CONSTRUCTION COST DATA WORKBOOK

Neil Sinclair, Philip Artin and Stewart Mulford

DMS International

Conference on the International Comparison Program

World Bank
Washington, D.C., March 11-14, 2002

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 COLLECTION OF CONSTRUCTION COST DATA

WORKBOOK MODIFIED BILLS OF QUANTITY FORMAT

Introduction

DMS International, Inc. was requested to assist the World Bank with creating a

method of collecting construction cost data from member countries throughout the world

to assist with economic studies. The task of data collection is a difficult procedure and

can be prone to wide variations. Based upon our experience as construction cost

consultants, estimators and quantity surveyors we chose to develop a data collection

method based upon a workbook format. Our workbook defines construction line items

and quantities for relativity simple building types. In fact, four building types have been

chosen:

 Residential house

 Warehouse

 Road

 Office building

The workbooks would be sent to member countries to be completed by local

contractors, estimators or quantity surveyors. When completed the data would be

collected and analyzed by the World Bank as part of its overall economic study.

Before we explain further about our workbook format and design, reference must

be made to previous studies and methods of construction cost data collection. One

comprehensive review of past practices has been completed by Dubner and McKenzie 1.

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This detailed study compares various methods and documents the advantages and

disadvantages of each method. The method that provides the best opportunity for data

collection was noted as the Bills of Quantity (BOQ) method. This method appears to

have advantages over the other methods but yet even with the BOQ method some

potential pitfalls exist.

A BOQ is basically a listing by trade of certain construction components that

make up the total project. The project may be an office building or a warehouse. The

BOQ documents quantities for each element of the building type such as cubic meters

of concrete foundations or square meters of roofing material. BOQ’s are used

frequently to assist in developing tenders or bids for projects throughout the world. The

BOQ may be provided by an independent party or in house by the bidding contractor.

Once the quantity of concrete footing is known a unit price to cover for material, labor

and equipment is applied to develop the cost of each line item or component. The total

project is basically a summation of all the individual line items. Various levels of

sophistication in terms of measurement detail and description exist with BOQ’s but the

same principals apply. The paper prepared by Dubner and McKenzie1, suggests that

the BOQ method offers the best opportunity for data collection, though they suggest

issues that must be dealt with to allow data collection to prove more successful than in

the past. The issues highlighted were:

 Interpretation of specifications

 Expertise to price BOQ

 Applicability of specifications to local design criteria

 Over sophistication and requirement to price detail project work break downs

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Silke Stapel2 also highlights various issues with cost data collection along the similar

lines as Dubner and McKenzie1. Stapel 2

is part of Eurostat, an organization that has

actually performed data collection on behalf of EU member states. Part of the Eurostat

data collection used detailed Bills of Quantities.

Stapel 2 along similar lines as Dubner and McKenzie 1 noted some issues such as:

 Data collection was expensive in terms of resources required to implement

system

 Bills of Quantities adopted by Eurostat appear too cumbersome in terms of level

of detail and sophistication

It would appear that the Eurostat data applies to advanced Countries in terms of

construction management and professional expertise. The Eurostat surveys collect

prices for about 15 Bills of Quantities. The typical Bills of Quantities could have up to

1000 line items.

A Modified Approach

In our approach, we have attempted to incorporate improvements into the

workbook approach such as:

 Provide a consistent quantity of materials and line items to price

 Line items are simple and comprise basic building materials common to most

countries (e.g. cubic meters of footings)

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 Quantities and line items reflect approximate quantities according to a trade

break down. The trade breakdown adopted reflects American Institute of

Construction Specifiers, 16 divisions trade format. The trade format reflects a

traditional worldwide understanding of how a project is built and categorized by

specialty.

 Projects chosen offer little complexity that would impact construction means and

methods. The projects provide materials used in nearly all construction projects

such as concrete, steel, wood, and plumbing piping, irrespective of what country

or location this project may be located.

 Projects chosen are easy to understand allowing the estimator to grasp the

overall project massing and configuration. Workbooks contain outline drawings.

 Project content provides for the basic construction products used extensively in

any project. This limits the specification issues that provide inconsistency among

different Countries. Basic materials such as concrete are relatively similar from

Country to Country.

 Designs chosen offer little complexity for pricing purposes. If the material or

component is not widely used then an opportunity exists for each individual

estimator to customize pricing based upon best local practices. This will occur to

some limited extent from Country to Country but as long as a substitute of equal

is priced then this variable factor will be minimized.

 Project site work and substructures are quantified therefore minimizing project

cost variances by building on a flat site as compared to a steeply sloping site.

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  Outline specifications provided show basic specifications that allow the estimator

to use more locally compliant products.

It’s accepted that the workbook could and should only be completed by someone

experienced in estimating construction projects. To have the workbook completed by

inexperienced estimators would only add to the potential for erroneous data. By

keeping the models and format basic by design the chances of greater overall success

will exist. A person experienced in estimating construction costs should have little

problem working through the workbook and creating a complete price for each project.

The probability of success with the collection of cost data must be viewed in two

parts. Part one being the design and format of the actual workbook and part two being

the expertise of the person completing the workbook exercise. It would be rather foolish

to issue the workbook to an individual unqualified in pricing BOQ or creating cost

estimates. The success of the workbook format will only exist if the data is priced by
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qualified individuals. Even with qualified individuals variations will occur. Sinclair

found that even qualified estimators would not produce equal estimates given the same

information from which to create an estimate. The balance of this paper identifies this

“estimating” problem to allow the perceived problems of collecting data via workbooks to

be put totally into perspective. The author of this paper agrues that perfection of data

collection can only be a goal but can never be achieved.

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The Estimating Problem

How does an estimator estimate the cost of a construction project? For those

reader’s not familiar with cost estimating, the process involved is complex. Learning

about cost estimating will help non-cost-estimators understand what is involved and

what limitations exist when reviewing cost data generated by cost estimators.

Fig. 1.1 The estimating objective: to hit the target.

