Tender Pricing Process for Accommodation Building

| February 5, 2013



INTRODUCTION

This assignment has been concise five main tasks through different topics related to cost estimation. The focuses of estimating for selected areas in a proposed accommodation building, tender pricing techniques, build up unit rates for selected descriptions from BOQ are discussed through the sub tasks.

Especially the parties participating of involved in pricing for a particular project and factor to be consider when pricing for a tender sum also identified and clearly discussed further, such as site over heads, head office over heads, subcontractor, suppliers, and the discounts for the performance of suppliers, subcontractors and the client.

At the time of build up rates for given descriptions the cost information and the current market price for components of the description take place as a challenge, so those are collected from site people and dealer of the material and the summery of the items which are related to the tasks also attached for further clarifications.

TASK 1

Describe the tender pricing process of above tender.

This is the tender pricing process given below

  • Receipt of invitation to tenders
  • Decision to tender
  • Collection of tender documents
  • Examine tender documents
  • Collection of necessary document
  • Preparing necessary documents
  • Tender adjudication
  • submission of tender

Receipt of invitation to tenders

Ministry of  health advertise this invitation to tender  for batticalo government hospital two story patients building in  srilankan public news paper. Our company got this information “veeracasari” daily news paper. They are published in news paper because this is open tender. If anyone  have the enough qualification they can participate the tender.

Decision to tender

On receipt of tender documents a tender information form should be completed by the estimator & acknowledgement on receipt of the enquiry should send to the client or his consultant. This form will provide management with the summary of the project & the tender documentation & it will be a significant document contributing the decision of the submission of the tender

Collection of tender documents

We get the tender documents form ministry of health .these are some tender documents

Tender notice / Invitation to tender , condition of tender /  Instruction to bidders , Form of agreement,

Conditions of contract and appendix to condition of contract, Form of tender , Drawings, Bonds

Bills of Quantities / Specifications / Schedule of rates , Schedules.

 

 

Examine tender documents

The estimator must inspect the tender document before the preparation of the net estimate and the check list must be establish of the documents receipt. Inspection of the tender document must seek to achieve the following objective

  • The documents received are those in the enquiry
  • Sufficient time is variable for production for tender
  • The documents and information are adequate for assessing costs

Collection of necessary document

We must collect the price list of  the materials, plats haring rate , labour rate. We should get the cortation  form the material suppliers. We must calculate the total cost of this two story hospital building .

Preparing necessary documents

We must prepare financial statement  of our company, work programmed, method of statement , site origination chart , bid bond and  pricing of bill of quantity.

Tender adjudication

First we must estimate the cost and decide the markup percentage. After that adding that markup percentage to estimated cost. Then used that final cost in to the tendering purpose

Submission of tender

Tenderers must lodge their tender with full identification and documentation at the nominated location by the advertised date and time. The estimator must ensure that the procedure set out in the tender documents for the submission of the tender is followed particularly.

The form of tender and any other declarations, must be completed as required and sign by an authorized person from the contractor’s organization.

The codes of procedure for selective tendering, whether for main contractors, state that a tenderer who submits a qualified tender should be given reasonable opportunity to withdraw his qualifications without amendment of his tender price.

 

1.2  explain the factors that need to be considered in pricing the proposed project .describe related factors only to the given project

Special conditions or instructions given by client

In the batticalo hospital client’s ministry of health. This is a hospital building because this is not complicated design. But in the apartment  construction, designing is very complicated.  Comparing the hospital  construction and  apartment construction take more  working hours. It’s very easy to construct hospital  constructions than the other  building constructions .

 

Availability of material, labour, plant, technology

Availability of resource one of the main consideration factor during the pricing time. Because in the construction field, it is totally depends on the material, labour, plant and technology. In hospital construction  materials availability is lower than the other construction materials. So we have to find the suitable suppliers & find the competitive quotation and select one from them and price the tender for competitive price.

In our hospital construction is two story building because  no need for higher plant we need the normal plant only We can get the plant for the construction cheaply. Any how the estimator duty is according to the contract chose the correct price and pricing tender. And also more than these availabilities.

