Cost

Part 4

Cost of
construction labour
and equipment

Preparing the Detailed
Estimate

Review the bidding documents: The bond section should
include bid bond and performance bond forms and
requirements. Bonds are written documents that describe
the conditions and obligations related to the
owner/contractor agreement. A bid bond certifies that if a
contractor is awarded the bid within the time specified in the
invitation to bid, the contractor will enter into the contract
and will provide all other required bonds in a timely manner.
A performance bond guarantees the owner that within
agreement limits the contractor will perform all work in
accordance with the contracting document. Labour and
material bonds guarantee to the owner that the contractor
will pay in a timely fashion for supplied materials used by all
the subcontractors related to the project.

basements. Review mechanical. and security drawings.Review the drawings to visualize the building size. function. fire extinguisher. electrical. Review structural drawings to get acquainted with specified systems. shape. . ----------------------------------------------------Start identifying work to be done by general contractor and work to be done by subcontractors. height. and so on.

Call a meeting with the personnel who will hold the key supervisory positions. Establish with them the general guidelines for quantities take off and pricing. --------------------------------------------- . Develop a list of subcontractors.Read and study thoroughly the specifications for the work to be done by the general contractor and those related to any subcontracted work. --------------------------------------Visit the project site and have with you the project manager or field engineer.

Develop a list of items to be considered for jobsite overhead and general overhead that need to be priced later. Start the quantities take off for the category of construction work selected to be done in house Condense quantities from the work up sheet by work category and transfer them to a summary sheet for pricing. .

Sources of Cost Information Cost information from published price books Priced bills of quantities from previous projects. Cost analysis and cost models produced inhouse. .

and can be as high as 60% of the overall project cost. is one of the most labourintensive industries in the world. The labour cost component of a building project often ranges from 30 to 50%.Construction Labour The construction industry. to which these craftsmen belong. .

.Labour’s production rates (Productivity) Construction productivity = quantity of work produced / time duration Productivity rates can be determined from published sources such as Means’ Building Construction Cost Data and Walker’s Building Estimator’s Reference Book.

it is simple to estimate the activity direct cost. and resources form what is called construction method. its method will have its own resources. cost. Then. Some activities can be performed using different construction methods. . the three elements of an activity: duration. it means that the planner have already defined the number of resources that will be employed in a particular work. cost and duration. Where.Estimating work duration Work duration = quantity of work / number of crews × production rate Having defined a duration of a given work. Knowing duration and resources employed.

The monetary factor is related to hourly wage rates.Basic principle for estimating labour costs Labour costs in construction are determined by two factors: monetary and productivity. insurance and taxes. Total cost of labour = total work hour × wage rate . wage premiums.

the activity duration is governed by the lowest production rate = 20 days.then.Example What is the duration of an exaction activity with a quantity of 3000 m3 using an excavation crew consists of an excavator with a production rate of 200 m3/day. a loader of 250 m3/day and 3-trucks of 150 m3/day? Solution .using the loader: duration = 3000 / 250 = 12 days . .Using the excavator: Duration = 3000 / 200 = 15 days .using the 3-trucks: duration = 3000 / 150 = 20 days .

Take a breath .

Specific use equipment Its usage is shorter term when compared to general use equipment.Construction Equipment Equipment could be classified based on their use as specific use or general use. .

TRACTORS LOADERS SCRAPERS COMPACTORS .

General use equipment These pieces of equipment are kept on the site over a longer period of time. throughout almost the entire construction phase. .

CRANES FORKLIFTS AIR COMPRESSORS LIGHT TOWERS .

Factors influencing equipment selection Site conditions The nature of the work Equipment characteristics Cost .

No need to maintain a large inventory of specialized equipment.Equipment cost accounting is simpler when equipment is rented. .Renting versus purchasing equipment The choice between purchase and rental usually depends on the amount of time the equipment will be used in the contractor’s operations. . .Reduced need to employ maintenance staff and operate facilities for their use. including: .No need for equipment warehouse and storage facilities.Continuous access to the newest and most efficient items of available equipment. . . There can be distinct advantages to renting equipment.

Time-value of money When you take engineering economics. .

Equipment costs Initial cost: the total cost required to purchase a piece of equipment. Depreciation: the decrease in market value of an asset. Cost of rubber tires. Operating costs: Maintenance and repair costs. Investment cost: interest rates and rate of return costs. etc…. Lubricating oil consumption. Fuel consumption. .

Break End of part 4 .

Cost Part 5 .

