COMPUTER SIMULATIONS FOR TEACHING ESTIMATING AND BIDDING

INTRODUCTION

The math skills required for completing a quantity takeoff and bid are fairly straightforward. Most students with a good background in algebra and trigonometry have little difficulty applying the mechanics of length, area, and volume to tabulate the necessary information. This allows instructors teaching estimating and bidding courses to concentrate more on the estimating process and unique procedures that must be applied to various construction methods.

 For students to learn the science of quantity surveying, they must understand the specific construction process involved and possess fundamental math skills. The TAKEOFF simulation is one that is used to give practice for a student who may have basic calculation skills but has trouble in conceptualizing what needs to be done when given a set of random data. Several different skill levels are available to allow the student to select a pace that will challenge him. A time limit is then set as the dimensions of a concrete slab are displayed on the computer screen. Each time the student runs the program, a different set of dimensions are given to allow for unlimited tries. Even the brightest student can benefit from practice in making accurate calculations under a rigid time constraint. Also, the program is being expanded to include modules for other material takeoff problems besides concrete slabs.

The competitive bidding process is one that involves many more dimensions than quantity surveying. There is a group of subcontractors that are providing, in many cases, the bulk of the numbers to use in a given estimate. They often will wait until very late in the bidding process to notify the general contractor of their quote. This quote can then be changed at the last minute without notice, often times affecting the bottom line of the bid. Besides using competing subcontractors, the general contractor is matched up against other generals competing for the same project. Whether these competitors are known or unknown can affect how the profit margin is applied to the project. A third characteristic is the fact that competitive bidding is event oriented. The time at which a sealed bid must be submitted is absolute. Most construction companies acknowledge this fact and will subject a negligent estimator to grave consequences for missing the time. The BID-DAY simulation attempts to model these characteristics and make the student perform under pressure. Although traditional teaching methods include projects with competing teams, subcontract evaluation, and timed tests, the computer does a good job of simulating the pressure of bid day and the seeming randomness of the bid outcome.

TAKEOFF: QUANTITY SURVEYING SIMULATION

There are several objectives to the TAKEOFF simulation program for quantity surveying. The most important one is for the student to practice conceptualizing and calculating length, area, and volume given a random set of dimensions. Another objective of this exercise is to force students to be able to make the conversion of inches into decimals of a foot. Although a flurry of "feet-inch" calculators that have hit the market in recent years, a college graduate from a construction program should be able to make those conversions in his head. Lastly, the program reinforces in the student the fact that time does matter. Employers are looking for graduates who can work accurately under time pressure. Students are in error who think that they will have all the time they need to reference any book or old notes while on the job.

 The method used in TAKEOFF is an interactive compiled Quick BASIC program that generates the problems for the students. First, the e student must enter his company name, which will be printed on a certificate should he complete the problems accurately. The first screen allows the student to select the desired skill level for the exercise. (see Figure A­1)_. A quantity surveyor is given 10 minutes, an estimator 6 minutes, a chief estimator 4 minutes, and lightning 2.5 minutes to successfully complete the exercise. Although the program does not keep track of actual time to calculate, most students progress to chief estimator level within an hour after being introduced to the simulation. Each exercise consists of five problems. Each problem requires the accurate input of the perimeter, surface area, and volume of a concrete slab. After the skill level is entered, the computer clock is set accordingly so that the program is suspended at 12:00.

Figure A-2 is an example of a problem. Each time a new problem is given, the takeoff clock is displayed at the top of the screen to let the student know how much time is left. The dimensions of the slab are given in feet and inches. 

The numbers are randomly generated based on the following ranges:

Answers must be correct within a certain range or the student cannot continue. The range limits are as followed:

Although the precision required by these range limits (0.05 %) far exceeds what would normally be necessary in a real estimate, it provides a check to make sure that the student is making the inches to decimal conversion accurately. If the student enters a value outside of the acceptable range, the program displays the correct dimensions, formula to use, and the right answer in order to find the mistake.(see Figure A-3.) At this point, the student can choose to exit or restart the program from the beginning.

After each calculation cycle, the program tells the student how many more problems must be done to successfully complete TAKEOFF. It also gives the option to exit the program. If five problems in a row are successfully entered, the student will receive a certificate to verify his or her effort. (see Figure A-4) This can be submitted to the instructor for points or extra credit. To insure that it was a legitimate run, a six digit certificate number is issued for each certificate. This number is composed by placing three-two digit numbers together. Their random generation is based on the 'I' value in the program so that five correct loops will produce three numbers that add up to 50. This can be seen m the example in Figure A-4 that has a certificate number of 150827. To check, 15 + 8 + 27=50.