Figure 1.1 illustrates subjective estimates attempting to hit the target, which is the actual

cost. The subjective value chosen by each estimator was considered to represent the

resources required by each firm to complete an example office-building project. We can

see that the estimates are all scattered around the target of actual cost. Hitting the

target is not a common occurrence and is an inbuilt problem of estimating.

Briefly, let us consider an estimator pricing a brickwork item.

What are the difficulties presented? They are as follows:

1. Choice of work method.

2. Output of crew (given the firm’s unique efficiency).

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3. Cost of labor

4. Cost of material and selection of an appropriate wastage allowance.

5. Addition of overheads and profit

Problem 1 - Choice of work Method

There may be many or only a few work methods available. For instance, should

the estimator assume a three-man or a four-man crew, composed of two or three

bricklayer with either one or two laborers? Will there be central mortar mixing or

individual mixers for each crew? How will the brickwork be constructed? Will trestles or

proper standing scaffolding be used? Where will work commence from? What

restrictions will the other trades impose on the masonry work?

All possibilities must be investigated, and the most economical possibility should

be chosen.

Problem 2- Output of crew

The output chosen will be based on past performance, since the estimator will

assume that this performance will be repeated in the future. As will be explained later,

recording and properly documenting job site performance is helpful to the estimator

when he or she considers future projects. Manipulation of these historical data may

occur; for example, decreasing output to allow for restricted working condition.

Whatever manipulation occurs, the estimator is faced with the difficulty of trying to

assess what output will be achieved.

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Problem 3- Cost of labor

How much will the contractor be required to pay for labor? The estimator must

predict this cost. The labor cost will vary depending on job location, availability of skilled

labor, contract wage regulations, union or open shop labor requirements, general

market conditions, and so on.

Problem 4- Cost of Material

This can be predicted with a fair degree of accuracy if the material in question is

in ready supply and is frequently purchased. The quantity of material required must be

accurately measured from the drawing and is not dependent on the crew performance

or work method adopted. Although the estimator must not only consider the finished in

-place quantity of material, but also must allow for a wastage factor, this factor can vary

dramatically and is highly dependent on the performance and work procedures adopted

by the crew.

Problem 5 - Addition for overheads and profit

This amount will depend on company policy, market condition, and many other

variables that will be discussed later. It is, as you can imagine, very important to

incorporate overhead and profit into the final estimate.

Problems 1-5 have been presented simply, but you can begin to imagine their

complexity.

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An estimator has to posses the skill and expertise to assemble the known facts and

rationally solve the estimating equation. How this is done is best explained by reference

to the decision tree diagram shown in figure 1.2.

Fig. 1.2 Hypothetical decision tree diagram.

Figure 1.3 amplifies stages 5 and 6, here the estimator selects a range of most likely

values and, after a process of fine tuning and “weighing up” of the situation, the

estimator modifies his or her initial crude selection and finally selects a value that he or

she considers to be ‘most likely.”

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 Fig. 1.3 Fine tuning an estimate.

The thought process previously described and shown in fig.1.2 and 1.3 applies to our

hypothetical brickwork example, but generally indicates how and estimator arrives at a

solution for each separate item of the cost estimate. A total cost estimate consists of

numerous line items and specific sections relating to various trades and specialists

subcontractors. This thought process will usually be repeated on numerous occasions

during the compilation of one single estimate or bills of quantity.

Location

Since a construction project’s location affects the final cost, an estimator must

understand what particular locational factors will be encountered and what

considerations should be taken into account when formulating the estimate. Estimators

are aware that costs in Boston are different that costs in Miami, but not everyone is

aware that the locational variation within the Boston area or within the Miami area also

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influence construction costs. For example, the project location may be a restricted city

center infill site or a remote country site, each having its own particular difficulties that

the contractor must overcome.

Various locational difficulties are described:

1. Remoteness

2. Confined sites

3. Labor availability

4. Weather

5. Design considerations (related to location).

6. Vandalism and site security

Remoteness

A remote construction site, for example, a project site located high in the Blue

Ridge Mountains of Virginia, poses a contracting organization with a difficult set of

problems to cope with.

Communication Problems

If adequate communications such as telephone are not available, then a radio or

cellular-type installation is required. A telephone is a requisite to any construction

project: lack of communication during the construction process can result in major,

costly errors. In addition, because the project location is further away from the head

office, additional long-distance telephone charges will be incurred.

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Transportation Problems

All material and labor must be transported to the building site. If the transport

route is poor (if, indeed, any route exists at all), then delays in material deliveries may

occur; large vehicles may damage narrow bridges or other items of property, whose

replacements costs must be borne by the contractor.

It may be necessary for the contractor to widen the existing route or construct a

bridge to allow material trailers access into the job site. The route that is proposed

should be studied carefully by the estimator. Existing capacity of existing bridges on

route should be established to verify if equipment loads can be accommodated of if the

bridge needs to be strengthened by the contractor. Finally, the cost of hauling items of

equipment to the job site increases as the distance increases. Given these

considerations, the requirement for management to make the correct equipment

selections becomes very important.

Increased Material Cost

Increased material cost is primarily due to increased transport charges such as

when distance for haulage from the depot to a remote job site is longer than the haulage

associated with other construction projects the estimator has previously worked on.

Avery4 found that if the material was fragile or hazardous, then transport costs fluctuated

widely depending on distance. He also discovered that the bulk materials with low initial

cost, such as sand and gravel, tend to be the most adversely affected by distance and

difficult transport conditions. Ferry crossing or bridges with tolls increase the basic cost

of materials.

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Power and Water

Power and water are a necessity for building construction. Water is needed for

materials such as concrete, for cleaning the building, and for many other uses. Salt

water is not acceptable in most specifications for concrete or mortar mixing, so remote

projects without a convenient domestic water supply, even if the site has access to

thousands of gallon of seawater; require water to be trucked to the job site. The cost of

water depends on the hauling costs. In some instances wells can be dug to pump water

to the surface; of course, the costs involved must be considered in the estimate.

If no power source is available, then power must be provided by generators.

