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COST PLANNING AND

ESTIMATION
Daniel Ng
Danielng.trentglobal@yahoo.com
Course outline
1. Overview of Cost Planning
2. Cost Planning Techniques
3. Approximate Estimating
4. Elemental Method
5. Cost Planning at Various Stages of Design
6. Resource Analysis
7. Cash Flow
8. Valuation
9. Final Accounts
Teaching Scheme
DATE CHAPTER
11 April 2016 1. Overview of Cost Planning
13 April 2016 2. Cost Planning Techniques
3. Approximate Estimating
18 April 2016 4. Elemental Method
20 April 2016 5. Cost Planning at Various Stages of Design
25 April 2016 6. Resource Analysis
27 April 2016 7. Cash Flow
8. Valuation
3 May 2016 9. Final Accounts
7 May 2016 Exam
6. Resource Analysis
6.1 Estimating and Tendering
6.2 Resource Analysis
6.3 Analogous Rates or Pro-Rata Rates
6.4 Introduction to Overheads and Profit
6.1 Estimating and Tendering
Project Procurement
Procurement is the acquisition of goods or services in line with a client’s
requirements and main components are:
• Procurement route – this is the arrangement of roles, responsibilities,
contractual relationships and the allocation of risk to meet the client’s
requirements in terms of time, cost and quality
• Tendering – this is how the price for the works will be determined and
agreed
• Contract selection – this is how we select the most suitable form of
contract to meet the client’s requirements, taking in to account the
procurement route and type of tendering
6.1 Estimating and Tendering
Project Procurement
6.1 Estimating and Tendering
Project Procurement
A procurement route is defined by a range of criteria:
• Roles and responsibility of the parties involved with the project
• Contractual relationships of team members
• Allocation of risk amongst the team
• Impact on the project programme – overall length, certainty of end date
• Impact on cost – overall cost, cost certainty, cost control
• Impact on quality – control of design, construction quality
• Design flexibility – ability of client to implement change
6.1 Estimating and Tendering
Tendering
Tendering is the process of establishing a price for the works. This
might be a lump sum, a target figure, or agreeing the basis on which
the final account will be assessed (e.g. re-measurement, cost
reimbursable). This is done either by asking one party to suggest a
price in competition with others, or by negotiation. The tendering
process covers consultants, suppliers, as well as contractors and
subcontractors.
Tendering is a part of the procurement process.
6.1 Estimating and Tendering
Tendering
Public procurement often with “Open Tender” with a Tender Notice
published on GeBIZ.
Private procurement often with “Selective Tender” with an Invitation
Letter is sent to limited tenderers, selected based on their past
completed projects or recommendation.
6.2 Resource Analysis
Unit rate of a work is the cost to achieve the deliverables of one unit of
that work.
Example: Unit rate for concrete = $180/m3
Meaning the cost of 1m3 of concrete is $180
$180/m3 = Labour cost/m3 + Plant cost/m3 + Material cost/m3 +
Profits for Contractor
6.2 Resource Analysis
Build up all-in-rate
All-in-rate = Labour cost + Plant cost + Material cost + Profits for Contractor
How much for painting of 1m2 of wall?
Labour cost: Takes 15mins to paint 1m2 of wall, charge $15/60mins x 15mins = $3.75/m2
$15/ hour
Plant/machinery/tools/equipment cost: Bucket, $20/20m2 = $1.00/m2
brushes, masking tape @ $20 for 20m2

Material cost: 1 bucket of paint @ $20 can paint 36m2 $20/36m2 = $0.56/m2

SUB-TOTAL $5.31/m2
Add Profits for Contractor, assume 15% $5.31 x 15% = $ 0.80/m2
TOTAL ALL-IN-RATE $6.11/m2
6.2 Resource Analysis
Build up all-in-rate
Labour cost
• Salary, bonuses, allowances, CPF, cost of supervision, levy, insurance etc.
Plant cost
• Rental/ initial capital sum, maintenance, fuel, consumable stores, operator etc.
Material cost
• Discount, quality, quantity, wastage, different source of suppliers etc.
Profits for Contractor
• Overhead, turnover, availability of resources, type of work etc.
6.2 Resource Analysis
Factors affecting rate
• Type/ Method of construction
• Location
• Time
• Minimum quantity order
• Quality/ Workmanship
• Profits
• Market condition
• Error
6.3 Analogous Rates or Pro-Rata Rates
6.3 Analogous Rates or Pro-Rata Rates
If 102.5mm thick common brickwork cost $35.10/m2, how much is it
for 215mm thick?

A quick estimated cost is


$35.10 / 102.5 x 215 = $73.62/m2
6.4 Introduction to Overheads and Profit