Higher Diploma in Surveying EG114111

Module Title Cost Estimating CON4553

Higher Diploma in Surveying EG114111

Module Title Cost Estimating CON4553

Content Page

Page
1 2 3 4 5 6 7 8 Working Stages of a Construction Project Cost Control & Design Factors Approximate Estimating Tendering & Examination of Tender Factors in Tender Process Pricing of Construction Works Concrete Works Fluctuation 1/4 to 4/4 1/10 to 10/10 1/9 to 9/9 1/11 to 11/11 1/7 to 7/7 1/16 to 16/16 1/8 to 8/8 1/5 to 5/5

Working Stages of A Construction Project

Working Stages of A Construction Project

The Client initiates the construction of a project by deciding to invest in the industry. From the beginning of the client's decision to build, there are several working stages as from design, construction and up to completion of the building.

These are classified as follows:1) Client's Brief This is the stage in which the client's requirements are established. In the early stage, the Clients ideas maybe vague and the client will usually call upon an architect to prepare the brief. The brief will contain the clients requirements by stating the performance expected of the project with any restraints on the freedom of the design. It will also contain particulars important to the client, such as the cost limits and timing. This client may be either one of the following: A Government Department for eg. Architectural Services department Public Corporation for eg. MTR Utility services for eg. HK Electric Private development companies for eg. Sun Hung Kai

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2)

Design

The stage in which the brief is translated into building terms. This is normally carried out by an architect appointed by the client. The design process can be from preparation of scheme design involving preparation of sketch plans and preliminary estimates of costs. An outline specification and cost plan maybe prepared. Detail design is the stage whereby a full design and specification will be prepared. Architect, structural engineer, building services engineer and quantity surveyor are normally appointed during this stage for preparing the design and cost estimate. 3) Tendering The stage in which a suitable contractor is selected and an acceptable offer is obtained from the contractor for the work. The client will invite contractors to submit tenders for the project and tendering documents are normally prepared by the clients quantity surveyor. Once the tenders are returned by the contractors, the quantity surveyor will go through the tendering process until recommendation regarding a contractor is made. 4) Contract The contract stage in which the terms of a contract are agreed and the construction contract arranged and signed by both parties (the Client and the Contractor). The Client will hand over the site to the Contractor for his construction process.

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5)

Construction

The stage in which the design is translated and transformed into actual building works. The work is carried out by the selected contractor in accordance with the drawings and specifications. The clients representatives shall carry out the supervision work in accordance with the requirement in the contract.

6)

Completion

This is the stage after practical completion of construction. When the works are substantially completed, the Architect will issue a Substantial Completion Certificate for the works. As there is no definition in the Standard Form of Contract concerning the precise stage which substantial completion is achieved, it will be for the Architect to decide. Once the Substantial Completion Certificate is issued, the Defects Liability Period will commence. For this period of time, the contractor is required to maintain and repair the building in respect of damage occurring through poor workmanship, such as plaster cracking, doors and windows not closing properly etc. On completion of the repairs, the Architect is to issue a Defects Rectification Certificate and upon agreement of the Final Account, the Architect will issue of the Final Certificate in which all contractual obligations are discharged.

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7)

Maintenance Programme During the utilisation of the building, Client will normally require a maintenance programme for the building to preserve the building. Maintenance will ensure that the building will continue to serve its purpose and preserve the value of the building. Maintenance is defined as work undertaken in order to keep or restore every facility, of every part of the site, building and contents to an acceptable standard.

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Cost Control & Design Factors

Cost Control & The Influence of Design Factors on Costs

Main Aims of Cost Control:-

1) To give the building clients good value for money of satisfactory appearance and well suited to perform the functions of which it is required

2) To achieve a balanced and logical distribution of the funds between various part of the building - thus the sums allocated to foundations, structure, finishing, services and other elements of the building will be properly related to the class of building and to each other

3) To keep total expenditure within the amount agreed by the client based on approximate estimate of the cost prepared by the Quantity Surveyor in the early stages of the design.

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The Influence of Design Factors on Costs

The costs of building are influenced by a variety of factors which one of them is design variables. The cost effects of alternative design solutions must be considered when developing a scheme. In order to evaluate these effects, it is important to appreciate how costs are influenced by the following design factors:-

a)

Plan Shape

The shape of a building has an important effect on cost. As a general rule, the simpler the shape, the lower will be its unit cost. Circular shape In theory, the circle is the most economical shape as it provides the optimum wall to floor ratio (maximum floor area within a given envelope). However, the high cost of circular work together with the unusable area makes it uneconomical. Rectangular shape Rectangular buildings have a greater perimeter (perimeter to floor ratio) than a square and maybe less economical. However, rectangular shape offers more practical or functional aspects.

Square shape Square, being the simplest shape will be most economical. However, there are problems associated with square is that the requirement of artificial lighting and ventilation in internal spaces and rooms. Therefore a square building maybe the most economical but may not be the most practical solution. A large square structure would contain areas in the centre of the building which is deficient in natural lighting. Difficulties also arise in planning the internal layout of the accommodation.

Need to balance function, cost and appearance.

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Figure 1:- Compare the two buildings shown in Fig. 1 which have the same floor area. In building B, there is more quantity of external wall to envelope the same floor area, setting out costs are increased, excavation costs and drainage costs are increased. Brickwork and roofing will be more costly due to the work being more complicated.

Extracted from Building Economics, Ivor H Seeley

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b) Storey Heights/Building Heights

Variations in storey heights cause changes in the cost of the building without changing the floor area - Storey height is height measured from floor finish to floor finish.

Why the increase in costs?

Constructional costs of buildings rise with increases in their height. By increasing the floor to ceiling height, and thereby increasing cubic content, costs are increased given a constant floor area. This is due to the increases in quantities for the external envelope, internal walls, increases in vertical elements of services and wall finishes, additional lighting requirement, increased fire protection requirements, uses of expensive plants etc. However, these costs can be partly offset by the better utilization of highly priced land and the reduced cost of external circulation works.

Figure 2
Extracted from Building Economics, Ivor H Seeley

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b) Storey Heights/Building Heights

2

Buildings with high storey height will cost more per m of floor area than building with lower storey height. The increase in cost is due to the increase in cost for vertical elements and future maintenance especially in building services. A higher storey height results in higher wall to floor ratio.

