NEPAL ENGINEERING

COUNCIL
LICENSE EXAMINATION PREPARATION COURSE
FOR
CIVIL ENGINEERS

on
Estimation, Costing and Valuation

Prepared by : Er. Laxman Baral

1. Basic Civil Engineering
1.6 Estimating, Costing and Valuation
• Types of estimate
• Methods of estimating
• Rate analysis
• Specifications ( Purpose , importance and types )
• Valuation

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Estimation
• Approximate calculation of various items of work and probable cost
of construction is called estimation.
• Estimation is done before the actual construction of the project
• Actual Cost : Actual cost of the project calculated after the
completion of the project
• For good estimation, the deviation between the actual cost and the
estimated cost should be minimum.

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Data required for Estimation
• Drawings: - Fully dimensioned drawing.
• Schedules of rate: - Government approved rates is essential.
• Specifications: -General and detail specification.
• Method of measurement.

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Types of Estimate
A. Approximate/ Rough / Preliminary Estimate:
• It is rough estimate
• Carried out for administrative sanction, feasibility study, tax,
valuation, insurance, etc.
• Done by the owner/client of the property

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Types of preliminary estimate:
• Plinth area estimate : Plinth area x Rate per unit area of similar
building
• Cube rate estimate: Volume of building x rate per unit volume of
similar building ( more accurate than plinth area)
• Unit rate estimate : Eg. Per km of road , per bed in hospital, per
student in schools, per meter of bridge, etc.

Note:
Plinth area = Floor area + area of walls
Floor area = Circulation area + carpet area + Bathroom, Kitchen
Carpet area = Livable area
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Plinth Area
Includes Does not include
All floors excluding offsets Cantilever porch
Internal shaft less than 2 sq. m Internal shaft more than 2 sq. m
Area of non-cantilever porch Courtyard areas
Machine room Loft
Lift
Barsati
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Barsati

Loft
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B. Detailed Estimate/ Item rate estimate
• Most reliable estimate
• Done after administrative sanction
• Unit rate of each item is found and multiplied with total quantity
• Process of finding detailed quantity = Quantity surveying
• Quantity surveyor prepares Bill of Quantities that includes the column
for unit rate but is required to be fulfilled by the contractor.
• The estimator prepares the abstract of cost by multiplying the
quantity of items by unit rate of each item
• Unit rate of each item found from analysis of rate
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C. Revised Estimate
• Prepared when original sanctioned estimate exceed by 5% or
• Expenditure exceed by 10% due to rate being found insufficient or any
other reason
• Table comparing the original and the revised amount should be
prepared

D. Supplementary estimate
• When additional works are thought to be necessary when the work is
in progress and the expenditure for such work has not been
provisioned on original estimate
• The abstract of cost must show the amount of original estimate and
supplementary estimate 10
E. Annual repair and maintenance estimate
• Estimate prepared for the annual repair and maintenance of the property
• For annual repair, the estimated amount should not be more than 1.5 % of
the capital cost of the original work
• For annual repair ( planned previously) and special repair works (
unplanned ) the estimate should not exceed 2.5 % of capital cost .
F. Extension and improvement estimate:
• When some extensions or changes are required to be made that
cannot be met by annual repair and maintenance estimate
• A detail estimate of additional works is to be prepared.

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Methods of estimating
A. Long wall-short wall method / out to out and in to in
method

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Methods of estimating
A. Long wall-short wall method / out to out and in to in
method
• The long walls of buildings are measured from out to out
• The short walls of buildings are measured from in to in
• Length of long wall= center to center length+ half breadth at each end.
• Length of short wall= center to center length- half breadth at each end.
• Suitable to unsymmetrical building.
• Less chance of mistake and suitable for complicated building.
• Accurate Method
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Methods of estimating
B. Centre line method

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Methods of estimating
B. Centre line method
• Total center line length of walls in a building is found and multiplied the
same by the breadth and depth of the respective item to get the total
quantity.
• Quick method and easiest method as compared to other method.
• Suitable to calculate quantity of circular, hexagonal, octagonal shaped
building.
• More chance of mistake.
• In case of intersections, half the breadth of the wall is subtracted at
each intersection.
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Methods of estimating
C. Bay method
• The bay method is applicable in
garages, factory, and railway
platform where identical structures
are visible.
• Bay in a construction term means a
compartment of a building.
• The cost of one room is calculated
first and it is multiplied by the
number of bays.

