ESTIMATING COSTING AND VALUATION

What is Estimate?
Process of calculating the quantities and costs of the various items required in connections of
work.
Estimated cost
 Theoretical cost
 Probable cost
Actual cost
Actual expenditure after completion of the work.
Accuracy of Estimate
Depends on
 Skill and experience of estimator
 Careful study of dimensions on the drawing
 Method of estimating
 Consideration of rate
Purpose of Estimate
 To ascertain necessary amount of money required….
 To ascertain quantities of materials required…..
 To ascertain various categories of labours for ….
 Tools and plants…….
 Time and completion of the work
 To give reasonably accurate idea about :
Investment (B/C, IRR), Construction Schedule, Property for Valuation,Tender
Requirements for estimate
 Drawing
 Specifications (General, Detailed)
 Rates (Government approval rate)
 Updated mode of measurements
 Standing circulars (for those which are not in schedule of
rate)

Types of estimate
1. Approximate (Preliminary, Conceptual, Rough)
Approximate cost findout for
 Justify
 Budget
 Plinth area basis, Cubic rate method, Cost comparison method used

2. Detailed (Item rate estimate, Unit rate estimate)

 More Accurate
 After administrative approval of approximate estimate, detail estimate is prepared.
3. Revised
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  When sanctioned detail estimate ±5% from rate or expenditure exceeds by 10%
 Most accurate

4. Supplementary
 Detail estimate…., work in progress …,for additional work

5. Quantity estimate of quantity survey

 Complete estimate or list of quantities for an item of work required to complete the concern
project.

6. Extension and improvement

 Existing to be change

7. Complete estimate
 Total cost of land
 Total cost of budget
 Contingency

Building:
Cost of materials 65-70% of whole cost, Cost of labour 30-35% of whole cost
Road:
(E/w) 14%,consolidation soling cost 22%,wearing 44%,and other 20%
8. A.M/ A.R
For maintaining insame as construction….
(1-1.5)% of capital cost per year)
(Generally the fluctuation between actual cost and estimated cost lies in range ±10-15%)
 Which of the following is correct estimate?
a. Plinth area b cube rate
b. Detailed d building cost index estimate

 Working out exact quantities of various items of work

a. Estimate b. Quantity survey
b. Valuation d. all of above

Methods of estimating
 Long and short wall ( out to out and in to in)
Longer wall as long wall
Public work department method (PWD)
 Centre line method
For geometrical shaped building

 Crossing method
-Applicable if offsets are more or less systematical.
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 -Overall perimeter ofbuilding - 4*thickness of wall = Centre line length
-Principally same as Centre line method, center line length calculation is different.

Unit of measurement
Principle of unit of measurement
Depends on
 Shape
 Size
 Nature of work

- Mass voluminous and thick work- cubic unit (m3 ft3) (E/w, B/w, Cement concrete)

- Thin shallow and surface work square unit(shutter, plaster……)

- Long and thin work……. In running unit.(Handrail, exp.joint, gutter, surface drain…..)
- Piece work, job work in numbers.
Surface dressing up to 15 cm
a. m3
b. m
c. m2
d. None
-Lightning conductorswell sinking, cornice – m
-Honey comb, flat soling form work-m2
-Reinforced brick work, well stening, B/W in arch-m3

The quantity of partition wall is measured in

a. m b.m2 c.m3 d.LS

* In certain lime method of working out volumes for cross walls,what deduction must be made from
center line length at each junction?
a. twice the breadth b.breadth c.1.5 breath d. half the breadth.
-Measurement of steal greel is measured in
a.volume b.weight c.area d. none
- The unit of flat brick soling in foundation is measured in
a.m b.m2 c.m3 d.LS
- The unit of measurement of telia roofing is
a.m. b.m2 c. M3 d.LS

Method of measurement of bldg.. and other civil engineering works.

