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An accurate estimate of the cost involved is of great importance, especially to a contractor, as this forms a basis
for his bid proposals, procurement plans and control of the cost being incurred in a job. Estimating in
construction projects is a very complex process due to inherent interactions and interdependence involved and
the absence of standard norms. Given the highly competitive environment at present, it is important that special
attention is paid to cost estimation so that a contractor can win a job and still maintain a reasonable margin of
profit.
It may be noted that the client (or owner) organizations and contracting agencies draw up their own estimates
from the information and data available to them. Also, for different purposes, the required precision in the
estimates is different for example, for budgetary purposes an owner may be happy with even 10 per cent
variation, but such an error for a contractor bidding for the job could be simply disastrous and unacceptable.
There is, thus, a clear difference in perception towards estimation in the client and contracting organizations. An
effort has been made to bring the various issues in clients estimation of project cost in this chapter. The issues
inherent in project cost estimation from contractors perspective are presented in Chapter 8.
It is obvious that the accuracy of an estimate can be improved once the nature of the project is clearly defined,
and all quantities, quality of material and workmanship, logistics, etc., are well understood. Since this is often
not the case, rule of thumb and approximate methods have also evolved, and reference has been made to some of
the more commonly used approaches at appropriate places. For building works, for example, whereas
approximate estimates are at times drawn up on the basis of plinth area, floor area, enclosed volume, length of
wall, etc., detailed estimates would require specification, programme of works, available drawings, material,
manpower and equipment productivity, and the indirect costs.
4.2 APPROXIMATE METHODS OF ESTIMATION
The actual cost involved in any project can be accurately and simply worked out once the exact quantities of
different items and the unit cost associated with each of them is known; however, while the latter is known with
reasonable accuracy, the former is very difficult to determine till it is fairly late into the project. It may be borne
in mind that the specifications used for the materials and construction methods are also of relevance as far as
estimation of the cost is concerned. However, preliminary estimates (including estimates that may not be very
accurate) of various aspects of a work are essential for planning, mobilization of resources, policy decisions and
administrative approvals. Such preliminary estimates may be prepared differently for different structures, as
summarized in Table 4.1.
Structure
Buildings
Depending upon the type of the building, the basis could be number of occupants (e.g.,
per student for schools and hostels, per bed for hospitals, or per seat for theatres). Some
of the other commonly used bases are also discussed separately in subsequent
paragraphs.
Roads and
highways
The estimates are usually made on a per-kilometre basis, depending upon the nature and
classification of the road, its width and the cross-section of the road. Obviously, the
estimates are different for concrete and bitumen-topped roads.
Irrigation
works
Estimates for these could be on the basis of length involved, the capacity of the channel,
or also the area of land to be covered.
Bridges and
culverts
This is done on the basis of the span of the structure, depending on the roadway, the
nature and depth of foundation, the type of structure, etc. For small culverts, an
approximate cost may also be available in handbooks on a per culvert basis for culverts
of different spans. At times, approximate costs of bridges are also worked out separately
for the substructure and the superstructure.
Sewage and
water supply
Estimates for these could be made on the basis of per head of population served or the
area covered.
Overhead
water tank
Estimates could be made on the basis of the capacity of the tank, depending on the type
of structure, height of staging, etc.
Table 4.1 gives an idea of the diverse bases that need to be adopted for estimation of preliminary costs of civil
engineering jobs, and, indeed, experienced clients/contractors have reasonably accurate thumb rules for the
purpose. Some of the other methods used for building and industrial constructions are briefly discussed below.
Step
1:
Preparation of preliminary architectural drawings based on requirement of area, specification, function, etc.
Step
2:
Fixing of architectural features, type of foundation system, type of superstructure, general specification
pertaining to civil works, electrical works, sanitary, water supply, external development, etc., and special
structural requirements
Step
3:
Based on the specification, classification of proposed building into one of the categories available in PAR-2007.
Additional amount, as the case may be, need to be applied for a richer specification than those specified in PAR2007
Step
4:
Calculation of plinth area of the building in accordance with the specified methods
Step
5:
Multiplication of the plinth area and the specified rate with additional cost for richer specification, if any
Step
6:
Step
7:
Addition of contingency and architects fee (if applicable) in the total sum calculated as above
R2 = C V1 P1
(4.1)
where V1 is proposed projected annual sales volume and P1 is the price per unit of sales volume.
Six-tenth factor This is a modification of the investment per annual t capacity method, where in order to find
the cost of a component, a system, or a plant, the size of the new item is determined using a reference item, a
factor and the cost index or escalation. Mathematically, the method can be represented as follows:
Although any value between 0.20 and 1.37 can be taken for the factor, it is usually taken as 0.6 (and hence the
name of the method). This method is a fast way to develop an estimate and sometimes good enough to be used
even for preparing a definitive estimate.
