DDQ 2242

COST ESTIMATING

LECTURE 2
BUILD-UP RATES & PRICING
Rates & Its Constituents

CONCEPT OF ESTIMATING
Let us recap what we have learned in last lecture.

1. What is clients cost?

2. What is the purpose (or purposes) of estimating?

3. How can the cost of material be calculated

accurately?
4. Which is more significant than the other to the cost
of development; infrastructure cost or building cost?

COMPONENTS OF BUILDING COST

Building cost
Costs involved in constructing a building materials,
labour, equipments, etc

Preliminaries
Finishes
Fittings &
Furnishing

Sub-structure & Superstructure

Engineering
Services

External Work

Prime cost & Provisional Sum

RATES & ITS CONSTITUENTS

Rates?
Total costs of work + profit + overhead

Cost of
materials

Cost of
labour

Costs of
plants and
equipments

Overhead &
Profit

DIRECT COSTS
Costs of Materials
- Consist of basic cost, cost for transporting,
handling & installing the materials

Not all costs will

be included in
estimating the
work rates; for
example,

Cost of Labour
- Wages, bonus, overtime pay
- Varies based on trade skill and experience

1. Excavation
work shall only
include cost of
labour and
equipment

Costs of plants & equipments

- Hand tools (e.g. Hammer, shovel, etc) are
considered as overhead cost
- Only mechanical equipments & plants are
included in estimating the work rates

2. Paint work
only require
costs of
materials and
labour

COSTS OF MATERIALS
- 40 60% of the overall costs of construction
- Consists of;
1.Basic costs (costs of purchase, acquired from suppliers
quotations)
2.Transportation & delivery costs (if not included in the costs
of purchase)
3.Handling and storage costs
4.Cost of wastage; during handling and usage, or damages or
theft of materials, etc
5.Cost of miscellaneous items, such as nails for roof
installation, binders for reinforcement, and other materials
which are not measured.

PROCURING MATERIALS
Quantity

Factors of
consideration
Quality

Time of
usage

PROCURING MATERIALS - PROCESS

Selection
of
suppliers

Purchase
order

Delivery

Quality &
Quantity
inspection

Storage

PROCURING
MATERIALS
PURCHASE
ORDER

PROCURING MATERIALS - STORAGE

Storing

Safety &
security

Recording &
Book-keeping

Labelling

Handling &
care

COSTS OF MATERIALS - EXERCISE

A. Half brickwall in common bricks in cement lime mortar (1:1:6)
in Stretcher bond with brick reinforcement at every fourth
course m2
Information:
1. 1 m2 half brickwall = 63 bricks (including 5% wastage)
2. Mortar for 1 m2 half brickwall = 0.025m3 (including 33%
wastage)
3. Brick reinforcement for 1m2 brickwall = 3.60m (including 8%
wastage)
4. Cost of common bricks = RM0.24/No
5. Cost of mortar = RM112.33/m3
6. Cost of brick reinforcement = RM0.60/m
7. Overhead & profit = 15%

COSTS OF MATERIALS - EXERCISE

B. Reinforced in-situ concrete Grade 25 in roof beam m3
Information:
1. Concrete Grade 25 = concrete ratio 1:2:4
2. Cost of cement = RM10.50/bag (1 m3 cement = 28 bags)
3. Cost of sand = RM28.00/m3
4. Cost of aggregate = RM35.00/m3
5. Wastage = 30%
6. Overhead & profit = 15%

COST OF LABOUR
- Wages, bonus, overtime pay & costs of supervision
- Skilled, semi-skilled & unskilled labour
- Indirect costs such as insurance, EPF, PERKESO, provisions of
basic services for workers in the preliminaries
- Labour output?
- Labour productivity is influenced by:
a) Level of skill
b) Work
c) Experience
d) Environment
e) Motivation

COST OF LABOUR FINANCIAL INCENTIVE

Daily wages

Partnership

Work target
system

Bonus

Payment on
completed
work

COST OF LABOUR FOREIGN LABOUR

*PL (KS) : Pas Lawatan Kerja Sementara

COST OF LABOUR FOREIGN LABOUR

COST OF LABOUR - EXERCISE

A. Excavate pit to receive column bases starting from reduced
level maximum depth not exceeding 2.00 meter m3
Information:
1. Excavation work = 4.50 hour
2. Unskilled labour = RM65.00/day
3. Overhead & profit = 15%
B. 900mm x 1200mm wrought pressure treated timber standard
door - No
Information:
1. Door installation = 0.85 hour
2. Skilled labour = RM85.00/day
3. Overhead & profit = 15%

COSTS OF PLANTS & EQUIPMENTS

- Hand tools (e.g. Hammer, shovel, etc) are considered as
overhead cost
- Only mechanical equipments & plants are included in
estimating the work rates
- The costs can be included work rates especially for plants &
equipments which are used for specific job/trade = excavator
for excavation work, concrete mixer for concrete work, etc
- For plants & equipments which are generally used for various
jobs/trades, the costs will be included in the preliminaries =
tower crane, generator, etc.

PROCURING PLANTS & EQUIPMENTS

Ownership
(Purchase)

Has full control over plants

when needed can be
leased out when not used

Financial burden if not

optimise its usage
Method of
procurement

Rent/hire

Does not require any capital

investment to purchase the plants
No need for maintenance usually
done by the plants owners

Hire
purchase

Can be less efficient as the plants are most

likely have been used in other projects
Higher interest compared to
cash purchase

PROCURING PLANTS & EQUIPMENTS

Cost of purchase
Cost of
ownership

Depreciation
Interest on loan
Insurance

Ownership
Administration cost

Handling
cost

Cost for maintenance & repair

Fuel, lubricants & engine oil

Wages for the operators

PROCURING PLANTS & EQUIPMENTS

Renting plants & equipments - Plant rental rates

COSTS OF PLANTS & EQUIPMENTS EXERCISE

A. Using own excavator
*Assumption
1. Cost for excavation/hour = RM51.39
2. Output = 12m3/hour
3. Overhead & profit = 15%
B. Using hired excavator
*Assumption
1. Cost for excavation/hour = RM56.54
2. Output = 9m3/hour
3. Overhead & profit = 15%