Rework costs: 3 items to price before a public job

Key takeaways

• Check which inspection rules apply before pricing access and labor.
• Price removal and replacement separately.
• Keep dated cost-to-complete estimates for closeout items.

On a public job, some of those costs are set by rules outside your own estimate. They can show up as inspection support you must provide, as rejected work you must replace, or as money held back at closeout. The bid is the point where you can still price them into the number, so it helps to know the rules before you submit.

This post covers three of those costs. The rules come from three different public sources: a federal clause in the Federal Acquisition Regulation, the construction manual from California's Department of Transportation, and a Florida statute. Each rule holds only where its own source applies, and each section says where. None of these rules replaces the contract you are bidding on, so check your bid documents before you price from any example here. The quoted text comes from the official pages linked in each section.

Government inspection support under the federal clause

Under the clause titled Inspection-Dismantling, Demolition, or Removal of Improvements in FAR 52.246-13, the contractor must furnish "promptly, and at no increase in contract price, all reasonable facilities, labor, and materials necessary for safe and convenient inspection by the Government." Acquisition.gov, FAR 52.246-13

That clause is written for dismantling, demolition, and removal work, so first confirm that your scope falls under it. Do not carry its terms over to other federal work on the strength of this post.

For pricing, treat inspection support as part of your base price, not as a future change order.

Define the reasonable facilities your job needs for inspection. Start with the access an inspector needs to reach the work, the conditions that let them see it safely, and the labor to escort them and open the work for review. Write each item into your bid file with a quantity and a duration, so the assumption can be checked against the job later.

If you are the one scheduling inspection visits, put each visit into the crew's day. A visit that finds access blocked takes time from your crew and from the inspector. The clause's requirement for safe and convenient inspection is a reason to plan access in advance rather than when the inspector arrives.

The clause also says that all workmanship performed under the contract is subject to Government inspection "at all times and places where dismantling or demolition work is being performed," unless the specifications designate otherwise. That covers the whole period the work is under way, not a single visit at the end. Your crew plan should allow for inspection while that work continues.

The clause also says the Government shall perform inspections "in a manner that will not unduly delay the work." Estimate inspection holds for your job. Carry the crew time they require in your schedule and general conditions.

California's construction manual covers the access side of inspection in its own terms. Caltrans' manual states that Section 5-1.01, "General," of the Standard Specifications requires the contractor to provide safe and unrestricted access to the work for inspection by Caltrans. Caltrans, Chapter 3, Section 5: Control of Work

The same page says that the Department of Industrial Relations, Division of Occupational Safety and Health (Cal/OSHA), establishes standards for safe access to work, and that Caltrans enforces them under Section 7-1.02K(6), "Occupational Safety and Health Standards," of the Standard Specifications.

On a Caltrans job, check two things before you price. First, does your scope already include the safe and unrestricted access that the Standard Specifications require for Caltrans inspection? Second, does your access plan follow the safety standards Caltrans enforces under Section 7-1.02K(6)? Price any gap you find now, while you can still adjust the bid.

Replacing rejected work under the federal clause

Under FAR 52.246-13, the contractor must promptly segregate and remove from the premises any unsatisfactory facilities, materials, and equipment used in contract performance, and promptly replace them with satisfactory items. Acquisition.gov, FAR 52.246-13

The sentence has two actions, removal and replacement, and the clause requires both. Price them as separate lines. Segregation and removal take labor, handling space on site, and equipment to move the rejected items off the premises. Replacement takes material, labor to install it, and the time to get new items to the site. Splitting the two lines makes it easier to see which part of a rejected item's cost is driving the number.

Record the lead time for each likely replacement item in your bid notes, because the time it takes to get a replacement is a schedule cost. Note in your bid file what the replacement must meet under the contract documents.

The same clause addresses liability. It states: "The Contractor and any surety shall be liable, to the extent specified in the contract for any damage or cost of repair or replacement." Find those terms in the bid documents, and decide whether your price covers the exposure they create.

A useful check for each rejected item in your scope is to write down who pays for removal, who pays for replacement, and who carries any damage. Where the answer depends on the contract, mark it in your bid notes so it is not settled by assumption.

Keep a running record for any rejected items that do come up. Note what each item was, when it was segregated, when it was removed, and when its replacement was ordered and delivered. Those dates show how the rework moved through the job, and they are the facts you will want on hand if the schedule or the liability terms are questioned.

Illustrative example: walk one rejected item through the bid

Trace one rejected item from inspection to closeout, and price each step as you reach it.

First, the inspector finds the material unsatisfactory. Second, the material is segregated and removed from the premises. That is the labor and handling line. Third, the replacement must be ordered and delivered, and its lead time becomes a schedule item. Fourth, the replacement is installed.

For a separate Florida illustration, a $30 cost-to-complete estimate gives a $45 holdback at 150 percent.

Writing this walk-through in your bid file gives you one place to check each cost. It also shows where a step you have not priced would fall.

