Bill of Quantities and Cost Estimation

Tendering is an important step in construction projects, since it allows the comparison of several offers under equal terms. Hiring the first contractor who submits an offer may be tempting when a project has a tight deadline. However, consulting engineers do not recommend this, since other options may offer a better quality or a lower price. During the tendering process, project owners issue a Bill of Quantities (BOQ) to the bidding contractors. The BOQ is a document that breaks down the project scope by work items and quantities, ensuring that all contractors quote the same amounts of work.

The BOQ continues to be useful when all contractors have submitted their offers and a winner has been chosen. The BOQ is useful as a tracking tool during the construction process, and it can be combined with the project schedule for cost planning:

• When creating a progress report, the completed work can be input as partial quantities in the BOQ spreadsheet.
• Since there is already a unit price for each item, the spreadsheet will automatically calculate the monetary value of the completed work.
• By comparing each report with the previous one, the contractor can calculate interim payments.
• If the contract terms include an advance payment and a quality retainage, they are normally deducted as percentages from each interim payment. For example, if the advance payment was 10% and the retainage is 5%, there is a 15% deduction from every interim payment.

At the end of the project, the BOQ can be filled with the actual work quantities to check discrepancies with the original quantities. This results in additional payment for the contractor if the actual work is more than planned, but the contractor may also owe money to the owner for items where the actual work was less. Consider that some contract types do not allow this; in fixed-price contracts  or construction management at risk, for example, the construction firm assumes any additional expenses while keeping the savings achieved.

Using a BOQ is a standard practice in construction projects, since it brings many advantages during the tendering process: 

Contractors compete with each other during the tendering process, but the lowest bid will not necessarily win. Before tendering, the cost consultant calculates a project budget on behalf of the project owner. This budget is not shared  with contractors, and it serves as a reference when comparing their offers. A bidding contractor may be disqualified for presenting an offer with an unreasonably low price (lowballing).

A BOQ can also help detect possible errors in contractors bids through comparison. For example, if one contractor prices a specific item much higher or lower than other participants, a calculation error is likely.

• This often occurs when there are differences in measurement units.
• For instance, if a roof installation is priced per square foot and a contractor calculates the price per square meter, the price will become 10.76 times higher than intended.
• Errors like these are unlikely when working with qualified contractors. However, the BOQ makes these errors evident when they occur.
• If the BOQ itself has an error, it will generally be noticed by one of the contractors. In this case, the BOQ is returned to the client for correction, and sent again to all bidders.

As previously mentioned, the BOQ is still useful after choosing the contractor and starting construction. Building projects normally have an upfront payment, interim payments and a final account. Since the BOQ has an itemized list of project activities, it can be used for a quick calculation of interim payments based on the completed work.

The BOQ is also a useful planning tool, since it can be used to estimate how the project costs will be distributed over time. Typically, the project schedule uses a Gantt chart where the scope is also broken down by areas. Cost information from the BOQ can be combined with time information from the Gantt chart, to create a cost schedule. The project owner and the contractor can use this to plan expenses, making sure the funds are available when needed, avoiding project delays.

If there are any change orders during the construction process, the BOQ can also be used to calculate their cost. Since all work activities are already itemized, the cost of a change order can be calculated from the additional work quantities and the existing unit prices.