labor costs, material costs, and transport costs Estimating
Table of Contents
Costs Estimating
Electrical installation work operates within a highly competitive business landscape, where contracts are typically awarded to the firm or company presenting the most economical estimate for project completion. Exorbitant demands from a contracting party can lead to disqualification from contract acquisition, while overly low estimates may result in post-completion losses for the firm or individual. Hence, accurate estimating costs play a pivotal role in sustaining a successful business.
It is evident that crafting a precise estimate is an art, involving the meticulous calculation of various factors such as itemized costs, material expenses, and labor costs essential for project completion. Prior to initiating any project, a thorough estimation of the total costs expected during project completion is crucial. This proactive approach prevents untoward situations during contract execution and ensures the work doesn’t halt prematurely due to a lack of funds resulting from an inaccurate estimate.
The comprehensive evaluation of costs from project inception to completion is commonly referred to as a ‘cost estimate.’ This estimate places special emphasis on considering labor costs, material costs, and transport costs. Emphasizing the importance of estimating costs throughout the business process underscores its strategic significance in securing contracts and ensuring successful project outcomes.
Labor Costs Estimating
The total amount of money consumed till the completion of any project is called labor cost. In other words, the cost incurred on labor during the completion of any project is known as labor cost. Labor cost includes all salaries of a project ranging from the salary of a common laborer to the salaries of officers, which is recorded in a table on a per day basis. It is worth remembering that labor costs depend on the type of project or work, nature of work, and labor market. For further explanation, labor rates have been given in table 9.1.
Table 9.1 labor Rates
| S. No | Description | Unit | Rates (Rs.) |
| 1
2 3 4 5 6 7 8 9 10 11 12 |
Mate / General worker
Blacksmith Grade II Blacksmith Grade I Carpenter Grade II Carpenter Grade I Fitter Grade II Fitter Grade I Mason Grade I Painter Wireman Grade II Wireman Grade I Electrician / Supervisor |
Per Day
Per Day Per Day Per Day Per Day Per Day Per Day Per Day Per Day Per Day Per Day Per Day |
250
350 400 350 400 350 400 500 400 350 450 500 |
Material Costs Estimating
By material costs estimating, we mean the total cost incurred on electrical appliances or equipment being used during the completion of any project. In other words, the cost incurred on materials required during the completion of any project is called material cost.
In order to establish the material costs of any project, first, a list of materials being used in the project is prepared. Then per-unit rates of material are recorded in the prepared list from a booklet or after confirmation from the market. In the end, the total cost is found by multiplying the quantity of material in the material list with its per-unit rates. In this way, the cost of all materials is summed up to determine total material costs.
The best method to find out a material cost is that a table be prepared, which must contain the under mentioned columns;
(1). Material nomenclature along with a complete detail
(2). Quantity
(3). Unit
(4). Rate per unit
(5). Total cost (in Rs.)
A similar table has been illustrated below to find out material costs, in which material detail, quantity, unit, rate per unit, and total cost have been entered. For elucidation, the following items have been recorded in the table.
Table 9.2 Material Cost Estimate
| S. No | Description of Material with Specification | Quantity Required | Unit | Rate (Rs.) per Unit | Amount |
| 1
2 3 4 5 |
PVC Cable 3 / 0.029”
PVC Pipe ¾” Wooden Screw ½” Junction Box ¾” Lamp Holder 5A |
5
200 2 3 4 |
Coil
Meter Packet Dozen No. |
350
5 20 50 10 |
1750 1000 40 150 40 |
Transport Costs Estimating
In a situation of a project site being located far off from a market or factory etc., every type of material is supplied utilizing transport. Thus, all types of transportation costs, which are incurred for the provision of any type of required material from factories or markets to the project site, are known as transportation costs. For bringing necessary project-related material (i.e., towers, electrical wires, insulators, sand, crushed stones, cement, etc.,) required for installation of any electrical project e.g., high tension electrical line, transport is obviously required, and such expenses being incurred on transport, are included in transportation costs. If the desired material is available nearby, the transport cost will be low, however, if the material is required to be supplied from a distant place, the transport cost will be high in such a situation. Some of the electrical projects (e.g., grid station, powerhouse, etc., tend to be so large, that a temporary railway track is spread from the railway station up to the project site for a safe and easy supply of gigantic and heavy machinery. Moreover, this also ensures a profuse and round-the-clock supply of material to the project site. Remember that transport costs further increase during such projects. Often, a railway track is spread permanently for a power station, so that when work starts on the project, the supply of fuel (coal, diesel, etc.) continues easily and uninterruptedly to the project site.
