BAQS 1293
PRINCIPAL OF ESTIMATING FOR BUILDING
WORKS 1
SEMESTER 2
REPORT:
COMPONENT FOR BUILDING-UP RATE
PREPARED BY:
NAME MATRIC NO.
LUQMANUL HAKIM BIN 2419827
MOHD PUZHI
MUHAMMAD ISMARUL 2410125
HAKIMI BIN ISHAMUDDIN
SHAHIR AMNAN ANWARI 2419553
BIN ANUAR
MOHAMAD IRFAN SHAHMI 2417641
BIN SUHAIDI
TO OUR LECTURER:
ASST. PROF SHARINA FARIHAH BINTI HASAN
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TABLE OF CONTENT
1.0 INTRODUCTION ..................................................................................................................................3
2.0 COMPONENT OF BUILD-UP RATE ......................................................................................................3
2.1 MATERIAL .......................................................................................................................................3
2.2 LABOUR ..........................................................................................................................................4
2.3 PLANT .............................................................................................................................................5
2.4 PROFIT ............................................................................................................................................5
2.5 OVERHEAD .....................................................................................................................................6
3.0 EXAMPLE OF THE BUILD-UP RATE COMPONENT ...............................................................................7
3.1 MATERIAL .......................................................................................................................................7
3.2 LABOUR ..........................................................................................................................................8
3.3 PLANT .............................................................................................................................................9
3.4 OVERHEAD ...................................................................................................................................11
3.5 PROFIT ..........................................................................................................................................12
4.0 CONCLUSION ....................................................................................................................................12
5.0 REFERENCES .....................................................................................................................................12
6.0 APPENDIX .........................................................................................................................................13
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1.0 INTRODUCTION
Build-Up Rate (BUR) is a significant concept in the estimation of construction costs. It is
utilized to determine the unit price of every work item in a project. It involves the analysis of
the overall unit price into smaller components such as materials, labor, equipment, plant and
profit. This transparent approach assists in determining how costs are arrived at, assuring that
each component of the work is properly accounted for.
In construction, cost estimation is not just a matter of giving a price, it needs an acute
understanding of the materials, time, and labor that go into each activity. With the BUR
method, estimators will be in a position to give improved, more competitive, and clearer
pricing structures. It helps the contractors in successful bidding and also helps consultants
and clients in cost management and cost assessment of the project as a whole.
2.0 COMPONENT OF BUILD-UP RATE
2.1 MATERIAL
Materials costs form an integral part of Unit Rate Build-Up, directly influencing total budget
certainty and project feasibility. For Quantity Surveyors, an appropriate understanding of the
cost estimation of materials is significant to present competitive and precise tender bids. To
obtain a good estimate of material cost on a building project, you need more than just the
supplier's cost of the materials. A true Build-Up Rate (BUR) takes into account all of the cost
involved in transporting the materials to the construction site, moving them around, and
accounting for loss or wastage during use.
The purchase price is the original price of the material from the supplier. It includes the unit
price of the material, which can be measured by a lot of units. This price can also include
some tax, duty, or discount offered by the supplier. It takes into account price differences
from bulk purchasing or market fluctuations. For example, cement is available at $7 a bag
including value-added tax (VAT).
After materials arrive at the elementary site location, they often need to be moved to the
location where they will be used. This operation includes the use of equipment like
wheelbarrows, forklifts, or cranes. It also includes workers needed to move any materials as
well as fuel or equipment upkeep expenses. For example, steel bars might need to be moved
from the store to the foundation trench.
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2.2 LABOUR
A construction project's total cost includes labour expenses as a significant component.
Because they have varying cost implications, the kind, category, and performance of the task
must be decided before estimating the cost of the job. For contractors, making money while
performing tasks on the job site is crucial. Therefore, before or during work on site,
contractors must efficiently manage, plan, and monitor labour consumption to ensure
maximum profit. If this isn't done, building will take longer and cost more. Working in labour
management calls for a variety of skills and expertise, including familiarity with human
resource management and labour standards. Direct cost and indirect cost are the two types of
labour expenses.
• Direct Cost
− Payments made to employees after they finish a project are known as direct costs.
Skills, gender, market conditions, site location, working conditions, and other factors
all affect workers' pay. When determining prices, these expenses must be considered.
