Dear Readers,
Wish You a Happy Republic Day 2025.
Rate analysis plays a crucial role in the construction industry and is considered an art. Preparing a rate analysis is not as simple as collecting quotations from other agencies, which is the usual practice in the industry. If you are experienced with similar projects, you may be aware of the pitfalls; however, if you lack familiarity, others may mislead you, which could erode your profit margin.
What is mean by Rate Analysis? What is the purpose and What are the advantages? Let us Discuss.
To establish the price of a specific item, the elements influencing its cost are meticulously examined before setting its final rate. This procedure for ascertaining an item's pricing is known as rate analysis.
It is based on scientific assessment of inputs of Labour,
Material, Consumables, Plant and Machinery in various items of work normally
encountered in projects.
The rate of particular item of work depends on the following:
Specifications of works and material about their quality, proportion and constructional operation method.
Quantity of materials and their costs.
Cost of labours and their wages.
Operation Cost & Hire charges of P&M
Location of site of work and the distances from source and conveyance charges.
Overhead and establishment charges
Profit
Rate Analysis- Purpose
To work out the actual cost of per unit of the items.
To work out the economical use of materials and processes in completing the particulars item.
To work out the cost of extra items which are not provided in the contract bond, but are to be done as per the directions of the department.
To revise the schedule of rates due to increase in the cost of material and labour or due to change in technique.
The rates of Materials and Labour are changing from place to place, therefore the rates of different items of work also changes from place to place
Rate Analysis are required before commencement of Work
It is a guide to cross check with actuals during execution.
Rate Analysis- Advantages
To compare the costs with sanctioned amount and to take action for regularization of excess/ less cost
To assess the rates payable for deviations, extra items of work to the sub-contractor
To work out the budget and cash flows at various stages of the work and arranging interim/ final payments
To detect irrational rates quoted by sub-contractors
To serve as basic data in case of disputes that may arise at a later stage
Basic Requirements for Rate Analysis
Scope of Subcontract
Brief scope of Work
Duration of Work
Minimum Wages of Labour
Rate and frequency of labour wage revision
Proportionate element of terminal benefits such as bonus, gratuity
Overtime requirement
ABW (Average Basic Wages) and MD (Man day) rate
Cost of Materials & Consumables including its wastages
Hire Charges of Plant & Machinery
Operating Cost of Plant & Machinery
Productivity of resources
Special Points to be considered for Rate Analysis. Following points are considered while preparing Rate analysis:
Landing Cost of Material:
Cost of materials includes the supplier’s price, transportation, loading/ unloading, haulage to site, handling for incorporation into the work, wastages/breakage/pilferage, storage charges, deterioration on storage, returning of empty bags/ cases and taxes and other incidentals.
Specification of Materials:
Generally, the basic materials shall conform to the relevant Indian standards.
Where no such standards exist the relevant British/ American standards in so far as they are applicable could be followed.
Existing Labour Union Activities:
Terminal benefits of workmen
Privilege wages for workmen Vs Minimum Wages
Scope of Statutory Compliance
PF Compliance
Insurance policy
Percentage profits & overhead charges:
Sub Contractor profit normally varies from 5 to 10%.
Overheads vary from 3 to 7 ½%.
The total element of overheads and profit shall not normally exceed 17 ½% on estimated rates. This should be restricted to 10% if paid bills/ days work is considered.
Will be Continued....
