Estimation and costing

In short

Estimation is the calculation of probable quantities of materials, labour, equipment and money needed to complete a construction project before it is built; costing is the assignment of rates and money values to those quantities. A detailed estimate supports administrative approval, technical sanction, budgeting, tender invitation, contractor bidding, running-account payments and final-bill settlement. Indian practice follows IS 1200 (method of measurement of building and civil engineering works, in 28 parts), IS 3861 (plinth, carpet and rentable area of buildings), CPWD/State PWD Delhi Schedule of Rates (DSR) and departmental works manuals. It is examined in university Construction Management/Estimation papers, in GATE Civil (Construction Materials and Management), and in the technical rounds of L&T, Tata Projects, Shapoorji Pallonji, NBCC, CPWD, PWD, MES, RITES, NHAI and metro-rail recruitment, where quantity take-off and rate build-up are asked directly.

Explained

Purpose, data needed and types of estimate

• Why estimate: to decide feasibility, obtain administrative approval and technical sanction, provide for funds in the budget, fix the tender/contract value, control cost during execution and settle final bills.
• Data needed: complete drawings (plan, elevation, sections, details), specifications, schedule of rates, lead and lift of materials, site conditions and prevailing labour rates.
• Approximate (preliminary) estimates — used for a rough idea at the project-report stage:
  • Plinth area method: plinth area × plinth area rate (₹/m²) — the commonest; CPWD publishes plinth area rates periodically and they are revised, so the current issue must be used.
  • Cubical content method: plinth area × height (from floor to top of roof) × rate per m³ — more realistic as it accounts for storey height.
  • Unit base (service unit) method: cost per unit of utility — per bed for hospitals, per student for schools, per seat for auditoria, per km for roads, per ha for canals.
  • Approximate quantity method: running metre of wall × rate per metre of wall, split into foundation and superstructure — more accurate than plinth area.
  • Cost comparison/cost index method: cost of a similar completed work updated by the ratio of cost indices.
• Detailed estimate: item-wise measurement of every item of work from drawings, multiplied by rates from the schedule of rates or from rate analysis, plus contingencies and other charges. Accuracy is normally within about ±5%.
• Other estimates by purpose:
  • Revised estimate — fresh detailed estimate when the sanctioned cost is exceeded by more than about 5% (departmental limit; check the manual in force) or when material deviation occurs.
  • Supplementary estimate — for additional work taken up with the original work.
  • Supplementary and revised estimate — both situations together.
  • Annual repair (AR) / maintenance estimate — yearly whitewashing, petty repairs.
  • Special repairs estimate — major renewal such as re-roofing, re-flooring.
  • Complete estimate — includes all ancillaries: land, roads, water supply, electrification, landscaping, supervision.
  • Extension and improvement estimate, dismantling and demolition estimate (credit for salvage).

Parts of a detailed estimate and the standard allowances

1. Report — scope, basis, specifications adopted, rate source.
2. General specifications and detailed specifications.
3. Measurement sheet (details of measurement) — item, number, length, breadth, height, quantity.
4. Abstract of estimated cost — quantity × rate = amount, item by item.
5. Drawings, lead statement, analysis of rates (where no scheduled rate exists).
6. Contingencies: 3-5% of the estimated cost for unforeseen petty items; 5% is customary in PWD practice.
7. Work-charged establishment: about 1.5-2% for site staff paid from the work's funds.
8. Other provisions commonly added: tools and plant (T&P) 1-1.5%, centage/departmental charges (for deposit works, often of the order of 10-15% depending on the department's rules), petty supervision charges, and price escalation/contingency for price rise where the period is long.
9. Taxes: works contracts attract GST (as of now, composite works contracts for most government/infrastructure work are taxed at 18%, with concessional rates for a few specified categories; rates are notified and revised, so the current notification governs). Estimates state clearly whether rates are inclusive or exclusive of GST.

