Analysis of Rates

ANALYSIS OF RATES
Definition The procedure to find out a reasonable and correct estimation in order to obtain the rates of quantity of work or supply for different items or labours following their respective specifications and detailed survey of materials, labour, equipments, etc. as required for the project on the basis of their prevailing market rates, is called Analysis of Rates. Purposes 1. 2. 3. 4. 5. To determine the current rate per unit of an item To examine the viability of rates offered/proposed by contractors To calculate the quantity of materials and labour strength required for project planning To prepare a reasonable and effective billing budget for a project To fix up labour contract rates.

The following are to be estimated and a summation of all these step-by-step is to be found out i. ii. iii. iv. v. Quantity of materials and cost Cost of labour Costs of equipments or tools and plants (T & P) Overhead or establishment charges including incidental costs, water charges, etc. Profit.

Some important discussions 1. Cost of any material at site in general is of following two categories a) First cost: The cost at the time of purchase from original manufacturer or authorized supplier. b) Landing cost: The cost at work site, which includes the first cost, freight charges, transportation costs, taxes and insurance charges, if any. If the materials, e.g., cement, steel, stone chips, sand, bitumen, timber, etc. are supplied departmentally or internally within the same organization, the profit on the cost of materials will not be applicable. However, transportation and carrying charges might be added. 2. To obtain labour cost, the number and wages of different kinds of labourers like skilled, semi-skilled and unskilled should be incorporated.

Analysis of Rates

3. Equipments, instruments, tools and tackles, plants and machinery are used in a number of various woks at site and in the project as described on the next page Some equipments, tools and plants are used for some particular purposes or nature and types of jobs. So their costs of use should be allocated to those jobs only. Example Batching plant (used only for concrete production) Concrete pumps (used only for pumping of green concrete to some inaccessible area or higher floors) Dumpers (used for dumping of bulk materials, debris, soil, etc.) Cranes (used for lifting, carrying and placing of heavy materials) Welding machines (used for welding in structural fabrication and erections, reinforcements). Some equipments, instruments, tools and tackles are used in general and hence their usage charges cannot be allocated to some particular jobs. These costs are incorporated into overhead charges. Example Equipments vehicles, generators, water pumps, etc. Tackles hammer, screw-driver, sly ranges, etc. Instruments weighing balances, measuring tapes, computers, total stations, auto level machines, etc. 4. Overhead or establishment charges include office rent and its maintenance cost, salaries of staffs, plan and specification, maintenance and repairing costs of equipments and instruments, electricity charges, travelling costs, telephones, etc. It is generally considered to be within 2.5 to 5% of the net cost depending upon the volume of work. Overhead charges increase if the project gets delayed. There are two types of overhead costs that may incur in a project, a) General overheads: These are the constantly running costs to maintain the establishments even though there is no job in hand. These costs are spread proportionately on all works in a year. b) Job overheads: These expenses are directly incurred in a job or project. These are not known expenses and depend upon the volume of the work under execution. 5. Profit of 10% is generally considered reasonable for ordinary projects after the costing of materials and labours, and the allocation of all charges of equipments, establishments, etc. Water charges are also an important part of costing to include in rate analysis. Water is used for drinking, washing, cooling, concreting, curing and many other purposes. Most of them are even immeasurable. The uses of water in a project are not only related to the requirements and availability but to the quality also. Hence, water becomes a chargeable item and it is generally charged @ 1% of the total cost of materials and labour.