Chapter 13
Pricing Subcontractors’ Work
Objectives
• Upon completion of this chapter, you
will be able to:
– Describe how subtrade work is usually
estimated and explain the role of the
contractor’s estimator in this process
– Identify potential problems with
subcontractors on a project
Objectives (cont’d.)
– Explain how the competency of subtrades
can be evaluated and list what should be
considered in this evaluation
– Explain how surety bonds can be used to
help manage subtrades
– Describe subtrade pre-bid proposals and
explain their use with subcontractor bids
– Describe how subtrade bids are evaluated
Objectives (cont’d.)
– Describe the main features of bid
depositories and explain their use with
subcontractor bids
Introduction
• Subcontractors
– Building construction projects
• Often perform 80% or more of the work
– Contractor has to rely on subtrades
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•
•
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Good relationships
Mutual trust
Two-way communications
Common goals
Potential Problems
• Possible reasons:
– Unreliability of some subcontractors
– Errors in subtrade bids
– Overlap or underlap in scope of work
– Conditional bids from subcontractors
– Bid closing congestion
– Compliance with government positive
action requirements regarding minorities
Managing Subcontract Pricing
Procedures
• Effective management practices
– Required throughout estimating process
• Control problems
– Well-organized system of dealing with
subtrades
• Identify subtrade needs
• Ensure subtrade capabilities
List of Subtrades
• Complied after bid drawings and
specifications are obtained
– Used to determine trades to be contacted
• Subtrades should be notified early in
estimating process
– Design questions and problems are
resolved
Contacting Subcontractors
• Most contractors maintain a directory of
subtrades
– Checklist on computer spreadsheet
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Estimator checks off or adds trades required
Checklist is compiled
Copy is e-mailed to subtrades
Subcontractors return checklist with name
against trades they are prepared to submit prices
Unknown Subcontractors
• Can be stressful
– Sometimes necessary
• Nominated subcontractors
– Deal made before bids
• Clause is inserted in bid documents
• Unsolicited subtrade bids
– Low price is received from unknown
company
Evaluating Subcontractors
• Main concerns:
– Is the subtrade capable of meeting the
quality and schedule requirements?
– Does the subtrade have the financial
capability required?
Evaluating Subcontractors (cont’d.)
• Factors to investigate:
– General company reputation
– Quality of previous work performed
– Quality of company’s management
– Company’s disposition
• General cooperativeness
• Ease of dealing with site and personnel
– Financial status of company
Bonding of Subtrades
• Bonds are obtained to guarantee work
performance
– Surety bonds: manage construction risk
– Bid bonds: give prime contractor the right
to damages from bonding company
• If subtrade fails to execute the subcontract after
bid has been accepted
Pre-Bid Subtrade Proposals
• Methods of submitting bids:
– Fax and e-mail
• Provides a hard copy
• Received quickly
• Pre-bid proposals:
– Copy of subtrade’s bid without prices
• Complete in all other details
Figure 13.2
Pre-Bid Proposal
(Delmar/Cengage Learning)
Analyzing Subtrade Bids
• Subtrade bids
– Ensure all work required is included
– List inclusions detailing all the work
• Excluded items should be listed on the
subtrade’s proposal
• Estimator has to lookout for items excluded
from the work and not priced
– Complicated by multiple trade bids and
discounts
Figure 13.3 Subtrade Analysis Spreadsheet (Delmar/Cengage Learning)
Bid Depositories
• “Bid shopping” or “bid peddling”
– Disclosing prices to obtain an equal or
better price
• Not illegal, but unethical
• Bid depositories
– Assemble bids from subtrades
– Distribute them to prime contractors
Scope of Work
• Trade scope definitions
– Useful guide to what is accepted locally as
the definitions of subtrades’ scope of work
• Enables overlap and underlap investigation
• Examples:
– Masonry scope of work
– Windows scope of work
– Glass and glazing scope of work
Summary
• Subcontractors on building construction
projects
– Often perform 80% or more of the work
– Several problems occur with subtrade bids
• Effective management practices
– Required to deal with subcontractors in the
estimating process