1991 AACE TBlWBM3103S

H.5 Practical Cost, Estimation in a Competitive Environment

by Osama Moselhi, Tarek Hegazy, and Paul Fazio

'IBIEBDwIcpIa3 Construction estimating forms the basis for various strategic decisions regarding preparation of bid proposals, procurement plans, various levels of schedules, and job cost control. As opposed to manufacturing, construction estimating is a crude process due to the absence of standardization of conditions from one job to the other [a]. In addition, the inherently complex factors of weather, labor, material and locality make the computation of exact construction costs a matter of accident than of design. Yet, these estimating difficulties are exacerbated in the competitive environment so prevalent in the construcIn order to win a job and maintain a tion industry. fair profit under such environment, a contractor needs to provide a competitive bid value in terms of realistic unit prices assigned to the different contract items. To compile the bid proposal, contractors generally have to perform, in a timely and efficient manner, three main functionsz (1) estimate direct and indirect costs; (2) decide on an optimummarkup value; and (3) decide on an optimum bid unbalancing method. Although several estimating tools are available (eg, software systems and published cost data), they have not been able to provide a structured estimating procedure or an effective decision aid that adequately considers the realities of the competitive bidding environment. This paper presents an integrated methodology for cost estimation and bid preparation under the risky and uncertain environment so prevalent in the indusThe methodology minimizes redundancy and aids try. the various decisions necessary to compile a bid. Based on the methodology adopted, a prototype microcomputer system (Em B) is developed. An example application is presented to illustrate the essential features of the system. The prototype operation and necessary future enhancements are also discussed. ~ICIBECY OF EXISTIIR; xxs

Equally their direct and indirect cost estimates. large number of books and publications have provided ample cost data and/or demonstrated methodologies and custom-designed computerized systems that aid contractors in cost estimation and/or job coat control On (See [7, 15, 19, 21, 22, and 261 for examples). research efforts have been the other hand, various conducted to develop decision aids regarding the estimation of an optimum markup value and the determination of a bid unbalancing method. Several probability-based bidding strategy models have been proproviding different posed since the mid-1950'6, assessments to the optimum markup problem, mainly in account of job profitability and expected competition (eg, the bidding strategy models of Friedman [S], Other research efforts have Gates [9], and Carr [4]. been directed towards the development of optimum bid unbalancing methods that improve the contractor's cashflow, using mathematical programming (eg, [24]). Despite the proliferation of available estimating tools and their underlying methodologies, estimators develop procedures of their own to compile the cost of construction, based mainly on their experience and in an intuitive manner that suits their work environment to the lack of genera[201. This has been attributed lly accepted estimating guidelines [4]), and also to the inability of existing tools to provide integration among the different efforts necessary for an overall The main deficiencies of estimating methodology. available tools and procedures could be summar ixed as follows: the cost and time of conLack of inteqrationr struction are highly dependent on the quantity of work, cost of resources, date of execution, and productivity of working crews, pertaining to the Thus, cost method of construction adopted. estimation, planning and scheduling and control operations are highly interrelated management although usually treated as three functions, distinct and isolated ones [25]. Most available tools are designed to perform one of the three leading to high redundancy, timefunctions, and higher operations, consuming processing probability of introducing errors. Lack of structured methodolosv8 two basic approaches have evolved to orqanise work items for One approach -ia to identify work estimating. categories contained in the project's written specifications, such as those of the Construction

With the advent of affordable, reliable, and more efficient computer systems in the 1980'6, intensive research work has been conducted in the area of cost estimation, aiming at the development of effective tools f?r contractors to compile competitive bids in a timely and practical manner. On one hand, a large number of commercial computer software systems [3] have been developed to assist contractors organize

