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CMGT 5330 Discussion Posts
Week 1
In order to compile a complete estimate of the project, the manager must consider the direct costs as
well as the indirect costs of a job. Direct costs for the work performed are built upon accurate takeoffs
of all units of work as shown in the contract documents. The takeoffs, in conjunction with a thorough
understanding of what means and methods will be used to complete each operation during the
project, will then be used to calculate a) materials costs, based on quotes obtained from suppliers (the
manager should account for possible escalations of the price in in between when the price was
obtained and when the materials will be used on site), b) labor costs, based on historical production
rates for the contractor's crews as well as the wage schedule that will be utilized on the project (open
shop, union, or prevailing wage), c) equipment costs which include the cost of operation as well as cost
of investment and cost of ownership if it makes sense to buy or lease the equipment instead of renting
it. When it comes to listing accurate estimates for direct costs, the project manager must work with the
estimating team to evaluate not only the drawings and specifications, but also the actual site
conditions and any circumstances that will affect production rates, such as location, weather, jobsite
security, available laydown area, availability of trained manpower, and many other factors that can
lead to a project not being profitable. For example, a project I previously worked on had a problem
with graffiti on the temporary construction fencing-the owner required that all graffiti be either
painted over or that construction fencing screens be replaced, and the costs added up very quickly as
new graffiti would pop up on a daily basis. Because the team was familiar with the area of town and
took the time to visit the jobsite before finalizing their bid, these costs were accounted for and
recouped from the owner as a contingency.
In addition to the cost of the general conditions and all self-performed work, bids from
all subcontracted work must be solicited and reviewed as part of the cost of the project. A manager
who has a good working relationship with subcontractors of various trades will be able to reach out to
the companies that she knows would be best suited to do the work.
Furthermore, job overhead and general overhead must be included in the cost of every project. Job
overhead will include jobsite office and parking space rentals, job-specific laydown yard rentals,
utilities, supplies, the pay of salaried staff, engineering and testing (if not explicitly paid for directly by
the owner), catered lunches, among many others. The cost of general overhead will be charged to
support main office salaries, rent, contractor licenses and insurances, shops, yards, technology fees,
software licenses and training, and any other expenses that cannot be directly tied to the project.
