Chapter 5-Five Cost Establishmentand Valuation
Chapter 5-Five Cost Establishmentand Valuation
Chapter 5-Five Cost Establishmentand Valuation
FACULTY OF TECHNOLOGY
DEPARTEMENT OF WATER
RESOURCES AND IRRIGATION
ENGINEERING
CHAPTER-5
PROJECT COST ESTIMATION AND VALUATION
Price escalation
Tax exemptions
Insurance of the works
Owner’s risks
Applicable laws
B. Technical Specification
Technical specifications specify the following crucial information to the
contractor and it is the sole basis both for the construction methods to be
adapted and the construction cost of the project.
Quality of materials
Quality of machineries and plants
Quality of workmanship
Erection and installation methods
Test and inspection requirements and methods
Technical specifications basically have restricted applications, which usually
define specific work items. Therefore, for a better understanding and cost
estimation of the project, the contractor must check the given specifications
for:
Technical accuracy and adequacy
Define and clear stipulations
Fair and equitable requirements
Formats which can be easily used during bidding and
construction
Legal enforceability
C. Drawings
The contractor mainly understands from the drawings what type of
construction methods to be adapted during cost estimation as well as
construction of the project.
Some of the construction methods which need to be addressed during cost
estimation of this building project are:
Concrete production
Concrete transportation and placement
Transportation of construction materials to different floors
Methods and type of scaffolding
Types and methods of shuttering works
Erection and installation of glazing works
Temporary access for manpower working at different floors
Skilled manpower requirement
D. Estimated Bill Quantities
Estimated quantities of work are also the basis to determine the type and
number of resources to be deployed during construction of the project.
Moreover, construction methods shall be selected in such a way the given
quantity of works can be executed during the completion time of the
project.
Based on the estimated quantity of works, the contractor shall decide the
method of construction to be adapted during executing of the project such
as:
Type and size of crushing plants
Type and size of mechanical mixers or batching plants
Type, size and number of machineries such as dozers, graders,
loaders, rollers, dump trucks and so on.
Skill and number of manpower requirement
Type and quantity of construction materials
and so on
E. Supporting Documents
Supporting documents such as geological formations, hydrological data and
other technical reports like socio-economic studies are usually provided by
the owner to contractors for their own interpretations for heavy construction
projects.
Therefore, the contractor shall have the technical ability and experience in
interpreting the technical data provided to determine construction methods
to be adapted which directly affects the construction cost estimates.
F. Site Visit
In order to prepare competent and reasonable construction cost estimates,
the contractor must visit the project site unless the site is familiar to the
contractor with previous reliable site information.
visits are critically important especially when the contractor is working
with heavy construction project cost estimates such as road works and
hydropower projects.
The contractor shall prepare his own checklists during the site visit which
shall address, but not limited to, the following issues which have direct
impact on the construction costs of the intended project.
i. Location of the site:
It helps to determine the mobilization and demobilization costs.
It also helps to determine the transportation cost of materials from main
material suppliers.
Availability and expected wages of daily labors can be fairly
estimated based on the location of the site.
Site location also helps to determine the type of camp facilities required to be
constructed such as project offices, living areas, food accommodations and
so on.
Having proper understanding of site location and local weather condition
helps the contractor to determine salaries and benefits of staffs, skilled
manpower and daily laborers.
ii. Location of local construction material
The contractor shall identify the location and quality of local construction
materials such as quarry area for gravel production, sand, selected material,
water as well as sub base and base course materials in the case of road
projects.
Moreover, the contractor shall have the general understanding of the site
layout for different plants such as batching and crushing plants.
iii. Access Roads
Site access roads to the main works, quarry areas, water supply, sand, and
the like shall be identified which incurs additional construction and
maintenance costs. These costs are extremely high, in case of heavy
construction sites such as road works, hydropower projects and so on.
iv. Water and power supply
v. Communication facilities
vi. Environmental protection
vii. Existing facilities
F. Method of measurement
Contractors shall thoroughly understand the method of measurement
incorporated within the bidding documents before starting any cost
breakdown calculations.
BaTCoDA Technical specification and method of measurement
ERA standard specifications
Civil Engineering Standard Method of Measurement (CESMM)
G. Construction Method Statements
Construction method statements give the clear picture of each project
activity execution during the construction phase of the project.
The required quality of works as per the specifications, estimated quantity of
works, safety standards, as well as time for completion are the sole basis in
determining the construction method statements of a project.
Construction method statements shall clearly indicate the following
crucial construction issues:
Skill and number of manpower required
Type and specification of equipment’s
required Quantity and quality of materials
required Proposed working crews
Estimated crew productivity
Estimated duration for completion
Expected defects and remedial measure
5.7. Basic Cost Components of a construction project
Basically, the cost of any construction project comprises
Direct costs, which include the direct cost of materials, labor as well
as equipment’s and
Indirect costs, which include but not limited to head office and site
overhead costs.