Units of measurement and the rules of IS 1200

• Units follow the nature of the item: volume (m³) for earthwork, concrete, masonry; area (m²) for plaster, painting, flooring, skirting and dado, formwork/shuttering, DPC, tiling, door and window shutters; length (m) for cornice, moulding, railing, pipes, kerbs, ridges and hips; number for sanitary fixtures, fans, manhole covers, trees; mass (quintal/tonne) for steel reinforcement and structural steel.
• Measurement is net as fixed in position; dimensions are recorded in metres to two decimals and areas/volumes to two decimals.
• Deductions are the most-examined rules:
  • Masonry: openings and recesses exceeding 0.1 m² are deducted; small openings up to 0.1 m² and bearings of lintels up to 0.1 m² are ignored.
  • Plastering: no deduction for openings up to 0.5 m²; for openings 0.5-3 m², deduction is made for one face only where both faces carry the same plaster (jambs and soffits not measured); for openings above 3 m², deduct the full area from both faces and measure jambs, soffits and sills separately.
  • Concrete: no deduction for reinforcement, or for openings/voids up to the limits stated in IS 1200 Part 2 (commonly 0.1 m²; different limits apply to RCC and mass concrete — quote the limit as per the relevant part).
  • Earthwork: measured in stages of depth (e.g. up to 1.5 m, 1.5-3 m) because output and rate change with depth; separate items for soft/hard/rock.
• Reinforcement: measured as the net length fixed in position × unit mass; laps, hooks and bends as per drawing/bar bending schedule are included, but wastage, binding wire, chairs and spacers are not measured separately — they are part of the rate.
• Thumb/derived mass: unit mass of a round bar = d²/162.2 kg/m (d in mm), from 7,850 kg/m³.

Methods of taking out quantities for buildings

• Long wall and short wall method (out-to-out and in-to-in): long walls measured out-to-out, short walls in-to-in, for each layer (footing, foundation concrete, plinth, superstructure); length changes at every change of thickness. Used when wall thicknesses differ.
• Centre line method: total centre line length × breadth × depth of each layer — the centre line length is the same for all layers of a wall of uniform thickness, making it quicker and less error-prone.
  • For each junction of a cross wall with a main wall, deduct half the breadth of the layer under measurement from the total centre line length, per junction (a T-junction = one deduction; a cross/+ junction = two).
  • For a simple rectangular or symmetrical plan with no cross walls, no deduction applies.
• Crossing method (partly centre line, partly long-short wall) for plans with mixed thicknesses.
• Earthwork in roads and canals — computed from cross-sections at regular chainages:
  • Mean sectional area method, also called the average end area or trapezoidal rule: average of end areas × length; the mid-section formula uses the area at mid-length; the prismoidal formula (which needs the mid-section area as well) is more exact.
  • Mass haul diagram and lead-lift statements decide cut-fill balance and haulage cost.

Rates, cost structure and economics of an item

• Schedule of Rates (SOR): department-published rate list — DSR for CPWD (DSR 2023 superseded DSR 2021 as the civil edition, and is applied with the notified cost index; a newer edition can supersede it, so the sanctioned edition must be quoted), plus State PWD SORs, MORTH Standard Data Book for roads and Railways' USSOR/Unified SOR.
• Cost index: SOR rates belong to a base date and base station; a published cost index (percentage above base) escalates them to the current date and place.
• Build-up of an item rate (the detail belongs to rate analysis, but the cost structure is examined here): material + labour + plant and machinery + overheads (about 5-10%) + contractor's profit (about 10-15%) = item rate; add water charges (about 1-1.5%) where specified.
• Prime cost: the cost of an article (e.g. a fitting) supplied at the rate actually paid, with fixing measured separately.
• Lump-sum item — a fixed amount for work not amenable to measurement; day-work — work paid on actual labour and material with a percentage, for unforeseen small work.
• Lead and lift: lead is horizontal haulage distance (rate increases in lead slabs); lift is vertical raising; both change earthwork and material rates.
• Escalation clause: price adjustment during execution, usually by a formula with component weightages (labour, cement, steel, bitumen, POL, plant) and published indices (the WPI series of the Office of the Economic Adviser, DPIIT, reproduced by the RBI). FIDIC and Indian standard contracts both use index-linked adjustment.
• Bill of Quantities (BOQ): item code, description, unit, quantity, rate, amount; priced BOQ from a bidder is the financial bid. Schedule-A (quantities) and Schedule-B (materials issued by department) in PWD tenders.