Length= 0.01m exc.
Woodwork 0.002m

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 Steel reinforcement 0.005m
Thickness of slab 0.005m
<20cm thick roadpavement 0.005m
Area = 0.01m2 exc.
Steel plate 0.001m2
Volume 0.01m3 exc.
Wood work 0.001m3
Steel reinforcement 0.001MT
1. E/W excavationup to: 1.5 m depth
1.5 m to 3.0m
3.0 to 4.5m
2. B/w (foundn super str, other)
3. Concrete work pcc, pcc for rcc, pcc in floor
-No deduction to 0.1m2opening duct
-Volume of reinforcement.
4. Formworks: wooden plywood steel, formwork.
No deduction upto 0.4m2opening/duct.
5. False ceiling: No deduction upto 0.4m2
6. Plaster work: No deduction upto 0.5m2, end of beam
for 0.5-3.0 m2 opening, only one side deduction
Both side plaster >3 opening, deduct both side
7. Painting work: Same as plaster work
[for detail IS 1200 (part 15)-1987) – Method of measurement of Building and Civil Engg. work]

Preparation of Detail Estimate, Abstract of Cost, Bill of Quantity (BOQ)

Detail Estimate
Item Description Unit No. L B H Quantity Remarks
no. of work

Abstract of Cost
Item no. Description Unit Quantity Rate Amount Remarks
of work

TOTAL A

i) Total cost =A
ii) Contingency @ 5.0 % of A = …..

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 iii) Total with Contingency = (i) + (ii) = …..
iv) VAT = 13% of (iii)
v) Grand Total = (iii) + (iv) = …….

Bill of Quantity
Item no. Description Unit Quantity Rate in Rate in Amount Remarks
of work fig word

 The rate column of BOQ of any construction project is filled up by

a. Client b.Contractor c.Both d. Engineer

Rate Analysis
The method of determining unit rate of item of work, considering the cost of materials, cost of
labour, hire charge of tools and plants, overhead cost is called rate analysis.

 Overhead cost:cost of running office staff phone etc. taken. (generally 5%)
 Contractors profit: 10%
Purpose of rate analysis
 To revise schedule of rate,
 To workout economical use of material,
 To workout actual cost,
 To examine validity of tender rate,
 To fix labour contract rate,
Requirement of rate analysis
 Correct information of market rate of material
 Correct information of various categories of labour
 Output of labour (outturn of worker per day)
 Knowledge, rate and outturn of equipment to be used in construction work.
 Up to date knowledge of construction work.
Factors affecting rate analysis
 Quantity of materials
 Proportion of mortar (1:3, 1:4, 1:6)
 Location of site of work
 Construction facilities available
 Transportation facilities available
 Transportation charges
 Overhead of cost (2-5)%
 Profit desired

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  Experience of workers
 Management

Government procedure of preparing rate analysis

i) Total cost of material = Rs x
ii) Total cost of labour = Rs y
iii) Hire charge of tools/plants+ fuel cost = Rs z
iv) Total cost = x+y+z= A
v) Contractors overhead= 15%of A = 0.15A
vi) Unit rate of item= (iv + v)= 1.15A
Norms of rate analysis
To get dry or unmixed volume of PCC, increase quantity by 50-55%
To get dry or mortar, increase quantity by 30%
To account wastage of steel reinforcement, increase weight of steel by 5%
PCC
Item Skilled Unskilled
1:2:4 PCC for per m3 1.0 4.0
2
1:2:4 PCC 40 mm thick, per 10m 1.25 2.0

1:2:4 PCC 50 mm thick, per 10 m2 1.25 2.5

1:2:4 PCC 75 mm thick, per 10 m2 1.25 3.0
PCC M20 for RCC 0.8 7.0

Plaster
Item Skilled Unskilled
12 mm thick plaster per 10 m2 1.2 1.6
20 mm thick plaster per 10 m2 1.4 1.9

Ceiling Plaster 12.5 mm 1.5 2.0

B/W
For (1:4) B/W, i) Skilled-1.5 nos, ii)Unskilled- 2.2 nos iii) Unskilled
0.2 nos (GF)
0.7 nos (higher floor)
Sal wood for door and window frame:
Skilled- 34.0 nos, Unskilled- 3.4 nos

