2. CONTENTS
5.1 Introduction to Cost Data
5.2 Components of Cost
5.3 Purposes and Uses of Cost Data
5.4 Classification of Cost Data
5.5 Sources of Cost Data
5.6 Uses of Index
5.7 Types of Indices
3. 5.1 INTRODUCTION TO
COST DATA
The collection, analysis, publication and use of cost
data and price are important in construction industry.
The cost data is required at the initial stage to reflect
the probable cost of the proposed project to the client.
– normally at initial stage cost data closely related to
the construction functions and design.
Also required at various later stages of design and
construction – to provide realistic estimate. During this
stage, cost is closely associated to the quantities and
specifications of a construction.
A systematic and sufficient cost data is used to
establish an accurate estimate.
4. 5.2 COMPONENTS OF
COST
The cost of a particular work comprises cost of
several basic components – which will finally
forms the total cost of components.
Example component of costs:
Plant and equipment
Labour
Material
Overhead
Profit
5. Components of Cost
(unit rate)
Material Profit
Overheads
Plant
Labour
Basic cost of
material
Transportation
Unloading &
storing
Wastage
Basic wage
Insurance
Overtime
payment
Bonus
Contribution
Allowance
Health benefit
Transportation
etc.
Capital Cost
Operation
Cost
Purchase price
Interest of
capital
Economic life
span
Repair cot
Transportation
cost
Fuel
Operator’s
salary
Fixed Cost Variable
Cost
Salary of admin. staff,
contribution and
allowance
Rent and taxes on the
office
Printing and stationary
Bills and postage
Insurance,
Interest rate
Manager’s
salary
% basis or lump sum
5-10% of total
component cost
6. 5.3 PURPOSES & USES OF
COST DATA
Main purposes:
1. Control contract operation especially in the
interim payment and final account procedures.
2. Estimate cost of the proposed project and control
the design to ensure figures produced are comparable
or close to tender estimate.
3. Balance the cost in the estimate to assure money is
spent based on the client’s preferences.
4. Discuss the schedule of rates with the contractor for cost
reconciliation and to speed up tender submission.
7. 5.3 PURPOSES & USES OF
COST DATA
A readily available and quick cost data is required to:
1. Prepare an estimate or budget
2. Plan outline and detailed costs during the design
stages
3. Estimate tender for tendering purposes
4. Negotiate variation prices during the preparation of a
final account
5. Calculate and settle off the contractor’s claims
6. Adjust the valuation of profit and loss
7. Manage maintenance and repair
8. Calculate the life-cycle-cost or cost-in-use
8. 5.4 CLASSIFICATION OF
COST DATA
Primary
Data
Secondary
Data
Refers to data which are
gathered and kept by
organisation.
Often obtained from
published sources.
Also used to obtain a
second opinion – data
gathered from the
experience and practice
of a professional
individual has been
identified as the best
9. 5.5 SOURCES OF COST
DATA
1. Technical Data
Journals, magazines related to design, building,
management and construction industry as well as built
environment.
Example: The Malaysian Surveyor published by ISM –
information like elemental cost analysis, studies on cost
of materials, labour wages, basic wage rates of labour etc.
2. Priced Books
Example: Spon’s Achitects’ & Builders’ Price Book
Hutchins’ Priced Schedules
Griffiths Building Priced Book
10. 5.5 SOURCES OF COST
DATA
3. Information Services
Example: Institution of Surveyors Malaysia (ISM) has a
Sub-committee for Cost Information (prepares ECA
Forms, Manual Preparation of ECA, SMM2)
4. Tender/Contract Document and Bills of Quantities
Some of the available information include schedule of
rates for each element, overall cost of a project/building,
basic rates of materials, labour, plant etc.
5. Government Publications
a. From Public Works Department (PWD)
b. From Department of Statistics Malaysia (DSM)
11. 5.5 SOURCES OF COST
DATA
From Public Works Department (PWD)
PWD under ‘Unit Pembangunan dan Khidmat Kos’, Contract
and Quantity Surveying Branch for example publishes
several books such as:
i. Average cost per square meter for building construction
work
ii. Schedule of rates
- Schedule of rates for minor and repair works
- Schedule of rates (for tender based on drawings and
specifications)
iii. Construction cost guide (for preparation of preliminary
estimate)
12. 5.5 SOURCES OF COST
DATA
From Department of Statistics, Malaysia (DSM)
i. Building material cost index – referred as Special Release
1 (Civil Engineering Work) and Special Release 2 (Building
and Structural Works) for Peninsular Malaysia. [Published
Monthly]
ii. Statistics on the country’s overall economy as well as on
different economics sectors. For CI can be referred in
‘Annual Survey on Construction Industries’
Other Government Publications
i. Ministry of Housing and Local Government
ii. Bank Negara Malaysia
Publish policies pertaining to cost, borrowed interest rates,
13. 5.6 USES OF INDEX
Almost all of cost data used are historical data. When these data
are used to prepare cost plans or estimates, this information has
to be adjusted using indices.
