CEMP-E/CECW-E
EI 01D010
1 September 1997
f. The cost estimate for a modification should
14-4. Preparation of Cost Estimates and
be prepared in as much detail as required to clearly
Negotiation
cost the change for negotiations. In many instances,
even more detail is required to negotiate the lowest
a. The estimate can be prepared after all the
reasonable price. The estimate should, however, be
information has been collected and analyzed, and the
modified to reflect a negotiated procurement in lieu
cost engineer decides upon the format to present the
of an advertised procurement. It should include a
change. It is important to have a prior agreement
general summary sheet relating the major categories
and discussion as previously indicated with the
of cost of the modification, both for increases and
contractor. Generally, successful negotiations
decreases. Revised construction drawings and
depend on agreement in scope of work and accurate
specifications are included in the modification
quantity take-off and a detailed estimate supported
supporting documents. When the cost engineer
by accurate cost data for all elements. General
prepares the estimate, the effort should be the same
guidance for the calculation of direct costs are noted
as the contractor acting prudently under the given
as follows:
conditions. The results will generally provide an
accurate estimate which can be used as a firm basis
b. For additional work, items and format
for negotiation. The Government estimate should
should be priced similar to a new contract as
not rely on past generalized rates and settlements
performed by the known contractor. New work
unless actually appropriate to the specific
should be priced at the rates anticipated to be in
modification under consideration.
effect at the time the work will be performed.
14-5. Cost Considerations
c. For changed work, a separate quantity
takeoff for each item directly affected will be
The estimate should be based on the data actually
required for both before and after the change. Each
collected and experienced from the project. Time
item should be priced at the rates which would be in
motion studies are important, and periodic field
effect at the scheduled time of accomplishment.
visits and log records can provide this data. Previous
Typically, each item of changed original work is
modifications can also provide valuable data.
priced, and each comparable item of revised work is
Valuable cost data is often available from past audit
priced at the applicable rates. The net cost (or
reports on other modifications. With the assistance
credit) would be obtained by subtracting the total of
of the auditor, many costs can be readily obtained
the original work from the total of the revised work.
and may be directly applicable to the present
It is important that the cost engineer maintain a
modification. The cost engineer must exercise
comparable scope of work for both estimates. When
judgment in the use of audit information from a
an item of work will be performed as originally
specific report which may not be released.
specified, except for a revision in quantity, the net
quantity may be estimated directly for that item.
14-6. Timeliness of Preparation
d. For deleted work, the item and format
should be priced similar to a new procurement as
Timeliness of the estimate for modification is as
performed by the current contractor. Rates in effect
important as its accuracy. Procurement
at the time the work would have occurred should be
requirements stress the importance of settlement
used. In addition to the direct cost of the work,
prior to commencing the work. Therefore, the cost
overhead, profit, and bond costs should be included
engineer should immediately proceed to obtain the
for credit on the deleted work.
necessary data for the modification and notify the
appropriate authorities of the earliest date that the
e. Impact related costs, if applicable, should be
estimate can be completed. It is generally
clearly described and included as a part of each cost
understood that the larger and more complex the
estimate.
change, the longer the time requirement for the
initial preparation of a accurate cost estimate.
14-2
Previous Page
