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ESTIMATES AND RATE ANALYSIS. Ajay Ghosh Associate Professor Works IRICEN.
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ESTIMATES AND RATE ANALYSIS Ajay Ghosh Associate Professor Works IRICEN
Indian Railways is likely to end this financial year with an operating ratio of 95 per cent and set a target to improve it to 93 per cent in the next fiscal.Operating ratio is the measure of money spent to earn every Rs. 100; the lower the better.With the merger of the Rail Budget with the General Budget since 2017-18, Railways has stopped announcing its operating ratio numbers publicly, even though it is maintained internally.Union Finance Minister Nirmala Sitharaman proposed a capital expenditure of ₹1,60,175.64 crore for the Railways Ministry for 2019-20 in Budget 2019. This is the highest-ever allocation for the national transporter, surpassing last year’s ₹1,48,528 crore.
An important requirement for effective investment planning is the realistic estimation of project costs detailing the technical features, cost break up, benefit expected to accrue and financial implications. • Full details of the scheme must be worked out and no scheme should be included in Rly.works programmes unless detailed plans and estimates have been prepared and are ready. Investment planning
An estimate is a statement of calculation of the quantities required and expenditure likely to be incurred in a work. It may also be described as an approximate calculation of quantities or worth i.e. a rough idea to know the probable cost of execution of work or we may also call it as an educated guess. E S T I M A T E S
An estimate is a projection of qty. based on experience and/ or information available at the time of estimation. • It may be a detailed cost estimate computing cost of each activity in a work break down structure • It helps in planning and scheduling, decision making and problem solving strategy, • It is a process of calculating the total expected cost of a project and includes not only material and lobour but also equipments, tools, management and overheads. • It is a document consisting of construction plans, specifications, project manuals, scope of work and other related data useful for drafting the contracts, determine project feasibility and set budgets for financial planning. Estimate definitions
To know probable cost of work before hand. • To work out material schedule. • If cost exceeds limit, then to make suitable adjustments in the quantity and quality of items • To examine whether the work is financially justified or not. • To obtain administrative approval and technical sanction from competent authority. PURPOSES
PURPOSES (contd.) • To get the funds available to execute the work. • To prepare bar chart based upon quantity of items so that progress of work may be monitored. • To work out completion periods of individual activity as well as that of whole work. • To work out and arrange various types & no. of labour required for specified work & time. • To work out requirement of plants and machinery for work / project.
PREPRATION OF ESTIMATE IS NOT REQUIRED :- For repairs and replacement of assets charged to revenue if estimate cost up to Rs 2,00,000/- Work under urgency certificate(1103E&1104E)-To safe guard life or property or to repair damage to the line caused by flood, accident or other un foreseen contingency, so as to restore or maintain through communication. Div. engineer may authorize commencement of work, but should at once submit ,through proper channel, a report to the authority competent to give administrative approval to the work and allot the required funds.
As per model sop released by railway boardvide, Letter No. 2017/Transf/01/Policy datd 26.10.2017 Model SOP Latest schedule of power
ABSTRACT ESTIMATES. • DETAILED ESTIMATES. • SUPPLEMENTARY ESTISMATES. • REVISED ESTIMATES. • PROJECT ABSTRACT ESTIMATE. • CONSTRUCTION ESTIMATES. • COMPLETION ESTIMATES. TYPES OF ESTIMATES.
To form reasonably accurate idea of the probable expenditure of any proposal. • Required for administrative approval. • to establish necessity, utility and financial prospects by the CA • Saves time & expense of preparing detailed estimates at early stage. • Cost is calculated based upon past expenditure incurred in similar type of structure duly modified for escalation, and variation in site conditions etc., ABSTRACT ESTIMATE.(E-702)
Accompanied with brief report and justification. • Cost can be calculated based on thumb rule as follows: Building work -- per sq. m. Platform (COP) -- per bay. Or per sq.m P. Way. -- per km. Floor over Platform -- per sq. m. Washable apron -- per m. Inspection pit -- per m. O.H. Water tank. -- per. Lt. Land -- per hectare
An abstract estimate should contain .. Brief report and justification for the work (including inadequacy statement if for construction of new quarters, showing %age of staff provided with quarters) A rough sketch (not to scale) in A4 size showing the site & scope of work. The plan head to which it is to be charged in case of works proposed for Works demand The allocation of each item as between Capital, Development Fund, Open Line Works-Revenue, Depreciation Reserve Fund and Revenue should be indicated. Funds required for the year for which it is programmed.
