Unit Rate Analysis in Construction: Labor, Materials and Equipment Norms
A unit rate in a bill of quantities is one number per row, but behind it stand five separate calculations. A unit rate analysis shows them: how much labor goes into one unit of work, which materials, how much machine time, what overheads and what profit. Without it the price is a guess, and with it you know which component to adjust when the client asks for a discount or a material gets more expensive.
Below we work through one example to the end and show the three mistakes that most often eat into profit. The overall cost of a project and the allocation of overheads have a separate article; here we look at a single line item and its price.
What a unit rate is made of
Direct labor. It is calculated as a resource norm multiplied by an hourly rate. The norm says how many man-hours one unit of work takes, and the rate is the full cost to the company of one hour: the gross wage together with the employer's social security contributions, not the amount the worker takes home.
Materials. For each material you take the consumption norm per unit of work, increase it by the waste allowance and multiply by the delivered price. On top of the total you add delivery and storage costs: transport to the site, unloading, storage. They are usually a percentage of the materials cost.
Equipment. It is measured in machine-shifts. The norm shows what fraction of one machine shift falls on a unit of work, and the machine-shift price includes everything you pay for it: rental or depreciation, fuel, operator, transport to the site.
Overheads. These are the site and company costs that do not appear in any line item: technical supervision, temporary works, tools, administration. In the analysis they enter as two percentages, one on labor and one on equipment. Overheads are usually not charged on materials, because the delivery and storage costs are already there.
Profit. A percentage on everything so far.
The hourly rate and the four percentages are called pricing parameters. They are set once for the bid and apply to every line item in it, and in public procurement the client often wants you to declare them explicitly.
Resource norms in construction
A resource norm says how much of a resource goes into one unit of work: how many cubic meters of concrete, kilograms of rebar, liters of primer or machine-shifts. A norm is a quantity, not money. The money comes later, when the quantity is multiplied by the price of the resource. That is why the same norm stays valid for years while the prices in the analysis change every month.
For equipment, the industry works with the УСН and ТНС collections (the Bulgarian norm books for construction work) and with the СЕК reference guides. For materials, the most reliable source is the manufacturer's technical data sheet, where the consumption per square or cubic meter is given for the specific product. The norm for a material always includes the waste allowance: what is cut off, spilled or left in the packaging.
The collections are a starting point. Some of the norms in them were written for technologies and work organization that look different today. The best norms are your own: how much material and machine time actually went into completed projects.
Labor norms in construction
A labor norm is the special case for labor: how many man-hours a unit of work takes under normal organization. The main collections here are again УСН and ТНС. For placing concrete in a slab it might be 1.2 h/m³, for skim-coating a wall 0.4 h/m². In the collections the norm is usually given for a particular crew composition, so check whether it matches yours.
The labor norm is where your own measurements are worth the most. Two crews with the same headcount can differ by 30% in productivity, and the overheads on labor depend on the labor norm too. Record the hours worked per line item on two or three projects and compare the average with the norm you calculated with.
Example: 1 m³ of concrete placed in a slab with a concrete pump
All the numbers below are illustrative. They were chosen so that the calculation is easy to follow, and they are not market prices or normative values. Amounts exclude VAT.
Pricing parameters in the example:
- hourly rate with social security contributions: €10.00/h
- delivery and storage costs: 3% on materials
- overheads on labor: 80%
- overheads on equipment: 30%
- profit: 10%
Step 1: labor
We take a norm of 1.2 man-hours per cubic meter for placing, compacting and finishing.
1.2 h × €10.00/h = €12.00
Step 2: materials
The only material is ready-mixed concrete at €100.00/m³. For one cubic meter in the structure you order slightly more, because some stays in the pump and the pipes or is spilled. With a 2% waste allowance the norm becomes 1.02 m³.
- concrete: 1.02 m³ × €100.00 = €102.00
- delivery and storage costs: 3% × €102.00 = €3.06
Materials total: €105.06
Step 3: equipment
The concrete pump costs €640.00 per shift and, with good organization, pours 80 m³ in that time. Per cubic meter that is 1/80 = 0.0125 machine-shifts. A poker vibrator at €25.00 per shift, with a norm of 0.02 machine-shifts per cubic meter.
- concrete pump: 0.0125 × €640.00 = €8.00
- vibrator: 0.02 × €25.00 = €0.50
Equipment total: €8.50
Step 4: overheads
- on labor: 80% × €12.00 = €9.60
- on equipment: 30% × €8.50 = €2.55
Overheads total: €12.15
Step 5: profit and final price
| Component | Amount per 1 m³ |
|---|---|
| Labor | €12.00 |
| Materials with delivery and storage costs | €105.06 |
| Equipment | €8.50 |
| Overheads | €12.15 |
| Cost price | €137.71 |
| Profit 10% | €13.77 |
| Unit price | €151.48 |
This €151.48 goes into the "Unit price" column of the line item in the bill of quantities. For 300 m³ of slabs, the row value is €45,444.00.
Profit is 10% of the cost price, but against the selling price it is 13.77 / 151.48, or about 9.1%. The first number is a markup, the second is a margin, and both describe the same amount.
Where mistakes happen
Forgotten waste allowance. If you calculate the concrete at 1.00 instead of 1.02 m³, materials drop to €103.00 and the price falls by about €2.27 per cubic meter. For 300 m³ that is close to €680. With concrete the waste allowance is small; with tiles, plasterboard and rebar it is several times larger, and the same mistake weighs more.
