4) Overhead determination

In order to determine the percentage of the overhead of the maintenance operation from
that of the direct cost of maintenance activities and the total maintenance costs, the annual
work load quantities of maintenance activities that each District can perform with its capacity
and the annual overhead expenses, assuming the new reform study will be implemented, are
carefully estimated.
In this option, the direct and the overhead cost of all maintenance operation is computed
only for operational cost of equipment.

The overheads of Districts are tried to be identified and analyzed in different categories
as follow:

I. Head office overhead cost

1. Total head office over head common for

Districts & Projects ( excluding estimate = 12,772,900
of Districts Engineering Services Branch)

II. Districts overhead cost

1. Districts ( direct ) overhead = 43,802,500

III. Direct cost of Districts & Projects

For the purpose of determining the proportions of the common head office overhead
for Districts & Projects, the total direct cost of Districts & Projects that they can perform
with their capacity are collected.
We have tried to calculate the direct cost of each respective district and come up
with the following analysis.
The total amount of budget allocated to perform the maintenance works of the
federal network per year =130,000,000 birr
The total amount of budget allocated to perform emergency
maintenance works per year =60,000,000 birr
The total direct cost would be = 0.65*(130,000,000+60,000,000)
123,500,000
Here, since salaries of Central Garage technicians which amounts Birr 1,724,000
are included in the Head office Overhead, it has to be deducted from direct cost of Districts
and Projects with the proportion 55% and 45% respectively.

1. Direct cost of Districts = 123,500,000 - ( 0.55 * 1,724,000 )

= 122,551,800

2. Direct cost of Projects = 81,289,800 - ( 0.45 * 1,724,000 )

= 80,514,000

3. Total direct cost of Districts = 203,065,800

& Projects

Therefore, the proportion thereby to determine the contribution of common head office
overhead in to the District overhead will be:
 = 122,551,800
203,065,800

= 0.60
Thus, the portion of common head office overhead that could go to the Districts will be:

= 0.6 * 12,772,900

= 7,663,740

Total estimate of Districts' direct overhead :

= 43,802,500

Grand Total Overhead of Districts :

= 51,466,240

Thus, surcharge rate of overhead or percentage of total Districts' overhead cost from
that of total direct cost of Districts is :
= 51,466,240 * 100
122,551,800

= 42%

Meaning that the total unit cost of each maintenance activity will be increased by 42%
so that it could include the total overhead of the maintenance operation.

Therefore, the total estimate of annual maintenance operation is :

= 51,466,240 + 122,551,800

= 174,018,040

The percentage of total overhead cost from that of total amount of maintenance operation is :

= 51,466,240 * 100
174,018,040

= 30%
Assuming the percentage of total overhead cost from that of total amount of construction
projects to be half of the maintenance overhead

= 30%
Profit Margin
By taking commercialization concept into account,it is neccessaary to add some profits on the unit price
There is no any empirical formula to calculate the amount of profit and may vary depending on the demand
and competition in the buisness of free market.However,based on practice we suggest the profit to be 10%
of the total cost.
 Ethiopian Roads Authority

Head Office's Overhead Cost Estimation Summary

Cost Summary
No. Description Total Overhead Cost

1 Operations DGM Office 172,468

2 Engineering & Administrative Service 330,804
3 Bridge & Structure Branch 705,172
4 Safety, Traffic signs & Marking Branch 327,300
5 Procurement Service 634,774
6 Equipment & Supplies Division Office 183,704
7 Equipment Management Services Branch 465,400
8 Supplies & Parts Branch 5,718,024
a Salaries, transport vehicles and others 2,915,524
b Supplies transportation equipment 2,802,500
9 Technical Support & Equipment Maintenance Branch 657,292
and Technical Support Section
10 Equipment Maintenance Section and Administration Unit 614,296
11 Industrial Unit 1,539,622
12 Equipment Repair Unit 1,424,042