(for more detail about norms and specifications:www.dudbc.gov.np , www.dor.gov.np ,

www.doi.gov.np )
Specification

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Describes the construction to be done, quality of materials and workmanship to be used, tools and
plants to be used, method of construction to be adopted, method of testing inspiration etc.
Defined as the written instructions limiting and describing in detail, construction works to be
undertaken.
Purpose of specification
 Contract document between owner and contractor limiting and describing their
responsibilities.
 Guide to the site Engineer/Contractor during construction and supervision of work.
 Guide to manufacturing agencies for their products.
 Guide to bidder and tendering …….(for rate)
Importance of specification
 Cost of unit quantity of work governed by spec.
 Arbitration process-… spec. analysis- part of contract document.
 Conflict between specification and drawing – sepc. shall given priority
 Any change in Spec ?…chages rate.
 Any contract without spec…..- incomplete
 Specifies quantity of materials, strength… (to check, supervision)
Types of specification
General Detailed
General idea of whole work. Forms the part of contract document
Not contract document Gives the detail information regarding
quality of materials, workmanship etc.
Useful for cost estimate Technical provision,general provision (gcc)
standard provision
Items to be used in various parts of work.

Example 1)
Prepare an analysis of rate for 50 mm thick 1:2:4 PCC work for 10 m2
 Volume of PCC = 10 m2 * 50 mm = 0.5 m3
 Dry Volume = 0.5* (1+0.54) = 0.77 m3 (increase 50-55%)
 Summation of proportion = 1+2+4 = 6
1
 Cement = 0.77 * 7 = 0.11 m3 = 0.11 * 28.8 bags = 3.17 bags
2
 Sand = 0.77 * 7 = 0.22 m3
4
 Aggregate = 0.77 * 7 = 0.44 m3
 Water = 3.17* 50 *0.5 kg = 79.25 lit (assume w/c = 0.5)

A) Cost of Materials:
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  Cost of cement = 3.17 bags * Rs 825 /bag = Rs 2615.25
 Cost of Sand = 0.22 m3 * Rs 3000/ m3 = Rs 660.0
 Cost of Aggregate = 0.4 m3 * Rs 3500/m3 = Rs 1400.0
 Cost of Water = 79.25 lit * Rs 0.3/lit = RS 23.77
Total cost of Materials = Rs 4699.02
B) Cost of Labour:
 Cost of SkilledLabour = 1.25 * Rs 1030 = Rs 1287.5
 Cost of Unskilled Labour = 2.50 * Rs 750 = Rs 1875.0
Total cost of Labour = Rs 3162.5

C) Total Cost:
Total cost = Cost of Material + Cost of Labour = Rs 4699.02 + 3162.5
= Rs 7861.52
Contractors Overhead and profit = 15 % of Total cost = 0.15 * 7861.52
= Rs 1179.23
Grand total =Rs 7861.52 + 1179.23 = Rs 9040.75per 10 m2

Example 2)
Prepare an analysis of rate for 1:2:4 RCC work for using Equipment per m3
 Volume of Concrete = 1.0 m3
 Dry Volume = 1.0* (1+0.54) = 1.54 m3 (increase 50-55%)
 Summation of proportion = 1+2+4 = 6
1
 Cement = 1.54 * 7 = 0.22 m3 = 0.22 * 28.8 bags = 6.34 bags
2
 Sand = 1.54 * 7 = 0.44 m3
4
 Aggregate = 1.54 * 7 = 0.88 m3
 Water = 6.34* 50 *0.5 kg = 159 lit (assume w/c = 0.5)

A) Cost of Materials:
 Cost of cement = 6.34 bags * Rs 825 /bag = Rs 5230.5
 Cost of Sand = 0.44 m3 * Rs 3000/ m3 = Rs 1320.0
 Cost of Aggregate = 0.88 m3 * Rs 3500/m3 = Rs 3080.0
 Cost of Water = 159 lit * Rs 0.3/lit = Rs 47.7

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  Diesel = 3 lit * Rs 95/lit = Rs 285.0
 Petrol = 0.1 lit * Rs 110/lit = Rs 11.0
Total cost of Materials = Rs 9974.0
B) Cost of Labour:
 Cost of Skilled Labour = 0.8 * Rs 1030 = Rs 824.0
 Cost of Unskilled Labour = 7.0 * Rs 750 = Rs 5250.0
Total cost of Labour = Rs 6074.0
C) Cost of Equipments:
 Cost of mixer charge = 0.6 hr * Rs 2000/hr = Rs 1200.0
 Cost of vibrator charge = 0.25 hr * Rs 150/hr = Rs 37.5
Total cost of Equipment = Rs 1237.5
D) Total Cost:
Total cost = Cost of Material + Cost of Labour + Cost of Equipment
= Rs 9974.0 + 6074.0 + 1237.5
= Rs 17285.5
Contractors Overhead and profit = 15 % of Total cost = 0.15* 16450.2
= Rs 2592.8
Grand total = Rs 17285.5 + 2592.8 = Rs 19878.3 per m3

