DUNCAN CARTLIDGE

Estimator’s Pocket Book SECOND EDITION

Estimator’s Pocket Book

The Estimator’s Pocket Book, Second Edition is a concise and practical reference covering the main pricing approaches, as well as useful information such as how to process sub-contractor quotations, tender settlement and adjudication. It is fully up to date with NRM2 throughout, features a look ahead to NRM3 and describes the implications of BIM for estimators. It includes instructions on how to handle: •• •• •• •• ••

the NRM order of cost estimate; unit-rate pricing for different trades; pro-rata pricing and dayworks; builders’ quantities; approximate quantities.

Worked examples show how each of these techniques should be carried out in clear, easy-to-follow steps. This is the indispensable estimating reference for all quantity surveyors, cost managers, project managers and anybody else with estimating responsibilities. Particular attention is given to NRM2, but the overall focus is on the core estimating skills needed in practice. Updates to this edition include a greater reference to BIM, an update on the current state of the construction industry as well as up-to-date wage rates, legislative changes and guidance notes. Duncan Cartlidge is a chartered surveyor and construction procurement consultant with extensive experience in the delivery and management of built assets, as well as providing education and training to a wide range of built-environment professionals.

Estimator’s Pocket Book Second Edition

Duncan Cartlidge FRICS

Second edition published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business  2019 Duncan Cartlidge The right of Duncan Cartlidge 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 utilised 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. First edition published by Routledge 2013 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: Cartlidge, Duncan P., author. Title: Estimator’s pocket book / Duncan Cartlidge. Description: Second edition. | Abingdon, Oxon ; New York, NY : Routledge, 2019. Identifiers: LCCN 2018038405| ISBN 9781138366695 (hardback) | ISBN 9781138366701 (paperback) | ISBN 9780429430176 (ebook) Subjects: LCSH: Building—Estimates—Handbooks, manuals, etc. Classification: LCC TH435 .C363 2019 | DDC 692/.5—dc23 LC record available at https://lccn.loc.gov/2018038405 ISBN: 978–1–138–36669–5 (hbk) ISBN: 978–1–138–36670–1 (pbk) ISBN: 978–0–429–43017–6 (ebk) Typeset in Goudy by Swales & Willis Ltd, Exeter, Devon, UK

Dedication Harry and Darcy

Contents Preface 1 Approaches to pricing

ix 1

2 Early cost advice

37

3 Resources

64

4 Unit-rate pricing

83

5 Tender settlement/adjudication

205

6 The supply chain

231

7 Applied estimating

252

Appendix A: Indicative costs per m2 for a range building types

267

Appendix B: Useful rules and conventions

269

Further reading

274

Index

276

Preface Estimating: precision guesswork based on unreliable data provided by those with questionable knowledge. Estimating is one of the core skills of construction professionals, and success as an estimator relies, among other things, on a sound knowledge of the relevant technologies. However, in recent years when main contractors have become, on the whole, managing contractors relying heavily, if not totally, on sub-contractors to price work sections, estimating from basic principles, like measurement, has tended to be left out of university courses and training programmes. Not only are estimating skills required for preparing bids, but also during the post-contract phase they are essential when negotiating rates and prices for settling final accounts and claims. When times are hard and work scarce, then the estimator’s role becomes even more crucial as they are the people within a contracting organisation who win work and keep the cash flow flowing. In 2018 major UK contractors declared profit margins of less than 1% and with such little wiggle room it is even more important for estimating to be accurate and a true reflection of the cost of the works. Estimators are to be found in a wide range of organisations across the building, civil engineering, and mechanical and electrical sectors, working for main contractors, sub-contractors and component manufacturers. Estimating tends to be a specialism that people come to during their professional lives and learn on the job. To the author’s knowledge, there aren’t any degree programmes or courses in estimating in the UK, hence the need for a pocket book for constructional professionals and students. The increased pervasiveness of systems such as Building Information Management (BIM) claim to reduce the need for the manual measurement, quantification and costing of building projects. Whether this is the future is anyone’s guess; however, the time when sophisticated software will ever be able to carry out tender adjudication, assess risk and negotiate with the bank is perhaps a few years away yet! Fifty years or so ago, the majority of work was based on a fully detailed bill of quantities, prepared by a quantity surveyor employed by the client; typically the tender would have been based on detailed bills of quantities. In the modern construction market, bids are now based on a variety of approaches – including work packages, cost plans, and drawings and specification – requiring contractors and sub-contractors to be flexible in their approach to formulating a bid and identifying risk. The examples in this pocket book are based entirely on the RICS New Rules of Measurement 2: Detailed Measurement for Building Works. Duncan Cartlidge www.duncancartlidge.co.uk

