Bid Day Unit-Price Reconciliation Under a Tight Deadline
You are the estimator for a mid-size electrical contractor bidding a 42,000 sq ft tenant improvement. The bid is due in six hours. Your takeoff is complete for branch power and lighting, but the gear package quote from your preferred vendor arrived late and shows a 14-week lead time, while the specification requires 10 weeks. The vendor offers a 6% expedite premium to meet 10 weeks. Your labor unit library is two years old and your field supervisor says current crew productivity is running about 8% lower than the library assumes. The general contractor has flagged that the low bid will likely be within 3% of the next bid. Your markup policy is 12% overhead and 6% profit on direct cost.
1. How should you handle the expedite premium and the stale labor units when assembling the direct cost? Show the reasoning and the arithmetic.
Read the worked answer
Treat both items as real cost drivers and resolve them before applying markup.
Expedite premium. The spec mandates 10 weeks; the base quote delivers 14. A non-compliant bid is a defective bid. Add the 6% premium to the gear line as a direct cost. If the gear package is, say, $180,000, the premium is $10,800. Do not bury it in markup or contingency - it is a known, quantifiable cost.
Labor productivity. An 8% productivity loss means the library hours understate actual hours. Multiply library labor hours by 1.08 (not 0.92). If the branch/lighting labor at library rates is $240,000, the adjusted figure is $240,000 × 1.08 = $259,200, an increase of $19,200.
Markup. Apply the 12% overhead and 6% profit to the corrected direct cost, not the original. With direct cost of roughly $450,000 after corrections, markup at 18% compounding gives about $531,000.
The judgment point: with the low bid expected within 3%, a 6% gear premium plus 8% labor drift can easily exceed the winning margin. You must decide whether to absorb the risk (bid sharp and hope) or price it in and risk losing. The defensible answer is to price known costs in and flag the productivity assumption to management, because an unhedged 8% labor miss on a thin-margin job wipes out profit.
2. The GC hints that if you sharpen your number you are likely to win. What is the disciplined response, and what would you document?
Read the worked answer
Sharpen where you have real leverage; never sharpen by deleting known cost.
Legitimate levers: value-engineering the gear (ask the vendor for a compliant alternate at 10 weeks without premium), reducing contingency only where scope is truly firm, and trimming markup to the minimum your policy allows. Illegitimate levers: dropping the expedite premium, using stale labor units, or cutting the productivity factor to hit a target number.
Document: the basis of the labor units and the 8% adjustment with the supervisor's input, the vendor quote and expedite terms, the markup applied, and any assumptions or exclusions. If you bid sharp, state the risk explicitly to ownership - a 3% spread means one labor miss decides the job. Record the decision and who approved it. This protects the company and gives you a defensible record if the job underperforms.