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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 1
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Dr. Luay DwaikatPh.D Construction Economics and Management
Building Economics, Quantity Surveying,and Cost Estimation(Course Code: 10611471)
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Course Outline Description of the industry The construction process Building life cycle Quantity surveying principles Estimating Earthworks Estimating concrete works Estimating finishing works Construction cost estimate Estimating labor cost Estimating material cost Estimating machinery and equipment cost Estimating overhead cost Pricing and profit margins Life cycle costing
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 2
Grading System
Midterm Exam 30% Term Project 20% Final exam 50%
Hope You Success
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Text Book & ReferencesText Book: Peurifoy, R.L., Oberlender, G.D., 2001. Estimating
Construction Costs. (5th edition). NY: McGraw-HillHigher Education.
Kirk, S.J., Dell’isola, A.J., 1995. Life Cycle Costing forDesign Professionals, (2nd edition). NY: McGraw-Hill,Inc.
References:
Bull, J.W. (2003). Life cycle costing for construction. London: Taylor& Francis.
Boussabaine, A. & Kirkham, R. (2004). Whole life-cycle costing: riskand risk responses. Oxford, UK: Blackwell Publishing Ltd.
Blank, L. & Tarquin, A. (2012). Engineering economy. (7th edition).NY: McGraw-Hill, Inc.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 3
Communications & Contact You can use the Zajel system
to post your comments andenquiries in the discussionforum.
Frequently check the Zajelsystem to find assignments .
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Before we start Attend the class on time Switch off your mobile Stop the side talks Be a smart listener Use your analytical skills Question every piece of
information you acquire
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 4
Construction Industry
Description of the Industry
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How large is the construction industry!!!
1. Buildings2. Tunnels3. Pipelines4) Dams5. Canals6. Airports7. Power plants
8. Railroads9. Bridges10. Sewage Treatments
plants11. factories.
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Construction includes all immobile structure such as:
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 5
Manufacturing Versus Construction
Manufacturing ConstructionMass production Custom built projectsEasy quality control Complex quality controlOne plant location Unique plant locationNot seasonal work Seasonal workRelatively small products Huge products
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Quantity Surveying
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 6
Units of measure
The most common units of measure are:
Cubic Meter Square Meter Linear Meter Weight Number
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Quantity Surveying (QS)
Contractor QS
Consultant QS
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 7
Project Break Down
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The WBS(Work Breakdown Structure)
It is used to breakdown the project from onemain and relatively big entity into smaller,defined, manageable and controllable units,usually called work groups (packages) ortasks, or, at the finest level of detail (which isundesirable) activities.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 8
A construction activity
Anything that must be accomplished in orderto complete the project may be considered asan activity.
Consumes time and resources.
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House
Structure Mechanical Electrical
Sub – str. Super str. HVAC Plumbing
Earth work Foundation Str. elements Finishing
ExcavationBackfillingleveling
BlindingfootingsTie beamsGround slab
columnsbeamsRoof slab
Level 2
Level 3
Level 4
Level 5
Level 11.0
1.1 1.2 1.3
1.1.1 1.1.2 1.2.1 1.2.2
1.1.2.21.1.2.11.1.1.21.1.1.1
PlasterTilepaintingDoors &windows
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 9
The WBS(Work Breakdown Structure)
1.0 house1.1 structure
1.1.1 sub – structure1.1.1.1 earth work
E10 excavationE20 backfillingE30 leveling
1.1.1.2 foundationF10 blindingF20 footingsF30 tie beamsF40 ground slab
1.1.2 super structure1.1.2.1 structural elements
C10 columnsC20 beamsC30 roof slab
1.1.2.2 finishingCF10 plasterCF20 tileCF30 paintingCF40 doors & windows
1.2 mechanical1.2.1 HVAC
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Take care!!!
The deeper you go into the lower levels of theWBS, the more detailed knowledge you’llneed to know.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 10
The WBS
it is a major task to undo.
Why???