It is to be reminded here that transport costs depend on the type of a project, its location, nature of work, the distance of the project from the market or factory, type of transport available, transport rate, etc. A change in any one of these factors may lead to a change in the transportation cost.
Determination of labor Costs
Any one of the following methods is adopted for finding out the labor cost of any project;
(i). This is the simplest and most widely accepted method for the determination of labor costs of any project. Under this system, a total number of points (along with the installation of mainboards and switchboards) to be used in any building, is found. Two points are counted for the mainboard, or switchboard whereas only one point is for every sub-circuit and added to the total number of fans, lights, and socket points to be installed in the building. Then according to the type of wiring, total labor cost is determined by keeping in view per unit labor cost according to a fixed market rate. For example, labor charges are received as 35 – 40 rupees per point for batten wiring, 30 to 35 rupees per point for surface conduit wiring, and 40 to 50 rupees per point for concealed wiring. (Remember that per unit labor cost keeps changing with time). for further elaboration, see table 9.3 below;
Table 9.3 Total labor payment
| S. No. | Description of unit work Conduit/ Batten system of wiring | No. of points | Rate (Rs) | Total Payment (Rs.) |
| 1
2 3
4 |
Main Board installation
15 switchboards @ 2 points for each Installation of bell push and having underground wiring up to main gate @ 6 points per bell Total points, lights, fans, sockets |
4
30
6 40 |
40
40
40 40 |
160
1200
240 1600 |
| Total labor charges | Rs. 3200 |
(ii). Total labor cost is determined according to one day individual labor work of the total number of labors employed on a project.
(iii). About 15%, 20%, or 25% of total material costs are reserved as labor charges. For explanation, see table No. 9.4 below;
Table 9.4 – Determination of Labor Charges
| S. No. | Description of material | Cost | Rate (Rs.)
% Of Total Material |
Cost | |
| 1 | Total cost of wiring material | 6115.00 | 15 Percent | Rs. | 917.25
1600.00 |
It should be inculcated in mind that after getting the total amount by adding up material cost and labor cost, some part of this amount is reserved for emergencies or contingent situations, which is later on added to the total amount received through the summing up of labor cost and material cost. Thus, the actual amount consumed on a wiring project is found. This amount is generally known as a base cost.
Factors Affecting Labor Cost
After finding out estimation of any installation, labor cost occupies significant importance. The labor costs normally depend on the following factors, and changes or fluctuations in any one of these factors tend to change labor costs. Thus, it is very important to keep these factors in mind while finding out the labor costs.
(a). Type of Project
(b). Working Conditions
(c). The Labor Market
Type of Project
The electrical work is generally carried out during the construction of any building. As the nature of construction of different buildings varies due to the type of project, therefore, electrical work also differs with the condition of a building and the type of any project. As a result, the labor cost of electrical work also differs according to the type of project. Thus, labor costs depend on the type of project, and labor cost tends to change as a result of a change in the type of the project. From a contractor’s perspective, who is associated with some kind of a building construction work, labor cost changes, or get affected as a result of a change in the type of building. Types of projects, or types of buildings that may affect labor costs, are as follows;
(i). Residential Projects
Residential projects include speculative houses, high-class residences, apartment buildings, etc.
(ii). Commercial Projects
Commercial projects include small stores, departmental stores, theaters, cinema halls, offices, etc.
(iii). Institutional Projects
In this project, schools, hospitals, shelters, asylums, etc. are included.
