• Rate Analysis

•   At various stages in the project management, we need to know how much

is cost of executing unit amount of the work, how many equipment or
labour are required to execute unit amount of an item of work.
• These things are required for the purpose of eliminating cost of
construction, material planning, labour and equipment allocation in the
scheduling etc.
• Obtaining the cost of unit amount of an item is called rate analysis. To obtain
the rate of an item, generally following cost are considered.
– cost of material
– cost of labour
– cost of equipments, plant tools etc.
– overhead cost
– profit
• The costs of these components are determined from the area survey, schedule of rates published
by central and state government; transportation charges based on the location of the area. Also
we need to know how much is required for execution of the work. Similarly number of labour
and equipment. These things are bared on both the heuristics and engineering design. Not only
specification is important for obtaining the cost of the work, but one has also to include quality
mentioned during construction we shall discuss this pointing detail through case study.
• Cost of material – To obtain the cost of material in the unit amount of an item, first specification
is studied carefully. Quantity of material required is calculated and multiplied by the cost to
obtain the unit cost. Cost includes freight, transportation, sales tax, insurance, as well as profit.
An estimator has to do his market survey and the area survey before calculating the unit cost of
the material.
•
Cost of labour – Productivity of the labour is very important aspect in calculation of labour cost.
Productivity of the labour depends upon the type of work, training imparted to the labourer,
nature of work, time schedule of the work, etc. For example, a mason can do more plastering
standing on the floor than working at a height on the scaffolding. Initially, it takes time to learn
the work and gradually productivity increases, which is shown by the learning curve as follows –
• For specific works, different types of
labourers, such as skilled and unskilled labour,
mason, carpenter, mazdoor, bhisti, etc. are
required to execute the work. Unit amount of
work is obtained based on experience; and
their cost is obtained from the local survey or
government wage rules.
• Cost of equipment - Calculation of work-hour used for equipment is dependent upon the
type of equipment utility. Some equipments are used for specific purpose where as some of
it are used for different work simultaneously. Generally equipment used individually is
calculated for each item of work. For these equipments, it is not possible to calculate the
cost; the equipment charge can be added as overhead. For example, installation of a batching
plant requires special effort and it is not easy to distribute its initial cost on the concreting.
We can incorporate such kind of work as establishment charges or overhead.
• Overhead cost – During the period of construction, a company has to maintain an office or
depreciation of its equipments may take place. This is usually taken as 2-5% of unit rate.
• Part of the overhead is directly related to the construction of an item of work. Such expenses
include –
• Repair and depreciation of tool and plants
• Salaries of supervisors, etc; who are indirectly involved in the work
• Temporary godown and sheds to store the material at the site
• Lighting arrangements
• Labour welfare
• Safety scheme
• Small tools used for work
• Such expenses are incurred only when work is under execution. If there is no
work, no expense is required.
• Other parts of overhead are permanent in nature. These expenses are
throughout the year. These expenses include –
• Salaries of office staff,
• Printing and stationary charges,
• Electricity and rental charges,
• Communication expenses such as telephone, e-mail, etc,
• Traveling, etc.
• In bigger companies, these expenses are higher compared to smaller
contractors.
• Water surcharged: -1% water surcharge is generally added in the rate analysis.
• Profit – The profit targeted in construction works is between 7-15%. In large jobs, profit is low
where as profit considered is higher in smaller jobs. We shall illustrate the calculation of rate
analysis through the examples –

– Obtain the unit rate of production of M20 concrete.

