Demon Contingencies: A Bidmeister’s Bane
Vince Bailey / July 2018
The devil always seems to be in the details, one way or another. I know it’s cliché, but it’s also the ironclad truth. And as sure as horseflies will bite a sleepy nag, some obscure cost contingency will eventually get the better of even the best of bidmeisters. It’s inevitable, not simply because of the overwhelmingly voluminous list of the slippery devils, but also due to their elusive nature. They remind me of whack-a-moles—dropping from sight and then popping up again, when and where they are least expected.
The contingencies of which I speak consist of nuisance cost items that may or may not apply to particular projects. As such, they should either be included or excluded and expressly stated so in every proposal. Astute estimators keep a comprehensive list of these demons close at hand. Other bidmeisters, however, believe they have them all memorized as they appear and disappear from the exclusions lists on their proposal templates.
As stated, a thoroughly inclusive list of these annoyances would be too extensive to regurgitate here. But a few of the most costly, or most frequently overlooked, merit individual mention.
Shop drawings. Most of us have adapted to the notion that the steel framing sub is expected to provide engineered design for the exterior framing, complete with details for every projected variance in condition. This requirement usually appears in the cold-formed framing section of the spec book or on the structural notes page of the drawings—or both. When stated this clearly, it is reasonable to expect that all bidders will include this considerable cost in their base bids. The snare here is whether the post-award shop drawings designate conditions that incur costs over and above what was assumed in the bid. Most estimators will clarify that added costs will be passed on, but good luck collecting on that if the need arises. What else may not be clear to the GC is whether the requirement goes above and beyond to include interior framing, something as a rule we never do. If shop drawings are mentioned in the cold-formed framing section, it merits an RFI. If not, it should appear on the exclusions list of every proposal.
Safety. Let me clarify. General safety consideration is inherent in the performance of every project, and in that respect, it is not considered a contingency, although there is a cost. Virtually all serious commercial subs operate some kind of safety program, and most treat the expenditure as overhead or an indirect cost. But there may be certain specific requirements associated with safety programs and imposed by the general contractor that incur significant extra costs and should be considered contingencies. Many GCs mandate a full-time onsite safety officer from each sub for all sizeable jobs. This requirement may or may not appear as a pre-award item in the instructions to bidders, but it may just suddenly appear in the scope section of the contract. This requirement is usually triggered by manpower attendance—i.e., once the sub’s onsite presence exceeds, say, 40 employees. Some estimators will attempt to dispute this requirement by stating that the man-days in the estimate coupled with the contract schedule will never require 40 men. Sounds good to the estimator, but every project manager knows that a baseline schedule is a moving target, and when schedules slip, the two recovery tactics are increased manpower and overtime. Obviously, if the increased manpower to recapture the schedule exceeds the full-time safety officer requirement—boom! You just incurred a 40-hour per week unrepresented cost. Similarly, when a GC requires a daily safety talk coupled with a stretch-and-flex routine, the time lost for getting started can be pretty crippling. Do the math. Estimators need to account for this daily time lost with efficiency reductions in their production rates.
Certifications. This can be a really elusive item because most estimators are not familiar with the level of training that his field has received. He may just assume that all of his foremen are OSHA certified, all operators are trained and certified to operate their equipment, and all welders are certified for the work they are performing. Then again, their certifications may have lapsed, and new-hires may have slipped through the cracks, while certain GCs may have been remiss in their requirements. Whatever the case, it would bode well for the estimator to verify the current state of certifications in the field with field superintendants and, if need be, include a contingency for re-training time and certification fees. It can be costly.
Parking. This can be a serious budget-buster. Many estimators assume parking should be included only where sites are congested near city centers. But many GCs shy away from onsite parking for liability purposes, even where space would otherwise allow. This item should be clarified, and excluded or accounted for. Woe unto the poor bidmeister who disregards this costly pitfall.
Patch and Repair. Most reputable GCs accept that trade damage to the drywall sub’s work constitutes an extra. Still, some rather disingenuously “assume” that all drywallers carry an allowance for this in their bid. Preconstruction conversations should include clarification as to whether an allowance should be carried in the contract price, and what amount.
Of course, this is only a short list of the slipperiest or most egregious of these little devils. A more comprehensive list might include items like travel, per diem, dumpster/hauling, hoisting, fuel, facilities, demolition, testing, inspections, seismic requirements, bond, sales tax, mockups, stenciling, overtime, shift work, expansion joints, putty pads and job trailers, among many others. Building and maintaining such a list provides a good defense against the torment that the demon contingencies can inflict.
Vince Bailey is an estimator/project manager working in the Phoenix area.