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Steel estimators must produce bid letters that properly convey the work proposed and the conditions by which the intended work is to be performed. The bid letter (or scope letter) to the customer should identify:
1.A complete list of items that are to be included and excluded as the condition of the pricing
2.A list of qualifications that indicates compliance with the project documents
3.The specific payment terms and conditions
Inclusions, Exclusions, and Qualifications
During the initial review of the bid documents and contract drawings for the project being estimated, steel estimators should list all the bid items to be included, excluded, and qualified within the project scope of work.
In the project specifications, the section for steel subcontractors is called Division 5, which is explained in Chapter 4, The Bid Documents. For commercial construction, customers expect all items indicated in the Division 5 section of the specifications—which is everything that is metal—to be included in the scope of work to be provided. The steel fabricator may or may not provide everything indicated at Division 5; there may be items listed in the specifications that will not apply to the project scope of work indicated at the contract drawings.
Specialty metals such as stainless steel or aluminum are most often provided by a specialty fabricator. You must make your customer aware of your intent to provide (or not to provide) such items by listing them specifically in the inclusions or exclusions part of your bid letter.
Structural steel, miscellaneous metals, steel joist, steel deck, ornamental metals, and cold formed metal framing are all items that are listed at their specific sections within Division 5 of the Contract Specifications. Read through the specifications carefully for items that you would provide; include these in your inclusions. All items that your company will not provide should be listed in your list of exclusions.
Composing and Sending the Bid Letter
Once you have satisfied yourself that you have listed everything on your project in your inclusions, exclusions. and qualifications, send your bid letter to your selected detailer for pricing. Your letter will be the guide for this job for all who are involved in the process, for example, detailing the items to be delivered and billed by the company shipping and accounting departments. It will also be the key for negotiations with the potential customer.
The take off should be listed in the same order as the inclusion/exclusion numbers on the drawings from which you are working. Items can then be easily located in some logical order. The ability to cross reference between the bid letter and the take off listing will save much in time and leaves little to question.
Furthermore, the bid letter should be sent to the potential customer a few days ahead of bid day, without the pricing. This advance notice will make the customer aware of what you have and don’t have in your scope of work. Some readers tend only to lightly review these letters. Prior to the bid date, make a bid item review phone call to the potential customer referencing this letter. This communication would be helpful for everyone.
Bid documents often leave out specifics with regard to the steel fabrication. A conversation with your potential customer prior to bid day to discuss any items that are unclear or ambiguous in the drawings will go far to support a competitive price.
This Bid Letter is fundamental and comprehensive to any quote. One cannot afford to be complacent when preparing a bid document for pricing contract work.
Using this bid letter template will help you cover all the inclusions, exclusions, and qualifications that may be applicable to many different types of projects. You can then add or delete items as appropriate. A letter of this style, used to define your proposed scope of work, will clarify that which you are providing, which you are not providing, and the contractual conditions by which you plan to complete your work.
Figure 3.1 shows a sample of a typical bid letter.
Each one of the inclusions, exclusions, and qualifications has a specific purpose. The bid letter supports and protects both the fabricator and the customer from ambiguities and assumptions. The bid documents use some information that is general and other that is specific in application to the project, leaving the trade professionals to identify the difference. Any item left unattended and unaddressed by the bid letter may result in the steel fabricator bearing the financial responsibility.
Understand that the bid letter may be viewed as a contractual and binding agreement set forth by the steel estimator at the time the project is quoted. The terms and conditions stated within the letter enable the fabricator to produce the best and final low number. From the time the project is awarded through the last payment from the customer, this letter (together with any cited contract documents) is the guide by which the work will be performed.
During project negotiations, the Bid Letter often provides the only clarification of the steel fabricator’s role. The letter specifies to the customer the steel fabricator’s responsibilities in performing the work.
It is best to send the bid letter and the pricing prior to bid day. The customer then has ample opportunity to review these points of qualifications, inclusions, and exclusions, ensuring a complete scope of work. Most potential customers appreciate the clarity and completeness of scope as well as the opportunity to prevent future possible ramifications.
Qualifications
This section lists and explains the specific points within the Qualifications portion of the bid letter:
1.This proposal is based on drawings (list all the drawings here that you reviewed by which you created your quote) dated (indicate latest revision date shown on the drawings) as prepared by (specifically write in the name of the architect and engineer, with the city and state they reside), together with Addendums (list addendum numbers, or indicate that there are no addendums incorporated).