Example 3)
Prepare an analysis of rate for B/W (1:4 cement sand mortar) per m3
 Assume size of brick = 230 mm x 110 mm x 55 mm
 Assume size of mortar = 10 mm (Range generally 3.0 mm -12.5 mm)
 Size of brick and mortar = 240 mm x 120 mm x 65 mm
1
 Numbers of Bricks = = 534 nos
(0.24∗0.12∗0.065)
 Add wastage (5%) = 26 nos
 Total number of Bricks = 534 + 26 = 560 nos
 Mortar Volume for 1 m3 B/W
= 1 – 534 * (0.23 *0.11 * 0.055)
= 1 – 0.743
= 0.257 m3
 For Dry Volume of mortar add 30 %
= 0.257*(1+0.3)
= 0.35 m3

 Sum of Parts = 1+4 =5

1
 Cement Required = 0.35 * 5 = 0.07 m3 = 0.07 m3 * 28.8 bag/m3 = 2.02 bag
4
 Sand = 0.35 * 5 = 0.28 m3

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 Water = 2.016* 50 *0.5 kg = 71 lit (assume w/c = 0.7)

A) Cost of Materials:
 Cost of Bricks = 560 nos * Rs 14.5 /nos = Rs 8120.0
 Cost of cement = 2.02 bags * Rs 825 /bag = Rs 1666.5
 Cost of Sand = 0.28 m3 * Rs 3000/ m3 = Rs 840.0
 Cost of Water = 71 lit * Rs 0.3/lit = Rs 21.3
Total cost of Materials = Rs 10647.8
B) Cost of Labour:
i) Cost of Skilled Labour = 1.5 * Rs 1030/day = Rs 1545.0
ii) Cost of Unskilled Labour = 2.2 * Rs 750/day = Rs 1650.0
iii) Cost of Unskilled Labour = 0.2 * Rs 750/day = Rs 150.0
Total cost of Labour = Rs 3345.0
C) Cost of Scaffolding:
Cost of Scaffolding = 3 % of cost of labour (iii) = Rs 150 * 0.03 = Rs 4.5

D) Total Cost:
Total cost = Cost of Material + Cost of Labour + Cost of Scaffoldings
= Rs 10647.8 + 3345.0 +4.5
= Rs 13997.3
Contractors Overhead and profit = 15 % of Total cost = 0.15* 13997.3
= Rs2099.6
Grand total = Rs 13997.3 + 2099.6 = Rs 16096.9 for per m3

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VALUATION
 It is the technique of determing the present fair value of property at a stated time.
 Art of assessing the present fair value of property
 Land building factory,manchine,agriculture land jwellery etc.
 The value of property mainly depends on its
-Structure
-Life
-Location
-Supply of demand
-Bank interest rate

# Cost – original cost of property may be -Property cost

-Construction cost
# Value- present saleable value of property may be less or more then original cost.
# Purpose of valuation
 Buy and sell of property
 Auction bid of property
 Insurance of property ( fire, earthquake, flood etc. )
 Determination of rent of property (generally 6-10%per year)
 Partition of property
 Acquisition of property
 Security of loan
 Preparation of balance sheet of property
 Determination of court fee of property
 Assessment of taxes (property tax, gift tax)

# Principle of valuation
 Cost depends on supply and demand of property.
 Cost depends on design and specification of materials used.
 Cost depends on its location
 Cost depends on purpose for which valuation is to be done.
 Cost affected by age and physical condition of property
 Vender must be willing to sell and also purchaser must be will up to purchase.
 Cost analysis must be based on statistical date
 Present and future use of property should be given.

