CHAPTER 4

Project Cost Estimation

4.1 Introduction
 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.
 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
 Cont…
Purposes of Estimation
 The main purposes of costing or estimating are to:
 Know the volume of work in reference to the fund available

 Determine actual cost per unit of item

 Identifying engineering estimate of the work for bidding purpose

 Work out economical use of materials, labor and equipment's

 In cases of variations to determine the extra cost to be incurred

 When changes in cost due to legislation happens, to work

escalation cost.
 Cont…
Factors Affecting Cost Estimation
 Construction scheduling.

 Quality & availability of material & labor

 Strength or grade required. E.g. C15, C20, C25 concrete

 Construction facilities /tools and method of construction

 Location of the site

 Transportation charges

 Proper management

 Land charges (lease)

 Nature of subsurface condition

 Cont…
Information for cost estimation
 The following information is required to define cost per unit of
work.
 Correct information of the market price of the materials at
the time of need to be used as a prime cost.
 Correct information of the rates of various categories of
skilled and unskilled laborers as wage rates to be used for
daily work rate.
 Output of laborers per day for various types of items
(productivity).
 Correct information of the rates of various categories of
equipment's and tools as rental rates to be used for major
items of rate.
 Up-to-date knowledge of the construction method.
 4.2 Types of costing or estimating
 Estimation can be broadly classified as preliminary
(approximate) & detailed (refined).
1. Preliminary /approximate costing

2. Detailed estimate or item rate method

1.Preliminary /approximate costing

 It is required to know the financial position of client before

costly detailed designs are carried out.

 Such estimates are based on practical knowledge and cost of

similar previous works.
 Cont…
 Examples of approximate cost estimations are as follows:
i) Cost per functional unit
 Hospital =cost per bed,
 Dormitory = cost per student,
 Cinema or theatre = cost per seat,
 Road works = cost per kilometer length, etc.
ii) Plinth area method -Cost per m2 of a building.
 Social Buildings: not aesthetic but functional,1000-1500
Br/m2
Industrial Buildings: Profitable but aesthetics is not main
quality, 1300 – 2000Br/ m2
 Monumental Building: Aesthetics is the main quality, e.g.
Palaces, museums 2000 – 3000Br/ m2
 Cont…
iii) Cubical Content method
 Cost per m3 of the building
iv) 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, & elemental
costs are added to get the total construction cost.
Example: Slab =.....Br/m2
Beam (Specified size) = .....Br/meter linear
Column = .....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.
 Cont…
Revised Estimate
 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.
Supplementary Estimate
 When additional works are there, a fresh detailed estimate is
prepared to supplement the original work
 4.3 Basic Cost Components of a Construction Project
 Basically the cost of any construction project includes:-
 Direct costs, which include the direct cost of materials, labor as
well as equipment and
 Indirect costs, which include but not limited to head office and
site overhead costs.
A. Direct Construction Cost
 Direct construction costs are all costs that can be specifically
booked with an activity in a project.
 The direct costs mainly include:-
 Material,
 Labor,
 Equipment and
 Subcontract costs
 Cont..
B. Indirect Construction Cost
 Indirect construction costs are all costs, which cannot be directly
booked under a specific activity in a construction project.
 But required to keep the whole project operational.
 These costs are also called overhead costs, which mainly include the
head office and site overhead costs.
 Head office overhead costs are all costs required to run the whole
operation of the construction company, which usually administers
different projects at a time.
These costs are not usually associated with specific project but rather
shared proportionally by all projects under the company
 Site overhead costs are all costs required to run the whole operation of a
specific construction project at site level.
 Cont…
C. Risk Allowance
 Usually contractors incorporate risk allowances in their tender prices
to compensate the negative impacts of different risks such as
contractual, technical, political and economic risks.

D. Profit and Income Tax

 Construction projects are executed by contractors whereby these

contractors will commit to invest their capital to get maximum
possible profit from the contracts to be performed.