List all of the drawings that were used in creating your estimate. It is very important that this list be complete, including the revision numbers and issue dates, to provide verification of the documents used to create the steel estimate.
Contract drawings issued for construction may have changes that were not noted by addendum or any other means. When a set of drawings is issued with the intent for producing shop detail drawings, it is essential that the drawing list is checked—drawing by drawing and detail by detail—to verify that the drawings are the same as what was used in creating the quote.
If you forego this opportunity to perform a diligent drawing review, it is very likely that any changes affecting the scope of work won’t be discovered until the project is in process. The window of opportunity to alert the customer of such changes and charge for that extra work will most likely be lost.
Document all changes, making certain that costs are covered with regard to any exposure to the steel fabrication. The differences in the drawings between the bid set and the construction issue set will come up eventually, and the steel estimate will be called to question. It is always that which is left undocumented or undone that will raise questions and create problems later.
2.All invoices are net 30 days with no retainage. 1.5% interest on all overdue invoices. Detailing to be billed as a separate line item. A 50% deposit is required upon receipt of order to guarantee mill rolled materials, generate and purchase engineering, and shop detail drawings.
Management makes the judgment call whether to accept or reject retention as part of the purchase order agreement. The reasoning behind retention being held on the billings is in case errors arise in the product or services being provided. If the steel fabricator is strictly a supplier, retention isn’t as necessary because the steel fabrication is usually completed and installed before the end of the billing cycle.
If a fabricated item doesn’t fit, then the “right to remedy” is executed and the steel is fixed or replaced right away. Once the fabricated steel has been delivered, and the steel fits, there is no reason to retain funds.
The 1.5% on overdue invoices is a given, a policy made by the company’s accounting department.
The detailing is billed as a separate line item on the schedule of values for the job. Billing prior to providing the fabricated steel will ensure that the steel detailer gets paid in a timely manner. The steel detailer is on a 30-day billing cycle, like all the other subcontractors or suppliers.
The deposit requirement provides cash flow for steel and other materials on the project. Requiring a deposit is a good business practice; it secures the material delivery and enables steel fabricators to better control their schedule when the material resources are secure.
Financial markets require a quick turn on cash; deposits will secure the materials before they are sold out. Material availability impacts delivery schedules. The time span of 30–60 days may occur between award of a project and the shop drawing approvals. Often, materials are not purchased until the steel shop drawings have been approved. Customers need to be made aware that deposits are necessary to the project’s success because every job has a quick turn schedule.
Most projects are quoted based on optimum project management conditions. Having ready cash flow for your suppliers is one of them. Financing costs to pay vendors, suppliers, and payroll cannot be bid into the project for you to be low bidder. The argument for deposits provides a good negotiating tool if you choose to use it. However, if this is not the case, just eliminate deposits from your list of qualifications.
3.This quotation is valid for 15 days and is based upon labor and material cost as of the date indicated on this quotation. Awards subsequent to the 15 day period may be subject to mill price increase and / or scrap surcharges at time of material ordered.
Validating the quotation is essential because the steel market is very volatile. If your customer waits too long to award a project, you may lose your low price on the steel detailing, the materials, and potentially all remaining buy out items.
Labor availability in the shop may change; you may need to allow for overtime costs once a job has been awarded to you. All of these factors change over the course of time from bid date to project award. Therefore, a validation time frame is important.
4.This quote, if accepted, will form the basis of any purchase order awarded and will be included as an attachment to said contract as pertaining to specific inclusions and exclusions.
It is very important that the bid letter tie into whatever contract or purchase order that your customer gives you. When you submit a bid on a project, it is contractually binding. Although the bid documents are the law for the project, your bid letter outlines the rules by which you will perform the work based on your pricing.
The contract specifications are usually generic in their presentation. Your work is specific to each job. Therefore, it has specific conditions by which it must be performed at the price you have submitted. For this reason, the bid letter must be included and must override any contract conditions that may conflict.
5.This quotation is based on availability of steel from the warehouse or mill at time of award.
Material availability changes all the time. The first step any estimator or project manager should take upon getting a new job is to check the steel availability. Steel mill rolling dates are undependable and materials move out of the warehouses on a daily basis. Materials need to be secured as soon as possible to insure availability for project fabrication.
Your estimate has a set budget for materials. It is very important that you maintain that budget. Unavailable materials or delayed deliveries due to the timing of mill rolling or shipments that come in from obscure locations may force you to acquire materials at a higher price, affecting both the budget and fabrication schedule.