4.3 TYPES OF ESTIMATES
Cost estimates of different accuracies are required by different agencies for different purposes in different stages
of the project! T he primary objective of an estimate is to enable one to know beforehand the cost of the work,
though the actual cost is only known after the completion of the work from the accounts of the completed work.
If the estimate is prepared carefully, there will not be much difference in the estimated cost and the actual cost.
For accurate estimate, the estimator should be experienced and fully acquainted with the method of
construction.
The estimate may be prepared approximately in a manner explained earlier or may be made in detail, itemwise. In general, a choice of the method of estimation to be used depends upon the nature of the project, the lifecycle phase, the purpose for which the estimate is required, the degree of accuracy desired and the estimating
effort employed. The essential steps in estimation are calculation of quantity and cost. While the working of
quantities can be done based on the available drawings and design data, a number of other things are needed to
estimate the cost. While rough estimates are prepared based on some thumb rule, the detailed estimates are
prepared based on a number of factors such as specification, programme of works, available drawings, material,
manpower and equipment productivity, and indirect costs.
Table 4.2 summarizes some of the types of estimates that are used in the construction industry and their basic
functions. Some of these are explained in greater detail in subsequent paragraphs.
Estimate type
Comments
Feasibility stage
Preliminary estimate
Detailed estimate
Definitive estimate
Final cost
It may be noted that this estimate becomes the basis for making the final go-ahead decision for execution of the
project, which essentially means tendering action, and of course, the acceptance of a bid implies the clients
commitment for the payment of the quoted costs and the execution of the works.
A margin of 3 per cent to 5 per cent of X is added for contingencies, unforeseen expenditure, changes in design,
changes in rates, etc., which may occur during the execution of work. A margin of 1 per cent to 2 per cent is
also added to meet the expenditure of work-charged establishment1. The grand total thus obtained is the
estimated cost of work. For large projects, a margin of 1 per cent to 1 per cent of the estimated cost is provided
in the estimate for the purchase of tools and plants that will be required for the execution of work. Normally, the
contractor has to arrange and use his own tools and plants.
The detailed estimate is usually supplemented with (1) report or history, (2) detailed specification, (3)
drawings such as plan, elevation, sectional elevation and site plan, (4) calculation and designs, and (5) analysis of
rates. Clients prepare detailed estimate for getting the sanction of the competent authority. The estimate is also
required to be prepared for the bidding process. The detailed cost worked out is used to compare and evaluate
the rates quoted by bidders.
The cost estimate, prepared by a client during the planning stage, generally follows a structured approach. The
structure of this estimate takes many forms. These forms vary with the nature of the project, the type of contract,
the company policy, the type of contract and the client requirements. The three typical well-known forms in
structuring estimation items in the United States, besides the one used predominantly in India, are given
in Table 4.5.
In particular, the bill of quantities of a detailed estimate can be suitably divided under the heads given above.
In the bid estimates, the contractor-quoted price includes direct and indirect costs and profit margin suitably
distributed across the various items of the bill of quantities.
4.5 ILLUSTRATIVE CASES IN PREPARATION OF ESTIMATE
The schematic diagram (Figure 4.1) provides only the entry and exit schemes of the proposed car park, besides
providing the overall area involved in the project. The designer at this stage is familiar with broad specifications
of the project and he would also know the preliminary scheme of car parking. For example, at this stage he is
expected to know the number of levels in which cars will be stacked (Figure 4.2) and, thus, the construction
height involved in the project. Based on the broad specifications and the preliminary sketch, the quantities are
worked out and schedules are referred to in order to arrive at the project cost. The preliminary plan and sectional
drawing shown in Figure 4.1 and Figure 4.2 form the basis of plinth area calculation, which is the basis of
estimate preparation at this stage. The plinth area calculation for this example is given in Table 4.6.
Now, based on the plinth area calculated above, the broad specification for the project can be laid out, and on
basis of CPWD plinth area rate as on 01.10.2007, the estimate can be prepared. The estimate is made in two
partsfor schedule items and for non-schedule items. While the rates for schedule items are readily available in
the schedule of rates, the non-schedule items are estimated based on the market rates prevailing at the time of
preparation of estimate.
The estimate for schedule items is given in Table 4.7. The estimate contains the following major parts:
RCC Frame Structure
The total area for RCC frame structure is 16,000 m2, and the corresponding rate given in schedule of rates is Rs.