Detailed Estimates • Approval of plans • Availability of site • Land acquisition ? • Latest rates • New construction materials and technology • LAR and Rate analysis Framing of Estimates
Prepared after getting administrative approval (other than that for which construction estimate in form 553 is prepared). • Prepared in sufficient details. • Required for technical sanction of competent authority. • No work included in an abstract estimate should be commenced till detailed estimate is prepared and sanctioned and funds allotted by C.A. DETAILED ESTIMATE.(E-703)
Necessary for preparing tender & contract documents. • Work can only be executed after sanction of detailed estimate. • Open line detailed estimate should comprise:- • 1. Statement showing details of estimated cost. • 2. An outer sheet giving the abstract cost of work, report, financial justification & the allocation. • Prepared in form E -705 for P. Way. Material. • Prepared in Form E- 704 for all other works. • Abstract cost of work prepared in form E-706.
The sanction accorded by CA to the detailed estimate of a work is known as technical sanction. • Before according TS the CA should satisfy itself that • The details of the scheme as worked out are satisfactory. • The methods proposed for the execution of the work are adequate; and • The cost has been estimated from reliable data and is likely to be reasonably accurate. Technical sanction
SUPPLIMENTARY ESTIMATE: (E-707) • For items which ought to have been included in sanctioned estimate, but has not been so included or items found later, should be considered as being a part of estimate. If the above items cannot met out of contingencies taken for all the purposes S.E is treated as a part of the main estimate. • S.E. is prepared in the same form and the same degree of details as the main estimate.
If expenditure is likely to be exceeded in the sanctioned detailed estimate then R.E. is prepared. • R.E. is not required if :- (1) estimated cost exceeds up to 20% due to variation in quantities of items or new item, (2) estimated cost exceeds up to 100% due to escalation. REVISED ESTIMATE.(E-708)
R.E. Should be got sanctioned by C.A. Who sanctioned main estimate unless otherwise financial limits of C.A. Has been exceeded. • In case however the work is in advanced stage & likely to be completed before a R.E. can be got approved, the excess may, with the prior approval of C.A. be dealt within completion report of the work.
For the estimate within the competency of local authority, the form in which R.E. is prepared should be decided by C.A. in case where there has been no great modification in the scope of the main estimate, an abstract dealing with major items with explanation only to be prepared. • In all other cases detailed R. E. In the same form and the same degree of details as the main estimate. • Each R. E. Should be accompanied by a comparative statement showing the excess or saving under each sub head of account against latest sanction. • Reasons for each such variation is explained.
Abstract estimate of construction project is called project abstract estimate. • Prepared for railway board’s approval. • Prepared in the form E-554 PROJECT ABSTRACT ESTIMATE(E-709)
Abstract cost to be accompanied by :- 1. An abstract estimate of junction arrangements. 2. A narrative report explaining the salient features and major items of expenditure. 3. Detailed estimate on form E- 553 under the following heads : 1132-tunnels, 1151 & 1152-major bridges, 1153 & 1154-minor bridges, 1140-ballast and permanent way (detailed estimate for one kilometer). 1180 & 1190 – establishment and general charges, 2000-rolling stock. The detailed estimates should be prepared from an engineering survey report.
Detailed estimates of all the works included in the project as a whole are collectively called construction estimate. • Required for getting technical sanction to the various works included in the construction project. • Prepared on the basis of information collected during final location survey of new line, gauge conversion, doubling of line • Should be prepared in such details as to avoid any other further estimating. • Prepared in the form -E - 553. CONSTRUCTION ESTIMATE.(E-710)
Prepared in super session of a construction estimate and includes :- • Amount of sanctioned estimate. • Actual expenditure on all works. • Commitments on date. • Anticipated further outlay. • Total estimated cost. • Diff. between the sanctioned estimate and the estimate cost. COMPLETIONESTIMATE.(E-713)
The completion estimate is a stock taking estimate, and all the works not started on day are excluded from the scope of the project and are to be dealt with separately. • For each excess over Rs 10000 Or 10% under each sub- head , and for savings of 20% or one lakh which ever is less explanation is to be given. • Completion estimate is put up for sanction, if required.