There are factors which make increase of building height desirable, for eg:-

1) When in particular site, it is desirable to construct a tall building to obtain a large floor area with good day lighting.

2) Where the addition of extra storey will not affect the structural form of the building, then the construction cost may fall per unit of floor area 3) Foundation cost/m2 of floor area will fall with increases in the number of storeys provided in the form of foundations remained unchanged.

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c)

Size of Building
2

Increases in the size of buildings usually produce reductions in the cost per m of floor area. (Refer to Example in Figure 3)

The main reasons are that:-

1) On costs do not rise proportionately with increases in the plan size of a building. Certain fixed costs such as the transportation, temporary roads, site facilities may not vary much with the increase in the size of a building.

2) A large project is often less costly to build as the wall/floor ratio reduces, and there is a possible proportional reduction in the extra costs of windows and doors over walls.

3) With high rise buildings, a cost advantage may be due to lifts serving a larger floor area and greater number of occupants with an increased plan area.

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Extracted from Building Economics, Ivor H Seeley

Figure 3

Effect of change in size of buildings:Building A Building B 240 m

2

Floor Area Length of Enclosing Wall Length of m2 of Floor Area

120 m

46 m

76 m

383 mm

317 mm

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d) Perimeter/Floor Area Ratios Plan shape directly influences the enclosing walls which affect the external walls, windows and doors. Different plans can be compared by examining the ratio of enclosing walls to floor in square metres (known as the wall/floor ratio). The lower the wall/floor ratio, the more economical is the design

With reference to Figure 4, a comparison is made between Building A and Building B of different shapes. Both building have an identical floor area of 244 m , and assuming the buildings are each of 2 storeys, the total floor area is 488 m .
2 2

The length of enclosing wall in Building A is 70 m while that in Building B is 100 m. Assuming the height of walling is 6 m, the areas of enclosing walls for Building A is 420 m2 (70 m x 6 m = 420 m ) while B is 600 m2 (100 m x 6 m =600 m ). The wall/floor ratio for both buildings :Building A = 420 488 Building B =600 488 =0.86
2 2

=1.23

Building B is uneconomical with a greater area of enclosing walls than A. Thus, Building B is more likely to more expensive on account of the increased perimeter costs.

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Extracted from Building Economics, Ivor H Seeley

Figure 4 Perimeter/floor area Ratio

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e) Internal Layout An economic layout for a building will have as one of its main aims the reduction of circulation space to a minimum. Circulation space in entrance halls, corridors, stairways and liftwells are space which cannot be profitably use but involves cost in lighting, maintenance etc. The need to reduce circulation space must be compatible to the satisfactory function of the building. Elimination of lengths of corridor for open plan is one consideration, careful planning of suitable circulation route is also another example of efficient layout.

f) Specification The quality of materials and the standard of workmanship required must be taken into account in the cost of a project. A higher quality requirement will definitely influences the cost of the project and alternative may be considered when adjusting the cost.

g) Buildability The availability of building components and ease of construction will influence building costs. For eg, the use of prefabricated components may speed up the site operations although they may be more cost and time effective. However, the use of prefabricated components can be limited as they do not provide originality in design. Consideration must be given to the compromise between time, cost and quality.

h)

Special Requirement of the Building Some buildings are for special use such as hospital which may require more innovated and complex design to accommodate medical equipment and provide special hygienic condition. When there is such specialism, the Users Requirement will be a priority in the design element.

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Approximate Estimating

Approximate Estimating
Primary function of approximate estimating is to produce a forecast of the probable cost of a future project. There a number of techniques available and the choice will be influenced by the information available, the experience of the QS and the amount and form of cost data available to the QS. 1) Unit Method The unit method is to allocate a cost to each functional unit of a building, be it persons, seats, beds, car spaces etc. Functional units are those factors which express the intended use of the building. Certain categories of building such as schools- cost per student place, hospital- cost per bed place are suited to use this method. The method is simple but requires experience in order to select the appropriate rate. The rate is usually derived from previous completed building of similar type. The difference in size and construction are adjusted and used to forecast the cost of current projects.

Example:Data from a previous Car park Project Total cost Number of spaces Cost per unit $1,000,000 50 $1,000,000 = $20,000 per car park space.

50 Cost per space with adjustment for quality, location and market condition $22,000/space -------------------------------------------------------------------------------------------------------Proposed Carpark 250 spaces Cost Estimate 250 no. of space x $22,000=$5,500,000

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1) Unit Method (contd)

Advantages:(i) A simple and fast method.

(ii)

May be used to establish an overall target for budgetary estimates.

(iii)

If used in conjunction with experienced consultant, maybe used in calculating of investment.

Disadvantages (i) Difficult to assess the variation in rates due to differences in design, materials, constructional method etc.

(ii)

A blunt tool for establishing a general guideline which estimates need to be followed up with more reliable method when detailed information is available.

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2) Superficial/ Floor Area Method Construction Floor Areas (CFA) are defined as covered spaces fulfilling the functional requirements of the building measured to the outside face of the enclosing external wall. a. Includes area occupied by partitions, columns, internal structural walls, stairwells, lift wells and the like. b. No deduction for internal walls, partitions, staircase, landings, lift shafts, plant rooms, water tanks and the like. c. Excludes any spaces fulfilling the functional requirements of the building which are not enclosed spaces (eg. open walkways, roof top car parks and the like) d. Sloping surfaces such as staircase and the like should be measured flat on plan.

Gross Floor Area (GFA) plot ratio area permitted under the lease conditions with normal exemptions from such as refuge areas, covered area intended for playgrounds, plant rooms, balconies as in green design, communal sky garden, podium garden and the like. Normal ratios between GFA and CFA Residential Office/Commercial Hotel GFA: CFA = 1: 1.15 to 1.25 GFA: CFA = 1: 1.15 to 1.25 GFA: CFA = 1: 1.25 to 1.30

A unit rate is calculated per square metre of floor area and the probable total cost of the building is obtained by CFA or GFA Area (m ) x $/ m = Total Cost Estimate.
2 2

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2)

Superficial/ Floor Area Method (contd)

There are several considerations in the use of this method: Firstly, the cost estimate taken into account all the spaces required to make the building function properly Secondly, projects with different standards or types of usage, will be priced using different rates. A variety of rates will be required depending on the function of the building. Thirdly, items of work which cannot be related to the floor are will need to be priced at a separate item for eg. Preliminaries, Contingencies etc.