(iv). Industrial Projects
As its name implies, this project includes factories, power plants, and powerhouses.
(v). Special Projects
Special projects include projects related to sewerage disposal plants, waterworks (works related to supply of water), and works related to mines, etc.
Working Conditions
Labor costs can also be affected, if working conditions on any project site are adverse instead of being appropriate. Under such a situation, the following factors have to be kept into consideration;
(i). Proper selection and timely delivery of material
(ii). Overall work progress of any project
(iii). Working Conditions on Project sites
(iv). Tools and Equipment
(v). Cooperation or Coordination with other Trades
(vi). Weather conditions
The detail of these factors is as follows;
(i). Proper Selection & Timely Delivery of Material
A perfect construction operation is one in which the basic principle of timely delivery of a proper quantity of a proper material on the project site, is followed. As a result of the implementation of this golden principle (selection of proper materials with correct numbers along with a timely delivery), progress can be executed in any construction operation, otherwise, the impetus of construction work will be sluggish, irregular, and inconvenient apart from a possibility of an increase in the labor costs.
(ii). Progress of The Job as A Whole
Factors like the completion and detail of any project, general supervision, contracting, and trade cooperation, have great importance and play an important role in the progress and pace of any project as a whole. The best results can be achieved only when the control of any project is in the hands of skilled engineers and architects. Moreover, the selection of a contractor should have been done very carefully and that work should have been completed on time. The economic benefits thus achieved will not only be restricted to contractors but as a result of the contractors working swiftly, such benefits will also be conferred on architects and owners, because architects can thus, finish up their tasks within a specified period of time. The owner is also protected against any risk of his amount getting stuck in the project due to timely completion of the project.
(iii). Condition of Working Spaces
The condition of working spaces can be classified into the following three types;
(a). Construction spaces (b). Condition of floors (c). Air condition
The main obstacle that an estimator has to confront is the lack of comprehensive information about the working spaces, and how narrow, thin, or unfavorable conditions (e.g., the existence of gas, air, steam, and water pipes) actually exist at the working spaces. In order to avoid such obstacles, an estimator should have complete knowledge of all such things, so that he can remove such complications. An electrician has to come across great difficulties while carrying on work in such places. He has to carry on his work within specified measured and narrow spaces. This difficulty deteriorates further when persons associated with different skills (e.g., carpenters, welders, pipefitters, masons, etc.) work together in one space simultaneously.
A contractor normally prepares his project accomplishment plan keeping in view the fine condition of any building. However, he can have such a typical situation very rarely. On the contrary, he has to face several types of hindrances. Sometimes, an electrical contractor has to finish his work on incomplete floors. Under such a floor condition, the use of wooden scaffolding (standing above which a mason carries on work) becomes forbidden, and the usage of stairways increases. In buildings, where floors have been constructed, chances of facing working hurdles exist through material and operating equipment.
Such obstacles tend to be quite large in numbers and different in nature. While working on a completed operational plant, generally several types of dangerous situations may be expected. In such spaces, running machinery, hand-driven trollies, stock heaps, factory labor, etc., cause obstacles in a contractor’s work.
During temporary nature projects, air condition surrounding the working space most often tends to be inconducive, and hardships can be experienced in working as a result of the presence of gases, vapors, excess heat, etc., in the air. Working nearby roofs of gas plants or furnace rooms, or in all such places where air condition is not normal, tend to be inordinately difficult.
(iv). Tools & Equipment
A contractor can get a benefit of up to 35% in labor costs through the application of proper tools and equipment (i.e., labor costs can be reduced by up to 35%). However, this advantage or saving depends on the type of installation. Through the application of the right tools, an economy in overall costs from 5 to 10% can certainly be gained. Remember, that this advantage cannot solely be achieved only through the application of proper tools and equipment, so long as the services of expert persons or technicians are not availed for a correct application of power tools and other specific construction equipment.
