Module 42 · Core · 9 min read

Building an estimate from rates

You will be able to: Follow the fixed order in which Zeyto prices an estimate item; Compute the unit cost, cost and sell rate of an item; Use quotes and the rate library to support the numbers.

  • Read not done yet
  • Self-check: not taken not done yet
  • Lesson complete not done yet

An estimate in Zeyto Construction & Contracting is a tree of groups and priced items. Each item is built up from components taken from the rate library: materials, labour, plant, subcontract and preliminaries. The library holds rates, productivity norms (crew size divided by output per hour, which turns a quantity into labour hours) and assemblies, which are saved build-ups you copy onto an item.

The Rate Library listing materials, labour, plant and subcontract rates with unit and wastage.

Rate Library: the components of every rate.

Rate Library: the components of every rate.

The fixed pricing order

  1. Direct cost: quantity times the sum of the component unit costs. A component's unit cost already includes its wastage: quantity per unit times (1 + wastage) times rate.
  2. Allowance: the risk and escalation percentages applied to the direct cost, kept in the same nature.
  3. Adders: bonds, insurance, labour camp, visas, permits and similar are shared over the included items in proportion to cost and booked to the nature Other.
  4. Cost: the sum of the nature amounts, so the budget by nature adds up to the cost exactly.
  5. Overhead then profit on cost: sell = cost x (1 + overhead%) x (1 + profit%).
  6. Sell rate is rounded to two decimals (a tender rate is quoted in fils), and the sell amount is quantity times that rounded rate.
An estimate of a tender showing the tree of groups and priced items, each built up from rate library components with overhead, profit and risk markups.

An estimate: items built up from the rate library.

An estimate: items built up from the rate library.
Floor tiling, 1,000 m2Per m2: tile 40.00 with 5% wastage gives 42.00; adhesive 5 kg at 1.20 gives 6.00; labour 0.5 hour at 20 gives 10.00. Unit cost is 58.00. Direct cost for 1,000 m2: material 48,000, own labour 10,000. Risk 2% plus escalation 1% adds 1,440 to material and 300 to labour, so 59,740. A permit and bond adder of 1,260 is shared to this item, giving a cost of 61,000. With overhead 8% and profit 10%: 61,000 x 1.08 x 1.10 = 72,468. The sell rate is 72.47 per m2 and the sell amount is 72,470, 2.00 more than the unrounded figure because the rate is rounded first. The margin on sell is 11,470, or 15.83%.

The cost of this item is then the baseline budget when you win: material AED 49,440, own labour AED 10,300 and other AED 1,260, which add up to AED 61,000.

Quotes and options

  • Quotes from subcontractors and suppliers are entered per item with the UAE terms that change the real price: retention, advance and guarantee, insurance, labour camp and visa, and permit fees. The comparable cost adds those lines to the price so that offers can be compared fairly.
  • Selecting a quote puts its comparable cost into the item's build-up. Choosing a blocked supplier, a supplier graded D, or a dearer offer needs a written reason.
  • An optional item that is not accepted is priced and shown but left out of every total, the budget and the award.
Watch outThe percentages above are an illustration. The overhead, profit, risk and escalation percentages on a real tender are your company's decisions and are set on the Markups tab of the estimate.
TipDo not tune the sell rate directly to hit a target price. Change the markup or the cost; the build-up then still explains the rate if the client asks.

Walk it through

  1. Recompute the example with overhead 6% and profit 8% and a different adder.
  2. Check that your own unit cost includes wastage inside each component.
  3. In the demo, open an estimate item and press Build-up. Without access, build a one-line estimate in a spreadsheet using the six steps.
Open the live demo

Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.

Key takeaways
  • Pricing has a fixed order: direct, allowance, adders, cost, overhead then profit, rounded rate.
  • Wastage lives inside component unit costs.
  • Quotes are compared on comparable cost, including retention, advance, camp and permit terms.

Check yourself

5 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.

1. A tile has a unit price of 40.00 and a wastage of 5%. In the build-up, what unit cost does 1 m2 of tile carry?

2. Per 1,000 m2, direct cost is material 48,000 and labour 10,000, with risk 2% and escalation 1%. What is the cost after allowance?

3. Cost is AED 61,000, overhead 8% and profit 10%. The sell price before rounding is:

4. A subcontractor quote has price 100,000 plus retention terms and a labour camp charge. How should it be compared with others?

5. An optional item that is not accepted is included in the BOQ totals but excluded from the budget.

Previous: Categories, codes and the six cost naturesNext: From tender to a locked contract baseline

Practice questions for this module · Printable study sheet