Advantages:(i) A popular method as it is comparative easy to calculate the floor area and the costs are expressed in a way which is readily understood by the client.

(ii)

Majority of items are related to floor area and it is easier to adjust.

(iii)

Large data sources and most published cost data is expressed in this form.

Disadvantages:(i) It cannot take account of changes in shape or total height of the building.

(ii)

As with other methods, it needs to make allowances for number of variables such as site conditions, constructional methods etc.

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Example of Superficial Method (I):-

Extracted from Building Economics, Ivor H Seeley

Example:The measurement for CFA is taken to the outside face of the external walls and no deduction is made for the internal walls. One brick wall thick is taken to be 225 mm. Area of workshops = 60.00 x 26.00 = 1560.00 m Area of Offices
2 2

= 60.00 x 4.00 = 240.00 m

Estimated Cost of Office/Workshop Block would be :Workshops Offices 1560.00 m 240.00 m

2

x $3,000 =$4,680,000.00 x $5,000 =$1,200,000.00 $5,880.000.00

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Example of Superficial Method (II)

Site area Plot ratio GFA =300 m2 = 15 =300 m2 x 15 =4500 m2 GFA: CFA Ratio =1: 1.20 Assumed CFA =4500 m2 x 1.20 =5400 m2

Cost Information based on similar project of March 2012 : $ 5500/m2 (Foundation & Structure) $2500/m2 (Finishing) $3,000/m2 (Building Services including Lifts) Indices Index of similar project used March 2012 1087 1433

Index at the date of tender out for new project May 2013

Percentage Adjustment

(1433-1087) =31.83 % 1087

Adjusted Cost Data:$5500 + ($5500/m2 x 31.38%) $2500 + ($2500/m2 x 31.38%) $3000 + ($3000/m2 x 31.38%) =$7225.90/m2 =$3284.50/m2 =$3941.40/m2

Allowance for Preliminaries 10 % of the Builders Work Contingencies

Allowance for Contingencies 5 % of the Estimated Contract Sum

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Example of Superficial Method (II)

Calculation of Cost Estimate:Foundation & Structure 5400 m2 x $7225.90/m2 5400 m2 x $3284.50/m2 =39,019,860.00

Finishings

=17,736,300.00 56,756,160.00

Preliminaries (10% of Builders Work) (10 % x $56,756,160.00) 5400 m2 x $3941.40/m2 = 5,675,616.00

Building Services

=21,283,560.00 83,718,336.00

Contingencies (5% of Estimate Sum) 5% x 83,718,336

= 4,185,916.80

Total Estimated Contract Sum as at May 2013

$87,904,252.80

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3)

Approximate Quantities This method provides a more detailed approximate estimate than any other method. It involves the measuring and pricing of work in the traditional manner. However, the measurement process need not be as detail as the requirement in the HKSMM. Dimensions maybe scaled and rounded off. The scope of measurement will be limited to significant items only. In the measurement process, items with common units of measurement are grouped collectively. For example:2

A brickwall item is measured in m will include the finishing to both wall faces. An appropriate composite rates for brick wall and the finishing is then applied to the m I B thick brick wall 2 coats of plaster and painting to brick wall 60/ m
2 2

= $100.00/ m x 2 faces =$120.00/ m

2 2

$220.00/ m The m of the brick wall is 5.00 m x 2.5 m high =12.5 m

2 2

x $220.00/ m

=$2750.00 Advantages:(i) Approximate quantities priced at rates produced at times of estimating is a most reliable method (ii) (iii) An excellent basis for cost checking during detailed design of a project Greater level of accuracy

Disadvantages:(i) (ii) Involve more work than any other method Requires more design details which limit its use during the early stage of project brief

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Example of Approximate Quantities:Beams Calculate the cost per liner metre of a ground beam, including excavation, concreting, reinforcement and formwork. Size of beam to be 200 mm x 500 mm deep Cost $ /m Excavation 1.00 0.70 (incld working space of 250 mm each side) 0.55 (assume blinding 50mm) 0.39m3 x $60/m3 23.40

RC

1.00 0.20 0.50 0.10 m3 x $1000/m3 100.00

Reinforcement 200 kg/m3 x 0.10 = 20 kg x $10.00/kg 200.00

Formwork (to sides of grd beam) 1.00 1.00 1.00 m2 x $90.00/m2 90.00

Blinding

1.00 0.20 0.05 0.01 x $ 800/m3 8.00 $421.40/m

From the drawings, measure the total linear metres of the ground beam, say 185 m. Therefore the total cost for this approximate estimate of ground beam is 185 m x $421.40/m = $77.959.00

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Tendering & Examination of Tender

The Tendering Process

Selection of Tenderers The basic purpose of tendering is to select an appropriate contractor to construct the designed building at a reasonable price.

When selecting tenderers, following need to be considered: General experience and reputation of the contractors Recent experience Financial stability and record Availability in relation to current workload Management and company structure and their adequacy for the type of contract for eg. Design & build Genuine interest in submitting a tender The contractors who are selected for tendering are issued letter of invitation to tender and are invited to tender for the proposed project. When tender documents are prepared by the consultants of the Client: The tender documents are sent to the tenderers with instruction on tender or sometimes the tenderers are required to collect the documents at the specified office normally an Architect's office.

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Documents Used in the Tender Process a) Instruction to Tenderers - information relating to conditions of tender for example where and when to return tender, what other documents that need to be submitted

b) Drawings - Structural and Architectural Drawings for tender showing the scope of works

c) Specification - Specification giving information regarding the quality and workmanship for the works

d) Bills of Quantities - to facilitate the contractor's pricing for the works

e) Conditions of Contract - the Conditions of Contract that will be used on signing of contract for example the HKIA Standard Form of Building Contract

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Tender Queries from Tenderers

If a tenderer requests clarification of any part of the tender documents or additional information, any answer given to him must also be communicated to the other tenderers, ensuring Parity of tenders.

Where alterations need to be made to the tender documents, a tender addendum must be issued to all tenderers.