Because cost collections begins at a WBSelement,
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ESTIMATING EARTHWORK
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 11
Earthwork
Earthwork includes:
1. Excavation 2. Grading & Leveling: Moving earth to change
elevation 3. Temporary shoring 4. Back fill or fill: Adding soil to raise grade 5. Compaction: Increasing density 6. Disposal
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Units of Measuring Earthwork
Earth work measured in Cubic Meter (bank, loose, orcompacted)
Bank (BCM): Material in its natural place beforedisturbance (in Place or In situ)
Loose (LCM): Material that has been disturbed orloaded.
Compacted (CCM): Material after compaction
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 12
Swelling and shrinking of excavated materials
Swelling: soil increases in volumewhen it is excavated
Shrinkage: soil decreases in volumewhen it is compacted
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Swelling and shrinking of excavated materials
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1.0
1.25
0.90
1.0 CM INNATURALCONDITION(IN-PLACE)
1.25 CMAFTERDIGGING(LOOSE)
0.90 CMAFTERCOMPACTED(COMPACTED)
In place CompactedLoose
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 13
Swell Factor
The swell Percentage is calculated as follows:
1001(%) XDesnityLoose
DensityBankSwell
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Swell Factor =DesnityLoose
DensityBankVolumeBank
VolumeLooseOR
Shrinkage Factor
Shrinkage: soil decreases in volume when itis compacted
Shrinkage (%) = (1 - ) x 100
Shrinkage factor = 1 – Shrinkage %
Compacted volume = Bank volume x Shrinkage factor
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Bank densityCompacted density
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 14
Example
The loose density of soil is 1,250 Kg/cm, bank density is 1,500Kg/cm and the compacted density is 1,700 Kg/cm. The excavationcalculated net quantity is 1,000 cm and the calculated backfillingnet quantity is 750 cm. Assuming:
5 $/cm excavation cost. 10 $/cm hauling cost 20 $/cm for importing & compacting the backfilling material.
Find:1. Earthworks total cost.2. Excavation & hauling unit cost3. Backfilling & compaction unit cost
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solution
Swelling Percentage = ((1,500/1,250) – 1 )) x 100 = 20 % Swelling factor = 1,500 / 1,250 = 1.2 Shrinkage Percentage = (1 – (1,250 / 1,700)) x 100 = 26.47 % Shrinkage factor = 1 – 26.47 = 0.74
Excavation Cost = 1,000 Cm x 5 $/m3 = 5,000 $ Disposal Cost = (1,000 Cm x 1.2) x 10 $/Cm = 12,000 $ Total Excavation & disposal cost = 17,000 $
Backfilling & compaction Cost = (750 Cm / 0.74) x 20 $/Cm = 20,400 $
1) Earthworks total Cost = 17,000 + 20,400 = 37,400 $2) Total Excavation & disposal Unit Cost = (17,000 / 1,000) = 17.00 $/cm3) Total Backfilling & compaction Unit cost = (20,400/ 750) = 27.20 $/cm
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 15
Typical Soil Volume Conversion Factors
Init ialSoil Type Soil Condit ion Bank Loose Compacted
Clay Bank 1.00 1.27 0.90Loose 0.79 1.00 0.71Compacted 1.11 1.41 1.00
Common earth Bank 1.00 1.25 0.90Loose 0.80 1.00 0.72Compacted 1.11 1.39 1.00
Rock (blasted) Bank 1.00 1.50 1.30Loose 0.67 1.00 0.87Compacted 0.77 1.15 1.00
Sand Bank 1.00 1.12 0.95Loose 0.89 1.00 0.85Compacted 1.05 1.18 1.00
Convrted to:
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Excavation
Allowance is added for measuring excavationfor working space, e.g. nearly 0.5 mallowance should be added around footingsand foundations walls for erecting andremoving formwork.
Allowance is added for sloping the sides ofexcavation for stability vary with type ofground (most common 45o).
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 16
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Approximate Angle of ReposeFor Sloping Sides of Excavation
OriginalGround Line
Solid
Roc
k, S
late
or C
emen
ted
Sand
and
Gra
vel
(90
Deg
.)