Confined Sites

The problems associated with confined sites generally take the form of

congestion resulting in restricted working areas resulting in low productivity from labor

and equipment. These difficulties are generally associated with downtown sites, but this

need not always be the case.

In extreme cases, congestion can limit the choice of work methods, types of

equipment used, and size of crew to be employed. Careful investigation of the

problems likely to be associated with each particular site will allow a realistic

assessment of factors such as productivity to be made. Project startup requires a

careful utilization of resources in order to provide production outputs that maximize

profits. Confined sites create logistical problems. Material movement should be

minimized: each time an item of material is moved, its cost to install in place increases.

When materials are delivered to a confined site, the material should be used

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immediately. If this is not possible, a storage area should be available to receive the

material, or, if possible, the material should be offloaded directly at its intended

utilization point.

The estimator needs to consider the unique logistical problems associated with

each job site. These problems, including restricted access, restricted material lay down

area, restricted equipment storage areas, and restricted location for site trailers, affect

the type of equipment that can be used, the effective management of the job, the worker

productivity, and the amount of labor involved in handling material. Since confined sites

nearly always pose logistical problems, the unit prices used by the estimator must

account for the increased costs.

Labor Availability

Each location has varying amount of available skilled and unskilled labor,

depending on the condition of the local economy. If labor of any kind is not available

locally (as may be the case in remote areas), then labor must be imported from other

location. In order to move labor from one area to another, a financial incentive is usually

required. The magnitude of this incentive will vary depending on the state of the labor

market. If labor is imported, accommodations may have to be provided. Labor camps

comprising full time kitchen staff, dormitories, leisure facilities, etc., have been set up on

major construction project to house the contractor’s labor force. The leisure facilities

keep the labor force relaxed and occupied during any rest periods. Living and working

on a remote construction site can be very demoralizing, after a while, and by keeping

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the morale level high, labor turnover is reduced. Generally, the cost of importing labor

will follow the laws of supply and demand.

Weather

Since the building process is highly weather dependent, extreme conditions can

greatly affect building costs. These extreme weather conditions include large amount of

rain or snow, occurrences of ice and frost, and high humidity and heat. Their effects on

cost include the following situation. Concrete pours in temperatures below 40 degrees

Fahrenheit require special precaution. With cold weather concreting, the cost of

admixtures, insulation the formwork, removing ice from formwork, and protecting the

freshly placed concrete from dropping below the specified temperatures must be taken

in to account by the estimator. Not only does cold weather affect concrete, but hot

weather concreting has its associated problems as well. During periods when the

temperature exceeds 80 degrees Fahrenheit, special precautions are required to reduce

and maintain the concrete below this temperature. For example, ingredients such as

the water may be cooled or chopped ice can be utilized. Another alternative is to use

liquid nitrogen to cool the concrete. Admixtures and low heat cement can be used to

control the set and hardening times of the concrete to achieve the design strength and

quality. All these precautions and procedures increase the cost of pouring, placing, and

curing concrete.

Exposed sites may have problems associated with high winds, which affect crane

and hoisting operations, and the contractor’s dust control program. Additional

temporary bracing to partly completed structures may be required to prevent a collapse

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due to high wind gusts. In areas where hurricanes occur, the estimator should consider

the cost of temporary measures required to prevent damage to a structure before,

during, and after a hurricane. It would be prudent to allow for the costs involved in

bracing, tieing down structures providing sand banks, garaging equipment, and storing

particular materials such as doors and windows off the job site, unless safe, dry, and

secure storage exists on the project.

Labor productivity is also associated with the weather. During poor weather

when it is cold, damp, and windy, the morale of workers exposed to adverse elements,

drops, which in turn results in a decline of productivity. During days when it may be

impossible to work, such as during a torrential rain, the productivity is zero.

Design Considerations (related to location)

The location of a project has certain aspects that must be considered by a

designer. For example, in historic Frederick, Maryland, all designs must harmonize with

the existing historical buildings. Planning committees may dictate the material

selections and configurations that designers must abide by to suit certain local

conditions.

These design considerations can create estimating problems in historic districts.

The estimator must know if the materials specified are, in fact, locally available of if local

labor exists to carry out complicated historical work, such as ornate plaster work; if not,

a specialist will be required. Traditional building techniques tended to be labor

intensive. If the same techniques must be repeated, then the estimator must be familiar

with the procedures involved. If workers are required to use traditional, building methods

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with which they are unfamiliar, then a learning curve cost needs to be built into any unit

price.

The local climate also dictates the designer’s choices in mechanical and

electrical systems and in the choice of materials and design of the building envelope.

Material resources will fluctuate from location to location throughout the country, and the

designer must investigate what materials are locally and economically available.

Finally, each locality tends to have its own construction trade practices, and the

estimator should be familiar with them.

Vandalism and Site Security

Site integrity is an important problem in urban areas. Protective measures can be

expensive, for example, when 24-hour guard service and perimeter enclosures, are

required. The level of security will depend on the risk to the project from the

surrounding neighborhood. The local police should be consulted.

Variability of Estimates

The following are where cost variances between one estimate and another can

occur:

1. Quantity take off.

2. Material Costs.

3. Labor Costs.

4. Labor productivity forecasts.

5. Work Methods.

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6. Construction equipment costs.

7. Indirect Job costs.

8. Subcontractor quotations.

9. Quotations from material suppliers.

10. Unknown site conditions.

11. Locational Factors.

12. Cost associated with the time element of the construction project and escalation

costs.

13. Staging and project start up costs.

14. Overheads.

15. Profit element.

16. Contingency and risk allocation.

17. Errors in estimate formulation.

18. Basis of information used to formulate estimate.

19. Market forces.

Wendes5, commenting on the estimating ability of estimators lists the following points

concerning their performance when estimating projects:

1. Reasonably correct with shop labor if everything is standard.

2. Good with raw material and equipment pricing.

3. “Okay” with subcontractor quotes if they are familiar with the work; “bomb out” if they

are unfamiliar.

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4. At the “high school level” with their quantity take offs.

