ARC 417: BUILDING ECONOMICS, QUANTITIES AND ESTIMATING (3CU)

COURSE OUTLINE

 Building Construction Estimating.

 Approximate Estimating.
 Factors affecting Construction cost.
 Bids and Bids Strategies.
 Principles and procedures of ‘taking off’ quantities for the preparation of Bill of
quantities.
 Accurate Estimating by unit rate, build up rate for sections of work in a bill of
quantities.

BUILDING CONSTRUCTION ESTIMATING

Before undertaking any construction work, it is necessary to know the probable cost of the
concerned work. Estimates provides for the probable cost of the [Link] is calculated from the
plans and drawings and the cost is worked out on the basis of current ‘schedule of rates’, if there
be any or on the basis of current market rates of materials and labour.

Estimation is the computation of the quantities required and cost likely to be incurred in the
construction [Link] is prepared by calculating the quantities from the dimensions furnished in
the drawings of various items of work to be complete the project/work and computing the cost of
the work on the basis of unit cost of the items.

Requirements for preparation of Estimate

i) Complete and fully dimensioned plans and sections of the structure with all possible
details, so that all information regarding the structure is available.
ii) Detailed specifications of items of works provided in the plan
iii) Rates of various items of works.

PURPOSE OF ESTIMATION

Preparation of estimate for a work or project is necessary mainly for the following;
 i) To ascertain the probable cost of the work for knowing the probable fund
required for the work. In Public works department system, estimate is required
for obtaining administrative approval and technical sanction of the work or
project.
ii) To ascertain the quantities of different materials that would be required and
programming for procurement of the same.
iii) To ascertain the different categories of labour that would be required for
completion of the work in desired period of time.
iv) To ascertain the requirement of tools, plants, equipment and appliances which
would be required during execution of work.
v) To fix up a probable date of completion on the basis of quantities of works to
be done.
vi) It helps in drawing up a comprehensive work programme for management of
the construction by bar charts etc. It also helps in financial planning and
programming of the work.
vii) To evaluate the cost benefit ratio and economic viability of the work/Project.
viii) It is required for inviting tenders and for the preparation of bill of quantities.
ix) Estimate for existing property is required for assessing the valuation of it.

APROXIMATE ESTIMATING METHODS

An early price estimate which is too high may discourage the client from proceeding further with
the Project. However, if the estimate is too low, it may result in abortive design or dissatisfaction
on the part of the Client or even litigation. Therefore, it should be accepted that the early price
estimates are an approximation and will therefore include some amount of uncertainty. The
degree of accuracy will vary much depending on the type of information provided to the
Quantity Surveyor and the quality of pricing information and judgment that is used. Some of the
approximate estimating methods are as follows;
1. Unit method
The unit method of approximate estimating consists of choosing a standard unit of
accommodation and multiplying this by an approximate cost per unit. The standard units may
represent, for example, Schools – costs per pupil place, Hospitals – costs per bed place, Car
parks – costs per car space.
The technique is based on the fact that there is usually some close relationship between the cost
of a construction project and the number of functional units it accommodates. Functional units
are those factors which express the intended use of the building better than any other. This
method is extremely useful on occasions where the building’s client requires a preliminary
estimate based on little more information than the basic units of accommodation.
The method of counting the number of units is extremely simple, but considerable experience is
necessary in order to select an appropriate rate. These rates can be obtained by the careful
analysis of a number of recently completed projects of a similar type, size and construction.
However, it suffers from the major disadvantage of lack of precision, and at best can only be a
rather blunt tool for establishing general guidelines. It is a useful method of estimating when
dealing with national building programmes where some comparability in the unit cost is
required.
2. Superficial /Floor area method
The superficial area method is still the most common method in use for early price estimating
purposes. The estimate of cost is easy to calculate and thus is expressed in a way that is fairly
readily understood by those in the industry and the average construction industry client. The area
of each of the floors is measured and then multiplied by a cost per square metre. In order to
provide comparability between various schemes, the floor areas are calculated from the internal
dimensions of the building. It is appropriate for projects such as schools and housing where
storey heights were similar. Storey heights, plan shape and methods of construction are
particularly important when deciding on the rate to be used.
3. Cube Method
The cube method of approximate estimating was used extensively at the beginning of the last
century but has since been superseded by superficial/ floor area method because of its inherent
disadvantages. It was a method extensively used by architects. All architects’ offices used to
keep a ‘cube book’ for future estimating purposes. Once the contract was signed the agreed price
would be divided by the cubic content and entered into the office price book. The cost of a new
job could then be determined by calculating its volume and selecting an appropriate rate from the
book. Even with such a primitive method it was necessary to provide some rule for comparable
quantification of purposes.
4. Storey Enclosure Method
In an attempt to overcome the many disadvantages of the other single-price methods of
estimating, James (1954) devised a new method, this method attempted to take into account the
following;
- Plan shape (by measuring the external wall area)
-Total floor area (by measuring each floor)
- Vertical position of the floors (by using different multipliers for each floor)
- Storey heights (ratio of floor and roof areas for external wall areas)
- Overall building height (ratio of roof area to external wall area)
- Extra costs of providing usable floor areas below ground (by using multipliers)
James claimed that it would perform better in terms of accuracy than the other single-price
methods. Lack of use of this method, however, has meant that it has not been possible to verify
this claim because they are unlikely to apply to every building.
5. Approximate quantities Method
Approximate quantities method provide a more detailed approximate estimate than any of the
methods described above. They represent composite items which are measured by combining or
grouping together typical bill-measured items. Whereas the methods described above estimate
costs on the basis of measurement and some cost relationship, this method relates cost to the
actual work to be carried out. In practice, only the major items that are of cost importance are
measured. This method does provide a more detailed and reliable method of approximate
estimating, but it involves more time and effort than any of the methods.

