A pre-tender estimate sits somewhere between cost planning and the post contract cost control. It is the quantity surveyors final costing of the works before tenders are received. At this stage the works can be benchmarked against available cost data to provide comparisons against the provisions on other projects and related to unit values.
The pre-tender estimate allows a reconciliation of the cost plan with the tender information from which any deviations to be identified. If changes have occurred without the client’s approval then this is the final opportunity to capture these before it is too late. It also identifies whether changes to the design are additions or require the implementation of value engineering.
The pre-tender estimate also gives a benchmark by which the returned tenders can be measured. This is particularly prevalent when the procurement route is single contractor negotiation and at times when the market is quite volatile.
When undertaking a pre-tender estimate it is important to consider the form of contract that will be reflected in the tender return. Much of this comes down to risk allocation.
The ECC comes in six options which are:
|Main option||Contract type||Pricing mechanism||Risk allocation|
|A||Priced contract with activity schedule||Lump sum||Contractor|
|B||Priced contract with bills of quantities||Remeasurement||Client|
|C||Target contract with activity schedule||Cost reimbursement with pain-gain mechanism||Shared|
|D||Target contract with bills of quantities||Shared|
|E||Cost re-imbursement contract||Cost re-imbursement||Client|
|F||Management contract||Cost re-imbursement||Client|
Where the tenderer is being asked to take the risk then there needs to be due allowance made in the pre-tender estimate. In contrast, where the client takes the risk it is important as an early warning to the tender return to start to identify the risk in order to determine what provisions the client needs to maintain for the project.
This section is maintained by Patrick McNamara of AECOM.
RICS standards: Cost reporting
RICS standards: New rules of measurement
RICS standards: RICS property measurement