spreading indirects

Spreading Indirects

Spreading the Indirect Costs over the BOQ

This Candy facility allows you to manage the spread of Indirect Costs over bill items in a controlled manner.

What has to be spread and where it is spread is set-up by the User early in the bid process and can be thoroughly tested beforehand. At finalisation the Indirects can be re-spread at the last minute with confidence.

How the Spreading works

There are a variety of ways to organise the spreading of the Indirects - this is controlled through named “Procedures”.

Each Procedure has a list of Indirect items assigned to it and a list of target bill items over which they are to be spread.

The Procedures have no effect until the Indirect Spreading calculation is invoked by the User.

Where the Spreading goes

The Indirect spread amounts are recorded against each bill item.

This Spread amount is divided by the quantity to calculate a “Spread rate”. The Spread rate is added to the bill item’s Gross rate and stored as its Selling rate.

The User elects to use either the Bill or Final quantity to derive the Spread rate.

Three types of spreading are used:

1. Specific2. Trade related3. Balance

During the spreading calculation, the Specific and Trade related spreads are done first. Any amounts remaining against Indirect items are then spread proportionally over the entire bill, except for items that have been marked as “blocked” or have zero rates.

Types of Indirect Spreading

The Specific spreader takes the total amount of the Indirects allocated to a Procedure, modifies it by the percentage specified and spreads this amount over the target bill items in proportion to each bill item’s Gross amount.

Blocking a bill item does not stop it from receiving a Specific spread – these ignore a bill item’s Blocked status. Blocking is explained below.

1. Specific Spreading

The Trade Related spreader takes the total amount allocated to the Procedure, modifies it by the percentage specified and spreads it over all the target bill items of the specified Trade in proportion to each bill item’s Gross amount.

Blocking a bill item prevents it from receiving a Trade Related spread.

2. Trade Related Spreading

After the Specific and Trade Related spreading, any unallocated Indirect amounts are spread over all the bill items in proportion to their Gross amounts – this Balance spread ensures that the entire Indirects are spread over the bill.

Blocked bill items are skipped in the Balance spreading process.

If no Specific or Trade related spreading had been done, then the Balance spread would distribute the Indirects over all the items in the bill in proportion to their Gross amount.

3. Spreading the Balance

Any bill item can be marked as “blocked” – it will then only accept Specific spreads. Typically, PC sums would be blocked.

Items with zero quantity (rate only) cannot be resolved by the Indirects spreading process and they must be Blocked. A quantity is essential to calculate the Spread.

The spreading process will be aborted unless every zero quantity bill item has been Blocked by the User. The User is responsible for rate only items like this and must enter the Selling rates manually.

Blocking bill items

Bill items with a zero rate can be included in the Indirect spreading under the following conditions:

1. If multiple items with zero rates are included in a procedure, the spread is divided equally, ie: two items get half each, three items get a third each, etc.

2. Items with zero rates cannot be included in a procedure with any items that have rates, and will stop the spreading process.

Items with zero rates are ignored in the Balance spreading.

Items with a zero rate

Bill items with negative rates become less negative after spreading – a positive spread contribution reduces the negativity .

The Price codes must be unique – this is because the Selling rates are manipulated for individual bill items.

The bill items and the Indirects should be marked-up prior to spreading.

If any Indirect item are found to be contributing more than 100% of their Gross amounts the spreading is aborted and a list of offending Indirect items is displayed.

Other points….

The Indirect Costs

The Indirect Costs are accessed from the Estimating Document manager1.

Any of these documents can be used to select the IDC items to spread over the bill2.

Spreading Indirect Costs

1

2

The Indirect Costs

The Candy Indirect Cost are used to calculate overheads for an estimate and distribute these over time1.

The cost of each item is calculated using Price code worksheets as for bill items.

This is actually the intersection of the Candy pricing mechanisms and a SitePlan program. Items in the Indirects can be time related (red bars), fixed costs spread over time (blue bars).


1

The IDC Spreading documents

There are three primary documents used to manage the spreading of Indirect Cost items over the bill1 – these will be used in the following example.


1

Setting up procedures

Named procedures1 are created which spread groups of Indirect items over groups of bill items.

