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Construction Labor Estimate Using a Subcontractor Lump Sum Quote

This discussion assumes that you are acting as a general contractor, home builder, or construction manager who is NOT doing self-employment in specific areas of work.

This process is very similar to the unit cost approach of the subcontractor system. However, in this discussion, you have absolutely NO subcontractor pricing history, just a lump sum quote, making it almost impossible to qualify the quote. Possibly the only way to rate quotes is to compare the quotes of all subcontractors in a specific specification section or category in the hope that none of the subcontractors or suppliers have left anything substantial (material, equipment or labor) of your lump sum quote. Another TOP concern is, what happens when you don’t get any or enough citations in a spec section or category? It goes without saying that this method is very risky for your business. Whereas, in the unit cost process of the subcontractor system, you may have some price histories from some subcontractors who have bid you in the past for specific types of past performance work. But being equipped with only system price histories from those or some contractors probably won’t provide you with the time or pricing analysis to help reduce risk to your business or make your offering more competitive. This is primarily because your mindset is in Lump Sum Quote Expectation Mode, rather than thinking or preparing your analysis on a scope or system outline.

Now don’t be offended here, but this process is probably one of the most widely used processes, so it is highly recommended that you explore a hybrid estimation process, scoping process, or subcontractor system unit cost process. Those areas extend the concept of verifying subcontractor quotes in a little more detail to help you qualify quotes. One of the reasons this lump sum listing process is so popular is not because it is efficient or accurate for that matter. It is strictly a time saver as you only request quotes or offers from suppliers or subcontractors. Therefore, this process does not allow you to understand (what is in the job or offer) the elements of the offer (or the complexity of the project) or how you expect the offers or quotes to reach you in the last two hours or twenty minutes of a competitive offer to an owner. Basically most people accept the subcontractor’s low lump sum quote without really understanding the scope or scope of the quote, where the volatile risk to your business is really high. Some would agree that bidding like this is like flying blind, so do your research on the other estimating processes mentioned above.

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