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Chapter 4
Analysis of Rates
4.1 Introduction
The computation of the rate per unit of a particular item of work, based on its specifications,
from the cost of quantities of materials, labor charges, and other miscellaneous expenses
required for its completion is known as rate analysis.
4.2 Purpose of Rate Analysis
The main purposes of rate analysis are as follows:
a) To determine the current rate per unit of an item at the locality.
b) To examine the viability of rates offered by contractors.
c) To fix labor contract rates.
d) To calculate the quantity of materials and labor force required for project planning.
e) To prepare detailed estimates for construction works.
f) To verify the cost of extra/substituted items not covered in the original contract.
4.3 Importance of Rate Analysis
a) The process of rate analysis gives a clear picture of the types of labor and materials
required for completing a particular work.
b) It aids in the proper allocation of resources by analyzing the cost of materials, labor, and
equipment.
c) It can be used to settle disputes between contractors and clients regarding items not
included in the original estimate.
d) Rate analysis helps in developing realistic project schedules by estimating the time and
resources needed for specific tasks.
e) It ensures cost control and financial planning by breaking down the cost components.
f) It helps identify cost-saving opportunities during project execution.
4.4 Requirements of Rate Analysis:
To perform rate analysis accurately, the following information is required:
a) Correct and up-to-date market rates of materials.
b) Accurate labor wage rates for various categories of laborers.
c) Productivity rates (output per day) for different types of laborers.
d) Rental or operational costs of construction equipment, tools, and plants.
e) Updated technical knowledge of construction methods and practices.
f) Understanding of local working conditions, labor laws, and safety regulations.
4.5 Factors Affecting the Rate Analysis
Several factors influence the outcome of rate analysis:
a) Specifications and quality of materials and workmanship required for the item.
Chapter 4 Estimating and Costing Analysis of Rates
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b) Quantities and unit rates of materials, and the number and type of laborers (skilled and
unskilled) involved.
c) Location of the construction site, accessibility, distance from material sources,
transportation costs, and water availability.
d) Availability and type of tools, plants, and equipment needed as per the work specification.
e) Contractor’s overheads, including site administration, utilities, taxes, and contingency
allowances.
f) Desired speed of construction (tight deadlines may increase labor costs).
g) Climatic and environmental conditions that may impact productivity.
Components Considered in Rate Analysis: To compute the unit rate of an item, the following
five sub-heads are estimated and summed:
a) Material Cost – Quantity and cost of materials used.
b) Labor Cost – Wages of all laborers involved (skilled and unskilled).
c) Equipment/Plant Cost – Hire or operating cost of tools, machinery, and plants.
d) Overhead/Establishment Charges – Site office, administrative, and supportive staff
expenses.
e) Contractor's Profit – Usually taken as a percentage (e.g., 10–15%) of the total cost.
Chapter 4 Estimating and Costing Analysis of Rates