18,035/m2. On this base rate, the provision for mastic asphalt in the basement, earthquake resistant design and
stronger structural members to carry heavy loads are to be added. Further, the schedule specifies additional cost
provisions for modules over 35 m2 (which in our case is applicable), and for additional heights above 3.35 m (this
is again applicable in our case), and accordingly, these provisions have been kept as given in Table 4.7.
Fire Fighting, Automatic Fire Alarm System and Pressurized Mechanical Ventilation System
The estimate for fire fighting is based on plinth area of 16,000 m2 and the applicable schedule of rate is Rs.
450/m2. Similarly, automatic fire alarm system and pressurized mechanical ventilation system in the basements
with supply of exhaust blowers are based on PAR-2007 and the applicable rates are Rs. 300/m2 and Rs. 50/m2,
respectively.
Services Such as Internal Water Supply and Sanitary Installation, External Service
Connection, Internal Electric Installation and Quality Assurance
The schedule of rates specifies a certain percentage of total cost obtained from the above two heads. In case there
is a basement involved in the project, the percentages are reduced to 50 per cent of the given percentage. Thus,
for internal water supply and sanitary installation, 50 per cent of the specified 4 per cent of the subtotal cost
given at Sl. No. (C) of Table 4.7 is taken, which is equal to Rs. 15,579,977.00. Similarly, other estimates have also
been derived. A provision of 1 per cent of cost mentioned at Sl. No. (C) of Table 4.7 is taken for quality assurance.
Lifts
Four passenger lifts of 20 persons capacity are envisaged for the project, and the unit rates as mentioned in the
schedule of rates are taken for estimate preparation.
Water Tanks
For estimating the cost of water tanks, the volume of the tanks is computed in an approximate manner by means
of approximate knowledge of the length, breadth and height of the tank. The schedule of rates provides the rate
on per-litre basis (Rs. 9/l as per CPWD PAR-2007).
The estimate for non-schedule items is given in Table 4.8. There are only two itemsautomatic parking system
and Qualideck PU flooring. In order to arrive at the market rates for these items, the broad specification must be
frozen. For example, the level of automation, the time of retrieval, the level of automation, the security system,
etc., would be required for estimating the cost of an automatic car-parking system. Market rate at this point need
not be based on formal quotation. One can give reference to the various discussions with manufacturers and
installing agencies, as well as the actual costs of similar systems in other nearby projects. Too much emphasis
should not be given on the discussion held with a single agency; one should use his own judgement to arrive at
an appropriate estimate.
The abstract of cost estimate for Multi Level Car Parking Facility is presented in Table 4.9. The sum total of
estimate of schedule items is taken from Table 4.7. The cost index prevailing as on the date of preparation of
estimate is added in the sum total of schedule items. For this case, cost index value of 20% has been assumed.
The sum total of estimate of non-schedule items is taken from Table 4.8. The total cost of schedule items,
increase on account of cost index, and the total of non-schedule items have been summed up in Sl. No. 4 of Table
4.9. On this a contingency amount of 3% of total cost is added to arrive at the estimated project cost of Multi
Level Car Parking Facility (See entry at Sl. No. 6 of Table 4.9).
Table 4.9 Abstract of cost estimate for Multi Level Car Parking Facility Project
S.
No.
Item of work
Amount (Rs.)
Schedule items estimated on the basis of PAR-2007 (Sl. No. (E) of Table 4.7)
885,381,214.90
Add prevailing cost index (say 20% over PAR-2007 estimate) as on the date of
estimate preparation
177,076,242.98
Total of non-schedule items based on the market rate (Sl. No. (F) of Table 4.8)
317,600,000.00
1,380,057,457.88
41,401,723.74
Total estimated project cost for Multi Level Car Parking Facility (Sl. No. 4 Sl.
No. 5)
1,421,459,181.62
Load-bearing Construction
These items are estimated based on the total plinth area of load-bearing construction. The project envisages
construction of single-storey quarters of Type I, Type II and Type III, and servant quarters of floor height 2.90
m. The plinth area rate specified for such construction, based on PAR-2007, is Rs. 6,390/m2.
Water Tank
A large number of water tanks are required in a sewage treatment plant. The sizes are fixed based on the
preliminary design available at this stage. Based on the preliminary sizing, the volumes of each of the tanks are
calculated. The schedule of rates provides per-litre rate (Rs. 9 based on PAR-2007) for such construction.
Development at Site
Under this head, internal roads, horticultural works and area lighting in plant area have been considered. While
per-square-metre rates are available in the schedule of rates for internal roads and horticultural works, for area
lighting a lump-sum cost has been assumed.