Location

Location is one of the important consideration factors in the pricing of tender. Because in the location we consider the many things like the transport facilities, availability of material, labour and plants, storage, weather conditions, etc.

Our location is situated in thebatticalo. So we can easily find material & labour force there. We can’t  find huge plant facilities from that area. So this cost will be affect in the pricing of the tender.

In the storage site facilities is the other important factor in here. We can easily find the storage facilities in the near area. The storage facility cost will low than the city so it’s an advantage for us in the storage cost.

 

 

 

 

Construction period and maintenance period

 

At the pricing time, estimator should consider the construction period and maintenance period of the building. Because the working process depending on the time and cost. In the hospital construction may the construction period is lower  but the same kind of the work is here. In pricing time normally put more unit rate in short period contracts. Because the normal working process should be change and take some arrangement for this. In our case we cant used noise making instruction this is in the hospital because we always keep silence.

 

After the construction we gave one year for the maintenance of the building. This is a hospital building because most people use this building because we must maintenance correct fully .because we need allocate more amount for that .

 

Competition in the market

While considering the market situation in these days the hospital  construction is very rare in the market. All the construction companies cannot do this kind of hospital construction works. reason is client is ministry of health this is one of the government. Normally government they didn’t pay the money on time.  So when the pricing time of the tender we can go some advantageous price. So we have to collect some money for  this new works. And finally we have to request the management to put the high percentage of profit margin. By doing this we can earn a huge profit. This is government project because we don’t care about market competitions the reason is if we participate the tender we must rejecter in ICTAD. In batticalo most of the contractors they didn’t rejecter in ICTAD .

Payment of structure

We must considerate the payment  structure. How much rupees they paid for advanced then when they make the second and other payment. We must conformed and  fixed to the payment dates .

 

 

 

Fluctuation

We must conformed fluctuation allow or not . Now  materials of the market price is suddenly going up and down. Market price going up this will be effect  to the contractor. Market price going down this is good for contractor but effect to the client ( In our scenario client is ministry of health department ). Before tendering we must conformed these thinks.

Type of contract

In our scenario this is a lump sum type contract. Normally lump sum type contracted base on drawing and specification. In these type of contracted most important document is drawing and specification. Quantity surveyor must care fully read the  drawing and specification do the calculation work care fully. Quantity surveyor make any mistake in the calculation part this will be effect to the contractors profit.      
1.3) Explain what type of cost information you would use in pricing this tender and name the sources of such cost information

Pricing this tender is the major part of preparation of BOQ. This procedure will be done by using different cost information. Do to this type of project we can get the cost details from an experienced person like a sub contractor who is specialized in this kind of hospital  constructions. we can get the cost information by having a conversation with some suppliers or sub contractor too.

There are some sources from that the information about the materials, labour and plant can be taken,

  • Quotation   -      to get the sub contractor or supplier.
  • If previous same project -   if the contractor can be used the previous project experience, he wants consider the type of project; the previous project will be good experience for this current project to reduce tender pricing.
  • Daily report.
  • Price index – this is issues ICTAD in Sri Lanka.

 

So to price this particular tender we can take the pricing information through quotation for suppliers and sub contractors. Because, this is a government  project which is going to be with high quality  and also we are specialized in any type  construction we can go for quotations. The contractor’s success in obtaining contract depends upon ­quality of the quotations received for materials, plant and items to be subcontracted. It is essential to obtain realistically competitive prices at the time of preparing the estimate. Standard procedures must be established setting to responsibilities of the person who is to carry out the enquiry function and any subsequent negotiations that arise. Lists of items for which quotations are required are established following the detailed exanimation of the contract documents.

 

Details of past performance, previous performance in returning complete quotation on time, extent of geographical operation, size and type of contract on which previously used, information concerning contacts are considered when selecting sub contractors and this will be necessary if deal with unknown suppliers and sub contractors. Pre selection must confirm that quotations will be submitted and establish that the particular suppliers or sub contractors has the necessary resources and desire to tender for the project.

