Estimation procedure
This procedure outlines the process used to develop a cost estimate or a quote to complete projects for PEER Construction. This procedure is used at the beginning of the project to establish an initial estimate used as the basis to develop the schedule and cost baseline.
Purpose
The purpose of this procedure is to provide guidance on managing estimates and is applied across the life cycle of projects whenever cost estimate data needs to be generated.
Planning an estimate
The following should be considered when planning an estimate.
Methodology
The cost estimating methodology used on projects is a bottom-up process based on a logically networked schedule that is resource loaded at the lowest activity level.
The schedule used for the cost estimate must reflect the scope of work as defined by PEER Construction and support all key event milestones.
Standard estimating guidelines and methodologies are used as part of the process.
These components of a resource loaded schedule that reflects the scope of work and uses standard estimating guidelines and methodologies is a key part of the PEER Construction methodology.
This approach is used to ensure that the cost estimate is based on a reasonable schedule using approved estimating factors; the schedule activity resource amounts are used to generate the time phased cost estimate based on the activity start and finish dates.
All estimates are assessed in dollars in the actual year spent. All estimating guidelines and methodologies are established by the PEER Construction project office and implemented through the PEER Construction project control team.
Assumptions
Inclusions
What to include
- PEER Construction ABN and contact details
- total cost
- breakdown of the job or product components and cost
- schedule outlining proposed service or delivery dates
- assumptions on which the estimate is based
- terms and conditions
- preferred terms, means and schedule for payments
- estimate expiry date.
To ensure an estimate is an accurate reflection of the cost of the work to be performed consider:
- the plan and proposal
- project site conditions
- time limit
- sequence of construction
- seasonal limitations
- regional conditions
- current market conditions
- quantities/price relationships.
Specifications and scope of work
Specifications
Meet with the client to obtain the details or the client must provide all details in writing. Document all the details so you and the client can refer to them later.
Scope of work
The scope of work document should detail:
- all the work to be done
- who is responsible for the work
- how the work should be performed (techniques used)
- what materials will be used.
Process
The process has the following components.
Quoting for services
If you are quoting to provide services:
- Get a request in writing for the quote to make sure you know exactly what the client requires. This is important to establish whether PEER Construction can provide what the client requires.
- Keep accurate records and log the time you spend on various tasks. The details will be invaluable when you are quoting and budgeting in the future.
- Compare the job – use previous service contracts, or the advice and experience of colleagues, as a precedent to cost the proposal.
- Be realistic – do not underestimate the amount of time you will spend providing the services, make sure any flat fees you quote are carefully considered and clearly state the scope of the work
- Identify any additional costs – charge for additional costs (disbursements) the business will incur in providing services for example ‘Disbursements are charged at cost plus 15%’.
The quote template must be used then quoting for a client on behalf of PEER Construction
Presenting quote
- Quotes are to be typed
- Include date
- Account Number
- Order Number
- Formatting is well space and structured.
- Spelling checks for grammar and punctuation
- Include clients’ name(s) and address
Precise inputs will give you a precise estimate. Think about the project carefully, double-check drawings, and visit the worksite to plan how the job will unfold.
Approval
Apprentices must send their quotes to their supervisor for review and authorisation.
Documentation
Completed quote is to be sent via email to PEER Construction accounts payable for processing.
Costs
Consider the following about the costs.
Labour
Establish how much it costs per day (or hour) for you and any direct employees to complete the work. Multiply that rate by the time you expect the job to take.
Identify where you will need subcontractors and confirm their availability as you do not want to be waiting on them. Ask the contractors to estimate the job but be aware they may not be as precise as you. Double check their calculations based on their hourly rate. Build in some contingency to cover unforeseen work that may be needed.
Refer to the business plan information to get up to date information about costs.
Material costs
Calculate a cost for direct materials like wood, steel, plumbing, and electrical wiring, then add indirect materials like fasteners and caulking. Make sure equipment hire is covered. You might also charge a margin on these materials to cover delivery and wastage.
Overheads
You will need to charge an overhead to account for depreciation of equipment, and for other business expenses such as office rental and administration. Refer to the business plan information to get up to date information about costs.
Documentation
All documentation relating to a cost estimate must be retained and sent via email to PEER Construction for record keeping. This includes all specifications, site plans, drawings, estimate, instructions issued by client, and email correspondence.
These should be added to the estimate:
- client names and details
- services to be provided
- materials and labour
- costs
- total costs
- date of issue
- estimate number
- completion date
- timeline
- exclusions (what the project does not include)
- PEER Construction business details
- PEER Construction terms and conditions
- cost estimate is valid for 14 days.
Cost estimates are to be verified with the accounts department before sending to client.
Terms and conditions
The following statement must be on all cost estimates and quotes.
Terms and conditions: in addition to any terms and conditions contained in this communication, all dealings with PEER Construction, are subject to the Terms and Conditions of Trade of PEER Construction.
Archive
All email correspondence must be archived when the job is completed.
Note: This is done by creating an Archive folder in your emails.
Negotiation of contract or estimate
If you are negotiating with clients, suppliers, lease renewals or any form of negotiation you should consider:
- prepare and be knowledgeable – identify the interests of both parties and articulate the substances of the problem.
- set clear goals and objectives. The more you clarify your goals, the more likely it is you get the result you need from the negotiation.
- be empathetic, positive, and optimistic.
- ask questions for clarification – this is an opportunity for educating and informing parties on the issues, why they are important and how each person arrived at their initial demands.
- clearly explain the situation – both parties should have a clear understanding about what the negotiation is about. All statements should be clear and understood by both parties. They should not be ambiguous, contradictory or lead to misunderstandings.
- tackle complex issues first – when you know there are major obstacles, be tactful, but bring them up early rather than risking going through an arduous process.
- clearly articulate the terms and conditions during the negotiation – be clear and define what it is you expect from the negotiation.
- treat all parties with respect – do not attempt to talk over the parties involved in the negotiation, be empathetic towards their situation.
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Version 2.0 – Last updated 01/05/2023