Substitution requests can be made by petitioning the engineer for a different size material that is readily available in lieu of a size that is not. The paper-work involved in managing such a request may affect your schedule. Additional engineering costs may be incurred.
6.Detailing and fabrication in this quote is based on release for construction documents being per “AISC, Code of Standard Practice” latest edition. (Steel Fabrication is not performed by an AISC-Certified shop; all welders are WABO certified.)
Make certain of the AISC status of your company. Be advised that if you are not an AISC-certified shop, you may not bid on work that requires it. Complying with the AISC Code of Standard Practice is an industry standard; most shops comply.
Make certain that the company’s specific status with regard to AISC membership or union involvement is clear to your customer—for their own safety as well as yours.
7.Delivery of steel is based on the shop schedule, with the first delivery in the time frame of 2-to-4 weeks after approved shop drawings.
Any changes in delivery for any reason are not viewed well by the customer—unless they are improvements! The steel package is the “skeleton” of the building; as such, scheduling delays will have a domino effect on all the other trades down the line.
Steel delivery to the job site is set prior to your even quoting the job. Your shop fabrication schedule isn’t determined until you have approved shop drawings returned from the general contractor. Project scheduling information is usually available in the general conditions portion of the specifications. This delivery statement is intended to help protect you from delays caused by circumstances beyond your control, with approval of shop detail drawings being one of them and a potential major cause for holding up the project.
8.Changes to submitted design by the contractor/owner or engineer on items designed by the fabricator will be incorporated as an added cost.
Changes happen all the time during shop drawing approvals and even after approvals. This statement is a continuation of that which is already in the AISC code of standard practice. If the architect or engineer makes a change that will cost your company extra money to create, then you have the option to put a cost to those changes and submit them to your customer.
Require written approval on the funding from your customer for the extra work before you start that work. If work proceeds without agreements in place, the steel fabricator runs the risk of being liable for all costs incurred.
9.This proposal is based on Prevailing Wage rates (if applicable) that are current as of the date of this bid document.
Watch the wage rates because they do change periodically. Prevailing wage or Davis Bacon requirements may put your shop fabricators at a higher rate than they normally earn and create additional paperwork for your accounting department. The Davis Bacon Act was created to force trade pay scales to be equal to union scale requirements.
This section lists the inclusion items in the bid letter, with an explanation of each numbered item.
Inclusion #1
In this section, list the main framing members. Include the material grades as well as information regarding the connections and the finings of the steel. This sample letter style has the entire structural package all included in one bid item. A more specific breakdown is preferred, with a line item for each component of the building. The breakdown would also list the plan drawings with the applicable details, and drawing references with quantities as required. Indicate the type of finish to be applied to the material.
Inclusion #2
This bid item talks only about the steel stairs together with the catwalk and railing as a complete system. Note that the total linear feet of railing is indicated with the finish as being galvanized.
Inclusion #3
In this listing, estimators are specific about the fasteners being provided. This information is important because steel fabricators should not be responsible for supplying fasteners to be used for connection to other trade materials.
Inclusion #4
Estimators indicate that their quote includes the design engineering for the fabrication per some requirement in the documents. This information is important to note specifically because design engineering is an expensive item. For the most part, steel fabricators tend to omit this listing because the pricing can vary so much from engineer to engineer.
Inclusion #5
In this inclusion, estimators affirm that shop detail drawings will be provided inclusive of erection drawings. Some projects have the steel detail drawings already provided to them.
Inclusion #6
Advising potential customers of the total weight of the project allows them a frame of reference to better compare your quote with the other prices they get from the competition. Customers need to know about the shipping and offload point; it allows customers to better evaluate your quote with what your competition may or may not have.
Note: Additional inclusion items may need to be listed according to the items requiring fabrication, as shown at the contract drawings.
1.It is important to show clearly the exclusion of any additional costs associated with doing business. Taxes, sales taxes, bonding, and liquidated damages are all costs that are referenced in the general conditions. This exclusion eliminates any assumptions that might be made about their provision
2.This exclusion prevents any assumption that the steel fabricator will provide holes in the steel for other trades to use. Such work by the fabricator is not shown in the contract drawings and cannot be assumed as part of the labor for your portion of the work. Excluding holes for other trades is a standard exclusion for every job.
3.All light gauge materials less than 1/8” are a standard exclusion; the light weight materials are in a different section than the Division 5 (see explanation of Division 5 requirements in Chapter 4, The Bid Documents) that we are working with. Light gauge materials are often used for flashing, roofing, and cold formed metal framing.
