A contractor is preparing to bid for a project. He has his cost estimate and the work schedule. Table P6.4 gives his expected expenses and their time of occurrence. Other expenses such as insurance, bonds, and payroll taxes are included. For simplicity of analysis, he assumed that all expenses are recognized at the end of the month in which they occur. The contractor is planning to add 10% to his estimated expenses to cover profits and office expenses. The total will be his bid price. He is also planning to submit for his progress payment at the end of each month. Upon approval the owner will subtract 5% for retainage and pay the contractor one month later. The accumulated retainage will be paid to the contractor with the last payment (i.e., at the end of month 13). What is the peak financial requirement and when does it occur?

 

 

 

 

Month	Mobilization / Demobilization	Subcon- tractors	Materials	Payroll	Equipment	Field Overhead
0	$40,000	$0	$0	$0	$0	$0
1	0	10,000	10,000	10,000	20,000	1,000
2	0	30,000	20,000	15,000	10,000	5,000
3	0	30,000	30,000	20,000	20,000	6,000
4	0	40,000	30,000	20,000	30,000	6,000
5	0	50,000	40,000	40,000	20,000	6,000
6	0	50,000	40,000	40,000	15,000	6,000
7	0	40,000	30,000	40,000	10,000	6,000
8	0	40,000	10,000	20,000	10,000	6,000
9	0	70,000	10,000	10,000	10,000	6,000
10	0	30,000	5,000	5,000	10,000	6,000
11	0	30,000	5,000	5,000	5,000	6,000
12 Total	20,000 $60,000	50,000 $470,000	0 $230,000	5,000 $230,000	5,000 $165,000	5,000 $65,000

Total cost = 60,000 + 470,000 + 230,000 + 230,000 + 165,000 + 65,000 = $1,220,000

Profit plus overhead = (10%) (total cost) = $122,000

Bid price = total cost + profit + overhead = $1,342,000