Explaining BouwData - part 3

Another lazy saturday morning after a great evening at Jazz Middelheim. Blog time.

For the last time in these series, let's go back to my fancy office filled with boxes full of paperwork . One of all the documents is the bill of quantities. As an estimator you are expected to put a price after each item mentioned. Quite obvious. 

Unfortunately most of the time the items mentioned only concern products which make up the building itself. Construction involves a lot more than the concrete, bricks and mortar though. Questions like which crane will we use, how many hours do we need for figuring out every detail, is there water and power on site, who are we putting on site to organise everything, etc. ... they all come with a price. And beside these additional costs related to the project, there are also general costs like housing, accountancy, a staff party every now and then, etc. ... to be considered. And there is the issue of profit. Or adding an additional percentage for the risk if you are running out of time and can't check everything to the detail you want to. It's quite some work.

"And a lot of words but give me some figures", I hear you think. Well, the costs of the site installation, the organisation, the general costs and percentage of profit and risk all together mount up between 20% for a big apartment building to 35% for a complicated renovation project related to the sheer production cost.

So when there are no specific items for it in the bill of quantities, you need to add these costs in another way. And here comes the catch. Or better, the commercial thinking pops in. 
Let me give you an example. Suppose you heared that the project developer is considering to take the windows out of the tender and intends to order it directly to the subcontractor. In this case you will add no additional fee to the items suspected to be cut out of the tender. You might be satisfied with less turnover but not with less profit or less money to cover your general costs. And now suppose that your collegue-competitor-contractor doesn't have this information. He will normally split the additional costs equally on all the items mentioned in the bill of quantities.
The result is that you will end up with pricelists very difficult to compare all depending on the commercial view of the contractor on the project.

So here is what I suggest:

  • Don't judge by price only. Look at his willingness to share technical support, check the references.
  • Treat installation site and organisation on site in the same way as production costs. And do make a difference between fixed costs and costs related to the execution time
  • Negociate on the percentage of general costs, profit and risk. General costs between 5% and 10% are normal depending on how many support the contractor can offer (e.g. when he has a whole team available to study stability issues, making BIM models etc it is obvious that he has higher general costs than the contractor who only know how to pour concrete). Percentage for profit and risk go from 0% up to 10%. I usually aim, when working with open books and a real building team for 7% general costs and 3% profit & risk. On top of that I make the deal that further profit gained while actually purchasing is cut in two: 50% for the contractor, 50% for the owner
  • When you work with a real building team and open book system, make sure you have a coach and concentrate all administration to one hand. Use groupware and let everyone focus on what he or she is best at. Don't forget that the design team and contractor team are used to be on different sides of the curtain for decades. In a building team it's essential that they are at the same side !
So now you know the history of estimating and got a glimps of the future. 
Next time we'll start discussing the 8 sets of agreements in detail. 

Kind regards,