Closeout holdbacks under Florida's statute

Under section 255.077, within 20 business days after developing the list, and after a proper invoice or payment request arrives, the public entity must pay the remaining contract balance, including remaining retainage under section 255.078, less 150 percent of the estimated cost to complete the listed items. Florida Senate, Chapter 255 Section 077

For your bid, keep a written cost-to-complete estimate for each item that could appear on a closeout list. The statute's figure depends on that estimate, so an unsupported number is hard to defend later.

Keep your invoices and payment requests complete and dated, so you can show when each one was received.

When you finish a listed item, record the completion date and keep any inspection or sign-off record the contract calls for. Keep the file for each item in one place so it can be pulled quickly.

Update your cost-to-complete estimates as the work moves. A figure that was reasonable at bid time may not match the work left at closeout, so date each estimate and note what changed. Keep the basis of each estimate on file with its date, since the statute's figure is built from the estimated cost to complete the listed items.

A good-faith dispute can keep money held. The statute also says: "If a good faith dispute exists as to whether one or more items identified on the list have been completed pursuant to the contract, the public entity may continue to withhold an amount not to exceed 150 percent of the total costs to complete such items." Florida Senate, Chapter 255 Section 077 That sets a ceiling on what can stay held during a dispute. Show it in your cash-flow plan as a range, with the upper figure tied to your cost-to-complete estimate.

A separate timing rule covers larger projects. For construction projects having an estimated cost of $10 million or more, paragraph (b) of section 255.077 sets a limit of 30 calendar days, counted after reaching substantial completion of the construction services purchased as defined in the contract or, if the contract does not define them, after reaching beneficial occupancy or use. The contract may extend that period, but not beyond 45 calendar days. Read the full paragraph before you use these days in your schedule. Florida Senate, Chapter 255 Section 077

For related payment planning, see retainage caps.

Schedule and cash flow move with the three rework costs

Each of the three costs changes your schedule or your cash flow, not only your cost total. Inspection holds add time to the work. Replacement items carry lead time, which can push out the work that depends on them. A Florida holdback sets an amount the public entity keeps back when it pays the balance, so your cash-flow plan should show payment timing and the holdback as separate items.

Write each rework assumption into your bid notes as a stated condition

Write each rework assumption in your bid notes as a stated condition, not as a silent number. For each cost line, note what it includes, which rule or contract section it rests on, what would change it, and who on the job has to act. An inspection line that assumes a particular access setup should say so. A replacement line that assumes a particular allocation of liability should name the contract terms it relies on.

Stated conditions are easier to review before award and easier to check after it. They also make it clear when a rule outside your estimate would change the number, which is the point of pricing these costs at the bid stage.

Write the conditions in plain words so a reviewer can see what the price assumes without decoding it. For example, an inspection line might say that the price covers the access and labor listed in the bid file for inspection under the federal clause, if the job falls under that clause. A replacement line might say that the price covers removal, haul-off, and replacement of rejected items at the lead times noted, and that liability follows the contract terms named in the notes.

If you use subcontractors for removal, replacement, or inspection support, pass the relevant conditions down into their scopes. Then the same assumptions appear in every price that touches the rework, and nobody is pricing from a different set of facts.

Before award, confirm which rules govern your job

Before award, confirm in writing which inspection, replacement and closeout rules apply to your job. Ask the owner or agency to identify the rules that govern the work, and keep the answer in your bid file. Then check each cost against this list:

• Inspection support: Confirm whether the work falls under FAR 52.246-13 or the Caltrans access requirement. List the facilities, labor, and materials you need for inspection and price them into the base bid.
• Replacement: Price removal, segregation, haul-off, replacement material and labor, and lead time. Note who carries damage or repair cost under the contract's liability terms.
• Closeout: Keep a cost-to-complete estimate for each item that could be listed. Check the applicable payment and list-development timing before scheduling closeout.

You can also put these questions to the owner or agency in writing before you submit:

• Which inspection clauses apply to this scope?
• Who provides safe access for inspection, and who pays for it?
• Who removes and replaces rejected work, and what does the contract say about liability for damage or repair?
• How will the closeout list be developed, and how are payment requests handled?

Keep the three costs on separate lines in your bid worksheet. A cost you name and price before award can be reviewed, and a cost left off the worksheet still shows up on the job. Keep in mind where each rule applies: the federal clause covers dismantling, demolition, and removal work, the Caltrans sections are the Standard Specifications the manual cites, and the Florida statute is Florida's rule.

Use the construction estimate audit for a broader bid review.

Today, choose one likely rejected item and record its removal cost, replacement lead time, and applicable contract terms.

Questions before award

Does the federal clause apply to every public job?

No; confirm that your scope falls under the dismantling, demolition, and removal clause before pricing from it.

Is a closeout holdback another replacement cost?

A holdback is money withheld from payment, so show it separately from the cost of replacement in your cash-flow plan.