5. Unsatisfactory with special items.

6. Poor with field labor.

7. Fail with overhead markups.

8. Coverage of profit is in the realm of wishful thinking.

Variances between estimates and actual costs do occur. The estimator,

unfortunately, always appears to be incorrect, since an estimate is an “estimate”, which

is a forecast of the anticipated future cost. Many forces can, in reality, cause the actual

cost to vary from the estimated cost. It sometimes appears to owners and management

that, when the estimate does not equal the actual costs, a mistake has been made.

Because it is an estimate, it should always be expected that the actual cost will vary

somewhat from the estimated cost. It is the job of the estimator to minimize the extent

of variance between estimate and actual cost. Any data collection system must be able

to recognize that variances exist.

Explanation of Variances - Why Do They Occur ?

As previously discussed, the author believes that there are 19 major areas where

differences between cost estimates can exist. When compiling the cost estimate, each

of the 19 categories has to be dealt with by the estimator. In dealing with each

category, the estimator has to make several assessments, such as what subcontractor

price for drywall should be used in the cost estimate or what labor productivity shall be

used for the carpenters installing intricate millwork. The total cost estimate is made up

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of numerous smaller cost estimates for each activity required to complete the overall

project. The estimating equation is therefore composed of a series of calculations, the

estimator has to assess and propose a monetary solution. The total cost estimate is the

total of all the minor monetary solutions.

Each assessment the estimator performs is based on:

 Previously recorded data (historical data)

 The estimators own past experience.

 Previous experience of others.

 Hunches.

The final assessment is subjective. The estimator will decide what productivity to allow,

or what dollar allowance or unit price to use. Even though the estimator has consulted

with subcontractors, suppliers, site superintendents, project managers, and others,

when compiling his or her estimate, it is the estimator who will decide what value will be

used in the estimate. This subjective act is the main reason why estimates vary. If you

give identical drawings and specifications to 100 estimators, you will get 100 different

cost estimates.

Figure 1.4 indicates the factors influencing variance in an estimate.

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 Fig. 1.4 Basic reasons for variances being introduced into cost estimates – the subjective assessment.

Historical Data

Historical Data is used frequently by estimators when compiling cost estimates,

with their attendant advantages and disadvantages. There are some rules to be

followed, which are extremely important:

 Always understand the source of the historical data.

 Always understand what the historical data represent

 Always understand what time period the historical data reflect.

 Always understand fully how to update and project the historical data to the

present time.

 Always understand how to manipulate the data to represent your particular

project, since no

 Two projects are the same.

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  Always be wary of working with historical data that you are not familiar with.

Various sources of historical data are available, such as published price books,

cost information publication services, trade journals, and, most important, cost feedback

from actual projects that the estimators firm has been involved with and therefore most

knowledgeable of.

Actual cost feedback is the best information to use if it were recorded and

documented properly. The feedback cycle (see Fig 1.5) is of critical importance. In

order for estimating to be effective, feedback from the job site must occur. Actual costs

should be compared with estimated costs to inform the estimator of his or her

performance during the estimating phase. Unfortunately, the feedback process is not

carried out effectively within the industry. To quote the Business Round Table Report on

modern management systems7: “Even within companies, a feedback of actual costs is

not consistently used to review and adjust the basis for estimating future projects.”

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 Fig. 1.5 Company cost feedback cycle.

Sound estimates are produced from a combination of experience and recorded

cost data of similar work previously performed. The cost data, if proper feedback

procedures have been adopted, will have been refined over time to reflect accurate

costs for performing certain operations. The estimator can use these data to formulate

estimates accurately for future work. If the data to formulate are incorrectly used or

formulated, then mistakes will undoubtedly occur.

Accuracy Versus Economy

Estimating involves the assessment of probabilities and risks making complete

accuracy impossible. However within the limits of achievable accuracy, it can be stated

that the greater the accuracy, the higher the cost of achieving that accuracy. There is

usually a point beyond which the cost in increasing and estimate’s accuracy is greater

than the benefit to be gained.

Figure 1.6 indicates the accuracy versus economy dilemma. As more of the

estimator’s time and effort are devoted to the preparation of the cost estimate, a point is

reached where obtaining the utmost accuracy is not economical. As we have discussed

100% accuracy is impossible.

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Fig. 1.6 Estimating time required for a $2,000,000 building (© R.S. Means, Inc., 100 Construction Plaza,
Kingston, MA, reproduced from Mechanical and Electrical Estimating Workbook.)

Figure 1.7 indicates the general accuracy that is expected by employing varying

amounts of estimating manpower.

Fig. 1.7 Estimate accuracy versus costs of estimate.

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The Pareto Distribution in Estimates

The estimator will price (or at least consider) each item he has discovered, such

as cubic quantity of concrete footings, walls or slabs. These items may be in the form of

a detailed quantity take off or some other form sufficiently detailed to enable confident

estimating to occur.

Each of the items discovered by the estimator has a cost importance that varies

in magnitude. Some items are of more cost importance than others, since they form a

larger percentage of the total cost than the minor items do. The Pareto 1 effect is seen to

occur, that is, a small proportion of the items account for a very large proportion of the

cost. Investigation into the cost structure of items in Bills of Quantities by Brown 8 has

shown that, typically, 20% of the items priced contained at least 80% of the total cost.

(See Fig 1.8)

Fig. 1.8 Pareto principle applied to estimating. (Reprinted from R. Brown, Investigating into the Feasibility
of Applying the Pareto Principle to SMM Bills of Quantities of Cost Planning, Project Report,
Loughborough University, UK.)
1
At the end of the 19th century an Italian economist, Vilfredo Pareto, developed a curve known as “Pareto’s Law of
Distribution.”

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 The Pareto effect can be used to great advantage by applying strict control over

the major items; the chance of major errors and discrepancies occurring is therefore

reduced. Owing to the time constraints involved with preparing a competitive bid, the

Pareto effect should be taken advantage of. Estimators should be quick to recognize

what the major items of cost importance are and devote attention to these items. When

faced with abnormal conditions, the search for the critical items of cost may take longer,

but the Pareto principle should still apply. Both Dubner and McKenzie 1 and Stapel2

recognized this aspect with current BOQ methods. We have attempted to provide

concise and specific line items in the modified work book approach to accomplish major

resource savings at very little, if any, expense of quality.

