The occurrence of differences between the employer’s estimate and the bid quotation is widespread and difficult to avoid. The differences between the investor’s and contractor’s calculations are often quite significant. This article analyses the differences between the value of the contract and the bid submitted for construction work carried out on a multi-storey buildings in 2013. An attempt was also made to analyse the reasons for such differences, providing possible ways to solve the problem

Zima, Krzysztof

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* Ph.D. Eng. Krzysztof Zima, Institute Of Building And Transport Management, Faculty Of Civil 
Engineering, Cracow University Of Technology. 
KRYZYSZTOF ZIMA*
THE REASONS FOR DIFFERENCES IN CALCULATIONS  
IN INVESTOR’S AND CONTRACTOR’S ESTIMATIONS 
PRZYCZYNY RÓŻNIC W KALKULACJACH 
KOSZTORYSOWYCH INWESTORSKICH I OFERTOWYCH
A b s t r a c t 
The occurrence of differences between the employer’s estimate and the bid quotation is 
widespread and difficult to avoid. The differences between the investor’s and contractor’s 
calculations are often quite significant. This article analyses the differences between the value of 
the contract and the bid submitted for construction work carried out on a multi-storey buildings 
in 2013. An attempt was also made to analyse the reasons for such differences, providing 
possible ways to solve the problem.
Keywords: cost estimation, differences in cost estimations, investor’s estimations
S t r e s z c z e n i e 
Występowanie różnic pomiędzy kosztorysem inwestorskim a kosztorysem ofertowym jest zja-
wiskiem powszechnym i trudnym do uniknięcia. Różnice pomiędzy kalkulacjami inwestorski-
mi a ofertowymi są jednak zbyt duże. W artykule dokonano analizy różnic między wartością 
zamówienia a złożonymi ofertami w 2013 roku na wykonanie robót budowlanych dotyczących 
budynków wielokondygnacyjnych. Podjęto również próbę analizy przyczyn pojawiania się ta-
kich różnic, a także podano możliwe sposoby rozwiązania problemu.
Słowa kluczowe: kosztorysowanie, różnice w kalkulacjach kosztorysowych, kosztorys inwestorski
TECHNICAL TRANSACTIONS
CIVIL ENGINEERING
1-B/2014
CZASOPISMO TECHNICZNE
BUDOWNICTWO
76
1. Introduction 
Estimates prepared for the needs of the employer are designed to provide an estimated 
total cost of the construction project. The estimate is usually obtained on the basis of indicative 
calculations, and is approximate, additionally burdened with an extensive “fuzziness” of 
results. The wide range of variation in estimates is due to, among others, the initial lack 
of detailed information on the planned project and related methods of cost calculation. It 
is obvious that in the early stage of the project, the employer has only a general idea of the 
project, for example, in the form of a project brief or a conceptual design. Cost analysis 
carried out on the basis of general information will obviously lead to a considerable price 
scatter [5].
It is important, however, to seek to minimize them, in particular by the appropriate 
determination of the planned construction costs. According to [7], the goal of the discussion 
should not be to point the finger of blame, but to evaluate the differences in the employer’s 
estimate and the bid quotation, between different bid quotations, and indicating the reasons 
for this situation. 
2. Analysis of differences between the contract value and bids. 
The occurrence of differences between the employer’s estimate and the bid quotation 
is widespread and difficult to avoid. The scale of this phenomenon can be shown using 
the example of public procurement. An the analysis of public contracts carried out for 
construction work on multi-storey buildings. Such contracts were identified using the CPV 
code 45.21.13.40-4.
Fig. 1. Types of construction works on multi-storey buildings
77
In 2013, there were 72 public contracts for construction works on multi-storey buildings, 
including 6 partial orders. In total 85 contracts were awarded for such construction works. 
However, two cases concerned different types of contract as the employer made an incorrect 
identification of the contract confusing the CPV codes. Among the remaining 83 contracts 
, 39 were for renovation works and 34 were contracts for the construction of new facilities. 
The distribution of works contracts is shown in Fig. 1.
In 79 cases, the contractor was selected using the open tender procedure, and 4 using 
single source procurement. In the vast majority of contracts (94%) the only criterion for the 
selection of the contractor was the lowest price. In other cases, two criteria were distinguished: 
the lowest price with a weight of 80% or 90%, and the second criterion was the implied 
warranty period, warranty or the contract completion date. 