Total 12,772,898

13 District Engineering Service Branch*** 3,828,160

Grand Total 16,601,058

***As the necessary steps toward client /contractor split have been completed ,the required budget
for District Engineering Division would be allocated from different source( the capital budget)
 Head office overhead cost estimation

Staff salaries & Allowances

Safty,Trad. Equipment and Suplies Division
Annual DGM Eng.&Adm. Brg & Str. sign & mark. Procurment Division Equ. Mang. Supplies Technical support & equipment maintenance
Grade Salary office service Branch Branch Service office ser. Bra. & parts Technical Equipment maintenance section
Branch Support Adm. Unit Ind. Unit Eq Rep. unit
No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost
1 2,714 0 0 9 24,430 0 0 0 0 27 73,289 0 5 13,572 0 0
2 4,350 0 0 1 4,350 1 4,350 1 4,350 1 4,350 0 22 95,700 0 7 30,450 6 26,100 0
3 5,272 1 5,272 1 5,272 0 2 10,544 0 0 0 68 358,508 0 0 0 0
4 6,264 0 0 1 6,264 2 12,528 0 0 1 6,264 34 212,976 1 6,264 1 6,264 0 1 6,264
5 7,343 0 0 0 3 22,028 1 7,343 0 1 7,343 4 29,371 0 1 7,343 2 14,686 1 7,343
6 8,509 1 8,509 1 8,509 12 102,103 2 17,017 3 25,526 1 8,509 0 36 306,310 1 8,509 9 76,577 13 110,612 7 59,560
7 9,779 0 1 9,779 7 68,452 1 9,779 2 19,558 0 4 39,115 37 361,816 0 7 68,452 3 29,336 0
8 11,119 1 11,119 1 11,119 4 44,474 3 33,356 6 66,712 1 11,119 3 33,356 46 511,456 2 22,237 6 66,712 6 66,712 0
9 12,876 0 0 1 12,876 1 12,876 8 103,008 0 1 12,876 7 90,132 1 12,876 2 25,752 5 64,380 0
10 15,712 0 1 15,712 1 15,712 1 15,712 1 15,712 1 15,712 0 4 62,849 0 3 47,137 2 31,424 0
11 18,827 1 18,827 1 18,827 1 18,827 1 18,827 2 37,654 0 1 18,827 26 489,497 2 37,654 0 4 75,307 2 37,654
12 22,289 0 1 22,289 1 22,289 2 44,579 0 0 0 20 445,788 4 89,158 1 22,289 1 22,289 3 66,868
13 26,100 0 0 1 26,100 0 0 0 0 0 1 26,100 0 2 52,200 3 78,300
14 30,259 0 0 2 60,517 0 3 90,776 0 2 60,517 1 30,259 5 151,293 4 121,034 2 60,517 0
15 34,765 0 2 69,530 0 0 0 0 3 104,296 2 69,530 1 34,765 1 34,765 0 1 34,765
16 39,620 0 2 79,240 1 39,620 1 39,620 2 79,240 0 1 39,620 1 39,620 2 79,240 1 39,620 1 39,620 0
17 44,822 0 0 2 89,645 0 2 89,645 1 44,822 2 89,645 0 1 44,822 0 0 0
18 50,373 0 0 1 50,373 0 1 50,373 0 0 0 1 50,373 0 0 0
19 56,272 0 1 56,272 0 0 0 1 56,272 0 0 0 0 0 0
20 62,518 1 62,518 0 0 0 0 0 0 0 0 0 0 0
Total cost 106,244 296,548 586,032 241,216 589,895 140,783 411,858 3,177,100 563,290 559,967 593,183 290,754

Grand Total 7,556,871

Note : - In this estimation salaries & allowances of the tecnicians in the equipment maintenance section are excluded in order to avoid double counting.
 Engineering
Survices
Branch
No. Cost
0
0
0
0
0
11 93,595
10 97,788
40 444,744
10 128,760
0
30 564,804
0
20 522,000
0
0
10 396,198
0
10 503,730
0
0
2,751,619