The professional manner in which enquiries are sent to suppliers and sub contractors can have considerable effect on the qualityof quotations submitted. Objective of sending out enquires for supplier and subcontractor to labour, materials, and plant is to ensure that technically accurate quotations are received with the main contract conditions. This must clearly setout terms& conditions on which quotations are being invited.

 

All needed materials for this project shall be supplied from the selected suppliers. Enquiries to suppliers of materials must state these important factors:

  • Title and location of the work, and site address
  • Specification, class and quality of the material ,Quantity of the material
  • Delivery programmed , Special deliver
  • Date by which the quotation is required, Period for the quotation is to remain open.

 

Conclusion

In above task I am clearly indicate the tender pricing process of  batticalo two story hospital building and clearly indicate some factors considering  in pricing process of above construction  project. Finally I am explaining how we can get the cost information using our tender and name of source such cost information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Task 2

2.1)What are the factors affecting pricing  labour, material and plant items in day work Schedule?

Labour

The calculation for the prime cost of labour differs somewhat from that of the all-in-rate, various incidental costs, over heads and profit are deemed to be included in the percentage added to the prime cost rate by the contractor. The percentage added must include all other items that the contractor considers are necessary to cover the true cost incurred but not allowed under the definition of prime cost of day work. At the time of calculation following factors to be consider for pricing

  • Wages :- wages depend on his talent (eg-special skilled ,skilled or un skilled) we must pay the wages  his skill  type only. Wage is different for every type.
  • Transportation time :- The labour come to other site we must allow a percentage for his transporting cost. If  this cost higher than the accommodation cost we can arrange the accommodation for labours we can reduce the anonymous cost.
  • Overtime :- A labour  normally working eight  hours per day but our requirement he some time he working ten hours or eleven hours per day if he work eleven hourse per day over time three hours. These  three hours per day we must paid 1.25 X  one our wage.
  • Subsistence allowances
  •  Social benefits (EPF, ETF) :- this benefits only for permanent labours only. Not for daily wage labours. Company will pay some percentage of his/ her  salary and some percentage of his salary. These percentage is decided by labour department (Srilanka)
  • Overhead :- we must add a percentage for over head. This is operating cost of the contractor head office. This is indirect expenditure.
  • Superintendence
  • Liabilities, Insurance and allowances for labours

 

 

Material

The contractor shall be entitle to payment in respect of materials used for day work at the rates in the contract documents, in the schedule of day work rates and such rates shall be deem to includes overhead charges, profit, cost and other expenses. Factors to be consider when the pricing are;

  • Material cost: – material cost also effect the pricing of day work schedule.
  • Wastages: – we must include some percentage for wastage. This wastage mostly affects the timber. Form work time timber wastage is very high. Our structural design is very difficult that time we make some molding for get required shape. That time timber wastage is very high. For example sand we un loading sand in our site we can’t use the total cube of material. When the storing time sand will mixed with bottom part of the land that sand mixed with other sand we can’t use that sand for construction works
  • Insurances:-  some materials we must take a insurance otherwise we may face huge problem. Here a am indicate a problem for example my home town is Jaffna. I am studied at Hartley College. The tsunami time (2004) our school built a auditorium for 1500 student. End of the year tsunami attacked Srilanka that time Jaffna also effect hugely. That time our school store they keep 500 bags cement. But they didn’t get the insurance. Those 500 cement bag fully destroyed. That project contractor face huge lost that time and he left that project. Some time he get a insurance he don’t care about this problem this a natural disaster because that insurance company they paid the full money. I hope This Is a good example for this insurance. Because we must  get a insurance for required materials
  • Handling expenses (loading, unloading, storing) :- whatever  the material we are using at site those material has the loading and unloading process. If we are doing the estimation we must add a percentage for loading and unloading purpose. Some material we stored any wear but some material we must keep carefully for examples steel, tiles, cement, some expensive materials
  • Losses:- if there theft happen we must parches that lost material because we must spent more money for that material for examples electrical fittings, other costly items
  • Head office overhead:- we must add some percentage for head office over head. This percentage will decide by contractor.
  • Profit:- this is a amount for contractor. This amount will be decide by contractor and add the amount in material cost.