FACTORS AFFECTING CONSTRUCTION COST

Cost undoubtedly is the most concern in construction Projects. Maintaining a consistent (as
planned) construction project cost has become a serious concern to both client and
contractors. Keeping Construction Projects within the estimated costs require sound
strategies, good practices and a careful judgment. Within the Construction circle certain
terms are prominent; cost, price and value.

Cost is the result of labour, materials, plants and management deployed for a specific
activity.
Price is the amount a purchaser (or Client) is willing to pay for an item, element or a product
such as a complete building.

While value comprises of the relationship between demand and supply; meaning an increase
in value of an object arises because of an increase in demand or decrease in supply.

The cost of Construction Projects are influenced by various factors and some of the factors
are interrelated. Two of such interrelated factors are the size and complexity of a construction
project. Some of the factors affecting construction costs are;

i) SIZE OF CONSTRUCTION PROJECT: Most times in large Projects, it may be

difficult to manage and control cost. Large construction projects bring together
materials, labour and equipment in an enormous magnitude that is rare. Such
construction projects like mega projects can cause localized labour and material
shortages leading to inflationary effects that was unforeseen at the time of estimate.
ii) COMPLEXITY OF CONSTRUCTION PROJECT: Complex construction
projects tend to have lower productivity and cost more to build. These complex
projects may be difficult to construct because of the difficulties in fabricating
complex shapes for the building shell and using new materials in innovative ways.
iii) USE OF NEW MATERIALS: Construction contractors are used in dealing with
certain types of materials. The introduction of new materials on construction project
can reduce productivity and increase costs until the contractor learns how to handle
the material in the most efficient manner.
iv) LOCATION: Construction cost vary depending on the construction project location.
A remote site will increase transportation cost, cost of materials making it difficult to
attract skilled labour. It has been reported that highly urbanized sites can be difficult
to work in because of limited space, traffic congestion, high standard of living etc.
v) REQUIRED QUALITY: Specifications define the quality required by a client or
owner. A Project requiring high standard will take longer to complete and more costly
than a similar project with lower quality. Most times, projects with lower quality
requirements are easier to estimate than projects requiring higher quality standards.
vi) MANAGEMENT FACTORS: A well-managed project will have a better
performance than poorly managed project. In a well-managed project the contractor
 will be aware of projects issues and will closely monitor the project to keep costs
from exceeding the estimate.
Some other factors affecting construction cost are;
 Incorrect planning and scheduling by Contractors
 Fluctuations in prices of materials
 Frequent Design changes.
 Unforeseen ground conditions.
 Inadequate contractor experience.
 Change in the scope of the project.
 Cash flow and financial difficulties faced by contractors.
 Low speed of decision making
 Contractor’s poor site management.
 Practice of assigning the contract to the lowest bidder.
 Lack of communication among parties.
 Shortage of site workers
 Delay in material procurement.
 Underestimation of project duration
 Incompetent project team(designers and contractors)-omission of certain items
from BOQ by the QS
 Fraudulent practices and kickbacks.
 Currency exchange.

