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id:
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  - topic/estimating
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# Construction Estimating

Construction estimating is a subset of cost estimation.

## Purpose

The purpose of [[construction-estimating]] in practice
is not to determine the cost of the scope,
which would take far longer than allotted for bid,

### For the Solicitor

* Determine feasibility of functional requirements

> [!info] Type 2 Owners
> For some owners, money is no object,
> and standardization is far more important
> than any potential construction savings.
>
> These owners can be expected to decline every [[value-engineering]] option offered
> (see [[gold-plating]]).

### For the Contractor

* Make profit to meet growth target
* Secure work for current and projected employees (fill backlog)

%% TODO: "Determine the sale price of a service" %%

> [!aside]
> I take increasing issue with the common model
> of measuring operational success by negative overrun,
> as it is incompatible with the preferable target of estimate certainty.

#### The Role of the Estimator

The role of the estimator is to model the potential cost distribution of the project,
taking actions to reduce the model's uncertainty.

The effect of estimating methods can be represented as $d\sigma$,
thus efficiency is $\frac{d\sigma}{dt}$.

#### The Role of the Executive

The role of the executive is to allocate profit and contingency
according to the potential cost distribution
weighted by the organizational desire to win the project.

$$
{E}[P]=
$$

## Misconceptions

### Standard Practices

In general, many things thought to be standard are quite the opposite.

* Use of square receptacle symbols

### Proposals

Proposals are not legally binding,
which is a double edged sword
for intermediate subcontractors like electrical:

* Proposals to GC's can be withdrawn for any reason
* Proposals from subcontractors can be withdrawn for any reason

This is obviously not popular practice,
however it is important to recognize
that errors aren't set in stone
until a contract is signed.

Destigmatizing proposal retraction is of critical concern for subcontractors.
See [[estimating-culture]] for more on estimate error game theory.

It's important to recognize that retracting a proposal
may upset a few people employed by the GC,
but consider how little your own opinion matters to your company's strategic decisions.
Much bigger people are involved after the proposal is accepted.

## Ethics

Clients engaging in unethical bidding practices can quickly gain a reputation for doing so,
leading to reduced bid response that can be impossible to fully recover from.

To ensure a transparent bidding process, one must

* divulge all selection criteria to bidders,
* avoid conflicts of interest,
* maintain confidentiality of bid submissions, and
* provide equal access to bidding information.

### Terms

> [!info] Bid Shopping
> the practice of sharing a bidder's quote with other prospective vendors
> in order to solicit lower bids.
> The competing quote may be legitimate, fabricated,
> or a non-serious proposal from a colluding vendor.
