KD Construction Company: Bidding and Cost Estimation

KD Construction is a new company in the construction industry, it was opened by Mr. Irfan and Mr. Kamran on February 6, 2013. The company constructs houses for individuals and for builders, commercial shopping malls and also works as a subcontractor for big construction companies like Habib, Paragon and AMCE Private Limited. KD worked on only small projects till now, but on January 17, 2018 Mr. Irfan received a call from a builder to work with him on a new project. This will be the first time that they got a contract from a big builder and they were asked to build houses for four variants of areas (in square yards 150, 250, 300 and 600) on which they had to work. They gave their final price of 107 crores and 50 lacs for the whole project, but they heard from the market that other construction companies were also trying for this project but the builder preferred them for this project. Mr. Irfan and Mr. Kamran have to estimate costs for the overall project whether to accept the project or not, to analyze whether the offered price was suitable or not and if they had estimated cost of total project they can negotiate on final price if the price is not suitable. As KD is in existence for five years, KD's employees are well aware of the prices and conditions of the country moreover, country's economic conditions can fluctuate any time due to political instability. With the experience of five years, KD construction wanted to estimate a budget for the whole project of 20 acres on which they have to construct 75% houses and 25% of amenities (Mosque, Road, Park, School, Hospital) (See Exhibit 1) in one year.