FAR 36.203—Government estimate of construction costs.
Plain-English Summary
FAR 36.203 requires the Government to develop an independent estimate of construction costs for proposed construction contracts and for construction contract modifications expected to exceed the simplified acquisition threshold, and it allows the contracting officer to require an estimate even for smaller work when appropriate. The section also explains when the estimate must be prepared in two-step sealed bidding—at the time the requirements are definitized—and how detailed the estimate must be, namely detailed enough to reflect how the Government would compete for the work itself. A major purpose of the rule is to give the contracting officer a sound basis for price analysis, negotiation, and award decisions, especially in construction where scope, labor, materials, and site conditions can materially affect cost. The section also protects the estimate from unnecessary disclosure by limiting access to personnel with a need to know, while allowing narrow disclosure of specific cost breakdown information during negotiations when needed to reach a fair and reasonable price. In practice, this means the estimate is both a pricing tool and a sensitive source-selection/negotiation document that must be prepared early, maintained carefully, and shared only on a need-to-know basis.
Key Rules
Independent estimate required
An independent Government estimate must be prepared for each proposed construction contract and for each anticipated contract modification that is expected to exceed the simplified acquisition threshold. The estimate must be furnished to the contracting officer at the earliest practicable time.
Smaller work may still need estimate
Even when the work is not expected to exceed the simplified acquisition threshold, the contracting officer may still require an estimate. This gives the CO discretion to obtain a pricing benchmark when the acquisition circumstances warrant it.
Estimate must be detailed
The estimate must be prepared in as much detail as if the Government were competing for the award. This means it should reflect realistic labor, materials, equipment, overhead, and other cost elements rather than a rough lump-sum figure.
Two-step bidding timing
When two-step sealed bidding is used, the independent Government estimate is prepared when the contract requirements are definitized. The estimate should therefore align with the final, settled scope of work.
Access is tightly limited
Information about the Government estimate may be shared only with Government personnel whose official duties require knowledge of it. The estimate is treated as sensitive procurement information and is not for broad internal circulation.
Limited disclosure in negotiations
During contract negotiations, the contracting officer may disclose specialized task cost breakdown figures from the estimate to the extent necessary to reach a fair and reasonable price. The overall total of the Government estimate generally may not be disclosed unless agency regulations specifically allow it.
Responsibilities
Agency
Ensure procedures and controls exist for preparing, safeguarding, and limiting access to independent Government estimates, including any agency-specific rules governing disclosure.
Estimating personnel / technical staff
Prepare a detailed, independent construction cost estimate early enough to support acquisition planning, pricing analysis, and negotiation, and do so with sufficient detail to mirror how the Government would compete for the work.
Contracting Officer
Obtain and use the estimate for proposed contracts and qualifying modifications, decide whether to require an estimate for smaller work, use the estimate in price analysis and negotiations, and protect the estimate from unauthorized disclosure.
Contracting Officer in two-step sealed bidding
Ensure the independent Government estimate is prepared when requirements are definitized so it reflects the final scope before award decisions are made.
Government personnel with a need to know
Access the estimate only when official duties require it and maintain its confidentiality consistent with procurement integrity and agency rules.
Practical Implications
The estimate is a key benchmark for evaluating contractor prices, so if it is late, incomplete, or overly generic, the contracting officer loses an important tool for determining price reasonableness.
Because the estimate must be detailed, teams should build it from current labor, material, equipment, site, and overhead assumptions rather than relying on prior project totals or rough historical averages.
Unauthorized disclosure is a common risk: broad email distribution, casual discussion, or inclusion in shared files can undermine negotiations and create procurement integrity concerns.
In negotiations, the CO may share only targeted breakdown information when necessary; disclosing the total estimate can distort bargaining and is generally prohibited unless agency rules expressly permit it.
For two-step sealed bidding, timing matters: preparing the estimate too early, before requirements are definitized, can make it less useful or inaccurate, while preparing it too late can weaken the Government’s pricing position.
Official Regulatory Text
(a) An independent Government estimate of construction costs shall be prepared and furnished to the contracting officer at the earliest practicable time for each proposed contract and for each contract modification anticipated to exceed the simplified acquisition threshold. The contracting officer may require an estimate when the cost of required work is not anticipated to exceed the simplified acquisition threshold. The estimate shall be prepared in as much detail as though the Government were competing for award. (b) When two-step sealed bidding is used, the independent Government estimate shall be prepared when the contract requirements are definitized. (c) Access to information concerning the Government estimate shall be limited to Government personnel whose official duties require knowledge of the estimate. An exception to this rule may be made during contract negotiations to allow the contracting officer to identify a specialized task and disclose the associated cost breakdown figures in the Government estimate, but only to the extent deemed necessary to arrive at a fair and reasonable price. The overall amount of the Government’s estimate shall not be disclosed except as permitted by agency regulations.