Estimating Long-Schedule Jobs

Tips on projecting costs and covering yourself for changing conditions when getting involved in multi-year projects. November 4, 2007

Question
How do you handle a bid job that will be done over the course of several years? This job is a huge church with 3 phases of construction over 4 years, and that schedule can be thrown out the window probably. How do you handle pricing a job that won't be done for 4 years? Inflation alone will wreak havoc on margins 4 years old. Any thoughts?

Forum Responses
(Business and Management Forum)
From contributor G:
I'm surprised they're not making you bid per phase. That's the way an airport is that I'm working in now. I too have been thinking about this a lot lately, because even if it's 1 year out, it's too far. I would consider writing a stipulation in your contract about the materials. Something like you will absorb up to 3% increase in material costs, but the rest you are entitled to be compensated for, as you purchase material. I'm not sure how to address anything else that would change, but at least you'd be covered on the materials.

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From contributor J:
I have done a lot of these type jobs. The furthest out has been 3 years with a contract of 9+ million. When we bid these type of jobs, we get the suppliers to confirm their prices for the duration of the job. At first they were hesitant, but after a bit of discussion they are happy to do this for us if they know they will receive the order. We bid it out just like a general and give them the bid results along with a purchase order. As far as labor goes, it is pretty easy to figure out. Wages and benefits go up between 3% to 5% per year. We are union, so we can pretty much depend on that type of raise.

The real important part to all of this is to keep the original schedule handy. When they start to fall behind, it will impact your labor with the new wages. When you put in a change order, this is very important and should be put into the contract on your behalf.