Why we need Rate Analysis?

• To determine the actual cost of construction

• To finalize the quotation of contractor and for tendering process
• To workout the economical use of resources
• To revise the schedule of rate due to increase in cost and technique.
1. To Determine the Actual Cost of
Construction:

• Description: Rate analysis helps to calculate the actual costs involved in a

construction project by breaking down the expenses associated with materials, labor,
overheads, and equipment.
• Example: For a project that requires pouring concrete, the contractor will analyze the
cost of cement, sand, gravel, labor rates, and machinery rental. Suppose the total
cost for a specific volume of concrete is calculated as follows:
• Cement: $100
• Sand: $50
• Gravel: $70
• Labor: $150
• Equipment: $30
• Total Cost: $400.
This gives the contractor a clear understanding of the actual cost before quoting it to the client.
2. To Finalize the Quotation of Contractor and for
Tendering Process:

• Description: Rate analysis enables contractors to prepare competitive

and accurate quotations during the tendering process, ensuring that
all costs are covered and margins are considered.
• Example: If a contractor is bidding on a project to build a school, they
will use rate analysis to determine the total cost of each component
(e.g., roofing, flooring, plumbing). If the total calculated cost for the
school is $500,000, the contractor might decide to add a profit margin
of 10%, making the final quotation $550,000.
3. To Work Out the Economical Use of
Resources:

• Description: Through rate analysis, contractors can assess how to

utilize resources efficiently, minimizing waste and optimizing costs.
• Example: In a project where a contractor needs to use steel beams,
they perform rate analysis to compare different suppliers and types of
steel. After analysis, they find that using a specific supplier's steel not
only has a lower cost per ton but also reduces transportation costs.
This helps them choose the most economical option, thus saving
money and resources.
4. To Revise the Schedule of Rate Due to Increase in Cost and
Technique:

• Description: Rate analysis allows contractors to adjust their pricing

schedules based on fluctuations in material costs, labor rates, or
changes in construction techniques.
• Example: If the price of steel rises significantly due to market
demand, a contractor may need to revise their schedule of rates for
projects that require steel. For instance, if the previous rate for
steelwork was $200 per ton and the new market rate is $250 per ton,
the contractor will update their BOQ and quotations to reflect this
increase, ensuring they remain profitable.
Sample of tender notice :Tender Invitation
for Office Renovation
Client: XYZ Enterprises ; Tender No: XYZ/TEND/2024/001 ; Date: October 4, 20241.
1. Introduction: XYZ Enterprises invites sealed tenders from qualified contractors for the renovation of Office
Space located at 5678 Maple Avenue, Cityville. The project includes painting, flooring, electrical works, and
minor partitioning
2. Scope of Work: The scope of work includes: Painting: Interior walls and ceilings. Flooring: Installation of vinyl
tiles. Electrical Works: Replacement of fixtures and rewiring. Partitioning: Installation of drywall partitions for
two new offices.
3. Eligibility Criteria: Interested contractors must meet the following minimum qualifications:Experience in
similar renovation projects.Valid business licenses and insurance.A minimum of two references from past
clients.
4. Tender Submission Guidelines: Tender Document: Interested contractors can obtain the tender document by
contacting the office(reg drawings and BOQ)
Tender Fee: A non-refundable fee of $50 is required to obtain the tender document.
Submission Deadline: All tenders must be submitted by 5:00 PM, October 15, 2024.
Submission Method: Sealed bids must be sent to: XYZ Enterprises ,5678 Maple Avenue, Cityville.
5. Pre-Bid Meeting: A pre-bid meeting will be held on October 10, 2024, at 2:00 PM at the project site.
Attendance is recommended.
6. Contact Information For further inquiries, please contact: Ms. Jane DoeTender Coordinator, XYZ
EnterprisesPhone: +1 234-567-8900,Email: [email protected] , Website:
www.xyzenterprises.com
 Example of a Bill of Quantities (BOQ) for a small
construction project, such as the construction of a
residential building.
Project: Construction of Residential
Building
Location: 1234 Elm Street, Cityville
Client: John Doe
Contractor: ABC Constructions Ltd.
Date: October 4, 2024

Total Estimated Cost: $21,550.00

Sample of
quotation
Factors affecting Rate analysis
• Quantity of material and their cost
• Cost of labour and their daily wages
• Location of site work
• Wastage factor
• Types of tools and machineries used
• Water/ electricity charges
• Overhead + profit
1. Quantity of Material and
Their Cost
• Description: The amount and type of materials required for a project
directly impact the work rate. Higher quantities typically mean more
labor and resources are needed, which can influence costs and the
duration of the project.
• Example: If a contractor needs 1,000 bricks for a wall and the cost is
$0.50 per brick, the total material cost for bricks would be $500. If the
contractor can source bricks in bulk at a discount (e.g., $0.40 per
brick), the total cost would be $400, allowing for a lower overall work
rate.
2. Cost of Labor and Their Daily
Wages
• Description: Labor costs can vary based on the skill level of workers,
local wage rates, and the duration of the project. Skilled labor often
commands higher wages, which can affect the overall work rate.
• Example: If skilled electricians are paid $30 per hour and unskilled
laborers are paid $15 per hour, using more skilled workers for
electrical work might speed up the project, but it will also increase
labor costs.
Task work or Out of turn
Factors affecting task work
SOR- Standard of rates
3. Location of Site Work

