---
title: "Importance of rate analysis; how rates taken"
subject: "Estimating and Costing"
chapter: 4
key: "semester_7/estimating_and_costing:rate-analysis-importance-rates-taken"
source: https://www.bctengineer.com/q/semester_7/estimating_and_costing/rate-analysis-importance-rates-taken
site: BCT Engineering
---

# Importance of rate analysis; how rates taken

Estimating and Costing · Chapter 4: Analysis of Rates

- Asked in: 2079 Bhadra, 2+2 marks
- Video: [Rate Analysis of a Construction Project | Basic Elements | Direct & Indirect Cost](https://www.youtube.com/watch?v=0LhI-AJFFwg) — QSplorer
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/estimating_and_costing/rate-analysis-importance-rates-taken
- Whole chapter: https://www.bctengineer.com/md/semester_7/estimating_and_costing/chapter-4

## Question

Why is analysis of rate important for civil engineering work? Also, explain how rates are taken for analysis.

## Short answer

Rate analysis gives unit rates for estimates, shows material/labour/machinery per unit, and supports tender evaluation, variations and cost control. Rates are taken from departmental norms, District Rate or market survey, plus transport, then 15% overhead/profit and 13% VAT are added.

## Answer

#### Importance of rate analysis
- It gives the **unit rate** of every item of work, without which an estimate or a bill cannot be prepared.
- It gives the materials, labour and machinery per unit, so **procurement and planning** can be done.
- It is the basis for **evaluating tenders**, valuing **variations** and settling extra-item rates.
- It allows comparing alternative designs and methods and keeps the cost under control.

#### How rates are taken
1. The **quantity of materials, labour and equipment** per unit of work is taken from the departmental **norms** (DUDBC norms for buildings, Department of Roads norms for road work).
2. The **rates of the materials and labour** are taken from the **District Rate** of the concerned district (or from a market survey if the material is not listed).
3. **Transport** is added for the lead from the source to the site.
4. Cost per unit = norm x rate for each resource; the sum is increased by **15% contractor's overhead and profit**.
5. VAT (13%) is added in the estimate.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Why is rate analysis important?
   A. It replaces estimates
   B. It only gives wages
   C. It decides design
   D. It gives unit rates without which an estimate or bill cannot be prepared
   Answer: D. Unit rates are essential for estimates and bills. (Key point: Importance)

2. Where do quantities of materials and labour per unit come from?
   A. Departmental norms (DUDBC, DoR)
   B. Contractor's memory
   C. Market survey always
   D. Client
   Answer: A. Norms give quantity per unit. (Key point: Source of norms)

3. Where are the rates of materials and labour taken from?
   A. National budget
   B. District Rate of the district (or market survey if unlisted)
   C. Tender winner
   D. Foreign market
   Answer: B. District Rate, else market survey. (Key point: Source of prices)

4. How is the final unit rate built up?
   A. Sum x 13% VAT only
   B. Sum minus 15%
   C. Norm x rate for each resource plus transport, then 15% overhead and profit; VAT 13% added in the estimate
   D. Norm only
   Answer: C. Direct cost + 15% O&P, VAT separately. (Key point: Calculation)

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