RATE ANALYSIS: It's Not as Difficult as You Think

 RATE ANALYSIS: It's Not as Difficult as You Think

The construction sector is extremely difficult to execute. It includes a number of tasks that must be completed in the correct order in order to meet the project deliverables

A combination of material, labor, machinery, and profits are the things that need to be done.

To comprehend and calculate the cost of work, a detailed analysis of the items' complexity is required

An experienced civil engineer or architect can be the right person to do Rate Analysis for Civil Works. His understanding of the tasks to be executed at site, the methodology of execution and the specifications can help in calculating the exact cost of  the item.

Importance of Rate Analysis:

• The foundation for determining an accurate rate per unit of work is rate analysis. A guideline for determining costs for consultants and contractors during the tendering process is rate analysis.

• It facilitates comprehension of material economy.Knowing the kind of labor needed to complete the task is helpful.Understanding the machinery needed to complete the task is beneficial.

• It aids in estimating the amount of equipment, labor, and materials needed for the job.

• Rate Analysis is a guideline to arrive at costs for consultants and contractors in the tendering process. It guides comparative analysis of tenders.

• Rates of various items are constantly varying in the market. Rate Analysis guides in understanding the impact of rate fluctuations.

• It helps to control the project costs.

• It helps to estimate the PROFITS from the project.

Purpose of Rate Analysis:

1. To determine the most cost-effective way to complete the specific object using supplies and procedures.

2. To calculate the cost of additional things that are not covered by the contract bond but must be completed in accordance with departmental instructions.

3. To update the rate schedule in light of rising labor and material costs or technical advancements.

Factors influencing Rate Analysis:

1. Material: 

A significant portion of any construction project's cost is related to the price of raw materials like steel, cement, sand, etc. The item's rates will be influenced by the specifications of the material included in the tender.

2. Transportation of Material: 

Rate analysis takes into account the cost of storage and transportation as well as the material's price per unit.

3. Standard Sizes and Wastage of Material:

Materials available for construction activities are generally available in standard sizes and standard packages. Hence wastage needs to be considered depending upon the quantity of work to be executed.

Breakage in handling , pilferage, non standard sizes of execution.

4. Scaffolding, Plant and Machinery:

Neither the BOQ nor the item expressly state how much scaffolding is needed. Therefore, it is necessary to determine its quantity and include the cost in the rates.

The necessary machinery specifications for plants and machinery are typically included in the tender. However, the number of deployment days and the availability of machinery will determine the rate.

If not agreed upon individually, idle charges for machinery may be included in the rate analysis.

5. Labour Charges:

The man hours of each type of labour required is to be calculated and assigned to each item.

Skilled Labour, Un – Skilled Labour and Daily Wage Labour needs to be quantified.

6. Contractual Obligations:

Comprehensive Contractors All Risk (CAR)Insurance Policy, Royalties, PF, ESIC, Electricity, Water, Interest on Working capital if required, Import Duties, Quality Tests are mentioned in the contract document. The Rate analysis needs to take care of costs related to these compliances for the project.

7. Overheads or Operational Expenses:

For any project to be successful, operational setup is necessary. Among these costs are administrative costs, such as the salaries of office administrative staff (including accountants, clerks, and engineers who work on projects).

Site Administration: Establishing the Site Office (Paying Technical Staff: Engineers, Storekeepers, and Non-Technical Staff: Site Watchmen)

Mobile bills, printing costs, site travel, lodging rentals, and office rent are examples of office expenses.

Costs of marketing could be added.

8. Profits:

Profits are an integral part of the project. On an average 8% to 12% profit is expected by the contractor for large scale projects. But it may increase or decrease depending upon the competition in the market, prior investments in plant and machinery, duration of the project, and scale of the project.

For small scale project profit percentage may be high in order to achieve break even point for the contractor.

9. Contingencies:

Buffer Amount to address uncertainties in the item execution. Usually Contingencies are added after estimating the entire project. But in some cases, it might be advisable to consider the rate of the item, especially if the item is not detailed out properly in the Bill of Quantities.

Contingencies range from 3% to 5% of the overall project cost, depending on the project.

Contingencies also act as a buffer to handle Risks in the project.

10. Sundries:

Unspecified sum to round the rate to the closest whole number.

Implementation of Rate Analysis in Construction:

• Cost Estimation for project: A cost estimate sets the baseline for the project's expenses at various phases of its development. At a specific point in the project's development, a cost estimate is a forecast made by the cost engineer or estimator using the information at hand.

• Tender Preparation and tender submission: It helps to win the Bids in a competitive bidding process.

• Financial Planning and Budgeting:A budget is a financial road map for the future; assuming everything goes as planned, it outlines how much should be made and spent on a particular item.

• Cost Control and Cost Optimization: Strategic cost control and resource allocation are key components of cost management and optimization, which aims to maximize value and efficiency within predetermined parameters.

Conclusion: 

Rate Analysis is a powerful tool to gain control in the cost management of the project. 

Use of Rate Analysis is to be done judiciously to establish cost benchmarks and define profitability of the company.

Sthaptya Vishwa Projects is a renowned firm in the construction industry where we understand and implement the Rate Analysis techniques for our projects so that the clients and contractors can clearly understand the factors influencing the  costs of the project. 

We establish transparent cost analysis with our expertise in the field and thus control the cost and cost overruns.

Connect with us to discuss the Rate Analysis for your company as a strategy to gain control over costs. 

Architects, Contractors and Owners should always keep in mind that Every Rupee Saved is Every Rupee Earned.