Labor without social security contributions. If you take €8.00/h as the rate because that is what the worker gets in hand, labor becomes €9.60. Because overheads and profit are calculated on top of it, the error grows down the calculation: the price drops to €146.73. That is €4.75 per cubic meter and €1,425.00 for the whole quantity, which you pay out of your own profit.
Equipment without downtime. The norm of 0.0125 machine-shifts holds when the pump really pours 80 m³ in the shift. If the mixer trucks arrive late and you pour 40 m³, the pump costs €16.00 per cubic meter instead of €8.00. With the same percentages the price should have been €162.92, that is €11.44 more. Downtime, machine transport and the minimum rental time are built into the norm in advance, instead of you discovering them on the supplier's invoice.
There is also a fourth mistake that is harder to spot: the parameters change halfway through. One analysis uses 80% overheads on labor, another 100%, because it was copied from an old bid. So record them in one place, from which they apply to all line items.
Construction work prices: why a ready-made price is not enough
When you look for construction work prices, you usually find tables with a single number per square or cubic meter. They are useful as a guide, but they do not say what is inside: with what waste allowance the material was calculated, at what rate the labor was priced, whether there is any profit. Two prices that look the same at first glance can rest on completely different norms.
A unit rate analysis answers that question. Preparing unit rate analyses in construction is exactly the calculation in the example above: a norm times a price for each resource, then the overheads and profit. If the market price of a job is below your analysis, you know which row to check: the norm, the material price or the percentages. If you simply cut the price, you do not know which part you are losing on.
How the analysis ties into the bill of quantities and the bid
The bill of quantities lays out the line items and quantities, and the analysis gives the unit price of each, one analysis per line item. For a smaller project you do not need to analyze every row: start with the ten or so line items that carry most of the value, and the ones where you have lost money before.
In the bid the client sees only the final unit price. The analyses stay with you, unless the client explicitly asks for them as an appendix, which is common in public procurement. If the tender documents have requirements for the format of the analyses, follow them. This article is not legal advice.
After the project is finished, the analysis does one more job. You compare the norms in it with the hours, materials and machine-shifts actually used, and correct the ones that were not confirmed. That way the next bid rests on your own data.
What this looks like in Construction Team
In Construction Team the price breakdown lives in the nomenclature. Every item can have a norm (resource breakdown) in the "Components" tab: with "Add component" you pick other items, for example material, labor and equipment, and set a quantity for each. In our example that is 1.02 m³ of concrete, 1.2 hours of labor and 0.0125 shifts of the concrete pump. The table shows the unit cost and the total per component, and below it are the cost price, the markup and the selling price.
When the cost source is "From components", the item's cost price is the sum of the components by their cost price, not by their selling price, so the markup is not stacked twice. The selling price is the cost price plus a markup, set as a percentage or as a fixed amount. If the cost price of a component changes later, the system shows a warning and both amounts, and the norm is brought up to date with the "Update from items" button.
There are two limitations. The norm is not a ready-made analysis form with separate fields for delivery and storage costs and overheads: you enter those percentages yourself, as separate components or in the markup. And the system does not come with a ready database of the УСН or ТНС norms: you enter the norms yourself, from the collection, from the technical data sheet or from your own measurements.
Ready prices are arranged in price lists with versions, so bids and bills of quantities take the price from there, and old versions keep what applied before. In the bid itself every line item has a "Cost price" column, which is filled from the item when you select it, and below the table there is a "Cost and margin" card with the selling value, the cost price and the margin in euros and in percent. The margin there is calculated on the selling price, as in the example above, and the card is visible only to people with the cost price permission.
What to do tomorrow
Take your latest bid and pick the five line items with the largest value. For each, write out the five rows: labor, materials, equipment, overheads, profit. If for some row you have no number, only a feeling, that is where the risk in your price is.
Related articles
- Construction bid template - a ready file for Word and Excel
- Cost price in construction - direct and overhead costs at project level and plan versus actual
- What a bill of quantities is and how to make one - the line items and quantities each analysis attaches to
- How to create a construction bid - from unit rates to the document for the client
- Bill of quantities template - a ready file in which to enter the prices
How the norm of one line item reaches the margin of the bid is best seen live. Request a demo and we will go through the example with your numbers.
Frequently asked questions
What is a unit rate analysis?
A unit rate analysis is a breakdown that shows how the price for one unit of work is built up, for example 1 m³ of placed concrete. It covers labor by resource norm and hourly rate, materials with waste and delivery and storage costs, equipment by machine-shift, overheads on labor and equipment, and profit.
What are the pricing parameters in an analysis?
These are the numbers that apply to every line item in the bid: the hourly labor rate, the percentage for delivery and storage costs on materials, the overhead percentages on labor and on equipment, and the profit percentage. They are set once for the bid and applied identically in every analysis.
What is profit calculated on?
In the usual scheme, profit is a percentage of the sum of the direct costs (labor, materials with delivery and storage costs, equipment) and the overheads. The client may ask for a different base in the tender documents, so check before you calculate.
Where do the resource norms for labor and materials come from?
From the norm books and reference guides the industry works with (the Bulgarian УСН and ТНС collections and the СЕК reference guides), from manufacturers' technical data sheets for materials, and from your own measurements on completed projects. The collections are a good starting point, while your own norms show how your crews actually perform.
What is the difference between markup and margin?
Markup is a percentage of the cost price, while margin is the same amount expressed against the selling price. A 10% markup on a cost price of €137.71 gives a price of €151.48 and a margin of about 9.1%. When you compare bids and reports, check which of the two numbers you are looking at.