Specifications Institute (CSI) for building construction projects, and are commonly utilized by commercial software systems. The other approach uses a work breakdown structure [28] to identify work items by their location on the project. The use of the WBS has been strongly supported by researchers seeking integration among estimating, planning and scheduling, and control [l, 2, 13, 16, 19, 221. Wevertheless the construction industry in general, and the building sector in particular, has not yet embraced USS and integrated project control, probably due to perceived high implementation cost [la]. A recent survey performed be Tavakoli and Riachi [27] shows that only 43.6 percent of the top 400 US contractors use WBS. 0 Lack of nracticalityr available systems do not incorporate procedures for optimum markup estimation and optimum bid unbalancing, into the cost estimation methodology, leaving them to the intuitive judgement of the contractor. This may be due to the subjective nature of these decisions and also the lack of simplified procedures pertaining to their resolution. The optimum markup estimation has been a subject of large controversy and debate regarding the validity and practicality of the models developed and their the bid unbalancing associated results. AlSO, procedure developed by Stark and Allayer requires large input data that relate to both cost and schedule, and as such are limited to integrated cost and schedule environments which, if they existed, are unlikely to b-s employed in the bidding stage. Inefficient utilization of available informationr contractors often have information regarding their own organization, conditions, economic market volatility, project risks, and the bid competitors. However available systems are not designed to store, process, and benefit from such valuable experience-based information.

As shown in Figure 1, the quantitative aspects of cost estimation are efficiently assessed through effective implementation of three main aspects. First is the utilization of a WBS as basis for the integratSome of the advantages gained by ed methodology. using WBS include8 UBS forms a logical hierarchical decomposition of the project into different levels of detail, from a broad level (definable areas), down to a very detailed level incorporating well-defined work elements (work packages) usually of reasonable These work packages are tied size and duration. to the company code of accounts and the database(s) of resources, unit costs, and productivity data. WSS elements at various levels relate to the contractor's organization breakdown structure responsibility different identifying (OBS), levels and their appropriate reporting formats. WBS elements could be linked to different userdefined breakdown structures (BS). Examples are functional BS (eg, concrete work, mechanical ES (eg, columns 11-27, work, etc) and physical Each of these breakdown footings l-15, etc). structures adds an additional dimension to the The interaction between these WBS elements. dimensions allows various levels of aggregation, detailing, and reporting of the project data to be obtained, pertaining to the management function performed (eg, functional aggregation could be used for value engineering purposes). WBS facilitates integration information for planning, operations. of cost budgeting, and schedule and control

The second aspect for an efficient quantitative assessment of cost estimation is proper design of a According to contractor unified code of accounts. the benefits offered by a well-designed Neil [19], code of accounts include8 0 0 catalogs facilitates levels of tailed; all needed information. consolidation of information detail from very broad to very sorting, from within at de-

As shown in Figure 1, the basis of an integrated methodology for cost estimation and bid preparation that overcomes the aforementioned deficiencies, is the incorporation of two complimentary assessmsnts: (1) quantitative assessment, for direct and indirect cost estimation; and (2) qualitative assessment, for optimum markup estimation and optimum front-end A brief discussion of these two issues is loading. provided next. I I

0 0 0 o

allows -for extraction, selected information suitable usable supports for

and summary of the total:

computerized operating

processing: personnel: needs.

by typical

both current

and historical

Direct and Indirect Estimation. WBS tmplcmeatation.

Cost

Markup Estimation Front-end Loading. -

and

A Simple Bidding Strategy Procedure. A Simple Bid Unbahachg Pmc~ure.

The third aspect is the incorporation of productivity-based databases which are a major component of an integrated management system [l]The function of a database is to store data pertaining to the integrated management functions, such as the tasks and activities included in different work packages, costs Idealof resources, and working crews productivity. ly, the contractor integrated system would interact with the common database(s) and provide timely, relevant, accurate, complete, and formatted data for the different management functions. Although many cost estimating systems have been developed incorporating resource databases, current literature is limited in describing a structure of contractor

- .

