Rate Analysis for Construction Works (Part-1)

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 assess various quantities of Labour, materials, machinery, money and to effect economy by using alternatives and to optimize the resources

        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....

New Year Wishes

 Dear Readers,

Wish You a Happy New Year-2025

Best Wishes received from Friend

New Year is more than just a turn of the calendar page; it is a moment of renewal, reflection, and optimism; it is a gift to be unwrapped with excitement & gratitude.

Let's Cherish the memories of the past year, Embrace the lessons it taught us, and Welcome the opportunities that lie ahead.

The arrival of 2025 brings with it Fresh beginnings, Endless possibilities, Limitless opportunities for a Promising prosperous year with a power to uplift our spirits, inspire positivity and step into the unknown with courage and enthusiasm.

May every sunrise in 2025 bring you boundless energy, unlimited joy, true love, stress free laughter, abundant happiness, amazing accomplishments, meaningful connections and magical miracles.

Wishing you endless good Vibes, may your heart be full, mind at ease, soul at peace which together makes your New Year 2025 extraordinary, blissful, meaningful and successful

As we step into a new year, may it be sprinkled with hope filled joy and adorned with prosperity.  Wishing you & your family a family new year

Regards,

S. Arivazhagan & Arivu

Abbreviations Used in Construction Industry - Part 4 (M to P)

Dear Readers, 

This continues from Part-3. For both seasoned professionals and newcomers, grasping construction management acronyms, construction estimating abbreviations, and construction project management acronyms is crucial for industry success.

Understanding a list of construction abbreviations is crucial. Recognizing these abbreviations is the initial step in learning to read construction blueprints.

221) M-Book – Measurement Book. It is used for work certification of executed quantity.

222) Mat’l – Material used for Construction.

223) Material Management (MM) – The Process of Managing and Coordinating the Delivery of Materials to a Construction Site.

224) M/c – Machine. Hand tool machines used for grinding, drilling, cutting operations.

225) MD – Man-Days is the cumulative product of no. of persons involved in work & no. of days they worked each. Generally, in construction involving labour, man days is very important feature to estimate amount work force needed and to quantify that.

226) MDL – Master Document / Drawing List. It is targeted at the following User Project Roles: Document Controllers (DC) with Owner's PM Team, Consultants, Contractors, and Specialist Contractors. Design Managers and their key review team members who will oversight design and shop drawings review & approval.

227) Mediation – A Form of Alternative Dispute Resolution Where a Neutral Third Party Facilitates Negotiations Between Disputing Parties.

228) MEP (Mechanical, Electrical, And Plumbing) – The Systems and Components of a Building That Provide Heating, Cooling, Electrical Power, and Plumbing.

229) MIG – Metal Inert Gas (MIG) welding is an arc welding process that uses a continuous solid wire electrode heated and fed into the weld pool from a welding gun.

230) MIS – Management Information System. It is a planned system of the collecting, processing, storing and disseminating data in the form of information needed to carry out the functions of management. The term usually refers to business operations not engineering.

231) MM – Man Month. It is similar to Man Day but calculated per month.

232) MOH – Materials on Hand. This refers to materials that have been purchased specifically for a project. In construction, this typically refers to materials that have been procured, but not yet installed. Physical Stock.

233) MoU – Memorandum of Understanding. It is a nonbinding agreement that states each party's intentions to take action, conduct a business transaction, or form a new partnership. This type of agreement may also be referred to as a letter of intent (LOI) or memorandum of agreement (MOA).

234) MP – Monthly Plan. It shows the monthly target and in line with the project schedule.

235) MPCS – Management Planning and Control System.

236) MPR – Monthly Progress Report.

237) MPT – Magnetic Particle Test.

238) MRC – Material Receipt Certificate.

239) MRM – Monthly Review Meeting.

240) MSDS (Material Safety Data Sheet) – A Document That Provides Information About the Hazards of a Chemical Substance.

241) MQP – Manufacturing Quality Plan. It is a basic test requirement during manufacturing process.

242) MTC / MTR – Material Test Certificate / Material Test Report.

243) MTO – Material Take-Off.

244) N/A – Not Applicable.

245) NCR – Non-Conformance Report / Non-Conformity Report.

246) NDA – Non-Disclosure Agreement.

247) NDCT – Natural Draft Cooling Tower.