Depreciation, valuation and life-cycle cost

• Depreciation — loss in value of a property due to age, wear and obsolescence. Methods:
  • Straight line: equal annual amount, D = (C − S)/n.
  • Constant percentage (declining balance): value after m years = C(1 − r)^m.
  • Sinking fund method: annual deposit accumulates at interest to replace the asset.
  • Quantity survey method: item-wise assessment of actual deterioration.
• Sinking fund — annual instalment set aside to recover the cost (less scrap) at the end of the useful life.
• Valuation terms: scrap value (material value after dismantling, less demolition cost), salvage value (value if sold without dismantling at end of use), book value, market value, capitalised value = net annual income × year's purchase (YP), where YP = 1/rate of interest for perpetual income.
• Methods of valuation: rental (capitalisation of net rent), land-and-building (plinth area/cubic content cost less depreciation plus land value), profit-based (for cinemas, hotels), development method, depreciation method (Abstract: present value = original cost × depreciation factor).
• Life-cycle cost (LCC): present worth of initial cost + operation + maintenance + replacement − salvage; used in PPP and highway option appraisal. Value engineering reduces cost without reducing function.
• Statutory/professional backdrop: valuation for tax is governed by the Income Tax Act and its rules (the Wealth Tax Act was abolished in 2015, though its Schedule III survives as a valuation reference) and registered valuers under the Companies (Registered Valuers and Valuation) Rules, 2017; detailed valuation theory belongs to a separate subject area and only its estimation interface is examined here.

Key points

• Estimation - pre-construction computation of quantities and probable cost; costing - applying rates and arriving at money value.
• Plinth area rate method - fastest approximate estimate; accuracy about ±15-20%, used for administrative approval.
• Detailed estimate - item-wise measurement plus abstract; accuracy about ±5%; forms the basis of the tender.
• IS 1200 - Indian Standard method of measurement, in parts (Part 1 earthwork, Part 2 concrete, Part 3 brickwork, Part 12 plastering, Part 8 steelwork, etc.).
• IS 3861 - definitions and measurement of plinth area, carpet area and rentable area.
• Centre line method - quickest for uniform wall thickness; deduct half the breadth of the layer per cross-wall junction.
• Long wall-short wall method - long walls out-to-out, short walls in-to-in; essential when thicknesses differ.
• Deduction rule for plaster - nil up to 0.5 m²; for 0.5-3 m² deduction for one face only; above 3 m² full deduction on both faces with jambs measured.
• Deduction rule for masonry - openings and recesses above 0.1 m² deducted.
• Reinforcement mass - d²/162.2 kg per metre for a round bar of diameter d mm.
• Contingencies - 3-5% (usually 5%); work-charged establishment - about 1.5-2%; T&P - about 1-1.5%.
• Overheads 5-10% and contractor's profit 10-15% are built into an item rate.
• DSR with cost index - CPWD scheduled rates escalated from base date/station to present by a published index.
• Lead and lift - horizontal haul and vertical raising; rates are quoted in lead slabs.
• Prime cost - actual purchase cost of an article, with fixing paid separately.
• Revised estimate - needed when sanctioned cost is exceeded beyond the departmental limit (commonly 5%); supplementary estimate - for added work.
• Depreciation - straight line, declining balance, sinking fund, quantity survey; capitalised value = net income × year's purchase.
• GST on works contracts - presently 18% for most composite works, with concessional rates for a few specified categories; the current notification governs.

Formulas and examples

Example 1 - Approximate estimate by plinth area, with all allowances A two-storeyed office building has a plinth area of 320 m² per floor. The plinth area rate adopted is ₹18,500/m². Provide contingencies at 5%, work-charged establishment at 2% and T&P at 1%.

• Total plinth area = 320 × 2 = 640 m².
• Building cost = 640 × 18,500 = ₹1,18,40,000.
• Contingencies 5% = 0.05 × 1,18,40,000 = ₹5,92,000.
• Work-charged establishment 2% = ₹2,36,800.
• T&P 1% = ₹1,18,400.
• Estimated cost = 1,18,40,000 + 5,92,000 + 2,36,800 + 1,18,400 = ₹1,27,87,200 (say ₹1.28 crore).

Example 2 - Centre line method for a single-room building Room internal size 5.00 m × 4.00 m, superstructure walls 300 mm thick (one brick in cement mortar), height 3.20 m above plinth. Foundation: concrete bed 900 mm wide × 300 mm deep; one footing course 600 mm wide × 400 mm deep; plinth masonry 300 mm wide × 600 mm high. No cross walls.

• Centre line length = 2 × [(5.00 + 0.30) + (4.00 + 0.30)] = 2 × (5.30 + 4.30) = 19.20 m.
• Earthwork/PCC bed (0.90 m wide): length = 19.20 m (no junctions) → volume = 19.20 × 0.90 × 0.30 = 5.18 m³.
• Footing masonry (0.60 m wide, 0.40 m deep) = 19.20 × 0.60 × 0.40 = 4.61 m³.
• Plinth masonry (0.30 m, 0.60 m high) = 19.20 × 0.30 × 0.60 = 3.46 m³.
• Superstructure masonry gross = 19.20 × 0.30 × 3.20 = 18.43 m³.
• Deduct one door 1.00 × 2.10 = 2.10 m² and two windows 1.20 × 1.20 = 2 × 1.44 = 2.88 m²; total opening area = 4.98 m² → volume deducted = 4.98 × 0.30 = 1.49 m³.
• Net superstructure brickwork = 18.43 − 1.49 = 16.94 m³.
• At ₹8,200/m³ for brickwork in superstructure, cost = 16.94 × 8,200 = ₹1,38,908.