During the operation of a project, an expert and skillful contractor can economize on project costs in two ways. According to the first method, he economizes on his costs through the application of tools by common labor. In this way, a person can complete a large piece of work in a relatively less time. According to the second method, he can economize on his costs by availing of the services of a fewer number of mechanics, upon completing his work within a specified period of time. In such projects, persons associated with the work prove helpful in the completion of work quickly with less physical exhaustion.
(v). Cooperation with other Trades
There are a number of such methods, through which people associated with different trades can help out one another. For example, a contractor responsible for installing windows and ventilators in a building can arrange the delivery of power equipment to an electrical contractor according to his requirements. As a result, an electrical contractor can install such equipment according to his plan. An electrical contractor is generally provided with starters and motors etc., and so long as he does not finalize their connections, such equipment tends to remain to be under his responsibility. As all such equipment is provided to a contractor beforehand, therefore, offloading of the equipment from a vehicle, protecting it at a safe place, and security of this equipment tends to be the responsibility of a contractor. For the undertaking of such tasks, a contractor needs separate labor. However, a contractor can make substantial savings through the cooperation of persons associated with other trades. There are so many other methods as well according to the nature of work, through which different contractors can work together and cooperate with one another. They can use a staircase, scaffolding, equipment, or equipment used for lifting workers upward, collectively. Sometimes, they can also provide benefits to one another by letting out their tools, etc.
(vi). Weather conditions
Inconducive weather conditions have also to be kept in mind because labor loss can also occur as a result of this. A person who does not know that work progress on projects located in open places tends to be very slow as a result of intense heat, chilly weather, or stormy conditions, cannot be termed a contractor. Sometimes, the working pace becomes so slow as a result of rainy weather of intense heat, that work on the project has virtually to be halted. The underground work done outside a building is counted in some of these works, which are hugely affected by rains. The possibilities of continuing work on any snow-clad piece of ground, are higher as compared to the continuation of working in rainy conditions. As no definite forecasting can be possible about the coming rains, therefore, an economic loss can always be apprehended due to an interruption of work during rains. However, if any work has to be completed within a specific period of time, then work has to be continued even during inconducive or unfavorable weather conditions, which is a hard and costly affair. That’s the reason, a prudent contractor always has to take into his consideration the weather conditions for any outdoor projects and adds up such costs in his estimate to compensate for the extra costs resulting from delays in working due to weather conditions.
The Labor Market
Unfortunately, the construction business moves on in intervals (i.e., sometimes its speed progresses tremendously, and sometimes a deep slough is witnessed in them). That’s the reason, the demand for electricians associated with this trade, does not always remain the same all the time (that’s electricians’ demand increases rapidly due to a boom in business, and their demand decreases due to sluggishness in their business). Whenever such sluggishness happens in any business, even adequately skilled technicians and electricians, etc., can be deprived of their jobs, and occasionally they even get ready to work on half remuneration. On the contrary, during the peak period of any construction business, skilled and experienced electricians and mechanics, etc., are hard to be found, and their per day wages demand also increases. Thus, estimators fell prey to uncertainty during such a situation.
Many estimators change their labor units as a result of these changes taking place in the labor market according to the time requirements, without getting affected by these variations. These labor units are made for certain specific construction periods (normally for a more suitable time) performance of which is assumed nearly 100 percent. Its advantage is that whenever labor charges increase or decrease in a market according to the labor demand, a multiplier is being applied for compensation for these variations. As such, an increase or decrease in the remunerations of labor existing in the already prepared unit keeps occurring according to their demand. Thus, good and highly skilled mechanics and electricians remain available even during the peak days of business activity, and during lackluster business days, they do not have to lose their jobs.
In places where the labor force is available in large numbers, there is a likelihood of a dearth of labor jobs taking place in such places, and wherever the number of the available labor force is small, every labor gets a high remuneration in such places. However, all this depends on the availability of jobs at these particular places. One thing is, however, evident that both availability and non-availability of labor certainly casts an impact on the labor market. Sometimes, laborers from remote regions have to be called for jobs due to the scarcity of laborers in the locality or region, owing to which labor costs also tend to increase.
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