surveys 1,958,256 9% on works cost
9 Bid costs 217,584 1% on works cost
10 Preliminaries 3,263,761 15% on works cost
11
12 Works cost 21,758,404 £/m2
13 Facilitating works + abnormals 1,189,500 130 using knowledge of site
14 Substructure 732,000 80 design-to-cost target
15 Superstructure 7,320,000 800 design-to-cost target
16 Internal finishes 1,830,000 200 design-to-cost target
17 Fittings, furnishings and equipment 2,470,500 270 design-to-cost target
18 Services 5,947,500 650 design-to-cost target
19 External works 915,000 100 design-to-cost target
20 Design reserve 1,353,904 balancing item

Figure 1.5 Top-down cost plan using a client’s affordability target.

In practice, the top-down cost plan will be produced in an NRM1 format by inserting the client’s
target at the bottom of the sheet.
Bottom-up estimating is characterized by working from a design solution, creating a bill of
quantities and obtaining quotations for work packages. A planning manager will produce a
programme, and preliminaries will be calculated late in the tender period. The estimate is completed
immediately prior to the settlement meeting, which of course creates huge challenges if the design
has to be changed due to cost overruns.
6 Introduction

start TOP-DOWN BOTTOM-UP

Affordability Tender

Margin Margin
Risks Opportunities
Inflation Risks
Design fees Contingencies
Bid costs Dayworks
Preliminaries Provisional Sums
civil & struct Inflation
envelope Design fees
fit out Bid costs
mech & elec Preliminaries
Works costs Sub-contractors
civil & struct Materials
envelope Plant
fit out Labour
mech & elec Bill of Quantities
Design to cost
Specifications
allowances
Design to cost
start Detailed drawings
statements

Figure 1.6 ‘Top-down’ and ‘Bottom-up’ estimating.

Formats for cost plans

There are two principal formats for cost plans using spreadsheet software: bills of quantities in a
single tab (linear bills) and bills of quantities on separate tabs representing the elements of a building.

Alternative 1: linear bills in cost plan workbook

Figures 1.7 to 1.9 illustrate a linear bill cost plan where all the work items are listed in a single
worksheet. Other worksheets are reports derived from the first sheet. Here, an elemental summary
has been produced (Figure 1.8) for submission to the client to satisfy the requirement for a contract
sum analysis. Costs for each element are automatically taken from the linear bill, to the summary,
using the ‘sumif’ formula.
The next sheet, Figure 1.9, has been created to list the work packages and their associated costs. This
project comprises three buildings: Block 1, Block 2 and Community building. Package totals have
been allocated to each building. This is achieved using the ‘sumifs’ formula in the Excel workbook.
A cost plan workbook will typically contain the following sheets:

• cover sheet
• tender settlement summary
• tender preparation notes
• floor areas broken down by buildings and floors
• linear bill of quantities
 Introduction 7

A B C D E F G H I J K L
1 Hypark ConstruCtion
2 Oldmills Skills Campus COST PLAN - STAGE 3 Linear Bill of Quantities
3