BIDS AND BID STRATEGIES

Prospective contractors (Bidders) who are willing to complete the construction project normally
prepare a bid and give to the owner (Client).A bid tells the owner what a contractor is willing to
accept to complete a construction project. There are two types of bids; open bid, close bid.

The Open Bid: The open bid is used for public projects where contractors are allowed to submit
their bid based on public advertisement made concerning a project.
The Close Bid: This type of bid is used for private projects where selected contractors are sent
an invitation to submit a bid for a specified project.

Bid selection Method

i) Low bid selection: This selection focuses on the price of the project.
Out of the numerous contractors who bidded, the Contractor who
submitted the lowest price is considered to complete the works.
ii) Best value selection: This selection focuses on the price and
qualification of the Contractors submitting the bids. The owner
therefore, chooses the contractor with the best price and the best
qualifications.
iii) Qualification based selection: This selection focuses on choosing a
contractor based on the contractor’s qualification. Some of these basis
of qualification are to be considered are contractors experience,
management plan, project organization, budget and schedule of
performance.

BID STRATEGIES

A bid is a proposal from one party to the other party to do something in accordance with the
requirements or specifications and agreed. While strategy is a comprehensive action plan that
specifies guidance and a critical direction for the allocation of resources to achieve long term
goals of the organization.

Bidding strategy in construction is defined as a management skills using all the available
resources both physical and financial in order to offer a comprehensive and competitive bidding
through the consideration of various aspects, including internal, external and environmental with
the aim of winning the bidding competition and providing maximum project performance. In the
simplest term, bidding strategy means a plan for success. Bidding strategy in construction
comprises a number of decisions to be made including whether to bid or not to bid; the level of
mark up to be adopted, if the decision is to bid; the winning strategy to be adopted to competitive
bidding is widely applied in the construction industry and is the process used in selecting the
lowest bidder to carry out a construction industry.

The table below shows the variable and sub variables of bidding strategies

VARIABLE SUB-VARIABLES
Bidding Strategy External factors i. Client Characteristics
ii. Project Characteristics
iii. Contract
Internal factors i. Benefits of business
ii. Project financing
iii. Company characteristics
iv. Company experience
Environmental factors i. Bidding situation
ii. Economic condition
iii. Completion

STEPS IN COMPETITIVE BIDDING

The bidding process consists of a set of steps that span the period from completion of the design
to the award of the contract. Construction contractors must ensure they receive completed design
to use in their bid estimate. These steps include:

i) Completion of design and the development of bid package: This comprises of

completed plan and specification with additional documents such as general
conditions, special conditions etc. They set forth the contractual relationship between
parties and describe how the project is to be administered.
ii) Advertising the bid: in order to ensure adequate competition for the intended
construction project, the owner advertises the availability of the project for great
 number of bidders to hear about the project. Traditionally, this is achieved through
newspapers and trade magazines.
iii) Obtaining the bid package: When the project is advertised, contractors obtain the
complete bid package by paying a certain fee.
iv) Preparing the bid: A successful construction bid must be comprehensive enough to
include the following:
1. Cost of construction: The bid must cover direct cost (DC) of labour, materials
and equipment required to build the project.
2. Project and office overhead: the bid price must include cost to the contractor for
the supervision of the construction project and the cost of maintaining an office
that includes administrative functions of the company. These are known as
indirect costs(IC)
3. Contractors’ profile: the bid price must include profit for the contractor, also
known as mark up.
v) Pre bidding meetings: This is the instance where the owner and the designer are
available to answer questions about the proposed project.
vi) Submission of bid and bid opening: bids are submitted before the time stipulated for
bid opening. At the bid opening, the lowest bidder is then declared and announced.
vii) Award of contract and notice to proceed: upon the determination of the lowest
bidder, the contract is awarded and formal agreement is signed. The project
commences when the owner gives the contractor a written notice to proceed and the
site officially is handed over. This notice to proceed indicates to the contractor that
the project site is available and work can commence on site. It establishes the start
date of the project.