Pricing of Bills

f) The priced bills by the tenderers will have to be submitted back to the Client at the specified time, date and venue.

g) Once all the tenders are returned to the Client, the Client will open all the tenders in front of witnesses and record the returned prices.

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Examination Upon the Return of Tenders The tenderers are usually given 4 to 6 weeks for pricing of the tender. When the priced tenders are returned, the following steps will normally be taken by the Client's consultants:a) Normally select three lowest tenders for extensive checking and examination. b) Check if there is any arithmetical error in the tenders. Tender figure should not be altered. Tenderers are requested to confirm that they will abide by their tenders. If a contractor confirms his offer, a method can be agreed of making the compensating adjustment to the priced bills equating to the errors total if the tender is accepted. The percentage adjustment will be used (excluding preliminary items, contingencies, prime cost and provisional sums) inserted in the priced bills are to be reduced or increased in the same proportion as the corrected total of the priced items Watch for abnormal pricing for example some prices maybe too high or too low when compared to market prices or if there is front-loading in pricing. Check if there is any alternative proposal to the offer whether technically or contractually. Prepare a tender report to the Client; listing out the analysis on the prices and other relevant information. Once the Client's has selected a contractor, a letter of intent will be issued to the Contractor and letters will also be sent out to notify those unsuccessful tenderers of the tender result. Prepare the contract documents for signing by the Client and the Contractor. Once the contract is signed, then the post-contract period shall commence and the contractor shall begin his construction on site.

c)

d)

e)

f)

g)

h)

i)

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Example of Adjusting Errors in the Examination of Tenders

Bill No:

As Tendered

A B C D E F

Preliminaries Substructure Superstructure External Works Drainage Prime Cost and Provisional Sums

300,000.00 850,000.00 8,500,000.00 400,000.00 750,000.00 360,000.00

The following are detected in the examination of tender document:1) 2) The substructure bill corrected total is 900,000.00 The following error is detected in Bill No. D External Works Qty 502 Unit Rate m 40.00 Amount 80.00

3)

Form of Tender indicates a total of 11,200,000.00

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Adjustment for Errors in Tender

Step 1 Corrected Total and Tender Errors Bill No: A B C D E F As Tendered Corrected

Preliminaries 300,000.00 300,000.00 Substructure 850,000.00 900,000.00 Superstructure 8,500,000.00 8,500,000.00 External Works 400,000.00 420,000.00 (502 m x $40.00/m = 20,080.00) Less 80.00 =20,000 (+) Drainage 750,000.00 750,000.00 Prime Cost and Provisional Sums 360,000.00 360,000.00 11,230,000.00 Form of Tender Error Step 2 Correction Factor
Tender Errors/ Corrected Total (Preliminaries+ PC+Prov Sums) x 100% Corrected Total Less Prelims 11,230,000.00 300,000.00 10,930,000.00 360,000.00 10,570,000.00

11,200,000.00 30,000.00 (-)

Less PC & Prov Sums

The adjustment factor is :

30,000 = 0.2838221% (-) 10,570,000.00

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Step 3 Adjusted Value Using the Correction Factor to all Bills (Excluding Preliminaries, Pc and Provisional Sums) Bill No: Corrected Adjusted Value ( - 0.2838221%) 300,000.00 897,445.60 8,475,875.12 418,807.95 747,871.33 360,000.00 11,200,000.00 11,200,000.00

A B C D E F

Preliminaries Substructure Superstructure External Works Drainage Prime Cost and Prov.Sums

300,000.00 900,000.00 8,500,000.00 420,000.00 750,000.00 360,000.00 11,230,000.00 =

Form of Tender

Step 4-Endorsement to Summary page of Bills of Quantities The discrepancy of $30,000.00 between the tendered sum in the Form of Tender and the Corrected Total amounts to minus 0.2838221% This percentage will be applied to the rates in Bill B to E of the Bills of Quantities This percentage adjustment is used for the valuation of addition and omission from the contract

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The Competitive Tendering Process

Client wants to have a construction project

Designs completed by Architect/Engineer

Appoints Architect/Engineerr

Quantity Surveyor prepares the tender document: Bill of Quantities

Tender Documents Completed

Invite Tenders

Contractors returned priced tender documents

Architect/Engineer and Quantity Surveyor assess returned tender: Choose suitable Contractor

Contract is awarded to the successful Contractor

Client and Contractor sign the construction contract

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Good Practice in Tendering from the Clients Perspective

1) Parity of Information Fair for all tenderers to receive the same information. Written clarification to tender queries and all amendments to be issued to all tenderers

2) Full Information Disclosure as far as practicable if possible. If more and accurate information is provided to the tenderers, then the risks will be lower.

3) Realistic Tender Period Enough time for tender preparation.

4) Confidentiality of Tender Restricted to the representatives of the Client and should be divulged to any other parties. Degree of competition, number and names of tenderers Tender sums, ranking and etc

5) Openess and Fairness Especially on public projects as the funding is based on public money Late tender submission will not be accepted Witness, record and registration with formal procedures when opening of tender

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6) Maintain Optimum of Degree of Competition Too many will result on more error and likely loss of contractor. Too few may result in ring formation and lack of competitiveness

7) Equality of Competitor Similar ability of tenderers which provide a comparable competition Equal range of grading

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Good Practice in Tendering from the Clients Perspective (Contd)

8) No Unreasonable Risk Dumping on Contractor No onerous (harsh) clause in conditions of contract for example on matters pertaining to unreasonable rate of Liquidated Damages, Extension of Time claims etc.

9) Quality of Tender Documents Adequate and clear information should be provided to the tenderers in the pre-tender stage as discrepancies lead to argument in the postcontract stage.

10) No Dutch Auction There should not be any unethical tender negotiation.

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Factors In Tender Process

The Estimating Process

Estimating is the procedure of building up a price for a job of work, calculating the components of labour, material, plant, on-costs etc.

Tendering is the process of converting an estimate into a tender. Tender is the final price of offer which is submitted to the Client from the Contractor. It is the sum of money for which a contractor is prepared to carry out the work and will include also the amount for overheads and profit.

Adjudication While the preparation of the estimate is largely a relatively mechanical operation involving the calculation of labour, material and plant and other site operation costs, the conversion of into tender by a addition of profit margin is often undertaken by the management which is known as Adjudication.