It has been noted that wide variances do occur between estimates. If 100

estimators prepared an estimate for the same project using identical drawings and

specifications, then 100 different estimates would be submitted. Remarkably, though,

the bottom line of the estimates would be within an acceptable range of some +/- 10%

of each other. This is often the case when contractors submit bids for projects. The

bids submitted by the majority of bidders are quite often very close to each other.

Though, when examination of the bidders estimates occur, the cost difference between

each of the trades differ greatly (up to 25%) and when examination of the cost to

complete each activity within each of the trades occurs, the cost differences between

each bidders numbers can be as much as 50%. The degree of difference between

estimates will therefore differ depending on whether you are examining the bottom lines,

the trade amounts, or the cost of activities within each trade. Greater variances within

estimates occur when uncertainty exists, such as in excavation work. Our workbook

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format excludes site work and varying site related features thus eliminating an area of

major uncertainty.

Conclusions

The modified workbook approach attempts to simplify yet increase the quality of

information received through cost data collection methods. It’s agreed by both Stapel 2

and Dubner and McKenzie1 that the preferred tool is the Bills of Quantity Method. Our

workbook format is based upon abbreviated Bills of Quantities that provide a consistent

set of line items that can be priced without difficulty by a local estimator qualified in

construction cost estimating. The line items proposed can provide information on

various levels such as:

 Cost per building type

 Cost of each trade

 Cost of individual line items such as concrete footings

These levels of information can be used to formulate “basket” of data that could be

analyzed even further. Merging of the Basket of Goods Collection Method and the Bills

of Quantity Method is possible given the simplified format of the modified workbook

approach.

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References:

1
Dubner and McKenzie, Australian Bureau of Statistics paper submitted to

international conference on ICP, World Bank, Washington, DC (11-13 March

2002).

2 Stapel Silke, Eurostat, Paper submitted to international conference on ICP World

Bank, Washington, DC (11-13 March 2002).

3 D. Neil Sinclair, Estimating for Abnormal Conditions, Industrial Press, Inc., New

York, New York, 1989

4 D.W. Avery, “Problems of Locality in Construction Cost Forecasting and Control,”

in Building Cost Techniques, edited by P.F. Brandon, E.F.N. Spon Ltd., New York,

New York, 1982.

5
H.C. Wendes, The Eight Facets of the Estimating Diamond, Heating/Piping/Air

Conditioning, October 1976, pp. 51-56.

7
The Business Roundtable, Modern Management Systems, The Business

Roundtable, New York, New York, Report A-6, November 1982.

8
R. Brown, Investigating into the Feasibility of Applying the Pareto Principle to

SMM Bills of Quantities and Cost of Planning, Project Report, Loughborough

University, UK.

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The Promoters and Directors have raised the initial funds on their own and to start

the Project of the company. The promoters are High Net worth Individuals and

they have capability to manage finances for the project.

Processing Flowchart: 9 | P a g e D P R – A G R O P R O C E S S I N G

Products: The Company intends to produce various kinds of products Jalepeno,

Okra, Green Peas, Red Paprika, Sweet Corn, Baby Corn, Jalepeno , Bitter Gourd,

Red Capsicum , Carrot, Cauliflower, Chillies , Ginger, Red Paprica, Yellow

Capsicum, French Beans etc., and Various Fruits Mangoes, Papaya, Strawberries,

Jackfruit, etc., under contract farming from the farmers. All the farmers have

around 100 acres of land in Karjat. The land is very fertile to grow all of the above

products. The Company shall provide the seeds, fertilizer and pesticides to the

farmers. The Company has entered into the agreement with all the farmers to grow

the necessary products. AAT has a confirmed buy back from the domestic and

international companies.

3.1. Jalapenos: The Jalapenos Spanish pronunciation is a medium-sized chili

pepper pod type cultivar of the species Capsicum annuum. A mature jalapeño fruit

is 5–10 cm (2–4 in) long and hangs down with a round, firm, smooth flesh of 1–1.5

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in (25–38 mm) wide. It is of mild to medium pungency, having a range of 1,000 to

20,000 Scoville units, depending on cultivar. Commonly picked and consumed

while still green, it is occasionally allowed to fully ripen and turn red, orange or

yellow, and is wider and milder than the Serrano pepper. The Chile Pepper Institute

is known for developing colored variations.

3.2. Okra The major okra producing states are Uttar Pradesh, Bihar, Orissa, West

Bengal, Andhra Pradesh and Karnataka. In West Bengal, 0.662 M mt of Okra is

produced from 58,400 ha with an average productivity of 11.4 mt/ha. The crop is

also used in paper industry as well as for the extraction of fiber.

3.3. Green Peas Green Peas, also popularly known as “garden peas” is one of the

vegetable crops in India and basically this crop is cultivated for its green pods.

Green peas belong to Leguminaceae family. Green Peas are used in vegetable

cooking’s, in soups & frozen canned food as well. Green Pea straw is a nutritious

fodder and be used for any animal (livestock) feed. Major Green Peas Production

States in India:- Karnataka, Madhya Pradesh, Rajasthan, West Bengal, Punjab,

Assam, Haryana, Uttar Pradesh, Uttarakhand, Himachal Pradesh, Bihar and Orissa.

Some of the health benefits of Green Peas are given below.  Green Peas help in

losing weight.  Green Peas help in controlling blood sugar levels.  Green Peas

help in prevention of wrinkles, alzheimer’s, arthritis, bronchitis and osteoporosis. 

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Green Peas source of anti-aging, strong immune system, and high energy.  Green

Peas may help in prevention of stomach cancer.  Green Peas may help in

improving digestion.

3.4. Paprika Paprika is a variety of mild pepper (Capsicum annuum) that is dried,

ground and used with food either as a spice or garnish.Paprika has been used in a

variety of cuisine for hundreds of years, adding a serious boost of vitamin C to

dishes. In fact, paprika peppers have more vitamin C than lemon juice by

weight.They are grown much like other peppers, which means they like a well-

draining, fertile soil in a sunny area. Provided that you live in a warm climate, you

may start paprika outdoors from seed in zones 6 and higher.

