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Section 4: Prices

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Overview

This section gives guidelines on the following aspects of prices:

  • Average bid price access
  • Project specific adjustments
  • Factors affecting unit bid prices.
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Average Bid Price Access

Unit prices are usually determined by locating previously submitted low bid prices or average low bid prices and adjusting them to fit the project being estimated. All projects are different, and the prices bid for one project can vary substantially from prices bid on others. Previously submitted bid prices or average low bid prices should only be used as a starting point from which a more accurate unit bid price can be derived with good engineering judgment.

The next subsections cover these areas when accessing average bid prices:

  • Bid tabs
  • Average low bid unit prices.
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Bid Tabs

Each month during and after letting, the Construction Division inputs all of the bids received for every item on every project into the DCIS database. A tabulation of bids, or bid tabs, is generated and verified for each bidder on every project. This information is made available to the various divisions and districts on a Data on Terminal (DOTS) File once the bids have been verified by the Construction Division. An estimator could use a tabulation of bids report for a recent contract similar in scope and location to the project being estimated in conjunction with the average low bid unit price reports to derive unit prices.

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Average Low Bid Unit Prices

After the Commission awards the low bids, the Construction Division accumulates the letting’s low bids and the previous 12 months’ low bids for each district and inputs this information on the database. This information is available on TxDOT’s Internet site at http://www.dot.state.tx.us/business/prepostletting.htm. Statewide averages and averages by TxDOT district can be found under the Business section of the TxDOT Internet at http://www.dot.state.tx.us/business/Avgd.Htm.

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Project Specific Adjustments

When making project specific adjustments, consider the following factors:

  • Unit bid determination
  • Unbalanced bidding
  • Project variations
  • Importance of good estimating
  • Factors affecting unit bid prices.
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Unit Bid Determination

The determination of unit bid prices is based on experience and past trends. The designers should gather all the statistical data and information available and then study it with their knowledge and experience to establish the most accurate estimated unit bid price.

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Unbalanced Bidding

Since the TxDOT low bid prices are actual contract bid prices, the estimator must realize that if a contractor has unbalanced a bid, only the estimator’s experience and judgment can identify if the prices truly reflect the conventional bid prices for the items. Unbalanced bidding is the somewhat common practice of a contractor setting higher-than-conventional bid prices on items which will yield large payouts early in the construction process. The front-end loading represented by the higher bid prices are then compensated for by the contractor with lower-than-conventional bid prices for items to be accomplished later in the project. It will be to the estimator’s advantage to keep a running record of the unit bid prices received on projects by area office.

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Project Variations

The estimator can use the average low bid unit prices in arriving at a base price, but should keep in mind that every project will differ from all other projects in some way. These variations must be identified by the estimator and considered during the price selection process.

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Importance of Good Estimating

As will be noted later, the consequences of poor estimating can be substantial. No one can predict exactly how the low bidder will bid, but by using effective estimating aids and good judgment, reasonably accurate unit prices can be determined. Each project requires individual consideration, and the estimating aids provide a starting point from which unit prices suitable for a project can be derived.

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Factors Affecting Unit Bid Prices

Consider the following rules of thumb when making adjustments to unit bid prices:

Project size. Projects with large quantities will tend to have lower unit bid prices than a project with small quantities.

Project location. The location of a project, such as a rural project with long material hauls and no commercial asphaltic concrete hot-mix plants or ready-mix concrete plants available, most likely will have higher unit bid prices than an urban project where these facilities are readily available.

Traffic conditions. Traffic conditions quite frequently have a significant effect on bid prices. Due to difficulties, dangers and expenses caused by traffic, contractors will typically raise prices to reflect these conditions. Projects with complex sequences of work and high traffic volumes will command higher prices than uncomplicated projects with low traffic volumes.

Construction season. The time of year that a project is to be let for contract and the estimated time required for completion may be significant in price selection. Factors, such as if the project will have to be suspended or delayed by inclement weather, will have an effect on bid prices.

Accessibility. Accessibility to the work area and the existing terrain are important factors. For example, construction on an existing interchange may require long out of direction movements by men and equipment. If material hauling must be accomplished under these conditions, it can be unusually expensive.

The type of terrain where the project is located may have a bearing on bid prices. Work that is normally easy to accomplish on level terrain or gentle slopes may be almost impossible on steep slopes.

Restrictive conditions. Restricting the working hours or method of work on a project can have a great effect on prices. If the specifications limit work to nighttime or short shifts, unit prices may need to be increased to reflect the higher costs involved.

Availability of materials. The availability of materials also influences bid prices. An example is the fluctuation of bid prices received for asphalt over the years which is directly related to the availability or use of crude oil.

Experimental or research items. Projects which include experimental or research items usually receive higher bids. Since the bidders cannot foresee all the difficulties associated with these items, they usually pad their bids to allow for contingencies, thus resulting in higher bids.

Specifications. The estimator must also be aware of Special Specifications and Special Provisions which may dictate materials or procedures more costly to the contractor than the conventional items.

Construction time. Projects requiring long periods of construction, a year or longer, will quite likely reflect higher bid prices for items which must be purchased from suppliers. Especially noteworthy are large quantity items or expensive items which will be constructed during the later stages of the project, since suppliers are usually unwilling to guarantee prices for extended periods of time. The Contractor(s), for protection against any increase in prices, will usually hedge their bid on this type of item, resulting in higher prices than in projects with shorter completion times.

Plan clarity. Plans which are neat, clear, and accurate will usually contribute to lower overall unit bid prices.

Bidder competition. The number of bidders bidding on a project has been shown to be directly related to the unit bid prices received. The general rule is the greater the number of bidders to bid on a project, the lower the bids received. This is due to the increased competition necessary among bidders in order to be awarded the low bid. In determining the unit bid prices, the designer should account for the anticipated amount of bidding competition.

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