The number of hours worked determines the labour wage. Overtime compensation, or
time spent beyond regular working hours, is a direct expense associated with some
projects that take a short time to finish in addition to the base income. The abilities
and experience of employees are a significant factor that influences their pay rate.
There are two types of site workers: skilled workers and unskilled workers
−
• Unskilled Workers
− Unskilled workers carry out jobs like moving stone or wood, mixing concrete, or
helping more experienced workers. For example, men and women who perform
general labour will be compensated differently per hour. The daily wage for male
labour is RM50.00, while the daily wage for female labour is RM40.00.
• Skilled Workers
− Craftsmen or workers with the training, credentials, and experience necessary for a
specific sort of employment are considered skilled workers. Carpenters, plasterers,
bricklayers, and others are examples of these skilled labourers. The type of carpentry
and the worker's ability level determine the high compensation for skilled labour. For
example, bricklayers and blacksmiths receive varied salaries; bricklayers make
RM65.00 per day, while blacksmiths make RM60.00.
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• Indirect Cost
− When pricing the tender, the contractor must also account for indirect costs. These
expenses are typically priced in the Initial Requirements section rather than in the job
price. Insurance, EPF and SOCSO contributions, basic staff amenities like shared
housing, water and electricity, transportation, and so forth are examples of indirect
costs that are often present in the majority of construction projects.
2.3 PLANT
• The word "plant" in construction refers to any kind of machinery, tools, or equipment
utilized to complete different activities on the job site. These might be anything from
little instruments to massive devices like concrete mixers, cranes, and excavators.
Plants are frequently used by contractors to increase productivity on both small and
large projects. The cost of purchasing and operating equipment is a significant
component of total construction expenses, in addition to labor and materials. The
primary advantage of employing plants is that they expedite the process, which helps
save money and time.
• Besides materials and labour, a major cost in construction is the use of plants and
equipment. "Plant" refers to all machinery used on-site, and it's commonly used in
both small and large projects. The main advantage of using plant instead of manual
labour is that it saves time, which also helps reduce overall construction costs.
• There is a wide variety of plants and equipment available on the market for use in
construction projects, ranging from small tools to heavy machinery. Every kind and
size of plant has a distinct function and is appropriate for a given task. It is crucial that
contractors thoroughly evaluate the project's requirements and choose the best plant
for the job. Selecting the appropriate tools helps to save needless expenses and delays
in addition to guaranteeing that the work is completed effectively and securely. For a
construction project to be successful overall, careful planning and plant selection are
essential.
2.4 PROFIT
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• Contractors need to do more than just recover all of the money they invest on a
project to remain in the construction industry. The contractor has the final and most
crucial responsibility of determining the profit rate for the price rate.
• Normally, contractors determine profit using the same method to calculate overhead
cost. Some may choose to include the profit as a lump sum instead of a percentage of
the total cost.
Factors that influence profitability
• Current workload
To make the tender price more competitive, the contractor must reduce the
advantages if they are not present or have not much to do. On the other hand, the
contractor may submit a tender price that is less competitive if he already has a heavy
workload.
• Market Situation
The contractor tender price is influenced by the amount of competition for a work. To
succeed, the contractor should submit a more reasonable tender price for a potential
work that has a lot of competition. As a result, the contractor must research and
predict how many offers will be interested in the project.
• Risk
The amount of competition for a job influences the contractor's tender price. For a
possible job with a lot of competition, the contractor should provide a more
competitive tender price to win. The contractor must therefore conduct research and
estimate the amount of offers that will be interested in the project.
• Sources
It is important to make the best use of the resources that are available. If the available
resources are still not being used to their maximum potential, the contractor could
decrease the profit margin, which would result in a lower tender price and the other
way around. Additionally, the contractor should avoid taking on too many projects at
once to overload available resources.
2.5 OVERHEAD
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• Overhead is a fixed cost that cannot be directly connected to any project but is
required to manage a contractor for a construction company. This price is considered
in determining the work pricing rate and will be considered throughout the entire
process. The contractor's efforts will be completely insignificant if the overhead costs
are not calculated as accurately as possible because they will not result in the correct
price rate.
• Overhead costs include expenses for the following:
1. Staff salaries include the salaries of directors, administrators, secretaries, typists
and so on.