 A profit margin entirely depends on the market competitiveness and

company strategies.
 Income tax=30% of gross profit
 VAT= 15% of the construction cost
 4.4 Rate Analysis
 It is the process of fixing cost per unit of measurement for the
different item of works.
 Total cost per unit of work (TC) may be grouped into two
components
The direct cost (DC) includes
 Cost Due To Material
 Cost Due To Labor
 Cost Due To Equipment,
The indirect cost (IC) covers
 Overhead Costs
 Contractor’s Profit
 Cont…
 Overhead costs are expenses for
 General Office Facility,
 Rents,
 Taxes,
 Electrical Light,
 Water, And
 Other Miscellaneous Items.
 Material Break Down Is Essential To Estimate Costs Due
To Material.
 Material Breakdown
1. Quantity of materials required for brick masonry laid in
1:4 cement mortar
 Qty of brick masonry =1m3 (4m2 for 25cm thick brick wall)
 Size of one brick =24x12x6 cm (common in Ethiopia)
 Size of one mortared brick= 25x13x7 cm;
 Volume of each mortared brick = 0.25x0.13x.07 = 2.275x10-
3m3

 Number of bricks required =1/ 2.275x10-3m3 = 440 mortared

bricks per m3
 Add 2% for breakage = 440*2%=8.8 ~9
 Take 450 bricks per m3 or 450/4 = 112.5 bricks/ m2; take
115 bricks/ m2
 Volume of one nominal (unmortared) brick = 0.24x0.12x0.06
= 1.728x10-3 m3
 Volume of 440 unmortared bricks = 440x1.728x10-3m3
= 0.76032 m3
 Cont…
 Volume of wet mortar in 1m3 of wet masonry = 1 - 0.76032
= 0.23968m3
 Percentage of wet masonry in 1 m3 masonry work = (0.23968/1) 100
= 23.96% (Can be taken as 25%)
 Factor of conversion of wet mortar into dry mortar (quantity for dry
base analysis)
 Volume of wet mortar in 1 m3 of wet masonry = 0.23968m3
 Add 10% for wastage = 0.023968m3
 Sum Total = 0.23968m3 + 0.023968m3
= 0.263648 m3
 Assume 20% voids in sand (Note that cement fills the voids b/n sand
particles)
 Volume of dry base analysis = wet mortar volume + increment
because of voids in sand
 Cont…
= 0.263648 m3 + 20/100* 0.263648 m3
= 0.31638 m3; nearly 30% of the volume of construction
 Factor of conversion = volume of material required on dry base/ volume
of wet mortar
= 0.31638 m3 / 0.263648 m3 =1.2
 Cement mortar of 1:4 mix by volume (1+4 =5)
 Qty of cement required = 1/5 * 0.316 = 0.0632 m3 / m3 of construction
 Number of bags of cement = 0.0632 m3 / 0.035 m3 per bag =1.81 bags
per m3 of construction; 1.81/4 = 0.45 bags per m2
 Add 10% wastage =0.1*0.45bags per m2 + 0.45bags per m2
= 0.5 bags per m2
 Qty of sand required = 4/5 * 0.316 = 0.253 m3 per m3 of construction
= 0.063 m3 /m2
Exercise: define Qty of materials required to construct 1m2 HCB wall laid
in 1: 4 cement mortar; Take nominal size of blocks as 40x20x20 cm,
40x20x15cm, or 40x20x10 cm.
 Cont…
2. Quantity of materials required for C-25 cement concrete
(1:2:3)
 Cement concrete is a heterogeneous mixture of cement, fine
and coarse aggregates; cement fills the voids in sands also
while sand fills the voids in the coarse aggregate.

 Water acts as an agent so that the paste of cement can coat all
the particles of the aggregate.

