Cost Estimation Flashcards

A project's total cost is $500,000 and the contractor wants a 10% profit margin based on selling price. What is the bid price?

Answer: $555,556

Price = cost / (1 - margin) = $500,000 / 0.90 = $555,556.

Rent for a contractor's main corporate office is best classified as which type of cost?

Answer: General (home office) overhead

Home office rent supports the whole company rather than one job, so it is general overhead recovered through markup.

The jobsite superintendent's salary and the field office trailer are typically estimated as:

Answer: Project overhead (general conditions)

Job-specific indirect costs like site supervision and temporary facilities are general conditions, or project overhead.

A $2,000,000 estimate in today's dollars must be escalated 2 years to the construction midpoint at 4% per year, compounded. What is the escalated cost?

Answer: $2,163,200

$2,000,000 x 1.04^2 = $2,163,200.

An estimator's contingency is primarily intended to cover:

Answer: Undefined risks and uncertainties within the defined scope

Contingency covers uncertainties within the known scope, while owner scope changes are handled by change orders.

Under the federal Miller Act, a performance bond on a covered federal construction contract is normally required in what amount?

Answer: 100% of the contract price

Federal rules generally require a performance bond equal to 100% of the original contract price.

A bidder inflates unit prices on early work items and lowers them on later items while keeping the same total bid. This practice is called:

Answer: Unbalanced (front-end loaded) bidding

Unbalanced bidding shifts value to early items to improve cash flow, and owners may reject materially unbalanced bids.