A cost index of 20 per cent is assumed as on the date of preparation of estimate and, accordingly, the total cost
of the above three heads has been increased by 20 per cent. A contingency value equal to three per cent of the
total cost is also added to get the estimated cost of the project as shown in Table 4.11.
REFERENCES
1. Chitkara, K.K., 2006, Construction Project Management: Planning, Scheduling and Controlling, 10 reprint,
New Delhi: Tata McGraw-Hill.
2. Choudhary, S., 1988, Project Management, New Delhi: Tata McGraw-Hill.
3. Datta, B.N., 2008, Estimating and Costing in Civil Engineering Theory and Practice (Including
Specifications and Valuations), Ubs Publishers Distributors (p) Ltd.
4. DSR 2007, Central Public Works Department Delhi Schedule of Rates 2007, Jain Book Agency, New Delhi.
5. PAR-2007, Central Public Works Department, Plinth Area Rate, Jain Book Agency, New Delhi.
SOLVED EXAMPLES
Example 4.1
Derive the rate per cubic metre for providing and laying in position cement concrete 1:2:4 (1 cement: 2 coarse
aggregate: 4 graded stone aggregate 20 mm nominal size) for all work up to plinth level excluding the cost of
centering and shuttering.
Solution
The approach adopted here for the analysis of rate is mostly adopted by government departments for small jobs
or projects. The labour and material coefficients per m3 or per 10 m3 are specified along with the rates of material
and labour as on the base year of the schedule of rates. The coefficient for material carriage is also specified in
them. The working for this example (see Table S3.4.1) is based on per m3basis according to the Delhi Schedule of
Rates for the base year 2007.
REVIEW QUESTIONS
1. State whether True or False:
1. Estimating costs in construction projects is a very complex process due to the inherent
interactions and interdependence involved and the absence of standard norms.
2. Number of occupants is the basis for preparing preliminary estimate of a building project.
3. The preliminary estimate of roads and highway projects is prepared based on per-kilometre basis
and nature of classification of the road.
4. For irrigation projects, the preliminary estimates are prepared based on the length involved.
5. The preliminary estimate of bridges and culverts is prepared on the basis of the span of structure.
6. The preliminary estimate for sewage and water supply projects is on the basis of per head of
population.
7. The preliminary estimate of overhead water-tank project is prepared on the basis of capacity of
tank.
8. Methods for preparing preliminary estimate of industrial structures areplinth area method,
cube area estimate and approximate quantity method estimate.
9. Methods for preparing preliminary estimate of buildings areratio method, investment per
annual t capacity, turnover ratio and capital ratio, and six-tenth factor.
2. Match the following with proper options.
3. Prepare a preliminary estimate of a school building proposed to have 10 classrooms and a total of 500 students.
4. Why clients estimate of cost differs from that of contractors? Identify which estimate is more critical, and why?
5. Give a detailed account of different methods involved in preliminary estimate of cost involved in a building project and an
industrial project.
6. Define capital ratio and turnover ratio. How is it helpful in preliminary estimate of cost of an industrial project.
7. Identify different stages involved in a construction project and give a detailed account of types of cost estimate associated
with each stage.
8. Visit a construction site and get the projects drawing and specification for that project, and on the basis of this, prepare a
detailed clients cost estimate? Compare your estimate with the clients prepared cost estimate.
9. Why is the revised estimate necessary?
10. What are the different factors that determine the form of structure of an estimate?
11. What are the different types of costs involved in a project, and how is the overall project cost calculated? Taking an
example of a project you are working with or are familiar with, give the rough way of working out how the overall project
cost was derived.
12. What is preliminary estimate? Explain its process.
13. Write short notes on detailed estimates.
14. Derive the rate per cubic metre for 1:5:10 cement concrete in foundations with brick ballast 40 mm size.
15. Derive the rate per cubic metre of 2nd class brick work in foundation with 20 cm x 10 cm x 10 cm nominal size with
cement sand mortar 1:6.
16. Derive the rate of one MT of reinforcement cost including cutting, bending and tying all complete. Assume any suitable
data required for deriving the rate.
17. Derive the rate of one square metre of shuttering/centring to be done for wall, column, beam and slab. Assume any
suitable data required for deriving the rate.
18. Derive the quantity of materials required for producing one m3 of cement concrete 1:4:8 in foundation. Assume total dry
mortar for 1 m3 of cement concrete 5 1.54 m3.
19. Derive the quantity of dry materials required for producing one m3 of brick masonry in cement sand mortar. Ratio 1:5.
Assume total dry mortar required for 1 m3 of brick masonry 5 0.30 m3.