1991 Aiuz databases for estimation purposes. In general, however, researchers have reported that databases contarndata, in' terms of working historical productivity hours needed to perform a certain work, are more practical than those containing unit costs [I, 211. This is because historical productivity data are not as sensitive to change over time as unit cost data Currently in construction, several published are. cost data describe combination of crews, average productivity data, different construction activities, and work packages (eg, Means [15]. These data could readily be utilized in developing an integrated cost estimation methodology. Qualitative A6sessmant

Y!@AEmmIoBB The linear programming model developed by articles. Stark and Mayer [24], minimize the contractor's cash out-of flow as an objective, under a set of conlimited cashflow, expected differences in straints: bid quantities, and estimated upper and lower limits As such, this cashflow analysis for the unit prices. requires data pertaining to the expected expense curve (S-curve) and the expected income profile, which.could be obtained based on the project cost qd schedule estimates. Prooedura the, cost Based on the previous discussion, methodology that effectively includes estimation quantitative and qualitative assessments could be outlined as shown in the flow diagram of Figure 2. In the first step, bid documents are received and the contr,act.items form transformed into a computerized contract item with the ,following fields: database, unit of measure,. and the number, item description, quantity. In the next step, work breakdown structure (WBS) is performed, based on study of the project Interactive WBS is drawings and specifications. highly desired, and WBS templates can be of great Bach element in the WSS is automatically assistance. The elements in assigned a unique code of accounts. the lowest level of the WBS are interactively assigned a task or a group of tasks (ie, activity) from the appropriate database(s),'and the user is prompted for the quantity of work estimated and the appropriate 'contract item to which this task or activity is Once the logic-driven WBS is performed, linked. direct costs associated with.all the elements of the WBS are automatically calculated by means of a suitable algorithm that reads the a,ctivitiea and tasks in the WBS elements and retrievesftheir resource type, cost and average productivity data from the approThe,algorithm calculates the labor priate databases. costs, equipment hours and costs, material quantities and costs1 'subs costs, and total workhours used, in addition to the total of direct costs, for the differ-, ent WSS levels and contract items,

The first aspect to be considered in the qualitative assessment of bid preparation, as shown in Figure 1, is the utilization of a simple and practical procedure for optimum markup estimation. Such a procedure should consider many of the qualitative factors that represent the risk environment which the contractor has to assess (eg, contractor need for the market conditions, and owner attitude) and job, provide an estimate of the contractor's probability of winning the job associated with the optimum markup value estimated. Although most of the existing bidding strategy models provide such estimates, in practice, they have been very limited in use due to the limitations described earlier. In recent literature, research work'was pursued in an effort to simplify the optimum markup estimation procedure and include the qualitative factors. Some of these efforts have not been successful since they included some 'of the qualitative factors into the model formulation, and thus, add more.complexity to such models. Some of those efforts include the ea&y works of Goodman and Burmeister [lo], Knode and Swanson [14], and Grinyer and Whittaker [ll] where factors such as contractors managerial judgement and limited capacity were introduced into the models. l4oselhi and Hegasy [17, 181 have presented a computer program (BID) incorporating the three commonly used probability-based models of Friedman (81, Gates [9], and Carr [4]. In an effort to'extract the commonalities and markup trends among those models, the program was used to conduct a parametric study and sensitivity analysis over a wide range of statistical parameters that characterize bid situations (mean and standard deviation-of bid/cost ratio and number of typical competitors). The study revealed that the three bidding models used represent a pessimistic (Friedmans), an optimistic (Gates'), and a most likely (Cart's) estimators for optimum markup. A trade-off among these three strategies could be s&nply done by the contractor, in view of the anticipated risk environment. As such, program (BID) is perceived a simple and satisfactory decision aid, for the initial prototyping of the integrated estimation methodology. The second aspect to be considered in the qualitative assessment of bid preparation, as shown in Figure 1, is the utilization of a simple procedure for bid unbalancing. Bid preparation frequently constitutes the compilation of all the project costs into unit Prices assigned to the different contract items, to be submitted to the owner as the contractor8s bid for the project. This bid unbalancing technique is used to enhance the. contractor's cashflow, while maintaining his/her competitiveness. The total of direct cost, indirect cost, and profit (markup) are oPtimallY distributed over the different contract

RECEIVE RID DOCUMENTS & LL CONTRACT FORM. t 4 WORKBREAKDOWN 1 PROkEREPORTS.

