# What is a Unit Rate in Construction Estimating?

A **unit rate** can be described as the monetary value allocated to a unit of measurement for a given item in a bill of quantities, according to the Royal Institute of Chartered Surveyors (RICS). This can be the cost per square meter of floor area, cost per kilogramme of steel reinforcement, cost per linear metre of timber door frames, etc.

## The Basis of Construction Unit Rate Estimating

For an experienced estimator/Quantity Surveyor, building up a construction rate is something that they are already used to. However, for a junior estimator who has just joined the company or a student Quantity Surveyor in an internship, calculation of that can be a challenging task if they don’t have a thorough understanding of what a unit rate is. It is, therefore, important that you understand what a unit rate is, especially if you are working in the construction industry and the various methods that are applied in its calculation.

Whether you are running your small construction business or you are working as an estimator in a construction company, you need an understanding of unit rates, how they are built up and how they are used as a basis for entering into construction contracts.

The business of construction is a quite complex one and so are the construction projects. The costs associated with a construction project need to be known at the early stages of the design development, which is the conceptual design stage. The construction project participants need a schedule of unit rates and together with the design information available, the client can be briefed of the probable costs that they might incur in the future.

During the design stage, Adrian J (1995) says that estimators mostly rely on historical data to estimate construction costs. A reasonable assessment of costs is fundamental in making investment decisions. It is therefore important that detailed and accurate assessment is done to avoid cost overruns and variations in construction contracts during the construction stage of the project. This is where unit rates come in.

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unit ratecan be described as the monetary value allocated to a unit of measurement for a given item in a bill of quantities, according to the Royal Institute of Surveyors (RICS). This can be the cost per square meter of floor area, cost per kilogramme of steel reinforcement, cost per linear metre of timber door frames, etc.

## Types of Unit Rates

There are two types of unit rates as discussed in this article. These are the hourly rate and item rate. Both types depend on a clear identification of all the activities that need to be done and the number of materials that will be spent to perform those activities.

An **hourly unit rate** is based on the labour and equipment charges per hour while an **item-unit rate** involves a detailed consideration of the construction activities, the length of time they will take, the cost of materials, the cost of labour and any other important considerations such as percentages for profits and contractors overheads and value-added tax.

A good example of an item-unit rate is the rate per square metre of vegetable soil excavation. Hourly rate charges for hiring a bulldozer can serve well as an example of an hourly unit rate.

When calculating these rates, it is advisable that all reasonable considerations be made in order to come up with an accurate estimate that can be relied on to price a bill of quantities for the purposes of bidding.

## Uses of a Unit Rate

A unit rate (regardless of whether hourly or item based) can be used for the following purposes:

- To estimate the cost of planned works.
- To perform valuations of work done.
- For pricing bills of quantities and other tender documents.
- To develop cost plans for the purposes of estimating the cost of a proposed construction project.

## Approaches to Estimating a Unit Rate

To estimate a unit rate, the choice of estimating method depends on the type of unit rate you what to arrive at. Based on that, let us look at the following unit rate estimating methods:

### Unit Rate Estimating

As the naming implies, this estimating approach is applied when the estimator wants to arrive at a unit rate.

Past research indicates that the unit rate estimating approach uses predetermined labour output rates and plant output rates. This is used together with the price per unit of the materials that the construction activity will consume to calculate cost per unit of the measured works.

It is the approach that is commonly used when building up unit rates for use in pricing a bill of quantities prepared in accordance with a recognised standard method of measurement.

### Operational Estimating

This approach is applied when the estimator’s aim is to arrive at an hourly rate.

Operational estimating, therefore, aims at calculating the total cost for a complete work package by determining the total amount of material required together with the overall length of time that the required plant and labour will be required on-site for the completion of the whole operation.

Once the total cost of equipment and plant hire and labour costs for operating these plant is established, it is then divided by the total time to establish an hourly rate. It is very useful in establishing the rate for equipment hire.

### Conclusion

It is important to note that thorough market research needs to be done on the unit price of materials and labour productivity on the site. This will aid in the process of coming up with an accurate construction unit rate.

Do you have any other ideas about construction rates? Leave a comment.

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— QuantBuild Academy (@quantbuild_KE) July 27, 2020

#### Nzangi Muimi

I’m a Quantity Surveyor, Educator and the founder of QuantBuild Academy, the fastest-growing technology-focused YouTube channel online. I am passionate about construction information technology and the digitalization of the construction industry.

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To estimate a unit rate, the choice of estimating method depends on the type of unit rate you what to arrive at.It is important to note that thorough market research needs to be done on the unit price of materials and labour productivity on the site.