Spread Target Price Over Pay Items

VIDEO | Spread Target Price Over Pay Items

 

In the Cost Breakdown Structure you generated your direct and indirect costs, and in the Price Breakdown Structure you added profit to come up with a Target Price for the bid, but you still haven’t decided how to spread the Target Price over your pay items.

In Lesson 4 you created pay items for the project in the Pay Item & Proposal Register. You can now go back to the Pay Item & Proposal Register to distribute your Target Price over those pay items.

Current Price vs. Target Price

In InEight Estimate, Current Price means the total price that is currently assigned on your pay items. Open the Pay Item & Proposal Register to see what the Current Price is for your pay items (Price > Pay Item & Proposal).

At this point there is no pricing on your pay items, so your Current Price is $0.00. This is because you have not yet spread your Target Price (the total of your cost and profit) over your pay items.

Proposal Recap

On the Pay Item & Proposal Register, there is a Proposal Recap table where you can compare your Current Price to your Target Price to see if there is any variance.

Ideally, you want to add pricing to your pay items until your Current Price equals your Target Price, so that your Variance equals zero. That way you know you are covering all your costs and getting the profit you want.

Notice the Variance column will indicate if you need to ADD or CUT pricing on your pay items to hit your Target Price.

Spread the Target Price

For lump sum contracts, spreading the Target Price may be as simple as spreading it to a single pay item that represents the entire project. However, most jobs will have at least a few pay items defined by the owner, and Unit Price contracts will have many pay items.

There are two main ways to distribute pricing onto your pay items:

  1. Define pay item prices manually, by entering a unit or total price, or a margin percentage.

  2. Use InEight Estimate’s AutoPrice feature to distribute pricing automatically.

Define Pricing for Pay Items Manually

First, you will walk through the process of defining pricing manually. This method requires filling in each item’s price based solely on your own judgment.

Step by Step — Define pricing manually

  1. From the Estimate landing page, select the Price tab.

  2. Select Pay Item & Proposal from the Pay Items section.

  3. Select a Pay Item row.

  4. In either the Unit Price (current), Total Price (current), or % Margin field of a pay item, type a numeric value.

    For this example, we’ll do the following:

    • Mobilization pay item – change Total Price (current) to $20,000.

    • Clearing & Grubbing pay item – change % Margin to 5%.

Use AutoPrice to Balance and Hit the Target Total

Perhaps you want to get a head start and have InEight Estimate spread your Target Price proportionately over your pay items for you. This can be done using the InEight Estimate AutoPrice feature.

Once distributed, you will still have the ability to adjust your pricing on pay items manually as needed.

Look at how you can use the AutoPrice feature.

Step by Step — Use AutoPrice to balance and hit the target total

  1. Open the your job in Estimate.

  2. From the Estimate landing page, select the Price tab.

  3. Click on Pay Item & Proposal to open the Pay Item & Proposal Register.

  4. On the Pay Item & Proposal Register menu, choose Actions > Balanced Bid > Hit Target Total.

  5. Review the Proposal Recap and see that the Variance is now $0.00. Now that the job is balanced, you can see that the Current Price and the Target Price are the same, indicating that the costs and profit are spread proportionately over your pay items.

Use AutoPrice to Unbalance and Hit the Target Total

The Autoprice to Unbalance feature in InEight Estimate can automatically distribute profit to account for your over- and underrun items.

InEight Estimate will take profit from your underrun and put it on your overrun by using the Actions > Unbalanced > Hit Target Total feature. The purpose is to maximize your profit by spreading it strategically between these items.

Step by Step — Unbalance hit target total

  1. You may encounter overrun and/or underrun items in the Pay Item & Proposal Register of your job.

  2. If you do, highlight the row for each item to view it’s current balanced item recap.

  3. On the Pay Item & Proposal Register menu, choose Actions > Unbalanced Bid.

    • You will see the changes reflected and how the profit was spread to your overrun and underrun items

    • In the example shown, highlighting each item will show that all your overhead and profit from Excavation was put onto Clearing & Grubbing.