Warehouse Pad Bidding Under Unknown Soil
You are bidding a 24,000 sf single-story warehouse on a 3.5-acre site. The geotechnical report identifies 4 to 9 ft of undocumented fill with variable blow counts and a seasonal high water table roughly 3 ft below existing grade. The owner's bid documents include a grading plan but no earthwork quantities and state that bidders are responsible for verifying existing conditions. Your takeoff assumes 6,200 cy of cut and 5,400 cy of fill with a 12% shrinkage factor, but two subcontractors quote wildly different numbers: one assumes the fill is suitable for re-use, the other prices 3,000 cy of import plus disposal. The bid is due in five days and the owner will not extend. Your company's margin target is 8% on a $3.1M base estimate.
1. How should you structure the earthwork bid to protect margin while remaining competitive and defensible?
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The core problem is that the bid documents shift the risk of unknown subsurface conditions to the bidder without providing quantities. A defensible approach has three parts.
First, price the base scope on a clearly stated assumption. Use the geotechnical report's worst credible case for unsuitable fill (the import-plus-disposal quote) as the basis for the base bid, then document the assumption in the proposal. Bidding the optimistic number exposes the 8% margin to a single bad day of excavation.
Second, add a unit-price schedule as an alternate or as a bid clarification: cost per cubic yard for over-excavation, for import, and for disposal of unsuitable material. Unit prices let the owner compare bids fairly and let you recover costs if conditions differ, without inflating the lump sum.
Third, quantify the exposure. If shrinkage is 12%, 5,400 cy of compacted fill needs about 6,140 cy of bank material; if only part of the 6,200 cy cut is suitable, the gap is import. Carry that gap explicitly rather than burying it in a contingency. A stated assumption plus unit prices is more credible to an owner than a low number that will generate change orders.
2. The owner rejects unit prices and demands a firm lump sum. What is your recommendation and why?
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Recommend bidding with a written qualification or declining to bid firm lump sum on the earthwork, and explain the reasoning to management.
With 4 to 9 ft of variable fill and groundwater at 3 ft, the range between the two subcontractor quotes is likely on the order of several hundred thousand dollars. A firm lump sum forces you to either absorb that range as contingency (killing competitiveness) or gamble on the favorable case (threatening the 8% margin and possibly the project). Neither is a good business decision on a $3.1M job.
A common middle path is to bid lump sum for the work above a defined elevation or for the documented scope, and to exclude re-work caused by differing site conditions, citing the geotechnical report's stated variability. If the contract includes a differing site conditions clause, the risk is shared and a firm number is more tolerable; if it is a design-build or specified means-and-methods transfer, the risk is yours.
The decision rule: accept the risk only if you can price it, quantify it, and still win. Here you cannot quantify it from the available data, so qualify or pass.