10,308,489
 Head Office Overhead Cost Estimation
Support Giving Equipment Operational and Total Cost

Item Location Type of Number Rate/Hr Estimated Hrs per Amount

No Equipment Required Oper. Total Day Year Oper. Total
1 DGM Office Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Automobile 1 40.95 68.38 4 800 32,760 54,704
Sub Total 55,068 96,356
2 Engineering & Adminstrative Station Wagon ( 4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Service Pick Up (4 x 4) 1 33.87 61.30 4 800 27,096 49,040
Sub Total 49,404 90,692
3 Bridge & Structure Branch Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Pick Up (4 x 4) 4 33.87 61.30 4 800 108,384 196,160
Fuel Truck 1 105.45 155.69 2 400 42,180 62,276
Sub Total 172,872 300,088
4 Safety, Traffic signs & Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Marking Branch Pick Up (4 x 4) 2 33.87 61.30 4 800 54,192 98,080
76,500 139,732
5 Procuirment Service Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Pick Up (4 x 4) 3 33.87 61.30 3 600 60,966 110,340
Sub Total 83,274 151,992
6 Equipment & Supplies Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Division Office Pick Up (4 x 4) 1 33.87 61.30 4 800 27,096 49,040
Sub Total 49,404 90,692
7 Equipment Management Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Survices Branch Pick Up (4 x 4) 2 33.87 61.30 4 800 54,192 98,080
Sub Total 76,500 139,732
8 a) Supplies & Parts Branch Station Wagon (4 x 4) 1 37.18 69.42 4 800 29,744 55,536
transport vehicles Pick Up (4 x 4) 5 33.87 61.30 4 800 135,480 245,200
Sub Total 165,224 300,736
b) Supplies transportation Courier Truck with Trailer 9 144.77 181.29 3 600 781,758 978,966
Equipment Courier Truck 16 95.81 148.40 3 600 919,776 1,424,640
Low bed 10 159.71 254.59 2 400 638,840 1,018,360
Crane 3 242.96 452.23 1 200 145,776 271,338
Fuel Truck 5 105.45 155.69 3 600 316,350 467,070
Fork lift 1 55.12 123.10 4 800 44,096 98,480
Sub Total 2,802,500 4,160,374
Sub Total 2,967,724 4,461,110
 Head Office Overhead Cost Estimation

Support Giving Equipment Operational and Total Cost

Item Location Type of Number Rate/Hr Estimated Hrs per Amount

No Equipment Required Oper. Total Day Year Oper. Total
9 Technical Support & Equipment Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Maintenance Branch and Pick Up (4 x 4) 4 33.87 61.30 4 800 108,384 196,160
Technical Support Section Sub Total 130,692 237,812
10 Equipment Maintenance Station Wagon (4 x 4) 1 37.18 69.42 3 600 22,308 41,652
Section and Administration Unit Pick Up (4 x 4) 3 33.87 61.30 4 800 81,288 147,120
Sub Total 103,596 188,772
11 Indastrial Unit Pick Up (4 x 4) 4 33.87 61.30 3 600 81,288 147,120
Fork lift 1 55.12 123.10 1 200 11,024 24,620
Generator 1 62.05 80.57 1 200 12,410 16,114
Sub Total 104,722 187,854
12 Equipment Repair Shope Pick Up (4 x 4) 4 33.87 61.30 3 600 81,288 147,120
Fork lift 2 55.12 123.10 3 600 66,144 147,720
Generator 1 62.05 80.57 1 200 12,410 16,114
Sub Total 159,842 310,954

Total 4,029,598 6,395,786

13 District Engineering Service Station Wagon ( 4 x 4 ) 1 37.18 69.42 3 600 223,080 416,520
Branch Pick Up ( 4 x 4 ) 3 33.87 61.30 4 800 812,880 1,471,200
Sub Total 1,035,960 1,887,720