Trimming and grading
Trimming and grading generally measured insquare meter. And should be consideredseparately.
Hand (manual) excavations required to finishthe bottom to the desired level. Sincemachines cannot always work to the requireddegree of accuracy.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 17
Temporary shoring
Temporary shoring : required where everexcavating vertical surfaces are unstable. Temporary shoring costs includes the cost
of labor required to erect and remove theshore (props) and the cost of materialrequired for shoring. Temporary shoring is measured by the
area of the excavation surfaces that aresupported by shoring.
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Backfilling
Backfilling of excavated materials: isrequired in most projects. In some cases native excavated
materials are unsuitable for backfilling.therefore, filling materials should beimported. Like excavation, backfilling materials
measured in cubic meter net in place.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 18
Backfilling
In the estimate, the total net volume of therequired backfilling material are deductedform the total net volume of the excavatedmaterial.
(Excavated – backfilled = X) If the result is positive (surplus) X is total net
volume for disposal. If the result is minus quantity, more backfilling
materials required than excavated. And thedifference is total net volume of importedmaterials required. 35
Backfilling
The actual total quantity of backfilling required will begreater than the total net quantity (Bank Quantity)calculated.
Depending upon the type and moisture content ofbackfilling material specified, and the degree ofcompaction required.
Recall Loose and Bank volume
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 19
Measuring Concrete Work
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Measuring Concrete
Concrete is generally measured in CUBICMeters.
Concrete costs are affected by location in thebuilding.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 20
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Concrete
Concrete is a mixture of aggregate, cement and water
One cubic meter of cement is about 1510 kg One bag of cement contains 50kg of material One cubic meter of concrete is about 2400 kg
Strength of concrete is usually expressed in terms ofthe 28-day compressive strength
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Types of Concreting Activities
Costs of labor, equipment, and materials arerelatively high
Two major Categories: Plain concrete Reinforced concrete
Examples of activities: foundation, slab,column, beam, stairway, etc.
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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Types of Concrete
Cast-In-Place Concrete: consists of five major operations:
Form preparation Reinforcement placement Concrete placement Curing Form removal
Precast Concrete: formed, placed, and cured in amanufacturing plant
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Concrete Material
Expressed as the volume of concrete required. Usually obtained from a ready-mix concrete supplier. If mixing is conducted on site, quantities of cement, sand,
gravel must be taken off Concrete mixture is expressed as a ratio (e.g., 1:2:3):
1 Volume unit of cement 2 Volume unit of fine aggregate 3 Volume unit of coarse aggregate
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 22
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Concrete Materials
To obtain 1 m3 of concrete, a total volume of 1.5 m3
of dry materials is required. Example: a concrete mix contains cement, sand &
gravels in ratios of 1:2:3. Calculate each componentquantity. Cement = 1/6 x 1.5 = 0.25 m3
Sand = 2/6 x 1.5 = 0.5 m3
gravel = 3/6 x 1.5 = 0.75 m3
Waste factors: 5 to 10% cement, 10 to 30% aggregates
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Take-Off Methods for Concrete
Concrete quantity is expressed in terms of concretevolume Volume = length x width x height Section Area = Length x Width
Three methods are used to determine the volume ofconcrete: The unit method The perimeter method The centerline method
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 23
1) The unit method
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0.3 m
0.3 m
8 m
6 m
Concrete Volume = 2 (6 x 0.3 X 3) + 2 (7.4 x 0.3 x 3) = 24.12 m3
Given the height of the walls is 3 m, then:
Wall Plan (out of scale)
2) The Perimeter method
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0.3 m
0.3 m
8 m
6 m
Concrete Volume = (2 x 6) + (2 x 7.4) x 0.3 x 3 = 24.12 m3
Given the height of the walls is 3 m, then:
Wall Plan (out of scale)
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 24
3) The centerline method
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0.3 m
0.3 m
7.7 m
5.7 m
Concrete Volume = (2 x 5.7) + (2 x 7.7) x 0.3 x 3 = 24.12 m3
Given the height of the walls is 3 m, then:
Wall Plan (out of scale)
Formwork
Formwork is a part of most concrete work andis a large part of its cost.
