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QS APC > C - Design economics and cost planning > Flashcards

C - Design economics and cost planning Flashcards

1
Q

What is the RIBA Plan of Works 2019

A
  • Comprises 8 work stages

- Establishes boundaries between stages and details tasks and outputs at each stage

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2
Q

What is RIBA Stage 0?

A

STRATEGIC DEFINITION

  • Identify Client’s business case and strategic brief
  • Establish project programme (will be reviewed at every stage going forward)
  • Initial considerations made for assembling project team
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3
Q

What QS Services would be provided during RIBA Stage 0 - Strategic Brief?

A
  • Business case estimate
  • Opinion of Probably Cost
  • Budget advice
  • Feasibility Studies
  • Procurement Advice
  • Strategic Brief
  • Benchmarking
  • BIM Strategy Input (5D)
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4
Q

What is RIBA Stage 1?

A

PREPARATION AND BRIEF

  • Develop Project Objectives
  • Develop Project Budget
  • Develop Initial Brief
  • Undertake Feasibility Studies
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5
Q

What QS Services would be provided during RIBA Stage 1 - Preparation & Brief?

A
  • Project Brief
  • Risk Assessment
  • Risk Strategy
  • Development Approval (DA) Estimate
  • Benchmarking
  • Cash Flow
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6
Q

What is RIBA Stage 2?

A

CONCEPT DESIGN

  • Prepare Concept Design
  • Develop Cost Information (Cost Plan)
  • Consider strategies for sustainability, maintenance and operation, handover, H&S and risk assessments
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7
Q

What QS Services would be provided during RIBA Stage 2 - Concept Design?

A
  • Concept Design Estimate
  • Estimating Design Options
  • Value Engineering
  • Cash Flow
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8
Q

What is RIBA Stage 3?

A

DEVELOPED DESIGN

  • Prepare Developed Design, including coordinated and updated proposals for structural and services
  • Develop Cost Information (Cost Plan)
  • Review and update strategies for sustainability, maintenance and operation, handover, H&S and risk assessments
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9
Q

What QS Services would be provided during RIBA Stage 3 - Developed Design?

A
  • Developed Design Estimate
  • Value Engineering
  • Cash Flow
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10
Q

What is RIBA Stage 4?

A

TECHNICAL DESIGN

  • Prepare Technical Design to include all architectural, structural, services and specialist subcontractor design information
  • Prepare and submit Building Regulations submission and any other third party submissions requiring consent
  • Develop Cost Information (Bill of Quantities)
  • Review and update strategies for sustainability, maintenance and operation, handover, H&S and risk assessments
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11
Q

What QS Services would be provided during RIBA Stage 4 - Technical Design?

A
  • Pre Tender Estimate
  • Tender Reviews and Reports
  • Pre and Post Tender Interviews
  • Bill of Quantities
  • Value Engineering
  • Cash Flow
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12
Q

What is RIBA Stage 5

A

CONSTRUCTION

  • Construction of project inclusive of offsite manufacturing
  • Resolution of design queries
  • Regular site inspections for the PQS to value works complete and variations from the Contract
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13
Q

What QS Services would be provided during RIBA Stage 5 - Construction?

A
  • Cost Reports
  • Contract Administration
  • Variation Assessment
  • Progress Claim Recommendation
  • Progress Meetings
  • Bank Reports
  • Cost Control / Project Control
  • Commercial Management
  • Final Accounts
  • Cash Flow
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14
Q

What is RIBA Stage 6?

A

HANDOVER AND CLOSE OUT

  • Handover of building and conclusion of Building Contract
  • Final Account settled
  • Defects Liability Period
  • Carry out activities listed in handover strategy
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15
Q

What QS Services would be provided during RIBA Stage 6 - Handover & Close Out?

A
  • Lifecycle Costing
  • Asset Registers
  • Client Care
  • Project Perofmance
  • Lessons Learned
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16
Q

What is RIBA Stage 7?

A

IN USE

  • Concludes handover strategy activities including post occupancy evaluation
  • Contractor may be back for maintenance, if part of contract was to provide maintenance
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17
Q

What QS Services would be provided during RIBA Stage 7 - In Use?