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Methods of estimating
D. Crossing method
• In this method,overall perimeter of the
building is calculated and four times the
thickness of wall is subtracted to obtain the
center line length of building

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Methods of estimating
E. Service unit methods
• The term service unit method is designed for building with
identical rooms.
• This method is applicable in the construction of college,
hospital, cinemas, prison, and more.
• When it is a construction of a hospital, the service unit will
be a bed. Likewise, for cinema/stadium, it is seats.

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Rate analysis
It is the process of determining the rate of item of work considering the
following:
A. Total cost of the materials
B. Total cost of labour
• This includes i) Skilled ii) Semi-skilled and iii) Unskilled labours
C. Hire of tools and equipments ( 3% of unskilled labour)
D. Contractor’s overhead and profit ( 15 % of sum of A, B and C)
Profit = 10% and over head = 5%
Total unit rate of item = sum of ( A+ B + C + D )
Note:
• VAT is not included in rate analysis
• The overall cost of labour for a building construction is nearly equal to
25 % of total cost of the construction
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Specifications
• Specification is the specific description of a particular work
which is a part of contract document
• It is essential for estimation as well as execution of work
• Drawings do not fully provide the details of different items of
work, quantity of materials, proportion and workmanship, so
specifications are needed
• Dimensions are not mentioned in specifications

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Purpose of specification
• To specify the nature of work
• To estimate the quantity and cost
• To clarify any ambiguity
• To identify the quality of materials.
• To identify the material proportion.
• To identify the types of workmanship used.

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Types of specification

A. General specification :
• In general specifications, nature and class of works and names of materials
that should be used in the various items of works are described.
• Only a brief description of each and every item is given.
• General specification give the general idea of whole work
• It is useful for estimating the project.
• Without going through the lengthy detailed specifications, general
information for the proportion of the materials, nature and class of work
can be known from the general specifications
• They do not form part of the contract document.
Eg: 1st class brickwork in 1:6 mortar
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Types of specification

B.Detailed specification :
• It specifies the qualities, quantities and proportion of material and
the method of preparation and execution for a particular item of
work.
• Detail specification of different items of work is prepared separately
and they describe what the work should be and how they shall be
executed and constructed.
• While writing the detailed specifications the same order of sequence
as the work is to be carried out is maintained.
• Detail specification form a part of contract document.
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Valuation
The technique of finding the fair price of the property.

Purpose of valuation:
• To find the fair price of property
• Buying and selling of property.
• Taxation.
• Rent fixation
• Security of loan.
• Compulsory acquisition

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Important terms in valuation :
Book Value:
• Original cost - Total depreciation.
• Amount shown in account book after allowing necessary depreciation
Market Value:
• Value of property which is obtained at any time from open market.
Distress Value or Forced Sale Value:
• When a property is sold at a lower price than the market value of that
time, it is said to have a distress value.
• Such distress value may be due to any of the following reason
a) Financial difficulties of the seller.
b) Insufficient knowledge about the market value.
c) Quarrel among partners.
d) Panic due to war or riots or civil war
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Important terms in valuation :
Salvage Value:
It is the value of any property at the end of its utility period without being dismantled
Scrap Value:
Value of the property after dismantling of the property.
Rateable value:
A value ascribed to a domestic or commercial building based on its size, location, and other
factors, used to determine the rent payable to its owner.
Sentimental value:
When the property is sold at the higher value than market value by use of sentiments
Outgoing:
These are the expenses incurred to maintain the property by undertaking periodic repairs.
Net Income:
Net income= Gross income – Outgoings