ESTIMATION.

Figare Methodology In activities the

for

Flow Diagram of an Integrated Cost Estimation and Bid Preparation and are

integrated environment, the..tasks identified in the cost estimation step

to be scheduled, and the cost implications of such a schedule addressed. In the scheduling step, activities are assigned planned start and finish times, and Critical activities are determined. Practical productivity factors should then be assigned to the activities to account for expected weather conditions at the scheduled times, trade congestion, overtime, and other productivity-related factors, Workload of owned resources has to be considered to adjust the cost of resources. Based on these considerations, a cycle of schedule updates may become necessary, and resources may have to be real-located, impacting the direct cost and the schedule. Accordingly, reports pertaining to the project activities, direct costs, schedule, and resource use, can be generated at the different management levels. Some of these reports, particularly those pertaining to accumulated resource use, provide a guide for indirect cost estimation. Indirect costs are generally estimated to include the project overhead and a part of the firm general overhead, and the total costs cannot readily be attributed to a certain contract item. A list of possible indirect cost items could be utilized and estimated costs are assigned to those applicable to the project. The step to follow is to identify the project expected competition and collect available informatiqn about the competitors and any other factors that contribute to a better classification of the project degree of risk. Accordingly, optimum markup and probability of winning the job are estimated, utilixing a suitable bidding strategy that provides an adequate decision aid. Once this is done, the bid can be prepared for submission to the owner. A suitable bid unbalancing procedure is utilized, such as that of Stark and Mayer, to provide the final unit prices for the different contract items. A possible strategy to be used with the linear programming algorithm is to specify as a constraint that the unit price of a certain contract item is greater than or equal to the direct cost of this item/item quantity. A simpler procedure for bid unbalancing would be to allow user interactive distribution of the indirect costs and profit among the different contract items.

module, a planning and scheduling module, a markup and a bid preparation module. estimation module, These modules are linked through a core of databases designed based on input from Wontreal area contractors in building and civil engineering works. basic resource data in The system contains labor database, equipment different databases8 database, construction material database, permanent material database, crews database, and subs database. Another database includes data regarding various work tasks and a reference to the resource used to perform that task and the productivity of those resources* Several tasks can be grouped to form an activity that can be stored in a separate database for efficiency of processing. The last database contains data regarding the competitors and their performance in past bids. With its database, spreadsheet, and graphics capabilities, Lotus l-2-3 is used as an implementation enviThe record ronment for the present system databases. structure of the various databases is described in Figure 4 (see page H.5.5). Bach of the system's nine databases is a separate Lotus file, and the database manager is a macro-driven program that customizes the allowing user-interactive maintenance user interface, and simultaneous data viewing as of the databases needed. The decentralized design adopted allows each database file to have as many records as the user might want without much effect on the processing time. When a database is saved, a standard ASCII version of the database is produced and can be read by an interfacing program, designed to link the databases to the different system modules. A work breakdown structure is also implemented in a user friendly, menu-driven lotus environment. Currently, the WSS allows the user to specify three levels: area level (1 to 7 elements), major-activity level (1 to 7 elements), sub-activity level (1 to 7 elements). The total number of elements permitted at the lowest WBS level is therefore 7 * 7 * 7 = 343. However, if these elements are selected from the activities database, then the total number of tasks included in the project could be unlimited. In Figure 5, WSS for the example project is shown, with a unique code of accounts assigned for each WSS element. The code is designed to be a sequential number from 1 to 4008 7 elements at the area level, 45 elements at the second level, and 343 elements at the third level, in addition to one code for the entire project. As such, the code allows the processing of the WSS data in

Eased on the methodology described earlier, a microcomputer system (ESTICZQTSIR)is being designed and implemented in an effort to illustrate the practicality of the methodology. The computerized system is designed in a modular architecture, incorporating four main modules, as shown in Figure 3: a cost estimation

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1991 AWB !PmnSAc!i!IoIvS

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tional costs -External rent ($/hour). costs ($/hour). -Fuel Consump. -Fuel cost. -Engine oil consumption. -Engine oil cost. -Gear oil consumption. -Gear oil cost. -Hydraulic oil consumption. -Hydraulic oil cost.

