Why dual-quantity estimating can help you win more bids

Posted by Hadeel Dabbagh on November 1, 2021

If you have been estimating construction projects, then you are already familiar with using a quantity figure to calculate the cost of any bid item. Multiplying the quantity by the unit cost generates the total cost of any item.

But did you know that dual-quantity estimating using two quantity figures can help you win more bids, and improve your profit margins?

Let’s explore why.

What is the quantity and why is it important?

When you are estimating and pricing a bid, you normally have a list of pay items, each with a quantity figure provided by the client in the bid document (or Bill of Quantity). You are likely using these quantity figures to estimate the cost of the project. The quantity figures are what the client determined was needed based on their assessment.

Estimating with the client’s quantity figures remains important for several reasons:

  • The client’s measurement is an important data point to use as a reference.
  • The price generated with the quantity figures is the baseline you will use to determine the competitiveness of your bid price. Your competitors are likely generating their bid pricing solely based on the quantity figures, as most existing estimating tools are designed to only handle one quantity figure.
  • If the project is a lump sum contract and you win the bid, the price you quoted using the quantity figures is the amount you would get paid.

While estimating with the quantity figures is still very important, it is not enough to make an informed pricing decision. You can increase your likelihood of winning bids and improve your profit margins by also using estimated quantity figures.

What is the estimated quantity and why is it important?

The estimated quantity figures are the quantities you measure based on your own assessment as an estimator, or with the help of the quantity surveyor at your company. Your estimated quantity figures might match the client’s quantity figures, or they may be different depending on the item. Instead of solely relying on the client’s quantity figures, you use your own measurement based on the drawings and your understanding of the project. For indirect items that tend to be duration-based, the estimated quantity is based on your estimated duration of the project rather than the client’s expectation.

Estimating with your estimated quantity figures has key benefits:

  • It represents your own measurement and provides the confidence you need in the estimate.
  • The estimated price generated with the estimated quantity figures is the baseline you will use to determine the profitability of your bid price. Since the estimated price is the closest number you will have to your actual costs, you can use it to ensure that you do not quote a price that will not be profitable for your business.
  • If the project is a remeasurement contract and you win the bid, your estimated quantities are likely closer to your actual quantities, and therefore can provide an indicator for what you would get paid on a remeasured project.
  • Allocating the indirect cost based on estimated quantities guarantees the full retrieval of your estimated indirect costs in remeasurement contracts.

Perform dual-quantity estimating for competitive and profitable pricing

When you have estimated your project based on both the quantity figures and estimated quantity figures, you get two magic numbers: a competitiveness indicator and a profitability indicator.

Competitiveness indicator = Direct Cost based on quantities + Indirect Cost based on quantities

Profitability indicator = Direct Cost based on estimated quantities + Indirect Cost based on estimated quantities

The competitiveness and profitability indicators provide you with the insight you need to determine your target bid price. Without both indicators, you risk overpricing and losing the bid, or winning the bid but executing it at a loss. Having visibility of both indicators provides you a competitive advantage, and enables you to make smart pricing decisions for your business.

The good news is that with the right tools in place, dual-quantity estimating can be very simple.

We hear from our users that BidBow is the only construction estimating software that makes dual-quantity estimating easy, empowering you to determine the right target price for your bid. Try a dual-quantity approach to estimating with BidBow to experience the difference.

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