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Important terms in valuation :
Capitalized Value:
It is defined as that amount of money whose interest at the highest
prevailing rate of interest will be equal to the net income from the
property (for an indefinite period or for a specified period).
Capitalized value = Net income x Year purchase (Y.P.)
• Year's Purchase (Y.P.) = 100 /Rate of interest or (1/i)
• Y.P is defined as the capital sum required to be invested in order to
receive an annuity of Re. 1 at certain rate of interest .
Sinking fund:
Periodic deposit for replacement of Buildings at end of useful life
𝑖𝑠
𝑆𝑛 = 𝑛
∗ 𝑆𝑡
(𝑖𝑠 + 1) −1 27
Year’s Purchase and Sinking fund
• When sinking fund is also considered together with year’s purchase,
then the formula for year’s purchase becomes:
1
𝑌. 𝑃 = ,
𝑖+𝑆
where i= annual rate of interest and S= sinking fund coefficient
𝑖𝑠
• Sinking fund coefficient (S) =
(𝑖𝑠 +1)𝑛 −1
Where 𝑖𝑠 = Interest rate of sinking fund

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Year’s Purchase and Sinking fund
Q. Calculate the years purchase for a property of useful life of 30 years
and the rate of interest of 5% per annum. The rate of interest for
sinking fund is 3 %. [ 2 marks ]
a. 12.5 b. 14 c. 17 d. 22
Solution
𝑖𝑠 = 0.03
𝑖𝑠 0.03
S= = = 0.021
(𝑖𝑠 +1)𝑛 −1 (0.03+1)30 −1
i=0.05
1 1
Y.P = = =14.08 = 14
𝑖+𝑆 0.05+0.021

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Depreciation
Loss of value of property due to structural deterioration , use , wear and tear, decay or
obsolescence
Methods of calculating depreciation:
1. Straight line method:
Loss in value at same amount every year and only scrap value remains at last.

2. Constant percentage method/Declining Balance method .

Also called declining percentage method.
Property will lose its value by a constant percentage .

Where,
D= percentage rate of annual depreciation, V= scrap value , C= original cost, n=useful life

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3. Sinking fund method.
Depreciation is assumed to be equal to the annual sinking fund amount.

Book value for a year = Book value for a previous year – Sinking fund
• In this method of depreciation, the book value decreases at increasing rates with respect
to the life of the asset.
• The fixed sum depreciated at the end of every time period earns an interest at the rate of
r% compounded annually, and hence the actual depreciation amount will be in the
increasing manner with respect to the time period

4. Sum of Years Digit Method(SOYD) .

It is depreciation technique based on the assumption that tangible properties are usually
productive when they are new and their use decreases as they become old.
Sum of Years (SOY) = n(n+1)/2
Annual depreciation at 1st year = ( X-S) * n/ SOY
Annual depreciation at 2nd year = ( X-S) * (n-1)/ SOY and so on
Where X = initial cost and S = Salvage value
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Methods of valuation
1. Depreciation method.
• Value of property= value of land+ depreciated value of building.
2. Plinth area method.
• Value of property= value of land+ plinth area*plinth area rate –
depreciation
3. Cost based method.
• Value of property= value of land+ value of building as per detail estimate
(cost of building) – depreciation
4. Profit based method.
• Value of building= value of land + capitalized value.
• Capitalized value= Net income* year's purchase
• Used in cinema hall, commercial complex, hotel etc.
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Methods of valuation
5. Capital value comparison method:
• The capital value of similar building is compared to find the value of
the building
6. Rental method:
• Value of property= value of land + capitalized value
• Capitalized value= net income * year's purchase
• Net income = Rent incoming – outgoings
7.Development method:
• Valuation done on the basis of level of development done on the area
• Useful for plotting purpose
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Key points on methods of measurement
• Linear measurement shall be measured to the nearest 0.01m.
• Areas shall be measured to the nearest 0.01 SQM
• Cubic contents shall be worked out to the nearest 0.01 cum.

