MEKELLE UNIVERSITY

EiT-M
DEPARTMENT OF CIVIL ENGINEERING
CONSTRUCTION TECHNOLOGY AND MANAGEMENT CHAIR

Contract, Specification, And Quantity Surveying (CEng-5101)

Lecture 6
Source:-Wubishet Jekale (Dr. Eng.)

1
 Tender Pricing/Rate Analysis
1. Basic Price and Source Determination
• Define Materials Breakdown Structures (MBSs)
• Identify Direct Cost Components (Materials, Labors & Equipments)
• Identify Reliable Sources / Approaches for Materials, Labors &
Equipments
• Identify Basic Prices
2. Organization & Resources Breakdown Structures
• Define Allocation of Responsibilities (Head Office Vs Project Office)
• Identify and Define Indirect Cost Components (Office facilities, Staffs,
Utilities, Transport, Mobilization & Demobilization Expenses)
• Define Organization Breakdown Structures (OBSs)
3. Tender Estimation
• Define Cost Breakdown Structures (CBSs)
• Use already defined MBSs, LBSs & EBSs
• Use Indirect Cost Components defined
• Assign Risk Allowances and Profit Margin
• Determine Unit Rates
 Works Programming
Manageable WBSs
• Define manageable WBSs (Mobilization, Site Clearance, Bulk Excavation, etc)

Dormitory

Mobilization Earthworks Structures Finishing Installations Site works

Site Facilities Site Clearance Masonry Walls Sanitary Lines Site Clearance

Concrete Floors Electrical Lines

Site Staffs Bulk Excavation Bulk Excavation

Steel Roofs Fixtures

Resources Foundation Structures
Excavation Wooden Stairs Appliances
Installations
Utilities Fill Built In
Composite
Elements Road Works
Disposal

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 Resources Programming
Material, Labor and Equipment Breakdown Structures

C-25 Concrete Work

MBSs LBSs EBSs

Forman Concrete Mixer
Cement
Concrete Vibrator
Sand
Mason
Dumpers
Aggregate Carpenter
Pumps, if any
Water Mixer
Operator
Admixture, if any

Daily Laborers

4
 Rate Analysis
• A unit rate prepared will take into account
methods of construction and all circumstances
which may affect the execution of work on the
project.
• It will consist of a prediction of the cost of the
physical resources and mark-up by management.
These physical resources are: Labor, materials,
and plant.
The components of unit rate build-ups
UNIT RATE
BUILD UPS

LABOR MATERIAL PLANT

ALL IN OUTPUT GANG RATE HIRE OPERATO FUEL ATTENDA

LABOR CONSTANT COST R COST COST NT LABOR
RATE PET UNIT OF BUILD UPS COST
MEASURE

SUPPLY COST UNLOADING WASTE

PLANT COST
DELIVERED ALLOWANCE
LABOR COSTS COSTS PER UNIT OF
TO SITE
PER UNIT OF MEASURE
MEASURE

MATERI
AL COST
ON SITE

MATERIAL COST
PER UNIT OF
MEASURE

UNIT RATE COST

PER UNIT OF
MEASURE
1. Direct Project Costs:
A. Material Cost: Costs that can be allocated directly to a product

Delivery Price including Taxes

Port + Customs Clearance, and Duty + Tax Costs if imported
Materials

Transportation Costs
Loading and Unloading Costs
Insurance Cost
Environmental Protection for Water (5 % - Site Overhead) and Wastage
Differentiate between Head Office Supply Vs Project Site Purchase
Other Considerations

Compare Supplies from different delivery stations, their combinations and

their waiting time and availability impacts for comparative advantages
VAT Registered Contractors are advised to buy from VAT Registered
Suppliers

Compare Continuously Actual Material Cost with Contract Value

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 Example: Material Cost for Cement at Project Site
1. Cement from Mugher including Vat: Birr 125.09 / Qtls
2. Port … Birr …..
3. Transportation Cost
Mugher – Project Site (105 Km) Birr 12 / Qtls
4. Loading / Unloading Cost Birr 2 / Qtls
5. Insurance Cost Birr Some Amount
6. Waiting Time (acceptable) Birr ……
Total = Birr 139.09 / Qtls
Or
1. Cement from AA including Vat: Birr 135.08 / Qtls
2. Port … Birr ….
3. Transportation Cost
AA – Project Site (5 Km) Birr 0.57 / Qtls
4. Loading / Unloading Cost Birr 2 / Qtls
5. Insurance Cost Birr ……
6. Waiting Time (Cause overall 2 Days Delay) Birr Liq. Damage
Total > Birr 137.65 / Qtls
 Disposition of the Cost Calculation
1. Direct costs: Costs that can be allocated directly to a product
B. Labor costs
• The real challenge in pricing construction work is the computation
of labor and equipment costs.
• The most difficult to estimate accurately because of human variance
and external conditions.
• To do an acceptable job of establishing these costs, the estimator
must make
– a complete and thorough job analysis,
– maintain a comprehensive library of costs and production rates
from past projects (historical data), and
– obtain advance decisions about how construction operation will
be conducted.
• Direct Project Costs: Labor Cost
Salary / Wage Rate
Annual Leave
Overtime, if any
Labor

Severance Pay
Medical Insurance
SH&E Protections (Better be included in Site Overheads)
SH&E Expenses (Better included in Site Overheads)
Other Benefits such as Bonuses / Allowances, Per diems, Travel cost,
Considerations

Provident Funds, etc.