 Because of the voids in aggregates and wastage, 1.4 to 1.6

times dry volume of the materials are required to get 1m3 of
compact dense fresh concrete mix.
 Cont…
 Materials required for 1:2:3 cement concrete mix
Wet (fresh) concrete mix …………= 1m3
Quantity for dry base analysis……. = 1.5*1.0m3 = 1.5m3
Volume of cement…………… = 1/6*1.5 = 0.25m3
= 0.25m3/0.035m3 per bag
= 7.1 bags of cement
Sands ………………………. = 2/6* 1.5 = 0.5m3 of sand
Coarse aggregate……………. = 3/6 *1.5 = 0.75m3 of coarse
aggregate
Water …………………………….…. = 0.155 m3 (assuming
w/c 0.62)
Exercise: Do similarly for C 20 and C 30 concretes.
 Cont…
3. Materials required for 12mm thick cement plaster in 1: 4
cement mortar
 30% more mortar is required to fill joints & uneven surfaces.
 This total wet mortar is increased by 20% to convert to dry
mortar (for the effect of voids).Thus, wet mortar is multiplied
by 1.5 to define quantity of material required on dry base.
 Area to be plastered = 1m2
 Thickness of plaster = 12mm
 Volume of the mortar = 1*0.012 = 0.012m3
 Volume for dry quantity =1.5 * 0.012 = 0.018m3
 Cement required = 1/5 * 0.019 = 0.0036/0.035m3 = 0.1bags of
cement
 Sand required = 4/5 * 0.019 = 0.014 m3
 Calculation of Unit Price (rate)
I. Cost per m2 of 25cm thick brick masonry wall, laid
in 1:4 cement mortar
 Total cost (TC) = Direct cost (DC) + Indirect cost(IC)
 IC = 25% to 35% of DC; Equipment cost (EC) = 5% to
10% of TC
1.Material cost (MC)
Given:
 No of bricks required per m2 of 25cm thick brick wall is
115,
 Amount cement required per m2 of brick wall = 0.5 bag
(including 10% wastage)
 Amount sand required per m2 of brick wall 0.063m3, as
shown in example 1 above.
 Cont…
 Brick: Purchasing Cost + loading Cost + unloading Cost
+Transportation cost
= 115 pc*8Br/pc +115(1Br/pc) + 115(1Br/pc) + 115(1.5Br/pc)
= 920+115+115+172.5
= 1322.5Br/m2
 Cement: Purchasing Cost + loading Cost + unloading Cost
+ Transportation cost
= 0.5bag /m2*150Br/bag + 0.5 bag/m2 * 1Br/bag+ 0.5
bag/m2 *1Br/bag + 0.5 bag/m2 *2Br/bag
=75Br/m2 +0.5+0.5+1
= 77Br/m2
 Sand: Purchasing Cost + loading Cost + unloading Cost +
Transportation cost
= 0.063m3 /m2*375Br/m3
= 23.625Br/m2
 Cont…
 Total material cost = cost of (brick +cement +sand)
= 1322.5Br/m2 + 77Br/m2 + 23.625Br/m2
1423.125 Br/m2
Summery of Material Cost for 25cm thick brick masonry wall

Type of Unit Qty Unit rate Cost/unit

material
Brick: pcs 115 11.5 1322.5
Cement Bag 0.45 154 77
Sand m3 0.063 375 23.625
Total 1423.125
Birr/m2
 Cont…
2. Labor cost (LC)
 Crew = a group which is directly involved in a similar job
 A crew for brick masonry work consists of a mason, an
assistant mason & two labors.
 Utilization Factor (UF) = 1/ the # of crew or people under
supervision
 Forman, to guide/control masonry work, UF = ¼, when
controlling four crews
 Site Engineer/Manager, UF = 1/10 (assumed to control 10
formen)
 Cont…
Indexed hourly wages
 Site Engineer/Manager 4000Br/month = 4000Br/
(22days*8hrs/day) = 22.70Br/hr. For a utilization factor of
1/10 (for 10 foremen under him).
= 22.70*1/10 = 2.27Br/hr.
 Forman daily wage = 40Br/day = 40/8*(1/4) = 1.25 Br/hr.,
for 4 crews
 Mason daily wage = 30Br/day = 3.75Br/hr., UF = 1
 Assistant mason daily wage = 20Br/day = 2.5 Br/hr., UF = 1
 Daily laborers, daily wage = 10Br/day =1.25Br/hr., UF = 1
 Labor output (productivity) for the work = 4 m2/day = 0.5
m2/hr.
 Labor cost (LC) = Cost per unit time/ productivity
= [2.27+ 1.25+ 3.75 + 2.5 +2*1.25] Br per hr. / [0.5 m2per hr.]
= 24.54Br/m2
Summery of Labor Cost for 25cm thick brick masonry wall

Labors No UF Index hourly cost Hourly cost

(Birr)