4.Framing for openings are usually shown as a typical detail. If the contract drawings specifically show locations and details for floor and roof openings, then it is clear the steel fabricator would include them. Typical roof opening details are a gray area because there usually are no references to them in the floor and roof plans. For this reason, they are excluded. Unit prices on fabricated items may be offered as an alternate.
5.Field erection and all field welding are standard exclusions if the steel fabricator is not installing this finished product.
6.Verification of missing dimensions is a standard exclusion designed to protect the steel fabricator from exposure to field work.
7.This exclusion lets the contractor know that the steel fabricator is not including any costs for engineering.
8.Costs for special inspection are picked up by the owner as a rule. However, because the specifications put the inspection requirement in the Division 5 section (see Chapter 4), it could be mistaken that the steel fabricator is responsible for paying for them.
9.The section for metal floor deck and roof deck is in Division 5. Therefore, it is to be excluded if the steel fabricator is not providing this material.
10.The nosings for stairs are a buyout item installed in the field at the time the concrete is poured. Customers do not need to have the steel fabricator supply something they can buy themselves, saving themselves the additional profit markup.
11.Steel joists are also in the Division 5 section. Be clear whether or not they are included in your pricing.
12.Both the grout for leveling the columns and the concrete fill for stair pans and landings are handled by others. They are standard exclusions.
13.Steel shim material and backing plates are usually light gauge steel. The referenced sleeves are not sized at the specification; they could be light gauge as well, or any size for that matter. Steel fabricators have to be clear whether or not they are providing these items.
14.Steel fabricators need to reinforce that they are not providing any special finishes to the steel.
15.This category clarifies the provision of fasteners, which are a standard exclusion.
16.Catch basins, manholes and manhole ladders, and trench drains are typically shown in civil drawings. The mistake is often made, however, that because the items are steel, the fabricator would have them. In most cases, these are buyout items that the general contractor provides.
17.Downspouts and gutters are in the roofing section, although on occasion either they are designed with special attachments or the downspouts themselves are made from pipe that would be designated in Division 5. The mistaken assumption could be made that the steel fabricator will provide them. Thus, it is best to exclude them.
18.Stainless steel, aluminum, and brass are all nonferrous materials. These items are considered metal by the designers and are included in Division 5 of the specifications. Not all steel fabricators get involved with providing the items that are not carbon steel. If steel fabricators are not providing these items, then this exclusion must be clearly stated.
19.Rebar is an item that is included with the contractors providing the concrete and will be found in Contract Specifications Division 3, as explained in Chapter 4. This exclusion is standard, provided for clarity.
20.Roof penetration framing is sometimes shown as a typical detail in the contract drawings. Typical details force assumptions to be made by the estimator. This exclusion then notifies the customer to look to the inclusions for advice on this provision.
21.There are specialty companies that supply steel stud framing. There is a separate section at the project specifications that allows for provision of these items. This listing has been provided as a standard exclusion to be clear that the framing is not the fabricator’s/estimator’s responsibility.
22.Insulated panels are provided by specialty companies that bid directly to the contractors. This is a standard exclusion that is provided for clarity
23.Bridge cranes and supports are sometimes included in the building framing drawings. The provision of them is listed in the Division 5 specifications. Bridge cranes and their supports need to be specifically designed and engineered for their specific use and location. Due to the complex nature of this provision, bridge cranes are often purchased directly from the vendor by the contractor.
24.Templates for anchors are extra work. Anchor bolt placement is shown at the shop fabrication drawings. If templates are included in the steel fabricator’s price this does not help you come in with a low bid. If the customer decides they want them, a separate price may be offered.
Note: Additional exclusions that need to be listed will be determined by the actual bid documents of the job being quoted.
As steel estimators create the bid letter, it is easiest to list the items as they are found on the drawings during the initial review. Starting the letter while going through the drawings will lead to a more thorough guide for take off and prevent duplication.
Creating the bid letter first is an activity that will also prevent double listing items between the architectural and structural drawings. By listing the individual details that apply to locating specific items, the estimators can more quickly understand the project. Additionally, the estimators may become aware of missing or unclear information early on in the estimating process, providing time to send out an inquiry to the architect or engineer for clarification prior to bid time.
This chapter has reviewed the significance of providing complete and accurate bid letters to the customer. A copy of a standard bid letter was presented, followed by a detailed description of each item with the explanation of why each one was being used. The bid letter is an important part of the estimating process; it should be utilized for every job quoted.
