Estimating & bidding: Alaska Contractor Business & Law Practice Questions

What is a quantity takeoff?

The takeoff counts and measures everything in the drawings and specifications (cubic yards, square feet, linear feet, each). Prices are applied to those quantities later.

Which of these is a direct job cost?

Direct costs are labor, materials, equipment and subcontracts that go into a specific job. Office rent, office salaries and accounting are general overhead shared by all jobs.

A job trailer, temporary toilets and a site superintendent used only on one project are best classified as what?

Costs that exist only because of a particular project but are not part of a specific work item are job overhead, often called general conditions. They belong in that job's estimate.

A contractor's job cost is $80,000 and it adds a 15% markup on cost. What is the bid price?

Markup is applied to cost: $80,000 x 1.15 = $92,000. Dividing by 0.85 ($94,118) would give a 15% margin on the selling price, which is a different calculation.

A contractor wants a 20% gross margin on the selling price. What markup on cost produces that margin?

Markup = margin / (1 - margin) = 0.20 / 0.80 = 25%. For example, cost $100 x 1.25 = $125 price; profit $25 is 20% of $125.

A job sells for $250,000 and costs $210,000. What is the gross margin as a percentage of the selling price?

Gross profit is $250,000 - $210,000 = $40,000. Margin is $40,000 / $250,000 = 16%. The 19% figure is the markup on cost ($40,000 / $210,000).

A slab is 30 ft by 40 ft and 4 in thick. About how many cubic yards of concrete does it need, before waste?

30 x 40 x (4/12) = 400 cubic feet. 400 / 27 = 14.8 cubic yards. Estimators then add a waste allowance.

A takeoff shows 2,000 square feet of drywall and the estimator uses a 10% waste factor. How much should be priced?

2,000 x 1.10 = 2,200 square feet. The waste factor covers cutting, breakage and offcuts.

What does labor burden add to an employee's base wage in an estimate?

Labor burden is the employer's extra cost per hour: its share of FICA, FUTA and state unemployment tax, workers' compensation, liability insurance tied to payroll, and benefits. Income tax withholding comes out of the employee's pay and is not an employer cost.

A crew will need 120 labor hours at $30 per hour, and labor burden is 35% of wages. What is the estimated labor cost?

Wages are 120 x $30 = $3,600. Burden is $3,600 x 0.35 = $1,260. Total labor cost is $4,860.

A finisher installs 40 square feet of tile per hour. How many hours are needed for 1,000 square feet?

Hours = quantity / production rate = 1,000 / 40 = 25 hours. Production rates turn takeoff quantities into labor hours.

What is an addendum during bidding?

Addenda modify the plans, specifications or bid instructions before bid opening. Bidders usually must acknowledge every addendum on the bid form, or the bid may be rejected.

A bid form asks for a base bid plus a price to upgrade the flooring. What is that upgrade price called?

An alternate is a separately priced option the owner may accept or reject when awarding the contract. An allowance is a set amount carried in the bid for an item not yet selected.

The specifications carry a $5,000 allowance for light fixtures the owner has not chosen. The owner picks fixtures costing $6,200. What usually happens?

An allowance is a placeholder. When the real cost is known, the contract sum goes up or down by the difference, usually through a change order.

What is a unit-price bid?

Unit pricing is common on site work and roads where quantities are uncertain. Payment is the unit price times the measured quantity.