When it is required
Two situations make it necessary, and the second is less obvious than the first. Both lead to the same procedure.
The absent item is the immediate case: the operation the design requires has no counterpart in the price book adopted. The operation the design requires has no counterpart in the price book adopted.
The non matching item is the more insidious case: an item exists with a compatible heading, but its description includes or excludes work other than that intended, or presupposes execution conditions that do not obtain on this particular site. Applying it anyway, adjusting it by eye, produces an untraceable divergence. Replacing it with an item determined through analysis is the correct choice even when it costs more time.
The codified method
Article 31 of Annex I.7 to the public contracts code defines the procedure in three successive steps and fixes its parameters. The two uplifts are set by the provision itself.
The first step applies to the estimated quantities of materials, labour, plant hire and transport needed to produce one unit of each item the corresponding elementary prices. These are taken, where they exist, from the price books of the territorially competent regions and autonomous provinces, or from official lists or the lists of the local chambers of commerce, or failing that from current market prices. The result is the technical cost of the operation.
The second step adds a percentage varying between 13 and 17 per cent for overheads, according to the importance, nature and duration of the project and any particular requirements it presents. The choice within that band must be justified.
The third step adds a percentage of 10 per cent for the contractor's profit. That rate is not variable.
The structure is therefore rigid in its parameters and discretionary only in the choice of the overheads percentage within the stated range. That choice should be reasoned: a project of long duration, in a constrained urban setting or with particular logistical demands justifies a figure towards the upper limit, a simple project concentrated in time a figure towards the lower one.
A full worked calculation
Consider an operation absent from the price book, measured per square metre, for which the following unit inputs are assumed. The example runs through the three steps in order.
| Component | Quantity per m2 | Elementary price | Amount |
|---|---|---|---|
| Principal material | 0.022 m3 | 180.00 | 3.96 |
| Ancillary material | 1.05 m2 | 4.20 | 4.41 |
| Skilled labour | 0.35 h | 34.00 | 11.90 |
| Semi skilled labour | 0.20 h | 31.00 | 6.20 |
| Plant hire | 0.05 h | 12.00 | 0.60 |
| Transport and handling | 1.00 lump | 0.90 | 0.90 |
| Technical cost | 27.97 |
The two percentages are then applied to this technical cost in sequence, not in aggregate. The difference between the two methods is several points.
| Step | Calculation base | Rate | Amount |
|---|---|---|---|
| Technical cost | 27.97 | ||
| Overheads | 27.97 | 15 % | 4.20 |
| Subtotal | 32.17 | ||
| Contractor's profit | 32.17 | 10 % | 3.22 |
| Unit rate | 35.39 |
The order of the two steps is not a matter of indifference. Profit is calculated on the technical cost already increased by overheads, not on the technical cost alone: applying the two rates separately to the same base understates the rate. The elementary prices used in the example are illustrative and do not constitute market references.
Building the unit inputs
The weak point of any analysis is not the elementary prices, which are drawn from sources, but the unit quantities of material, hours and plant needed to produce one unit of work. That is the figure requiring technical judgement, and it does not come ready made.
Three sources are available, in descending order of reliability. The first has statutory force, the other two the force of practice.
The analyses already published in the price books come first. Many regional prezzari publish, alongside the schedule of completed works, the analyses that make them up. An operation similar to the one being analysed supplies inputs consistent with the method and with the territorial context, and should be used as a base to adapt rather than a value to copy.
The practice's own surveys come second, and for a structured office progressively become the best source. Systematically comparing forecast quantities with those actually valued on completed projects builds up, after a few jobs, a record of inputs verified against one's own way of working and one's own pool of contractors.
Manufacturers' technical data sheets come third, and cover material consumption reliably while saying nothing about installation times. They should therefore be used for the supply component and combined with other sources for labour.
What should be avoided is the use of inputs drawn from sources without territorial or temporal reference. An installation time recorded in a different construction context, or relating to a superseded technology, produces a technical cost that is plausible in absolute terms and wrong in its structure, and the error stays invisible until the contractor's bid arrives.
Documenting the analysis
The analysis is not an internal calculation to be summarised in a figure. It should be produced as a deliverable, attached to the design and made legible in its components, for three distinct reasons.
The first is statutory: article 31 of Annex I.7 places any analyses alongside the schedule of unit rates, which makes them part of the detailed design deliverables. The analyses thereby become part of the design deliverables.
The second is procedural: at design verification stage the analysis is what makes the rate checkable. An unanalysed rate is an unverifiable rate, and verification cannot but note it.
The third is practical and concerns the construction stage. When an unforeseen rate becomes necessary during the works, the existence of analyses already set out on the same template turns the discussion with the contractor into a technical exercise rather than a negotiation.
The relationship with labour costs
A distinction sits here that generates frequent errors. The price analyses used by the contracting authority to determine the tender amount include, beyond technical costs, overheads and the profit percentage. The labour costs the authority must quantify and state separately in the tender documents, by contrast, relate solely to those costs and may not incorporate any other element.
The two figures coexist in the same document and are not interchangeable. The labour component entering the analysis as an elementary cost is the one feeding the separate declaration, not the figure resulting after the overheads and profit rates are applied. Setting up the working file so that both readings can be extracted without recalculation is a choice that repays itself at verification stage.
The most frequent errors
The reverse engineered analysis is the first and most widespread. It consists in starting from a rate considered plausible and constructing the inputs so as to arrive at it. It is recognisable because the unit quantities come out rounded in ways no technical assessment would produce, and it is hard to defend at verification.
Labour inputs assumed from memory are the second. Unit times should be drawn from surveys, from analyses already present in the price books or from the practice's own data, not estimated by feel.
Omitting plant hire and transport is the third, and systematically understates operations requiring specific equipment or onerous handling. Operations requiring specific equipment are systematically understated.
Applying both rates to the same base is the fourth, a purely arithmetical error producing a divergence of several percentage points on every item analysed. The error is purely arithmetical and recurs on every analysed item.
Using analysis to sidestep the price book is the fifth and the most serious. Determining by analysis an item the price book contains, in order to arrive at a different figure, has no statutory basis and design verification is equipped to detect it.
Note: the values used in the example are illustrative and do not constitute price references. Legislative references relate to Italy and are current as at the date of publication: the version in force should be checked before any operational use.