3.5. Sweet Corn Corn (maize) is native to America and has been cultivated in

Central America since 3500 BC.Corn is classified as sweet, pop, flour, silage, or

feed corn, depending on the type of carbohydrate stored in the ear. Sweet corn gets

its name from special genes that prevent or retard the normal conversion of sugar

to starch during kernel development.

3.6. Baby Corn Introduction of Baby Corn Baby Corn maize is one of the valued

vegetables gaining popularity throughout the world including in India. What is

baby corn? It is nothing but “cobs removed within 4 to 5 days after their

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emergence”. Baby corn cultivation or methods are similar to regular commercial

maize cultivation practices. The only difference is the harvesting period or duration

of the crop. Baby corn crop duration is about 2 months whereas regular corn/maize

crop duration is 4 months. In India, Baby corn consumed as fresh vegetable in

curries, pickles, pulav, soups, salads and snacks. Baby corn is rich in ber and

phosphorus. This vegetable is low in calories and free cholesterol.

Following are the health benefits of baby corn.

 Baby corn is a low calorie vegetable.

 Baby corn helps in weight management.

 Baby corn is a low-carb, high fiber, fat-free vegetable.

 Baby corn is nutrient-rich and good source of vitamins and minerals.

 Baby corn has low glycemic index than regular corn. Hence good for controlling

blood sugar levels. Climate Requirement for Baby Corn Farming:- Baby corn crop

requires good sunlight with temperature range of 22°C to 28°C for optimal growth.

This crop does not grow well in high temperature regions exceeding

30°C.However there are baby corn varieties developed for low chilling areas.

Improved Varieties of Baby Corn in India: – There are some improved baby corn

varieties developed for good yield and short duration. Prakash, Vivek Maize

Hybrid 23,COBC 1, Vivek Maize Hybrid 25, HM-4, HIM 129,Hybrid maize 5,

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Pusa Extra Early Hybrid maize 5, DHM 109, MTH-14, RCM 1-1,VL Makka 42,

RCM 1-3, MLY & Golden baby. Climate Requirement for Baby Corn Farming:-

Baby corn crop requires good sunlight with temperature range of 22°C to 28°C for

optimal growth. This crop does not grow well in high temperature regions

exceeding 30°C.However there are baby corn varieties developed for low chilling

areas.

3.7. Bitter Gourd Bitter gourd is one of the most popular vegetable in India. It is

grown extensively throughout India; the bitter gourd has good medicinal value as

well. Varieties of Bitter Gourd Cultivated in India- Co 1, MDU 1, COBgoH 1

(Hybrid), ArkaHarit, Priya and Preethi are mainly cultivated. Climate of Bitter

Gourd Farming - Mainly a warm season plant, bitter gourd thrives in hot and

humid climates. Best Soil for Bitter Gourd Farming - The best medium for the

seeds is a fertile, welldrained soil with a pH ranging from 5.5 to 6.7, enriched with

organic matter, such as compost or dried manure. But it will tolerate any soil that

provide a good drainage system (sandy loam soil, but it will grow in areas with

poorer soils.) It should be in a frost-free area and will prefer the climate with

daytime temperatures between 24 C and 35 C. The soil must be prepared well by

adding organic matter before planting. Seeds soaked in water will germinate

sooner. Soil temperature for germination is at least 20 C to 25 C.

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3.8. Red Capsicum Coloured capsicum which also knows as “sweet pepper” or

“bell pepper” is one of the important high value vegetable crops cultivated in green

houses and to the some extent under shade net house in milder climatic regions like

Bangalore, Pune etc. It is rich in vitamin-A, C and minerals. Capsicum cultivation

is very popular in Peri-Urban production systems because of easy access to urban

markets in India like Bangalore, Hyderabad, Pune etc. It is also gaining importance

in Goa state due to ready market available throughout the year.

Harvesting and yield of Capsicum:- Harvesting of capsicum fruits starts from 60

days of planting in case of green colour capsicum, 80-90 days in case of yellow

and red fruited hybrids. Harvesting continues up to 170-180 days at 10 days

interval in green and up to 200-250 days in red and yellow. Fruits that are mature

green, yellow when it is 75% yellow and red when it is 100% red are harvested and

kept in cool place.

3.9. Carrot Carrots are easy to grow in a garden with deep, loose soil; and as you

may have guessed from the name, they are packed with beta carotene. A 1/2 cup

serving gives you four times the Recommended Daily Allowance of vitamin A in

the form of beta carotene. Growing and harvesting carrots is a great way to take

advantage of their nutritional benefits. Carrot Farming plays major role in Indian

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economy as it is major vegetable crop in India. Best Soil for Carrot Farming -

Carrot is a cool climate season crop and when grown at 15°C to 20°C will develop

a good colour. The carrot crop needs deep loose loamy soil. It requires a pH

ranging from 6.0 to 7.0 for higher yielding.

3.10. Cauliflower Caulifower is one of popular vegetable and known as “Ghobi or

Gobi” in India and this flower belongs to “Cruciferaceae” family often

overshadowed by its green cousin broccoli. This edible portion of the cauliflower

is called ‘Curd’ surrounded by leaves narrower than those of cabbage. There are

two main seasonal types of cauliflower is cultivated in India they are 1) Early

season type crop 2) Late season crop. Late cauliflower types are grown for a longer

period compared too early crop type.

Some of the health benefits of cauliflower is listed below:

 Cauliflower promotes heart health

 Cauliflower lowers cholesterol levels

 Cauliflower helps in building healthy immune system

 Cauliflower is rich in calcium and minerals

 Cauliflower works as anti cancer agent

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3.11. Chilli Chilli is one of the most valuable crops of India. The crop is grown

largely for its fruits all over the India. It is used in India as a principle ingredient of

various curries, and chutneys. It is also used for vegetables spices, condiments,

sauces and pickles. Dry chillies are used for curry powder. Red colour in chili is

due to “Capsanthin”. Pungency in chillies is due to the active constituent

“Capsaicin”, an alkaloid, is extracted from chillies and is used to medicine.