Factors affecting Contractor’s mark up

 Number of competitors and the intensity of competition.

 Size, cost and intensity of the project.
 Type of project
 Duration of the project
 Location of the project
  Season in which the work is done
 Degree of hazard and difficulty associated with the project
 Name of owner/Consultants and designers and time available for bid preparation
 Labour availability and productivity
 Materials availability and costs
 Percent of the work which is to be sub contracted and the bids of subcontractors
 Insurance cost and fringe benefits
 Availability of supervisory talent
 Method of performing the work
 Uncertainty in estimate and historic profit
 The current and forecasted economic conditions
 The Contractor’s risk attitudes.

PRINCIPLES AND PROCEDURES OF TAKING OFF QUANTITIES FOR THE

PREPARATION OF BILL OF QUANTITIES

The Art of Taking off:

The term ‘taking off’ refers to the process of identifying elements of construction works that can
be measured and priced. This is necessary to produce bills of quantities and requires that
the design is complete and a specification has been prepared. It involves the analysis of drawing
and specifications and extracting of quantities from a drawing.

Dimension Paper:

The dimension paper also known as a takeoff sheet or measurement sheet is used to enter
measurements “taken off” from an architectural drawing or building plan. The traditional
quantity takeoff sheet in the form of A4 paper is widely used at professional learning institutions
of quantity surveying, but it’s also used by consulting quantity surveyors, engineers, contractors
and building estimators.

Although estimating and quantity takeoff software has superseded paper because of its speed and
ability to reduce production time by as much as 80%, dimension papers still find their use on and
off the site. It’s much more practical, convenient and user-friendly to carry your dimension pad
 or measurement notebook to the site, than your laptop or tablet. There are two main layouts for
the standard quantity surveying takeoff sheet recommended by the system of measurement.
Outside of the quantity surveying field, a non-standard form is usually used by engineers and
building contractors.

This standard dimension paper is an A4 paper (size 210X297mm) (8.25×11.75 inches) with a
double sided page. The Left and Right side of the standard takeoff paper has 4 columns each.

First column is called the “Timesing column” (for entering multiplication factors or constants):
this column is provided for multiplication of the measurements in the dimension column.

Second column is the “Dimension column”: this is where the measurements are set down as
taken from the drawings.

Third column is the “Squaring column” (also known as the summation column): where the
calculated volumes, areas, and so on, are set out.

Fourth column is called “Description column” this column is for item descriptions and waste
calculations. The item of work to be measured is described in this column and waste calculations
are also done in the right hand side of the column.

The dimension paper must provide space for the binding column on the left side/margin. This is
a margin for binding the sheets which prevents obstruction with the timesing column.

Dimension:

In quantity surveying, measurements of items of work are done in different forms. The BESMM
guides us as to the unit of measurement of every item of work. So dimensions that
are measured will be in one of the following forms:

i. Cubic measurements (e.g. 3 m x 3 m x 3 m).

ii. Square measurements (e.g. 3 m x 3 m), also known as superficial measurements.
iii. Linear measurements (e.g. 3 m).
iv. Enumerated items (e.g. ‘Nr. 3’).
v. Item (e.g. ‘testing’).

Dimensions are usually set down in order of horizontal length, horizontal width or breadth, and
vertical depth or height. It is important for the sake of consistency throughout the taking off that
this order is maintained. Also it is very necessary to close every measurement completed with a
line as shown in the figure below.