Site Engineer 1 1/10 22.7 2.27

Forman 1 1/4 5 1.25

Mason 1 1 3.75 3.75

Assistant 1 1 2.5 2.5

mason

Daily laborers 2 1 1.25 2.5

Total 12.27Br/h

Labour cost = 12.27 birr/hr/0.5m2/hr = 24.54 birr/m2

 Cont…
 DC = MC + LC +EC; take EC = 0.05TC
DC = 1423.125 + 24.54 +0.05TC; but TC = DC + IC,
take IC = 0.25DC; thus
TC = (1447.665+ 0.05TC) + 0.25DC
TC = (1447.665+ 0.05TC + 0.25 (1447.665+ 0.05TC)
TC = 1809.58+ 0.0625TC
= 1930.22Br per m2
 Thus, the unit price for 25cm thick brick masonry
wall laid in 1:4 cement mortar is estimated to be
1930.22Br per m2 .
Exercise: Similarly fix unit price for HCB masonry walls
laid in 1:4 cement mortar making use of most recent
market prices.
 Cont…
II. Unit price for C -25 concrete per m3 of work
(formwork and reinforcement measured separately)
1.Material Cost, MC:
Given:
 Amount cement required 7.1bags/m3
 Amount sand required 0.5m3
 Amount Coarse Aggregate required = 0.75m3 as shown
in example 2 above
Cement = 7.1bags/ m3* 150Br/bag = 1065Br/ m3
Sand = 0.5 m3*375Br/m3 = 187.5Br/ m3
Coarse Aggregate = 0.75 m3*625Br/m3 =468.75Br/ m3
Water= 0.155 m3* 10 Br/m3 =1.55Br/m3
MC =1065+187.5+468.75+1.55
= 1722.8 Br/m3
 Summery of Material Cost for C -25 concrete per m3

Type of Unit Qty Unit rate Cost/unit

material
Cement Bag 7.1 150 1065
Sand m3 0.5 375 187.5
Gravel m3 0.75 625 468.75
Water m3 0.155 10 1.55
Total 1722.8
Birr/m3
 Cont…
2.Labor cost
 The crew consists of a mason, two assistants, and four daily laborers
at the wage rates given above for brick masonry work.
 Site Engineer/Manager 4000Br/month = 4000Br/ (22days*8hrs/day)
= 22.70Br/hr.
 For a utilization factor of 1/10 (for 10 foremen under him)
= 22.70*1/10 = 2.27Br/hr.
 Forman daily wage = 40Br/day = 40/8*(1/4) = 1.25 Br/hr., for 4
crews
 Mason daily wage = 30Br/day = 3.75Br/hr., UF = 1
 Assistant mason daily wage = 20Br/day = 2.5 Br/hr., UF = 1
 Daily laborers, daily wage = 10Br/day =1.25Br/hr., UF = 1
 Labor output (productivity) for the work = 2m3/day = 0.25m3/hr.
 Labor cost (LC) = Cost per unit time/ productivity
= [2.27 + 1.25 + 3.75 + 2*2.5 +4*1.25] Br per hr. / [0.25 m3per hr.]
= 69.08Br/m3
 Summery of Labor Cost for C -25 concrete per m3

Labors No UF Index hourly Hourly cost

cost (Birr)

Site Engineer 1 1/10 22.7 2.27

Forman 1 1/4 5 1.25

Mason 1 1 3.75 3.75

Assistant mason 2 1 2.5 5

Daily laborers 4 1 1.25 5

Total 17.27Br/h

Labour cost = 17.27 birr/hr/0.25m3 /hr = 69.08birr/m3

 Cont…
DC = MC + LC +EC; take EC = 0.05TC
DC = 1722.8+ 69.08 +0.05TC; but TC = DC + IC,
take IC = 0.25DC; thus
TC = (1791.88 + 0.05TC) + 0.25DC
TC = (1791.88 + 0.05TC) + 0.25(1791.88 + 0.05TC)
= (1791.88 + 0.05TC) + ( 447.97+ 0.0125TC)
TC = 2239.85+ 0.0625TC
= 2389.173Br/m3
Exercise: Revise the above unit price making use
of the most recent market condition for all factors
affecting the cost.
 Test 2 ,10%
Q1. What is quantity surveying?(2.5 pt.)

Q2. Define the term Specification Worksheet (BOQ form) and

show the form in detail ?(2.5 pt.)

Q3. Calculate the quantity of the excavation for the following

plan using long wall and short wall method ?(5 pt.)
Cont…
Thanks!!!