Bidding
A bid is a promise: if you win, you must build the job for that price. This lesson covers how to read plans and specs, take off quantities, price direct and indirect costs, add overhead and profit, and follow California’s public bidding rules on bid bonds, subcontractor listing, and bid mistakes.
Bidding questions on the Law and Business exam mix two skills. Some test math: markup, margin, overhead rates, and listing thresholds. Others test California law, mainly the Public Contract Code rules for public works bids. On the job, a careless bid is one of the fastest ways to lose money, because the price is fixed before the first shovel hits the ground.
1. Read the bid documents first
The plans (drawings) show what to build, where, and how big. The specifications (specs) describe quality: which materials, which methods, which testing standards. Together with the general conditions, special conditions, bid form, and addenda, they make up the bid documents. If the plans and specs disagree, look for an “order of precedence” clause that says which document controls, and send a written question before the bid is due.
- Scope of work: what is included and what is excluded.
- Bid form: base bid, alternates, unit prices, and required signatures.
- Bid security and bonds: bid bond, performance bond, payment bond.
- Schedule, liquidated damages, insurance, and prevailing wage requirements.
- Addenda issued before bid day, which become part of the bid documents.
- Site conditions: visit the site; access, soil, utilities, and storage space affect cost.
Exam trap
On a public bid, a mistake caused by carelessly inspecting the site or reading the plans and specs does NOT qualify for bid relief under Public Contract Code §5103. Reading the documents and walking the site is your job before you bid.
2. Quantity takeoff
A quantity takeoff is the count and measurement of every item of work shown on the plans. Each item gets a unit: cubic yards (CY) of concrete, square feet of drywall, linear feet of pipe, or “each” for fixtures and doors. Work in a set order (for example, by specification section or by trade) so nothing is missed, and add a reasonable waste factor for materials that get cut or spilled.
Worked example
Concrete slab takeoff
- Slab size: 40 ft × 30 ft, 4 inches thick. 4 in ÷ 12 = 0.333 ft.
- Volume: 40 × 30 × 0.333 = 400 cubic feet.
- Convert to cubic yards: 400 ÷ 27 = 14.81 CY.
- Add 5% waste: 14.81 × 1.05 = 15.55 CY.
Order about 15.6 CY; most suppliers round up to 16 CY.
3. Direct costs and indirect costs
Direct job costs can be traced to one job. Indirect costs support the whole company or the whole job but are not part of one item of work. A good estimate prices each group separately so overhead is never forgotten.
| Cost group | Examples |
|---|---|
| Direct labor | Field wages plus labor burden: employer payroll taxes, workers’ compensation premium, and fringe benefits |
| Direct materials | Lumber, concrete, pipe, fixtures, plus sales tax, delivery, and waste |
| Equipment | Rented or owned equipment used on this job, fuel, and operator time |
| Subcontracts | Quotes from subcontractors for their portions of the work |
| Job overhead (general conditions) | Superintendent, job trailer, temporary toilets, fencing, dumpsters, permits for this job |
| General and administrative (G&A, company overhead) | Office rent, office staff, accounting, advertising, office vehicles and equipment |
Labor burden is easy to forget. A carpenter paid $40 per hour may really cost $52 or more per hour once payroll taxes, workers’ compensation, and benefits are added. Price labor at the burdened rate.
4. Overhead and profit
Every job must help pay the company’s G&A costs. A simple way to find an overhead rate is to divide last year’s (or this year’s budgeted) G&A by total direct job costs for the same period. Profit is added last, as a reward for taking the risk. Profit is not the owner’s salary; salaries belong in overhead.
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