Quantity Surveying, Specifications & Contracts (TCOT 350)

CHAPTER V
PROJECT COST ESTIMATION

5.1 General
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

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 equipments
- In cases of variations to determine the extra cost to be incurred
- When changes in cost due to legislation happens, to work out the escalation in cost.

Factors affecting cost estimation

1) Type and documentation of the project
2) Construction scheduling
3) Bidding environment
4) Quality and availability of material and labor (given in specification)
5) Strength or grade required. Eg. C15, C20, C25 concrete
6) Construction facilities /tools and method of construction
7) Location of the site
8) Transportation charges
9) Proper management
10) Land charges (lease)
11) Nature of subsurface condition (and the foundation that is being used)

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Quantity Surveying, Specifications & Contracts (TCOT 350)

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.

5.2 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 are as follows:

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.

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, 1000 – 1500 Br/ m2
Industrial Buildings – Profitable but aesthetics is not the main quality, 1300 – 2000Br/ m 2
Monumental Building – Aesthetics is the main quality, e.g. Palaces, museums,
2000 – 3000Br/ m2

Cubical Content method – cost per m3 of the building

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

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Quantity Surveying, Specifications & Contracts (TCOT 350)

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
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.

5. 2.1 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 cost (IC) 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.

Material Breakdown
1. Quantity of materials required for brick masonry laid in 1:4 cement mortar
Qty of brick masonry = 1 m3 (4 m2 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 = 0.25x0.13x0.07 = 2.275x10-3 m3
Number of bricks required = 1/ 2.275x10-3 m3 = 440 mortared bricks per m3
Add 2% for breakage = 9
Take 450 bricks per m3 or 450/4 = 112.5 bricks/ m2; take 115 bricks/ m2
Volume of one nominal (un-mortared) brick = 0.24x0.12x0.06 = 1.728x10-3 m3
Volume of 440 un-mortared bricks = 440x1.728x10-3 m3 = 0.76032 m3

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Quantity Surveying, Specifications & Contracts (TCOT 350)

Volume of wet mortar in 1 m3 of wet masonry = 1 - 0.76032 = 0.23968 m3

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 1m3 of wet masonry = 0.23968m3
Add 10% for wastage = 0.023968 m3
Sum Total = 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
= 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 m3per bag = 1.81 bags per m3 of construction;
1.81/4
= 0.45 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.

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. The hydration of cement
results in solidification of entire mass and thus binds the different particles together. Because of
the voids in aggregates and wastage, 1.4 to 1.6 times dry volume of the materials are required to
get 1 m3 of compact dense fresh concrete mix.
Materials required for 1:2:3 cement concrete mix – a commonly used grade of concrete for
structural works.
Wet (fresh) concrete mix ………….= 1 m3
Quantity for dry base analysis…….= 1.5*1.0 m3 = 1.5 m3
Volume of cement…………………= 1/6*1.5 = 0.25 m3 = 0.25 m3/0.035 m3 per bag
= 7.1 bags of cement
Sands ………………………………= 2/6* 1.5 = 0.5 m3 of sand
Coarse aggregate…………………...= 3/6 *1.5 = 0.75 m3 of coarse aggregate

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Quantity Surveying, Specifications & Contracts (TCOT 350)

Exercise: Do similarly for C 20 and C 30 concretes.

3. Quantity of Materials required for stone masonry laid in 1:3 cement mortar
Quantity of stone masonry work ….= 1 m3

Quantity of undressed stone ………= 1.1 m3 (taken 110%)

Quantity of mortar required……….= 0.35 m3 (taken 35%)
Quantity of cement ………………. = 1/4 *0.35 = 0.0875 m3 = 0.0875/0.035 = 2.5 bags
Quantity of sand required …………= 3/4 * 0.35 = 0.263 m3

4. Materials required for 12mm thick cement plaster in 1: 4 cement mortar

30% more mortar is required to fill up joints and 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 1.55 to define quantity of material required on dry base.
Area to be plastered = 1 m2
Thickness of plaster = 12mm
Volume of the mortar = 1*0.012 = 0.012 m3
Volume for dry quantity = 1.55 * 0.012 = 0.019 m3
Cement required = 1/5 * 0.019 = 0.0038 m3 = 0.11 bags of cement
Sand required = 4/5 * 0.019 = 0.015 m3

5. Materials required for pointing in cement mortar of 1:2

Area to be pointed = 1 m2 [total wall area]
In 1 m2 wall area, number of mortared bricks of 25x13x7cm size (assuming 25cm thick double
brick wall) = 1/(0.25*0.07) = 57
Face area of the 57 nominal bricks = 57*0.24*0.07 = 0.82 m2
Area covered by joints (pointed) = 1 – 0.82 = 0.18 m2
Average thickness of pointing = 20mm
Volume of wet mortar = 0.02*0.18 = 0.0036 m3
Volume for dry quantity = 1.55* 0.0036 = 0.006 m3
Cement required = 1/3 *0.006 = 0.002 m3= 0.05 bags
Sand required = 2/3 * 0.006 = 0.004 m3