# Terms used in valuation

Book value: Original cost of property- depreciation till that year.
Scrap value: it is the value of dismantled materials at the end of its utility period after deduction of
cost of dismantling (generally 8-10%)

Also called Junk value demolition value

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May be –ve in case of Rcc structure.
Salvage value:
Value of existing property at end of its utility period without being dismantling.(8-10)%
Distress value:
Always lower than market value due to shape size and location.
Due to – financial difficulties of seller
-Insufficient knowledge of seller etc.
Monopoly value:
Always higher then market value due to shape, size and location.
Assessed value:
Value of property recorded in local authorities for taxes.
Capitalized value
Capitalized value= net rent or return or income*years purchased
Net Rent = gross rent-total outgoing (expenses)
Outgoings = Tax , repairs, sinking fund, w/s, electricity charge, insurance

1
Years purchase = (for indefinite period)
𝑖𝑝
1
= (for definite period)
𝑖𝑝 +𝑖𝑐
Where,
ip= highest prevailing rate of interest in decimal.
𝑖
ic = coefficient of sinking fund =
1+𝑖 𝑛 −1
i= rate of interest of sinking fund in decimal
n = future life of structure in years.
# Sinking fund
Sinking fund is the accumulation of fund to replace or the reconstruction of structure at the end of
its utility period.
𝑖
Annual sinking fund= S *
1+𝑖 𝑛 −1
Where, s = total sinking function to be deposit (about 90%)
Amortization
This is accumulation of sinking fund at compound interest for payment of debt.
Obsolescence
Loss of value of property due to old model out of date,old fashion,old design etc.
There is no method to calculate obsolescence.

Free hold vs. Leased property

Freehold Lease
Land belongs to owner Leased for some time
No time limit to ownership No direct sell to other
Land belongs to owner(extension of
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 ownership subjected to state approval)

Annuity
Net installment of annual or periodical payment for repayment of the capital amount invested in a
property for a specified period.

Sinking fund vs. annuity

Sinking fund –Deposit, Annuity -withdraw (retirement fund)
Depreciation
It is the gradual decrease in the value of property due to wear and tear, decay, obsolescence.

Types of Depreciation:
1)Physical 2) Functional 3) Contingent
-Due to wear and tear -due to amount of function -due to accidents
-Action of time -due to obsolescence -flood
-Inadequate -eatthquakes
-Diseases
# Methods of calculating depreciation
 Straight line method
 %rate of depreciation/Declining balance method
 Sinking fund method

1 Straight line method

Constant @each year
𝐶−𝑆𝑐
Annual depreciation%= * 100
𝑛
Where,
C= Original cost
Sc= Scrap value/salvage
n= life of structure

2. % Rate of depreciation/Declining balance method

Property is assumed to lose value annually at constant % of its value (Book value)
(p= percentage)
@ end of 1st year value= C(1-p)
@ 2nd year value= C(1-p) (1-p) = C(1-p)2
@ end of n, sc = C(1-p)n
𝑆𝑐
P=1-( )1/n
𝐶
Formula doesnot hold good if Sc= 0
3. Sinking Fund Method

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 In this method depreciation assumed to be annual sinking fund plus the interest of
accumulated sinking fund till that year.
Steps
 Calculate sinking fund
 Calculate interest on sinking fund
(1+𝑖)𝑛 −1
Interest=S*
𝑖
 Calculation of depreciation
 Calculation of book value
Various method of Valuation
1. Cost based method
Value of property= value of bldg. (by detail cost estimate) -total depreciation+value of land

2. Plinth area method:

Value of property= total plinth/building area in m2*prevailing plinth area rate per m2-
total depreciation + Value of land

3. Depreciation method:
Value of property=depreciated value of bldg. +value of land
D=p(1-rd)n
Where, p=cost of bldg at present market rate=total built up area*prevailing plinth area
rate.
Where, rd= fixed rate of depreciation (decimal)
n =age of structure in year
 value of rd depend on life of bldg
100 years=1, 75 years=1.3, 50years=2.0, 25years=4, 20 years=5

4. Rental method of valuation

Value of property=capitalized value of building+value of land
Capitalized value=net rent*years purchase
Net rent=gross rent-total outgoings
1
Years purchase, yp =
𝑖𝑝 +𝑖𝑐

5. Profit based method

Value of property=capitalized value of building+value of land
Capitalized value=net income*years purchase
Net income=gross income-total outgoings
1
Years purchase,yp =
𝑖𝑝 +𝑖𝑐
(used in commercial complex,cinema hall,hotel etc)

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# Some Terms
Muster Roll= Roll used in department for payment of daily wages/ labours.
MB= Books showing original record of work done or supply materials received.

BEST OF LUCK

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