A
  • Asset Management

- Asset Register Updates

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18
Q

What is an Estimate?

A

A forecast of the possible cost of a building based on historical data

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19
Q

What is a Feasibility Estimate?

A

A high level exercise to assess the financial viability of a project and to set and outline budget for the scheme

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20
Q

During which of the RIBA Stages would you carry out an estimate?

A

Stage 0 - Strategic Definition
Stage 1 - Preparation & Brief
Stage 2 - Concept Design

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21
Q

What is the accepted accuracy of an estimate?

A

10%

Accuracy is dependent upon the amount of information available

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22
Q

What is the format of a feasibility / budget estimate?

A

1) Cost / m2

2) Functional Unit

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23
Q

What is a functional unit?

A

The factors which express the intended use of the building better than any other

e.g.
Number of beds in a hospital
Number of pupils in a school
Number of parking bays in a car park

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24
Q

What information is required in order to carry out a feasibility estimate?

A

1) Function of building (Office / Hospital / Supermarket)
2) Type of build (New build / extension / refurbishment)
3) Location
4) Size
5) Indication of Quality
6) Site visit - ground conditions

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25
Q

What are the principal components of a cost estimate?

A

1) Construction Cost
2) Preliminaries
3) Overheads & Profit
4) Risk / Contingency (Design development, Construction, Employer change, Employer other)
5) Inflation
6) Assumptions
7) Exclusions
8) Area Schedule
9) Basis of estimate - Drawings, specification etc

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26
Q

What is risk / contingency?

A

A sum included in the estimate to cover unknown expenses or unmitigated risks during the project.

NRM 1 identified 4 types of risk

1) Design Development
2) Construction
3) Employer change
4) Employer other

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27
Q

How are contingency levels assessed?

A

The amount included should reflect the risks and unknowns specific to the project.

Early estimates - when little information is available it is common to include a %. At the end of stage 2, this is typically 10%

This should reduce as more information becomes available and unknowns decrease.

In stages 3 - 4, it is usually 5% (2.5% design and 2.5% construction)

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28
Q

What are preliminaries?

A

Costs that cannot be attributed to specific items of work.

A guide to preliminaries can be found in NRM

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29
Q

What considerations must be made when assessing preliminary levels?

A

1) Length of Contract
2) Location - accessibility, space restrictions, accommodation possibilities
3) Type of project
4) Size of project
5) Need for temporary works
6) Need for security
7) Limitations on method and sequencing of works, working hours - supervision requirements
8) Sectional completion
9) Availability of services
10) Level of Contractor’s designed works

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30
Q

What is usually excluded from a cost estimate?

A

1) Professional Fees
2) GST
3) Client direct costs
4) Loose fixtures and fittings
5) Inflation
6) Site acquisition costs
7) DA requirements
8) Removal of asbestos
9) Special furniture, fixtures and equipment (FF&E)

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31
Q

Why is GST excluded?

A

Different Clients incur different levels of GST, it may not be applicable.

We would not be in a position to know the correct rate unless informed of it.

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32
Q

What is the BCIS?

A

Building Cost Information Service

Self financing, non-profit arm of the RICS

Provides construction costs and price information through publications, online services and price books

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33
Q

What are the various sources of cost data?

A

BCIS - Available online for free, published in standard format. Useful for calculating cost forecasts

Published price books - Published annually which means that information is several months old

Priced BoQ’s from previous projects - Cost information tenders to be current

In-house cost data - Perhaps the most reliable, easier to ensure quality control on the data. Disadvantage - time and cost required to prepare and store

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34
Q

What is TPI?

A

Tender Price Indices

Reflect changes in the level of pricing contained in the lowest accepted tenders for new work to take account for market conditions

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35
Q

What are TPI’s used for?

A

To account for inflation when benchmarking / estimating

36
Q

How do you account for location within cost plans?

A

Through the application of location indices

37
Q

Why must location be accounted for in cost plans?

A

Different market conditions in different locations, this can affect cost of materials, wage rates etc and impact upon tender levels

38
Q

During which of the RIBA Stages would you carry out an cost plan?