1 Approaches to pricing

Estimators can be found in a wide range of organisations across the building, civil engineering, and mechanical and electrical sectors, working for main contractors, sub-contractors and component manufacturers. Estimating, like measurement, is one of the core skills of quantity surveyors and construction managers, and success as an estimator relies on a sound knowledge of the relevant technologies. However, in the recent past, with the increasing use of sub-contractors, estimating from basic principles has tended to be left out of university courses and training programmes. Estimators carry a great responsibility, as they are the people within a contracting organisation who win work, keeping the cash flow flowing and the profit margins intact. With major UK contractors working on paper-thin margins, it’s even more important that estimators get their sums right. Estimating tends to be a specialism that people come to during their professional lives and learn on the job. To the author’s knowledge, there aren’t any degree programmes or courses in estimating in the UK. Estimators are responsible for the preparation of tenders or bids that are submitted within a given time frame, and usually in competition with other contractors or sub-contractors, to win work. The format and extent of the information that estimators are supplied with to prepare a bid will vary according to the procurement strategy. Fifty years or so ago, the majority of work was based on a fully detailed bill of quantities, prepared by a quantity surveyor employed by the client. Typically the tender would have been based on: •• •• •• •• ••

two copies of the bills of quantities; indicative drawings; form of tender; instructions for receipt of tender; and technical reports/studies.

More recently, the format and the completeness of tender documentation have tended to vary considerably with the traditional bills of quantities being used less and less.

2

Approaches to pricing Generally, there are two strategies for obtaining a bid, these are by

•• negotiation; or •• competition. NEGOTIATION Negotiation involves the client’s and contractor’s representatives sitting down and negotiating a price for a project without the benefit of competition from other contractors. It is viewed with suspicion by many who consider that, without competition, a contractor will take advantage of the situation and negotiate a higher than market price as the client has no alternative other than to accept it. Anecdotal evidence suggests that negotiation results in bids approximately 11% higher than bids obtained through competition. However, the advantage of negotiation is that the estimating/bidding process can be shorter than with the competitive approach and that, if there is trust between the parties, the tender can be no more costly than by introducing competition. Due to the potential to deliver a project earlier than otherwise would have been the case, project finance may be recouped earlier and finance charges reduced. In this situation, the estimator will be involved in providing the negotiator with data on material, labour and plant costs, etc. COMPETITION In the first part of the 21st century, the majority of work in the construction industry is won through competition, with three or four contractors or sub-contractors submitting confidential bids; it’s a system that nearly always guarantees that the lowest price wins and ignores wider issues of value for money. The most popular procurement routes that use competition are: •• single-stage competitive tendering; •• two-stage competitive tendering; and •• design and build. It’s true to say that asking for competing contractors to submit bids based on largely incomplete information without the involvement of the supply chain is not the most effective way to arrive at a reliable bid. In particular, the Westminster and Scottish governments have, during the past few years, been highly critical of this approach and have piloted a number of alternatives. In Construction 2025 Industrial Strategy: Government and Industry in Partnership, HM Government procurement was described as one of the main barriers to innovation, stating that ‘the nature of construction procurement frequently restricts collaboration between client and supply chain’.

3

Approaches to pricing

In attempt to improve the situation, three new models of procurement were proposed by government, namely: •• cost-led procurement; •• integrated project insurance; and •• two-stage open book. In an attempt to ensure the price is built up against an outline declared budget and client requirements, the common principles of these models are to: •• engage with the supply chain and embrace early contractor involvement and a high level of supply-chain integration; and •• apply a robust review/risk-analysis process. It is claimed that a range of pilot projects delivered savings of £840 million. TRADITIONAL SINGLE-STAGE PROCUREMENT The approach to the estimating and bidding process will vary according to the procurement strategy adopted by the client for a project. The procurement route 0% Traditional single-stage procurement

46%

Design and build

41%

Partnering/alliancing

3%

Construction management

3%

Contractor approved without any tender process

2%

Measured term

1%

Private Finance Initiative (PFI)/Public Private Partnerships (PPP)

1%

Cost plus

1%

Management contracting

1%

10%

20%

Figure 1.1  Procurement routes Source: NBS National Construction Contracts and Law Report 2018

