Lecture 2 - Build Up Rates

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DDQ 4

COST ESTIMATING

LECTURE 2BUILD-UP RATES & PRICING

Rates & Its Constituents

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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 calculatedaccurately?

4. Which is more significant than the other to the cost

of development; infrastructure cost or building cost?

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COMPONENTS OF BUILDING COST

Building costCosts involved in constructing a building materials,

labour, equipments, etc

Preliminaries Sub-structure & Superstructure

Finishes

Fittings &Furnishing

EngineeringServices External Work

Prime cost & Provisional Sum

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RATES & ITS CONSTITUENTS

Rates?

Total costs of work + profit + overhead

Cost ofmaterials

Cost oflabour

Costs ofplants and

equipments

Overhead &Profit

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DIRECT COSTS

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

Costs of Materials- Consist of basic cost, cost for transporting,

handling & installing the materials

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

Not all costs willbe included inestimating thework rates; forexample,

1. Excavationwork shall onlyinclude cost oflabour andequipment

2. Paint workonly requirecosts ofmaterials and

labour

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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 costsof purchase)

3.Handling and storage costs4.Cost of wastage; during handling and usage, or damages or

theft of materials, etc5.Cost of miscellaneous items, such as nails for roof

installation, binders for reinforcement, and other materials

which are not measured.

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PROCURING MATERIALS

Factors ofconsideration

Quantity

Time ofusageQuality

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PROCURING MATERIALS - PROCESS

Selectionofsuppliers

Purchaseorder Delivery

Quality &Quantityinspection

Storage

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PROCURINGMATERIALS PURCHASE

ORDER

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PROCURING MATERIALS - STORAGE

Storing

Labelling

Handling &care

Recording &Book-keeping

Safety &security

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COSTS OF MATERIALS - EXERCISEA. Half brickwall in common bricks in cement lime mortar (1:1:6)

in Stretcher bond with brick reinforcement at every fourthcourse m 2

Information:1. 1 m 2 half brickwall = 63 bricks (including 5% wastage)

2. Mortar for 1 m 2 half brickwall = 0.025m3 (including 33%wastage)

3. Brick reinforcement for 1m 2 brickwall = 3.60m (including 8%wastage)

4. Cost of common bricks = RM0.24/No

5. Cost of mortar = RM112.33/m 3

6. Cost of brick reinforcement = RM0.60/m

7. Overhead & profit = 15%

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COSTS OF MATERIALS - EXERCISEB. 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/m34. Cost of aggregate = RM35.00/m3

5. Wastage = 30%

6. Overhead & profit = 15%

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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) Workc) Experienced) Environmente) Motivation

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COST OF LABOUR FINANCIAL INCENTIVE

Daily wages

Bonus

Payment oncompleted

work

Work targetsystem

Partnership

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COST OF LABOUR FOREIGN LABOUR

*PL (KS) : Pas Lawatan Kerja Sementara

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COST OF LABOUR FOREIGN LABOUR

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COST OF LABOUR - EXERCISEA. 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/day3. Overhead & profit = 15%

B. 900mm x 1200mm wrought pressure treated timber standarddoor - No

Information:1. Door installation = 0.85 hour

2. Skilled labour = RM85.00/day

3. Overhead & profit = 15%

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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 = excavatorfor 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.

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PROCURING PLANTS & EQUIPMENTS

Method ofprocurement

Ownership(Purchase)

Has full control over plantswhen needed can be

leased out when not used

Financial burden if notoptimise its usage

Rent/hire Does not require any capitalinvestment to purchase the plants

No need for maintenance usuallydone by the plants owners

Can be less efficient as the plants are mostlikely have been used in other projects

Hirepurchase

Higher interest compared tocash purchase

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PROCURING PLANTS & EQUIPMENTS

Ownership

Cost ofownership

Cost of purchase

Depreciation

Interest on loan

Insurance

Administration cost

Cost for maintenance & repairHandlingcost

Fuel, lubricants & engine oil

Wages for the operators

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PROCURING PLANTS & EQUIPMENTS

Renting plants & equipments - Plant rental rates

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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%