Other

Labor Idle Time due to Weather Condition

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 Example: Labor Cost for Mason
1. Basic Salary: Birr 3.75 / hr
2. Annual Leave: 14*30/(308*8) Birr 0.17 / hr
3. Over Time: 1.5*30/8 Birr 5.63 / hr
4. Severance Pay: 30*26/(308*8) Birr 0.32 / hr
5. Medical Insurance: 1.5*30*308/(308*8*100) Birr 0.57 / hr

6. HS&E expenses (Assumed 1500 Birr/yr) Birr 0.61 / hr

7. Idle Labor: (depends on rain period & intensity; assume 56 days) Birr 0.68 / hr
Total =Birr 11.73/ hr
Labor Index = 11.73 - 3.75 / 3.75 = 2.13
NB: For some labor Bonuses, Provident fund, Per Diem expenses can be
considered, but it can also better be considered in Overhead Costs

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 Disposition of the Cost Calculation
Equipment costs: -
– All costs for commissioning /holding and
operation of the equipment
• Ownership of plant
• Hire of plant
– The main factors in building up a rate will be:
• Standing Costs: includes capital sum based
on purchase price and operating cost,
maintenance, tax and insurance
• Operating Costs: operators cost, fuel,
consumable stores
• Direct Project Costs
– Equipment Cost (Buying Access – hourly cost)
• Owning + Operation + Operator’s Salary & Benefits
• Transportation Cost + Installation and De Installation
Cost, if any + Property / Registration Renewal Tax, if
any
– Owning Costs
• Depreciation + Life Time Upgrading + Insurance
Premium
– Operation Cost
• FOG + Consumables (Tires if any, Filters, High wear
items) + Normal Repair including Crawler carriage Costs
– Operator’s Salary & Benefits
• Same as Labor Cost (Better if included in Labor Cost)
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• Direct Project Costs
– Equipment Cost (Renting & Leasing Access)
• Rental or Leasing Rates
• Operations and Operator’s Cost, if any (less likely for
rental access)
• Transportation Cost + Installation and De Installation
Cost, if any
– Rental and Leasing Rates
• Buying Access + Overhead + Profit + Tax (hourly Cost)
• Rental Rate is often higher than Leasing Rate
• Both Rental and Leasing rate are less competitive than
Buying access cost
– If equipment is old or second hand consider break down
time that reduces yearly utilization time
– Consider equipment idle time due to weather condition 14
• Direct Project Costs
– Equipment Cost (Renting & Leasing Access)
• Rental or Leasing Rates
• Operations and Operator’s Cost, if any (less likely for
rental access)
• Transportation Cost + Installation and De Installation
Cost, if any
– Rental and Leasing Rates
• Buying Access + Overhead + Profit + Tax (hourly Cost)
• Rental Rate is often higher than Leasing Rate
• Both Rental and Leasing rate are less competitive than
Buying access cost
– If equipment is old or second hand consider break down
time that reduces yearly utilization time
– Consider equipment idle time due to weather condition

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 Indirect Costs
2. Indirect Costs
A. The project/Site overheads
– the cost of administering a project
– Time-independent costs
• Costs for site plant/ site installations, Cost for site facilities,
Engineering and controlling, Operation risks, Special costs
– Time-dependent costs
• Commissioning /holding costs, Operating costs, Costs for
contractor’s agent
– They consist of the items that cannot be
satisfactorily allocated to individual unit rates of
finished work.
B. General overhead costs
C. Risks and profit
• Indirect Project Costs
– Site Overhead Costs
• Project Facilities, Utilities and Running expenses
including camps expressed in terms of %ages to each
trades of works direct unit costs
– Project Utilities and Facilities
– Project staffs costs plus all Allowances & Camp
Costs, if any
– Transportation and Travel Expenses
– Mobilization and Demobilization Costs
– Detour and Access Roads, if any
– Tender and Contract Expenses (Pre-Paid Items)
– Sundry Expenses
– Site Overhead Cost = Total Project Site Overhead Costs /
Total Project Direct Cost 17
• Indirect Project Costs
– Head Office Overhead Costs (Annually)
• Head Office Facilities (Fixed Assets as depreciation)
Utilities and Running Expenses
• Head Office staffs costs including all Allowances
• Transportation and Travel Expenses
• Tendering and Contract Expenses
• Sundry (Miscellaneous) Expenses
– Head Office Overhead Cost = Annual Head Office
Overhead Costs / Average Annual Direct Cost Turnover
– Often depends on the number of Projects the company
runs