Formwork is temporary work and notincorporated to the building.
So, it is rarely shown on the drawings.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 25
Formwork
Formwork is generally measured in square meter ofthe actual concrete surfaces.
And the ,major cost of formwork is labor costs, sinceformwork is reusable as much as possible.
Plywood formwork could be reused up to twenty tothirty times.
And steel formwork could be used much longer. 49
•A •B•h•Contact Area =
2h (A + B)
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Steel Reinforcement
From the drawings, determine total linearmeter of each size bar
Waste for lapping and splicing is about 10% Determine the weight of each size bar
Weight per linear Meter
D is the diameter of Circular bars in MM
)(162
)()(
2
mLengthXmmD
kgW
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 26
Estimating ConstructionCost
Text Book:
Peurifoy, R.L., Oberlender, G.D., 2001. Estimating ConstructionCosts. (5th edition). NY: McGraw-Hill Higher Education.
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Cost Estimate Techniques
1) Analogous estimating (Expert judgment)Budget used to estimate total project costs ifthere is a limited amount of detailed information.
2) Parametric modelingUsing project characteristics (or parameters) topredict costs (e.g., price per square meter).
3) Bottom-up estimating (Definitive)Estimating the cost of individual work items andthen rolling up the costs to arrive at a projecttotal.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 27
Estimating Project’s CostConstruction costs includes:
1) Materials costs.2) labor costs.
a) direct labor costb) indirect labor cost
3) plant and equipment costs4) overhead costs
a) job overhead costs (site)b) operating overhead costs (head office)
5) profit.
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(1) Material costs
The material price in a competitive marketdetermined by the SUPPLY & DEMAND andis affected by:
1) quality of materials2) quantity of material3) time of purchase4) place of Delivery5) buyer & seller
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 28
Demand & Supply
In the competitive market the price of a goodmainly determined by the supply of that goodby manufacturers and the demand to thatgood by consumers.
The supply curve is upward curve The demand curve is downward curve
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Supply Curve
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Quantity
price
Q2 Q1
P1
P2
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 29
Demand curve
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Quantity
price
Q1 Q2
P1
P2
Demand & Supply
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price
Quantity
Qe
Pe
Q1
P1
Q2
P2
Pe: Equilibrium PriceQe: Equilibrium Quantity
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 30
Quality of Materials
Which type of material?
Specifications.
The higher the quality, is the higher the price.
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Quantity of materials
Mostly, the more the quantity requested, thelower the price quotation.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 31
Time of purchase or delivery
If the delivery time requires the manufactureror supplier to bear additional costs, he willback charge them to the material price.
E.g. Supplying material in holydays
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Place of delivery
Affects the price through the means anddistance of delivery, and the accessibility tothe site.
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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The buyer and seller
The buyer and seller affects the price throughthe market level from which they are able tobuy.
E.g. Retail Vs. Wholesale
Cash discounts, Trade discounts
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(2) Labor costs
Direct labor costs: wages and other directpayments to workman.
Indirect labor costs: any other amounts paidby the contractor on behalf of labors e.g.(transportation, insurance, accommodation,paid vacations, etc.).
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 33
(2)Labor costs
Tow Methods of Estimation:
1) labor rate: the hourly rates of employingworkman, based on total labor costs(direct and indirect cost) divided by thetotal Hours worked. E.g. 10 $/hour
2) productivity: the amount of work done ina specific period of time paid for.E.g. 10 $/m2
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Example
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Example:
150 M3 ready-mixed Portland cement concrete ( 300N/cm2 x 1.5” max size aggregate) placed in continuousfootings. Given the Concrete unite Cost is 18 $/ M3, andthe labor unite cost is 3 $/ M3
Calculate the work item total Cost.
