UNIT 3: CONSTRUCTION ESTIMATION, COSTING & VALUATION

1.0 FUNDAMENTALS OF ESTIMATION & COSTING

1.1 Purpose and Importance of Estimation

• Purpose: To ascertain the probable cost of a proposed construction project before commencement.

• Importance:

  • Financial Planning: Determines capital requirement, funding needs, and feasibility.

  • Decision Making: Helps choose between alternatives (e.g., materials, methods).

  • Contract Basis: Forms the foundation for tender documents and contract agreements.

  • Control: Provides a benchmark for cost control during execution.

  • Valuation: Essential for property valuation, sale, purchase, and mortgage.

1.2 Principle of Units

Standard units for measurement ensure uniformity and comparability.

1.3 Types of Estimates

[!TIP] Exam Distinction: Revised Estimate = Material change in scope (fresh sanction). Supplementary Estimate = Additional work within original scope (separate sanction).

1.4 Key Financial & Costing Concepts

• Overhead Charges (Establishment Charges): Indirect expenses of the project office (site staff salary, office rent, utilities, etc.). Added as a percentage to the total of direct costs.

• Contingencies: Provision for unforeseen minor items/price fluctuations (typically 2-5%). Not for major scope changes.

• Contractor's Profit: Added to total cost (direct + overheads) as a percentage (typically 10%).

• Petty Supervision Charges: Charges for site supervision by owner's engineer (1-2%).

• Fluctuation of Rates (Escalation): Clause in contract for adjusting material/labour rates due to market inflation beyond a base date.

• Work Charge Establishment: Temporary facilities at site (sheds, storage, water supply) – part of overheads.

2.0 METHODS OF ESTIMATION & QUANTITY TAKE-OFF

2.1 Building Estimation: Long Wall & Short Wall Method

• Procedure: For walls with cross walls. Long walls run parallel to the length of the building. Short walls run parallel to the breadth.

• Formulas:

  • Length of Long Wall = (Center to Center Length of Room) - (2 × Half Width of Wall) + (2 × Length of Wall Beyond Inner Face of Parapet)

  • Length of Short Wall = (Center to Center Breadth of Room) - (2 × Half Width of Wall) + (0.3 m for parapet)

• Example: For a room 5m x 4m with 0.3m thick walls:

  • Long Wall Length = (5 + 0.3) - (2 × 0.15) = 5.0m (at plinth level)

  • Short Wall Length = (4 + 0.3) - (2 × 0.15) = 4.0m (at plinth level)

• Centre Line Method: Faster for rectangular buildings without cross walls. Total center line length × width × height. Not suitable for buildings with internal cross walls.

2.2 Earthwork Estimation for Roads

• Mid-Sectional Area Method:

  • Volume = Area of Mid-Section × Distance between CS

  • Area of Mid-Section = (B + md) × d (for embankment) where B=top width, m=side slope, d=depth at mid-section.

  • Application: When cross-sections are taken at regular intervals (chainages).

• Mean Sectional Area Method:

  • Volume = (A₁ + A₂) / 2 × L

  • Where A₁, A₂ = areas of two consecutive cross-sections, L = distance between them.

  • Application: When only two end sections are known.

2.3 Deduction Rules for Masonry & Plastering

• No deduction for openings < 0.1 m².

• For openings ≥ 0.1 m²:

  • Masonry: Deduct full opening area. Add lintel/sill volume (if specified).

  • Plastering/Painting: Deduct only one face of the opening area. For jambs, add perimeter of opening × thickness of plaster.

• For RCC bands, lintels, etc.: Deduct full volume from masonry if they replace masonry.

2.4 Material Statement Preparation

• For R.C.C. (M20 = 1:1.5:3): For 1 m³ concrete:

  • Cement = $$\displaystyle \frac{1}{1+1.5+3} \times 1.54 $$ (dry volume factor) = 0.272 m³ ≈ 8 bags (since 1 bag = 0.035 m³)

  • Sand = $$\displaystyle \frac{1.5}{5.5} \times 1.54 $$ = 0.42 m³

  • Aggregate = $$\displaystyle \frac{3}{5.5} \times 1.54 $$ = 0.84 m³

  • Water-Cement Ratio = 0.5 → Water = 0.5 × 0.272 × 1000 = 136 liters

  • Note: 1.54 accounts for voids in dry mix. For M15 (1:2:4), adjust ratios.