Example 3 - Plastering with the IS 1200 deduction rule Plaster both faces of the above room's walls (12 mm thick, 1:6 cement mortar), internal height 3.20 m, same openings. Treat each opening by the IS 1200 rule.

• Internal plaster: perimeter (inside) = 2 × (5.00 + 4.00) = 18.00 m → gross area = 18.00 × 3.20 = 57.60 m².
• External plaster: perimeter (outside) = 2 × (5.60 + 4.60) = 20.40 m → gross area = 20.40 × 3.20 = 65.28 m²; both faces together = 122.88 m².
• Door 2.10 m² lies in the 0.5-3 m² band, and each window 1.44 m² also lies in that band → with the same plaster on both faces, deduction is made for one face only, and jambs, soffits and sills are not measured.
• Total deduction = 2.10 + 2 × 1.44 = 4.98 m² (taken from the internal face).
• Internal plaster = 57.60 − 4.98 = 52.62 m²; external plaster = 65.28 m²; total = 117.90 m².
• At ₹310/m², cost = 117.90 × 310 = ₹36,549.

Example 4 - Road earthwork by average end area and prismoidal formula A road embankment has formation width 10 m, side slopes 1:2 (s = 2). Centre heights at three chainages 30 m apart are 1.00 m, 1.50 m and 2.00 m; ground is level transversely.

• Area A = B·d + s·d²: A₁ = 10(1.00) + 2(1.00)² = 12.00 m²; A_m = 10(1.50) + 2(1.50)² = 15 + 4.50 = 19.50 m²; A₂ = 10(2.00) + 2(2.00)² = 20 + 8 = 28.00 m².
• Average end area over 60 m (two segments): V = 30 × (12.00 + 19.50)/2 + 30 × (19.50 + 28.00)/2 = 472.50 + 712.50 = 1,185.00 m³.
• Prismoidal over the full 60 m: V = (60/6)(12.00 + 4 × 19.50 + 28.00) = 10 × (12 + 78 + 28) = 10 × 118 = 1,180.00 m³.
• Difference = 5 m³ (0.42%) — the prismoidal value is the more exact; at ₹260/m³ for embankment formation, cost = 1,180 × 260 = ₹3,06,800.

Example 5 - Steel quantity and depreciation/valuation (a) A slab needs 120 bars of 12 mm, each 4.60 m long, and 80 bars of 10 mm, each 3.40 m long.

• 12 mm: w = 12²/162.2 = 144/162.2 = 0.8878 kg/m → 120 × 4.60 × 0.8878 = 490.1 kg.
• 10 mm: w = 100/162.2 = 0.6166 kg/m → 80 × 3.40 × 0.6166 = 167.7 kg.
• Total = 657.8 kg ≈ 0.658 t; at ₹78,000/t = ₹51,308 (laps and binding wire included in the rate).

(b) A building cost ₹60,00,000 to construct, has a useful life of 60 years and a scrap value of 10% of cost.

• Straight line: D = (60,00,000 − 6,00,000)/60 = ₹90,000 per year; book value after 20 years = 60,00,000 − 20 × 90,000 = ₹42,00,000.
• Sinking fund at 6%: (1.06)⁶⁰ = 32.988 → I = 54,00,000 × 0.06/(32.988 − 1) = 3,24,000/31.988 = ₹10,129 per year.
• If the same building yields a net annual income of ₹4,20,000 and the expected return is 6%, YP = 100/6 = 16.67 → capitalised value = 4,20,000 × 16.67 = ₹70,00,000 (approximately).