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DATAB ;ASE Input Fields

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/
b

ACTIVITIES
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L DATA InPut Fields

Code. Description. Unit of Measure (U.O.M.). Resource code (Labor, Equip., Material, or Crew). # ot resources. Daily U.O.M. output.

Fields
-Code. -Description. -Activity code. -Relation to predecessor. -Relation to

Calculated Fields

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NON

NON

Mean (p) of Bid to Cost ratio. St. Deviation (a) of Bid to Cost ratio.

Mean (p) of Bid to Cost ratio. St. Deviation (o) of Bid to Cost ratio.

Notes: #atabases are designed based on input from Montreal area contractors - Databases data could be saved with the project data files. 1 heavy civil and buildings. - All the data bases allow user specification of the date when last modified. Figure 4 -&xordStructnreof ContractorDatabase

arrays of 400 maximum size, avoiding PC memory limitatiot-S. at any WBS level, the elements' codes are function of their parent elements at levels (as shown in upper Figure S), and as such the aggregation and/or detailing of the WBS data is facilitated. The WDS is performed in an interactive manner, with input templates and menus that dynamically incorporate the selected WDS elements into the user interface, hiding the internally calculated code (see Figure 4a). The WBS elements' data are stored in a database of 400 records, with the following fields: a reference indicating the position of this element on the article the contract =s, number that is linked to the element, the quantity of work, the unit of measure, the number of work repetitions, and the task or activity code that links that element to the tasks database or the activities database (see Figure 6b).

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I

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The prototype developed WBS incorporates pllanxT :NosA.wBs an interfacing -_--^-^-----^-----------------------------------------------------------algorithm that integrates the databases and all the system CfJDE DEXRIFTION ART. # QUANTITY U.O.M. Repeat. REF. modules, except for the plan____________-_---__-------------------------------------------------ning and scheduling module which is currently being implemented. The system menu options shown in Figure 7 1 1000 sfca 2.22 Al-Ml-S1 DENXTERING should be followed in se1 4800 cuyd 2.1 Al-Ml-S2 Excavation quence, and the user is prompted if they are not. The 2.355 2.1 50 eacil Al-Ml-S3 Piling first option is to start the 2.2 510 cuyd 3.1 Al+ll-S4 Concrete Footing estimation by filling the 2.2 2.223 160 cuyd Al-XL-S5 Sand Fill @ Slab contract articles and perAl-Nl-s6 forming the WDS. The second Al-Ml-s7 is to generate reports con3.751 3 1200 sft Al-M&S1 Form Work the different WBS cerning 3 3.5 1200 sqft Al-G-S2 Rebars elements and the resources 3.12 3 150 cuyd Al-&?-S3 Concrete Walls used. Samples of these reports for the example project 3 1200 sqft 6.1 Al-K?-S4 Structrl Framing are shown in Figure Ba and b. Al*-s5 These reports provide elaboAl-&!-S6 rate data on the cost eleAl-&?-s7 workhours, and the ments, 4.1 4 2600 sqft Al-M3-Sl Brickwork used, for each resources 6.43 7 1300 sqft A1+3-S2 Interior Panelng These reports could task. . . . 0 . . . 0 then be utilized in formulat_----------^--------__________^_________--------------------------------ing a strategy for allocating individual indirect cost comlig. 6@p, A Lotus spreadsheet ponents. is prepared with different indirect cost items, and the I?igum 6 -a) WBS tk'exiplate madc2smm; b) Szmpls~S Dztmbazm contractor is expected to fill the costs pertaining to The next option as shown in Figure 9. The user is prompted to confirm the project applicable categories. the markup selection, and accordingly proceed to the could then be activated and the interfacing program A bid summary report is shown in prompts program (MUD) to calculate an optimum markup bid summary option. data residing in the Figure 10, where detailed direct costs associatedwith utilizing the competitors' each contract item are provided. The total of the During optimum markup calculation, the user database. can interact with BID to visualize the impact of a indirect cost and the profit (markup *- direct cost) is interactively distributed among the different contract selected markup on the probability of winning the job, crcrc

1991 A&cE l!RAeSAcl!1oers

ESTIMATOR t
MAINMENU

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1)Td.s & Activities.