• For Brickwork (1:6): For 1 m³ brickwork:

  • Bricks = 500 (standard size 19x9x9 cm with mortar)

  • Mortar = 0.3 m³ (approx). Cement = $$\displaystyle \frac{1}{7} \times 0.3 \times 1.54 $$ = 0.066 m³ ≈ 2 bags. Sand = $$\displaystyle \frac{6}{7} \times 0.3 \times 1.54 $$ = 0.396 m³.

3.0 PREPARATION OF DETAILED ESTIMATE

3.1 Data Required

1. Drawings: Plan, elevation, section, foundation details.

2. Specifications: Material quality, workmanship standards, mortar/concrete grades.

3. Rates: Current schedule of rates (CSR) or prevailing market rates.

4. Dimensions: All measurements from drawings.

5. Site Conditions: Soil report, access, water availability.

3.2 Step-by-Step Procedure

1. Take-off Quantities: Item-wise measurement from drawings using standard units.

2. Calculate Abstract: Enter quantities and compute cost (Qty × Rate) for each item.

3. Add Miscellaneous: Include contingencies, supervision charges.

4. Add Contractor's Profit: On total (direct + overheads).

5. Prepare Abstract Sheet & BOQ: Summarize all items and costs.

3.3 Factors to Consider

• Site conditions (soil, terrain, access).

• Availability of materials and labour.

• Construction sequence and methodology.

• Local bylaws and regulations.

• Seasonal variations (monsoon impact).

• Waste and wastage percentages.

3.4 Abstract of Estimate & BOQ

• Abstract Sheet: Summary table showing item no., description, quantity, rate, amount, and total cost.

• Bill of Quantities (BOQ): Detailed list of all work items with quantities, units, and rates. Forms part of tender document.

3.5 Item-wise Estimation (Foundation to Superstructure)

1. Earthwork in Excavation: Measure net volume (length × breadth × depth). Deduct for plinth.

2. Lime Concrete in Foundation: Measure over plinth area × average thickness (usually 30 cm).

3. Brickwork in Foundation/Plinth: Use long/short wall method for lengths. Deduct for openings if any.

4. Brickwork in Superstructure: Similar to above, up to top of lintel level.

5. Damp Proof Course (DPC): Measured in square meters over plinth area.

6. Plastering: Measured in square meters of surface area. Deduct openings (one face), add jambs.

4.0 RATE ANALYSIS & COST DETERMINATION

4.1 Definition & Objective

• Definition: Breaking down the cost of an item into its constituents (material, labour, equipment, overheads, profit) to determine a rational rate per unit.

• Objective: To fix a fair price for the item, understand cost drivers, and prepare accurate estimates.

4.2 Factors Affecting Rate Analysis

4.3 Procedure for Rate Analysis (Example: 1:4 Brickwork)

1. Calculate Material Cost:

   • Bricks for 1 m³ = 500 nos. @ Rs. X/brick.

   • Mortar (1:4) for 1 m³ = 0.3 m³. Cement = $$\displaystyle \frac{1}{5} \times 0.3 \times 1.54 $$ = 0.0924 m³ (≈ 2.6 bags). Sand = $$\displaystyle \frac{4}{5} \times 0.3 \times 1.54 $$ = 0.37 m³.

   • Total Material Cost = (Bricks + Cement + Sand).

2. Calculate Labour Cost: Based on output (e.g., 1 mason + 2 helpers can build 1 m³/day).

3. Add Tools & Tackles: 1-2% of labour cost.

4. Add Overheads: 2-5% of (Material + Labour).

5. Add Profit: 10% of (Material + Labour + Overheads).

6. Total Rate/Unit = Sum of all above.

4.4 Cost Estimates for Specific Services

• Water Supply & Sanitary: Typically 5-8% of structural cost. Includes pipes, fittings, fixtures, septic tank, soak pit.

• Electrification: Typically 6-8% of structural cost. Includes wiring, switches, fixtures, distribution boards.

• Drainage Works: Typically 3-5% of structural cost. Includes external drains, inspection chambers, connections.

