Rate analysis

• Rate analysis is the basis for arriving at a correct rate per unit work
or supply of work specifications such as labor, materials, and
equipment. It can also be defined as the analytical study that leads to
the definition of unit rates of work by identifying the basic
requirements.
• In order to determine the rate of a particular item, the factors
affecting the rate of that item are studied carefully and then finally a
rate is decided for that item. This process of determining the rates of
an item is termed as analysis of rates or rate analysis.
• Purpose of Analysis of rates: To work out the actual cost per unit of the items at the
locality. To examine the viability of rates offered by contractors. To calculate the number of
materials and labour strength required for project planning
• The primary Components of Rate Analysis are as below,
• Material cost inclusive of wastage.
• Labour cost.
• Plant & machinery owning and operative charges.
• Water charges.
• Overheads.(Overhead refers to the ongoing business expenses not directly attributed to
creating a product or service. It is important for budgeting purposes but also for
determining how much a company must charge for its products or services to make a profit.)
• Profit.
• What are the factors affecting the rate Analysis?
• Factors Affecting Rate Analysis :
• Materials required for Rate Analysis : Almost in every type of construction materials
are the major part.
• Labour
• Item Specification
• Tools and Plants
• Overhead Charges
• Contractor's Profit
• location of the Work
• Miscellaneous
• What are the data required for rate Analysis?
• For arriving at the correct rate of analysis of a particular item, the following
essentials are necessary for the person carrying out the rate of analysis: Good
knowledge of construction work and familiarity with the trade; Information
regarding costs of materials, labour and equipment's.
• The following are the minor factors affecting on the rate analysis,
• Location of the project.
• The range of lead and lift require for deposition of materials.
• Transportation charges if materials are not easily available in near by locality.
• Percentage charge for overheads.
• Possibility of theft of losses.
• Rate Analysis can be defined as the analytical study (qualitative and
quantitative) that leads to the definition of a new unit rate referring
to a given job or work type, by identifying its basic elements.
• How is a new unit rate defined?
• The starting point to define the new unit rate, is to run a careful analysis of the elements and resources that build up to form
the new work item.
The elementary components, or resources, are generally the following:
• • workforce
• materials
• hired equipment
• overheads
• company profits
• Labor
The cost of labor is defined by the type of workers (specialised, qualified operators) and the hours of work necessary per
quantity unit.
• Materials
To define the cost of the necessary materials, you need to determine the following:
• • the purchase price
• on-site transport costs
• unloading
• stacking and storage
• waste (an excess percentage of unwanted material due to the production processes)
• Rentals
Meaning the rented equipment or machinery that may be of 2 main types:
• • “operated equipment”: this means that the rental cost is inclusive of both
the equipment, or machinery, and the necessary operational labor (eg. a
crane and the crane operator).
The operated equipment rental includes the labor costs required for its use,
the fuel, lubricants, insurance costs and maintenance.
• “without operator”: in this case the equipment or machinery is rented
with the operator. This kind of freight cost does not include the cost due to
labor required for its use. Neither does it take into account the cost for fuel,
lubricants or maintenance
• Overheads
Overheads are the costs incurred in an indirect way and not directly
related to the works or to the construction site.
On average they are quantifiable with a fixed percentage of between
13% and 17% – (may vary from zone to zone).
Overhead costs include the following items:
• • Administrative and Management
• site technical systems
• surveys and audits
• temporary occupations and security arrangements
• etc.
RATE ANALYSIS AND COSTING
• DATA The process of working out the cost or rate per unit of each item
is called as Data. In preparation of Data, the rates of materials and
labor are obtained from current standard scheduled of rates and
while the quantities of materials and labor required for one unit of
item are taken from Standard Data Book
• SCHEDULE OF RATES Definition: In order to determine the rate of a particular item,
the factors affecting the rate of that item are studied carefully and then finally a rate
is decided for that item. This process of determining the rates of an item is termed as
analysis of rates or rate analysis. The rate of particular item of work depends on the
following.
• 1. Specifications of works and material about their quality, proportion and
constructional Operation method.
• 2. Quantity of materials and their costs.
• 3. Cost of labours and their wages.
• 4. Location of site of work and the distances from source and conveyance charges.
• 5. Overhead and establishment charges
• 6. Profit
• PROCEDURE OF RATE ANALYSIS Cost of materials at source and at site of
construction. The costs of materials are taken as delivered at site inclusive
of the transport local taxes and other charges. Purpose of Analysis of rates:
• 1. To work out the actual cost of per unit of the items
• 2. To work out the economical use of materials and processes in
completing the particulars item.
• 3. To work out the cost of extra items which are not provided in the
contract bond, but are to be done as per the directions of the department.
• 4. To revise the schedule of rates due to increase in the cost of material
and labour or due to change in technique
• Objective of Rate Analysis :
• With the help of rate analysis actual cost of items can be determined
on the location.
• It helps to cross check the rates offered by contractor.
• To find out the exact quantity of materials and labours required for
specific work.
• To finalise the labour contract rates.
• Factors Affecting Rate Analysis :
• 1. Materials required for Rate Analysis :
• Almost in every type of construction materials are the major part. About 50 % of the total
cost of any work is due to the materials itself. Hence it is very much important that the cost
of the materials should be exactly found out. Market surveys should be conducted to
analyse the exact cost of each and every material required for the construction.
• The quantity of the materials either more or less, both effects the rate analysis. Hence one
should maintain proper quantity of the materials on the site.
• 2. Labour :
• The number of the labours required for the execution of the work should be properly
calculated. Selection of the labours should be done according to their categories like skilled,
semi-skilled and unskilled and the payment of the labours should also be decided according
to their class. About 30 % of the total cost of the work is due to the cost of labours.
• 3. Item Specification :
• The specification of the items indicates the proportion of materials, the
process and the method of the work. If superior and high quality material is
issued then definitely the cost of the materials will be higher.
• 4. Tools and Plants :
• In every type of construction work different types of tools and plants are
required. It is the duty of the estimator to decide whether buying or hiring
of tools and plants will be more economical. It is decided on various factors
such as duration of work, number of labours, budget of work, type of work
etc. If special type of instruments are used in the execution of work then
the cost of the construction will be increased.
• 5. Overhead Charges :
• Overhead charges mainly includes expenses of office, labour welfare, material testing, water
supply, electrification, depreciation amount etc. This is usually considered as 2-5 % of the
total cost of the work.
• 6. Contractor’s Profit :
• Normally 10 % of the overall cost of the work is considered to be contractor’s profit.
• 7. location of the Work :
• If the location of the site is in the remote areas then it will be very difficult to execute the
work. Transportation charges increases as labours have to be transported to the location and
the cost of labours also varies as the location is far away from their residence.
• 8. Miscellaneous :
• Adverse climatic conditions, Completion period of work are also considered to effect the rate
analysis. As the effects caused by this directly reflects into rate analysis.