• Description: The geographical location of a construction site can

significantly affect the work rate due to factors like accessibility, local
regulations, and the availability of materials and labor.
• Example: A construction site in a remote area may have higher
transportation costs for materials and may require additional time for
workers to travel, resulting in a slower work rate compared to a site in
a well-connected urban area.
4. Wastage Factor

• Description: Wastage refers to the amount of material that is lost or

damaged during construction. A higher wastage rate leads to
increased material costs and can slow down the project as additional
materials need to be ordered.
• Example: If a project requires 500 kg of cement and the expected
wastage is 10%, the contractor must order 550 kg to account for
waste, thus increasing costs and potentially delaying the project.
5. Types of Tools and
Machineries Used
• Description: The efficiency of the tools and machinery employed in
construction directly impacts the work rate. Advanced, modern
equipment can often complete tasks more quickly and efficiently than
older or less suitable tools.
• Example: A contractor using a high-efficiency concrete mixer may
complete concrete pouring faster than one using a manual mixer. This
can significantly speed up the overall work rate.
6. Water/Electricity Charges

• Description: The costs associated with utilities like water and

electricity can affect the overall project budget and timeline. High
charges may lead to budgeting issues, which can slow down work if
resources are limited.
• Example: If a construction site requires a lot of water for mixing
concrete and washing equipment, high water charges may lead the
contractor to limit water usage, potentially slowing down the work
rate.
7. Overhead + Profit

• Description: Overhead refers to indirect costs associated with

running a project (e.g., administration, supervision, insurance).
Contractors typically add a profit margin on top of their costs,
affecting the overall pricing and work rate.
• Example: If the total costs of materials, labor, and utilities for a
project amount to $50,000 and the contractor adds 20% for overhead
and profit, the final project cost becomes $60,000. This impacts how
competitive the bid is and can influence the contractor's ability to
take on additional work, thereby affecting the work rate.
Example
• The widget making machine produces 100 units a day, the finished value of
each unit is £10.00. This means that the output of the machine is
£1000.00 per day.
• The total cost to make 1 widget is £2.50. This cost includes £1.50 of
materials, £0.50 of labour and £0.50 of machine time. This means that the
total input cost for 100 units is £250.00.
• So the basic productivity calculation is £1000/£250 = 4. Therefore the
productivity for this machine on this particular day is 4. Having established
a productivity factor for this particular machine, it is then possible to use
this same formula to compare the productivity of identical work stations,
or to monitor the productivity of this particular machine over time.
• OEE (Overall Equipment Effectiveness) Calculation
• For a more comprehensive productivity calculation OEE should be used. OEE takes into
account the speed at which the machine or factory runs, the quality of the finished products
produced and the actual machine operating time versus the available operating time. OEE is
best calculated per machine rather than across the whole factory as it is then easier to identify
where improvements need to be made to help improve productivity. OEE is calculated as:
• Performance x Availability x Quality
• Performance is the speed at which the machine or work station runs expressed as a
percentage of the speed it is designed to run.
• Availability is the asset operating time expressed as a percentage of available operating time.
• Quality is the total number of good units produced expressed as a percentage of the total
number of units that were started.
• Worked Example
• Availability – The widget making machine is capable of producing 100 units every hour. The production day is
8 hours, so the machine is capable of producing 800 units per working day. But, today there is a downtime of
1 hour due to maintenance and a shortage of materials so this means that the machine will only be working
for 7 hours.
• Actual Operating Time (7 hours)/Available Operating Time (8h hours) = Availability of 87.5%
• Performance – During the 7 hours of operating time that were available today, the machine produced 625
units. The amount of units the machine is able to produce within an hour is 100. So the theoretical time
need to produced 625 units is 625/100 = 6.25 hrs. The performance of the machine is;
• Theoretical time (6.25 hrs)/Available time(7 Hrs) = 89% Performance
• Quality – Of the 625 units produced today, only 600 of the units were of good enough quality to be sold. The
other 25 units need to be reworked before sale or scrapped. This means that the good units expressed as
time is 600 units/100 units per hour = 6 hours. So the quality is;
• Good Units expressed in time (6 hrs)/Performance time (6.25 Hrs) = 96% Quality
• So our final OEE calculation is
• Performance (89%) x Availability (87.5%) x Quality (96%) = 75% OEE
• This calculation shows that the total losses during the day for this machine were 25% which equates to 2
hours of lost production time. Over time, this adds up to a large amount of lost production time, therefore
decreasing the profits that could be made if the productivity of the machine was higher. It is therefore very
important to identify the root causes of this loss and to then implement the necessary measures to reduce or
eliminate the losses.