The average number of bids submitted by contractors is 4.8 bids per contract. The minimum 
number of bids submitted in a tender procedure was 1, and the maximum number was 17. The 
average estimated value of the contract amounted to PLN 2 298 875,45. The minimum value of 
the contract amounted to PLN 18 700,53 and the maximum to PLN 19 589 819,90.
The main objective of the analysis is to determine the differences between the employer’s 
estimates defining the value of the works contract, and the contractors’ bid quotations. In as 
many as 82 of the analysed cases, the estimated value of the contract was higher than the 
bid selected, in only 1 case it was lower. The differences between the value of the contract 
and selected bids are very large and 98,8% of the contracts exceeded 10%, and 81,9% of the 
contract were 20% or more (Fig. 2).
Fig. 2. Differences between the estimated value of the contract, and the selected bid
In the case of bids submitted by the contractors, the differences are even greater. After 
the rejection of public procurement, in which only one bid was submitted (17 contracts) 
the remaining 66 contracts were analysed. The differences between the minimum and the 
maximum bid submitted in as many as 91% of the contracts exceeded 10%, and in 65% of 
the contract are 20% or more (Fig. 3).
The criterion for the selection of a construction contractor (100% lowest price) adopted in 
the vast majority of cases justifies the importance of a correct estimate value of the contract 
using the employer’s estimate. In contrast, the differences seen between the employer’s 
calculations and bid calculations, and the differences between the different contractor’s bids 
forces consideration to be applied to the causes of such differences.
78
Fig. 3. Differences between the lowest and the highest submitted bid
3. Analysis of the reasons causing the difference between the contract values and bids
Competition
The primary cause of the differences in prices between the employer’s estimate and 
the bid quotations is competition. The market situation in Poland is characterised by 
a relatively small number of potential employers, and a large number of contractors. This 
causes difficulty in obtaining works contracts, and hence the need to reduce the prices of 
construction works. Builder’s price books available in Poland do not take this factor into 
account, which often causes the prices in employer’s estimates. Also, the level of overhead 
published in a minimum, average and maximum arrangement results in differences between 
the employer’s calculations (which is most often an adopted the average arrangement), and 
the bid calculations.
Project size
The project size also has a significant impact on the direct costs of construction. The basic 
principles of economics lead to the conclusion that the greater the volume of a building, the 
greater the opportunity to obtain discounts on the purchase of materials. A bigger batch of ordered 
materials results in lower prices of materials due to the possibility of obtaining high discounts. An 
example of a price difference depending on the obtained discount is shown in Table 1
T a b l e  1
The walls of multi-storey buildings made using with “YTONG” blocks 225 m2, thickness  
of 30 cm with and without a discount.
Walls Without discount 10% discount 20% discount
Price 21 991,50 zł 21 082,50 zł 20 173,50 zł
Percentage difference compared to 
the amount without discount
0% 4.13% 8.26%
79
In addition, the productivity of the work performed is greater in case of large volumes 
and surfaces (Table 2). The smaller the work space the more difficult the construction plan 
and the more detail work. This of course affects the cost of the works (Table 3), and is rarely 
taken into account in employer’s estimates.
T a b l e  2
Labour intensity of constructing 1 m2 of flooring using artificial stones laid on the adhesive,  
40 × 40 cm tiles, combined method
Room size
Method of laying tiles
Straight Offset Diamond
Up to 10 m2 1.00248 r-g/m2 1.10272 r-g/m2 1.30322 r-g/m2
Above 10 m2 0.8354 r-g/m2 0.91894 r-g/m2 1.08602 r-g/m2
T a b l e  3
Cost of constructing 1 m2 of flooring using artificial stones laid on the adhesive, 40 × 40 cm tiles, 
combined method
Room size
Method of laying tiles
Straight Offset Diamond
Up to 10 m2 113,13 PLN/m2 116,57 PLN/m2 123,42 PLN/m2
Above 10 m2 108,78 PLN/m2 111,80 PLN/m2 117,78 PLN/m2
Quality
The required level of quality of construction works directly affects the cost. For example, 
higher-quality lumber or chemicals will cost a lot more than regular quality products (Table 4). 
In addition, if high quality of work is required, labor intensity also increases.