– Obtain the cost of brick masonry for one cubic meter, for one brick thick wall.
• Prime Cost
• The owner or the department, in the case of government construction, supplies many Items
during construction. The contractor's job is to install such items. Examples of such items are
door and windows, water supply and sanitary fittings, fan and other electrical appliances or
Internet cables, etc. Cost of these items at the shop is called Prime Cost. Let an organization
provide the fan to the contractor. The owner buys the fan at the cost of Rs. 700. Thus the
prime cost of the fan is Rs. 700/-. The prime cost of an item is obtained based on the cash
memo (Purchase bill) of the owner.
• In many cases, it is possible to give exact specification of certain items during the preparation
of estimate or contract awarding. The owner can specify such items and the contractor
purchases the item. The payment is made based on the prime cost. The government
departments in our country follow such practices. CPWD specifies various rules regarding
handling of such an item.
• Estimation
• General
• During construction project planning and implementation, we need to know the quantities and costs of
various items required to meet the objective of the project. That is, construction project manager has to
anticipate the cost of project. The process of calculation of quantities and costs of various items in
connection with the construction project is called an “estimate”.
• An estimate is prepared by first obtaining the quantity of the items required to complete the project and
multiplied by unit cost of the items. Details of the estimate depend upon the purpose of carrying out
estimate.
• The preliminary estimate should be accurate enough to produce the cost of the project within 10% to 15%
variations.
• During the life cycle of a project, different parties for various reasons require an estimate. The details and
method of estimations depend upon the needs and level of management decisions.
Suppose a philanthropic organization wants to start an academic institute. The organization is interested in
knowing how much money is required to be spent. It can be just calculated from the experience with
previous project of similar kind. Such as, 20 thousand money per student has to be invested. If academic
institute is to be planned for one thousand students, 20 x 1000 thousand is required. Next level of details
may be required is how much money is to be invested on different subheads, equipment, laboratories,
hostels etc.
• Suppose a philanthropic organization wants to start an academic institute. The organization is
interested in knowing how much money is required to be spent. It can be just calculated from the
experience with previous project of similar kind. Such as, 20 thousand money per student has to be
invested. If academic institute is to be planned for one thousand students, 20 x 1000 thousand is
required. Next level of details may be required is how much money is to be invested on different
subheads, equipment, laboratories, hostels etc. These can be calculated based on knowing the area of
construction and cost of construction per unit area. But suppose hostel has to be built based on
specific drawing and specification. Now an estimate will be prepared from the drawing and
specification using specified rules. This estimates form the basis for contract evaluation by the client.
Similarly when contractor is bidding for the hostel, he will prepare his own estimate such that he can
buy the contract, also gets profit from the execution of the project. But during construction period
the construction, company has to prepare an estimate for order and supply of the material, also for
resource planning.
• Thus we have seen from the above example that the estimate of same item of works differs in details
based as need of the project implementation. Also the level of accuracy needed for the estimate is
dependent on the purpose of estimate. Like estimate for material supply has to be very accurate
because storage of material will be the burden for the project. But the accuracy of the estimate to
know the total cost to study the feasibility of the project will not be very high.
• Different body involved in preparation of estimate can be grouped into following three classes.
• The owner or owner's staff such as project manager.
•
Contractor's personnel such as senior manager, planner, site management staffs etc.
•
Materials suppliers and contractors
• The owner generally employs a project manager/engineer, who helps him in preparation of contract documents. The
contract documents require the bill of quantities. Also, owner should be aware of the cost to sell the contract. Thus an
estimate is required of various quantities. The owner's project manager prepares these estimates. Tender for the
contract in a construction company is prepared by higher management. These management are helped by estimators,
site engineers and material supplier to prepare the estimate of the job.

