Rate Analysis

Rate Analysis is the process of fixing cost per unit of measurement for the different item of
works. Cost due to construction (contractor’s cost) is given special attention here.
Total cost per unit of work (TC) may be grouped into two components; direct cost and indirect
cost. The direct cost (DC) includes cost due to material, cost due to labor, cost due to equipment,
whereas the indirect(IC) cost covers overhead costs, and contractor’s profit. Overhead costs are
expenses for general office facility, rents, taxes, electrical light, water, and other miscellaneous
items.
In order to facilitate estimation of cost due to material, it is important to know the quantities of
various materials involved in construction of various parts of the building or construction work
i.e. material break down is essential.
Estimating Direct Cost Work Items
Estimating the direct cost of any work items include estimating the cost of material, labor and
equipment.
Material Unit Cost Estimation
Material unit cost is the total unit cost of a construction material at the project site required to
execute a specific activity in the project. In estimating the material unit cost, the contractor shall
obtain the quantity and quality of materials required to produce the specific unit of activity from
his construction method statements. Construction materials required for the execution of
construction projects are normally purchased either from the local market or international market
depending on the availability and material prices. Whether the construction materials are
purchased from the local market or the international market, the material price shall include the
supplier’s price at place of delivery, transportation cost to the project site and the cost of all
relevant taxations.
In estimating the direct material cost, the contractor shall obtain:
 Current price of each material
 Quantity or amount of material for unit measurement.
Material cost = material qty * material unit cost
Direct Labor Hourly Cost Estimation
The direct labor hourly cost is the total cost of labor per hour at the project site required to
execute a specific construction activity in a project, which mainly refers to the skilled and
unskilled workers. The direct labor hourly cost widely varies from company to company based
on the contractors‟ salary and other benefits scale such as food allowance, insurance, hardship
allowance, project allowance, severance pay, provident fund, annual leave, bonuses, per diem
and any other benefits specially based on collective agreements in between the contractor and the
workers.
In calculating the direct labor cost, contractors need to calculate the direct labor hourly cost
which is the total hourly cost of labor crew required to execute a specific activity in the project.
In estimating the direct labor hourly cost, the contractor shall obtain the following inputs:
 Number of labor;
 Skill and labor utilization factor (UF);
 Labor basic salary; and
 Labor index from his previous records and the labor market.

Labor cost = # of labor * daily wage * UF/ prodctivity

Direct Equipment Hourly Cost Estimation

Then ….TDC = Mc + Lc + Ec
Estimating Indirect Cost

The indirect cost comprises both overhead costs, and contractor’s profit.

Overhead costs
Overhead costs are expenses for general office facility, Utilities needed for material storage,
fences, and gates, electrical light, water, and other miscellaneous

Contractor Profit
The last item to be included in the bid and representing contractors return on investment is the
profit. The magnitude of desired profit must be decided by the owner for each individual bid,
depending on local market conditions, competition, and the contractors‟ need for new work. In
the construction industry, markup is defined as “the amount added to the estimated direct cost
and estimated job into site overhead cost” to recover the firm‟s main office allocated overhead
(general overhead) and desired profit.
Example 1: Unit price for C -25 concrete per m3 of work
Calculate the price of a C -25 concrete with the ratio of 1:2:3, and water to cement ratio 0.55.
Assume:
For material cost:
 Cement 240 birr per quintal, Sand 400 birr/m3, coarse aggregate 320 birr/m3, Water
3birr/m3
For labor cost:
 One Forman with utilization factor of 0.25 and indexed daily cost of 120birr,
 One mixer operator, vibrator operator, with utilization factor of 1 and indexed daily cost
of 90 birr for each.
 Four daily labors with utilization factor of 1 and indexed daily cost of 60 birr.
 Productivity = 8m3/day
For equipment cost:
 One mixer and one vibrator with daily rental rate of 500 birr and 300 birr respectively.
 Four tools with daily rental rate of six birr.
 Productivity = 8m3/day
Take indirect cost = 20% of direct cost
Solution
Material cost
Materials required for 1:2:3 cement concrete mix – a commonly used grade of concrete for
structural works.
Step 1: material breakdown
Wet (fresh) concrete mix …………= 1m3
 Because of the voids in aggregates, shrinkage and wastage, 1.4 to 1.6 times dry volume
of the materials are required to get 1m3 of compact dense fresh concrete mix.
Quantity for dry base analysis…….= 1.5*1.0m3 = 1.5m3
Volume of cement………… = 1/6*1.5 = 0.25m3 ……but 1 bag of cement = 0.035m3
= 0.25m3/0.035m3 per bag = 7.1 bags of cement…..but 1qtl of cement = 2 bag of cement
= 7.1/2 qtl = 3.55qtl
Sands ………………………..= 2/6* 1.5 = 0.5m3 of sand
Coarse aggregate……………..= 3/6 *1.5 = 0.75m3 of coarse aggregate
Water ………………………..= W/C = 0.55= W/0.25….W= 0.55*0.25 = 0.138m3
Steps 2: calculate of each material with current price.
Cement = 3.55qtl * 240 Br/qtl = 852Br
Sand = 0.5m3*430Br/m3 = 215br
Coarse Aggregate = 0.75m3*350Br/m3 = 262.5Br
Water = 0.138 * 3birr = 0.4birr
MC = cost of cement + cost of sand + cost of coarse agg. + cost of water
=………..
Labor cost
Crew = a group which is directly involved in a similar job
The crew consists of forman, mixer operator, vibrator operator and four daily laborers at the
wage rates given above for brick masonry work.
Utilization Factor (UF) = 1/ the # of crew or people under supervision
Forman daily wage = 120Br/day, but UF = 0.25
= 120br/day*1/4 = 30birr/day.
Mixer operator daily wage = 90Br/day = UF = 1
Vibrator operator daily wage = 90Br/day = UF = 1
Daily laborers, daily wage = 60Br/day * 4 =240birr/day, UF = 1
Labor output (productivity) for the work = 8m3/day
Labor cost (LC) = Cost per unit time/ productivity =
=
Equipment cost
Daily mixer rental = 500birr/day
Daily vibrator rental = 300birr/day
Daily tools rental = 6birr/day
Equipment cost = total cost per unit time / productivity
=
DC = MC + LC +EC;
=
Exercise 1 : calculate the cost required to construct 1m2 HCB wall laid in 1: 3 cement mortar;
Take nominal size of blocks as 40x20x20 cm, 40x20x15cm, or 40x20x10 cm.
Qty of HCB masonry in 1m2
Size of one HCB =40x20x20 cm
Size of one mortared HCB = 41x21x21 cm;
Area of each mortared HCB = 0.41*0.21m2 = 0.0861 m2
Number of HCB required = 1 m2/0.0861 m2 = 11.6 = 12
Qty of materials for Mortar in 1m3
Volume of one mortared HCB= (0.41x0.21x0.21) m3 = 0.018m3
Volume of one unmortared HCB = 0.4m*0.2m * 0.2m = 0.016 m3
Volume of 12 unmortared HCB = 12*0.016 m3= 0.192 m3
Volume of mortar = 1 m3 – 0.192 m3= 0.81 m3
Assume 30% for wastage, shrinkage and voids in sand.
0.81 m3 + 0.81 m3 * 0.3 = 1.05.m3
Cement mortar of 1:3 mix by volume (1+3 =4)
Qty of cement required = ¼ * 1.052 m3 =
0.26 m3
Number of bags of cement =0.26/0.035 = 7.5bags = 3.7qntl
Qty of sand = ¾ * 1.052 = 0.79 m3