Where it is used

• Government works: CPWD, State PWDs, MES, Railways, NHAI, Jal Jeevan Mission and municipal bodies prepare detailed estimates on DSR/SOR with cost index for technical sanction and tendering; AMRUT and PMAY-U project DPRs use plinth area and unit-base estimates.
• Contractors and EPC firms: L&T, Tata Projects, Shapoorji Pallonji, Afcons, Dilip Buildcon run tendering/estimation cells that price BOQs, compute material take-off, and set bid margins; metro and highway bids live or die on earthwork and concrete take-off accuracy.
• Job roles: Quantity Surveyor, Estimation Engineer, Billing Engineer (measurements in the CPWD Form 23 measurement book, running account bills in Form 26), Planning Engineer, Cost Controller, Contracts Engineer, Chartered Engineer/registered valuer.
• Real estate and finance: developers' feasibility models, bank technical appraisal of project cost, construction-linked disbursement certification, insurance claim and loss assessment, and property valuation for loans and taxes.
• Software in practice: MS Excel templates, Candy/CCS, Primavera and MS Project for cost-loaded schedules, AutoCAD/Revit quantity take-off and 5D BIM, and departmental e-tender portals (GeM, CPP Portal) that issue BOQs for online bidding.
• Measurement Book (MB): the statutory record of measurements in government works; recorded measurements are the legal basis of payment and of final-bill arbitration.

Interview questions

• Q: What is the difference between estimating and costing? A: Estimating computes probable quantities and the likely cost before execution; costing determines the actual cost of work done, item by item, from rates and expenditure.
• Q: When is a revised estimate required? A: When the sanctioned cost is likely to be exceeded beyond the permissible limit (commonly 5% in PWD practice), or when there is material deviation in the scope, rate structure or specifications.
• Q: State the plaster deduction rule for openings. A: No deduction up to 0.5 m²; for 0.5-3 m² deduct the opening for one face only when both faces carry the same plaster, with jambs and soffits not measured; above 3 m² deduct the full area from both faces and measure jambs, soffits and sills separately.
• Q: Why is the centre line method faster than the long wall-short wall method? A: The centre line length is the same for every layer of a wall of uniform thickness, so only breadth and depth change; a deduction of half the layer breadth per cross-wall junction is the only adjustment.
• Q: How do you get the mass of reinforcement from a bar bending schedule? A: Sum the cut lengths including hooks, laps and bends, and multiply by d²/162.2 kg/m for each diameter; wastage and binding wire are not measured separately.
• Q: What is a cost index and why is it applied to DSR rates? A: It is the published percentage by which current costs exceed the SOR's base date/station costs; multiplying by the index ratio brings scheduled rates to present-day prices.
• Q: What are contingencies and are they the contractor's money? A: A 3-5% provision in the estimate for unforeseen petty items; it belongs to the department's sanctioned amount and is not paid to the contractor unless work is actually executed against it.
• Q: Differentiate prime cost, lump-sum and day-work items. A: Prime cost is the actual purchase price of an article with fixing paid separately; a lump-sum item is a fixed amount for unmeasurable work; day-work pays actual labour and materials plus a percentage.
• Q: What is the difference between scrap value and salvage value? A: Scrap value is the value of materials recovered after dismantling, less demolition cost; salvage value is the value of the asset if sold as a working unit at the end of its useful life.
• Q: How is capitalised value of a rented building found? A: Net annual income (gross rent less outgoings) × year's purchase, where year's purchase for perpetual income is 100 divided by the expected rate of return in percent.
• Q: Why is earthwork measured in separate depth stages and lead slabs? A: Output falls and handling cost rises with depth and with haulage distance, so the rate differs; IS 1200 and SORs therefore require separate items.
• Q: Which is more accurate — the trapezoidal or prismoidal formula, and when do they agree? A: The prismoidal formula is more accurate because it allows for curvature of the solid; they agree when the cross-sectional area varies linearly along the length.

Common mistakes

• Applying the masonry deduction limit (0.1 m²) to plastering or the plaster rule (0.5/3 m²) to brickwork — the limits are item-specific in IS 1200.
• Forgetting the half-breadth deduction at cross-wall junctions in the centre line method, or applying it for every layer with the wrong breadth.
• Using the centre line length (or the internal length) as the out-to-out length for long walls, which double-counts or loses the corner volume.
• Mixing mm, cm and m in one measurement sheet, and not rounding to the two-decimal convention — a factor-of-ten error in a quantity.
• Quoting a plinth area rate or DSR rate without stating its edition, base date and cost index, or treating a rate as inclusive of GST when it is not.
• Omitting contingencies, work-charged establishment and escalation, so the estimate cannot cover the real cost; or adding profit and overheads twice (once in rate analysis and once on the abstract).
• Measuring reinforcement wastage, binding wire, chairs and formwork props separately when they are already covered in the item rate, and ignoring lead/lift in material and earthwork rates.

Related topics

Quantity surveying and rate analysis · Contracts, tenders and specifications · Project planning: CPM and PERT · Equipment management and productivity · Real estate development and RERA · AutoCAD, STAAD.Pro and BIM basics