5.0 SCHEDULE OF RATES (SOR) & PROJECT REPORTS

5.1 Current Schedule of Rates (CSR)

• Definition: A document issued by government/public works departments (PWD, CPWD, NHAI) listing standardized rates for various items of work in a specific region/period.

• Purpose: Provides uniform rates for estimating, tendering, and payment. Prevents disputes.

• Preparation Authority: PWD (State), CPWD (Central), MES, etc.

• Components:

  • Material rates (at site/stockyard).

  • Labour rates (skilled, semi-skilled, unskilled).

  • Hire charges for equipment.

  • Standard constants (e.g., output of labour, material consumption per m³).

5.2 Detailed Project Report (DPR)

• Purpose: Comprehensive document for project appraisal, financing, and execution. Required for bank loans, government approval.

• Contents:

  1. Executive Summary: Project snapshot.

  2. Technical Feasibility: Location, site details, design parameters, construction methodology.

  3. Cost Estimates: Detailed abstract, year-wise phasing, escalation.

  4. Financial Analysis: Sources of finance, loan schedule, profitability, IRR, NPV.

  5. Implementation Schedule: Bar chart/PERT chart, milestones.

  6. Market Analysis: Demand, supply, pricing strategy (for commercial projects).

  7. Risk Analysis & Mitigation.

6.0 VALUATION PRINCIPLES & METHODS

6.1 Definitions & Differentiation

6.2 Purpose of Valuation

• Sale/Purchase, Mortgage/Loan, Insurance, Taxation (property tax, wealth tax), Rent fixation, Compulsory acquisition, Litigation.

6.3 Methods of Valuation

6.4 Key Valuation Concepts

• Sinking Fund: Fund accumulated to replace an old asset at end of its life. Importance: Provides capital for renewal without burdening current revenue.

  • Calculation: Annual Sinking Fund = $$\displaystyle \frac{C \times i}{(1+i)^n - 1} $$ where C = Replacement Cost, i = interest rate, n = life.

• Year's Purchase (Y.P.): Multiplier used to capitalize net annual income into capital value.

  • Formula (Dual Rate): Y.P. = $$\displaystyle \frac{1}{i + \frac{1}{S}} $$ where i = interest rate on capital, $$\displaystyle \frac{1}{S} $$ = sinking fund factor.

  • Example: Life=15 yrs, i=7%, S.F. rate=4% → Y.P. = $$\displaystyle \frac{1}{0.07 + 0.0267} $$ = 10.35.

• Dual Rate of Interest: One rate (i) for return on capital, another (s) for sinking fund to replace asset. Used in Rental Method for old buildings.

• Gross Income vs Net Income:

  • Gross Income: Total rent receivable (may include vacancies).

  • Net Income: Gross Income - Outgoings (taxes, repairs, insurance, management).

• Scrap Value vs Salvage Value:

  • Scrap Value: Value of completely worn-out asset (only as scrap).

  • Salvage Value: Value of asset at end of useful life if sold as working unit.

• Market Value vs Book Value:

  • Market Value: Current open market price.

  • Book Value: Value shown in accounts (Cost - Depreciation).

7.0 SPECIALIZED CONSTRUCTION ESTIMATION

7.1 Estimation for Culverts & Minor Bridges

• Key Items: Earthwork (excavation, filling), masonry/cement concrete in abutments, wing walls, bed, wearing coat, piers (if any), approaches.

• Method: Measure quantities from drawings. For earthwork, use mid-sectional area method along the length.

• Techniques: Pre-cast vs cast-in-situ, foundation type (open, pile), material (brick, stone, RCC).

7.2 Cost Distribution in Building Projects (Approximate %)

7.3 Rough Estimate for Commercial Complex (Cubical Content Method)

• Step 1: Calculate Total Cubical Content = Plinth Area per floor × Height of each storey × No. of storeys.

  • Given: PA = 500 m², Ht = 3.5 m, Storeys = G+2 = 3.

  • Cubical Content = 500 × 3.5 × 3 = 5250 m³.

• Step 2: Structural Cost = Cubical Content × Rate = 5250 × 1000 = Rs. 52,50,000.