BID-DAY: COMPETITIVE BIDDING

 SIMULATION Once the fundamentals of quantity surveying are developed in a course, the next sequence of study is in compiling a bid. The BID-DAY computer simulation is a program that models the characteristics of competitive bidding. The goal for the student, and measure of successful outcome, is to make a profit while competing against 3 other contractors. The markup by the other companies is generated by the computer and is purely random, not rational. Although this may not be true to life, it does seem at times that competitors' bids are not logical or consistent.

 There are several objectives to the BID-DAY program. First, it is intended that the students experience the phenomenon that occurs on the day of the bid. Subcontract selection, last minute adds and deducts, and time pressure are all a part of the simulation. (The student will be fired and kicked out of the program if a bid is turned in late.) Second, the student is subjected to the fact that every job has the possibility of a cost overrun. This, like the competitors' markup, is done in a totally random fashion. Finally, the fact that the process of bidding construction work costs money is evident in the program. A company cannot continue to operate over a long period of time without landing a job. The program keeps track of each company's reserve and updates it after each bid.

BID-DAY Program Method

After the program is initialized, the student enters his or her company name. The program then responds with a set of rules that govern the simulation. They are as follows:

1. The three competing contractors never make math errors. They all use the same computer calculated direct cost-before-profit in generating their bid. This is consistent with modern bidding strategies since all competitors are assumed to be competing over the lowest markup.

2. The competitors will add a random markup of from 3% to 15%. Each company has an equal probability for any percent recent markup within this range.

3. The competitors. project will have a cost overrun from 0% to 10%. This is based on an exponential relationship shown in equation number 1 below:

%OVERRUN = (RAND# FROM 0 TO 10)²                                             (1)

1000

There is a greater chance for a 0, 1, or 2% overrun than a

10, 9, or 8%. See Figure B-6 for a graph of the probability of a cost overrun.

 4. All companies start with a net reserve of $100,000. This will allow for bidding expenses until a bid is won with profit.

5. Each job that is bid costs the company $20,000. This is high compared to most actual costs but reinforces in the students mind that there is no such thing as a "free estimate".

6. Subcontractors will make last minute changes to their bids.

7. Bids must be submitted by 12:00. The student can select a skill level which starts the program clock according to the following allowed times:

Since subcontractors will be submitting changes late in the process, the programs requests that the bid amount be keyed in at 11:59:4

Examples of screen displays for the program are shown in the Appendix B. After the student enters his or her company name, the rules of the simulation are displayed and the skill level is entered. (see Figure B-1) At this point, a printer must be activated for the pro ram to continue. The program will generate a hard copy 11 a proposal summary or the student to tabulate the bid. (see Figure B-2) The material, labor, and equipment costs are randomly generated each run. Also, material sales tax will vary from 4 to 8% and overhead will vary from 8 to 14% on each bid.

Once the general summary is in hand, the student spends several minutes totalling the direct costs. The bid clock is active and the computer generates audible ticks, or beeps, every second. Although some contractors rely on spreadsheets or other software to do the final tabulations on bid day, manual calculation is emphasized here. There are advantages to each method. Again, it is important for students to develop accurate computational skills under time pressure. Subcontract quotes are listed at the bottom of the page. Low bids for steel, mechanical, and electrical are selected and put in the subcontract column of the summary. The subcontract quotes are generated randomly within the ranges shown on the next page:

It is pointed out to the student that the selection of subcontractors for a bid is much more complicated than looking down a list and picking the lowest cost. Past working relationships, bond rates, inclusions/exclusions, combinations of labor-only, material-only, or both can make for a very complex decision and have a great impact on which number is used in the bid. Further effort is underway to include some of these variables in the BID-DAY program.

Once the student arrives at the cost-before-margin subtotal, he or she waits until the computer displays subcontract changes. As mentioned before, the three other general contractors will reach this point of the program with no errors. At two and one half minutes before bid time, the first round of adds and deducts occur. (See Figure B-3) One steel, one mechanical, and one electrical subcontractor modify their quote. The amount of change are within the following ranges:

The revised quote may or may not be from the initial low bidder. This fact forces the student to note each change and the resulting revised quote since a different sub may now be low. If the student has already applied a margin percentage and has a preliminary total bid number, there is room on the general summary to make adjustment for adds and deducts.

Three more sets of adds and deducts are displayed at 30 second intervals. A prompt is then displayed at 11:59:45 for the student to enter the bid amount. Students quickly figure out that it is practical to round off to the nearest thousand or ten thousand dollar amount. At this point, the program does two things. It assigns profits and bid amounts to the other general contractors and creates the eventual actual construction cost which will determine if the project was a winner or a loser.

