W8_Afra_Time Evaluation for Submitting Bidding Proposal

1.      Problem Recognition

Project procurement management is a collaboration with outside suppliers in order to obtain or purchase goods and services for projects. These relationships are often created based on a contract so that the needed items or services are received on time and meet the standards requested by the purchasing company.

Our company is specialized in project procurement, and one of the current running projects is purchasing of a system by releasing RfP to the market. In this week blog posting, I will run an analysis related to time and cost, to prepare ideal proposal in bid process for contractor.

The result is estimate time for contractor to prepare the bidding. Then we will compare the results with company regulation, which is 35 working days to submit bidding proposal.

Table one below shows the Project Classification around the world in term of its cost.

Table 1: Project Classification

2.      Feasible alternatives

There are many methodologies that can be used to categorize cost estimate types. The most significant of these is Degree of Project Definition which is Categorizing cost estimates by degree of project definition. This methodology contains of two characteristics which are the “primary” and the “secondary” characteristics.

Five cost estimate classes have been established. While the level of project definition is a continuous spectrum. The estimate class designations are labeled Class 1, 2, 3, 4, and 5. A Class 5 estimate is based upon the lowest level of project definition, and a Class 1 estimate is closest to full project definition and maturity.

Table 2: Generic Cost Estimate Classification Matrix

3.      Development of the outcome of Alternative

Based on Table 2 above, cost estimate can be classified as follow:

1.      Class 5 estimates are generally prepared base on very limited information.

2.      Class 4 estimates are typically used for project screening, determination of feasibility, concept evaluation, and preliminary budget approval.

3.      Class 3 estimates are used as the project budget until replaced by more detailed estimates.

4.      Class 2 estimates are often used as the “bid” estimate to establish contract value for contractors.

5.      Class 1 estimates are typically prepared to form a current control estimate to be used as the final control baseline.

4.      Selection Criteria

Level 2 estimate are ideal for contractor to use in tender. Based on table 1, also estimate effort ranges from 0.025% to 0.1% of project cost.

5.      Analysis and comparison of the Alternative

 

The rate for cost estimator used here is $ 30.2/hour for people holding bachelor’s degree. However, keep in consideration that the normal workweek exists only when progress meets all its milestones and does not require overtime hours.

Figure 1 below shows the work time productivity. For ideal condition (100% productivity) is 5 days a week and 8 hours per day, and for worst condition (72%productivity) is 7 days a week and 12 hours per day.

Figure 1: Work Time Productivity Chart

According to the project value, the table below shows the preparation efforts in order to complete the project as scheduled.

Table 3 below shows the estimation of bid effort according to project value in USD, describing what is the maximum and minimum hours and maximum and minimum days in the 100% productivity and 72% productivity.

Table 3: Estimate Bid Effort

6.      Selection of the preferred Alternative

Most of our project considered as a medium project since their cost in the range between $1M to $3M. Based on the country law, contractor should submit their proposal in not less than 40 business days. Which means that the company already gives enough duration for the contractors to submit their bids, according to table 3 above, 12 days to 40 days and 17 days to 62 days for 72% productivity.

Moreover, if the duration in the range mentioned above, the contractor will have better estimate and minimize possibility of change order during project execution. Also, company will get competitive bidding and lower the risk for change order or breach in the middle of project, while contractor have more time to prepare their proposal and avoid “buying” the project.

7.      Performance Monitoring and the Post Evaluation of result

The cost and time to prepare bidding document should be monitor not exceed the budget range

and time allowance, or contractor will at risk of bankruptcy.

References: 

1.       AACE International Recommended Practice No. 17R-97
Retrieved from http://www.anvari.net/Risk%20Analysis/17r-97.pdf

2.       Project Classification (Jan, 2008)
Retrived from https://www.softed.com/assets/Uploads/Resources/Business-Analysis/Project-classification.pdf

3.       Effects of Extended Work Time on Productivity (2017)
Retrived from https://www.conest.com/wp-content/uploads/EffectsOfExtendedWorkTime.pdf