• 1 ropani = 5476 sq. ft = 16 Anna , 1 Anna = 4 Paisa , 1 Paisa = 4 Dam

• 1 Bigha = 72900 sq. ft = 20 kattha , 1 kattha = 20 dhur
• 1 Acre = 43560 sq. ft
• 1 Gallon = 4.546 Litres ( British)
• 1 Gallon = 3.785 Litres ( American)
• 1 Barrel = 164 Litres ( British)
• 1 Barrel = 159 Litres ( American)

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Methods of measurement

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MCQs
1. The expected out turn of 2.5 cm cement concrete floor per manson per day
a. 2.5 sqm
b. 5.0 sqm
c. 7.5 sqm
d. 10 sqm
2. The order of booking dimensions is
a. Length, breadth, height
b. Breadth, length, height
c. Height, breadth, length
d. None of these.
3. Pick up the item of work not included in the plinth area estimate
a. Wall thickness
b. Room area
c. Verandah area
d. W.C. area
e. Courtyard area.
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4.The brick work is measured in sq metre, in case of
a. Honey comb brick work
b. Brick flat soling
c. Half brick walls or the partition
d. All the above.
5.In long and short wall method of estimation, the length of long wall is the centre to centre distance
between the walls and
a. breadth of the wall
b. half breadth of wall on each side
c. one fourth breadth of wall on each side
d. None of these.
6.While preparing a detailed estimate
a. Linear dimension should be measured correct to 0.01 m
b. Area should be measured correct to 0.01 sqm
c. Volume should be measured correct to O.O1 cum
d. All the above.
7.The plinth area of a building does not include
a. area of the walls at the floor level
b. area of stair cover
c. internal shaft for sanitary installations up to 2 sq m. in area
d. area of cantilevered porch 44
8.The most reliable estiamte is
a. Detailed estimate
b. Preliminary estimate
c. Plinth area estimate
d. Cube rate estimate
9.The damp proof course (D.P.C.) is measured in
a. Cub.m
b. Sq m
c. Metres
d. None of these
10.The area is measured correct to the nearest
a. 0.01 sqm
b. 0.02 sqm
c. 0.03 sqm
d. 0.04 sqm
11.The 'centre line method' is specially adopted for estimating
a. Circular buildings
b. Hexagonal buildings
c. Octagonal buildings
d. All the above 45
12.Carpet area does not include the area of
a. the walls along with doors and other openings
b. verandah, corridor and passage
c. bath room and lavatory
d. kitchen and pantry
e. All the above.
13.What is the provision for contractor’s overhead and profit in Nepalese context
a. 5%
b. 10%
c. 15%
d. 20%
14.Which of the following specification is a part of contract document
a. General specification
b. Detailed specification
c. Preliminary specification
d. None
15. The value of the property in which the owner is obliged to sell at lower than the market price is
a. Book value
b. Distress value
c. Market value
d. Ratable value
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16.The depreciation is calculated on
a. Intangible assets
b. Tangible assets having life more than 1 year
c. Tangible assets having life less than 1 year
d. All of the above
17.The simple interest earned is one rupee per year under the prevailing rate of interest. The principal amount in this case
is called
a. Year’s purchase
b. Sinking fund
c. Capitalized worth
d. Interest on capital
18. The no. of corrugations in a CGI sheet is
a. 5
b. 10
c. 8
d. 7
19.One metric horsepower is equal to
a. 726 Watt
b. 736 Watt
c. 746 Watt
d. 756 Watt
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20. If a is the establishment cost, b is the cost at the end of each year,
then the total cost is [NEC 2079]
a. a + (n-1) b
b. a - (n-1) b
c. a + (n+1) b
d. a x (n-1) b

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THANK YOU

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