• Step 3: Add percentages for services (on structural cost):

  • Water Supply & Sanitary = 8% of 52,50,000 = 4,20,000

  • Electrification = 6% = 3,15,000

  • Fluctuation = 5% = 2,62,500

• Step 4: Total (a) = Structural + Services = 52,50,000 + 4,20,000 + 3,15,000 + 2,62,500 = 62,47,500.

• Step 5: Add Contractor's Profit (10%) & Petty Supervision/Contingencies (3%):

  • Profit = 10% of 62,47,500 = 6,24,750

  • Petty/Supervision = 3% of 62,47,500 = 1,87,425

• Step 6: Total Estimated Cost = 62,47,500 + 6,24,750 + 1,87,425 = \boxed{Rs. 70,59,675}.

8.0 PRACTICAL APPLICATIONS & SHORT NOTES

8.1 Earthwork Volume in Embankment (Numerical)

Given: Length L = 0.5 km = 500 m, Top Width B = 4 m, Depth d = 2 m, Side Slope m = 1.5:1. Volume (for uniform section): $$\displaystyle V = (B + m \cdot d) \times d \times L $$ $$\displaystyle V = (4 + 1.5 \times 2) \times 2 \times 500 $$ $$\displaystyle V = (4 + 3) \times 2 \times 500 = 7 \times 2 \times 500 = 7000 \ \mathbf{m^3} $$.

8.2 Cost Calculation from Quantities

Given: Wall 4m long, 3m high, 0.3m thick.

• Brickwork Volume = 4 × 3 × 0.3 = 3.6 m³.

  • Cost @ Rs. 320/m³ = 3.6 × 320 = Rs. 1,152.

• Plastering Area (both sides) = 2 × (4 × 3) = 24 m² (ignoring deductions for simplicity).

  • Cost @ Rs. 8.50/m² = 24 × 8.5 = Rs. 204.

• Total Cost = 1152 + 204 = Rs. 1,356.

8.3 Short Notes on High-Frequency Topics

[!TIP] Exam Focus: These are 5m/4m questions. Define clearly, list components/purposes, and give a small example/calculation if relevant.

a) Overhead Charges

Definition: Indirect project expenses not attributable to a specific work item but necessary for project execution.

Components:

• Site office rent, electricity, water.

• Salaries of project manager, engineers, clerks.

• Communication, travel, insurance.

• Taxes, permits, security.

• Typically added as 2-5% to total direct cost.

b) Sinking Fund

Definition: A fund accumulated periodically (annually) to replace a depreciating asset at the end of its useful life.

Importance: Ensures capital availability for renewal without straining current finances; used in valuation of old buildings.

Calculation: Annual Sinking Fund = $$\displaystyle \frac{C \times i}{(1+i)^n - 1} $$ where C = Replacement Cost, i = interest rate, n = life in years.

c) Dual Rate of Interest

Concept: In valuation (Rental Method), two rates are used:

1. Interest Rate (i): Return on capital invested (e.g., 7%).

2. Sinking Fund Rate (s): Rate at which fund accumulates to replace asset (e.g., 4%).

Application: Year's Purchase (Y.P.) = $$\displaystyle \frac{1}{i + \frac{1}{S}} $$ where $$\displaystyle \frac{1}{S} $$ is sinking fund factor. Used for valuing old properties with limited remaining life.

d) Bill of Quantities (BOQ) & Abstract Sheet

• BOQ: Detailed list of all work items with quantities, units, and rates. Part of tender document. Allows contractors to price uniformly.

• Abstract Sheet: Summary of BOQ showing item-wise cost and total estimated cost. Prepared after detailed estimate.

Difference: BOQ is detailed; Abstract is condensed summary.

e) Tender Notice

Definition: Public advertisement inviting bids from contractors for a project.

Contents: Name of work, estimated cost, time for completion, earnest money, date of submission, address for sale of tender documents, eligibility criteria, last date, place of opening.

Purpose: To obtain competitive bids, ensure transparency, select lowest qualified bidder.

f) Task Work

Definition: Standard output of work (quantity) that a worker should complete in a normal working day (8 hours).

Factors Affecting:

• Type of work (masonry, plastering).

• Skill and efficiency of worker.

• Tools and equipment used.

• Site conditions (space, height).

• Material availability at work point.

• Supervision and method of work.