School of Engineering and Architecture
Civil Engineering Department
Construction Engineering and Management Strand
CSI Master Format Cost
Estimating components
Module 2 Chapter 3 – CSI Master Format Cost Estimating
components
Objective After this chapter, the student should be able to:
∂ Apply the accounting concepts in construction projects.
∂ To analyze and design an improved cost engineering
Content This chapter focuses on
∂ Direct Cost
∂ Unit Cost Theory and Practice Materials
∂ Labor, Construction Laborer, Labor Productivity, Labor Costs
∂ Equipment Maintenance
∂ Equipment Cost
∂ Equipment Cost of Owning and Operating
∂ Element for Calculation of Ownership Cost
Related These are supplemental content necessary for this chapter
∂ Holm, L. (2019). Cost accounting and financial management for construction
Readings project managers. Oxon: Routledge
∂ Pratt, D. J. (2019). Fundamentals of construction estimating (4th ed.). Australia:
Cengage Learning
Page 1 of 12
Module 1 – Chapter Title
Direct Costs
The costs and expenses that are accountable directly on a facility, function or product are called
as direct costs. Labor, Material and Equipment.
These costs for a construction project are developed as estimates by means of detailed analysis of
the contract activities, construction method, the site conditions, and resources.
Detailed Estimates
▪ Often used as a contractor’s budget estimate.
▪ Include incredibly detailed information on quantities, costs and rates
CSI Master Format
(Construction Specification Institute):
Master Format is a standard for organizing specifications and other written information for
commercial and institutional building projects in the U.S. and Canada. Master Format was first
released in 1975.
Division 00 - Procurement and Contracting Requirements
Division 01 - General Requirements
Division 02 - Existing Conditions
Division 03 - Concrete
Division 04 - Masonry
Division 05 – Metals
Division 06 - Wood, Plastics, Composites
Division 07 - Thermal and Moisture Protection
Division 08 - Openings
Division 09 - Finishes
Unit Cost Theory and Practice Materials
A unit cost is simply the "average total cost" of producing one unit of output. A unit cost is calculated
by dividing the total cost of production by the total number of units of output produced.
It relies on linking or tracing costs to outputs, and this information is then provided to managers.
Managers strive to establish causal relationships between costs and cost objects to determine why
costs were incurred.
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Unit Cost derivation is usually divided into two parts. These are the Direct Costs and the Indirect
Costs.
Direct Costs - are accountable directly on cost of materials, facility, function or product, and
equipment.
Indirect Costs – can be either variable or fixed. These would be personnel costs, insurances,
procurement of permits, etc.
Materials
These are components of structures which are used to erect infrastructures. Each material has
different properties such as weight, strength, durability and cost which makes it suitable for certain
types of applications.
The production of these materials is subject to quality control procedures that involve inspection
and testing according to national standards and scientific testing methods. These materials are:
Concrete, Steel, Wood, and Masonry.
➢ Concrete
▪ It is a composite material made from mixing cement, aggregates such as sand, crushed
stone, and water. The properties of concrete depend on the ratios used in the mix design.
▪ Fresh concrete can be poured into form works to take any shape or form and takes time to
harden into a stone-like material.
➢ Steel
▪ It is one of the most durable building materials available that has great tension and
compression strength. It is excellent for structural framework of tall structures and huge
industrial complexes due to its high strength-to-weight ratio.
▪ It is also available in standard shapes such as angles, I-beams and C-channels. These shapes
can be welded together or connected using high-strength bolts to build structures capable
of resisting large forces and deformations.
➢ Wood
▪ It's a lightweight, highly machinable natural. It also provides excellent cold insulation,
making it an excellent building material for homes and residential structures.
▪ Wood that comes in larger dimensions are referred to as timber or beams and are
commonly used to construct the frames of large structures such as bridges and multi-story
buildings.
➢ Masonry
▪ Masonry has a high resistance to compression loads and strains, making it ideal for use in
load-bearing walls.
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▪ It is a long-lasting and fire-resistant material, although it is sensitive mortar and
poor craftsmanship. CHB, brick, and stone are examples of masonry materials.
Construction Labor:
The construction industry, to which these craftsmen belong, is one of the most labor-intensive
industries in the world. The labor cost component of a building project often ranges from30 to
50%, and can be as high as 60% of the overall project cost. Therefore, it is clear that construction
labor is a vital component of a construction project
Labor
▪ Economics
- is one of the three ‘factors of production’, along with land and capital. Historically, the
three factors have been required in combination to create a business or enterprise.
▪ Construction
- labor is the term usually given to unskilled, manual workers on a site, what is normally
termed ‘manual labor’ or ‘site labor’. It may do a variety of jobs including, digging, cleaning,
catering, carrying and lifting.