Each procedure has a list of source Indirect items2 and the percentage of

their value to be spread3. The procedure must also have a list of bill items over which to spread the amount4.

The above amount is spread over the destination bill items in proportion to their Gross Amounts.


1 3 2 4

Setting up Procedures

Step 1: Make a Procedure by entering a descriptive name1.

Step 2: Select the Indirect items and drag them onto the Procedure2.

Step 3: Enter the percentage of the Indirect amounts to be spread by this Procedure3.


1

2

23

Define the Destination items

Step 4: Select the destination bill item(s) over which the Procedure’s Indirect items are to be spread. Drag these onto the Procedure1.

So what we have specified here is that 70% of the value of five Indirect items is to be spread over the one bill item.

This is termed a “specific” spread – one or more Indirect items targeted at one or more specific bill items.


2

1

View from the Indirects

Each Indirect item records the spread by keeping the name of the Procedure and the percentage of its amount that is contributed to the spread1.

The Indirect items have no knowledge about the destination of the spread – only the Procedure knows this.


1

View from the bill

The bill items record the contributing Procedures and amounts1.

In addition, the bill items record the type of spread used by a procedure2 – Specific, Trade and/or Balance. In this case the procedure was a Specific spread and is shown in the Specific spread column3.


1 1

2

3

Another Procedure

This example is made up of the running cost of the Batch plant1.


1

Trade Related spread

To spread the Batch plant procedure over the concrete items we select only the Concrete trade the bill items as the targets1.


1


The Concrete trade is marked as the destination for this spread1.


1

View from the Indirects

Again, each Indirect item records the spread by keeping the name of the Procedure and the percentage of its amount that it contributes to the

spread1.


1


The batch plant running costs have been spread over all the concrete items in the bill - some bill items are shown here in the circle1. Note how they are displayed in the Trade spread column.


1

Spreading the balance

After the Specific and Trade related spreads have been done, any remaining amounts will be spread over the entire bill (except for Blocked items).

This Balancing spread is proportional to the spread already allocated to each item and displayed in the Balance column1.


1

The Spread splits

The Indirect spreads are displayed split into the three columns of Specific, Trade and Balance with a Total.


321 4

Calculating the Selling rate

The Gross amount1 and the Total

Spread amount2 for each bill item are

added to make a new Selling amount3. This amount is converted to the Selling rate by dividing by the Bill quantity.

Note: Any bill item receiving Indirect spread will have its Selling rate changed in the process. Items that are Blocked and have no Specific spread will be unchanged.


1 2 3

Blocking bill items

There are situations where particular bill items should not receive any Indirect spread. For example, PC sum items.

In this example, if we didn’t want the Wood float finish item to accept any burden from the Batch plant running costs, it could be marked as Blocked1.

This will prevent the Blocked item from Indirect spread from any Trade or Balancing spreads. However, Specific spreads would be accepted by a Blocked item. This allows you to put a specific amount against particular items.


Blocking bill items

Blocked items are marked with the word Blocked1.

Note how the Selling rate is the same as the Gross rate in Blocked items2.

The Procedure allocated to a Blocked item should be blank - displayed erroneously here.


12 2

Exceptions: Zero Quantity

Items with zero quantity are never included in the Indirects spread and must be marked as Blocked1.

Any zero quantity item that is not blocked will stop the spreading process and will be included in a list of items that must be dealt with.


1

Exceptions: Zero Rate

Items with a zero Rate will accept Specific spread but are automatically ignored by Trade and Balancing spreads.

If more than one zero rate item is in the target list of a procedure, the spread will be divided evenly amongst them For example, if there are three items they will each get one third of the spread amount.

If a zero rated item is mixed in with items with rates the spread will stop – zero rated items may not occupy a procedure which also has rated items.


1

1. Price codes must be unique against bill items.

2. The Price codes should be marked-up before spreading.

3. The Spreading process changes the Selling rates to reflect the sum of the Gross rate and the Indirect Spread rate.

4. Using this facility means the estimator can test the spreading well before bid finalisation and do the final spread with confidence at the last minute.

Final comments

The End

spreading indirects

Documents

bill items bill items

blocked bill items

bill items gross rate

spread rate

entire bill

list of target bill

balance spread

quantity bill item