Grand Total 5,065,558 8,283,506

 Head Office Overhead Cost Estimation

Annual Non Personnel Cost Estimate

( Only for material and financial requirement )

Item Description Annual Amount

No.
1 Operations DGM Office 27,000

2 Engineering & Administrative Service 33,000

3 Bridge & Structure Branch 40,000

4 Safety, Traffic signs & Marking Branch 53,000

5 Procurement Service 57,000

6 Equipment & Supplies Division Office 15,000

7 Equipment Management Services Branch 43,000

8 Supplies & Parts Branch 150,000

9 Technical Support & Equipment Maintenance Branch 58,000

and Technical Support Section

10 Equipment Maintenance Section 47,000

and Administration Unit

11 Industrial Unit 133,000

12 Equipment Repair Unit 117,000

Total 773,000

13 District Engineering Service Branch 500,000

Grand Total 1,273,000

 Head Office's Overhead Cost Estimation

( Summary )
Item No Descreption Amount

Operations DGM Office

1 Staff Salaries & Allowances 90,400
2 Transportation vehicles 55,068
3 Material and Fainancial Cost 27,000
Sub - Total 172,468
Engineering & Administrative Service
1 Staff Salaries & Allowances 248,400
2 Transportation vehicles 49,404
3 Material and Fainancial Cost 33,000
Sub - Total 330,804
Bridge & Structure Branch
1 Staff Salaries & Allowances 492,300
2 Transportation vehicles and others 172,872
3 Material and Fainancial Cost 40,000
Sub - Total 705,172
Safety, Traffic signs & Marking Branch
1 Staff Salaries & Allowances 197,800
2 Transportation vehicles 76,500
3 Material and Fainancial Cost 53,000
Sub - Total 327,300
Procurement Service
1 Staff Salaries & Allowances 494,500
2 Transportation vehicles 83,274
3 Material and Fainancial Cost 57,000
Sub - Total 634,774
Equipment & Supplies Division Office
1 Staff Salaries & Allowances 119,300
2 Transportation vehicles 49,404
3 Material and Fainancial Cost 15,000
Sub - Total 183,704
Equipment Management Services Branch
1 Staff Salaries & Allowances 345,900
2 Transportation vehicles 76,500
3 Material and Fainancial Cost 43,000
Sub - Total 465,400
 Supplies & Parts Branch
a) Supplies & Parts Branch Salaries, transport vehicles and others
1 Staff Salaries & Allowances 2,600,300
2 Transportation vehicles 165,224
3 Material and Fainancial Cost 150,000
Sub - Total 2,915,524
b) Supplies transportation Equipment
1 Transportation Equipment 2,802,500
Sub - Total 2,802,500
Sub - Total 5,718,024
Technical Support & Equipment Maintenance Branch
and Technical Support Section
1 Staff Salaries & Allowances 468,600
2 Transportation vehicles 130,692
3 Material and Fainancial Cost 58,000
Sub - Total 657,292
Equipment Maintenance Section and Administration Unit
1 Staff Salaries & Allowances 463,700
2 Transportation vehicles 103,596
3 Material and Fainancial Cost 47,000
Sub - Total 614,296
Industrial Unit
1 Staff Salaries & Allowances 1,301,900
2 Transportation vehicles and others 104,722
3 Material and Fainancial Cost 133,000
Sub - Total 1,539,622
Equipment Repair Unit
1 Staff Salaries & Allowances 1,147,200
2 Transportation vehicles and others 159,842
3 Material and Fainancial Cost 117,000
Sub - Total 1,424,042

Total 12,772,898

District Engineering Service Branch

1 Staff Salaries & Allowances 2,292,200
2 Transportation vehicles 1,035,960
3 Material and Fainancial Cost 500,000
Sub - Total 3,828,160