It is therefore evident that the Contractor is faced with two crucial decisions: i) ii) whether or not to accept the invitation to bid if the invitation is accepted what price should he bid

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Factors to be Considered by the Contractor in Making the Decision to Tender

1)

Contractors current workload Review the companys job in progress, and analysing if the existing project is sufficient to maintain the cash flow of the company. Assess the capability to take in new jobs

2)

Workload in Estimating Department The estimator must make the decision concerning the workload of the estimating department, and be satisfied that the project estimator who will be allocated to a project has the necessary expertise and knowledge needed for that tender. This may occur in cases when the contractor receives tender documents for a project for which pre-selection has not occurred and there is an increase urgency for the decision to tender.

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3)

Time Available to Prepare the Tender Normally 3 to 4 weeks for tender and depending on the type of tender documents. The tender timetable will be significance to both the estimator and management. The project estimator will normally be responsible for managing production of the estimate and it is essential for consultants to allow sufficient time for the pricing, obtaining quotas etc.

4)

Capital Availability The contractor needs to assess its current capital commitment on projects and availability of funding such as capital injection, overdraw facilities etc.

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Factors to be Considered by the Contractor in Making the Decision to Tender (contd)

5)

Resources Availability Resources include finance, staff and labour. bearing in mind that particular skills and quality needed for a project, as well as the availability of materials and plant. Consideration must be made on the relative proportion of works to be carried out directly by the contractor, sub-contractor or nominated subcontractor.

6)

Type of Work In making a decision to tender, the contractor will examine the type of work involved in the proposed project. Many contractor concentrate on particular market sectors, such as new build or refurbishment, industrial, commercial or housing. The management must ensure that the company is not exposed to undue risk by commitment to excessive amounts of work with one client, or one sector or industry.

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7)

Size, Location,Nature and Value of Project Assessment of risk of the project and the capability of the contractor in carrying a project which may of size and value which are great. Location may affect the labour available, lack of infrastructure and experience.

8)

Prime Cost Content of the Contract If there are many item of Prime Cost Sum in the contract, the contractor will have to consider the complexity of site management and the relationship of various parties such as the NSCs

9)

Type and Terms of Contract The particular term of contract conditions must be identified and changes to the standard form of contract be noted. Any alterations can be harsh to the contractor and can affect the contractors cash flow, risk allocation and responsibilities of the respective parties. Such changes must be highlighted and information passes to the management on the extent of the inherent risk to the contractor of any changes made.
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Factors to be Considered by the Contractor in Making the Decision to Tender (contd)

10)

Market Conditions When the contractor has a full order book or when there is plenty of work, the level of pricing and tendering will probably be high.

11)

Assessment of Profit Level To assess the profit level required in order to be considered worthwhile to do the project. This will depends on many factors relating to the project primarily the risk factor.

12)

Prestige of Project The prestige of the project or even the reputation of the Client will have an influence on the decision to tender by the Contractor.

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Constituents of a Tender
In estimating for preparation of a tender, there are various costs that need to be assessed by the estimating team. A tender is generally comprises of the following elements:Labour Materials Plant Subcontractors Attendances Nominated Subcontractors Nominated Suppliers Direct Work Measured Work Subcontractors ESTIMATE PC Sums Prime Cost & Provisional Sums

Provisional Sums Daywork Contingencies

Provisional Sums

TENDER

Supervision Accomodation Site Facilities Temporary Works General Plant Contract Conditions Facilities, Equipment Attendance Head Office Overheads Profit Risk Cashflow

Contractors general costs Project Overhead Employers requirements

Management MARK UP Commercial

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Pricing of Construction Works

Pricing Of Construction Works

Basic Pay rates Labour Bonus, on costs etc

Consolidation, shrinkage, etc Materials Storage

U N I T

Haulage, delivery and unloading Wastage

Own Plant Hired Operators & Attendance

R A T E S

Profit and overheads

Page 1 of 16

All in-Rates for Labour in Hong Kong 1) Ordinance Basic Rate (Daily Rate or Hourly Rate) for example the Daily Rate for General Labourer to be $350.00/day. 2) Employment -Normally 1 month notice or pay in lieu Severance Payment employed under a continuous contract for not less than 24 months Long Service Payment employed not less than 5 years Sickness Allowance sick leave taken not less than 4 consecutive days Holidays with pay 7 days annual leave and 11 statutory leave 3) Statutory Requirement Employers Liability Insurance 4) Local Custom 1 month double pay at Chinese New Year 5) Non-Productive Overtime

Refer to Appendix A for an example of Calculation of Productive Day.

Page 2 of 16

Appendix A
1) Productive Day Annual Productive Days 52 weeks x Less Statutory Leave with Pay 11 days Annual Leave with Pay Sick leave with Pay 7 days 10 days 28 days -(28 days) 284 days 2) Annual Cost Basic wage Statutory leave with pay Annual leave with pay Sick leave with pay (2/3) Chinese New Year Bonus Severance pay(Lay-off) Inclement weather Small tool allowance Travel allowance Meal allowance 284 days 284 days 284 days500 per day 11 days 500 per day 7 days 500 per day 10 days 500 per day 66.67% 26 days 500 per day 18 days500 per day say 5 % on basic say 1 % on basic 20 each day Nil 142,000 5,500 3,500 3,334 13,000 9,000 7,100 1,420 5,680 Nil 190,534 Insurance & Levies Workman Compensation Government Levies(CITA) say 5 % say 1% Annual Cost = 3) Hourly Rate Daily Cost (Annual Cost/Productive Days) 201,966 /284 days = $711/day 9,527 1,905 201,966 6 days/week 312 days per annual

Hourly Cost (Daily Cost/Working Hour*) *9.00 18.00 including 1 hr for lunch

8 hours per day $ 711/8 hrs = $88.88 +

Hourly Rate included Overhead and Profit

say 15 %

= $13.33 $102.21

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Non-Productive Overtime When overtime is worked by building workers, they will receive more pay per hour in respect of the hours worked over and above the basic 8 hours per day. Time worked after the 8 hour day is usually paid at the basis rate plus one half (1.5) of the basic rate. Time worked on Saturday is paid at the basic rate plus one half. If the time is worked on Sunday, this is paid at double (2.0) the basic rate. These extra payments made by the Contractor, the extra 1.5 hours paid do not represent any extra production. The Contractor still gets one hour of work done for each hour paid at 1.5 of the basic hourly rate. This non-productive overtime can be included in the all-in-hourly rate in respect of each worker.

