Estimating in Building Construction

Overhead and Contingencies 51

Professional Services

 Surveys

 Photographs

 Testing

To Estimate Cost. The amount of surveying required is a
function of the layout that will be performed by the field engi-
neer and that which is to be done by a professional engineer/
surveyor. It is best to contact a local firm and get their hourly
billing rate for these services.
The photographic requirements are part of the specifi-
cations and company policy. With the advent of low-priced
video cameras and digital cameras, this item is becoming less
costly.
The testing requirements for materials are typically
found in the specifications. This provides for the quantity
of tests required. The cost of these tests can be deter-
mined by contacting a testing laboratory to determine its
charge for specific types of tests. In addition, the estima-
tor must know what the laboratory charges to collect
samples. The cost of collecting the samples can exceed the
cost of the test.

Labor Burdens and Taxes

 Cash equivalents and allowances

 Social security

 Medicare

 Federal unemployment taxes

 State unemployment taxes

 Workers’ compensation insurance

 Benefits

 Sales tax

To Estimate Cost. Labor burden should be included in
the labor costs used in the estimate. For example, the labor
burden for the carpenter framing a wall should be
included in the carpentry labor rate used when estimating
the cost of the wall. The only labor burden that should be
included in the overhead is the labor burden associated
with the overhead labor. Historically, labor burden was
difficult to track and bill to the individual cost codes or
items. Labor burden was often charged to overhead and

then allocated. With computer accounting systems, the

charging of labor burden costs to the individual cost codes

or items is effortless. Because the estimate becomes the

basis of the budget used in the accounting system, the labor

burden must be included in each item so that the estimate

is consistent with the account system, making it easier to

manage job costs.

Similarly, tax should be included in each class of items

(for example, lumber, concrete, and so forth). When the

material bills are paid, they will include the sales tax for the

materials. Consistency between the accounting system and

the estimating process must be maintained as part of good

cost control procedures.

Bonds and Insurance

 Bid bond

 Performance and payment bonds

 Maintenance bonds

 Permit bonds

 Contractor’s public liability insurance

To Estimate Cost. Bonds and insurance are functions

of project requirements and the experience rate of the

contractor. The exact cost of these items can be deter-

mined by contacting the contractor’s insurance or bond-

ing agent.

Miscellaneous Equipment and Services

 Pick-up truck(s)

 Flatbed truck(s)

 Pumps

To Estimate Cost. Determine the quantity of service

vehicles and their approximate duration on the job site. This

can be converted into a cost item by charging the vehicle to

the project on a per month basis. If the trucks are rented, the

cost would be the number of months per vehicle times the

monthly rate. If a long-term lease agreement is used, there

may be substantial penalties for returning the vehicle early.

These costs could be charged to the project if the vehicle is

not needed on another project.

Web Resources

http://www.primavera.com

office.microsoft.com/en-us/project/default.aspx

Review Questions

1. What is overhead? Why must it be included in the cost
   of the project?
   2. What is the difference between general and job over-
   head costs?
   3. How are the items that the estimator will include in each
   type of overhead determined?
   4. Why is the length of time it will take to complete the
   project so important in determining the overhead costs?
   5. What competitive advantage is there for a company that
   has kept its general overhead low?