Grand Total 16,601,058

 Head office Overhead Cost Estimation

Staff salaries & Allowances

Safty,Traf. Equipment and Suplies Division
Annual DGM Eng.&Adm. Brg & Str. sign & mark. Procurment Division Equ. Mang. Supplies Technical support & equipment maintenance
Grade Salary office service Branch Branch Service office ser. Bra. & parts Technical Equipment maintenance section
Branch Support Adm. Unit Ind. Unit Eq Rep. unit
No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost No
1 2,958 2,714 0 0 9 24,430 0 0 0 0 27 73,289 0 5 13,572 0
2 4,740 4,350 0 0 1 4,350 1 4,350 1 4,350 1 4,350 0 22 95,700 0 7 30,450 9 39,150 10
3 5,745 5,272 1 5,272 1 5,272 0 2 10,544 0 0 0 68 358,508 0 0 12 63,266 26
4 6,826 6,264 0 0 1 6,264 2 12,528 0 0 1 6,264 34 212,976 1 6,264 1 6,264 0 4
5 8,001 7,343 0 0 0 3 22,028 1 7,343 0 1 7,343 4 29,371 0 1 7,343 7 51,400 4
6 9,271 8,509 1 8,509 1 8,509 12 102,103 2 17,017 3 25,526 1 8,509 0 36 306,310 1 8,509 9 76,577 25 212,715 14
7 10,656 9,779 0 1 9,779 7 68,452 1 9,779 2 19,558 0 4 39,115 37 361,816 0 7 68,452 30 293,364 20
8 12,115 11,119 1 11,119 1 11,119 4 44,474 3 33,356 6 66,712 1 11,119 3 33,356 46 511,456 2 22,237 6 66,712 29 322,439 27
9 14,030 12,876 0 0 1 12,876 1 12,876 8 103,008 0 1 12,876 7 90,132 1 12,876 2 25,752 18 231,768 18
10 17,121 15,712 0 1 15,712 1 15,712 1 15,712 1 15,712 1 15,712 0 4 62,849 0 3 47,137 7 109,985 6
11 20,515 18,827 1 18,827 1 18,827 1 18,827 1 18,827 2 37,654 0 1 18,827 26 489,497 2 37,654 0 4 75,307 2
12 24,288 22,289 0 1 22,289 1 22,289 2 44,579 0 0 0 20 445,788 4 89,158 1 22,289 1 22,289 3
13 28,440 26,100 0 0 1 26,100 0 0 0 0 0 1 26,100 0 2 52,200 3
14 32,971 30,259 0 0 2 60,517 0 3 90,776 0 2 60,517 1 30,259 5 151,293 4 121,034 2 60,517
15 37,882 34,765 0 2 69,530 0 0 0 0 3 104,296 2 69,530 1 34,765 1 34,765 0 1
16 43,172 39,620 0 2 79,240 1 39,620 1 39,620 2 79,240 0 1 39,620 1 39,620 2 79,240 1 39,620 1 39,620
17 48,841 44,822 0 0 2 89,645 0 2 89,645 1 44,822 2 89,645 0 1 44,822 0 0
18 54,889 50,373 0 0 1 50,373 0 1 50,373 0 0 0 1 50,373 0 0
19 61,317 56,272 0 1 56,272 0 0 0 1 56,272 0 0 0 0 0
20 68,123 62,518 1 62,518 0 0 0 0 0 0 0 0 0 0
Total cost 106,244 296,548 586,032 241,216 589,895 140,783 411,858 3,177,100 563,290 559,967 1,574,021 1,393,531

Grand Total 9,640,485

 District
enance Engineering
e section Division
Eq Rep. unit
Cost No. Cost
0 0
43,500 0
137,077 0
25,056 0
29,371 0
119,120 11 93,595
195,576 10 97,788
300,202 40 444,744
231,768 10 128,760
94,273 0
37,654 30 564,804
66,868 0
78,300 20 522,000
0 0
34,765 0
0 10 396,198
0 0
0 10 503,730
0 0
0 0
1,393,531 2,751,619

9,640,485 12,392,104