T a b l e  4
Prices of selected construction materials depending on their quality
Edged oak boards 32–45 mm 
thick, Class 1
Edged oak boards 32–45 mm 
thick, Class 2
Edged oak boards 32–45 mm 
thick, Class 3
3289,00 PLN/m3 3080,00 PLN/m3 2145,00 PLN/m3
Solid brick 25 × 12 × 6.5 cm 
class 100
Solid brick 25 × 12 × 6.5 cm 
class 150
Solid brick 25 × 12 × 6.5 cm 
class 200
1,07 PLN/unit 1,15 PLN/unit 1,30 PLN/unit
Concrete paving flag 35 × 35 
× 5 cm, class 1, grey
Concrete paving flag 35 × 35 
× 5 cm, class 2, grey
–
7,90 PLN/unit 4,85 PLN/unit –
80
Complexity
Similarly, the cost is affected by the complexity of the construction project. Comprehensive 
structural systems typically consume more materials and are often of a larger size, which 
increases the cost of materials. This results in increased workload associated with more 
materials, for example, per 1 sq. m. of the element’s surface leads to an increase in labor 
intensity and thus increases the related cost of labor. Equipment costs may also contribute 
to increasing the cost of construction, because it is very likely that the erection of complex 
multi-storey buildings will result in additional requirements for equipment which would not 
be the case for one simple construction project.
Location
Location of the construction project may have a significant impact on costs. The cost and 
availability of labor and materials can vary considerably depending on geographic location. 
Building regulations vary depending on location and can significantly increase the complexity 
of the project (restrictions regarding the building permit – technologies, noise, etc.). Each 
project has different restrictions related to the access to materials and access to equipment 
park areas and work areas, which can significantly impact productivity and costs. Equipment 
mobilisation costs also depend on the project location. Delivery of equipment to a site 30 km 
away from the equipment park will be much cheaper than importing the equipment from 
a distance of say 300 km. This will affect the investment costs (Table 5).
T a b l e  5
Examples of one-off costs of equipment depending on the transport distance
Construction equipment Transport of 30 km Transport of 300 km
Single-bucket crawler excavator 0.60 m3 – 
transport using haulage equipment
761,54 PLN 6 580,04 PLN
Truck-mounted tower crane 100 tm – transport 
using haulage equipment without assembly and 
disassembly
9 124,25 PLN 69 693,35 PLN
An important issue is also the fact that the construction market is a local market. 
Therefore, the location of the project also influences the price levels adopted in estimates. 
Contractors preparing bid quotations use the prices of materials from builders’ merchants or 
factories nearby the project location. An example of the prices of materials provided by the 
Sekocenbud system is shown in Table 6, and prices of labour in Table 7. 
Overheads, such as indirect costs and profit are highly individualized and depend on, 
among others, the deadline for completion of the works and their plan, the size of the 
company, processes of the company management and the process of construction at the 
given site. Average values of indirect costs and profit published in available builder’s price 
books are used to formulate employer’s estimates. This may be a cause of large differences 
between the employer’s estimates and bid quotations. Overheads costs and profit calculation 
problems has been described inter alia, in [8] and price variability in estimates has been 
thoroughly described in [2]. It should also be noted, that cost estimate calculations lack an 
81
item estimating the level of risk. Contractors must include the construction risk in their bids, 
especially in the case of a lump-sum contract. Therefore, in practice, they take the risk of 
carrying out works into account in the profit calculation, indirect costs, and labor input, and 
even in the prices of materials. Risk analysis in employer’s calculations hardly exist at all.
T a b l e  6
Examples of one-off costs of equipment depending on the transport distance
Material unit
Minimum 
price [PLN]
Average 
price [PLN]
Maximum price 
[PLN]
POROTHERM breeze blocks type 30 
P+W with dim. 30.0 × 24.8 × 23.8 cm, 
class 10
pc 3,35 4,01 4,45
Round smooth steel bars for concrete 
reinforcement Ø 16–28 mm
kg 2,34 2,51 2,70
Styrofoam board EPS 100 (PS) double-
sided laminated with traditional bitumen 
underfelt, thickness of 8 cm
m2 25,55 32,10 36,04
Natural aggregate concrete B-25 
(concrete mix)
m3 186,00 222,45 264,00
 Light expanded clay t 5–10 mm m3 168,50 193,69 252,00
T a b l e  7
Examples of net prices for general construction labour in Poland
City Unit
Minimum price 
[PLN]
Average price [PLN]
Maximum price 
[PLN]
National average PLN/r-g 9,00 14,10 25,00
Kraków PLN/r-g 11,00 15,00 18,00
Warszawa PLN/r-g 14,00 19,00 25,00
Lębork PLN/r-g 9,60 12,80 15,80
Suwałki PLN/r-g 10,00 12,00 15,00
Estimate calculations
In principle, employer’s calculations are estimate calculations. According to the Regulation of 
18 May 20041 the employer’s estimate is prepared using the simplified method. The cost analysis 
1 Regulation of the Minister of Infrastructure of 18 May 2004 on determining the methods and basis 
for the preparation of employer’s estimates, calculation of the planned costs of design work and the 
planned costs of construction works specified in the project brief.