4 Building NRM Sub Element Description quant unit rate Total

5
6 Block 1 1.1 Substructure Substructures Building GIA = 9,025 m2 -
7 Block 1 1.1 16 Substructure Site clearance and excavation to reduced level; including
4,000 m2disposal on site in temp
5.00 spoil heaps
20,000
8 Block 1 0.6 16 Abnormals EO cost for providing 750mm total thickness piling4,496 m2
mat; extends 4.0m beyond 14.25 64,068
external wall line. Assume 50% imported and 50%
9 Block 1 0.6 16 Abnormals Excavate to remove surface of piling mat 150mm deep 450andm3dispose offsite 25.00 11,250
10 Block 1 0.6 32 Abnormals Piling as Earthbank Constr quote 1 Item 134,291.00 134,291
11 Block 1 0.6 16 Abnormals Allow for disposal pile arisings 638 m3 25.00 15,950
12 Block 1 0.6 16 Abnormals Allow for machine attendance 3 weeks 1,000.00 3,000
13 Block 1 0.6 16 Abnormals Pile probing & cut down top of piles 300 Nr 55.00 16,500
14 Block 1 1.1 16 Substructure RC Pile cap PC1; 2600 x 800 x 900mm 30 Nr 630.00 18,900
15 Block 1 1.1 16 Substructure RC Pile cap PC2; 4400 x 800 x 900mm 1 Nr 1,010.00 1,010
16 Block 1 1.1 16 Substructure RC Pile cap PC3; triangular; 2600 x 2350 x 900mm 16 Nr 1,030.00 16,480
17 Block 1 1.1 16 Substructure RC Pile cap PC5; 2700 x 2700 x 900mm 8 Nr 1,680.00 13,440
18 Block 1 1.1 16 Substructure RC Pile cap PC6; 4018 x 2700 x 900mm 10 Nr 2,445.00 24,450
19 Block 1 1.1 16 Substructure RC Pile cap PC7; 4500 x 2700 x 900mm 1 Nr 2,780.00 2,780
20 Block 1 1.1 16 Substructure Allow for VE reduced.pile cap sizes 1 Item - 2,500.00 - 2,500
21 Block 1 1.1 16 Substructure RC Ground beam; 800 x 650mm 282 m 100.75 28,412
22 Block 1 1.1 16 Substructure RC Ground beam; 800 x 650mm 727 m 100.75 73,245
23 Block 1 1.1 16 Substructure Allow for VE reduced ground beams 1 Item - 3,500.00 - 3,500
24 Block 1 1.1 16 Substructure Ground floor slab; 250mm thick 3,246 m2 102.50 332,715
25

Cover Lin Bill Elements Packages Cashflow Areas

Figure 1.7 Linear bill of quantities in cost plan workbook.

A B C D E F G H I J
1 Hypark ConstruCtion
2 Oldmills Skills Campus COST PLAN - STAGE 3 Elements
3

Project Oldmills Skills Campus - All buildings 12,542 m2

4
Cost Cost/m2
Element Total Cost %
5 Centre of GIA
6 £ 26,841,636
7 FACILITATING WORKS AND BUILDING WORKS
8 0 Facilitating works [insert summation of all 115 1,442,601 5%
9 0.6 Abnormals - relating to chosen site 115 1,442,601 5%
10 1 Substructure 85 1,070,047 4%
11 1.1 Substructure 85 1,070,047 4%
12 2 Superstructure 569 7,135,324 27%
13 2.1 Frame 141 1,765,018 7%
14 2.2 Upper floors 48 600,663 2%
15 2.3 Roof 57 709,065 3%
16 2.4 Stairs and ramps 17 208,584 1%
17 2.5 External walls 100 1,250,636 5%
18 2.6 Windows and external doors 69 863,948 3%
19 2.7 Internal walls and partitions 106 1,331,920 5%
20 2.8 Internal doors 32 405,491 2%
21 3 Internal finishes 80 1,000,158 4%
22 3.1 Wall finishes 13 168,795 1%
23 3.2 Floor finishes 43 542,864 2%
24 3.3 Ceiling finishes 23 288,499 1%
25 … etc

Cover Lin Bill Elements Packages Cashflow Areas

Figure 1.8 Elemental summary in cost plan workbook (data in column I using formula ‘sumif…’).
8 Introduction

A B C D E F G H I J
1 Hypark ConstruCtion
2 Oldmills Skills Campus COST PLAN - STAGE 3 Packages
3