Challenges in Estimating

The job of an estimator is not only to calculate the quantity and cost of the material, but to co-ordinate different parties
involved in the project or construction in particular. An estimator of the construction company has to get involved with
the site engineer, material supplier, instrument (plant) manager and senior management staff to obtain the various
details of the cost and explaining the calculation to higher management. An estimator has to understand the project
details, study drawing and specification, obtain working conditions, labour and equipment productivity and collecting
other data from the site. An estimate also assesses the temporary work at the site such as formwork for concreting,
temporary plant for the storage of materials. Virtually, an estimator has to build the project on paper to obtain the right
guess.
• In the organization, background work for estimation is carried out by higher
management and organizations keeps the details regarding unit cost of the items
called schedule of rate, productivity, and guideline for basic calculation. The basic
calculation is carried out by junior level engineers or assistants.
• In preparing detailed estimate, we need to know the following two things
• Quantities of the items involved.
• Obtaining cost of the items involved.
• Methods of obtaining quantities of the items involved is called quantity estimate
and method obtaining unit cost of the items involved is called rate analysis.
• Types of Estimate:
• Based on the rigor with which an estimate is prepared, the estimate can be
classified as
• Preliminary estimate.
• Detailed estimate.
• Requirements of preliminary and detailed estimate:
• To prepare a preliminary estimate, quantity of work to be planned is measured in terms of unit of
person, built up area, extent of work in kilometer such as a preliminary estimate of housing can be
calculated based on type of house and number of house to be built. Similar preliminary estimate of
highway can be calculated by knowing the type of road in terms of lane or pavement and length of
the load.

• Preliminary Estimate
• Different methods of preliminary estimate can be grouped into the following categories –
• Time referenced cost estimate
•
Cost capacity factor
•
Component ration/installation cost ratio
•
Parameter cost
• The preliminary estimate is obtained during early phases of project. As the project progresses, an
estimate keeps on getting refined and lastly we get definitive estimate.
• Time referenced cost estimate – If the cost of construction of facilities is known at a certain time,
the present cost can be estimated by multiplying it with the cost index, with reference to that
time. Generally government finance department publishes cost index based on depreciation, etc.
But this cost index is very crude. Construction department keeps the cost index based on the
items and method of construction used. There are some limitations of such method. During the
time, technology changes; productivity of various equipment may change; degree of competition
may be different. One should be aware of all these factors while using the cost index to estimate
the constructed facilities.
•
Cost capacity factor – This factor refers to the change in cost of built-up facilities with the change
in size of the project of similar type. If C1 and C2 be the cost of facilities to be built and old
facilities. Let their size be Q1 and Q2 . We can calculate the cost of the new facility as

