How to Set a Rate for the Construction Work.

Rate Analysis for the Construction Work

Setting a rate for a particular building work is very important. Because the rate we give should be able to handle the total cost and overheads. Not only that but also that rate should be able to give the expected profit after completing the job. Therefore, it is necessary for us to do a method study (Work Study) of that particular work in order to determine the actual cost. 

Realisation of the scope work and construction method is the key to set the correct rate for a particular work. Otherwise, after the contract agreement, we can not change the agreed rate. The cost is two-way as the direct cost and indirect cost.

Direct Cost: 

The cost that directly affect the work. This would be the main cost for a particular work which is normally same for every site.  

1. Material
2. Labour
3. Plant & Equipment

Indirect Cost:

The cost that indirectly affect the work which depends on the site and it's location. Because with the location construction cost can be considerably changed.

1. Transport Cost
2. Accessibility
3. Material wastage
4. Safety
5. Food & Beverages
6. Water & Electricity
7. etc.

Analysis about above factors will make us come to a more accurate figure which covers the overall cost (Direct cost + Indirect Cost). After the realisation of all possible cost to be involved with the rate then only we are going to decide the profit that we expect from the work.  

Direct Cost = Material + Labour + Plant & Equipment

Indirect Cost = Transport + Accessibilty + Material wastage + Safety + etc.

Total Cost = Direct Cost + Indirect Cost

Rate for the Work = Total Cost + Total Cost x (X%)

X% = Expected profit percentage

Recommendations :- 

• First write a work breakdown
• Keep a Checklist for rates
• Refer similar site information