Articles

How do you build up a unit rate in construction estimating?

The all-in labour rate from paid and productive hours, the gang rate and output, waste, and plant spread over the pour, with the two judgment inputs stress-tested.

A construction unit rate is built from three resources per unit of measured work: materials with waste, labour as an all-in gang rate divided by output, and plant spread over the quantity it serves. For an illustrative in-situ concrete slab, 138.60 of concrete, 16.29 of labour and 14.00 of plant give 168.89 per m3 before preliminaries, overheads and profit. The labour line depends on an all-in rate of 25.13 an hour for an operative on a basic wage of 18.50.

Worked in full in Construction Cost Control by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →

Every measured rate in a bill of quantities, and so most of a contract sum, is the sum of rates like this one. When an estimator's rate is challenged, at tender or in valuing a variation, the argument is never about the total; it is about the output, the waste, the hours that are paid but not productive, and how the plant is spread. Building the rate up line by line is what makes each of those visible.

The assumptions

Illustrative inputs for in-situ concrete to a suspended slab, placed by pump.
InputValue
Ready-mixed concrete, delivered, per m3132.00
Waste and over-ordering5%
Gang: 1 ganger and 4 operativesbasic 22.00 / 18.50 an hour
Working week / paid weeks a year / holiday weeks39 h / 52 / 5.6
Non-productive time (weather, stand-down)3%
Employer's social charges / pension / training levy / sick pay12% / 3% / 0.5% / 1%
Protective equipment and tools, per operative a year400.00
Gang output: placing, compacting and finishing8 m3 an hour
Concrete pump per day / small plant per day1,100.00 / 160.00
Typical pour90 m3

The statutory percentages differ by country and change every year; the ones above are placeholders to be replaced with the rates that apply to the job. The structure of the calculation does not change.

The calculation, step by step

All-in hourly rate = annual cost of employment / productive hours

Labour per unit = gang rate / output per hour

Unit rate = material × (1 + waste) + labour per unit + plant cost / quantity served

In Excel: =(PaidHours*Base*(1+OnCosts)+PPE)/ProductiveHours for the all-in rate and =Conc*(1+Waste)+Gang/Output+(Pump+SmallPlant)/Pour for the unit rate.

Step 1: hours. Paid hours are 52 × 39 = 2,028, because holiday is paid. Hours available for work are (52 − 5.6) × 39 = 1,809.6, and after 3 per cent non-productive time, 1,755.3 productive hours.

Step 2: annual cost of an operative. Wages of 2,028 × 18.50 = 37,518. On-costs of 16.5 per cent add 6,190: social charges 4,502, pension 1,126, levy 188, sick pay 375. With 400.00 of equipment the annual cost is 44,108.

Step 3: all-in rate. 44,108 / 1,755.3 = 25.13 an hour, 35.8 per cent above the basic wage. The ganger, on the same arithmetic, costs 52,378 a year, or 29.84 an hour.

Step 4: gang rate and labour per m3. 29.84 for the ganger plus 100.51 for four operatives (4 × 25.13, unrounded) gives 130.35 an hour. At 8 m3 an hour, labour is 130.35 / 8 = 16.29 per m3.

Step 5: materials. 132.00 × 1.05 = 138.60 per m3 placed.

Step 6: plant. The pump costs 1,100.00 a day whatever the pour, so on a 90 m3 pour it is 12.22 per m3; vibrators and the power float add 160.00 a day, 1.78 per m3. Plant is 14.00.

The result

Unit rate per m3.
ResourcePer m3Share
Concrete with 5% waste138.6082.1%
Labour: 130.35 an hour at 8 m3 an hour16.299.6%
Plant: pump and small plant over 90 m314.008.3%
Net unit rate168.89100%

On a slab of 1,450 m3 the rate carries 244,897 into the measured works. Preliminaries, overheads and profit are added above it, not inside it, as set out in how to calculate preliminaries and OH&P in a contract sum; putting them in the rate as well is a common way to price them twice.

Material dominates this rate, but the line that moves is labour and plant. Concrete is bought at a quoted price; output and pour size are the estimator's judgment, and they are where a rate is won or lost.

What if: output and pour size

Unit rate as the two judgment inputs move.
Gang output, m3 an hourLabour per m3Unit ratePour size, m3Plant per m3Unit rate
621.73174.334528.00182.89
816.29168.899014.00168.89
1013.04165.641508.40163.29

Halving the pour doubles the plant cost per m3, from 14.00 to 28.00, because the pump is hired by the day. A design that forces small pours, through phasing or awkward construction joints, changes the rate more than twice as much as a drop in output from 8 to 6 m3 an hour: 14.00 per m3 against 5.44. The same reasoning is behind measured-mile claims, where lost output is costed at the all-in gang rate, worked in how to calculate a measured mile for a disruption claim.

The common mistake

The common mistake is to price labour at the basic wage. The gang costs 96.00 an hour at basic rates against 130.35 all-in, and labour falls from 16.29 to 12.00 per m3: 4.29 a unit, or 6,227 on this slab, lost before a single problem on site. A subtler version divides the annual cost by paid hours rather than productive hours. That gives an operative 21.75 an hour instead of 25.13 and labour of 14.10 per m3, still 2.19 short, because holidays and rained-off hours are paid but produce nothing, and their cost has to be recovered on the hours that do.

Takeaway

The book follows a contract sum through to the final account, with the free workbook for this case on the Construction Cost Control companion page.

Questions readers ask

How do you calculate an all-in labour rate?

Divide the annual cost of employment by productive hours. In the illustrative case an operative on 18.50 an hour is paid for 2,028 hours, costs 44,108 a year with 16.5 per cent of on-costs and 400.00 of equipment, and works 1,755.3 productive hours after holidays and 3 per cent non-productive time: 25.13 an hour, 35.8 per cent above the basic wage.

Should overheads and profit be included in a unit rate?

Either inside every rate or as separate percentages above the measured works, but never both. The illustrative 168.89 per m3 is a net rate: preliminaries, overheads and profit are added to the total of the measured work. Including them in the rate and then adding them again is a common way to price them twice.

Why does pour size change a concrete unit rate?

Because the pump is hired by the day regardless of volume. At 1,100.00 a day plus 160.00 of small plant, the plant cost is 14.00 per m3 on a 90 m3 pour but 28.00 on a 45 m3 pour, taking the rate from 168.89 to 182.89. A larger pour of 150 m3 brings it down to 163.29.

Read the whole case

This article is one calculation from Construction Cost Control. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.

Get the book on Amazon →Free companion files

Also on Amazon UK · Amazon Germany · Amazon France · Amazon Canada

Also on this site

Reading guide: business operations: cost, contracts, pricing and supply chain → · All 1340 articles →

If this book helped, or didn’t, a few lines on Amazon are worth more than they look: they are what the next reader goes on. Write a review. The workbook stays free either way.