Project Oldmills Skills Campus 9,025 3,297 220 12,542

4
5 Package totals £ 13,565,000 £ 6,288,115 £ 352,866 £ 20,205,981
6 Ref Package Location Block 1 Block 2 Community TOTAL
7
8 1 Aluminium Windows & Doors 533,209 248,457 20,809 802,475
9 2 Brickwork/blockwork/render 121,624 61,335 10,259 193,218
10 3 Bris soleil 23,800 7,350 - 31,150
11 4 BWIC M&E Installation 136,686 69,194 3,462 209,342
12 5 Cladding & Roofing 584,522 194,572 34,000 813,094
13 6 Concrete Frame 307,903 108,771 6,600 423,274
14 7 Demolition 168,673 70,332 - 239,005
15 8 Demoliton, repairs and alterations - - - -
16 9 External Rendering 140,938 73,905 2,800 217,643
17 10 Fencing/Barriers 83,780 156,310 - 240,090
18 11 Fire Protection 57,313 32,125 2,900 92,338
19 12 Floor & Wall Tiling 7,365 2,720 899 10,984
20 13 Furniture and fittings 1,104,308 354,696 8,800 1,467,804
21 14 Grilles and Shutters 3,000 15,792 897 19,689
22 15 Groundworks drainage and service trenches 294,735 313,110 - 607,845
23 16 Groundworks sub-structures 927,311 399,618 18,150 1,345,078
24 17 Groundworks site works 607,588 187,326 - 794,915
25 18 Highway Works 60,480 - - 60,480
26 19 ICT infrastructure structured cabling 569,104 171,627 13,500 754,231
27 … etc

Cover Lin Bill Elements Packages Cashflow Areas

Figure 1.9 Package summary in cost plan workbook (data in columns G to I using formula ‘sumifs…’).

• preliminaries
• elemental summary
• package summary
• value-drawdown chart
• elemental cost summary for submission to client
• benchmarking data
• priced risk and opportunities schedule
• life-cycle information for a life-cycle manager to understand the likely capital replacement
costs.

The linear bill of quantities and preliminaries sheets provide the data for all the other reports.

Alternative 2: cost plan workbook with separate tabs for each element
A cost plan, where bills of quantities are spread across separate tabs, has been a popular format since
spreadsheets became a widespread tool for producing a cost plan. Figure 1.10 is an example of a
cost plan with the internal doors worksheet open. This layout has the benefit of simplicity, but
some serious drawbacks, as follows:

1 Each page total has to be linked to the elemental summary.

2 With multiple buildings in a project, there will be a separate workbook file for each building.
 Introduction 9

3 It is very difficult to produce a package summary where each building is shown in a ‘side-by-
side’ format (shown in Figure 1.9).
4 In a similar way, it would be difficult to produce other reports such as tender summaries and
cash flow forecasts for the three buildings shown in Figures 1.7 to 1.9.

A B C D E F G H I J
1 Hypark ConstruCtion
2 Oldmills Skills Campus COST PLAN - STAGE 3 BLOCK 1
3

Internal doors Quant Unit Rate £

4
5 1 Carpentry as WYY quote - supply and fix
6 2 Single classroom doors; incl frame + ironmongery 173 Nr 1,150 198,950
7 3 Double doors; incl frame + ironmongery 35 Nr 1,650 57,750
8 4 Riser double doors 17 Nr 1,600 27,200
9 5 Extra over single door for glazed side panel 64 m2 700 44,800
10 6 Fire shutter to kitchen servery 7150 x 1200 1 Nr 3,100 3,100
11 7 Painting to internal woodwork as Doker quote 1 sum 23,500 23,500
12 8 Allowance for Blackwell locks 1 sum 11,500 11,500
13 9 Sub-contract preliminaries 12 % 366,800 44,016
14
15
16
17
18
19

20 TOTAL FOR INTERNAL DOORS £ 410,816

Ext walls Windows Int walls Int doors Wall fin Floor fin Ceiling fin FF+E

Figure 1.10 Internal doors sheet in a workbook with elemental cost plan tabs.

The Public Contracts Regulations 2015

New public contracts regulations came into force in 2015 – aligned with EU public sector
procurement directives, they clarify and simplify EU public procurement law.
Competitive procedure with negotiation will be a preferred procurement route where prior
negotiations are necessary due to specific circumstances related to the nature, complexity or risk
profile of the contract. The competitive procedure with negotiation is intended for use when the
open or restricted procedures are unlikely to lead to a satisfactory outcome.
Award criteria (Regulations 67 and 68) says that all public contracts must now be awarded
on the basis of the MEAT. This means that the evaluation of bids must be on the basis of the best
quality/price ratio. However, authorities are permitted to determine MEAT on the basis of price
or cost alone.
Whole-life costs can also be used for the purpose of awarding a contract. An authority wishing
to base their award on whole-life costs must clearly set out the criteria for award in their invitations
to tender. In a recent competition to design, build and operate a major hospital, the client set a
target floor area which was deemed to be the most economical long-term design solution. Any
excess area offered by the tenderers was penalized by a rate of £x/m2 per annum for the duration
of the concession. The reason for this criterion was that each square metre of building needs
heating, cleaning and maintenance for a 30-year period.
10 Introduction