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Non-Productive Overtime (NPOT) Calculation Calculate the non-productive overtime (NPOT) for the tile layer assuming the normal working hours is 8 hour/weekday and 4 hour/Saturday and no work on Sunday. Work Schedule:Mon Thursday Friday Saturday Sunday 12 hours 8 hours 8 hours 4 hours

If the normal hourly pay for the tile layer is $60/hour, calculate the effectively hour rate for the above schedules work. Note: Overtime pay is 1.5 for the first two hours on weekday and Saturday and double pay (2.0) after the first two hours on weekdays and on Sunday.

Day Normal Rate Overtime OT x 1.5 (1st two hrs) OT x 2.0 (2nd two hrs and thereafter & Sun)

Mon 8.0 4.0 2.0 2.0

Tue 8.0 4.0 2.0 2.0

Wed 8.0 4.0 2.0 2.0

Thu 8.0 4.0 2.0 2.0

Fri 8.0 0 0 0

Sat 4.0 4.0 2.0 2.0

Sun 0 4.0 0 4.0

(Hours) 44.0 24.0 10.0 14.0

NPOT =labour hours on account =(10 x 0.5) + (14 x 1.0) =19 hours Total actual labour hours in the scheduled work-week: 44 hours + 24 hrs =68 hours Total payment for the labour in the scheduled work-week (68 hrs + 19 hrs) x $60/hr = $5220.00

The Effective All-in-Labour hourly rate for the above scheduled work-week $5220/68hrs $76.76/hr Page 5 of 16

Plant
Plant is a necessity in the construction industry whereby many of the works are based on utilization of plant. The Contractor can consider TWO ways of possessing the necessary plant for the construction work:- the plant can be HIRED or PURCHASED.

Advantages and Disadvantages of Plant Hiring

Advantages of Plant Hiring

1) Immediate replacement if the plant is out of order. 2) No insurance is needed for the plant user if covered by the hiring company. 3) No need to maintain an operator. 4) No large capital investment. 5) Easy to release of site space after use. 6) The budget for using plant can be forecast, subject to standard price list. 7) Different types of plant can be hired for different construction method. 8) Quantity of plant can be flexible to meet the need of different project. 9) High flexibility in using of resources.

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Disadvantages of Plant Hiring

1) High long term cost. 2) The desired type of plant may not be readily available. 3) Maintenance fully relies on the supplier which may delay the progress. 4) Efficiency and condition of plant equipment cannot be ensured. 5) Plant operator are not familiar with the organization. 6) Non-productive time charged for the operating staff. 7) Minimum hiring period is to be allowed. 8) Plant operator cannot be allocated alternative duty if there is a delay in progress.

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Advantages and Disadvantages of Plant Purchasing Advantages of Plant Purchasing 1) Increases the Clients confidence in the Contractor. 2) Good investment method as a long term company development. 3) Easy to coordinate for plant using, and high availability 4) Release tight condition when demanding supply on the current market 5) Save cost as plant can be used repeatedly on other projects 6) Save waiting time of plant mobilization when in direct operation 7) Routine maintenance can decrease maintenance cost of equipment. 8) Provide extra financial facilities when loan is required. 9) Long term saving compare to plant hiring. 10) More accurate estimating allowance for plant cost. 11) Will not be affected by hiring rate fluctuation.

Disadvantages of Plant Purchasing 1) Large capital to be invested. 2) Space shall be provided for storage of idling plant. 3) Plants model may not be suitable for all projects. Expensive if not constantly in use. 4) Cost of maintenance is required, fitter and mechanical parts. 5) Cost subject to depreciation allowed in each year. 6) The model of plant is fixed and difficult to update. 7) Less flexibility allowed for project programme. 8) Waste occurred when machines are not in use. 9) Raised operation cost and land cost for storage.

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All-In-Plant Rate (Direct Purchase) Plant Cost Cost of Machine Deduct: Scrap Value 500,000.00 -(20,000) 480,000.00

Cost per annum, say 7 years = 480,000/7 years Cost per working hour, say 1500 working hours per annum=68,571/1500 hrs Cost for Maintenance & Repair, say 10 % Running Cost Fuel 3 liter/hr @ $7/liter Oil and greases, say 20 % Plant Insurance, premium/1500 hrs, Premium= 3,000

68,571.00

45.71 4.57

21.00 4.20 2.00 77.48 (1)

Labour Cost (Operator) Hourly rate, $500 perday/7.50hrs Hourly Cost (With Operator) 66.67 (2) 144.15 (1) + (2)

Major Factor of Hourly Plant Rate Allowance 1) Cost of machine, including interest rate cost and sundries of purchasing 2) Depreciation method 3) Productive hour allowance 4) Maintenance and repair cost 5) Plant Life expectancy
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Excavation
One of the important factor in excavation is the Bulking & Consolidation Factor:Bulking & Consolidation Before any disposal and backfill items can be priced, there must be an explanation of the bulking and consolidation factor. Bulking Takes place as the excavated material is disturbed from its solid position. After it has been disturbed, it expands in volume size and this is called Bulking. The amount of bulking depends on the type of soil. Refer to Table Exc.1. - for example: stiff heavy clay will bulk by 33 1/3 %. Consolidation Takes place during the backfilling of soil into excavation. The soil is required to be compacted in each layer of backfill and consolidation will occur from loose to solid. Compaction after backfill will result in decrease in volume. The amount of consolidation will depend on the type of soil and can be checked in Table Exc.1. For e.g, stiff heavy clay will require an extra 25 % during consolidation.

