subcontracted works. Indirect costs are the costs which are not associated with each item of work rather these costs are calculated for the entire construction work and includes overhead costs (both job office or site office overhead and general head office overhead), contingency i.e. cost for any unforeseen work and profit. It is important to accurately estimate all the cost components of the project before bidding. The material cost for each item of work can be calculated by multiplying required quantity of materials by its unit price. The material quantity take-off or the quantity of materials for an item of work can be easily calculated by using the information from contract drawings and specifications. The current unit price of materials can be obtained from the material suppliers. In addition, the estimator has to add a certain percentage for wastage of materials while calculating the material cost. The equipment cost consists of two components i.e. ownership cost and operating cost. Generally the equipment cost is expressed on hourly basis. As already mentioned (in Module 4), equipment operator wages which vary from project to project are normally calculated as a separate cost category and are added to other components of equipment operating cost. The procedure of calculating hourly equipment cost is already stated in Lecture-1 and Lecture-2 of Module 4. The hourly equipment cost and production rate of the equipment are used to calculate the cost per unit production of the equipment. The production rate of the equipment depends on its rated capacity, production cycle time, efficiency and also on job site conditions. The labour cost depends on the productivity of labourers which vary with the nature of work. The productivity of labourers depends on various factors namely their skill, number of working hours in a day, supervision, nature of job, job site conditions etc. The portion of work that is to be accomplished by the labourers can be found out form project documents i.e. from contract drawings and specifications. The labour cost is generally expressed on hourly basis. Historical data from past projects can also be referred for calculating the cost of materials, equipment and labor. For the contractors, the calculated bid price (sum of direct cost and indirect cost) for the project must have a balance with the associated profit margin such that the bid price should be low enough to be within the owner’s budget and to win the bid and at the same time, it should be high enough to complete the project with the expected profit.