Estimating Practice Exam

What percentage can general expenses constitute of the total bid price in some cases?

1. 5%

2. 10%

3. 15% or more

4. 25% or more

The correct answer is: 15% or more

General expenses in a bid typically encompass a wide range of overhead costs that are necessary for the overall execution of a project but are not directly tied to any particular line item or activity. These can include administrative costs, utilities, insurance, and other indirect expenses. In some bidding scenarios, especially ones involving complex projects or larger scopes of work, general expenses can indeed represent 15% or more of the total bid price. This consideration can be crucial for ensuring that all necessary costs are covered to avoid underbidding or financial loss during project execution. Such an allocation ensures that the contractor can maintain business operations and deliver the project effectively. Defining a threshold of 15% or higher for general expenses acknowledges the intricacies and dynamics of project management and budgeting, reflecting the need for a cushion that accounts for unforeseen costs or expenditures that arise throughout the duration of the project. In contrast, percentages like 5%, 10%, or 25% may not adequately capture the potential financial realities encountered in larger, more complex projects, which is why the 15% or more guideline is a more recognized benchmark in industry practice.