How accurate is a QS supposed to be?

[Raj28]

Hi all,

We had an experienced QS/Cost Consultant put together a Bill of Quantities together for our conversion project of some offices to flats. This was for a fully detailed/designed scheme, and not a design and build. The QS came back with £5.5m.

After first round of tenders, we got pricing from a reasonable number of contractors. The pricing came back from between £6.1m to about £7.8m - most were around the £6.5m mark, so a variation of just over 10% at best, 18% average).

Looking at the high level breakdown of the tenders (eg: substructure, frame, internal walls, external walls etc), it looks like the same few elements are massively over across most of the tender replies consistently.

The company I am dealing with have asked me to focus on the overall price and bigger picture as some people will price elements differently. I sort of get this, but then what's the point of using a QS to price up if the numbers are going to be so far off?

I would have understood if out of say 24 elements, there was some randomness to the pricing, but it really is the same 7 or 8 elements which have large differences across all the tender replies.

Any advice on how best to proceed? I have also been trying to eek out some value engineering options from the firm we have engaged (for QS/CA role), but nothing has been forthcoming. Alarm bells are ringing, as again, perhaps mistakenly I thought that the QS would have the best eye for value engineering as they see/do all the pricing!

Thanks,
Rajesh

[rdjohn]

QSing is largely based on the prime costs of labour, materials and plant. On a new build, once you have come out of the ground, it is comparatively easy to calculate a fairly exact figure of outturn cost.

With an existing structure, there is a lot of hidden work to take account of - things to take down (safely) and then restore finishes. So it inevitably becomes less exact.

The next part might be described as fiddle factors, geography, site access, location, diverting services, risk of things going wrong etc. and then finally contractor's overheads and profit.

So what might seem a fairly precise science, in reality relies very heavily on judgement.

A contractor pricing the BoQ also factors how much they want the work, available resources and payments, so local a authority will get better rates, than a PLC and than a comparative unknown - especially if funding source is unknown.

It is the contractors price that is all important.

How was the QS chosen? You tend to get what you pay for. If you try to reduce the price of a well known practise, you are likely to get the office junior, who might be no better than the freelance down the street.

How were the contractors selected? Are they sufficiently skilled in the value and type of contract that you propose?

In short, there is no simple answer that can account for the apparent discrepancies in the price.

[RammyMP]

They base their price on previous projects, the costs have increased recently so hence why their cost plan was low. I'm in a similar situation with a local authority who says we are too expensive as their cost plan (based on 2015 projects) is 20% less than our price.

[paul0843]

Also location would have an effect.
Say if you were building in central London,I am sure it would cost more
just from a logistics perspective..
Paul

[iphonedyou]

Raj28 said:

Hi all,

We had an experienced QS/Cost Consultant put together a Bill of Quantities together for our conversion project of some offices to flats. This was for a fully detailed/designed scheme, and not a design and build. The QS came back with £5.5m.

After first round of tenders, we got pricing from a reasonable number of contractors. The pricing came back from between £6.1m to about £7.8m - most were around the £6.5m mark, so a variation of just over 10% at best, 18% average).

Looking at the high level breakdown of the tenders (eg: substructure, frame, internal walls, external walls etc), it looks like the same few elements are massively over across most of the tender replies consistently.

The company I am dealing with have asked me to focus on the overall price and bigger picture as some people will price elements differently. I sort of get this, but then what's the point of using a QS to price up if the numbers are going to be so far off?

I would have understood if out of say 24 elements, there was some randomness to the pricing, but it really is the same 7 or 8 elements which have large differences across all the tender replies.

Any advice on how best to proceed? I have also been trying to eek out some value engineering options from the firm we have engaged (for QS/CA role), but nothing has been forthcoming. Alarm bells are ringing, as again, perhaps mistakenly I thought that the QS would have the best eye for value engineering as they see/do all the pricing!

Thanks,
Rajesh

Did the QS price their own BoQ and provide that as the pre-tender estimate?

Typically we'd produce a separate cost plan and reconcile that against any unpriced BoQ produced by ourselves or others - as in the real world, pricing a BoQ isn't a particularly prudent way to produce a PTE.