Construction Laborer
➢ Does physical labor on construction sites
➢ Prepare sites by cleaning them, loading or unloading materials, and removing hazards
➢ May also run types of equipment, or put together and take apart scaffolding and other
temporary structures
➢ They are essential to highway construction, building and environmental remediation
Construction Laborer Responsibilities & Requirements
Responsibilities:
▪ Operate and care for construction equipment and machines.
▪ Help equipment operators, carpenters, and other skilled labor when necessary.
▪ Prep construction sites by cleaning obstacles and hazards.
▪ Load or unload construction materials.
▪ Put together and take apart temporary structures, such as scaffolding.
▪ Remove, fill, or compact earth.
▪ Follow instructions from supervisors.
▪ Assist craft workers.
▪ Ready to learn from on-the-job training when necessary.
▪ Perform site clean-up.
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Requirements:
✓ Must have a valid driver's license.
✓ Be at least 18 years of age.
✓ High school diploma.
✓ Ability to work in all weather.
✓ Ability to do physical labor and other strenuous physical tasks.
✓ Must have experience as a general laborer in the construction industry.
✓ Must be punctual and reliable.
Labor s production rates (Productivity)
▪ A production rate is defined as the number of units of work produced by a person in a
specified time.
▪ The time that a labor will consume in performing a unit of work varies between labors and
between projects and with climatic conditions, job supervision, complexities of the
operation and other factors.
▪ Construction productivity is defined as the quantity of work produced in a given amount of
time by a worker or a specific crew, that is, the quantity of construction output units
produced in a given amount of time or a unit time. The formula for productivity is presented
in:
Estimating work duration
Determining the total work duration for a task involves knowledge of the quantity of work required
for the task and the production rate for the specific crew that will be performing the work. The
duration of an activity maybe estimated as given in:
Basic Principle for Estimating Labor Costs
Labor costs in construction are determined by two factors: monetary and productivity
The monetary factor is related to hourly wage rates, wage premiums, insurance and taxes.
The formula for computing the total cost of labor is quite simple. It requires the knowledge of the
total work hours or labor hours needed to perform all the tasks and then applying the
corresponding wage rates.
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The formula for calculating the total cost of labor is shown in:
Construction Equipment
Construction equipment refers to heavy-duty vehicles, specially designed for executing
construction tasks, most frequently ones involving earthwork operations. They are also known as
heavy machines, heavy trucks, construction equipment, engineering equipment, heavy vehicles, or
heavy hydraulics.
Types of Construction Equipment
There are several types of construction equipment that is been used in the industry.
Construction equipment can be categorized into 4 main sections based on purpose and use; they
are:
▪ Earth Moving equipment
▪ Construction vehicle
▪ Material Handling Equipment
▪ Construction Equipment
➢ Earth Moving Equipment
Heavy equipment is essential for construction jobs of almost any size, from home building to large-
scale commercial and civil projects. Earth-moving equipment covers a broad range of machines
that can excavate and grade soil and rock, along with other jobs.
➢ Construction Vehicles
Construction companies have uncovered which are the most popular types of construction
vehicles that they are using in order to achieve great performance. Still, one must not forget that
great performance leads to success.
➢ Material Handling Equipment
The term ‘material handling equipment’ is a broad one. There’s plenty of situations where it’s critical
to move large and often heavy materials in a production environment. Any piece of equipment that
helps with this process could be labeled ‘material handling equipment’.
➢ Construction Equipment
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Heavy equipment functions through the mechanical advantage of a simple machine, the ratio
between the input force applied and force exerted is multiplied. Some equipment uses hydraulic
drives as a primary source of motion.
Heavy Equipment:
▪ Track/Wheel Excavator ▪ Tamping Rammer
▪ Loader ▪ Rebar Cutters
▪ Backhoe Loader ▪ Hand tools, such as; screwdrivers,
▪ Compactor/Roller brushes, trowels, wrenches, knives,
▪ Bulldozer crimpers, clamps
▪ Cranes ▪ Power tools: mixers, saws, cutters,
▪ Welding Machines drills, grinders, breakers
▪ Excavator
-are commonly used for projects such as demolition, dredging rivers,
material handling, or just simply heavy lifting of objects.
▪ Loaders
-A loader is a heavy equipment machine used in construction to move or
load materials such as soil, rock, sand, demolition debris, etc.
▪ Backhoe Loader
-is also known as a rear or back actor. The backhoe is an excavating
equipment digger that has a bucket at the end of a two-part articulated arm.
▪ Compactor
-is a type of construction machine used to apply pressure to soil that
reduces air pocks and allows the soil to handle heavier weights on even
surfaces.
▪ Bulldozer
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-are strong machines that mainly assist with pushing, digging, excavating,
and leveling materials like soil and debris at a work site.
▪ Cranes
-to lift heavy materials such as steel and concrete.
