Local Road Management Manual 136 4. Cost Estimation Cost estimation is a two-step process where unit prices of the quantities are determined first in order to come up with the over-all project estimate. The main reference in the derivation of Approved Budget for the Contract (ABC) is the DPWH Department Order No. 197 Series of 2016 (or its latest amendment). Sample cost estimation templates are attached as Annex 4B in this Manual. 4.1 Road Works by Contract: 4.1.1 Direct Costs The first component of the total project cost is the Direct Costs. It is defined as all costs attributed directly to a particular function of work. These are costs which are identifiable from a particular accounting standpoint as having been incurred in the performance of a specific item of work. Direct cost elements of each pay item are composed of the following: a. Material Costs. Materials are classified into Commercial Materials and Processed Materials. Commercial Materials are sold by various hardware’s and suppliers and are available at a minute notice. Processed Materials are produced or processed by contractor at quarries and are delivered and stockpiled at plant or project site. Probable material sources are shown on the Materials Sources Map. Where applicable, royalty and haul road fees from source or quarry site were included in the computation of unit costs of processed materials. The current market price of construction materials is gathered/ collected and compared with prices obtained from other sources. Quotations from various suppliers are also taken particularly for major construction materials (e.g. cement, aggregates for cement and asphalt, Bituminous materials, reinforcing steel bars, etc.). Existing plants within the vicinity of the project site are also taken into consideration. The cost of materials normally includes the following: