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Group

Procurement Exercise – The Big Ideas Paint Job


Big Ideas (Pvt) Ltd is going through a rebranding exercise. As part of the new image they are
repainting their Head Office in the new ‘Lime Green’ to project their new Eco Friendly image. Their
procurement team is in the process of awarding the painting contract – given the shortage of time
they don’t have the time to do a very detailed estimate of the external walls that will be painted in
the first part, but they think the variation should not be a big problem. This work can be done
throughout the week but due to security considerations no more than 9 people (with 1 supervisor)
can be allowed at the site at any one time.

The procurement team is exploring various options for awarding the work including a) Fixed Cost, b)
Cost Plus and c) Time & Material contract. But, they have done some due diligence and gathered
information on the job and have a target price in mind as they go into contract.

You are going to bid for the job based on a contract type that will be assigned to your group. Your
job is to win the contract and to turn a profit from this work.

The relevant information is as follows-

 Scope of Work: To paint the exterior of Big Ideas Head Quarter in Lime Green with good
quality paint. The total painted area is approximately 40,000 sqft (it could be +/- 20% less or
more). The job requires 2 coats of paint over the 40,000 sqft.
 Material: Paint is sold in 16 liter Buckets. Prices depend on quality/manufacturer – ICI Rs.
2500, Berger 2200, Black Horse 2050, Master 2000
 Labor: Typical daily charges are Rs. 600/day for painter and Rs. 1600/day for supervisor
 Productivity: 1 liter of paint is required for 40 sqft of surface (single coat), and 1 labor can
paint 1000 sqft per day.
 Profit Margin: There is no fixed margin; generally it ranges from 10-20% of the total cost of
Labor & Material

Your team has to prepare the bid on the contract type assigned to it. The object is to win the
contract.

1. Fixed Cost – Specify as single Cost Figure in Rs. For the job
2. Unit Rate – Specify cost in Rs./Sqft painted surface inclusive of labor, material and profit
3. Time & Material – Specify cost for paint, labor, supervisor and your profit margin (either
fixed or as percent of the total paint, labor, supervisor cost)

1
The Bid should be in the following format (depending on the contract type)

Fixed Price

Job Scope:
Lump Sum Bid Cost (Rs):
Duration (Days):

Cost Plus

Job Scope: Rate (Rs/sqft) Quantity (sqft) Amount Rs.


Painting
Duration (Days):

Time & Material

Job Scope: Rate (Rs/ Unit) Quantity (units) Amount Rs.


Paint Cost: (Berger) 2200 125 packs 275,000
Labor Cost: 600 80 labor 48,000
Supervisor Cost: 1600 10 days 16,000
Profit 15% on total cost 50,850
Total Cost Estimate (Rs): 389,850
Duration (Days): 10 days with 8 labor and 1 supervisor daily