#Tips on How to Rent Construction Equipment
➢ Determine the Exact Type of Equipment You Need
➢ Get a Quote for the cost of rental equipment
➢ Ask Whether You Will Be Charged Additional Fees
Equipment Preventive Maintenance
Preventive Maintenance of Equipment: These definitions and thoughts of dedicated people to
maintain, with years of professional experience, all agree that handling equipment, involves not
only perform maintenance, supplies, fuel, oil changes or repairs, but these activities with economic
outlook and knowledge of the costs involved, not only to know them but to control and manage
them.
➢ Maintenance manager
Managers’ preventive maintenance of equipment who have precise control of the management of
reports, follow-ups, and knowledge of the actual total costs of their operations are valuable people,
in their company, or organization.
➢ Maintenance Mechanic
A maintenance mechanic takes care of equipment. Technical concepts about mechanical
maintenance:
The maintenance tasks are divided into two main groups:
▪ Scheduled maintenance
- Scheduled maintenance and unscheduled maintenance are part of the normal operations of an
industrial facility.
-Within scheduled maintenance, we have:
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-Preventive maintenance
-Predictive maintenance
-Planned corrective maintenance or backlogs
▪ Unscheduled maintenance
- Unscheduled maintenance, on the other hand, is a more reactive approach that is utilized when a
component or machine has stopped working
-Within the unscheduled maintenance, we have:
-Unanticipated corrective maintenance
Equipment Cost
Estimating equipment cost involves identifying the OWNERSHIP and OPERATING COST.
Ownership
Ownership costs include:
▪ Initial Cost
▪ Financing
▪ Depreciation Cost
▪ Tax and Insurance
➢ Initial Cost
▪ The initial cost is the total cost required to purchase a piece of equipment
▪ This initial cost is the basis for determining other costs related to ownership as well as
operating costs
➢ Investment Cost
▪ This money either be borrowed from a lender, or it will be taken from reserve fund of the
contractor
P = Purchase Price
F = Salvage Value
n = useful life
I = interest rate
➢ Depreciation Cost
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Depreciation represents the decline in market value of a piece of equipment due to age, wear,
deterioration, and obsolescence.
Can result from:
▪ Physical deterioration occurring from wear and tear of the machine
▪ Economic decline occurring over the time
Three common methods for calculating depreciation:
➢ Straight-line depreciation
-is the simplest to understand as it makes the basic assumption that the equipment will lose the
same amount of value in every year of its useful life until it reaches its salvage value.
➢ The sum-of-years digits
-assumes high rate of depreciation at the early age of an asset and decreasing rate at its aged life
➢ Sinking Fund Method
-This method assumes that a uniform series of payments are deposited into an imaginary fund at
a given interest rate
-The amount of yearly depreciation is invested in a compound manner for the remaining period
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Tax and Insurance Cost
The cost of insurance and tax for each item of equipment may be known on an annual basis. In this
case, this cost is simply divided by the hours of operation during the year to yield the cost per hour
for these items
Insurance cost represents the cost incurred due to fire, theft, accident, and liability insurance for
the equipment. Tax cost represents the cost of property tax and licenses for the equipment.
Equipment Cost of Owning and Operating
▪ Construction equipment is one of the biggest investments carried by construction industry
▪ Owning cost and operating cost of equipment has significant impact on profitability of work
executed
▪ The ownership costs of construction equipment can be categorized into 'fixed cost' and
'variable cost’.
▪ Owning cost and operating cost need to be calculated based on the financial investment
terms and condition, depreciation method and operating condition of equipment
Ownership and operating costs of work need to be calculated based on:
➢ Units of work production per hour (ton/hr or cum3/hr)
➢ Cost per hour (Rs./hr)
➢ Unit Cost (Rs./ton or Rs./cum)
The ownership cost of the construction equipment can be categorized into:
➢ Fixed Cost
➢ Variable cost
➢ Employee Cost
Fixed Cost:
-are those which can be predetermined as accumulating with the passage of time, rather than with
the rate of work.
Commonly included in fixed costs are:
o Equipment Depreciation
o Interest on investment
o Taxes
o Storage and protection
o Insurance
Variable Cost
Variable cost incurred only when the machine is put to work.
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These costs include:
1. Cost of fuel
2. Lubricants
3. Wear Parts
4. Equipment Maintenance and Repairs
Employee Cost
Employee costs are those costs associated with employing people for
o Operation
o Maintenance
o Supervision
Employee cost includes:
o Direct wages
o Food contributions
o Transport
o Social costs
Element for Calculation of Ownership Cost
▪ Purchase price ▪ Storage and Protection Cost
▪ Wear parts cost ▪ Fuel cost
▪ Economic Life ▪ Fuel consumption per hour
▪ Ownership period ▪ Cost of major overhaul
▪ Residual Value ▪ Life time of major overhaul
▪ Depreciation time ▪ Planned Maintenance Cost
▪ Annual depreciation cost ▪ Life time of planned maintenance
▪ Interest rate ▪ Cost of wear parts
▪ Interest cost ▪ Lubricants
▪ Machine tax ▪ Operator Cost
▪ Insurance Cost(annual) ▪ Operating hours
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