(Effects of Bulking and Consolidation can be Referred to Diagram 1)

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Diagram 1

A Diagram to illustrate the effect of Bulking and Consolidation

If heavy stiff clay, 33 1/3 bulking = 1.33 m3

1 m3 exc. in solid

Consolidation for backfill =1.25 m3

Extra soil to be removed from site = 1.33 m3 1.25 m3 = 0.08 m3

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Example of Calculation for Excavation (Refer to Table Exc.1 for Data) B.Q Item:Excavate vegetable soil, 150 mm thick including wheeling 100 m and spread and level m2 -------------------------------------------------------------------------------------------From this description, there are three areas of work:- a) excavate b)wheel c)spread and level The bulking of the soil takes place after the excavation process and obviously will affect the wheeling and the spread and level process. Labour (from Table Exc 1) Excavate Fill spoil into barrow Wheel not exceeding 100m Spread and level Add:- 10 % Bulking

2.40 hours 1.00 hours 1.72 hours 1.31 hours 4.03 0.40 hours 4.43 hours

4.43 hours 6.83 hours

If the Hourly Rate for a Labourer is $65/hr, then the rate for m3 will be 6.83 hrs x $65/hr = 443.95/m3. For Excavate vegetable soil, 150 mm thick including wheeling 100 m and spread and level m2 150 mm thick x $443.95/m3 x 0.15 = 66.59/m2 unit rate.

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Example of Calculation for Excavation (Refer to Table Exc.1 for Data) B.Q Item:Backfill trench excavation with excavated material and consolidate in layers of 225 mm thick m3 Remove surplus excavated material from site m3 ------------------------------------------------------------------------------------------(Assumed the type of soil is stiff heavy clay) Backfill trench excavation with excavated material and consolidate in layers of 225 mm thick m3 Backfill Add: 25 % consolidation 1.33 hrs 0.33 1.66 hrs x $65/hr = $107.90/m3. --------------------------------------------------------------------------------------------

Removal of surplus excavated material Cart away by lorry Bulking of 1 m3 heavy clay Deduct: Backfill including consolidation (25 %)

m3 = 1.33 m3 = 1.25 m3 0.08 m3

Load and fill into lorry (from Table Exc.1)

1.70 hrs for 1 m3

For 0.08 m3, it will be = 0.08m3 x 1.70 hrs = 0.136 hr x $65/hr = $8.84/m3.

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Table Exc 1
Labour Output
Description
Type of Excavation Oversite not exceeding 150mm Oversite 150 mm -300 mm Basement not exceeding 1.50m Trench not exceeding 1.50m Drain trench not exceeding 1.50m Pit not exceeding 1.50m Fill spoil into barrow Wheel not exceeding 100m Deposit, Spread & Level Load and Fill into Lorry Backfill in Layers Vegetable Soil or Loose Soil or Loose Sand 2.40

Labourer (Hours /m3)

Firm Soil or Firm Sand 2.56 Light Clay Stiff Heavy Clay 2.92 Soft Chalk 3.00

2.72

2.20 2.20

2.36 2.36

2.52 2.52

2.72 2.72

2.84 2.84

2.40

2.56

2.72

2.92

3.04

2.60

2.72

2.92

3.12

3.24

2.90

3.06

3.22

3.42

3.54

1.00 1.72

1.10 1.72

1.15 1.72

1.20 1.92

1.25 2.00

1.31 1.00 1.00

1.31 1.50 1.00

1.41 1.60 1.00

1.51 1.70 1.33

1.71 1.90 1.44

Bulking & Consolidation

Type of Soil Vegetable Soil/ Loose Soil/ Loose Sand Firm Soil/Firm Sand Light Clay Stiff Heavy Clay Soft Chalk Rock Bulking (% Add) 10 % 12 % 20 % 33 1/3 % 50 % 50-100 % Consolidation (% Add) 9% 11 % 17 % 25 % 33 1/3 % 33 1/3 -50 %

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Ground work - Hardcore Filling

Example of Calculation of Unit Rate for Hardcore Filling:Hardcore 150 mm thick to make-up level, blinded with fine sand m2 Given Data:Broken brick hardcore delivered to site at $100/m3 Fine sand delivered to site at $150/m3 Consolidation factor is 35% for bricks and 25% for fine sand Allow 5 % for wastage for broken bricks and fine sand Plant cost to allow in Preliminaries Bill Production Index :1.50 hour/m3 All-in-labour rate for hardcore and fine sand :$60.00/hour 35% Extra labour for hardcore layer, 25 % for fine layer Filling composition: Hardcore 100 mm thick and fine layer 50 mm thick Hardcore layer 100 mm thick:Material Cost 1 m3 brick hardcore Consolidation 35% Allow 5 % for wastage (135 x 5%) $/m3 100.00 35.00 135.00 6.75 141.75 --------

Plant Cost Labour Cost 1.50 hour/m3 x $60/hour x 1.35

121.50 263.25

Item (A) Rate for 100 mm thick hardcore layer $263.25/m3 x 0.10 m = $26.33/ m2

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Example (2) of Calculation of Unit Rate for Hardcore Filling:(Contd)

Fine layer 50 mm thick:Material Cost 1 m3 fine sand Consolidation 25% Allow 5 % for wastage (187.50 x 5%) $/m3 150.00 37.50 187.50 9.38 196.88 __

Plant Cost

Labour Cost 1.50 hour/m3 x $60/hour x 1.25

112.50 309.38

Item (B) Rate for50 mm thick fine layer $309.38/m3 x 0.0 5 m = $15.47/ m2 Composition Rate:Hardcore 150 mm thick to make-up level, blinded with fine sand m2

Item (A) + Item (B) = $26.33/m2 + $15.47/m2 =$41.80/m2

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Concrete Works

Concrete Works
An estimator must decide on whether the concrete should be Site Mixed Concrete or whether to allow for Ready Mix Concrete deliveries. The factors influencing the decision are :1) Having the necessary plant available to mix the concrete in the quantities required 2) Having the space available to set up the mixer complete with its aggregate and sand bins 3) Experienced personnel to mix the ingredients in the correct proportion and to carry out the necessary testing 4) Storage space for all materials 5) Capital expenditure with expensive batching equipment Use of Ready Mixed Concrete:1) Better quality control due to more sophisticated equipment 2) Wide selection of mixes are available 3) If site is restricted, more use can be made for the lorry to discharge its load direct from outside the site area Problems with Ready Mix Concrete 1) Traffic problems which may affect the delivery time 2) Access must be adequate to accommodate the large capacity truck for eg. 26 tonne Ready Mix lorry 3) Price and small load charges and the reliability of company

Page 1 of 8

Concrete Pricing Items to be Considered by Estimator:1) Size of load an addition for small loads should be made this will be predetermined after looking at the details at the pre tender programme. 2) Unloading- normally takes 30 minutes for a full load of 6 m3. If it takes a longer time for loading on site, then a demurrage (waiting time) charge will be incurred. This has to be added to the total cost of the concrete supplied.