82
is therefore mainly based on unit prices of construction works. It is therefore difficult to make any 
adjustment of the unit price in the absence of data on the labor, materials, equipment, or overheads.
The above causes are not exhaustive but are the basic factors affecting the differences 
between the employer’s estimates and bid quotations. But, as is apparent from the examples 
shown, differences between the cost estimates should not be so great.
One which question which arises concerning the employer’s estimates: Should the cost 
estimation be close to the selected bids, or to the actual cost of the project? According to 
the author, the employer’s calculation, in the presence of the most commonly used type of 
remuneration in Poland for construction works, namely a lump sum (constant price), should 
aim to be close to the value of the selected bid. The reasoning is simple – in today’s market 
conditions, the employer is only interested in a constant price, not the actual costs incurred by 
the contractor. Of course, we should assume that only selected bids are taken into consideration. 
These are those that were successful (implemented). For this purpose, we can use various types 
of mathematical models which employ knowledge based on data mining and which allow for 
learning. For example, we can use neural networks or inference of cases based on prices from 
selected and implemented bids. Such attempts have already been made, for example, in [3] 
the authors attempted to estimate the cost of construction of residential buildings using groups 
of artificial neural networks, or in [4, 6], using Case Based Reasoning. The combination of 
the existing normative price database, residual statistical base with the experience of people 
involved in the implementation, allows for estimating the risk [1] in the cost estimate calculation.
4. Conclusions
Currently in Poland, differences in the employer’s calculations and bid calculations, as 
well as between the bids submitted by building contractors, are considerable. There are many 
reasons, most of them mentioned in this article, which lead to this. It is important to strive 
for the greatest precision in cost estimate calculations, as well as to minimize the differences 
between the employer’s and bid calculations. Situations in which the differences between the 
employer’s estimated value, and the bids submitted often exceed 20%, 50% and even 100% 
are not acceptable. Using the cost estimate calculations the entity contracting construction 
works should arrive at a number which is as close as possible to the market prices, and 
therefore the most realistic prices in the bids submitted by contractors. It is therefore necessary 
to verify employer’s calculations based on a knowledge base containing the bid prices from 
selected and successfully completed works.
R e f e r e n c e s
[1] Bętkowski M., Pownuk A., Szacowanie ryzyka kosztowego procesu budowlanego z wy-
korzystaniem zmiennej losowej o parametrach rozmytych w oparciu o metodę Monte-
Carlo, Konferencja naukowo-techniczna Budownictwo polskie w rok po wstąpieniu do 
Unii Europejskiej, Gdańsk 9–11 june 2005, 13-22.
[2] Górecki J., Koszty budowy w perspektywie zmienności czynników kosztotwórczych, 
Przegląd Budowlany, Vol. 2, 2013, 45-50.
83
[3] Juszczyk M., Modelowanie kosztów realizacji budynków mieszkalnych z zastosowaniem 
zespołów sztucznych sieci neuronowych, Technical Transactions, series Civil 
Engineering, vol. 107(2), 2010, 167-175. 
 [4] Kim M., Lee S., Woo S., Shin DH., Approximate Cost Estimating Model for River 
Facility Construction Based on Case-Based Reasoning with Genetic Algorithms, KSCE 
Journal of Civil Engineering, Vol. 16(3), 2012, 283-292.
[5] Leśniak A., Plebankiewicz E., Zima K., Wpływ założeń kalkulacyjnych na wynik 
oszacowania kosztów robot budowlanych, Technical Transactions, series Civil 
Engineering, Vol. 109(20), 2012, 75-87.
[6] Mianaei H.S., Iranmanesh S.H., Akbari H., Application of Case-Based Reasoning in 
cost estimation of drilling wells, IPCSIT, Vol. 31, 2012, 186-193.
[7] Orłowski H.J., Przyczyny różnicy cen w kosztorysach ofertowych na roboty budowlane, 
Buduj z Głową, Vol. 3, 2012.
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The reasons for differences in calculations in investor’s and contractor’s estimations

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The reasons for differences in calculations in investor’s and contractor’s estimations

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