A

Stage 3 - Developed Design

Stage 4 - Technical Design

39
Q

What is a cost plan?

A

It presents the estimated cost into a structural elemental or functional format.

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

40
Q

What is the purpose of a cost plan?

A

It is used by the cost consultant to control the development of the design.

It defines the Client’s agreed cost limit and how the money is to be allocated to the different parts of the building.

They provide a work breakdown structure and a cost breakdown structure which, through coding, can be used to redistribute works in elements to trade works packages for the purpose of procurement

41
Q

What is the difference between a cost estimate and a cost plan?

A

Cost Estimate - An approximate forecast of construction cost

Cost Plan - Details costs associated to elements of the building, this is established to monitor costs against

42
Q

How accurate is a cost plan?

A

Depends upon the amount of information available

Typically 5% accuracy is accepted for a cost plan.

43
Q

What are the main purposes of cost planning?

A

1) Ensure the employers are provided with value for money
2) Make employers and designers aware of the cost consequences of their desires or proposals
3) Provide advice to designers that enables them to arrive at practical and balanced designs within the budget
4) Keep expenditure within the cost limit approved by the employer
5) Provide robust cost information upon which the employer can make informed decisons

44
Q

How are elements broken down?

A

The NRM provides a list of elements and guidance

e. g.
1) Substructure
2) Superstructure
3) Internal Finishes
4) Fittings, furnishings and equipment

45
Q

What is cost checking?

A

Usually an elemental review of costs against the cost plan.

Can be very time consuming if there are major discrepancies between the cost plan and the architect’s final design.

Time can be saved when the surveyor has provided the architect with detailed cost plan and specification descriptions and where the architect has stuck to them

46
Q

What would you do if a cost check identifies an element is over budget?

A

Inform the design team and proceed in one of three ways

1) Redesign the element back within the target cost
2) Approve the change in the element, but re-examine other elements to achieve savings in order to maintain budget
3) Approve the change and cost implications. The Client must be informed of the proposal and accept or decline

47
Q

What is Benchmarking?

A

A comparison in cost of similar projects, in order to review levels of pricing

48
Q

What are the benefits of benchmarking?

A

1) Highlights areas of the design that are not offering good value for money
2) Can be used to support business cases
3) Supports project estimates

49
Q

What is value management and value engineering?

A

The process of providing all the required functions at the lowest cost

50
Q

What is the difference between cost and value?

A

VALUE IS FLEXIBLE
It means different things to different people, it comes down to perception.

COST IS FIXED
A product or service will have a predetermined cost attached to it, irrespective of what an individual may think it is worth

51
Q

What is value and what does it mean?

A

Value is a complex concept

It is a measure of worth

A relative measure of usefulness of something in relation to the cost paid for it.

52
Q

What is Value Management?

A

1) Identifying what values and objectives that the client holds
2) Considering design solutions within the context of these objectives
3) Deciding on which provides the optimum lifetime value to the client

53
Q

What is the process for value management?

A
  • A team based approach, used to define the client’s objectives and ensure best value whole-life solutions are selected to satisfy those objectives.
  • To achieve maximum benefit, VM should be carried out from very early stages of the project. Not simply introduced when a problem occurs.
  • Team needs to determine the best solution to achieve the greatest value to the client in terms of meeting their objectives.
54
Q

What are the benefits of Value Management?

A

1) There is a clear definition of what the owners and end users mean by value, this providing a precise basis for making decisions throughout the project
2) A tool for optimising the balance between differing stakeholder needs and expectations
3) A basis for creating a clear project brief that reflects the stakeholders priorities and expectations. This is expressed on the basis of value and function. It improves communication between all stakeholders so they can understand the other’s constraints, expectations and requirements
4) A basis for ensuring the project is the most effective way of delivering the business benefits and satisfying business needs
5) A functional basis for design development and management through improved communication, mutual learning and collaborative working
6) A functional mechanism to measure value, taking into account monetary and non-monetary benefits and thus demonstrating value for money

55
Q

What is a value tree?

A

A brainstorming exercise to ascertain the values perceived by the client.

