Cost Estimate - Comparing Bids

5m 56s

In this ARE 5.0 Project Management Exam Prep course you will learn about the topics covered in the ARE 5.0 PjM exam division. A complete and comprehensive curriculum, this course will touch on each of the NCARB objectives for the ARE 5.0 Project Management Exam.

Instructor Mike Newman will discuss issues related to office standards, development of project teams and overall project control of client, fee and risk management.

When you are done with this course, you will have a thorough understanding of the content covered in the ARE 5.0 Project Management Exam including quality control, project team configuration and project scheduling.

Obviously, the key information that's happening here is that we're adding all these numbers up and we're getting a full total cost estimate for the sum total of the project. But we're also breaking down those numbers into these different categories, so we can see individual category zones. That's going to be very useful if you're especially looking at different bids coming back from a multiple number of bidders, that, when we're comparing these things one to the other, it's useful if you see somebody who has demolition at, in this case, 24,000 or so, and then we see another bidder, and their demo comes in at 105,000, you know there's a question there.

Somebody misunderstood something, it's just not a reasonable set of comparisons, so something's wrong. This is a way of helping you to sort of track where something is right, where something is wrong. But it also might just be that you have a number like, well, these guys got the 24,000, these other ones who we really like, but theirs was 36,000 for that demo, so you get how you might just have a more expensive contractor or subcontractor for that.

But maybe we can talk to them about finding a way to bring that cost down, because we now know that people can do that demo for less money than what that other cost estimate had. It's trying to give us useful information, not just in this moment, with this cost estimate, but also in the comparison process when we compare one to the other. We're comparing different bidders to each other, we're comparing previous cost estimates from, say, schematic design or design development to where we are now.

We're looking at the cost estimate, and then moving into the construction phase, and that becoming the sworn statement, so we're comparing those numbers, and as things change during construction, how do those numbers change, do we find new things that makes certain trades have to, we have to spend more on, does the client change their mind on certain things, and things go down on.

The cost estimate is this constantly living document. We start with simple ideas, but hopefully, still pretty accurate, and then get it more and more accurate, and then there becomes that moment where we're comparing a whole bunch of them from the different bidders, and then we've chosen a bidder and now it's sort of this living document because construction is so constantly changing and everything's always coming in new, we have new information, we have new inspectors, we have gone through the permit process, all of these different things have happened that can start to alter this set of numbers.

The idea is, it's a simple, straightforward document with key pieces of information that allow us to do all of those comparisons at the appropriate moment in time when that comes up. But one of the things that you'll find as you start going through these more and more, is that that idea of comparison can actually be fairly tricky. For example, in this particular one, we have partition walls under carpentry, we've got thinner ones at 3 5/8 inch studs and then we've got some 6 inch studs, and we have some square footages for all of those, and then down here, we have the gypsum board, the drywall.

Well, for a project this size, it may well be that the same people who are doing the framing are also doing the drywall. May not be, they may be totally separate subcontractors. But it might be that they're the same group, or it might be that that's work that's being done in house by the GC, as opposed to work that's being bid out to separate subcontractors.

In different situations, when we're trying to compare these numbers, if those are being done by the same trade, well, it's likely that this number here and this number here start getting added together, and so having it broken down in this way wouldn't make sense in that situation, because that's not how they're thinking. They're thinking of it as one thing, as one unit, the framing and the drywall.

But then, another bidder, another contractor, may be bidding it in a different way. They may be bidding it out where the framers are being bid separately and the drywall is being bid separately, at which point, this would make sense as a way to break it down. This is one of those examples where you have to be in control of the numbers so that everything makes sense as best you can. If somebody's doing it a little differently than everybody else, you have to ask them, you've got to find a way to make these numbers work or you have to be really clear to everybody when you show it to a client, when you show it to other folks who are making decisions from this, well, we talked to them, the reason their numbers are so different, the reason that their finishes number is roughly $6,000 less than everybody else, is because they have that finish number up here in carpentry, which is why their carpentry number is so much higher than everybody else.

You have to be able to explain the numbers to the people who are using these numbers to be able to make decisions.

The fact that you have it organized in one way doesn't necessarily mean that's how everybody else wants it to be, so you either have to force them into using that, or you have to understand the information well enough that you can at least explain how people are using the information, so that somebody who needs to be able to make decisions can use that information in reasonable ways and make the right set of decisions from it, so they're not thinking, wow, we can get this really cheap if we get this guy's carpenters, but it turns out their carpentry number really is just somewhere else.

It's all about comparisons, and yet, still, it's complicated. It's a simple document, you want to keep it as simple as you can, but it, already, just by its sheer nature, has lots of complications built into it.

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From the course:
ARE 5.0 Project Management Exam Prep

Duration: 15h 3m

Author: Mike Newman