Deposit Works- execution of works for and at the cost of other Govt.deptts, local bodies, private persons etc. are termed as Deposit Works. • To meet the cost of plans and estimates of such works as also those to be carried out for other departments out of railway funds departmental charges at prescribed rates are to be levied. (for works costing over Rs.1 lakh- 2%) min.Rs.2000/- • All estimates of DW should be got accepted by the parties ordering the works before submitting for sanction to the C.A and work to be started only on getting the sanction and deposition of estimated cost to railways. Estimates of Deposit works
Part estimates are those estimates which are prepared for sub-works associated to the works which are to be commenced at the earliest date by which detailed estimate for the project as a whole could be prepared and sanctioned. Part estimate
Preliminary works including FLS • Setting up of project offices and organizations like office accommodation etc. • Land acquisition • Formation and Bridge work for whole or part of the estimate • Minimum service bldg.in case of new lines • Min.residential qtrs.to meet immediate need of constn.staff. • It should be certified that no work included in part estimate are likely to become redundant when estimate for the whole project is prepared to obtain Rly.boards sanction. Items of part estimates
1. No over-provision of land. • 2. Suitability of track standards in accordance with category of section (type of rails and sleepers, sleeper density, ballast cushions, etc). • 3. Corresponding suitability of signaling and electrical standards. • 4. Provision of sub-ballast as per traffic anticipated. • 5. Acceptability of bridge design (type of foundation, PSC or steel girders etc). • 6. Views of associate finance obtained and enclosed. • 7 Explanation for cost escalation of various items between the time of sanction of the work and reparation of the detailed estimate. • 8. Explanation for cost escalation between the detailed and revised estimate stages. • 9. Variations in quantities adequately scrutinized and justified. Check list
10. Changes in track and signaling standards originally proposed elucidated clearly. • 11. Introduction of new items and facilities not envisaged at the original proposal stage accounted for, duly supported with the views of associate finance. • 12. Material modifications suitably justified. • 13. Inclusion of various M&P items and/or off-line facilities not directly related to the work under consideration disallowed. • 14. In the case of part estimates requirements of concerned departments included. • 15. Provision of various D&G and other miscellaneous charges restricted to the bare minimum. • NB: This check-list is not exhaustive.
When two or more works are so connected , either by their situation or by the purpose or purposes which they are designed to serve, • that construction of one necessarily involves that of the other or others, • the works should be considered as one scheme and the aggregate estimated cost of the work so connected determine the authority competent to sanction expenditure on that. Grouping of works
In order to monitor control over expenditure, regular checks are being exercised by Accounts officer on all the estimates before sanction of C.A • The object of such preliminary checks are to avoid irregular sanction to expenditure Vetting of Estimates
The main points of consideration are • The propriety of the expenditure • The incidence and classification of charges • Existence of budget provision during F.Y • Freedom from errors and omissions and • Competency of sanction Vetting of estimates…
Propriety of expenditure • All proposals for expenditure are critically examined to see • That the expd. proposed to be charged to Rly. funds is properly and legitimately so chargeable • That proper financial justification is given wherever necessary • That in the case of staff quarters and other rent returning building the return on investment (excluding cost of land) by way of recovery of rent is not less than 6 percent Vetting of estimates
Incidence and classification of charges The correctness of allocation of expd. Should be certified by the accounts and if the estimate of the work is altered as a result of verification of the estimate by the accounts then the previous sanction should be revised. Verification……
The existence of budget provision to cover the expenditure during the financial year should be verified with reference to sanctioned budget allotments for the year • Freedom form errors and omissions i.e. the irregularities detected during verifications should be got rectified from the executive officer concerned. The accounts officer may give a check note along with his verification certification listing out items of errors and omissions pointed out but not accepted by executive and any other pointed of importance. Verifi…….
Competency of sanction: • This should be decided with reference to the delegation of powers given by railway board/GM as revised from time to time. • Currency of sanction the sanction to an estimate will ordinarily remain current for the given years from the date on which it has been accorded. If a specific provision of expd. on works in progress is available in sanctioned budget of the year then it may be regarded as reviving for that year irrespective of the 5years limit. But if no work has been commenced on a sanctioned scheme within two year from the date of sanction, then such sanction should be treated as lapsed. Fresh sanction with up to date estimate would be necessary if it is decided to undertake the work. Verification…