Identify everything that is required to ensure a certain level of value is achieved.

Objectives should be ranked and weighted - primary objective, sub objective, sub sub objective

Members need to agree that the value tree is a fair representation of design objectives

56
Q

What is the difference between Value Management and Value Engineering?

A

VM - Aims to ensure that the right decisions are made the first time

VE - Used to correct decisions when things go wrong

57
Q

What is Value Engineering?

A

Part of the value management process.

It is a more systematic approach to providing the necessary functions at the lowest cost, without detrimental effect to quality

It is used to solve problems and identify and eliminate unwanted costs while improving function and quality

58
Q

What happens during the VE process?

A

1) Design team is brought together
2) Pool expertise, guided by the team leader
3) Higher chance of identifying and solving problems at an earlier stage - better value for money
4) Not a cost cutting exercise, this leads to reduced quality and value

59
Q

What are the Value Engineering process?

A

1) Identifying the main elements of a product, service or project
2) Analysing the functions of those elements
3) Developing alternative solutions for delivering those functions
4) Assessing the alternative solutions
5) Allocating costs to the alternative solutions
6) Developing in more detail the alternatives with the highest likelihood of success

60
Q

What is a FAST diagram?

A

First stage in the value engineering process

Where results of the functional analysis are presented

Functional Analysis System Technique

61
Q

What is a cost / benefit analysis?

A

Evaluation technique used within the value management process to decide whether or not to make the change

It is used to determine whether the benefits outweigh the costs and by what margin.

It serves the basis for comparing alternatives proposals and making informed decisions about whether to proceed.

Suitable for smaller construction projects with a short time to completion. This is because greater accuracy in the cost estimating can be achieved.
For larger projects with long programmes which may be exposed to more cost uncertainties analysis models such as net present value (NPV) and internal rate of return (IRR) may be more suitable.

62
Q

What is the Life Cycle Costing Technique?

A

An assessment used within the value engineering process which takes into account the total costs that the project will impose upon the client during the whole of its life.

Assesses long term value rather than initial capital outlay

63
Q

What are the potential problems when carrying out VM and VE Studies?

A

1) Not starting early enough
2) Not including appropriate stakeholders
3) Not enough time
4) Revisiting previous decisions
5) Lack of precision

64
Q

What is Whole Life Costing?

A

The summation of the entire costs over the life of a building.

Includes:

  • Costs to acquire (land, construction, consultants, design)
  • Costs of operating over the life of the building
  • Costs of maintaining over the lift of the building
  • Disposal costs

TOTAL OWNERSHIP COSTS

65
Q

What is Life Cycle Costing?

A

A technique used to evaluate the life cycle cost of a component of the building

Analyses costs that will be incurred over a period of time including supply and installation costs, maintenance costs and operating costs

Identifying alternative means to achieve the clients objectives and providing better value for money

Used for budgeting / cash flow projection and option appraisal

66
Q

What is the difference between Whole Life Costs and Life Cycle Costs?

A

Whole life costs are the summation of the entire costs over the life of a building

Life cycle costs relate to individual items e.g. cladding, carpet, lighting etc

67
Q

What clients would benefit from life cycle costing?

A

Those that are concerned with overall value for money

Clients that will have input into the day to day running of the building after construction

If they intend to sell the building, there is little benefit to spend more capital upfront in order to reduce maintenance costs as they will not benefit from the saving

68
Q

What are the advantages of life cycle costing?

A

1) Consideration of the long term implications of a decision
2) Enables informed decisions to be made on material selection
3) This can result in lower operational, maintenance and replacement costs
4) Can be used to plan future maintenance requirements
5) Encourages sustainability - can be measured in terms of monetary value

69
Q

What are the disadvantages of life cycle costing?

A

1) Future costs are optional and costs of maintenance can always be deferred
2) Components are not always replaced due to end of life - can be replaced for aesthetic purposes before end of life - difficult to assess this at design stage
3) Costs of defects caused by bad workmanship / design faults cannot be predicted
4) Uncertainty of available data - hard to predict life spans, future inflation and maintenance requirements over long periods
5) The client may be selling the building after it is constructed
6) Choosing the wrong discount rate can render the exercise useless

70
Q

What does life cycle costing take into account?