Climate for Chilli Farming:- The chili is a plant of tropical and sub -tropical region

-It grows well in warm and humid climate and a temperature of 20-25°C. Low

moisture in soil during blossom development and fruit formation causes the bud,

deblossom and fruit drops. Excessive rainfall is detrimental to the crops, because it

brings about defoliation and rotting of the plant. As a rained crop, it is grown in

areas receiving an annual precipitation of 25-30 inches. Best Soil for Chilli

Farming:- Chilli can be grown in a range of soils, but black soils which retain

moisture for long periods are suitable for rain fed crop whereas well drained soils,

deltaic soils and sandy loams are good under irrigated condition. However, in hills

of Uttarakhand, chillies are grown in a wide range of soils ranging from sandy to

clay loam mixed with gravel and coarse sand.

3.12. Ginger Ginger is a very important commercial crop grown forits aromatic

rhizomes which is used both as a spice and a medicine. Ginger of commerce is the

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dried rhizome. It is marketed in different forms such as raw ginger, dry ginger,

bleached dry ginger, ginger powder, ginger oil, ginger oleoresin, gingerale, ginger

candy, ginger beer, brined ginger, ginger wine, ginger squash, ginger flakes etc.

Ginger is the rhizome of ZingiberofficinaleRosc., a herbaceous perennial

belonging to Zingiberaceae, and is believed to be native of south-eastern Asia.

Ginger produced in India, goes for domestic consumption and only a small

quantity is exported.

3.13. Jackfruit In India, Jackfruit (Artocarpusheterophyllus) mostly considered as

wild fruit and not taken up as a commercial crop. However, its one of the most

remunerative fruits in India. Jackfruit cultivation is growing day by day due to

market demand and health benefits. Originally it is native to India, but today it

spread across tropical regions. Jackfruit belongs to “Moraceae”. This fruit is grown

in Malaysia, Burma and some parts of Brazil. Wild jack fruit is grown in Western

Ghats of India. Apart from consuming as fresh fruit, this is also used to prepare

some special dishes. Below are the some of the health benefits of Jackfruit:

 Jackfruit boosts the immune system

 Jackfruit helps in healthy digestion

 Jackfruit protects against cancer

 Jackfruit is good for eye and skin

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 Jackfruit controls the blood pressure

 Jackfruit controls the asthma

 Jackfruit maintains healthy thyroid

 Jackfruit helps in strengthening the bones

 Jackfruit boosts energy and prevents from anemia

3.14. Papaya Papaya also known as “Carica papaya” is a tropical fruit having

commercial importance because of its high nutritive and medicinal value. Papaya

cultivation had its origin in South Mexico and Costa Rica. Papaya is a popular fruit

famous for its high nutritive and medicinal values. It comes early in bearing than

any other fruit crop, produces fruits in less than a year and the production of fruits

is quite high per unit area. Papaya is cultivated more or less on a commercial scale

in the foothills and plain valleys of all states of the north eastern region. Papaya is

planted during spring (February-March), monsoon (June-July) and autumn

(October-November).

3.15. Strawberry Strawberry (Fragariavesca) is an important fruit crop of India

and its commercial production is possible in temperate and sub-tropical areas of

the country. but varieties are available which can be cultivated in subtropical

climate. In India it is generally cultivated in the hills. Its main center of cultivation

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are Nainital (district) and Dehradun in Uttar Pradesh, Mahabaleshwar

(Maharashtra), Kashmir Valley, Bangalore and Kalimpong (West Bengal). In recent

years, strawberry is being cultivated successfully in plains of Maharashtra around

Pune, Nashik and Sangali towns. The strawberry is the most widely adapted of the

small fruits. Strawberries are grown throughout Europe, in every state of the

United States, as well as in Canada and South America. The wide variation in

climates within these regions and the wide adaptation of the strawberry plant

permit harvesting and marketing, the fruit during greater part of the year.

Strawberry is rich in Vitamin C and iron. Some varieties viz. Olympus, Hood &

Shuksan having high flavour and bright red colour are suitable for ice-cream

making. Other varieties like Midway, Midland, Cardinal, Hood, Redchief and

Beauty are best for processing.

4. Project Plan The company is setting up a processing plant admeasuring 1,00,000

sq.ft area in Karjat. The company has tied up with farmers having around 100+

acres of land near the processing plant. The location of the land (Chai) is as given

below:

There is a lake named Morbe lake passing near by the location. The lake is a

perennial lake having water across the year. Thus, there is no issue for water

availability. The Mumbai JNPT port is 75 kms (1.5 hours drive) away from the

39
location of the land and the state highway is 1.5 kms away from the location of the

land. Thus, the proximity of the land is very good. The company has entered into

agreement with an international company who will provide the seeds and fertilizers

required to grow the necessary products. They will also buy the final processed and

canned products from us. Also, the company will enter into a contract farming

agreement with the farmers to provide the company with the raw products at a

fixed price during the year. A sample agreement will be shared with the financial

institutions. Project Schedule: Particulars July August September October

November December January February March Acquistion of Land Incorporation of

Company Approvals Fund Raising Construction of Factory Shed Plant &

Machinery Procurement Growing of Products by farmers Processing of Products

The company will start the construction of the factory shed from the month of

August and start procuring process of plant & machinery from the month of August

as well. The farmers will start the work of growing products on their land by the

month of September / October depending upon the product requirements and

climatic conditions. Based on that working, the company will draw the working

capital limit from the bank. The company will need to pay initially to procure the

seeds and fertilizer to give it to farmers and then procure the produce from the. In

both this cases, the payment will have to be made in advance for which there is a

need for working capital. Sales and Marketing: The company plans to have both

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domestic and export market for its products. Internationally, the company has

already tied up to sell its products. The payment cycle will be conducive for the

company in the export markets. In the domestic market, the company plans to sell

the produce in retail and modern trade market like ‘More’ of 21 | P a g e D P R – A

G R O P R O C E S S I N G Aditya Birla, Reliance Fresh, D Mart, V Mart etc..