Plant

The charge for plant is normally applied under ‘Schedule of basic plant charges’. The rates in the schedule are basic and may subject to an overall adjustment to be quoted by the contractor prior to placing of the contract.

The rates apply to plant and machinery already on site, whether hired or owned by the contractor. If we are hiring a plant first we pay some amount for advance and guaranteed .our using time any troubles may occurred. If that trouble is minor work we must repair that problem. Otherwise they deduct some amount for that repair work.

The rates unless otherwise stated , include the cost of fuel of every description; lubricating oils, grease, maintenance, sharpening of tools,  replacement of spare parts, all consumable stores, and for license and insurance applicable to items of plant. They do not include the costs of drivers and attendants.

The rates should be applied to the time during which the plant is actually engaged in day work. Whether or not plant is chargeable on day works depends on the day work agreement in use.

Conclusion

Before calculating the labour , plant, material we must know about what are the factors affect the pricing those item after that we can  successfully done the pricing of labour, plant , material. Above task I am  indicate some factors and clearly describe how  to effect those calculations. I hope I am done my level best explain in above task.

 

 

 

 

 

 

 

Task-03

Explain the reason for using particular method of pricing

In my calculation part I am using norms. If we are using the norms no need to do the extra works for examples

  • No need to calculating the wastage separately
  • No need to calculate the shrinkage  separately

Our description is a standard because I am using norms directly.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Task -04

4.1) Describe the preliminary items that could be required in implementing permanent works of this project. List out the items considered for calculation of head office over head and how you would calculate the over head percentage

The pricing preliminaries of the bill of quantities are the estimator’s part in the preparation of a tender process. Preliminary means the items which are not included in the measured works section. The contractor’s general cost items, temporary woks, contractual matters; specific requirements of the employer will be included under the preliminaries. Preliminary section can be divided as fixed charges and time related charges.

The description of the work as a whole and the circumstances in which it is to be constructed is intended to convey to the estimator an initial impression of the types of work involved, including any particular or usual features or conditions that are relevant. Bearing in mind, which accompanies the tender documents, the description required under this rule can be relatively succinct.

I have identified the following preliminaries items that could be required for   permanent works of this proposed project.

Management and staff , site accommodation ,insurance, engineers facility, performance bond, Advance guarantee bond, Services and facilities (Power, lighting, fuels, water, telephone facility, safety, health and welfare, security, storage facility ) ,Mechanical plant (Personnel transport, transport) ,Temporary works (Access scaffolding, Support scaffolding and propping  )

Duration 

Project duration is important factor which is affect a project cost directly.

Availability of material  

This project is in batticalo. If we get the most material in batticalo, we may be in a position to complete this work in a quick process. Also we may get the materials with acceptable price. That also will affect the pricing of preliminaries.

 

Services and facilities

Project time we must arrange the accommodation for Labours. If we arrange the accommodation we gave some belongs facilities toilets, electricity. This cost also affects the pricing of preliminaries.

Staff accommodation 

While providing the staff accommodation, we are providing the all the staff for entire project period. But the reality sometimes staffs may be not needed for the entire duration of this project. That will affect the pricing the preliminary.

Access of the site

During the excavation period we have to bring large machineries. Therefore we need large access of the site to bring the large machineries. If we don’t have the large access we have to do other methods. That’s also affecting the pricing the preliminary.

Staff vehicles   

Staff members travel head office to site office, site office to head office and other purpose we must arrange for a vehicle. If we hiring the vehicles for professional staff. we must paid for more money because we bought a new vehicle for our company that cost will affect the pricing of preliminary. This total price is increase that particular project cost will increase.

Guarantees and bonds

This is common for most of the projects, that client will requires some amount of money as a bond which to keep a good relationship between the two parties. A contractor normally pays a single insurance premium for this and it can be a very expensive item depending on the financial status and experience of the contractor.