Assuming that the student enters her or his bid on time, the program will generate a screen as shown in Figure B-4. The top half of the screen is used to check the general summary for math errors. First, the low subcontract bids are shown. Next, it lists the column subtotals for material, labor, equipment, and subcontracts. Also, the sales tax amount and final subtotals are given. It is stressed that the student must arrive at this point accurately before they can have a chance at getting the bid and coming out with a profit. The rest of the screen shows the results of the bid. Congratulations go to competitors that are successful. The consolation for not getting_. a job is that sometimes they are losers. If the student gets a job with a cost overrun, he may deplete_. his reserve and be out of business. However, the distressing part is that while the student can only bid with money from the original reserve or profit made from successful jobs, the competitors stay in the simulation even with negative reserve.

At this point, the program allows the student to continue or exit. In either case, the program will display the status of each general contractor and their reserve up to that point. If exiting, the student can receive a hard copy of the results to be turned in for grading or competing with other class members. (See Figure B-5) If continuing, it is possible to change the skill level before bidding another job. If the student does not land a successful job within six tries, she or he will run out of reserve and the simulation will stop.

BID-DAY Bidding Strategy

 Bidding theory is a topic that is often discussed in an estimating course. Although the BID-DAY simulation is not intended to convey any of these theories to the student, the simulation itself can be analyzed in this regard. To begin with, the probability of the student getting a job can be calculated at each percent markup. See Figure B-6 and B-7 for data. As mentioned previously, the probability of a cost overrun is plotted on the same graph. Finally, the expected profit at each percent markup can calculated by equation number 2 below:

 EXP.PROF_%mu = %MU * P_abc * (1 – PROB_ov.run)                                    (2)

This results of this equation are plotted in Figure B-8. As bidding theory concludes, the optimum percent markup is at the high point of the expected profit curve. For the BID-DAY program, this theoretical markup is around 5%. A good project for advanced students would be to calculate the optimum markup for BID-DAY using the given parameters.

To verify whether the program is actually following bidding strategy logic, the author conducted a test of the BID-DAY simulation. The program was reduced to its essential formulas and a loop was added that would generate 50 bid tries. This was run thirty different times at each percent markup with results plotted in the graph in Figure B-8. A total of 7146 bids were calculated by the computer , resulting in the hi highest profit gained at a 6% markup. It is conclude that the BID-DAY simulation does generally follow the principles behind bidding theories.

BID ROOM EXERCISE

Once the students gain an appreciation from the BID-DAY simulation for the activities that go on during a competitive bid, they apply their experience m a different way. As a part of the second semester estimating class at John Brown University, the students participate in a mock bid. One or more conference rooms, depending on the class size, are set up on campus with four or more phone lines in each. The bid teams are issued plans for a commercial building in the five million dollar range. They are given two weeks to quantity survey and price items that they will be doing with their own forces. Also, they organize bid notebooks to tabulate subcontractor quotes.   On or before bid day, estimators from area construction companies call in and act as subcontractors. They are given what was actually the low quote for the project for their item. Their responsibility is then to make up company names, various quotes, late changes, and attempt to play games' that occur m some parts of the industry. Some early quotes are sent in by fax or mail. The actual bid room exercise lasts about four hours, culminating with a sealed bid submittal at a remote location. This exercise catches some of the things that the computer cannot: phone lines being cut off, lost faxes, teamwork, and periods of chaos and confusion. It also tests the ethical fabric of the student when a subcontractor requests confidential information about another quote. Although this exercise has only been tried one time, it appeared to have rest educational value and is a good follow-up to the BID-DAY computer simulation.

CONCLUSION

The process of teaching construction estimating is challenging in many ways.. Enough time has to be spent on developing quantity surveying skill so that a graduate can be productive early in his or her career. However, students must also have a good understanding of formulating unit prices, specifications, contracts, bidding methods, and other topics to be successful in the industry. Two computer simulation program have been resented here that can aid in educating future estimators and managers. The TAKEOFF program can help students practice basic estimating calculations. Although designed to help someone struggling with basic concepts of length, area, and volume the program is useful and challenging to students of all levels. The BID-DAY simulation attempts to capture_. the events that occur when competitively bidding a construction project. It could be argued that the computer in this situation actually represents some real life activities better than other teaching methods. Certain things in the construction process do appear to occur in totally random and illogical ways to the observer (cost overruns, competitors bidding below your bare costs, etc.) Both computer programs can be easily added to any current estimating course with little effort. They take little instruction to operate, can adapt to most existing IBM compatible computer systems, and provide another way for the student to become more comfortable with the use of computers. Both programs provide a good background for a mock bid room exercise at the end of the semester. Although computer aided teaching is not a cure-all, it can be a great complement to other teaching tools.

ACKNOWLEDGEMENTS

The author would like to thank Mr. Mike Carringer, Chief Estimator for Hensel-Phelps Construction Company, Little Rock, Arkansas, and the rest of the estimating staff, for their professional review and comments during the development of the BID-DAY computer program.

REFERENCES

APPENDIX A: TAKEOFF PROGRAM SCREENS AND CERTIFICATE