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 34
Solution
Description Quantity Unit Unit cost Total Cost
Concrete(as specified) 150 m3 18 $ 2700 $
Labor 150 M3 3 $ 450 $
Total Material And & Labor Costs 3150 $
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Example
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A plaster mason works 10 hrs/day, 6 days/week and canproduce 30 m2/day. A base wage of 10 $/hour is paid forall straight-time work (8 hrs/day). An overtime rate oftime and one half is paid for all hours over 8 hrs/day.The social security tax is 7% and the health insurance is10 %. (Tax are paid on actual wage and insurance ispaid on base wage)
Calculate:1) the average hourly, daily and weekly labor cost?2) Labor unit cost
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 35
Solution
Actual hours = 10 hrs/dayPay hours = day straight-time + day overtime
= (8 hrs x 1) + (2 hrs x 1.5)= 8 + 3 = 11 hrs
Average hourly pay (Actual Wage)=(pay hours/actual hours) x base wage= (11 / 10 ) x 10 $ = 11 $/hr
11 $/hr is the direct Labor Cost
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Continued
Tax is paid on actual wage and insurance is paid on base wage.
Indirect Labor Cost:
Social security tax: 7 % x 11 $ /hr = 0.77 $ /hrHealth insurance: 10 % x 10 $ /hr = 1 $ /hr
Indirect Labor Cost: 0.77 + 1 = 1.77 $/hr (Indirect)
Average hourly cost = Direct Labor Cost + Indirect Labor Cost= 11 $ /hr + 1.77 $ /hr = 12.77 $/hr
Daily cost = 10 hrs x 12.77 $/hr = 127.7 $/dayWeekly cost = 6 days x 127.7 $/day = 766.2 $/week
2) Labor unit cost = 127.7 $ / 30m2/day = 4.26 $/m2
70
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 36
Example 2
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For a floor tile activity, the estimated tile quantity wasaround 600 m2. A gang of one tile mason and one helpercan produce 30 m2/day (8 hours per day). The tilemason cost per hour was estimated to be around 10$/hour, while it was around 7 $/hour for the helper. Find:
1. The activity duration, total labor cost, total man hours,and the labor unit cost.
2. The total labor cost, total man hours, and the labor unitcost for completing the activity in a duration of 10 days.
Example 2 Solution
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1. Activity duration = Quantity/P.R = 600 m2 / 30 m2/day = 20 days
2. Total labor cost = 1 gang x 8 hrs/day x 17 $/hr x 20 days = 2720 $
3. Total man hours = 1 gang x 8 hrs x 20 days = 160 Mhr (gang)
4. Labor unit cost = 2720 $ / 600 m2 = 4.53 $/m2
In 10 days duration:
1. Total labor cost = 2 gangs x 8 hrs/day x 17 $/hr x 10 days = 2720 $
2. Total man hours = 2 gangs x 8 hrs x 10 days = 160 mhr (gang)
3. Labor unit cost = 2720 $ / 600 m2 = 4.53 $/ m2
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 37
(3) Equipments cost
Whether to rent or own.
Does not matter to the estimator since heshould consider costs.
73
Equipment costs
If the equipment is rented, the rental rate will beformed by offer and acceptance like any othercontract.
The PRICE of renting is your Equipment COST
If equipment is self-owned, an economically realisticrental rate should be established for use within thecompany to assure accurate cost estimation.
74
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 38
Equipment costs
If your decision is to own equipment considerthe following costs:
1) owning costs2) operating costs
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1) Owning costs of equipment
Can be identified as:
1) Depreciation: Loss in value2) maintenance: major repairs3) investment: cost arising from
investment and ownership
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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Depreciation
Loss in value of equipment resulting fromuse and age.
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Straight line Depreciation.
Annual straight-line depreciation =
78
Where:P = initial capital costF = salvage or resale valuen = estimated life of equipment
initial cost (P) – estimated salvage Value (F)
estimated life in years (n)
= (P – F) / n
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 40
Straight line method.
A concrete vibrator having an initial cost of10,000$ and an estimated salvage value of2,000$ after 8 years. Calculate the annualdepreciation?