1. Cost Planning
New price/rate (current) = Base Price x Current Index
Base Index
From the above formula, the percentage of price change can be
calculated.
% change = Current index – Base index x 100%
Base index
14. EXAMPLE
An office was constructed in 2007 at RM1,800.00/m2 GFA. Another
new office will be constructed at the end of 2009. Calculate the new
rate and the percentage in the change in rate if the current index given
is 215 and the base index is 198. Other factors remain unchanged.
New rate (current) = 1,800.00 x 215
198
= RM 1, 954.55/m2 GFA
% change = 215 – 198 x 100
198
= 9%
Checking percentage change can also be done by using the current rate
and the base rate.
% change = Current rate –Base rate x 100%
Base rate
= 1, 954.55 – 1, 800.00 x 100
1, 800.00
= 9%
15. 5.6 USES OF INDEX
2. Prediction
The pattern or trend of the current index may be extended to a
certain date in the near future. However, it need to be done
cautiously. It can be easily predicted if the market is stable.
3. Adjustments to Price Fluctuation
Index is used to calculate the increase in the construction cost for
contracts with fluctuation clauses (ex. Contract that provides
allocations for the increase in the cost of the contractor’s
resources like materials, labour wages, plant and overheads)
4. Price Comparison
The cost of different materials and processes does not change at
the same fixed price rate. Therefore, indices can be used to
measure such changes and to observe changes in cost between
components at a stipulated duration.
16. 5.6 USES OF INDEX
5. Evaluation of Market Trend/Condition
The condition of the market also influences the sum to be paid by
the client (apart from the construction cost). The tender price
index will take into consideration these changes.
Market trend index = Tender Price Index
Building Cost Index
6. Price Appreciation
Values in the indices could be used to update the price in BQ or
other resources to the current value/future value. Process
involved is similar to the process in cost planning.
17. Laspeyre’s
Index
It is a base year index and stated in a following formula:
Current price x Base quantity x 100
Base quantity x Base price
Paasche’s Index
This index uses the current year quantities in its computation.
Current price x Current quantity x 100
Base price x Current price
Laspeyre’s index is often used due to the difficulty of obtaining the
current quantity.
18. 5.7 TYPES OF INDICES
1. Price Index
‘Output Index’ that measures changes in tender price.
Main use :
(1) to update historical cost data to obtain cost target and a
realistic cost limit,
(2) to evaluate price where the specification, location, types
of building, different size and contracts period, and
(3) to make cost planning.
Index is managed and produced by Unit Pembangunan dan
Khidmat Kos, PWD Malaysia. Produced for standard
government buildings once every six months.
19. Year Tender Price Index
1/2005 312.09
2/2005 312.56
1/2006 393.64
2/2006 412.62
1/2007 415.44
Example of TPI for construction
*1/2005 – 1st six months, 2/2005 – 2nd six months
Source: Kos Purata Semeter Persegi Kerja-kerja Pembinaan Bangunan,
PWD
20. 5.7 TYPES OF INDICES
2. Location Factor
One of the multiplying factors that are used to adjust the
building cost to take into consideration differences in
location.
Locality factor are divided into regions. Each region divided
according to the following location:
A = Penang, Kedah, Perlis
B = Perak
C = Federal Territory, Selangor, Negeri Sembilan, Malacca
D = Johor
E = Pahang
21. Region A B C D E F
Localit
y
Factor
1.113
4
1.065
2
1.000
1.081
1
1.058
2
1.058
0
Source: Kos Purata Semeter Persegi Kerja-kerja Pembinaan
Bangunan, PWD
A = Penang, Kedah, Perlis
B = Perak
C = Federal Territory, Selangor, Negeri Sembilan,
Malacca
D = Johor
E = Pahang
F = Kelantan, Terengganu
22. 5.7 TYPES OF INDICES
3. Cost Index
‘Input Index’ that measures changes according to time for
resources used like cost of labour, materials and plant.
This index also referred to as ‘ factor cost index’ and each
individual factor has its own index.
Sources that are used to adjust the cost index can be
referred to ‘Special Release’ published by Dept. of Statistics
Malaysia.
Special Release 1: Civil Engineering Works
Special Release 2: Building and Structural Works
Available at:
https://www.dosm.gov.my/v1/index.php?r=column/csearch&search_keyword=spe
