Elements of Pricing

The pricing portion of the estimating process consists of three major segments: the establishment of appropriate data, the computation of unit prices based on these data and the application of such prices to the measured quantities of work. Before beginning a detailed study of the elements of pricing, it is appropriate, in order to avoid ambiguity and confusion, to examine the meanings of some words and phrases commonly used with the subject matter of pricing. 

Unit Rate and Unit Price 

There is no universal agreement among estimators about the precise meanings of the terms unit rate and unit price. The expression unit rate has two common meanings : average output for a measured unit of work, or basic cost to the contractor to perform a unit of work. The expression unit price usually means a composite figure, consisting of a basic cost plus a percentage marks up for overhead and profit. In this block, 'unit rate' refers to output, and 'unit price' refers to cost, item of work, and unit of work. An item of work is a part of the total construction project which can be distinguished from all other parts, and for which costs can the  determined separately - e.g. concrete beam as distinct from a concrete slab. A unit of work is a collection of item, generally comprising the work of one distinct trade, such as masonry or roofing. Synonym for item of work is a pay item and for a unit of work is a specification section. 

Wage Rate and Labour Rate 

Wage rates are those paid to the workers for doing work on an hourly basis; labour rates are those used by the contractor to calculate labour costs, and include wage rates plus all other pay roll burden, such as fringe benefits and statuary requirements. Some estimators use wage rates in calculating unit prices for labour; such estimates should theoretically equal actual payroll disbursements. Some estimators prefer to use the more comprehensive labour rate, because it is more representative of the costs if the work being done. 

Plant, Equipment and Tools 

These three words require some comment because of the special meanings ascribed to them by estimators. Plant means relatively large, immobile machinery ,  and often includes the buildings or other fixtures housing such machinery, e.g. concrete ready-hix plants. Equipment means heavy but relatively mobile machinery, e.g. concrete mixer machine, power hoist, power trowel. Tools means light weight manual devices such as hammers, chisels hand-held machines like drills. Plant and equipment are usually provided by the construction company, whereas tools are usually provided by the tradesman themselves for their own use. 

Mobilisation 

Mobilisation refers to the costs of transporting a piece of equipment from the contractor's storage yard or other source, such as a rental agency, to the construction site setting it up ready to do work and returning to the source upon completion of work. If the equipment has to be transported using another vehicle, such as a flatbed truck or van, the costs of the second vehicle must also be calculated and charged to the project generating these costs. Specifically, the costs of mobilisation should be charged to the item of work precipitating the necessity to provide the equipment under consideration, e.g. mobilisation of a pile driving rig 

to the foundation work.