5.2.1.1 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
Brick: Purchasing Cost + loading Cost + unloading Cost
= 115 pc*0.85Br/pc + 115(50Br/1000pc) + 115(350Br/3000pc) + 115(80Br/1000pc)
= 126.12Br/ m2
Cement: Purchasing Cost + loading Cost + unloading Cost

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Quantity Surveying, Specifications & Contracts (TCOT 350)

(Provide 10% allowance for wastage by wind, = (1.81/4)*1.1= 0.5 bag/ m2)
= 0.5 bag/ m2*55Br/bag + 1Br/bag* 0.5bag + 2Br/bag* 0.5bag + 1Br/bag* 0.5bag
= 29.5 Br/ m2
Sand: Purchasing Cost + loading Cost + unloading Cost
= 0.063 m3/ m2 *120Br/ m3 = 7.56 Br/ m2
Total material cost = cost of (brick +cement +sand)
= 126.12 + 29.5 + 7.56 = 163.18 Br/ m2

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 and two labors
Utilization Factor (UF) = 1/ the # of crew or people under supervision
Foreman, to guide/control masonry work, UF = ¼, when controlling four crews
Site Engineer/Manager, UF = 1/10 (assumed to control 10 foreman)
Indexed hourly wages
Site Engineer/Manager 4000Br/month = 4000Br/(22days*8hrs/day) = 22.70Br/hr
For a utilization factor of 1/10 (for 10 foreman 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 out put (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 m2 per hr]
= 24.54Br/ m2
DC = MC + LC +EC; take EC = 0.05TC
DC = 163.18 + 24.54 +0.05TC; but TC = DC + IC, take IC = 0.25DC; thus
TC = (187.72 + 0.05TC) + 0.25DC
TC = (187.72 + 0.05TC) + 0.25(187.72 + 0.05TC
TC = 234.65+ 0.063TC
TC = 250.30Br per m2
Thus, the unit price for 25cm thick brick masonry wall laid in 1:4 cement mortar is estimated to
be 250.30Br/ m2
Exercise: Similarly fix unit price for HCB masonry walls laid in 1:4 cement mortar making use
of most recent market prices.

II. Unit price for C -25 concrete per m3 of work (formwork and reinforcement m/s)
Material cost
Cement = 7.1bags/ m3* 50Br/bag = 355Br
Sand = 0.5 m3*120Br/ m3 = 60 Br

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Quantity Surveying, Specifications & Contracts (TCOT 350)

Coarse Aggregate = 0.75 m3*120Br/ m3 = 90 Br

MC = 505 Br/ m3
Labour 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 foreman 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 = 2 m3/day = 0.25 m3/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
DC = MC + LC +EC; take EC = 0.05TC
DC = 505+ 69.08 +0.05TC; but TC = DC + IC, take IC = 0.25DC; thus
TC = (574.08 + 0.05TC) + 0.25DC
TC = (574.08 + 0.05TC) + 0.25(574.08 + 0.05TC)
TC = 717.6+ 0.063TC
TC = 765.8Br per m3
Exercise: Revise the above unit price making use of the most recent market condition for all
factors affecting the cost.

Valuation:

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Quantity Surveying, Specifications & Contracts (TCOT 350)

Valuation is the art of determining present value of a property such as a building, a factory or
other engineering structure.

It is determined or decided by its selling price.

The value of property depends on its structure, life, maintenance, location, etc.

Purpose of Valuation:
–For rent valuation –It is generally 6% to 10% per annum of the value.
–For buying or selling
–For Security of loans or credit
–Acquisition –government compensation
–For Tax assessment
Valuations of a building depends upon, the type of building, its structure, shape, size, locality,
the quality of material used, present day prices of the materials, and plinth area.
Determined after knowing the contents of each item of work, specifications and physical
condition of the building.
It can also be calculated on its cost of construction at present day rate after deducting a suitable
depreciation.
Methods of valuation:
Rent Return Method: based on the net rent value, capitalized for the future life of the building.
Valuation on land and building basis: Land + Cost of Building
Valuation on profit basis: Suitable for commercial buildings like hotels, cinemas, etc.
–Net profit = after deducting all outgoings and interest of capital invested.
–The net profit is multiplies by future life of the building.
Valuation on cost basis: Actual cost incurred in construction -depreciation.
Development method of valuation: underdeveloped or partly developed or require renovations by
alteration.
Anticipated future net income is renovated and multiplied with the future life of the property to
get the value.
Depreciation method of valuation: the property value is determined based on the book value for
the year by deducting the deprecation.

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