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Schedule of rate breakdown

15 replies [Last post]
Sun, 2009-03-29 02:00
Mohamed Sahir
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In the schedule of rate break down, we have % breakup of Material, labor, plant and overhead & profit. For Ex: item “A”: Material – 70%, Labor-15%, Plant-15%, OHP-15% Totaling 100%.
Now we have a variation for a similar item as “A”.
We got the new quotation for the materials.
We submitted our variation to the consultant, saying that since the material cost is 70%. The new rate for the item will be (material cost / 0.7).
They replied back to us stating that such a calculation is unacceptable, since in doing so we will be getting 15% of the total rate as our OHP. Since the OHP is 15% of (Material + Labor + Plant).we will have to resubmit the variation in this format.
In such a case how will one work out the Labor & Plant component using the schedule of rate breakdown.
Your suggestions are welcome.
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Replies

Tue, 2011-03-01 16:58
#1
Mike Testro
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Hi Moahmed

The first thing to think about is not re start long dead threads - it is anoying for PP members to be reminded of 4 year old topics.

If you have any number of queries please set them down in the appropriate forum and PP members will respond.

Best regards

Mike Testro

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Tue, 2011-03-01 09:07
#2
mohamed saddam
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salaam to you all,  my name is moahmed, i am from maldives, i have lots to ask, if any body have time 4 me plz i need some help,

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Wed, 2009-04-15 14:32
#3
Samer Zawaydeh
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Dear Mohamed,

You can make the format that is appropriate for the project that you have.

Basically you will have the following sections:

1. Material
2. Manpower
3. Equipment
4. Others depending on the type of project.

Then you apply the factors for Overhead and Profits.

With kind regards,

Samer
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Wed, 2009-04-15 07:32
#4
Mohamed Sahir
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Samer Thank you for your reply,

But my basic question is regarding the way in which the schedule of rate breakdown is presented. The standard format.
The variation example was just to explain the complexity of it.

regards
sahir
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Tue, 2009-04-14 13:16
#5
Samer Zawaydeh
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Dear Mohamed,
Since the description of the item in the BOQ changed (the thickness in this case) then you need to do a price analysis.

The price analysis will be based on the rates of similar items in the BOQ. So in this case, you will only change the cost of the material from thickness 1 to thickness 2.

With kind regards,

Samer
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Tue, 2009-04-14 04:49
#6
Mohamed Sahir
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hello,

I was waiting to get some suggestions.Is any more detailing required.

regards

mds.
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Mon, 2009-04-06 05:28
#7
Mohamed Sahir
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Hey guys wait a minute! Let me give you an example: Variation: Change in thickness of the 150mm Gre Pipe. (Pl. Note it is not the Dia. but the thickness that has changed) BoQ Item Description Is : In trenches, depth: not exceeding 1.5 m for 150mm pipe Rate Break down from the: Schedule of rate break down. Material-60%, Labour-15%, plant-10% & ohp-15% Total (100%) Now the general approach would be to 1. Break up the rate into M, L, P components based on the Schedule of rate break down %’s. 2. To the material component apply the price differences, to get the new material cost. 3. Assuming there will not be any increase in labor and plant costs the new direct cost ( M+L+P) will be (New M + L + P ) 4. Now the new rate has to be (New M + L+ P) x 1.15 (I.e., including the OHP) or can we say the new rate is (New M)/0.6 .These two approaches yields two different OHP’s. The consultant is in favor of the former. We objected to this saying, how can we have two different approaches, while breaking up the rate and then when rebuilding it. So their argument was doesn’t rely on the “Schedule of rate break down” build up the plant and labor components for the new rate. This is ok, but it just makes the post contract administration simply tough. Still we decided to buildup the L&P cost, then the productivity is always questioned, and academic evaluations are done leading to wastage of time and energy and disputes. What went wrong in our contract? Was it the format of the Schedule of rate break down, that is creating the problem? Is it not the standard way to show your rate breakdowns? Please comment.
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Sun, 2009-04-05 00:21
#8
R. Catalan
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Sajid/Samer,

I agree to both of you. Hope we made it clearer this time.

Best regards,
Rommel
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Sat, 2009-04-04 14:44
#9
Samer Zawaydeh
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Dear Everyone,

This is a numbers issue.

The Contractual OHP = 15% of the Final Price = 17.647% of the M+L+P.

You just have to point this issue to the Consultant, and they should understand.

Unless you have another clause in your Contract stating clearly that the OHP=15%.

Best Regards,

Samer
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Sat, 2009-04-04 12:44
#10
Sajid Balma
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Hi Catalan
I understand but don’t agree that my OHP is 17.647%.

Although, in the end it won’t make a difference in terms of amount. But, if I have a lump sum contract then I may loose ground as I am asking higher OHP.

My 15% OHP is based/integrated in my selling price and not in my direct cost. So, I divide my direct cost by 0.85 to reach my selling cost.

DC = 1080
Selling Price = 1080/.85 = 1270.59

Now, what is my OHP in 1270.59 is 15%.

OHP = 1270.59x.15 = 190.59

So, my direct cost comes to what you have claculated earlier.

It is just how you present/argue your claculations.

I am looking forward to listen on my way of presenting the entitlement.

Regards


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Sat, 2009-04-04 03:00
#11
R. Catalan
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Dear Mohammad,

Let us calculate:

For example if your BOQ rate is 1,200:
Material = 840 (70%)
Labor = 120 (10%)
Plant = 60 (5%)
OH&P = 180 (15%)

Therefore, your Direct Cost (M+L+P) is 1,020 and OH&P is 180. Then, what is the % OH&P?

OH&P = 17.647% of Direct Cost (180/1020)

Let us check whether the 17.647% is correct:
1,020 x 15% = 153 (Wrong)
1,020 x 17.647% = 180 (Correct)

From the above example, if the new material cost is 900, what is the new BOQ rate?

Direct cost = 900+120+60 = 1,080
OH&P = 1,080 x 17.647% = 190.59
New BOQ Rate = 1,270.59

Hope the above helps,

R. Catalan

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Sat, 2009-04-04 02:07
#12
Samer Zawaydeh
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Dear Mohammad,

You will calculate the total cost including everything, then apply the percentage of OHP.

Kind Regards,

Samer
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Fri, 2009-04-03 23:48
#13
Mohamed Sahir
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Dear Samer,

Thankyou for you view, But my question is if the schedule of rate breakdown shows OHP as 15 %, is it 15% of rate or 15 % of (M+L+P), as when calculating the rate from first priciples.

The General format for the schedule of rate breakdown is:

item “A”: Material – 70%, Labor-10%, Plant-5%, OHP-15% Totaling 100%

I hope iam clear now.

Regards : Md. Sahir
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Sun, 2009-03-29 23:11
#14
Samer Zawaydeh
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Dear Mohammad,

For variations, you need to calculate the actual costs. So start by submitting the quotations or actual invoices, then you can estimate the number of hours+ supervision+ overhead and profit+ any other cost associated with it.

You can not use the original formual for the variation. Unless the variation is an extra quantity. If it is a new item, then a fresh analysis is needed.

kind regards,

Samer
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Sun, 2009-03-29 02:00
#15
Mohamed Sahir
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There is a correction:
For Ex: item “A”: Material – 70%, Labor-10%, Plant-5%, OHP-15% Totaling 100%.
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