Testing material

Throughout a contract the testing of materials may be ordered by the architect. That test costs can be taken laboratories. These requirements executed by the consultant which helps to maintain quality, standard workmanship of the works. It will also affecting the pricing the preliminary. In our project will be commencing at   Batticalo . We can’t find a testing center

Form Batticalo because we must brink required samples to Colombo that time traveling charge, Who brink that samples to Colombo that person welfare cost. These cost are including in the testing material. This cost also affects the cost of preliminaries.

Pricing for maintenance of public and private roads

Some contracts need provision for the repair of damage to existing roads by the builder’s plant and heavy vehicles continually passing over them. They must also be constantly kept clean and free of mud, building materials, debris and the like.

Head office overheads

The construction of the project must contribute towards the cost of running company’s head office and other general overheads of the organization. This consist of the cost of administrating a company and providing off site services the apportionment of head office over heads to project and to the company as a whole is decided by management as part of the management policy.

 

Items considered for calculation of head office over head

  • Head office salaries
  • Director’s fees
  • Office rent/depreciation of furniture
  • Incidental insurance
  • Heat, light, power, fuel
  • Stationary
  • Postage
  • Books and telephone  charges
  • Auditor’s fees
  • Staff vehicles
  • Interest on working capital and retention money

Head office over head percentage

 

X 100

H/O % =  total h/o expenses during previous year

                 Total turn over during previous year

Total turnover mean how much money come to the head office. These are some basic examples for turnover, interim payment resived from various client, advanced payment of previous project.

 

4.2) build up the management and supervision cost of this project. Clearly state the factors to be considered in pricing

  Establishment Running cost Disposal cost Total
Assumption        
Site engineer-1   12X40000    
Clerk-1   12X14000    
Store keeper-1   12X12000    
Supervisor-1   12X20000    
Quantity surveyor-1   12X35000    
Accountant-1   12X15000   Total -1632000

 

 

These are some factors directly link with the pricing of management and supervision cost. If we select the b.sc holder site engineer we must pay more money because we select next lower level best site engineer with more experience (  for example 5 years) we can reduce our monthly salary cost. We are selecting the professional people like this we can save lot of money.

Conclusion

In above task I am clearly indicted what are the preliminaries items required in permanent work of this our project and I gave some factors to calculate the head office over head and head office over head percentage.

 

Task 05

5.1 Draft inquiry letter to

A) M/s mascons ltd requesting prices of asbestos roofing sheets

 

The Managers,

M/s Mascons (PVT) Ltd,

No 39, Inner fairline Rd,

Dehiwala .

01.10.2010

 

Dear Sir,

Quotation for Asbestos roofing sheets

 

We are Raj engineering (PVT) Ltd, which is located in No 12A, Boswell place, Wellawattae. We have decided to tender for a project which is a two story hospital building in batticalo. According to our estimation we need 200 Asbestos roofing sheets 10’X4’ size. This project is going to construct in Batticalo area. As we know that your company has a branch in batticalo. As we are having a good relationship with your company for past 4 years, we decided to request the quotation from your company for this tender too. The materials we require on 1st of November 2010. We want the quotation within 14 days from the day you receive this letter. Also we kindly request you to include about your credit facilities, discount details, storage facilities and your best price for our requirement. Thank you.

Yours faithfully,

T.subaraj

                                                                                                                            (Junior Q.S)

 

 

 

B) M/s ABC tiles requesting rates for fixing tiles

Dear Sir,

Quotation  for  fixing tiles rate

 

We are Raj engineering (PVT) Ltd, which is located in No 12A, Boswell place, Wellawattae. We have decided to tender for a project which is a two story hospital building in batticalo. According to our estimation we want fixed 10000 (300X300) tiles for 100000m2 area. Because we need a quotation for fixing tiles. This project is going to construct in Batticalo area. As we know that your company has a branch in batticalo. We have a good relationship with you; we decided to request the quotation from your company for this tender. We require on 1st of November 2010. We want the quotation within 14 days from the day you receive this letter. Also we kindly request you to include about your credit facilities, discount details, your best price for our requirement. Thank you.