2. Rent a workshop, offices, others.
3. Stationery, office equipment and others.
4. Payment of water, electricity, phone bill and others.
5. Professional fees such as accountancy fees and secretaries' fees.
6. Expenses on office vehicles including maintenance cost.
7. Interest in loans from the management department.
8. Non-machined equipment such as hammers, hoes and so on.
• According to the size of each project, overhead will be allocated to all of the projects
that are completed. The amount of turnaround annually, or the percentage of the
project cost for that year, can be utilized for calculating the cost of overhead based on
the financial records from the previous year. It is possible to determine the expected
overhead cost for the time contract using this percentage.
3.0 EXAMPLE OF THE BUILD-UP RATE COMPONENT
3.1 MATERIAL
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Client hired a contractor to build a wall for their master bedroom with the area of 16m².The
material to build a 16m² of bedroom are:
-200 pieces of 6inch blocks
-1 bag of 50 kg of cement
-20 kg of sand
-22kg of aggregates
-3 L of water
ITEM UNIT QUANTITY RATE AMOUNT(RM)
BLOCKS PCS 200 1.10 220.00
CEMENT KG 5 0.8 4.00
SAND KG 20 0.05 1.00
AGGREGATES KG 22 0.08 1.76
WATER LITER 3 - -
TOTAL 226.76
The cost of material to build a wall for bedroom is RM226.76 not including labour costs and
tools.
3.2 LABOUR
Given Data:
• Bricklayers:
o 3 workers
o Working 3 days
o 8 hours/day
o Wage: RM 50/hour
• General Labourers:
o 2 workers
o Working 3 days
o 8 hours/day
o Wage: RM 20/hour
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Calculation:
1. Bricklayers:
a. Total hours = 3 workers × 3 days × 8 hrs = 72 hours
b. Total cost = 72 hours × RM 50/hr = RM 3,600
2. General Labourers:
a. Total hours = 2 workers × 3 days × 8 hrs = 48 hours
b. Total cost = 48 hours × RM 20/hr = RM 960
3. Total of Labour Cost = RM 3,600 + RM 960 = RM 4,560
Labour Number of Working Hours/Day Total Hours Rate Total Cost
Type Workers Days (RM/Hour) (RM)
Bricklayers 3 3 8 72 50 3,600
General 2 3 8 48 20 960
Labourers
Total of 4560
Labour
Cost
3.3 PLANT
• Use of existing plant
Example:
Existing plant = CWB520 Cement mixture lorry weight 30,000kg
Plant purchase cost = RM150,000.00
Estimated annual operating costs of the plant:
Year 1 Year 2 Year 3 Year 4
Cost Component Notes
(RM) (RM) (RM) (RM)
Depreciation 15,000 15,000 15,000 15,000 Fixed (10-year lifespan)
Fuel 35,000 36,750 38,500 40,250 5% increase/year
Maintenance & 12,000 13,000 14,000 15,000 Increases with wear
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Repairs
Insurance & Road
6,000 6,000 6,000 6,000 Assumed constant
Tax
Driver Salary 30,000 31,500 33,000 34,500 5% annual increase
Tolls & Parking 4,500 4,725 4,960 5,200 Estimated inflation
Minor increase for
Miscellaneous 3,000 3,150 3,300 3,500
incidentals
− End of year 1 = RM105,000.00
− End of year 2 = RM110,000.00
− End of year 3 = RM115,000.00
− End of year 4 = RM120,000.00
The period the plant being used = 2 years
The economic life of the plant = 4 years
The plant resale value at the end of year 4 = RM30000.00
Interest rate = 20%
Current annual cost:
1/(1+f) ^n
f = interest rate
n = number of years
End of year 1 = 0.83334
End of year 2 = 0.69444
End of year 3 = 0.57870
End of year 4 = 0.48225
Total for 4 years = 2.58873
Estimated value during plant operation:
End of year 1 = RM105,000 x 0.83334 = RM87500.70
End of year 2 = RM110,000 x 0.69444 = RM76388.40
End of year 3 = RM115,000 x 0.57870 = RM66550.50
End of year 4 = RM120,000 x 0.48225 = RM57870.00
Total for 4 years = RM288,309.60
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Reduction in resale value = resale value at the end of year (RM30000.00) x 0.48225
= RM14,467.50
Plant current value = RM288,309.60 - RM14,467.50
= RM273,8421.10
The contractor needs to allocate a total of RM273,8421.10 to maintain and use its own plant
for a period of 4 years.
