Tendering and estimating 10

Labour related overhead costs estimation how to do

1) Start with the agreed pay rates between the company and workers.

2) Add extra costs such as: Employer’s National Insurance, Holiday pay, Sick pay and Other allowances.

3) These additions create a comprehensive labour rate.

4) This rate is then used by the estimator to include all labour-related overheads in the tender.

Methods of estimating

1. Unit or number methods

2. The Area method

3. The cubic method

4. The approximate quantities method

5. Cost of functional element method

6. Elemental estimating

7. NRM quantities method

Pricing for demolition and temporary works

• When you prepare an estimate, you price every activity required for the project and Demolition is often the first stage in redevelopment projects

• Temporary works (like scaffolding, hoardings, site access roads) also need pricing because they are essential for safe and efficient construction.

Pricing alterations, repairs, and conventions:

Large projects often have variations from the original design, which change costs. Estimators must include:

• Alterations and repairs likely to occur.

• Maintenance work if required.

Building up rates

The tender price will be built from the following cost

• Approximate quantities – Initial rough quantities prepared by the quantity surveyor, refined as design develops.

• Selection of material price for use – Choose appropriate materials based on quality, price, and discounts.

• Coverage rates – Amount of material needed per unit (e.g., bricks per m²).

• Wastage percentage – Extra for breakages, incorrect deliveries, or over-ordering.

• Offloading & storage – Costs for unloading, secure storage, and handling hazardous materials.

• ‘All-in’ labour rates – Wages plus extras (National Insurance, tax).

• Labour constants – Productivity rates to calculate time for tasks.

• Plant requirements – Cost of hiring or owning equipment, including fuel and maintenance.

Inclusion of Subcontractor Quotations

Each tender includes quotes from subcontractors for specific jobs.

These quotes cover:

▪ Unit rates (cost per unit of work)

▪ Lump sums (fixed price for a package of work)

▪ Pricing for attendance (cost for main contractor to support subcontractor)

▪ Profit and overheads added by subcontractor.

what are provisional sums

Provisional sums are allowances for work that cannot be priced accurately at tender stage (e.g., unknown ground conditions).

Prime costs sum equation and when calculated

Prime cost = Direct cost of materials + direct labour.

PC sums are calculated for supplying work or materials for the client.

Additional factors added to PC sums:

• Overheads

• Profit

• Attendance and special attendance

• Contingency sums

Factors affecting profit level

• Current workload

• Competition

• Project risk and complexity

• Procurement route

• Payment terms

To recover overhead costs in estimates —>

Overheads ÷ Turnover × 100% = percentage added to tender.

what are contingency sums

Contingency sums are small reserve amounts added to a quote to cover unforeseen risks (e.g., bad weather, site issues, delays).

What are dayworks?

Dayworks are hourly rates for specialist trades (e.g., bricklayers, plumbers).

These rates are published by BCIS (Building Cost Information Service) every year or after price increases.

How contractors use dayworks:

Contractors add a percentage markup to each daywork schedule for

• Labour

• Plant (equipment)

• Materials

This markup covers profit and overheads.

Factors included in the all-in labour cost

• Basic hourly pay rate (agreed between employer and worker)

• Annual holiday entitlement & public holidays

• Employer’s National Insurance contribution

• Weather-related downtime (loss of production)

• Staff sickness

• CITB levy (Construction Industry Training Board)

• Travelling time

• Bonuses

Application of labour cost in unit rates equation

Hourly rate = Total cost of employing a worker for a period ÷ Total hours worked in that period