Cost Estimation And Considerations For Front Fence Installation Project

Overview of Front Fence Installation Project

From the site plan in Project 1, estimate the cost of a variation to provide the front fence as detailed on the plan. As the work is minor in extent, there is no need to measure in trade order but the tasks should be sequenced as they would occur in the construction process. Your builder’s bill should be prepared in P10 format.You can assume the site has been surveyed and identified with survey pegs to allow an easy set-out for the construction of the fence. Your builder’s bill should include the costing of the tasks identified and include a builder’s margin and GST. You should also nominate an appropriate ‘extension of time’ for the contract period to be extended if you believe it is
warranted. 

Reflecting on your answer for Part A, please answer the following questions:
1. Explain the basis of your calculation of the labour component of installing the metal panels
2. As this is a variation, will all the labour components be priced at the same rate as the work in the main project which has been tendered on? Explain your answer.
3. Charge out rates for directly employed labour can be higher than sub-contract rates.Have you utilised any directly employed labour in your costing? If so, nominate the component and explain how you costed the rate. Note: at the very least there should be a cost for supervision of the work.
4. Is there any danger in the work associated with procuring and fixing the sandstone capping? Elaborate on your answer and explain how you will cover any risks identified. 

1. Briefly discuss the benefit of estimating the cost of a task by separately costing the materials, labour and plant required.
2. List the considerations that would affect your decision on whether to tender on a project or not.
3. When estimating the cost of excavation, what are the factors which determine the size of plant needed to complete the task?
4. What does the builder’s margin include?
5. Why do engineering drawings take precedence over architectural drawings when estimating and constructing a project?
6. Why are many components of the construction process sub-contracted out to other parties?

7. Discuss the issues with obtaining quotations from specialist trades or companies with whom you have no previous association and no direct knowledge of.
8. List the on-costs associated with directly employed labour.
9. List five (5) conditions of a contract which may produce a cost on the project and therefore should be included in your bill of quantities.
10. Discuss how you would calculate the labour cost to complete a task when you have no knowledge of the time involved to carry out the work.

In this project, the front fence will be constructed along the side of the allotment that is bordering the 14 Hemmings Street. The other three sides of the allotment are bordering other allotments or properties and therefore they will require a boundary fence. By definition, a front fence is a fence installed within three meters next to a street boundary and is usually at the front of the plot.

The total length of the front fence is about 18 m.

Reinforcing mesh is only used to reinforce the concrete footing

Size of reinforcing mesh = 18m x 0.3m = 5.4 m² + 10% wastage

= 5.4m² + 0.54m² = 5.94m² = 6m²

Concrete footing: the dimension of the footing is 18m long, 0.3m wide and 0.6m deep

Volume of concrete footing = 18m x 0.3m x 0.6m = 3.24 m³ + 10% wastage

= 3.24m³ + 0.324m³ = 3.564m³ = 3.6m³

Size of bricks used: 480mm long, 230mm wide and 150mm high

Number of bricks used:  

= 150 + 135 = 285 + 10% wastage

= 285 + 28.5 = 313.5 = 314 bricks

Length sandstone capping: 600mm + 2(20mm) = 600mm + 40mm = 640mm

640mm * 9 pieces = 5760mm = 5.76 m + 10% wastage = 5.76m + 0.576m = 6.336m = 6.3 m

Length of metallic panels = 1.7m x 8 pieces = 13.6 m + 10% wastage

= 13.6m + 1.36m = 14.96m = 15m

Item	Particulars	Unit	Quantity	Rate ($)	Amount ($)
1	Site clearing and preparation	Item			200
2	Excavation	M3	3.6	100	360
3	Compaction	M2	6	5	30
4	Supply and delivery of reinforcing mesh	M2	6	5	30
5	Installation of reinforcing mesh	Item			15
6	Supply and placing of footing concrete	M3	3.6	200	720
7	Supply and delivery of bricks	No	314	0.7	219.80
8	Laying of bricks	Hours	24	40	960
9	Supply and delivery of metallic panels	M	15	100	1500
10	Installation of metallic panels	Hours	8	35	280
11	Supply and delivery of sandstone capping	M	6.3	200	1260
12	Installation of sandstone capping	Hours	10	35	350
13	Removal of excavated materials	Item			500
14	Final cleaning	Item			1000
	Sub-total 1				7,424.8
	20% Builder’s margin				1,484.96
	Sub-total 2				8,909.76
	10% GST				891
	Grand Total				9,801

Part B

Question 1

The labour component of installing the metal panels has been calculated based on the length of panels to be installed. In this case, the total length of the panels to be installed is estimated to be 15 meters. Since the metal panels will be installed after completing the footing, brick fence and sandstone capping, the work can be done in one day. Therefore if all the materials and equipment are available on site, one metal panel installer and one labourer can complete the work in 8 hours. The wage of a metal panel installer and labourer is $23 and $12 per hour respectively. This means that cost of labour per four for metal panel installation is $35. The work will take 8 hours hence total labour cost is $35 x 8 = $280.

