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1. What are the major factors in determining the accuracy of a cost estimate?Contractors involvement as early in the project as possible, during the estimate process, is probably the most important factor in determining the accuracy of a cost estimate. This brings us to what you need to know before preparing an estimate.

You need to know if you’ve done any similar projects, this would be a great reference resource. Contractors must understand the conditions of the construction site and its location. Along with the size and type of project that is to be estimated. You need to know what materials will cost you and what is the labor wage rate. Communicating with the subcontractors and material suppliers and/or manufacturers is how you can get this information, and let’s not forget to factor in inflation. When is the project expected to be completed, is there a schedule? What are the regulatory and insurance requirements? The quality of plans and specifications also play a major role in determining the accuracy of a cost estimate, is all required information provided and clear, preventing missing or inaccurate cost from an estimate? Finally, did you add a waste percentage to the cost before finalizing8. What are lump-sum contracts and when are they used?A lump-sum contract is an agreement that the contractor will be responsible for completing any work within the contract at a fixed cost/rate.

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This is can be good and bad. If the contractor completes the work under budget (the fixed cost) they get to keep the extra cash, whereas on the other hand, if the contractor goes over budget, they will have to pay the remaining cost agreed upon out of pocket. This type of contract is typically used to decrease design and contract administration costs.10. What are cost-plus contracts and when are they used?A cost-plus contract is when the buyer agrees to pay a projects tangible expenses, which includes all materials, labor, and any additional costs encountered to have the project completed along with a fixed fee that must be agreed upon in advance to the contractor. The fixed fee would cover the contractors overhead and profit.

This kind of contract is also known as an “open book” contract because it gives the buyer the right to see what the true cost amounts are for materials, labor, and any additional cost that they need to have work done. This type of contract is used when the buyer/owner wants to have the flexibility to make any changes during the development of a project.

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