Contents:

1. General Introduction to the Construction Industry

2.Specification
3.Quantity Surveying
4.Project Costing and Valuation
5.Construction Procurement
6.Construction Contract

1
5. Project cost estimation
 Project cost estimation is the process of valuing on monetary expression,
including the cost of all possible entrants necessary for the planning,
implementing and monitoring stages of the proposed project under
consideration.
 If the available financial capacity is smaller than the estimated cost, it is
important to redefine the scope of the work by either changing the
specification or size of the work.
The possible entrants of project cost are:
 Preliminary investigation (project appraisal costs)
 design and supervision (consultancy cost )
 construction works (contractor’s cost )
 land owning cost
 monitoring costs
Cost due to construction is the focus of this chapter
Cost includes:

 cost due to material,

 cost due to labor,

 cost due to equipment,

 overhead costs and contractor’s profit.

 Material Break Down - In order to facilitate estimation of cost due to material, it

is important to know the quantities of various elements involved in construction of
various parts of the building work

􀁠 Example: Material Break Down for 1m3 C-25 concrete (1:2:3 mix)
 Purposes of Estimation and factors affecting cost estimation

The main purposes of costing or

estimating are to: Factors Affecting Cost Estimation
 know the volume of work in  Type and  Location of the site
documentation of the  Transportation
reference to the fund available
project charges
 determine actual cost per unit of  Construction  Proper management
item scheduling  Land charges (lease)
 identifying engineering estimate of  Bidding environment  Nature of subsurface
the work for bidding purpose  Quality and condition (and the
availability of foundation that is
 work out economical use of material and labor being used)
materials , labor and equipments (given in
specification)
 in cases of variations to determine
 Strength or grade
the extra cost to be incurred required. Eg. C15,
 when changes in cost due to C20, C25 concrete
legislation happens, to work out the  Construction
facilities /tools and
escalation in cost
method of
construction
The following information is required to define cost per unit of
work
1. Correct information of the market price of the materials at the time of
need to be used as a prime cost
2. Correct information of the rates of various categories of skilled and
unskilled laborers as wage rates to be used for daily work rate
3. Output of laborers per day for various types of items (productivity)
4. Correct information of the rates of various categories of equipments and
tools as rental rates to be used for major items of rates
5. Up-to-date knowledge of the construction methods.
Types of Costing or Estimating
 Estimation can be broadly classified as Preliminary (Approximate) and Detailed
(Refined). But it is also possible to classify estimation into four categories as follows:
1. Preliminary /Approximate Costing
 This type of cost estimation is required to know the financial position of the client
before costly detailed designs are carried out. Such estimates are based on practical
knowledge and cost of similar previous works.
Examples of approximate cost estimations:
A. Cost per Functional Unit
 residential buildings=cost per area
 Hospital =cost per bed,
 Dormitory = cost per student,
 Cinema or theatre = cost per seat,
 road works = cost per kilometer length, etc.
 culverts or bridges=cost per meter span,
 water supply or sewerage projects=cost per head of population
B. Plinth Area Method – cost per m2 of a building (Plinth area means built up
(covered) area measured at floor level of the storey)
 Social Buildings :-not aesthetic but functional, 10,000 – 15,000 Br/m2
 Industrial Buildings :-Profitable but aesthetics is not the main quality, 13,000 –
20,000Br/m2
 Monumental Building:-Aesthetics is the main quality, eg. Palaces, museums
20,000 – 30,000Br/m2
C. Cubical Content Method – cost per m3 of the building
D. Elemental/Parametric Estimate – roughly grouped quantities or elemental bill .In
this approach the project is first divided into functional systems/elements and rough
quantities are taken off. The cost of each element is obtained by multiplying the
quantities obtained by established unit prices, and the elemental costs are added to get
the total construction cost.
Example: Slab =.....Br/m2
Beam (Specified size) =.....Br/meter linear
2. Detailed Estimate or Item Rate Method

This is the most reliable and accurate type of estimate. The quantities of items are
carefully prepared from the drawings and the total cost worked out from up to
date market rates. Detailed estimate is accompanied by a detailed report,
detailed specification for the execution of the work, and detailed drawings, etc.

3. Revised Estimate

It is a detailed estimate prepared afresh when the original detailed estimate is beyond
an acceptable range. It should be accompanied by all the papers as in the case
of the detailed estimate and also should include the comparative statements of
variations in each item of works.

4. Supplementary Estimate

When additional works are there, a fresh detailed estimate is prepared to supplement
the original work.
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;

1. Direct cost and

2. 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.