W4_OAN_Time Evaluation for Submitting Bidding Proposal

  1. Problem Definition

As function who specialized in project management and procurement, one of our main job is to organize tender for EPC project.  In this week blog posting, Author will running an analysis related to time and cost, to prepare ideal proposal in bid process for contractor.

The result is estimate time for contractor to prepare the bidding. Then we will compare the results with company regulation, which is 3 to 7 working days to submit bidding proposal.

Table 1 shown Project size is measured in the overall investment.

Tabel 1: Project Classification

  1. Development of feasible alternatives

This Matrix provides an estimate classification for process industries.

Tabel 2: Cost Estimate Classification

  1. Possible Solution / Alternative

Based on Table 2, cost estimate can be classified as follow :

  • Class 5 estimates are generally prepared base on very limited information.
  • Class 4 estimates are typically used for project screening, determination of feasibility, concept evaluation, and preliminary budget approval.
  • Class 3 estimates are used as the project budget until replaced by more detailed estimates.
  • Class 2 estimates are often used as the “bid” estimate to establish contract value for contractors.
  • Class 1 estimates are typically prepared to form a current control estimate to be used as the final control baseline.
  1. Selection of Criteria

Level 2 estimate are ideal for contractor to use in tender. Based on table 1, level 2 estimate effort ranges from 0.025% to 0.1% of project cost.

  1. Analysis and Comparison of the Alternatives

We use rate for cost estimator $ 29.71/hour for bachelor’s degree and work time productivity chart as shown in table 3. For ideal condition 100% productivity (5 days a week, 8 hours per day), and for worst condition productivity 72% (7 days a week, 12 hours per day).

Tabel 3 : Work Time Productivity Chart

Table 4 describe preparation effort based on the project value.

Tabel 4: Estimate Bid Effort

  1. Selection and Preferred Alternatives

Since most of our project cost more than $5.000.000, then project in this range will be considered as normal project. Based on company regulation, contractor should submit their proposal 3 to 7 working days in normal project, instead of 11 days to 43 days and 15 days to 59 days for 72% productivity as shown at table 4. Therefore, company should revised their bidding rule.

By using range from 11 to 43 days, contractor will have better estimate and minimize possibility of change order during project execution. This is win-win solution for both parties, company will get competitive bidding and lower the risk for change order or breach in the middle of project, while contractor have more time to prepare their proposal and avoid “buying” the project.

  1. Performance Monitoring and the Post Evaluation of Result

The cost and time to prepare bidding document should be monitor not exceed the budget range and time allowance, or contractor will at risk of bankruptcy.

 

References

  1. Module 08-4 Creating the Owners Cost Estimate (Top Down) (2015).
    Retrieved from http://www.planningplanet.com/guild/gpccar/creating-the-owners-cost-estimate
  2. AACE International Recommended Practice No. 17R-97
    Retrieved from http://www.anvari.net/Risk%20Analysis/17r-97.pdf
  3. Occupational Outlook Handbook – Cost Estimator (2015)
    Retrieved from https://www.bls.gov/ooh/business-and-financial/cost-estimators.htm
  4. W20_RM_Estimate Preparation Effort for a bid
    Retrieved from h https://goldenaace2015.wordpress.com/2016/05/24/w20_rm_estimate-preparation-effort-for-a-bid/
  5. Effects of Extended Work Time on Productivity (2017)
    Retrived from https://www.conest.com/wp-content/uploads/EffectsOfExtendedWorkTime.pdf
  6. Project Classification (Jan, 2008)
    Retrived from https://www.softed.com/assets/Uploads/Resources/Business-Analysis/Project-classification.pdf

 

 

 

1 thought on “W4_OAN_Time Evaluation for Submitting Bidding Proposal”

  1. WOW Pak Nunug!!!! What an awesome posting!!! Excellent job and I honestly hope that your management will listen to your compelling argument to allow more time for contractors to produce better estimates.

    This is a SIGNIFICANT improvement that can be made towards ensuring “better” or “more accurate” bids from your contractors.

    BUT allowing more time, while important, if Pertamina would invest the time and effort to adopt a STANDARIZED WBS as a CHECKLIST, that would also serve to reduce change orders and improve the accuracy, reliability and precision of bids from your contractors.

    Keep up the good work and good luck getting your organization to change how they define scope and bid projects.

    BR,
    Dr. PDG, Perth, Australia

     

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