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Depreciation = (P – F) / n
= (10,000 – 2,000) / 8 = 1,000 $ /year
Investment
Investment cost includes:
1) interest on investment2) insurance and taxes.3) storage costs.
80
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 41
Ownership costs calculations
Ownership cost can be calculated as Follows:
nn
n
i
iF
i
ii
)1(1)1(
)1(PA
81
Where:A = Annual Cost P = Purchase PriceF = Future Salvage Value I = Annual interest raten = useful life, in years
Example
The purchase price for new equipment is145,000$. The estimated salvage value is25,000$ after the end of its expected usefullife of 6 years. Assume interest for borrowingmoney is 9%, 5% risk allowance and 3% fortaxes, insurance, and storage.
1) Calculate the annual ownership cost2) Calculate ownership cost per hour
considering that the equipment will work 40hrs/week
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Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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Solution
nn
n
i
iF
i
ii
)1(1)1(
)1(PA
83
Analyze Data:A = ??P = 145,000 $F = 25,000 $I = 9 % + 5 % + 3 % = 17 %n = 6
Apply Equation :
Continued
66
6
)17.01(
17.0$000,25
1)17.01(
)17.01(17.0$145,000A
0662726.0$000,250.2786148$145,000
hryearhrs
/$62.18/2080
$38,742costownershipHourly
84
= 38,742 $ / year
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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Distribution of Hourly charges of equipment
85Hours used per year
Hou
rly O
wne
rshi
p C
harg
es (
$ / h
r )
2) Operating costs
Operating costs includes:
1) Fuel2) running repairs ( minor repairs and parts
replacement)3) Transportation: (transporting to and form
the site, setting up and dismantling)4) operator: direct and indirect costs
86
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 44
Example
A contractor borrowed 150,000 $ with 10% interestrate to buy a diesel engine shovel. No salvage valueis assumed for this equipment after 6 years. tax andinsurance is 5 %. Maintenance and repairs costs areexpected to be around 80% of the annual straight linedepreciation cost. Fuel gallon costs 1 $ and theaverage fuel consumption is 30 gal/day.
Determine the probable cost per hour of owning andoperating the shovel considering that the equipmentwill work 40 hrs/week?
87
Solution1 ) Calculate hourly owning cost:
nn
n
i
iF
i
ii
)1(1)1(
)1(PcostOwnershipAnnual
88
66
6
)15.01(
15.00
1)15.01(
)15.01(15.0150,000A
00.264237150,000A
A = 39,635.54 $ / year
Hourly ownership cost = 39635.54 $ / 2080 hr/year = 19.05 $ / Hr
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
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Continued
Annual Depreciation = (P – F)/n = (150,000 – 0)/6=25,000 $ / year
Maintenance and Repair = 0.80 x 25,000= 20,000 $ / Year
Hourly Maintenance and repair Cost = 20,000 $ / 2,080 hr/year= 9.61 $ / hr
Fuel Cost = 30 gal/day x 6 days/week=180 gal/week X 1 $/gal= 180 $/week
Hourly Fuel cost = 180 $/week / 40 hr/week = 4.5 $/hrTotal Hourly operating cost = 9.61$ + 4.5 $ = 14.11 $/hr
Total hourly (Owning + operating) Cost = 19.05 $ + 14.11 $ = 33.16 $/hr89
2 ) Calculate Hourly operating cost:
(4) Overhead Costs
Overhead costs can be specified as:
1) Job overhead costs2) Operating overhead costs.
90
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 46
Job overhead costs
If the costs can be attributed to a specific project,and cannot be attributed to a specific work item.these costs are JOB OVERHEAD COST.
E.g. Project manager salary. Security fence.site offices services. Water and power supplyand etc.
These costs estimated to be 5 – 15 % of theprojects direct cost.
91
Operating Overhead costs
If the cost cannot be attributed to any specificproject, they are operating overhead costs.
Costs of running business
These costs exist as long as firm exists.Regardless projects running or not.
92
Building Ecnomics, Quantity Surveying& Cost Estimation
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Operating Overhead costs
Operating Overhead costs may include: (head office costs)
1) Management and staff.2) Business offices.3) Communications.4) Rentals
93
Operating Overhead costs
Usually is not a part of the estimator’s duties.