Question 2

Since this is a variation, the labour components will not be priced at the same rate as the main project work tendered on. This is because the variation is not part of the original tender and therefore it has to be valued or priced using a different schedule of rates. This variation includes rates of added items of work such as excavating some volumes of soil and constructing a linear distance of fence. It also requires new resources for the added work, such as equipment, materials and labour (Sergeant, 2017). Some of these materials, equipment and labour, such as sandstone capping and metal panel installer, were not needed in the original tender and therefore should be priced separately.

Cost Estimation for Materials, Labour, and Plant

Question 3

Yes, some directly employed labour has been utilized in the costing. The directly employed labour component that has been utilized is the foreman and supervisor. The company will not hire a new foreman or supervisor but will use the ones involved in the main project. The cost of the foreman and supervisor labour has been creatively included in the builder’s margin. The builder’s actual margin for this project is 15% but it has been raised to 20%. By calculation, this gives extra $371.24. Therefore the company will retain a margin of 15% and use the extra $371.24 to pay for the foreman and supervisor’s for the work they will done in relation to the front fence variation.

Question 4

One of the dangers associated with sandstone capping work is defects. Sandstones are porous and therefore susceptible to various environmental conditions such as high humidity, chemical attack and stains. When the material absorbs water, it becomes vulnerable to bacterial growth, mold and stains that reduce its durability (Sandstone Pavers, 2016). These risks can be prevented by ensuring that the sandstone is properly sealed. Another risk is losses when these material is broken. Being a natural stone, sandstone costs higher than other artificial stones and therefore any breakage during installing will be very costly. This risk can be prevented by handling the sandstone carefully during installation.

Part C

Question 1

The main benefit of estimating cost of a task by separately costing the plant, materials and labour required is that each of these components has a different standard rate of cost. For instance, the rate of material is mainly affected by the quantity and quality of materials; the rate of labour is affected by the qualification of the staff, working hours and nature of work to be done (Manfredonia, Majewski, & Perryman, 2016); and the rate of plant is affected by the type of work, working conditions and size of plant. Using these different standard rates helps in lowering the total cost of work. Another benefit is that each of these components are affected by different conditions, such as demand and supply, regional market conditions, political climate, environmental conditions, etc.

For instance, when needed materials are available abundantly, it means their rate will be lower hence this estimation method will significantly reduce the materials cost. Last but not least, this estimation method helps the contractor to get separate discount for each component. For example, if the contractor is ordering large quantities of materials than equipment then he will get more discount on material costs than on equipment costs.  

Benefits of Separately Costing Materials, Labour, and Plant

Question 2

The considerations that would affect the decision on whether to tender on a project or not include:

• Type, size and complexity of the project
• The need for the project/work
• Type of client
• Location of the project
• Profitability of the project
• Resource requirements of the project
• Resource capability of the company, including financial and human resources
• Past experience on similar projects
• Compatibility of the project with the company’s goals, objectives, mission and vision
• Current work load of the company (number of projects being undertaken currently)
• Prospective competitors tendering for the same project
• Risks associated with the project
• Current market conditions in the region
• Political climate

Question 3

Factors that determine suitable size of plant for excavation work include:

• Project size and size/amount of the excavation work
• Available working space on the site
• Project timelines or deadline
• Labour considerations – availability of trained and untrained manpower
• Safety considerations(Mahindra Construction Equipment, 2017).
• Cost – the bigger the plant the higher the cost
• Site conditions
• Size and location of access ways to the site
• Specific job to be done, that is, whether it involves excavating and loading
• Logistical problems

Question 4

The builder’s margin include the following:

• Job costs – which include materials, labour and leased equipment costs, permits, gas, projected capital costs and other supplies.
• Overhead – which includes office rent, site accommodation, legal costs, accounting costs, bookkeeping costs, insurance, support staff salaries, outstanding debt payments and owner’s salaries.
• Sales and marketing costs
• Sales price
• Markup

Question 5

Engineering drawings take precedence over architectural drawings when estimating and constructing a project because the former are easy to read, understand and interpret than the later. Engineering drawings provide more technical details of the project thus making it easier to extract information such as dimensions and other specifications of the system components. These details are very useful when estimating a project and also when constructing the project on site as workers can easily interpret the drawings and construct them.

