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INTRODUCTION
This paper discusses differences between estimate preparation by contractors and government. Discussions will be limited to capital improvement projects on which an independent design is produced and on which competitive bids will be received. Differences discussed may apply to other types of procurement and by work as required by any owner. Views brought forth are from the author's 36 years of experience as a cost engineer for the federal government and six years in private practice. Processes used in government estimate preparation is similar to that of a cost consultant or anyone preparing estimates for owners. Topics to be discussed in this paper are reasons for estimates, types of estimates, available information, personnel preparing estimates, format of estimates, and uses of estimates.
REASONS FOR ESTIMATES
Construction cost estimates for capital improvement projects are prepared for one initial purpose: to determine the future construction cost of a project.
Contractors prepare estimates immediately prior to bidding to determine their 'cost' and to obtain the project by being the lowest bidder. After bidding, their estimate may be used to monitor costs during construction and prepare the schedule of prices for payment purposes and other miscellaneous items. Contractors' estimates must be low enough to obtain work while still being at a price within which the project can be constructed. Estimates that are too high mean no work is obtained; estimates that are too low mean the risk of losses on a project. In either case, the company runs the risk of failure.
Government estimates are not prepared to obtain profit and should not necessarily be the low bid. In the budgeting stage, an estimate that is too low will make the project more attractive to those establishing programs. The problem of insufficient funds arises later. High estimates are likely to cause the project to be dropped from the program or reduced in scope. A reasonable, but not necessarily low, price is needed. In each of the design stages, reasonable estimates are still needed, but it is not necessary to be at the pricing level of the lowest bidder.
Government estimates are prepared at several stages in the design process. Early on, estimates serve to determine budgeting requirements. Later, estimates additionally serve to provide design cost guidance, as...