Timesing:

This is a method in which several items that have the same measurements can be set down
without having to replicate calculations multiple times.

The number of times that the measurement in the dimension column is to be multiplied is set
down in the timesing column and separated using a diagonal stroke. The same item can be
timesed multiple times by setting down additional numbers in the timesing column.

In the first example below, the cubic measurement 3.00 x 2.00 x 1.00 is to be multiplied by 2 and
in the second example below, the same measurement, once multiplied by 2, is then multiplied by
4.
Dotting on:

Dotting on is used to add dimensions together in the timesing column rather than multiplying.
The numbers are positioned diagonally in the column with the dot between them to avoid any
confusion with decimals.

In the first example below, the cubic measurement 3.00 x 2.00 x 1.00 is multiplied by (1 + 4) 5.
And in the second example below, the same measurement is multiplied by (1 + 4) 5, which is
then multiplied by 2.
Waste Calculations:

It is important that any calculations done to work out the dimensions that are entered into
the dimension column are written down as waste calculations on the right-hand side of the
description column. This is so that if someone reviews the taking off to check for accuracy, the
process by which the final figures have been calculated can be traced back.

Alterations (Nilling):

Where incorrect dimensions have been set down, they should be neatly crossed out with ‘nil’
written alongside in the squaring column. This indicates that the dimensions are cancelled. Care
should be taken to avoid confusion with the ‘nil’ label in terms of how many figures are to be
cancelled and which are still to be used in the calculations.

In the example below, the square measurement 4.00 x 2.00 has been cancelled.
Description:

The description of the item being measured is included in the description column alongside the
calculations. The contents of the description should correspond to the New Rules of
Measurement (NRM). Where there are more than one set of calculations associated with the
same description, then they can be bracketed together on the outside of the squaring column.
Adding on:

This is where there are two or more descriptions that apply to the same measurement. The
descriptions are separated in the description column by ‘&’ so as to clearly distinguish between
them. They can also be bracketed together for clarity.

Where items are to be deducted or added, they are preceded by ‘Deduct’ or ‘Add’ in the
description column.

GIRTH OF BUILDINGS

Rectangular Buildings
One of the most common mensuration problems is the measurement of the girth or perimeter
of a building. This length is required for foundations, external walls and associated items.
The length may be calculated on a straightforward rectangular building by determining the total
external length of walling and making a deduction for each external angle equivalent to the
thickness of the wall. Alternatively, the internal length might be taken and an addition made for
each of the external angles
The method of approach in taking off quantities and the application of the principles laid down in the
Building and Engineering Standard Method of Measurement (BESMM4), the importance of a logical
sequence in taking off cannot be over-emphasized. It simplifies the taking off process, reduces the risk of
omission of items and gains the student additional marks in the examination. For example, in taking off
foundations to a small building a satisfactory order of items ,which could also be referred to as the taking
off list could be as follows:

 Site Clearance

 Site preparation

 Trench Excavation

 Disposal of excavated material off site

 Earthwork support to faces of excavation

 Insitu concrete in foundation

 Block/brick work in foundation

 Damp proof course(DPC)

 Backfilling(filling to excavation)

 Hardcore filling(filling to make up level)

 Laterite filling

 Oversite concrete(floor bed)

ANALYSIS OF RATES

The method of arriving at a probable cost per unit quantity of work or supply in accordance to its
specification including cost of materials required, lab our, equipment, etc. based on the prevailing rates is
called analysis of rates. The unit rate of an item comprises the following;

i) Cost of materials required including cost of carriage and all taxes.

ii) Cost of labour necessary to execute the work depending upon the nature of work.

iii) Cost of plants and equipment’s that maybe required. It is generally taken as percentage of
the cost of materials and labor.

iv) Sundries and contingencies to cover the cost of unforeseen expenditure that may be required
during the process of execution. A provision of 1% of the total cost is generally added where
water is not available at site

v) Contractor’s profit and overhead charges at 10% is added to the analysis to cover his profit
on the capital invested and for his other tax liabilities and establishment charges.