In Canada, parts of Europe, and on most
road construction projects in the United States, the estimated
quantities of materials required on the project are determined by a
professional quantity surveyor or engineer and provided to the
interested bidders on the project.
This is often referred to as a unit
price bid. In this method of bidding, the contractors are all bidding
based on the same quantities, and the estimator spends time
developing the unit prices. For example, the bid may be $47.32 per
cubic yard (cy) of concrete.
Because all of the contractors are
bidding on the same quantities, they will work on keeping the cost of
purchasing and installing the materials as low as possible.
As the project is built, the actual
number of units required is checked against the original number of
units on which the estimates were made. For example, the original
quantity survey called for 715 linear feet (lf) of concrete curbing.
If 722 lf were actually installed, then
the contractor would be paid for the additional 7 lf. If 706 lf were
used, then the owner would pay only for the 706 lf installed and not
the 715 lf in the original quantity survey.
This type of adjustment is quite
common. When errors do occur and there is a large difference between
the original quantity survey and the actual number of units, an
adjustment to the unit price is made. Small adjustments are usually
made at the same unit rate as the contractor bid.
Large errors may require that the unit
price be renegotiated. If the contractor is aware of potential
discrepancies between the estimated quantities and those that will be
required, the contractor may price his or her bid to take advantage
of this situation.
With a belief that the estimated
quantities are low, the contractor may reduce his or her unit price
to be the low bidder. If the assumption is true, the contractor has
the potential to make the same profit by distributing the project
overhead over a greater number of units.