Experience of the staff: an authority can include organization, qualifications and experience
of staff allocated to a project in the award criteria.
Abnormally low tenders need to be investigated by contracting authorities. The regulations
set a number of elements of a tender that can be assessed by consulting the tenderer. The authority
may reject the abnormally low bid where the evidence supplied does not satisfactorily account for
the low level of price proposed.
Communications and information exchange are to be by electronic means of communication,
although there are a few exceptions listed in the regulations.
Unrestricted and full direct access to procurement documents (Regulation 53) is a
requirement of authorities. They are to offer unrestricted and full direct access to procurement
documents from the date of publication of the OJEU notice (or the date on which an invitation to
confirm interest is sent). Procurement documents are to be available electronically from the date of
the OJEU advertisement. For many contracting authorities, this means starting the preparation of
tender documents at an earlier stage than is currently the case.
Electronic auctions (Regulation 35) are permitted whereby new prices are submitted
electronically (in a live bidding process) with the intention that prices are revised downwards (as
opposed to upwards in a traditional auction). Bidders may also submit prices for elements of the
auction. A set of rules is set out for the conduct of an e-auction.
A standstill period of ten days is required from notification of an award to the signing of a
contract with the successful bidder. This first became compulsory in the UK in 2005, in order to
allow unsuccessful bidders to challenge the decision before the contract is signed.
Chapter 2

Organization of the estimating function

'The corporate image consultant is in reception, Sir. '

Team roles and organization

The role of the contractor’s estimator is vital to the success of the organization. The estimator is
responsible for predicting the most economic costs for construction in a way that is both clear and
consistent. Although an estimator will have a feel for prices in the marketplace, it is the responsibility
of management to add an amount for general overheads and profit, assess the risks and turn the
estimate into a tender. The management structure for the estimating function tends to follow a
common form with variations for the size of the company. In a small firm, the estimator might be
expected to carry out some quantity surveying duties and will be involved in procuring materials
and services. For large projects, the estimator may be part of a multi-disciplinary team led by a bid
manager who usually comes from a project management background. The estimating section in a
regional construction organization (Figure 2.1) will often comprise a chief estimator, senior
estimators and estimators at various stages of training.
12 Organization of the estimating function

Construction Organization

Administration Commercial Pre-contract Operations Finance

Estimating
Business Commercial Chief Project Supply
development manager estimator manager chain

Submission BIM Senior Planning Enquiry

assistants surveyor estimators engineer assistants

Junior
estimators

Figure 2.1 Estimating staff structure for a medium-sized organization.