It is the duty of the firms accountants toprovide the estimator with the required data.
94
Building Ecnomics, Quantity Surveying& Cost Estimation
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Operating Overhead costs
Can be calculated as follows:
The accountant predicts the annual operatingoverhead cost for the coming year, say600,000 $, And the total expected amount ofwork for the coming year, say 20,000,000 $
History records are these data sources
95
Operating Overhead costs
Then: A percentage allowance can be calculated
600,000
20,000,000X 100 = 3 percent
This allowance should be added to each jobtotal cost.
96
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(5) Profit
The profit is an indicator to success andefficiency of the firms.
The profit = total income – total expenditures.
Usually added as a percentage to the totalproject cost. e.g. 15 %
Can be determined in relation to the marketsituation and the work conditions
97
example
A contractor estimated a project direct cost tobe 1,500,000 $, 10 % is the estimated joboverhead costs, 3 % is the operatingoverhead costs, his profit margin is 5 %.
Calculate:1) Job overhead costs2) Operating overhead costs3) total project cost4) Profit and5) Bid price.
98
Building Ecnomics, Quantity Surveying& Cost Estimation
An-Najah National University -Department of Building Engineering
Dr. Luay Dwaikat - Updated 2017 50
Solution:
Direct cost = 1,500,000 $
1) Job overhead = 1,500,000 X 0.10= 150,000 $
2) Operating overhead = 1,650,000 x .03= 49,500
3) Total project cost = 1,500,000 + 150,000 + 49,500= 1,699,500
4) Profit = 1,699,500 X 0.05= 84,975 $
5) Bid price = 1,699,500 $ + 84,975 $= 1,784,475 $
99
Solution:
Direct cost = 1,500,000 $
1) Job overhead = 1,500,000 X 0.10= 150,000 $
2) Operating overhead = 1,650,000 x .03= 49,500
3) Total project cost = 1,500,000 + 150,000 + 49,500= 1,699,500
4) Profit = 1,699,500 X 0.05= 84,975 $
5) Bid price = 1,699,500 $ + 84,975 $= 1,784,475 $
100
Building Ecnomics, Quantity Surveying& Cost Estimation
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BuildingsLife Cycle Cost
Text Book:
Kirk, S.J., Dell’isola, A.J., 1995. Life Cycle Costing for DesignProfessionals, (2nd edition). NY: McGraw-Hill, Inc.
101
Basic Terminology
102
1. Building life cycle.2. Life cycle cost (LCC)3. Life cycle costing4. Whole life cost (WLC)5. Discount rate6. Interest rate7. Inflation rate8. Net present value (NPV)9. Recurring cost
Building Ecnomics, Quantity Surveying& Cost Estimation
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The life cycle of a product or a system
103
The life cycle of a product or a system can bedefined by five major phases:
1. concept and definition2. design and development3. manufacturing and installation4. operation and maintenance5. disposal
The life cycle of a building
104
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What is Life Cycle Costing?
105
life cycle costing is an economic assessment ofan item, area, system, or facility that considers allthe significant costs of ownership over itseconomic life, expressed in term of equivalentdollar.
The method requires estimating the life cycle costfor different building design alternatives, orsystem specifications, to determine the bestdesign with the lowest life cycle cost over apredefined study period
Life Cycle Costing Methodology
106
Life cycle costing, in its principle, considers bothcost and time, its methodology can besummarized as:
1. Identifying all the current and future life cycle costs that arisefrom owning and operating a facility.
2. Aggregating these costs based on the expected accrual time.3. Discounting the costs to a common base date to come up with
the present worth (the current value of all costs and savings),or the annual equivalent value of the life cycle costcomponents.