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 Example: Head Office Overhead Costs
• Head Office Facilities and Utilities Expenses
– Buildings, Furniture and Equipments as Depreciations, Electric, Water,
Telephone, Internet, expenses etc
• = assumed as 1 – 2.3% of Direct Unit Cost
• Head Office Staff Costs (as per OBS):
– GM’s + Construction + Adm. & Fin. + Other Offices Expenses
• = assumed as 1.4% of Direct Cost Component (avg.)
• Transportation and travel Expenses
– All Head Office vehicles expenses including rental services
• = assumed as 0.7% of Direct Cost Components (avg.)
• Tender Expenses  Pre Paid Items but not successful
– Bonds, Guaranties, Insurances
• =assumed as 0.2% of Direct Cost Components (avg.)
• Sundry Expenses
– Advertisement, Reception and Donations expenses
• = 0.2 – 0.4 % of Direct Cost Components (avg.)
• Total = 1 to 2.3 + 1.4 + 0.7 + 0.2 + 0.2 to 0.4
– = 3.5 to 5.0 % (4.5 % avg.) of Direct Cost Components
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• Sub Contracting / Outsourcing Costs
– Sub Contract / Outsourcing Cost
– Tendering Expenses
– Sub Contract Administration Costs
• Risk Allowances
– Inflation rate
– Problems and Challenges based alternatives
impacts
• Profit Margin
– (8 to 12 / 0.7) % of (Direct + Indirect + Sub
Contracting + Risk Allowances)

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 Example: Site Overhead Costs
• Project Utilities and Facilities Expenses
– Electric, Water, Telephone, Internet, Furniture,
Equipments, etc
– = assumed as 1.2 % of Direct Unit Cost
• Project Staff Costs including Camp (as per OBS):
– PM’s + Construction + Adm. & Finance Offices Expenses
• = assumed as 3 – 4.3% of Direct Cost Component (Avg)
• Transportation and travel Expenses
– All Project Site vehicles expenses
• = assumed as 1 % of Direct Cost Components (Avg)
• Mobilization & Demobilization Expenses
– Mainly Transportation & Dismantle + Reinstall Costs
• = assumed as 2 – 3% of Direct Cost Components (Avg)
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 Example: Site Overhead Costs
• Detour and Access Roads, if not included in BOQs
– = assumed as 0.2 – 0.5 % of Direct Cost Components (avg.)
• Tender and Contract Expenses  Pre - Paid Items
– Bonds, Guaranties, Insurances
– = assumed as 3% of Direct Cost Components (avg.)
• Sundry Expenses
– Reception and Donations expenses
– = 0.2 – 0.5 % of Direct Cost Components (avg.)
• Total Site Overhead Expenses
– = 1.5 + 3.3 to 4.3 + 1.2 + 2 to 3 + 0.2 to 0.5 + 3 + 0.2 to 0.5
– = 11.4 to 14.6 % (13 % Avg.) of Direct Unit Cost

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 Bid Sum
• Direct cost + Indirect cost = bid sum +Value-added Tax
(VAT) / Bid sum inclusive turnover tax /vat/

• Production cost production =Direct cost + Site

overhead Cost

• Self-costs= Production cost +General overhead cost

• Bid sum=Self- costs + Risk& profit

 Execution of the Cost Calculation

A. Construction Material Costs:-Cost of all material which will be

part of the building. Required information?
 Quantity of material required to produce a unit amount of itemized work

 Basic price (Prime cost) at the source of material

 Transport, loading and unloading to the site

 Waste/loss (e.g. Breaking, rupture, defective material, wastage

etc).
 General Formula
1. Composition of the ingredients per cubic meter (Z cubic m):
i. Concrete: For example mix ratio of 1:2:4
 General Formula
1. Composition of the ingredients per cubic meter (W cubic m):
ii. Mortar: For example mix ratio of 1:4
 Site Engineering
Productivity
Labor and / or Equipment Productivity
Types Crew Productivity
Operational Productivity

Crews Designation and Coordination

Planning Line of Balance approach to Planning
Productivity Assignments

Gauging Productivities
Controlling & Determining Discrepancies
Impacts Assessing Impacts
Taking Appropriate Actions

1/28/2019 30
Wubishet Jekale (Dr. Eng.)
 Site Engineering
• Resources and Crews Productivity
• Worker’s Productivity
• Work units produced / Wo-Man hour used
• Record’s
• Time keepers’ records (Manpower time card)
• Daily or Weekly Labour productivity report
• Causes of High and Low Productivity Rate
• Worker’s low moral, poor pre-work preparation, etc
• Material’s Productivity if produced on site
• Work units produced / Material Quantity produced
• Resources Mobilization Monitoring
• Delivered / made available against Planned

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 Site Engineering
• Resources and Crews Productivity Monitoring & Evaluation System
• Equipment Productivity
• Work units produced / Equipment hour used
• Accounting as direct cost  use of rental rate
• Daily or Weekly productivity report
• Causes of high or law productivity
• Poor pre – preparation, poor equipment maintenance, low
operators skill, lack of continuous task, etc
• Crew Productivity
• Variance = Standard or Planned – Actual Productivity
• Index = Actual Productivity / Standard or Planned
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 Site Engineering

• Resources and Crews Productivity

Monitoring & Evaluation System
• Setting clear targets for monitoring
purposes
• Providing Resources Support
• Communicating Feed back
• Motivating Workers
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 Example
• Rate.xls