Rate Analysis: what is it and what’s the correct procedure for building up a unit rate
Rate Analysis can be defined as the analytical study (qualitative and quantitative) that leads to the definition of a new unit rate referring to a given job or work type, by identifying its basic elements.
But when does a Rate Analysis become necessary?
In normal practice, a quantity surveyor uses the price list items acquired from a regional or any other official Price Book. But what if a specific work description isn’t available? Well in these cases, we need to resort to “building up” the unit rate by identifying the elementary resources as components of the analysed rate.
How is a new unit rate defined?
The starting point to define the new unit rate, is to run a careful analysis of the elements and resources that build up to form the new work item.
The elementary components, or resources, are generally the following:
• hired equipment
• company profits
The cost of labor is defined by the type of workers (specialised, qualified operators) and the hours of work necessary per quantity unit.
To define the cost of the necessary materials, you need to determine the following:
• the purchase price
• on-site transport costs
• stacking and storage
• waste (an excess percentage of unwanted material due to the production processes)
Meaning the rented equipment or machinery that may be of 2 main types:
• “operated equipment”: this means that the rental cost is inclusive of both the equipment, or machinery, and the necessary operational labor (eg. a crane and the crane operator).
The operated equipment rental includes the labor costs required for its use, the fuel, lubricants, insurance costs and maintenance.
• “without operator”: in this case the equipment or machinery is rented with the operator. This kind of freight cost does not include the cost due to labor required for its use. Neither does it take into account the cost for fuel, lubricants or maintenance.
Overheads are the costs incurred in an indirect way and not directly related to the works or to the construction site.
On average they are quantifiable with a fixed percentage of between 13% and 17% – (may vary from zone to zone).
Overhead costs include the following items:
• Administrative and Management
• site technical systems
• surveys and audits
• temporary occupations and security arrangements
Known as the expected revenue for the company and is typically 10% of the costs incurred.
Rate Analysis: The advantages of using a software
In this section we’ll see how to set up a rate analysis using a construction estimating program, PriMus by ACCA software.
The software allows you to dynamically calculate the rate of a given work item.
PriMus, in fact, allows you to easily and dynamically build up a new rate by means of a rate analysis feature and therefore calculate the total unit rate from elementary resources or even from other structured rates whose final rate is the result of a combination of several sub-resources. To determine the rate of an item, the following may be used:
• primary costs
• compounds costs
• data from price lists
• data from other rate analysis items and references
The Rate Analysis document can also be very useful for the building company in the preparation of tenders or in setting up the site, but also for the surveyor who needs to draft a project plan of works or follow the works on-site.
PriMus can also determine the “Site Requirements” through a quantitative evaluation of those elementary items (materials, human resources, equipment, etc.) needed for the project.
This aspect may be different from country to country and for this reason, where in Brazil, the “Site Requirements” is replaced by the so called “ABC analysis”, this has been integrated into the software with the ‘ABC curve”, thus adapting to local legislation. One of the most obvious advantages of using a software to perform a Rate Analysis is the dynamic management of price variations. With the software, in fact, we can change the unit rate of an element used in a rate analysis and notice that the any analyzed rates that contain the varied rate, are all updated throughout the entire construction estimate document.
The Rate Analysis module configuration allows you to set the values for Overheads, Company Profits, etc).
The analysis elements can be acquired from other reference documents too such as price books, other price lists, estimates, etc. In the numeric fields, you can:
• insert quantities and amounts, algebraic formulas
• acquire values from tables
• use specific variables
Use of specific variables can be very useful in order to automatically acquire values from other elements used in the same rate analysis. In this case, all price list item data is seamlessly updated.
For each item, the software also allows the user to customise the data settings so as to obtain a useful amounts summary to print as a Rate Analysis report, a Site Materials Requirements report (with or without the unit rates) and a construction estimate.