4. Selecting the lowest life cycle cost alternative afterconsidering non-economic factors, if any.
Building Ecnomics, Quantity Surveying& Cost Estimation
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Life Cycle Costing Methodology
107
Life cycle costing, in its principle, considers bothcost and time, its methodology can besummarized as:
1. Identifying all the current and future life cycle costs that arisefrom owning and operating a facility.
2. Aggregating these costs based on the expected accrual time.3. Discounting the costs to a common base date to come up with
the present worth (the current value of all costs and savings),or the annual equivalent value of the life cycle costcomponents.
4. Selecting the lowest life cycle cost alternative afterconsidering non-economic factors, if any.
Life Cycle Costing Model
108
p
nd
CnqCnXNPV
1n )1(
Where:c: the cost in year n
q: the discounting factor
d: the expected real discount rate per annum
n: the number of years between the base date and the occurrence of the cost
p: the period of analysis
Building Ecnomics, Quantity Surveying& Cost Estimation
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Life Cycle Costing Simple Model
109
LCC = Construction cost + PV(Recurring Cost) - PV(Residual Cost)
Time Value of Money
110
If an amount P is invested at time t = 0, the amount Fn accumulated nyear at an interest rate of i percent per year will be:
F = P(1+i)n
Reverse the situation to determine the P value for a stated amount Fthat occurs n periods in the future:
P = F(1+i)-n
Where :
F: Future value at year n.P: Present value at time 0.i: interest rate.N: number of years/interest periods
Building Ecnomics, Quantity Surveying& Cost Estimation
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Example:
111
Two design alternatives were prepared for a greenbuilding, the initial design and construction cost foralternative (A) was around $85,000, while it wasaround $80,000 for design alternative (B). The annualenergy consumption according to the designalternative (A) was estimated to be around 6,200kWh/year, while it was estimated to be around 16,000kWh/year for design alternative (B). Given that theenergy price rate was around 0.16 $/kWh, and at adiscount rate of 5%, which design alternative is moreeconomical from life cycle perspective for an analysisperiod of 25 years?
Solution:• Life cycle cost analysis for design alternative 1:
• Design and construction cost = $85,000• Annual energy recurring cost = 6,200 kWh/year x 0.16 $.kWh = $992
• Net present value for energy = = $13,981.19
• LCC = Design and Construction cost + PV (Energy cost)
• = $85,000 + $13,981.19• = $ 98,981.19
25
1n )1(
)(cosni
ntEnergy
Year Futurevalue
PresentValue (PV)
1 992 944.762 992 899.773 992 856.934 992 816.125 992 777.266 992 740.257 992 705.008 992 671.429 992 639.45
10 992 609.0011 992 580.0012 992 552.3813 992 526.0814 992 501.0315 992 477.1716 992 454.4517 992 432.8118 992 412.2019 992 392.5720 992 373.8721 992 356.0722 992 339.1223 992 322.9724 992 307.5925 992 292.94
Total 24,800 13,981.19
n
n
ii
i
)1(
1)1(cost xenergyAnnualCost)PV(Energy
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Solution:• Life cycle cost analysis for design alternative 2:
• Design and construction cost = $80,000• Annual energy recurring cost = 16,000 kWh/year x 0.16 $.kWh = $2,560
• Net present value for energy = = $36,080.50
• LCC = Design and Construction cost + PV (Energy cost)
• = $80,000 + $36,080.50• = $ 116,080.50
25
1n )1( ni
Cn
n
n
ii
i
)1(
1)1(cost xenergyAnnualCost)PV(Energy
Year Futurevalue
PresentValue (PV)
1 2,560 2,438.102 2,560 2,322.003 2,560 2,211.424 2,560 2,106.125 2,560 2,005.836 2,560 1,910.317 2,560 1,819.348 2,560 1,732.719 2,560 1,650.20
10 2,560 1,571.6211 2,560 1,496.7812 2,560 1,425.5013 2,560 1,357.6214 2,560 1,292.9715 2,560 1,231.4016 2,560 1,172.7717 2,560 1,116.9218 2,560 1,063.7319 2,560 1,013.0820 2,560 964.8421 2,560 918.8922 2,560 875.1423 2,560 833.4624 2,560 793.7725 2,560 755.98
Total 64,000 36,080.50