23. Design Economics Level 1

Question 1

What is the difference between an order of cost estimate and a cost plan?

Answer 1

A cost estimate is prepared earlier on in the design process typically between RIBA Work Stages 0 to stage 2

This occurs when the level of design information is more limited and allows a cost estimate to be prepared on a cost per m2 or cost per functional unit so you would use

A cost plan is produced typically at each RIBA stage 2 onwards

As the design progresses more information can be included to eventually breakdown the estimated cost of the development elementally into each of its component’s parts such as substructure, roofing, superstructure

Question 2

How do you proceed if the cost plan exceeds the project budget?

Answer 2

I would carry out a cost comparison and identify any element of work which is abnormally high against the order of cost estimate

When the reason for overspend is identified I would propose to implement value engineering options to my client and design team to bring the forecast back in line with the project budget

Question 3

What is an order of cost estimate?

Answer 3

Under NRM this is described as the determination of the possible cost of a building early in design stage in relation to the employer’s fundamental requirements

This takes place prior to preparation of a full set of working drawings or bills of quantities and forms the initial build up to the cost process

Question 4

What is the purpose of an order of cost estimate?

Answer 4

To establish if the proposed building project is affordable and to establish a realistic cost limit

The cost limit is the maximum expenditure that the client is prepared to spend on the proposed building project

Question 5

What is the format of a feasibility estimate or order of cost estimate?

Answer 5

This can be presented as a cost per m2, elemental basis or function unit

It can also be presented as a range

Question 6

What is a functional unit?

Answer 6

A functional unit is a unit of measurements that considers the prime use of a building. For example a school and desk may be presented as cost per student desk

Question 7

Where would you get your rates from for a preliminary estimate?

Answer 7

Previous similar projects and historical cost data such as previous tender submission or a contract sum analysis

Other sources may include estimating price books such as Spons, BCIS

Question 8

What information do you need to be able to carry out an order of cost estimate?

Answer 8

Building location,

Floor area or functional units,

Storey height,

Initial floor plans,

Site conditions

Details of professional fees, treatment of inflation

Question 9

What is a cost plan?

Answer 9

The cost plan presents the estimated cost of the development into an elemental or functional format

It shows how the design team proposes to distribute the funds available on the different elements of the proposed building

Question 10

What is the purpose of a cost plan?

Answer 10

It is used to control the development of the design

It identifies the client’s agreed cost limit and how the money is to be allocated to the different elements of the building

Question 11

When would you do a cost plan?

Answer 11

A formal cost plan is typically issued between RIBA Work Stage 2 to Stage 4

At stage 2 the concept design is made available and the cost plan may be produced at a fairly high level

Stage 3 - Spatial coordination

Stage 4 - The technical design is made available and the cost plan updated to reflect the Architect and engineering technical designs

Question 12

What are the principal components of a cost plan?

Answer 12

Direct construction costs,like facilitating, building and prelims

Contractor’s overhead and profit,

Design

Risk Allowances

Tender inflation estimate

Construction inflation estimate

Question 13

What is contingency?

Answer 13

A sum within the estimate to cover unknown expenses which might arise later on in the project

Question 14

How is contingency assessed?

Answer 14

Intially at concept design when risks are unknown a contingency sum can be placed in the project at 5-10%.

As design develops to more technical with quantities and drawings, more risks are going to become known and so a risk register with probabilities and costs associated can be developed to develope a contingency pot.

Question 15

What are the stages of the RIBA Plan of Work?

Answer 15

Stages - to 7

0 - strategic defintion

1 preparation and brief

2 concept design

3 Spatial coordination

4 technical design

5 manufacturing and construction

6 handover

7 use

Question 16

How do you take account of inflation when preparing a cost estimate?

Answer 16

I would look to use an inflation indices such as TPI to include for adjustments

Question 17

What time period would Construction Inflation be included for?

Answer 17

I would allow a construction inflation from the anticipated start of the project to the mid-way point of the project

Question 18

What time period would Tender Price Inflation be included for?

Answer 18

I would allow for TPI from the estimate base date to the anticipated tender return date

Question 19

What is meant by the base date within a cost estimate?

Answer 19

The base date refers to the date on which rates and prices contained within a cost estimate are based on

These are included for the basis of calculations for example if adjusting the rates for inflation in the future, the base date can be used as a starting point from which inflation would be adjusted

Question 20

What does TPI stand for?

Answer 20

Tender price indicies

Question 21

What do TPIs show?

Answer 21

They reflect changes in the level of tender prices over a period of time

Question 22

Where can you obtain Tender Price Index information from?

Answer 22

You can obtain it from BCIS or larger cost consultancies

Question 23

Why do you need to take account of location?

Answer 23

Inflation needs to be accounted for to anticipate the changes in prices of labour, plant and material. We need t

Question 24

What does BCIS stand for?

Answer 24

Building Cost Information Service

Question 25

What is BCIS?

Answer 25

BCIS provides construction cost and price information through publications, online services and price books

Question 26

Where do you get cost information from?

Answer 26

Previous tender submissions, benchmarks, BCIS, SPONS

Question 27

What do you understand by the term VM?

Answer 27

Value Management is the proactive process of defining what value means to the client

and putting in procedures in place to ensure that maximum value is delivered for the client first time

Question 28

What is value, what does value mean?

Answer 28

Value is a measure of worth taking into account the overall usefulness and benefits that are delivered in relation to cost being paid for it

Value is a complex concept and means different things to different

Question 29

Why is VM needed?

Answer 29

Each construction client has their own specific objectives and definition of what value means to their organisation

VM is needed to reach an agreement on what value is defined as and to reach a shared understanding on the objectives that are being sought

Question 30

What are the advantages of life cycle costing?

Answer 30

Lifecycle costing allows consideration of the long term implications of a decision

It enables informed decisions to be made on material selection

Can be used to plan future maintenance requirements ensuring easier access and less disruption

Question 31

What are life cycle costs?

Answer 31

The costs that will be incurred over a defined period of operating, maintaining a building or an asset including repair, maintenance, replacement, cleaning, decorating, services

Question 32

What are the disadvantages of lifecycle costings?

Answer 32

It is hard to predict life spans, future inflation and maintenance requirements over long periods

The cost of defects caused by bad workmanship and design faults cannot be predicted

Question 33

What costs should be considered in life cycle costing?

Answer 33

Capital costs

Operational costs

Maintenance costs

Replacement costs

Disposal

Question 34

Where can you get information about maintenance costs?

Answer 34

Building maintenance cost infomration service (BMCIS)

From subcontractors and suppliers

Question 35

How do you quantify risk?

Answer 35

Through a risk register, assign probabilities and cost to each

Question 36

What is usually excluded from a cost estimate?

Answer 36

Professional fees

VAT

Inflation

Site acquisition costs

Section 106 agreement

Removal of asbestos