VK Estimating Solutions

During the estimating process, direct labour hours are calculated using quantities from material take-offs and estimating norms. There is then the need to convert the direct labour hours to construction cost. The simplest method is to multiply the direct labour hours with an all-in labour rate including direct labour, indirect labour, mob/demob, small tools, site accommodation, contractor’s field management, consumables, construction equipment and other related costs.

The all-in labour rate is purely an estimating parameter and is not something that is measured during actual execution. Total construction cost could be collected from historical projects and very rarely the corresponding total direct labour hours could also be found from historical project close-out reports. Because of this, most companies have very little data on all-in labour rates and generally only 1 or 2 data points for any specific country / region. The estimators end up making judgements as to the best possible all-in rate to use. For presenting to the client, the backup to the scarce historical data is generally left out mentioning the confidentiality of the information. Some benchmarks are provided, but it always remains a bit vague as to what the historical all-in labour rate included or excluded.

All-in Labour Rate buildup Example (free estimating resource)

In the attached file, I have generated a tabulation to help create a backup to the all-in labour rate and substantiate the rate to be used in any estimate. This is just an example working, and needs to be modified to suit the specific region / country / project type / project size / currency.

In any typical major onshore oil & gas project, there is generally a mix of local and international labour. The mix can considerably vary depending on the type of project and available skills in the local labour force. I have presented probable working for both local and international contractor in the attached example file, showing the possible differences.

Also the all-in labour rate will vary between different disciplines – civils, piping, electrical, mechanical etc. The attached working is for a typical average all-in labour rate for a country with an average labour cost. The percentages presented are anecdotal and to be used as guidance only.

This working is suitable to present as a backup to the all-in labour rate used in any estimate and clearly tabulates all the elements included in the rate. This also helps the team to understand what might not be part of the all-in rate and might need additional handling in the overall estimate.

This tabulation, along with any historical data that can be obtained, will help to make the estimates more transparent and generate confidence in the estimates produced.