3) Vibration- applies equally to site mixed and ready mixed concrete to allow for the decrease in volume experienced when vibrators are used. An addition of 7.5 % is added to the basic cost of the mix.

4) General Waste- waste of material during storing, for example bags of cement spoiled by weather. Waste during distribution- spillage and over batching

5) Over-dig in Foundation-when concrete is placed against earth faces, an allowance of 7-8% is allowed for over-dig. This occurs when the excavator breaks away the face of the excavation.

6) Additives-would include waterproofers, retarders etc.; so an extra cost is to be allowed for the use of additives if necessary.

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Example of Calculation for Reinforced Concrete:RC (1:2:4-20 mm agg) in foundations Data:Site mixed using 10/7 mixer Concrete wheeled by barrows to placing 25 mm away and placed by hoist Basic rates Cement (bag) Sand 20 mm aggregate Labourer Material Cost $500/tonne delivered $100/tonne delivered $250/tonne delivered $85/hour
(add the ratio 1:2:4)

m3

$/7 m3 1 tonne of cement @ 500/tonne delivered Unload 1 hr @85/hr 500.00 85.00 585.00
(Refer to Table A for Density)

1m3 cement @ $500.00/tonne x 1.44T/m3 2m3 sand @ $100/tonne x1.60T/m3 4m3 aggregate @ $250/tonne x 1.44T/m3

720.00 320.00 1440.00 2480.00

Allow for voids (40%) Consolidation

992.00 3472.00

Add 5% Distribution Waste Therefore cost of material 1 m3 of concrete

173.60 3645.60/7m3 = 520.80/m3

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Plant Cost Cost of mixing of 1m3 concrete (ReferTable B) Mixer 10/7 Output 0.20 m3 per cycle. Assuming that one cycle takes 5 minutes 60mins =12 loads/hr x 0.20 m3 = 2.4 m3/hr. 5 mins Hire cost for mixer =$200/hr $200/hr = 2.4m3/hr Mixing 1 m3 of concrete Labour Cost ( Refer Table C) Wheeling 1 m3 concrete 1.33 hrs Placing 1 m3 concrete 2.33 hrs 3.66 hrs x $85/hr = 311.11/m3 915.24/m3 83.33/m3 $83.33/m3 Cost/m3

Allow for waste (2.5 %)

22.88 Unit rate = $ 938,12/m3

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Example of Calculation for Reinforced Concrete:RC (1:3:6-20 mm agg) in 150 mm thick walls Data:Site mixed using 14/10 mixer Concrete wheeled by barrows to placing 25 mm away and placed by hoist Consolidation 45 % Basic rates Cement (bag) Sand 20 mm aggregate Labourer $500/tonne delivered $100/tonne delivered $250/tonne delivered $85/hour m3

Material Cost

(add the ratio 1:3:6)

$/10 m3 1 tonne of cement @ 500/tonne delivered Unload 1 hr @85/hr 1m3 cement @ $500.00/tonne x 1.44T/m3 3m3 sand @ $100/tonne x1.60T/m3 6m3 aggregate @ $250/tonne x 1.44T/m3 500.00 85.00 585.00 720.00 480.00 2160.00 3360.00 Allow for voids (45%) Consolidation due to decrease in volume during vibration Add 5% Distribution Waste Therefore cost of material 1 m3 of concrete 1512.00 4872.00 243.60 5115.60 /10 m3 = $511.56/m3

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Plant Cost Cost of mixing of 1m3 concrete (From Table B) Mixer 14/10 Output 0.28 m3 per cycle. Assuming that one cycle takes 5 minutes 60mins =12 loads/hr x 0.28 m3 = 3.36 m3/hr. 5 mins Hire cost for mixer =$250/hr $250/hr = 3.36m3/hr Mixing 1 m3 of concrete Labour Cost (Table C) Wheeling 1 m3 concrete 1.33 hrs Placing 1 m3 concrete 4.00 hrs 5.33 hrs x $85/hr = 453.05/m3 1039.01/m3 74.40/m3 $74.40/m3 Cost/m3

Allow for waste (2.5 %)

25.98 Unit rate = $1064.99/m3

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Example of Calculation for Ready Mix Concrete:Ready Mix Concrete Given Data:Cash and trade discount Small load allowance Demurrage Charge Each hour Waiting time each load average 10% occurrence Full load Price given in Quotation $/m3 500.00 (25.00) 475.99 Small load allowance 3% Demurrage charge per each m3 Each hour Effective hr each occurrence Occurrence Allowance Effective Load(1/6) 100 0.5 10 % 0.167 0.84 490.09/m3 Add Distribution Waste (spillage etc) 2.5% Add Vibration 7.5 % 12.25 36.75 539.09/m3
Page 7 of 8

5% 3%

100 30 mins 6m3 $500/m3

Material Cost Quotation Cash &Trade Discount 5%

14.25 489.25

100 x 0.5 x 10 % x 0.167 =

Table A Typical Densities

(Building Construction Handbook-R Chudley) Designation Cement Sand Aggregate Output 1.44tonne/m3 1.60tonne/m3 1.44tonne/m3

Table B Classification of Site Mixers

Designation 7/5 10/7 14/10 Output 0.14 m3 0.20 m3 0.28 m3

Table C: Guide to Average Labour Output for Concrete Works

Description Mixing by hand Wheeling, depositing and returning average 25 m Taking delivery of ready mixed concrete Placing and compacting concrete Foundations Ground beams Slab thicknesses not exceeding 150mm Slab thicknesses 150-450 mm Wall thicknesses not exceeding 150 mm Wall thicknesses 150 -450 mm Beams Columns Unit m3 m3 m3 m3 m3 m3 m3 m3 m3 m3 m3 Labour Hours 5.53 1.33 0.33 2.33 6.00 4.00 6.00 4.00 6.00 7.00 9.00

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