ANALYSIS OF PRICES

20/10/2021 BY PN HJH HAZWANI RAMLI/OCT 2021 1

Price Analysis is the process of deciding if the
asking price for a product or service is fair and
reasonable, without examining the specific cost
and profit calculations the vendor used in
arriving at the price. It is basically a process of
comparing the price with known indicators of
reasonableness.
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1. Definition
• A technique for analyzing the prices to determine
the types of components of prices present and
the amount of each component.
• The analysis is done on the rate or unit price of
the works – price/m3, price/m2, etc.- not on the
total price of the work unless the work is to be
priced on a lump sum basis.
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2. Objectives
• To produce the rates for the purpose of pricing
the work.
• To obtain a tender sum for the work.
• Tender sum must be competitive, realistic,
reasonable, workable – with some margin for
profit.

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3. The analysis
• Involves the calculation of elements that contribute
to the direct cost of the work.
• Labour cost + material cost + plant cost + site
overhead = Total cost of work.
• Total cost + general overhead + profit = tender price.
• i.e the price the contractor is prepared to carry out
work – the figure to be submitted in the tender
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4. Labour cost
• The cost of workmanship in executing the work.
• mainly the wages - including overtime pay, bonuses,
etc.
• for foreign workers – to also include levy charges,
permits, etc.
• All works require workers
• Wages are differ – sex, market condition, location of
sites, working condition, contract condition, etc

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5. Labour constant
• Labour constant is used in the calculation of
labour cost for the work.
• the time spent by workman to complete a
specified work.

• BRICKLAYER RM 50/DAY
• COST/M2 WALL=?
• LABOUR CONSTANT = 1HR/M2
• RM 50/8 HOUR X 1HR/M2 = RM 6.25/M2
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6. Material Cost
• Material (as per quotation from supplier)
• Delivery (if not included in material cost)
• Unloading & handling (storage cost may be included
in Preliminaries)
• Wastage, damage, theft, etc.
• Subsidiary fixing materials e.g. – nails for roof,
jointing compound for pipes.
• Price varies from place to places, market condition,
etc

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 SUMMARY OF BQ
• 1. PRELIMINARIES – SITE OFFICE, STORAGE,
SECURITY,WATER,ETC
• 2.PILING WORKS
• 3. BUILDING WORKS – BLOK A, BLOK B, SURAU, ETC
• 4. EXTERNAL WORKS
• 5. PROVISIONAL SUM
• 6. PRIME COST SUM
• 7. MECHANICAL AND ELECTRICAL WORKS
• TOTAL TENDER AMOUNT
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7. Plant Cost
• Consider only mechanical plant.
• Non-mechanical plant e.g. tools scaffolding, buckets,
ladders, ropes, hammer, etc. – to be included under
general overhead.
a) Own Plant
• Owning cost – Purchase price, depreciation allowances, cost
of capital/interest, plant department overhead, insurance
premiums, repairs & maintenance.
• Operating cost – Fuel, lubrication, operator.
b) Hired Plant
• Hire rate.
• Maintenance cost – oiling, greasing, cleaning, etc.
(repair/overhaul normally done by plant co.)
• Operating cost – Fuel, lubrication, operator (if necessary)
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8. General Overhead
• cost of operating/managing the business e.g. office
space, managers, secretaries, stationary, furniture,
non-mechanical plant, etc.
• Must be recovered in full
• Calculation - based on the previous financial year’s
account.
• Expressed as a % of the total project costs for that
year i.e annual turnover
• This % can be used to calculate the approximate
overhead charges for future contracts
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9. Profit

• The most arbitrary item

• A management prerogative but must be greedy to be
competitive. Must consider:
1. The workload/resources – if little work in hand –
reduce profit margin.
2. Market conditions i.e. the level of competition in the
area – if too many tenderers participate in the tender
– reduce margin – be more competitive.
3. The risks – examples – if there is a serious lack of
information from drawings/specifications or ambiguity
in contract conditions – opt for higher profit margin.
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10. DECISION TO TENDER
• Contractor to decide whether to tender or not to tender.
• Important decision before committing time, money and effort in
tendering excersice.
• Contractor must examine tender document – to understand
project’s requirements
• Factors influencing decision:
a) Nature of works
• Contractor has experience with similar project, which had carried
out similar work profitably
• Consider also size and location
b) Amount of works in hand
• Contractor must satisfied that he can take additional work
• Too many job in hand – strain resources
• Sufficient resources available – finance, workers, equipment, etc
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10. DECISION TO TENDER
c) Parties involved
• Consider past experience with parties involved – fussy client,
inconsiderate engineers, corrupt architect
• Good relationship with them will reduce dispute
d) Tender information
• Sufficient and accurate information for tendering
• Sufficient time to prepare estimate
e) Contract particulars
• value of contractor’s work,
• advance payments,
• access to site, etc.
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11. COLLECTION OF INFORMATION
• If the contractor decided to participate in the tender, he must
proceed with the collection of necessary information for pricing
purposes.
• Information : both technical and contractual
a) Estimating programme
Contractor to prepare the programme
b) Examination of tender document
Through examination of condition of contract, drawings,
specifications, soil report, etc
a) Enquiries and quotations
i. Materials suppliers
ii. Sub-contractors
iii. Plant suppliers
b) Visit to site
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