A

1) Capital costs
2) Operational costs
3) Maintenance costs
4) Replacement costs - need to know life span of the item
5) Disposal costs

71
Q

What is CapEx?

A

Capital Expenditure

Relates to the purchase of fixed assets.

The life of these purchases extend beyond the current accounting period in which they were purchased.

Capital expenditure is recorded on the company Balance Sheet and cash flow statement

Costs are recovered through depreciation across the useful life of the asset

72
Q

What is OpEx?

A

Operating Expenditure

The costs for a company to run its business operations on a day to day basis

73
Q

What techniques are used to evaluate life cycle costing?

A

1) Net present values

2) Payback period

74
Q

What is Net Present Value?

A

Where future costs are discounted to present values

It represents an analysis of the difference between the present value of cash inflows and the present value of cash outflows for an investment.

It is used to assess the profitability of different investment opportunities, LCC solutions.

In order for an investment to be worthwhile it has to yield a positive NPV. A negative NPV indicates an investment will lose money.

75
Q

What is involved in the assessment of net present values?

A
  • Future costs - maintenance / replacement etc are discounted to present values
  • Comparison of net present value for various alternatives
76
Q

What variables affect the outcome of the net present value method of life cycle costing?

A

1) Time periods for replacement are assumed
2) Assumed maintenance and replacement costs
3) The discount rate

77
Q

What is the payback period method of life cycle costing?

A

It assesses the time period over which an investment is returned in value

Initial expenditure is considered the ‘investment’ and the savings provided in the form of future costs is viewed as the ‘revenue’

The best option would be the one that repaid the investment in the shortest period of time

78
Q

What sorts of elements is the payback period method used for?

A

Typically the incorporation of sustainable technologies e.g. higher outlay on solar panels, however, savings are achieved through reduced power bills

Generally used for elements with a high initial capital cost but will pay back the investment over a period of time in terms of reduced running costs

79
Q

What are the sources of life cycle costing data?

A

1) Historical data
2) Data from models
3) Data from manufacturers, suppliers and contractors

80
Q

How accurate is life cycle costing?

A

Analysis relies on a lot of assumptions, accuracy relies on accurate assumptions

As the time period of analysis grows, accuracy typically falls

81
Q

Can you improve the accuracy of life cycle costing?

A

Through sensitivity analyses

Adjust the variables; time periods, costs and discount rates

82
Q

Why might a client accept higher capital costs

A

1) Prestige reasons
2) Replacement or repair may be inconvenient even if cheaper
3) Reduced operational costs, improved payback

83
Q

Can you provide some examples of value engineering on your projects?

A

1) Reduction of the extent of wall tiling - only to walls visible to the customer
2) The use of LED lighting - higher capital cost, although reduced operational cost.

84
Q

Can you explain to me the value management process you have been involved in on your projects?

A

When attending store refurbishments my client will identify the ‘affordability’ of the project through running a series of numbers in their accounting system to understand what extent of spending that the store can support based on their KPI’s - Payback period, return on investment

From this, an initial scope will be developed based on key business drivers to establish a base scope.

Various stakeholders will come together to provide their input into the design based on their needs.

From this we will establish business critical needs along with stakeholder desires to establish the best outcome for the store.

Stakeholders may request X, in which we will provide input to explain the cost of doing this and the required return on investment. Identifying that if we do X, we will need to achieve additional return on investment, or omit Y from the scope.

85
Q

What is the difference between value engineering and scope reduction?

A

Value engineering is all about achieving value for money, selecting the best solution to meet the clients objectives at the lowest cost without affecting quality.

Scope Reduction involves omitting items of scope from the project in order to reduce cost. This does not necessarily achieve value for money and may not meet the clients objectives.

The concept of value engineering is very different on refurbishments as opposed to new builds. In refurbishments you may have the ability to omit scope as the existing item is suitable for reuse, however it could constitute value engineering as the money saved may be redirected towards something which will provide better return for the Client.

QS APC (18 decks)

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