DOCUMENTATION 3
MRS S MANYUMWA
OBJECTIVE
To develop an understanding of the
essential elements and procedures in
pricing analysis. This will be followed by
examples of application towards the
establishing of unit rates. We will
concentrate on plant, earthworks and
concrete which should serve as a basis for
the pricing of other trades and the
building up of BoQ unit rates.
ESTIMATING
The technical process of predicting costs based on
objective information.
Function that exists in every construction organisation.
Estimators must keep pace with modern methods &
techniques using a logical & systematic approach to cost
estimating.
Feedback of historical data for future use is important.
INTRODUCTION
Mainly the job of a contractor
Process of measuring to ascertain a cost for a project.
If you want to price a project, look at the following in
tender docs.
❑PREAMBLE – anything special
❑PRELIMINARIES
❑PRIME COST ITEMS – subcontractors?
❑PROVISIONAL ITEMS – not firm
❑QUANTITY
SITE VISIT
As part of your site visit you observed the following:
✓ ACCESS
✓ STORAGE OF MATERIALS
✓ TEMPORARY ROADS
✓ LABOUR
✓ WATER AVAILABILITY/SERVICES
CONTRACTOR’S CHALLENGES
Limited time to prepare
Rates cannot be varied after tender close
Contractor is not sure if he will win the tender (10 –
20% chance)
TENDER SUM
Direct Costs – the nett cost of carrying out the work
exclusive of site & head office overheads, profit, risk etc.
Indirect costs – the fixed & time related costs required to
supervise & control a project through to completion.
Mark-up – to include head office overheads, risk and profit
In RSA you also need to add VAT, contingencies & at times
escalation.
INDIRECT COSTS
Fixed costs; e.g. transporting furniture to site
Value related costs; e.g. insurance
Time related costs; e.g. monthly salary for site agent
PRICING OF TENDER
Quotes from sub-contractors
Add the unit rates
Determine the following cost components:
❑PRELIMINARY
❑LABOUR
❑MATERIAL
❑PLANT
❑OVERHEAD %
PRICING CONTD.
❑PROFIT %
❑SUB CONTRACTORS etc
❑+ PROVISIONAL ITEMS
ALL IS ADDED AND TENDER PRICE IS
DETERMINED!!!!!!!
GENERAL OVERHEADS
Difficult to determine (hidden costs) e.g.
❑DIRECTORS’ SALARIES
❑HEAD OFFICE STAFF WAGES
❑RENT
❑LIGHTING
❑WATER
❑FURNITURE
GENERAL OVERHEADS CONTD.
Normally calculated on last year’s turnover (%)
Site overheads are taken as separate and added under
the preliminaries (P & Gs schedule)
Make overhead 10 – 15% to cover all.
PROFIT
Several factors are considered to determine profit
required:
❑MARKET SITUATION
❑HOW MUCH WORK THE COMPANY HAS AT THE
TIME
❑CAPITAL REQUIRED
❑RISKS
Profit can vary from 20% on a small job to 1% on a big
tender.
NET PRICING
Calculate unit rates using net site costs only
Rate determined x quantity = Total
Total + Establishment charges + Profit = tender figure
Only one calculation at the end for establishment & profit
No rounding off error
Disadvantage if there are variations
NET PRICING
P & G Bill - R
Measure Bill - R
Dayworks Bill - R
Sub-total - R
Add establishment charges 7.5% - R
Add profit 5% - R
TOTAL TENDER PRICE - R
GROSS PRICING
Include % for establishment & profit to the unit rate
Rate determined x quantity = tender figure
BUILDING UP RATES
MATERIALS – quotes including delivery to site
UNLOADING – e.g. bricks, bagged cement
WASTE – make allowance as a %
LABOUR – outputs vary
PLANT – output varies
SUNDRY ITEMS – small cost but must not be
forgotten.
LABOUR CONSTANTS
The Labour Constant for a job is the average unit time
for 1 lab to finish the operation.
Determined from experience
Ex. 10 lab = 2 hrs to excavate 4 m3
What is the Labour constant? (Ans. 5 Labhrs/m3)
LABOUR RATE
Gross hourly rates for labour must include:
❑Basic wage
❑Inclement weather
❑Overtime
❑Sick pay
❑Supervision
❑Tool money
❑Training
❑Insurance
❑Leave
PLANT (Owning)
Capital costs (depends on expected life of plant)
Depreciation
Interest, taxes, insurance
Repairs and maintenance
PLANT (operating/running costs)
Fuels & lubricants
Tyres
Operator wages
DEPRECIATION
This is an expense in the statement of comprehensive
income
Depreciation/yr =
(Capital cost – scrap value)/estimated life of plant
(Depreciation/yr )/(No. of working hrs) =
depreciation/hr
AVAILABILITY PER ANNUM
This is the number of working hours per year.
Idle time is approx. 25 %
➢ For servicing
➢ Bad weather conditions
➢ Unexpected breakdowns
➢ Holdups (waiting for material or other trades)
PLANT COST
TOTAL COST OF PLANT = OWNING COSTS +
OPERATING COSTS
Example 1
Calculate the cost of owning and operating a 400/300
concrete mixer with an output of 3.6 m3/hr where the
purchase price was R420 000.00 and an estimated
working life of 8 000hrs. The mixer has no residual value
at the end of the working life. Interest, taxes etc. @ 10%
of capital cost; Repairs and maintenance @ 12%
Example 1. Solution
Owning cost:
Depreciation = 420 000/8 000 = R52.50/hr
Interest, taxes, insurance = 10% x R52.50
= R5.25/hr
Repairs & mtce = 12% x R52.50 = R6.30/hr
Total owning cost = R64.05/hr
Example 1. Solution
Operating costs
Fuel consumption 15 litres per day @ R14.00/litre based
on an 8 hour day.
(15 x R14.00)/8 = R26.25/hr
Oil consumption: 3 litres/week @ R24.00 per litre
(3 x R24.00)/(40 hrs per week) = R1.80/hr
Example 1. Solution
Tyres: 2 sets @ R2500.00 per set over the working life of
8 000 hours
(2 x R2 500.00)/8 000hrs = R0.63/hr
Operator wages = R18.50/hr
Total running costs = R47.18/hr
Total owning + operating costs = R111.23/hr
Mixer output = 3.6m3/hr
Plant cost for concrete = R111.23/3.6 = R30.90/m3