Looking at the opportunity of inline grocery store, the company intends to tie up

with Big Basket as well. The company intends to build a strong sales and

marketing team. 5. Industry India has been bestowed with wide range of climate

and physio-geographical conditions which ensures availability of most kind of

fruits and vegetables. The country is the second largest producer of the Fruits

(81.285 Million tonnes) and vegetables (162.19 Million tonnes) in the world,

contributing 12.6% and 14.0% of the total world production of fruits and

vegetables respectively. (Source: Source FAO Website- February 2014 and Indian

Horticulture Database 2013) Banana, mango, citrus, papaya, guava and grape

account for major share in total fruit production across India. The major fruit

producing states are Andhra Pradesh, Maharashtra, Karnataka, Bihar, Uttar

Pradesh, Tamil Nadu, Kerala and Gujarat. These eight states account for 70 per

cent of the area under fruit cultivation. Potato, tomato, onion, brinjal, cabbage,

cauliflower and tapioca account for maximum share in vegetable production in the

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country. India is a front runner in many fruits and vegetables with share in world

production (Indian Horticulture Database 2013)as follows:

• 44.1% of mango

• 42.6% Papaya

• 25.6% of banana

• 20.2% of onion

• 35.6% of cauliflower

• 37% of Okra

Out of the total production of fruits and vegetables, nearly 76 per cent is consumed

in fresh form, while wastage, and losses account for 20 to 22 per cent. Only 2 per

cent of vegetable production and 4 per cent of fruit production are being processed.

This is in sharp contrast to the extent of processing of fruits in several other

developing countries such as Brazil (70 per cent), Malaysia (83 per cent),

Philippines (78 per cent) and Thailand (30 per cent).

The vast production base offers India tremendous opportunities for export. During

2017- 18, India exported fruits and vegetables worth Rs. 8760.96 crores which

comprised of fruits worth Rs. 3298.03 crores and vegetables worth Rs. 5462.93

crores. Mangoes, Walnuts, Grapes, Bananas, Pomegranates account for larger

portion of fruits exported from the country while Onions, Okra, Bitter Gourd,

Green Chilles, Mushrooms and Potatoes contribute largely to the vegetable export

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basket. The major destinations for Indian fruits and vegetables are UAE,

Bangladesh, Malaysia, UK, Netherland, Pakistan, Saudi Arabia, Sri Lanka and

Nepal. The country has exported 2,87,384.63 MT of processed fruits and

vegetables to the world for the worth of Rs. 2,266.66 crores during the year 2013-

14. The major export destinations are United States, Saudi Arabia, United

Kingdom, Netherland, United Arab Emirates and Japan. India is also a major

exporter of Mango Pulp in the world. The country has exported 174,860.34 MT of

Mango Pulp to Saudi Arabia, Yemen Republic, Netherland, United Arab Emirates

and Sudan for the worth of Rs. 772.97 crores during the year 2017-18. India is also

a prominent exporter of dried and preserved vegetables to the world. The country

has exported 56,158.40 MT of dried and preserved vegetables to Germany, Russia,

United Kingdom, United States, France and Brazil for the worth of Rs. 742.74

crores during the year 2017-18.(Source: APEDA) The fruit and vegetable

processing industry in India is highly decentralized. A large number of units are in

the small scale sector, having small capacities upto 250 tonnes/annum though big

Indian and multinational companies have capacities in the range of 30 tonnes per

hour or so. The prominent processed items are fruit pulps and juices, fruit based

ready-to-serve beverages, canned fruits and vegetables, jams, squashes, pickles,

chutneys and dehydrated vegetables. More recently, products like frozen pulps and

vegetables, frozen dried fruits and vegetables, fruit juice concentrates and

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vegetable curries in restorable pouches, canned mushroom and mushroom products

have been taken up for manufacture by the industry. Processing of fruits and

vegetables in India holds tremendous potential to grow, considering the still

nascent levels of processing at present. Though India’s horticultural production

base is reasonably strong, wastage of horti produce is sizeable. Processing and

value addition is the most effective solution to reduce the wastage. Considering the

wide-ranging and large raw material base that the country offers, along with a

consumer base of over one billion people, the industry holds tremendous

opportunities for large investments. Opportunity in Food Processing The Indian

food –processing industry is primarily export oriented. India’s geographical

situation gives it the unique advantage of connectivity to Europe, the Middle East,

Japan, Singapore, Thiland, Malaysia and Korea. One such example indicating

India’s location advantage is the value of trade in agriculture and processed food

between India and Gulf region. Various products, such as tomato puree, canned

fruit, frozen fruit, frozen vegetables and ginger-garlic pastes, gained popularity

among Indian consumers. Frozen and canned/preserved food products are proving

to be better alternatives to fresh foods due to the convenience of storage and usage

they offer. Demand for fresh, chilled and processed fruits and a vegetable is also

increasing in modern retail. Even some small retailers have started keeping

refrigerators to stock frozen peas or corn. This trend is likely to continue over the

44
forecast period and will help drive sales and penetration of processed fruits and

vegetables in India.

Government Policy: 100% FDI is allowed under automatic route in food

processing industry and food infrastructure including food parks, distillation &

brewing of alcohol, cold storage chain and warehousing. Five-year tax holiday for

new food processing units in fruits and vegetables processing along with other

benefits in the budget has bolstered the government’s resolution of encouraging

growth in this sector.

ADVANTAGE INDIA - THE FOOD PROCESSING SECTOR COMPRISES SIX

MAJOR SEGMENTS :- VALUE CHAIN IN FOOD PROCESSING SECTOR

AND KEY PLAYERS :- The unorganised sector accounts for 42 per cent of India’s

food processing industry. The sizeable presence of small-scale industries points to

the sector’s role in employment generation. Though the market falls under the

unorganised sector in the country, the organised sector has a larger share in the

secondary processing segment than the primary one. Rice mills account for the

largest share of processing units in the organised sector.

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