• C1=C2*( Q1/Q2)^X

Where x is called the capacity factor. Many organizations publish the value of capacity factor. It is
reasonable to consider cost capacity factor between 0.6 to 0.8.
The capacity factor method and time reference method can be combined.
• Installation cost ratio – In the industrial project, the equipment to be installed is known quite
earlier to the details for their installation. In such situations, an estimate is prepared based on
the ratio or percentage of the cost incurred as the installation cost. The organization generally
maintains this type of data. Example- The cost of an equipment is Rs10,00,000, and its
installation cost , including accessories is 50%. Thus the estimated cost is
• 10,00,000 + ( 0.5 x 10,00,000) = 15,00,000
We can consider the equipment in component wise and calculate the installation cost
individually. This approach will require detailed information, but will be more accurate.
• Unit Parameter cost – In many of the projects, it is possible to obtain the cost of unit parameter
of construction. These parameters may be unit area, unit volume, etc. This type or procedures
are used in building construction. Residential apartment in our country are generally estimated
using this method. There are different variations of the method. Some of them widely used are
as follows - Residential buildings are generally estimated using this method.
• Requirement for detailed estimate:
• To calculate the detailed estimate, complete structural drawing of the facilities to be built up
and specification of the items are necessary. We also need to know the rate of each of the
items, which includes profit of the contractor.
• Revised Estimate:
• Due to change in the rate of material or change in specification of materials, an estimate is often
required to be modified. Thus, we prepare revised estimate against the original estimate. In the
preparation of revised estimate, original estimate is also provided such that comparison can be
made. There is no change in structural drawing and additional items are not added in the revised
estimate.
• Revised estimate is a detailed estimate. It is also accompanied by the original estimate for
comparative purpose. While submitting the revised estimate, the reason for revision should also be
stated.
• Supplementary estimate:
• During the execution of project, structural modification are required or addition work is added for
construction. The estimate for additional work is called supplementary estimate. Supplementary
estimate is also required to be prepared when some of the items are overlooked. In preparing the
supplementary estimate reason for preparing the estimate would be clearly stated.
Example: Additional partition can be planned in the building. The estimate is prepared for
partitioning as supplementary estimate. Structural / architectural changes are prerequisite for
supplementary estimate.
• Measurement In Civil Engineering
• Measurement of civil Engineering work executed in the field is carried out based on thumb rule. Indian
standards provide the approximate rules to measure the quality in the field. They are comprehensive and
follows almost all areas. Following are the list of Indian Standards -
• Indian standards
• Standard Description
• IS 1200 : Part 1 : 1992 Methods of measurement of building and civil engineering works: Part 1 Earthwork
• IS 1200 : Part 2 : 1974 Method of measurement of building and engineering works: Part 2 concrete works
• IS 1200 : Part III : 1976 Method of Measurement of Building and Civil Engineering Works - Part III : Brickwork
• IS 1200 : Part 4 : 1976 Method of measurement of building and civil engineering works: Part 4 stone masonry
• IS 1200 : Part 5 : 1982 Method of measurement of building and civil engineering works: part 5 form work
• IS 1200 : Part 6 : 1974 Method of measurement of building and civil engineering works: Part 6 refractory work
• IS 1200 : Part 7 : 1972 Method of measurement of building and civil engineering works: Part 7 hardware
• IS 1200 : Part 8 : 1993 Method of measurement of building and civil engineering work: Part 8 steel work and
iron
work
• IS 1200 : Part 9 : 1973 Method of measurement of building and civil engineering work: Part 9 roof covering
(including cladding)
• IS 1200 : Part 10 : 1973 Method of measurement of building and civil engineering works: part 10 ceiling and linings
• IS 1200 : Part 11 : 1977 Method of measurement of building and civil engineering work: Part11 paving, floor finishes
dado and skirting
• IS 1200 : Part XII : 1976 Method of Measurement of Building and Civil Engineering Works - Part XII : Plastering and
Pointing
• IS 1200 : Part 13 : 1994 Method of measurement of building and civil engineering works: Part 13 Whitewashing,
colour washing, distampering and painting of building surfaces
• IS 1200 : Part 14 : 1984 Method of measurement of building and civil engineering works: Part 14 glazing
• IS 1200 : Part 15 : 1987 Method of measurement of building and civil engineering works: Part 15 painting, polishing,
varnishing etc
• IS 1200 : Part 16 : 1979 Method of measurement of building and civil engineering works: Part 16 laying of water and
sewer lines including appurtenant items
• IS 1200 : Part 17 : 1985 Method of measurement of building and civil engineering works: Part 17 road work including
air field pavements
• IS 1200 : Part 18 : 1974 Method of measurement of building and civil engineering works: Part 18 demolition and
dismantling
• IS 1200 : Part XIX : 1981 Method of Measurement of Building and Civil Engineering Works - Part XIX : Water Supply,
Plumbing and Drains
• IS 1200 : Part 20 : 1981 Method of measurement of building and civil engineering works: Part 20 laying of gas and oil
pipelines
• IS 1200 : Part 21 : 1973 Method of measurement of building and civil engineering works:
Part 21 wood-work and joinery
• IS 1200 : Part 22 : 1982 Method of measurement of building and civil engineering works:
Part 22 materials
• IS 1200 : Part 23 : 1988 Method of measurement of building and civil engineering works:
Part 23 piling
• IS 1200 : Part 24 : 1983 Method of measurement of building and civil engineering works:
Part 24 well foundations
• IS 1200 : Part 25 : 1971 Method of measurement of building and civil engineering works:
Part 25 tunneling
• IS 1200 : Part 26 : 1987 Method of measurement of building and civil engineering works:
Part 26 Acid resistant lining
• IS 1200 : Part 27 : 1992 Method of measurement of building and civil engineering works:
Part 27 Earthwork done by mechanical appliances
• IS 1200 : Part 28 : 1992 Methods of measurement of building and civil engineering works:
Part 28 Sound insulation works