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Project: NJSA.prj - .kea: W-.XU% Repetitions: 1 __-__________-----------------------------------------------------------------Major Actlvlty: S-UC. Sub_actlvity: Concrete Fmtlng - Quantrty: 510 U.O.M. Durat . M.H. L&our Bqu.qx subs other Mat. cost(S1 cost(S1 cost(Sl (daysI (tu-Sl co&($1 costc$~ ____________----___--------------------------------------------------------cwd 4.3 459 16279 2906 26520 0 0 Resources: 1 E3 1L.l 2 E6 2La 3 Llo all0 ( ( ( ( ( 2CR4 2CR4 2CR4 2CR4 2CR4 ) Hrs/week:45 O.T.: 0 ==) E.Hrs: 77 ) Hrs/week:JS O.T.: 0 ==> Y.Hrs: 77 I Hrs/week:45 O.T.: 0 ==> E.Hrs: 153 i Hrs/week:45 O.T.: 0 ==) M.Hrs: 153 1 Hrs/weeJc:45 O.T.: 0 ==) H.Hrs: 230 Quantity: 663 ==> I________-__--------__________________I cost: cost: cost: cost: Cost: cost :

Total cost($I 45705

;,

_________-------------------------___ cc& E3 E3 E3 E3

1479(l) 2544 1427(l) 6105 7631 26520 ___----

Fig.8(&.
r&EC. I 1 1 1 1 Area Mjor ___^__________--I_______________________----------------HrwWek Dvertme' Repstltion Sub-act. cost_type 45 45 45 45 0' 0 0 0 Total E4 E4 uxcm UXDm 1 1 EASP-AREA skXRW2. sand Fill WEsTkRFA SUB-SPRUCSand Fill @ operational $ Cpsrational' 45 45 0 0 Total 1 : 1' This code: 1 2 This code: Q.&-s. Cost.'rep 1479 340 870 35 3601 19 13 46

CCNCRETEMIX -Mix CoNcRFpE pIx -MIX

EAST-AREA SUBSIRl!C.Cmcrete Em*rational EAST-AREA SUPER-SIR Concrete Wal@eratioml NEST-m SUB-SIRUC Concrete Foe *rational ~-AREASUPER-SPRConcreteWal Operatio~l

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Project:
Total

KEA.prj

- Bid Sunmary Report.

Total 135450 . . . . . . . . t!aarjQl.p(F-,)= 3.5 182358 - Remaining: 25000 Total to Distribute(S) = 207358 - Assigned: ----------^________^^___________^_______----------------------------------------------------------------------------other Labor Equivt Platehal slh Art. UNt Quantity Description cost cost cost cost cost rt -----------_____________________^______^-------------------------------------------------------------------------0 1000 7461 738 0 200000 1.00 Excavation wft 0 20 0 0 0 45000 2.10 Plled foundations each 0 25 35622 6559 59582 0 2.20 Isolated Footings each 0 20:: 194292 752 201125 25000 3.00 Supsstructure per fla 0 232266 0 158400 0 4.00 Brick work rn2 0 1 23803 0 0 0 5.00 Electrical work hnn 0 210 106222 0 9040 400000 6.00 ?-kha~Cal work lsum 0 167550 0 65640 0 7.00 Interior Decorati per fla 0 1 422 42 0 115000 8.00 landscaping lslno -----------____1-1__-----------------------------------------------------------------0 767638 8091 493707 785000 ra?bNDmm I___-__----_____-^------------------------------------------------------------------------a--a... UseDp&DDwnAr-toVieslallArticles.... <EW-QUIT> <l?l-PRIhT REPORT> (F2-DIZ?IRIBUl'E>CF3-%?Gl?S>