On the question at hand; RICS guidance points to 10% accuracy at first cost plan and 5% accuracy at PTE, but as noted above there are myriad factors that'll affect this. Your QS should have excluded the major ones - S206, unforeseen ground conditions etc. - and heavily qualified the remainder.

Cut and carves are rarely an exact science pre-tender and are generally more difficult to price accurately than a new build. It's not inconceivable that issues with particular packages - I'm looking at you demolition, structural steels - come to light only when the package has been issued to the sub-market for pricing mid tender.

The tender list is worth looking at - how was that put together? What are the respective contractor's workbooks looking like? Is this their bread and butter, and in the right area?

ETA: with regards to VE, and noting you've gone traditional I'd be looking to convene a design team meeting or two to allow the entire team to have input. The QS can bring ideas to the table and / or price savings against design team proposals. To an extent that can run alongside the tender normalisation and clarification process your QS will be engaged in at the moment.

Then I'd put those ideas to the contractor, galvanise the savings and ask for their ideas on others with a view to getting the contract over the line.

Edited by iphonedyou on Monday 6th February 13:46

[RJD223]

As briefly mentioned above the cost of virtually everything has risen this January.

In our trade, air conditioning, a lot of things have gone up around 10% - blamed on Brexit.

So if you had the quote done last year this maybe something to do with it.

HTH!

[jules_s]

iphonedyou said:

Did the QS price their own BoQ and provide that as the pre-tender estimate?

Typically we'd produce a separate cost plan and reconcile that against any unpriced BoQ produced by ourselves or others - as in the real world, pricing a BoQ isn't a particularly prudent way to produce a PTE.

On the question at hand; RICS guidance points to 10% accuracy at first cost plan and 5% accuracy at PTE, but as noted above there are myriad factors that'll affect this. Your QS should have excluded the major ones - S206, unforeseen ground conditions etc. - and heavily qualified the remainder.

Cut and carves are rarely an exact science pre-tender and are generally more difficult to price accurately than a new build. It's not inconceivable that issues with particular packages - I'm looking at you demolition, structural steels - come to light only when the package has been issued to the sub-market for pricing mid tender.

The tender list is worth looking at - how was that put together? What are the respective contractor's workbooks looking like? Is this their bread and butter, and in the right area?

ETA: with regards to VE, and noting you've gone traditional I'd be looking to convene a design team meeting or two to allow the entire team to have input. The QS can bring ideas to the table and / or price savings against design team proposals. To an extent that can run alongside the tender normalisation and clarification process your QS will be engaged in at the moment.

Then I'd put those ideas to the contractor, galvanise the savings and ask for their ideas on others with a view to getting the contract over the line.

Edited by iphonedyou on Monday 6th February 13:46

Might be worth asking a couple of the contracts as well...

No mention of the programme length and risk register too?

[malks222]

as mentioned- loads of variables in there which could affect the pricing. But I would say one of the biggest issues could be location of the project and what level of contractors pricing the project.

recently was on a new build project in Scotland (£25mil pharma project) and trying to get contractors to get tenders back was like pulling teeth. some subcontractors admitted they were that busy with work, they would only take on projects from existing clients and/or projects that were worthwhile (profit margin). As a main contractor with no established base in Scotland, subbies were not that interested in tendering for a new unknown potentially one off project.

[Collectingbrass]

Raj28 said:

Hi all,

We had an experienced QS/Cost Consultant put together a Bill of Quantities together for our conversion project of some offices to flats. This was for a fully detailed/designed scheme, and not a design and build. The QS came back with £5.5m.

After first round of tenders, we got pricing from a reasonable number of contractors. The pricing came back from between £6.1m to about £7.8m - most were around the £6.5m mark, so a variation of just over 10% at best, 18% average).

I'd expect a PQS to be far closer than that at a Pre tender estimate, assuming the deisgn hasnt moved on a a stage between their estimate and tender.

I would also bin the lowest and highest tender and interview the rest. The should cost for the job reads around £6.5 from what you say so the £6.1m either badly wants it (& why in this market) or has mis read it and the £7.8m doesn't so don't waste your time.

Raj28 said:

Looking at the high level breakdown of the tenders (eg: substructure, frame, internal walls, external walls etc), it looks like the same few elements are massively over across most of the tender replies consistently.