Larger estimating departments may have administrative and estimating assistants who can prepare
enquiries for sub-contractors, make telephone calls to suppliers and sub-contractors and enter data
in a spreadsheet or computer-assisted estimating system.
The bid team for a proposed project has the estimator as its coordinator and is usually made up
of a project manager, supply-chain manager, planning engineer and commercial manager. The
involvement of other people will vary from company to company. A project quantity surveyor is
often consulted to examine amendments to conditions of contract, prepare a bill of quantities, assess
commercial risks, set up design agreements and identify possible difficulties which have been
experienced on previous contracts. Clients sometimes like to negotiate agreements with quantity
surveyors where a good working relationship has been established and follow-on work is to be
based on pricing levels agreed for previous work. A planning engineer might be asked to prepare a
preliminary construction programme so that the proposed contract duration can be checked for
possible savings. He can also prepare method statements, temporary works designs, organizational
charts and site layout drawings. Some or all of this material can be used to demonstrate to a client
that satisfactory systems have been developed for the project. The supply chain office will provide
valuable information leading to the most economic sources for the supply of materials and plant. In
many organizations today, a tender buyer is responsible for getting quotations from suppliers and
sub-contractors. At the very least, the buyer (sometimes called ‘procurement manager’ or ‘supply
chain manager’) helps prepare lists of suitable suppliers, keeps a library of product literature and
advises on likely price trends and changes. A buyer can provide an invaluable service in managing
enquiries and chasing quotations. His knowledge of local suppliers and current discounts is essential
at the settlement meeting when decisions need to be taken about the availability, and future costs,
of materials and services.
The role of the project manager is to report on the technical and financial progress of their
projects so that the estimator can learn from the company’s experience on-site. On completion of
contracts, site staff will usually contribute to tenders for larger and more complex schemes –
particularly for civil engineering and large-scale building work – where alternative construction
 Organization of the estimating function 13

methods have a significant effect on tender price. A site project manager is often used to lead the
bid team – managing all aspects of the tender.
The department dealing with business development and presentations can contribute in two
ways: by maintaining close contacts with clients to ensure their needs are met; and by producing
submission documents, usually with desktop-publishing software. Some companies go further with
their presentations. One contractor provided hot school dinners when interviewed for a new
school project. Another commissioned a film showing their design solution including a commentary
by a well-known personality. It seems wrong that contractors need to prepare extensive presentations
at the pre-qualification and tender submission stages. Despite many attempts to reduce the workload,
such as standard questionnaires, there remains a large cost burden to tenderers and eventually to
their clients. It could be argued, however, that since most contracts include a large element of
contractor-designed work, there will continue to be a need to understand how the design solutions
have met the client’s requirements.
The aim of the bid team is to gain an understanding of the technical, financial and contractual
requirements of the scheme in order to produce a professional technical document with a realistic
prediction of the cost of construction. The construction manager or director will then use the net
cost estimate to produce the lowest commercial bid at which the company is prepared to tender.
Figures 2.2 and 2.3 show the various stages in preparing a tender and the action needed with
successful tenders. Figure 2.3 has additional tasks for a design-and-build contract.
The workflow in an estimating department is never constant; the ideal situation is to have people
available who are multi-disciplinary and can deal with administrative tasks. The cost of tendering
for work in the construction industry is high and is included in the general overhead which is
added to each successful tender. For one-off large projects, such as PPP/PFI contracts, bidding
costs can be several millions of pounds. These costs are recovered when schemes are successful but
written off against annual profits when contractors fail to win. The chief estimator needs to be sure
there is a reasonable chance of winning the contract if the organization is in competition with
others. The decision to proceed with a tender is based on many factors, including: the estimating
resources available; extent of competition; tender period; quality of tender documents; type of
work; location; current construction workload; conditions of contract; and the trustworthiness of
the client. With all these points to consider, a chief estimator could be forgiven for declining a high
number of invitations to tender to maintain a high success rate and avoid uncompetitive bids which
can lead to exclusion from approved lists. On the other hand, he must recognize the goodwill
which often flows from submitting competitive prices and the need to carry out work which might
lead to suitable and profitable contracts.
Estimators are drawn from two sources; direct from school with some good grades in GCSE
subjects which suggest a potential to study to a higher technician or professional level, or from
experienced staff where management has identified an aptitude and willingness for the job. In both
cases a reasonable amount of time must be spent on-site to gain experience in construction methods,
materials identification and use and practice. The skills needed are the ability to read and interpret
technical documentation, the ability to communicate with clients, specialists and other members of
the team, and the faculty to make accurate calculations.
Technically an estimator must have a working knowledge of all the major trades, to identify
packages of work to be carried out by sub-contractors and the direct workforce, to foresee the time
and resources that will be needed. It is also necessary to have the skills needed to take off quantities
from drawings, where there are no bills of quantities. When bills of quantities are provided, the
estimator will need to check the principal quantities to understand how corrections to the quantities
during the contract will affect the profitability of the scheme.