 

 

 

Yours Faithfully,

T.Subaraj

 

 

 

 

 

 

 

 

5.2 Explain different forms of discounts given by the suppliers and how would  you incorporate those discounts into your tender.

Discounts

Discounts are quoted or stated cost of which will deduct from the payment of the suppliers and sub-contractors. It is depend on the fulfillment of the conditions which asked specified in the contract for acquiring discounts. The purposes of the discounts are increase the short terms sales, move out of date stocks, reword valuable customers.

Mainly there are two types of discounts, those are as follows;

  1. Cash discounts
  2. Trade discounts

Cash discounts

Cash discount is often given by the suppliers and sub-contractors to encourage early settlement of accounts. A statement is sent to the contractor at the beginning of each month listing the invoices for materials or services supplied during the previous month. If payment is made by end of the month, a settlement (cash) discount may be taken. These discounts are allowed off invoices if the contractor pay’s within a certain period. In the case of sub-contractors, the period is 17 days after issue of the architect’s certificate which includes the value of the invoice work or services. In the case of suppliers, the period is 30 days from end of the month during which delivery of materials or goods is made. If payment is not paid within the specified period, the contractor is not entitled to deduct the discount. For an example; the client pay his monthly payment earlier the contractor will be given some amount of discount for client, same think happening between main contractors and supplier, sub-contractors.

Trade discounts

Trade discounts are customarily allowed off the prices on standard price list of materials and goods in particular trades. This is often done to avoid frequent revision of such lists, the discounts being varied to allow for fluctuations in prices. In addition some suppliers will allow larger discounts to regular customers or those who buy large quantities. So the more the contractor buys he will get more amounts of discounts to a maximum amount provided by the supplier.

Explanation of how to incorporate them into the tender

Company name Sanan trade company Raj construction company Suban trade company
Cost of material 1700 1200 2000
Discount 5% 20% 10%
Payment structure 5% advanced No advanced 10% advanced
Warranty 5 years 20 years 10 years
Trade name of material Known Un known Known

 

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Above table clearly indicate three different types of company’s details. In this case we can select sanan Trade Company for supply materials. If we are select that company we can get the 5% of discount because our tendering amount will be reduce. We can easy to win the tender reasonable cost.

The main contractor is always expecting about the discount to use it in pricing the tender. If the main contractor knows the amount of the discounts from the subcontractors or suppliers, he can reduce the rate of the work in that tender. So the tender price may be reduced. This might be increased the chance to win the tender. That is why the estimator or being consultancy Quantity Surveyors should have a thorough knowledge about the discounts and should apply the discounts while he is pricing the tender.

 

 

 

Conclusion

I gained lot of knowledge about cost estimation through this assignment got idea about the tender pricing process, the factors that need to be considered in pricing a tender, the sources and nature of information for cost estimating, the factors affecting labour , material and plant rates, all-in-labour, material plant rates, unit rates that reflect the current local market prices for measured work items in a BOQ, preliminary, overhead costs in a bills of Quantities, the cost of site facilities to be provided by the contractors, prepare letters of enquires for supply of materials and subcontract services and different forms of discount .those are I gained through this assignment.

I referred lot of books to do this assignment .I got idea through our batch mates to do this assignment. And also review was useful for me. in review time our lecture corrected my fall in the assignment so review was very useful.

 

REFERENCE

  • Ivor H.Seely, Quantity Surveying Practices, 2nd Edition Published by Palgrave Macmillan, 1997.
  • RD Buchan, F.W. Fleming and J.R. Kelly ,Estimating for Builders and Quantity Surveyors ,1st Edition ,British library cataloguing in publication data,1991.
  • The procurement committee of the charted Institute of building, Code of estimating practice, 6th Edition, Published by The charted Institute of building through Englemere services limited, 1997.
  • Wills, Practice and procedures for the quantity surveyors, 12th Edition, Blackwell publishing.
  • Jack Ramus, Arics and Simon Birchall, Contract Practices for Surveyors, 3rd Edition, Published by British Library Cataloguing in Publication Data, 1996.

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