3. Of late years, in order to permit of free dom in making changes without interfering with the liability of the parties, to save time, and for other reasons, the cost-plus-a-fixed-sum type of contract has come into vogue. Its advantage, among others, is that the contractor is under no risk, and therefore cannot be put out of business; and where the quantity and conditions cannot be determined beforehand, it has much merit. One argument against it, from the standpoint of the owner, is that the contractor, not having any thing to lose, will not be likely to strive as hard for economy as he would if he guaranteed the price.
4. The fourth form of contract enumerated above—Cost plus Percentage—has long been used on railroad work, and usually provides that the contractor is to receive as his compensation and for his overhead charges a certain percent age of his pay-roll, with plant rental added. On this basis the contractor has nothing to lose; and the owner is at the disadvantage that the less the contractor's economy of operation, the greater is the contractor's financial gain, so that the con tractor apparently has an incentive to wasteful ness. Many contracts, especially on road work, require the contractor to maintain the finished work for a certain number of years. This places a peculiar hardship upon the contractor who is not expecting to remain long in that thus eliminating the journeyman contractor. It requires, however, that he shall keep a consider able amount of money invested in plant at the call of that particular job, and therefore tends to impel a conservative man to bid high.
Warning. The man who is entrusted with the making of important estimates has resting upon him a large responsibility. His blunders
may beggar him or his employer; yet too often cheap men of limited experience are employed on this work, and rules are accepted as substitutes for judgment. Effort has been made in this arti cle to make the methods of estimating simple and the theory clear; and to the younger men of the profession, it may seem that estimating is easy. Nothing could be farther from the truth. All that we can hope to have done is to boil down some of the gambling features of estimating, and place it upon a rational plane. To claim more would be dishonest and misleading. When a man says that he can safely estimate the cost of outside work within two per cent of perform ance, he may at once be written down as a fool or a liar. The difference in cost between a job that is run with ordinary methods and ordinary management, and the same job with proper cost analysis and thoroughly up-to-date management, handled with push and snap, may easily be 30 per cent; and the claim of ability to guess with in two or three per cent, without knowing a large number of the uncertain elements, is ab surd. Therefore, in making use of this article, the reader must bear in mind that it is not at tempted to predict what he or his organization will be able to do. A schedule is presented, cov ering most of the items on the main classes of work discussed in this treatise, the use of which should prevent many blunders of omission; but the reader must not understand that we claim to have given him a substitute for brains. He must use his own good judgment in every case.
With this preliminary consideration of gen eral principles and conditions, we now pass to the specific discussion of estimates.