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Rate Analysis: What is it, how does it work

All construction projects are subdivided into various activities. With each activity, there are different construction and civil works. Therefore, the total cost of construction works is a combination of all the costs of activities involved.

What is rate analysis?

Rate analysis is the basis for arriving at a correct rate per unit work or supply of work specifications such as labor, materials, and equipment. It can also be defined as the analytical study that leads to the definition of unit rates of work by identifying the basic requirements.

Benefits of rate analysis

There are two significant benefits for carrying out rate analysis of an item. The first is determining the cost per unit item, while the second determines its economic processes and uses.

Importance of rate analysis

Rate analysis gives a well-defined picture of tools, services, and machinery involved in the construction of a project.

Rate analysis helps in proportioning the effect of the market on the payments made for construction work. It also helps in determining the construction costs per unit as stipulated in the specifications. The use of rate analysis makes it possible to come up with uniform standards for construction works.

How do you calculate rate analysis?

Five factors play a pivotal role when calculating rate analysis. These are

  • Material costs
  • Labor costs
  • Equipment costs
  • Overheads
  • Contractor profits

Material costs

When determining the material costs, you need to determine purchase prices, storage prices, transportation costs, and wastages due to excesses. These rates are resolved from the current market rates.

Labor costs

When determining the labor costs, we determine the amount of labor required per unit measurement of a construction project. The numbers are then multiplied by the relevant applicable wages to get the labor costs per unit.

Equipment costs

There are different machinery employed in construction work. If machinery is used for construction work, the cost will be added to the activity cost involved. For instance, we will add a concrete mixer to the cost of preparation of concrete. However, if a machine is used for different types of work, a separate budget is reserved for them.

Overheads

The costs of overheads are also inclusive during rate analysis. These include office, rent, furniture, wages, and contingencies. The charges are about 5% of the overall costs. Taxes are also included in overheads as 6% of taxes have to be paid prior.

Contractor’s profit

A contractor’s profit of about 10% is included in the overall costs in overall project cost. The profit is about 8% in big projects and 15% in small projects.

calculate rate analysis

Examples

Now let us run through some examples to understand the rate analysis of different components of a project. 

Concrete rate analysis

For concrete rate analysis, we need first to organize the data we need for calculations. This includes materials, steel, craft, shuttering charge, and water charge.

We will calculate the rate for 10m3 of concrete. The Cement: Sand and Aggregate ratio is 1:2:4, whereas the density of cement is 1440kg/m3. Below is the detailed table with rate analysis calculations on concrete.

Component Description Quantity Rate in $ Total in $
Materials        
  Aggregate 8.8m3 25 per m3 220
  Cement 64 bags 3.5 per bag 224
  Sand 4.4m3 24 per m3 108.6
  Steel 785kg 0.44 per kg 345.4
  Binding wires 1.5kg 0.65per kg 0.98
Labor        
  Mason (1st class) 4 5 per day 20
  Mason (2nd class) 3 4 per day 12
  Casual 12 3 per day 36
  Blacksmith 8 3 per day 24
Formwork        
  Timber Lumpsum 10 10
  Carpenters 10 2.8 per day 28
Wastage   6%   62
Transport   1%   10.3
Contractor’s Profit   15%   154.7
Total $1258.5

Plastering rate analysis

Below we will calculate the plaster rate analysis for a 100m2 area. We will consider a 12mm thick plasterwork with a cement to sand ratio of 1:4.

Component Description Quantity Rate in $ Total in $
Labor        
  Mason (1st Class) 6.7 7 per day 47
  Mason (2nd Class) 9.2 4 per day 37
  Casual 7.5 4 per day 30
Material Cement 9 bags 2.8 per bag 25.2
  Sand 1.25m3 8.5 per m3 10.6
Wastage   2%   0.716
Scaffolding   1%   0.358
Transport   1%   0.358
Miscellaneous   2%   0.716
Water charge   1%   0.358
Contractor’s profit   15%   5.4
Total 157.38

Labor and material rate analysis

The number of personnel and materials required in a project greatly influence the price of the project. The labor and material units are multiplied by the relevant cost per unit to calculate the appropriate rates. Below is an example of labor and material rate analysis in concrete and brickwork.

Component Description Quantity Rate in $ Total in $
Materials        
  Class 1 bricks 2500 0.05 per brick 125
  Class 2 bricks 2440 0.04 per brick 100
  Brick ballast 6m3 8 per m3 48
  Cement 64 bags 2.7 per bag 173
  Steel 785 kg 0.44 per kg 345
Labor        
  1st class Mason 4 5 per day 20
  2nd Class Mason 3 4 per day 12
  Casual 12 3 per day 36
  Carpenter 8 3 per day 24
  Blacksmith 8 3 per day 24
Total 907
material rate analysis

Plumbing rate analysis

Plumbing rates depend on materials location and the plumber’s experience. Below are the average rates for the installation of plumbing fixtures.

Component Description Quantity Rate in $ Total in $
Labor        
  Plumber 5 25 per day 125
  Casual 7 5 per day 35
Installation        
  Pump installation 1 550 550
  Toilet installation 3 250 750
  Shower 2 450 900
  Bathtub 1 600 600
Total       2960
Total 2960

Brickwork rate analysis

Below is the rate analysis for brickwork. We will consider a volume of 10m3 of brick for our calculations.

Component Description Quantity Rate in $ Total in $
Labor        
  Mason (1st class) 6.7 7 per day 46.9
  Mason (2nd Class) 6 5 per day 30
  Casual 11 3.5 per day 38.5
Materials        
  Bricks 4940 0.05 247
  Cement 21 Bags 2.8 58.8
  Sand 2.8m3 8.5 23.8
Scaffolding   1%   3.29
Transport   1%   3.29
Miscellaneous   2%   6.59
Water charge   1%   3.29
Contractor’s profit   15%   49.44
Total 471.5

Frequently asked questions

A proper understanding of rate analysis improves work productivity and eases the cost estimation process. Below are some of the commonly asked questions concerning rate analysis to give a broader scope of the subject.

When is rate analysis important?

A quantity surveyor typically uses price list items from a unit cost database to estimate the rates of a specific work description. However, builders resort to building unit rates as elementary sources of the analyzed rates when this information is not available.

What are the advantages of using rate analysis software?

Rate analysis software allows you to dynamically build rates from elementary sources to calculate total unit rates. The software makes the quantitative evaluation of rates easier through the use of inbuilt mathematical models.

Conclusion

As discussed above, rate analysis is essential in every construction project. You need to be aware of the financial concepts that directly impact your project. After realizing the cost impacts on your projects, you can use the results from rate analysis to prepare a budget and a monthly schedule for your project.