Question

Discuss problems that may arise during contract negotiations between the owner and contractor when the contractor's bid summary is by materials (such as concrete, metals, etc.), rather than by completed facilities (such as building a, building b, parking lot, etc).

Answer 1

The owner generally is interested in the cost of major components of the project, rather than the cost of construction materials. For example, if the estimated cost exceeds the owner's permissible budget, cuts must be made by eliminating a building, or parts of a building, rather than merely reducing the cubic yards of concrete or pounds of steel. Owners think in terms of facilities and sub-facilities, rather than materials that make up the facilities. During negotiations, the contractor will likely have to reformat the estimate to enable the owner to make decisions on how to derive a contract amount that matches available funds.