248) NDT – Non-Destructive Test.

249) Negotiation – The Process of Discussing and Reaching a Mutually Agreed-Upon Resolution in a Construction Project.

250) NOC – No Objection Certificate.

251) N/S or F/S – Near Side or Far Side. It is used in structural fabrication drawing.

252) NTP – Notice to Proceed – This is a formal letter from an owner or director to a contractor or consultant to start work. It is usually the official start of contract time.

253) NTS – Not to Scale. “Not to scale" means the drawing is larger or smaller than real.

254) O2 – Oxygen gas.

255) O.C. – On Center – In dimensional callouts, on-center indicates the spacing between the center of an item or component and adjacent items or components, such as reinforcing steel, columns, footings, rails, etc. It’s the same as C.C. or “center-to-center.” It is distinct from “clear spacing.”

256) OH – Over Head. 

257) O&M – Operations & Maintenance.

258) OEM – Original Equipment Manufacturer. 

259) OPC – Ordinary Portland Cement.

260) OPEX – Operational Expenditure.

261) OSBL – Outside Battery Limit. It is the barricading of work limits.

262) OSHA (Occupational Safety and Health Administration) – A Federal Agency Responsible for Establishing and Enforcing Safety Standards in the Workplace.

263) OSL – Overhead Slab Level.

264) PAC – Plasma Arc Cutting. An arc cutting process using a constricted arc to remove the molten metal.

265) Paving – The Process of Laying Down a Surface for a Road, Parking Lot, Or Other Surface Area.

266) PAW – Plasma Arc Welding. An arc welding process that uses a constricted arc between a non-consumable electrode and the weld pool

267) PBG – Performance Bank Guarantee.

268) PCC – Portland Cement Concrete.

269) PD – Project Director, who holds end to end responsibility of that project.

270) P&ID – Piping and Instrumentation Diagram.

271) Plumbing Services – The Provision of Plumbing Services for A Construction Project.

272) P&M – Plant & Machinery. (Construction Equipment's)

273) PM – Project Manager, who manage the execution of Project.

274) PMG (Project Management Group) – The Planning, Execution, And Closing of Construction Projects Within Budget, Timeline, And Scope.

275) PMP (Project Management Professional) – A professional designation for project managers.

276) PO – Purchase Order. It is (PO) a legally binding document that confirms a business's intent to buy goods or services from a supplier.

277) P&OD – Personal and Organization Development. 

278) PPC – Portland Pozzolana Cement. PPC is a type of blended cement comprising Portland clinker, pozzolana particles and gypsum in certain specific proportions.

279) PPE (Personal Protective Equipment) – Equipment Worn to Minimize Exposure to a Variety of Hazards.

280) PQP – Project Quality Plan. sometimes referred to as a quality management plan, quality assurance plan or project quality management plan, is a project-specific quality plan that describes the activities, standards, tools and processes necessary to achieve quality in the delivery of a project

281) PR – Purchase Request. A purchase requisition is an internal document used by a department or individual within an organization to request the acquisition of goods or services. It is essentially a formal request.

282) Pre-Construction Services – Services Provided Before the Actual Construction Process Begins, Such as Design and Planning.

283) Procurement – The Process of Acquiring Materials, Equipment, And Services for a Construction Project.

284) Project Scope – The Defined Boundaries of a Construction Project, Including What is and is not Included in The Work to be Performed.

285) Project Stakeholder – An Individual or Organization that has an Interest in the Outcome of a Construction Project.

286) PRV – Pressure Relief Valve or Pressure Reducing Valve. A relief valve or pressure relief valve (PRV) is a type of safety valve used to control or limit the pressure in a system.

287) PTW – Permit to Work. A PTW system is a formal written system used to control and execute certain types of jobs safely, which are identified as potentially hazardous.

288) PVC – Price Variance (Price Escalation). The Contractor shall be reimbursed or shall refund to the Corporation as the case may be the variation in the value of the work carried out from time to time, depending on whether the prices of material and labour as a whole rise or fall.

289) PWD – Public Work Department. PWD is an Indian government agency responsible for building and maintaining public services, such as public government construction, highways, bridges, public transportation, drinking water sources, etc.

290) PWHT – Post Weld Heat Treatment. It reduces the levels of tensile residual stresses in a joint.