On the other hand, architectural drawings usually show how the structure should look like by providing details of its plans, sections and elevations (Shah, (n.d.)). These details alone are not enough to help estimate and construct a project. Additionally, engineering drawings go a step further and show the surroundings of the project, such as site conditions, which have significant impact on the cost and constructability of the project. For these reasons, engineering drawings take more precedence than architectural drawings.

Question 6

Many components of the construction process are being sub-contracted to other parties for the following reasons:

• To reduce cost of completing the work by reducing or avoiding errors and saving costs such as employment insurance, union fees and social benefits.
• To increase productivity because tasks get done faster by specialists
• To prevent complications and problems because the work gets done by qualified contractors.
• To ensure high quality products and services because specialized contractors get to do the work.
• To enhance strategic and proper utilization of resources because the company subcontracts what they are less good at.
• To preserve the company’s reputation
• To improve flexibility
• To access more specialized skills from subcontractors
• To meet deadlines
• To spread risks of the project
• To be able to handle large and complex projects

Question 7

Some of the issues with obtaining quotations from strange specialist trade or companies include the following:

Communication difficulties: it is rather obvious that communication is always a problem between two new partners. Since the partners still do not understand each other well, they may not disclose all the necessary information on time thus affecting accuracy of cost estimation.

Uncertain integrity and honesty: one of the issues is that their truthfulness and trustworthiness are not guaranteed and therefore their estimates cannot be trusted or relied upon with 100% confidence. This is because the new specialists may have some hidden agenda and therefore provide inaccurate estimates.

The actual accuracy level of the estimates provided may not be known or trusted because the specialists may be used new or unfamiliar methods. Since they are new, it may also be difficult to find out the accuracy of their past estimates.

The knowledge level and experience of the new specialists may not be known thus making it difficult to know whether to completely trust the estimates and rely on them or not.

The methods used and factors considered when estimating the cost may not be fully disclosed thus making it difficult to conclude whether all relevant variables have been accounted for in the cost estimates. It is important to note that these are new people and therefore information disclosure is still limited.

Ethical conduct is another very important issue when obtaining cost estimates from new specialist trades or companies. Some of these specialist trades or companies may be after fulfilling their personal interests and in the process can fail to provide accurate estimates.

Question 8

The on-costs associated with directly employed labour are:

• Superannuation guarantee.
• Productivity
• Payroll tax
• Workers compensation
• Long service leave (LSL) levy
• Annual leave loading
• Recreation leave

Question 9

Five conditions of a contract that may produce a cost on the project are:

1. Contract amount and adjustment
2. Prime cost sums, variations and provisional sums
3. Labour, materials and construction equipment
4. Fees, taxes and penalties
5. Changes or variations in the work(Standards Australia, 2005)

Question 10

There are several ways in which labour cost of a task can be calculated without knowing the time required to complete the work. One of the ways is using the labour rates of similar projects in the past. If the jobs are similar in terms of size, complexity and challenges, the same labour rates from the previous work can be to calculate labour cost of the present work. Another approach is consulting an experienced engineer or quantity surveyor for assistance.

These professionals have the expertise to help estimate labour cost for different construction projects. Other ways include considering the following factors: type and number of personnel needed for the job, the construction process to be followed, the size of the job, the complexity of the job (specifications and plans), the type of equipment to be used in the job, the type and quantity of materials to be used in doing the job, site conditions and potential risks of the project, among others.

References

Mahindra Construction Equipment. (2017, March 3). Factors Affecting Selection of Construction Equipment. Retrieved from MahindraConstruction Equipment:

Manfredonia, W., Majewski, J., & Perryman, J. (2016, November 2). Cost Estimating. Retrieved from Whole Building Design Guide: 

Sandstone Pavers. (2016, June 27). All your sandstone questions answered: Price, Types, Installation, Durability. Retrieved from Sandstone avers:

Sergeant, M. (2017, February 13). Valuing variations under a construction contract. Retrieved from Construction

Shah, Y. ((n.d.)). How Are Drawings Used in a Construction Project? 

Standards Australia. (2005). AS 4000-1997 General Conditions of Contract. Sydney: Standards Australia.