I'd ask the PQS & his managing partner to come and explain themselves. 18% out isn't explained by Brexit or market collusion. Despite that, this is going to cost you £6.5m unless you value engineer the arse out of it.

Raj28 said:

The company I am dealing with have asked me to focus on the overall price and bigger picture as some people will price elements differently. I sort of get this, but then what's the point of using a QS to price up if the numbers are going to be so far off?

I would have understood if out of say 24 elements, there was some randomness to the pricing, but it really is the same 7 or 8 elements which have large differences across all the tender replies.

How specialised are these elements? Can you focus on value engineering here at all?

Raj28 said:

Any advice on how best to proceed? I have also been trying to eek out some value engineering options from the firm we have engaged (for QS/CA role), but nothing has been forthcoming. Alarm bells are ringing, as again, perhaps mistakenly I thought that the QS would have the best eye for value engineering as they see/do all the pricing!

Thanks,
Rajesh

1. Appoint your preferred bidder for a two stage bid to provide preconstruction design review advice and value engineering and get him to firm up his price for works, prelims and logistics.
2. Undertake any recommended surveys to close off any discovery risk pricing
3. Appoint an enabling works minor contract direct with a demo / strip out subcontractor
4. Get the flats revalued & check your business plan stacks up - it might even be better
5. Explore whether the form of contract and pricing arrangement gets you what you want with your preferred bidder. A shared pain / gain payment mechanism might bear fruit

The QS/CA firm on a £5 - 7 m conversion project won't bring much to the VE party unless you pay them, but I would consider doing so, ditto the Architect and Structural Engineers.

[Mansells Tash]

Surely the Tender Evaluation report should tell you everything you need to know as to why the QS was out. I would expect a detailed report explaining the variances in rates from the PTE.

I also would never dismiss the lowest tenderer without consulting the QS and identifying if they've provided a compliant bid. My UK construction law is a bit rusty but I recall there is a precedent in case law that if you dismiss the lowest tenderer out of hand and they find out they could take you to court over it as a breach of the implied terms of the contract that they've tendered upon.

You need a valid reason to dismiss them, which if their bid omits something that was in scope then they could be excluded from being awarded the job as the bid would be deemed non-compliant...although you should still offer them the opportunity to accept the oversight and include the mistake within their tendered price.

[iphonedyou]

Mansells Tash said:

Surely the Tender Evaluation report should tell you everything you need to know as to why the QS was out. I would expect a detailed report explaining the variances in rates from the PTE.

I also would never dismiss the lowest tenderer without consulting the QS and identifying if they've provided a compliant bid. My UK construction law is a bit rusty but I recall there is a precedent in case law that if you dismiss the lowest tenderer out of hand and they find out they could take you to court over it as a breach of the implied terms of the contract that they've tendered upon.

You need a valid reason to dismiss them, which if their bid omits something that was in scope then they could be excluded from being awarded the job as the bid would be deemed non-compliant...although you should still offer them the opportunity to accept the oversight and include the mistake within their tendered price.

A breach of the implied terms of the contract they've tendered upon? They're not in contract, so there are no terms - implied or explicit. The instructions documentation will almost certainly state the Employer is under no obligation to accept any tender.

It's the Employer's money to do with what they choose, and / or as their professional team advise.

Different if you're procuring under Public Contracts Regulations - though even then, your documentation will state you've the right to reject Abnormally Low Tenders, usually those >15% below the mean return.

[Mansells Tash]

iphonedyou said:

A breach of the implied terms of the contract they've tendered upon? They're not in contract, so there are no terms - implied or explicit. The instructions documentation will almost certainly state the Employer is under no obligation to accept any tender.

Like I said I'm rusty so I'm off on the terminology, I definitely have come across case studies where the lowest tenderer was able to successfully sue for being the dismissed from the process despite having a compliant tender and being the lowest, I cant say off the top of my head though if it was for public works, you might be right there.

I fear we're getting off the point I was trying to make though...

My point is that, in simple terms, you need to be sure you're in a position to dismiss a lowest tenderer and that it is a bad idea to just do it out of hand with no justification.