2. ESTIMATION AND COSTING notes in english

 

2. ESTIMATION AND COSTING

Estimation and costing are essential parts of any construction or engineering project. They help in planning, budgeting, and ensuring that the project stays within the financial constraints while achieving the desired quality.

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2.1 Meaning and Purpose of Various Types of Estimates

1. 2.1.1 Rough Estimate:

   • Meaning: A rough estimate is a quick, approximate calculation of the total cost of a project. It is done early in the planning phase when the full details of the project are not available. It is usually based on the available measurements, data, and experience.
   • Purpose: The purpose is to get a rough idea of the budget needed for the project, to decide whether the project is financially feasible, and to allocate initial resources.
   • Example: If someone plans to build a house, the rough estimate would include costs for materials, labor, and permits, even before the design is finalized.

2. 2.1.2 Detailed Estimate:

   • Meaning: A detailed estimate is a more precise and exhaustive calculation that includes all components of the project. It lists every item of work required, the quantities of materials, labor costs, and other overheads.
   • Purpose: It is used for precise budgeting, resource allocation, and to serve as a basis for tendering or bidding. It helps in tracking actual costs during the project execution.
   • Example: A detailed estimate for a construction project includes costs for excavation, foundation, walls, roofing, electrical systems, and more.

3. 2.1.3 Supplementary Estimate:

   • Meaning: A supplementary estimate is an additional estimate that is prepared when there is a need to revise the cost or scope of work after the initial estimate. This could be due to unexpected changes, additions, or alterations in the scope of the project.
   • Purpose: The purpose is to adjust the initial budget based on real-time changes and to maintain the financial control of the project.
   • Example: If new work or unexpected repairs arise after the project begins, a supplementary estimate will be created to cover these extra costs.

4. 2.1.4 Annual Maintenance Estimate:

   • Meaning: An annual maintenance estimate is the budget for maintaining an already completed project for a year. This includes expenses for repairs, replacements, cleaning, and servicing.
   • Purpose: It helps in managing the long-term operational costs of a project, such as a building, machinery, or infrastructure, ensuring its upkeep.
   • Example: The estimate for maintaining a factory, including costs for equipment servicing, staff wages, and consumables for the year.

5. 2.1.5 Revised Estimate:

   • Meaning: A revised estimate is an updated version of the original estimate when the initial costs change due to alterations, errors, or unexpected conditions during the execution of the project.
   • Purpose: This helps in re-aligning the financial plan with the actual progress and actual costs incurred, making sure that the project stays within budget despite changes.
   • Example: If the cost of raw materials rises during the project, a revised estimate will reflect this increase in costs.

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2.2 Factors to be Considered While Preparing Estimates

1. 2.2.1 Detailed Estimate:

   • When preparing a detailed estimate, the following factors must be considered:
     • Project Scope: Define the complete scope of work clearly to ensure all tasks and requirements are accounted for.
     • Material Costs: Calculate the cost of materials needed, including quantity, quality, and transportation.
     • Labor Costs: Include the wages or salaries of workers required to complete the project, considering different skills and work hours.
     • Overheads: Include indirect costs like administrative expenses, equipment rentals, and utility costs.
     • Contingencies: Set aside a contingency fund to cover unforeseen costs.
     • Duration of the Project: Longer projects may incur higher costs due to inflation, labor rates, and material prices.

2. 2.2.2 Economical Execution of Work:

   • Economical execution refers to completing a project at the least possible cost without compromising on quality. It can be achieved by:
     • Efficient use of resources: Using materials efficiently, reducing wastage, and optimizing labor deployment.
     • Project Planning: Proper scheduling and planning to avoid delays and interruptions that can cause additional costs.
     • Choosing cost-effective materials and methods: Selecting materials and construction methods that offer the best balance between quality and cost.
     • Continuous Monitoring: Regular monitoring and updating of the cost estimates during the project to avoid cost overruns.

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2.3 Tenders and Quotations

1. 2.3.1 Type of Tender:

   • Open Tender: This type of tender is open to everyone and is the most competitive. It is used for public projects and invites all interested parties to submit bids.
   • Limited Tender: Only a selected group of contractors or suppliers are invited to tender. This is usually for specialized projects or to maintain confidentiality.
   • Negotiated Tender: The client negotiates directly with a chosen contractor, often used when only one contractor is suitable for the job.

2. 2.3.2 Tender Notice:

   • A tender notice is a public announcement inviting contractors or suppliers to submit bids for a project. It provides the details about the work, the required qualifications, and the submission deadline.
   • Example: A government department issues a tender notice for the construction of a new road, outlining the requirements and submission procedure.

3. 2.3.3 Preparation of Tender Document:

   • The tender document includes all the necessary information about the project, such as:
     • Project description
     • Scope of work
     • Terms and conditions
     • Bid submission deadlines
     • Financial and technical evaluation criteria
   • Contractors use this document to prepare and submit their bids.

4. 2.3.4 Method of Opening of Tender:

   • Tenders are typically opened in a public session where all submitted bids are reviewed and opened by a committee. This ensures transparency in the selection process.
   • The opening is followed by a technical evaluation to verify if the bids meet the required standards and a financial evaluation to compare costs.

5. 2.3.5 Quotation:

   • A quotation is a document from a supplier or contractor that provides the prices for materials, services, or labor for a specific project.
   • Example: A contractor may submit a quotation for the cost of constructing a wall, detailing the price of labor, materials, and any other related expenses.

6. 2.3.6 Quotation Format:

   • A quotation format typically includes:
     • Supplier/Contractor’s details (name, address, and contact information)
     • Description of services/materials
     • Quantity and unit price
     • Total price
     • Delivery terms and conditions
     • Validity period of the quotation

7. 2.3.7 Comparison Between Tender and Quotation:

   • Tender: A more formal process used for large projects, often involving multiple bidders. It includes detailed documentation and is governed by strict rules.
   • Quotation: A simpler, less formal process typically used for smaller jobs or when working with a particular supplier. It includes only the price and basic details.

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2.4 Comparative Statement

1. 2.4.1 Format of Comparative Statement:

   • A comparative statement is used to compare the different bids received for a project. It helps in evaluating which bidder offers the best value for money.
   • The format generally includes:
     • Contractor's name
     • Bid price
     • Timeframe for completion
     • Terms and conditions
     • Other relevant factors such as technical qualifications

2. 2.4.2 Order Format:

   • An order format is a document issued to a supplier or contractor to confirm the order. It usually includes:
     • Description of goods/services
     • Quantity
     • Price
     • Delivery terms
     • Payment terms

3. 2.4.3 Placing of Purchasing Order:

   • The purchase order is a formal request to a supplier to provide goods or services. Once the quotation is accepted, the purchasing order is issued, and it serves as a legal document for the transaction.
   • Example: After choosing a contractor, the client issues a purchasing order for the construction work, detailing the tasks to be completed, costs, and deadlines.

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2.5 Principles of Execution of Works

1. 2.5.1 Planning, Organizing, and Completion of Work:

   • Planning: Developing a detailed roadmap for completing the project, including timelines, resource allocation, and budget.
   • Organizing: Ensuring that the resources (materials, labor, machinery) are in place for smooth execution.
   • Completion: The work is completed according to the defined scope, ensuring quality standards and within the agreed timeframe and budget.

2. 2.5.2 Billing of Work:

   • Billing of work involves issuing invoices based on the work completed. This can include progress payments based on completed stages or a final payment once the project is fully finished.
   • Bills include a breakdown of materials, labor, and other expenses, along with the agreed rates and terms.
   • Example: A contractor submits a bill for the work done on a construction project, detailing the quantities of materials used and the work completed.