30%

40%

50%

4

Approaches to pricing

will also affect the type of documentation and other tender information received by the estimator. During the 1960s in the UK, the traditional strategy described below was the most commonly used form of construction procurement. It involved a bill of quantities, with approximately 60%-plus of all contracts being let on this basis in both the public and private sectors. In recent times, client pressure has seen its popularity decrease to 46% (NBS National Construction Contracts and Law 2018) (see Figure 1.1). This approach to procurement is also sometimes referred to as ‘architect-led’ procurement, as traditionally the client has chosen and approached an architect in the first instance, and it is then the architect who assembles the rest of the design team: structural engineer, services engineer, quantity surveyor, etc. The chief characteristics of traditional single-stage competitive tendering are: •• it is based on a linear process with little or no parallel working, resulting in a sometimes lengthy and costly procedure; •• competition or tendering cannot be commenced until the design is completed; •• the tender is based on fully detailed bills of quantities; and •• the lack of contractor involvement in the design process – with the design and technical development being carried out by the client’s consultants, unlike some other strategies described later. Other procurement paths have attempted to shorten the procurement process with the introduction of parallel working between the stages of client brief, design, competition and construction. During stages 2, 3 and 4 – Concept, Developed Design, and Technical Design of the Royal Institution of British Architects (RIBA) Plan of Work – the quantity surveyor should draw up a list of tenderers. The list should comprise three contractors/sub-contractors that are to be approached to carry out the work. The list may be extended to six in the public sector, although it is increasingly difficult to find this number of competent contractors available at the same time. During the preparation of the bills of quantities, the quantity surveyor should contact prospective firms, which have the approval of the client and the architect, to determine whether they are available to bid for the project. In the first instance, this is done by telephoning the chief estimator of a prospective contractor and giving brief details of the proposed project including the approximate value, date for dispatch of documents and the starting date. The decision on whether or not to tender for a project will be influenced by: •• •• •• •• •• •• ••

general workload; future commitments; market conditions; capital; risk; prestige; estimating workload; and

Approaches to pricing

5

•• timing – one of the decisions that will have to be taken by the design team is the length of the contract period, a critical calculation, as successful contractors will be liable to pay damages in the event of delays and non-completion. If the contractor is interested and available for the project, the enquiry is followed up with a letter giving the following information: •• •• •• •• •• •• •• •• ••

name of client, architect and other lead consultants; name and type of project; location; approximate value; brief description; date for dispatch and return of tenders; start on site and contract duration; form of contract; and particular conditions applying to the contract.

When the single-stage procurement route is used, the estimating department will receive the following documentation during RIBA Plan of Work Stages 4 and 5, Technical Design, and Construction: •• two copies of the bills of quantities, one bound and one unbound. The bound copy is for pricing and submission, the unbound copy is to allow the contractor to split the bills up into trades so that they can be sent to sub-contractors for pricing; •• indicative drawings on which the bills of quantities were prepared; •• the form of tender – a statement of the tender’s bid; and •• instructions (precise time and place) along with an envelope for the return of the tender. Only indicative drawings are sent out with the tender documents, however details are also given as to where tenderers may inspect a full set of drawings, usually the architect’s office. Details should also be included as to times when tenderers may gain access to the site. The usual time given to contractors for the return of tenders is four weeks, although for particularly complex project this may be six weeks. The tender documents contain precise details for the return of the tender, usually 12 noon on the selected date at the architect’s office. Note that the system described above is the one used in England and Wales; in Scotland it is slightly different in so far that tenderers submit a priced bill of quantities, not just a form of tender for consideration. It is common during the tender period for contractors to raise queries with the quantity surveyor on the tender documentation. If errors, omissions or other anomalies come to light, then the quantity surveyor, once the problem has been resolved,

The Estimator’s Pocket Book, Second Edition is a concise and practical reference covering the main pricing approaches, as well as useful information such as how to process sub-contractor quotations, tender settlement and adjudication. It is fully up to date with NRM2 throughout, features a look ahead to NRM3 and describes the implications of BIM for estimators. It includes instructions on how to handle: •

the NRM order of cost estimate;

•

unit-rate pricing for different trades;

•

pro-rata pricing and dayworks;

•

builders’ quantities;

•

approximate quantities.

Worked examples show how each of these techniques should be carried out in clear, easy-to-follow steps. This is the indispensable estimating reference for all quantity surveyors, cost managers, project managers and anybody else with estimating responsibilities. Particular attention is given to NRM2, but the overall focus is on the core estimating skills needed in practice. Updates to this edition include a greater reference to BIM, an update on the current state of the construction industry as well as up-todate wage rates, legislative changes and guidance notes. Duncan Cartlidge is a chartered surveyor and construction procurement consultant with extensive experience in the delivery and management of built assets, as well as providing education and training to a wide range of built-environment professionals.

QUANTITY SURVEYING

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