3.4 OVERHEAD
The amount of overhead is calculated by the percentage determined by the contractor.
Situation 1
- Last year’s turnover amount = RM 10,000,000.00 (Total cost of the project)
- Amount of profit = RM 500,000.00
- Amount of overhead = RM 150,000.00
-Total of amount of profit and overhead = RM 500,000.00 + RM 150,000.00
= RM 650,000.00
-Net turnover amount = RM 10,000,000.00 - RM 650,000.00 = RM 9,350,000.00
-Percentage of overhead =RM 150,000.00/RM 9,350,000.00 x 100 = 1.60%
Situation 2: Where there is a change in the overhead for next following years
- Estimated increase in overhead = 20%
- Estimated net turnover for the current year = RM8,800,000.00
-Amount of overhead for last year = RM 300,000.00
-Estimate overhead for the current year = RM 300,000.00 + 20% x RM 300,000.00
= RM 360,000.00
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-Percentage of overhead = RM 360,000/RM 9,350,000.00 x 100 = 3.85%
3.5 PROFIT
The amount of profit is determined by the contractor. The contractors use percentage to
determine the amount of profit based on the overall cost of the project. The amount of profit
is also being added to overall cost.
Example Overall cost = RM 10,000,000.00
Percentage of profit = 15%
Amount of profit = 15% x RM10,000,000.00
= RM 1,500,000
Total cost of the project = RM 10,000,000.00 + RM 1,500,000.00 = RM 18,500,000.00
4.0 CONCLUSION
The Build-Up Rate (BUR) method is a key tool for making construction cost estimates more
accurate and transparent. By breaking the unit price into parts like materials, labour, plant,
profit, and overhead, BUR gives contractors, consultants, and clients a clear view of how
costs are built up and managed across a project. Every piece matter, material costs aren’t just
about purchase prices but also about handling and wastage; labour costs must reflect the
different roles and skills on-site, along with any extra indirect costs; and plant costs need to
cover both buying and running the equipment. Overhead and profit margins also have to be
carefully set to keep businesses healthy without losing out on bids. In short, mastering the
BUR method helps construction professionals create well-supported, competitive estimates
that lead to better project outcomes, smoother construction processes, and stronger financial
results for everyone involved.
5.0 REFERENCES
− “Anggaran kos kerja Bangunan”, second edition, Ahamad Abdullah,
https://www.scribd.com/document/718745002/Anggaran-Kos-Kerja-Bangunan-Edisi-Kedua
− (“How to Calculate Operating Cost (with Definition and Tips)”)
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https://ca.indeed.com/career-advice/career-development/how-to-calculate-operating-
cost#:~:text=to%20Calculate%20Both-
,Types%20of%20expenses,any%20applicable%20interest%20and%20taxes.
− (“Understanding owner-operator's expenses and cost (with Definition and Tips)”)
www.rigbooks.com/resources/understanding-owner-operator-expenses-costs
− Fuel Cost Calculator
www.ndtv.com/tools/calculator/fuel-cost-calculator-online
6.0 APPENDIX
Book
“Anggaran kos kerja Bangunan”, second edition, Ahamad Abdullah,
− “TAFS Inc.” Tafs Dev, 16 July 2024, www.tafs.com/calculating-your-operating-cost/.
Accessed 23 Apr. 2025.
13
“Understanding Owner-Operator Expenses and Costs.” Rigbooks, 19 Sept. 2020,
www.rigbooks.com/resources/understanding-owner-operator-expenses-costs.
14
“Fuel Cost Calculator | Petrol and Diesel Cost Calculator - NDTV.com.” Ndtv.com, 2025,
www.ndtv.com/tools/calculator/fuel-cost-calculator-online. Accessed 23 Apr. 2025.
Newsroom. (2017, March 20). Rate Analysis: what is it and what’s the correct procedure for building
up a unit rate. BibLus.
https://biblus.accasoftware.com/en/rate-analysis-what-is-it-and-whats-the-procedure-for-a-unit-rate/
Nzes admin. (2024, November 18). Unit Rate Build-Up: Understanding theComponents - NZES.
NZES.
https://nzes.ac.nz/components-of-a-unit-rate-build-up/
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