Estimating work items costs. mark-up and contract pricing . indirect costs.

prior to excavating or after being compacted in place. in its undisturbed condition. Calculating truck requirements: Number of required trucks = truck cycle time / loading time Truck cycle time = loading time + going time + return time + dumping time Loading time = truck capacity / production rate of loader Truck capacity (bank measure) = truck capacity (loose) / (1+swelling factor) .Estimating Work Items Cost Swell and compaction factors: The soil to be excavated is called bank measure.

The values of waste factors usually lie between one and 10 percent for different materials.Waste factors: Allowance for waste and spillage of this material can be made by increasing the takeoff quantities or by raising the price by the percentage factor considered necessary. .

Temporary environmental controls requirements.Jobsite personnel wages and fringe benefits. fences. . . . .Jobsite production facilities (concrete batching plants. . parking. . and gates). etc. quarry.General use equipment for the benefit of the general contractors and subcontractors (cranes.Horizontal structures (roads. . and taxes required in the contract general conditions. insurance.Protective aids for workers (gloves. .Jobsite personnel project-related travel expenses. materials testing. etc.Field buildings.Utilities needed for material storage. These items might include: .Related camp facilities for remote jobs. .Outside contracted engineering support (surveying.Site utilities for the job duration.Bonds. hard hats. . various shops). .) during construction and final cleanup of the project.Winter and summer protection of completed works or works in progress.Estimating Indirect Cost Site overheads The estimated total jobsite overhead costs will become the baseline budget for jobsite overhead expenditure control.). hoists). . . . . permits.Cost of temporary site utilities.

Total office non reimbursable salaries . General overhead represents contractor fixed expenses.Associations and clubs dues .Office/shops rent .General overheads The company home office expenses cannot be chargeable most of the time to a single project.Secretaries .Human resource personnel .Office supplies .Licenses and fees .Advertising/jobs procurement/public relations .Total anticipated home office expense In general.Home office vehicles. .Accounting services . depreciation. if owned depreciated) .Travel .Benefits . operation expenses . A summary of the major categories is presented below: .Insurance expenses .Consulting fees (legal.Vice president .Legal services .Non reimbursable salaries .Payroll clerk .Accounts payable clerks .5 to 10% of annual construction billings.President .Trade journals subscriptions and books .Donations/sponsored research .Estimating and project management (not salaries) .) .Company sponsored training programs .Depreciation of capital expenditures .Office maintenance .Office utilities and communication .Office equipment (rented. etc.Estimating group . main office expense ranges from 2.Entertainment .

Unpredictable price escalation for materials.Unforeseen safety and environmental requirements. .Construction contingencies: Contingency is that amount of money added to an estimate to cover the unforeseen needs of the project. . . .Project complexity. . . . .Abnormal construction methods and start up requirements.To provide a form of insurance that the contractor will stay within bid price. and installed equipment for projects with an estimated duration greater than 12 months.Estimator personal concerns regarding project. labour.Soft spots in the detail estimate due to possible estimating errors. . or estimating accuracy.Incomplete design in the fast-track or design-build contracting approach. unusual construction risk. to balance an estimate that is biased low. and difficulties to build. construction difficulties. .Incomplete working drawings at the time detail estimate is performed.

.The profit must be as high as possible or what the competitive market will bear. . .The firm must recoup sufficient profit for return on equity.The profit must consider competitive bidding strategies. .The profit must be commensurate with industry averages. including the following: .Contractor/Subcontractor profit Different kinds of profits are related to several considerations. while commensurate with the contractor’s risk.

Finalizing a Tender Price .

Balanced bid (straight forward method) The share of specific item= Direct cost of this item/Total contract direct cost*(total indirect cost + markup) .

2.000*700. Bid price = direct cost + indirect cost + markup Indirect cost + markup (for the whole contract)= Bid price .800.direct cost 3.000 Then.000 = LE 100.800.000 = LE 700.000 .000 .500.500. Indirect cost + markup for activity (a)=400. Calculate the price for item (a) considering a balanced bid. price of activity a = its direct cost + indirect cost = 400.800.000 + 100.000 = LE 500.000.000 and its total direct cost is LE 2.000/2.000 Then.Example Assume that the direct cost for an item (a) is LE 400.000 and that item is included in a contract whose price is LE 3.

Unbalanced bid (Loading of Rates) The contract price is said to be unbalanced if the contractor raises the prices on certain bid items (usually the early items on the bill of quantities) and decreases the prices on other items so that the tender price remain the same. . The contractor usually loads the prices of the first items to ensure more cash at the beginning of the contract and to reduce the negative cash flow and accordingly reduces borrowing of money. This process is also called the loading of rates.

Example .

Questions? .