Directs Indirects(

ts)=

2054516

lbtd direct

Indirect cost

Unit prxe 208.2 7250.0 5070.5 21058.5

195.3

208198 +O -15000 *100000 101763 +25000 421170 +O 390666 +O 23803 *107358 515262 +O 233190 -50000 115464 *O -^-^-------------^ 2054516 +182358 total Bid:

131161.2 515261.8 9159.5 115464.1

2236874.0

Bach indirect cost, and so is the provided with portion yet to

items *

time a contract item is assigned an the unit price of that item is modified total bid value. The user is always the total assigned and the remaining be (see Figure 10). the system has

Based on the prototype operation, several interesting features2 0 0 0 0 0 highly future structured, expansions

modular architecture and enhancements;

allowing processing are simply

efficient, user interactive and fast on IBM AT machines and compatibles; transparent, changes in the databases reflected on the estimate; practical, databases with the project files flexible, all project used as templates.

Linear programming is used to contractor*s profit. optimally distribute the total of indirect costs and profit among the different contract items (bid unbalancing or front-end loading), to improve the contractor's cashflow. A prototype PC-based software system (Is-) is developed to automate the bid estimation process and provide a user friendly interface with minimum devel6pment cost and programming skills. The system is designed to work as a front-end to other management software systems pertaining to scheduling, quantity takeoff, procurement, and job cost control. ?UI example application is presented in an effort to illustrate the essential features of the system and demonstrate the operations of the prototype developed.

are saved and downloaded for records; files could be renamed and

1.

Adrian, J. I&qprQw-r. Inc.

1987. cQ!aratruoetin lFTc&m~was~ Elsevier Science Publishing Co.

2.

The planning and scheduling module is currently being developed to permit bid unbalancing using optimization methodology. 3.

Al-Tabtabai, H. and J. Diekman. Iarch 1990. PROCON: a Knowledge Based Approach to Construction Project Control, --5P II CIB, Sydney, Australia, 305-397. Arditi, D., and W. Riad. April 1988. Commercially Available Cost Estimating Software Systelw, lmQjmce rzLBnag-t iLbmazmti, Wol. XIX, mo. 2, 65-70. Can, R.I. Narch 1987. Optimum Rarkup by Direct Solution, Journslof GosstruotioniXngin~~g sndl rzbm?igBt, ASCB, vol. 113, Pao. 1, 138-150. Can, R.I. December 1989 e Cost-xstiiRatiIJg Principles, ~oum&k of C~~~aatmctGm E@.m~~g ad ric!mmg-t. AXE, vol. 115, WO. 4, 545-551. Clough, edition. R. 1975. bbpmsti~tbaWmW&hg. Wew York8 John Wiley 6 Sons Inc. 3rd

A structured methodology for cost estimation and bid preparation is developed to improve the efficiency and facilitate the process of preparing a bid estimate in a competitive bidding environment. The methodology employs the work breakdown structure (WSS) concept, a unified code of accounts, and resource productivity to provide an efficient quantitative databases, assessment of direct and indirect costs, incorporating the impact of the project schedule. The procedure integrates two existing techniques: bidding strategies and linear programming, to consider the qualitative aspects of bid preparation. Bidding strategies are used to maximize the markup value, and hence the

4.

5.

6.

1991 AACB -1oIps 7.

Nldin, N.

Progressr Conetraction Vol. 115, 8. 9.

Friedman,

September 1989, Neasurement of Work Quantitative Technique, Journal of ASCE, Nngiaeering andManagewnt. No. 3, 462-474.
A Competitive Bidding 1956. L. Vol. 4, 104-112. rations Research.

18.

1990. Bidding for a Profit: A fiockey -* PAI Project Stick Trend, proceedings. Drexel, Management Institute. Neil, J. 1982. Froject Control. Hall, Inc. Construction Englewood Cost Estimating for Cliffs, NJ, Prentice

19. Strategy, Gates, M. Probabilities, Division.

1967. Bidding Strategies and the Constractism Journal of ASCN, Vol. 93, No. COl, 15-107. A CompuBidding Vol. 22.' 1973. Bidding Vol. 24.

March

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