Cost Planning Part 2

Question 1

Why is the cost of a building more important now than ever to a client? And for it to be fairly exact?

Answer 1

• the majority of clients need a loan
• Loans need to be arranged prior to needing the money
• They have a limit which cannot be exceeded
  Average overheads have gone from 7% to 2.5%, therefore now running a tight arrangement where mistakes cannot be payed for.

Question 2

What are the three main stages to cost in a building?

Answer 2

• Costing a design
• Designing to a cost
• How to make sure you deliver the building to the client within the agreed cost.

Question 3

What level of costing should a design be at Stage C - Outline Proposal?

Answer 3

It should be indicative from what has been done before and what the rough cost for design could be based upon this.

Question 4

When will you be expected to get an approximate bill of quantities?

Answer 4

This will commonly be at stage D Final Proposals

Question 5

When will you be expected to have he finalised costs in place?

Answer 5

This would commonly be at stage G Tender Documentation.

Question 6

When will a true cost come in?

Answer 6

After practical completion is done Stage L, as it is only at this point that you ca really get a true cost.

Question 7

What happens in reactive cost control, after each estimate is produced?

Answer 7

The client is asked for more money (they do not tend to like that).
Or redesign is undertaken to bring cost back into line with the budget. (you don’t get paid for this redesign = unpaid non productive effort & time wasted + corrupted design)

Question 8

What is a main problem with Reactive Cost Control?

Answer 8

• It commonly leads to acrimony and delays

- You are reacting to events not controlling them.

Question 9

What is Cost Planning? (CP)

Answer 9

• it is NOT an estimating technique
• It is a TOOL used to MANAGE project cost.
• It is an important service which QS’s offer to clients.
• A “pot-pourri” of estimating techniques are used in undertaking CP
• The principal estimating technique adopted in CP is however Elemental Estimating.

Question 10

What are the main aims of cost planning?

Answer 10

• To ensure that the project can be and that it is delivered within budget.
• That a financially balanced (in relation to building function) project is achieved.
• That project “costs” are managed as a resource throughout the design and construction of the project.
• That value for money is achieved for the client in delivery of the project.

Question 11

What are the main reasons cost planning exists?

Answer 11

• The focus is upon cost (not value)
• Value is becoming increasingly important to clients.
• The focus is upon the design and construction phases of the project not the whole life-cycle.
• They tend to have a few quantities in and a few provisional sums. 15 years ago Building surveyors used to take on a trick that they would put a budget together for the whole package. As long as you came in with the cost, they couldn’t care how it was chopped up. Values. What does the client see as the value, what do clients see as valueable?

Question 12

Upon researching the potential benefits of using a cost planning system, what did the Educational Department resolve?

Answer 12

• Research resulted in the development of ELEMENTAL COST PLANNING.
• Sometimes referred to as “designing to a cost”.
• A target cost is set for each project related to function and level of provision required.
• The project team then have to design and build the project within that budget.
• Efficient teams would be able to provide more “provision” for the budget set thereby ensuring their commission upon future projects.

Question 13

Upon researching the potential benefits of using a cost planning system, what did RICS resolve?

Answer 13

• Research resulted in the development of -COMPARITIVE COST PLANNING.
• Sometimes referred to as “costing a design”.
• Concept here was that alternative designs were developed early in the project life with each being costed separately for comparison purposes.
• Clients could then make an informed choice based upon aesthetics, function and cost.
• It was assumed that clients would not always want to commission the cheapest option.

Question 14

What is the nature of Cost Planning today?

Answer 14

• Incorporates both techniques into one CP methodology.
• Initially COMPARITIVE COST PLANNING is undertaken.
• When a design solution has been identified then ELEMENTAL COST PLANNING is exercised.
• This ensures that clients get the benefits of both techniques at the most appropriate stage in the project life cycle.
• Definition - Controlling the cost of a project within a predetermined sum during the design stage by the application of a cost plan and cost checking

Question 15

What is the Cost Planning Methodology?

Answer 15

1. Comparative Cost Planning (preliminary design)
2. Elemental Cost Planning (design solution identified)
3. Set target cost plan (design solution identified)
4. Cost checking (detailed design and construction phases)

Question 16

What is Cost Control?

Answer 16

• Forms part of the CP methodology
• Refers to
  
  • Setting the target cost plan
  • Cost checking
• Definition
  - All methods of controlling the cost of a project within the design budget limits throughout the design and construction stages.

Question 17

What are the three main parts of a Cost Control system?

Answer 17

• Having a frame of reference for or a means of establishing a realistic first estimate and planning how that estimate should be spent among the building elements.
• Having a method of cost checking
• Having a means of remedial action

Question 18

What is a target cost plan?

Answer 18

• The conscious and deliberate allocation of the project budget across the elements of a cost plan to ensure that a financially balanced project is achieved in relation to the buildings quality and function.
• The target cost plan is the used as a “yard stick” against which the elemental cost are cost checked as the design and construction of the project is completed.
• A cost limit is set for the project.
• Note the focus upon only managing cost as a resource.

Question 19

What is the Cost Limit?

Answer 19

• The project sum set in the target cost plan (the project budget).
• This is the maximum project budget agreed with the client.
• The sum beyond which the project will not be pursued.

Question 20

What is Cost Checking?

Answer 20

• This is the process of checking/ managing the target cost plan as the project design and construction is completed.
• Note this is intended to be proactive.
• The QS giving feedback to the design team so that the target cost plan and consequently the projects budget/cost are proactively managed.
• It is not about merely estimating costs.
• It is all about managing cost as a resource.

Question 21

What does the Cost Planning Toolbox include?

Answer 21

• All of the pre-contract estimating techniques but especially elemental estimating.
• Project drawings and specifications (project design data).
• Project procurement method and program.
• Cost data (historical)

Question 22

What are the main points to summarise Cost Planning?

Answer 22

• Cost planning is a management technique used to manage project cost as a resource.
• It aims to deliver the project within the budget set and to provide a financially balanced building in relation to function and quality.
• It is a proactive technique.
• It involves a lot of pre-contract estimating

You will get a reputation for getting a project completed within budget. If you do not, then people will give you a name. It is about your reputation. If you keep on getting it wrong, people wont employ you again.

Question 23

What is Proactive Cost Control?

Answer 23

• Comparative cost planning is performed at each of the following RIBA stages:
  B (Strategic Brief), C (Outline Proposal), D (Detailed Proposals).
• A TARGET Cost Plan is prepared at RIBA stage E (Final Proposals).
• Elemental cost planning (Cost Checking) is performed at each of the following RIBA stages:
  F (Production information), G (Tender Documentation), H (Tender Action), J (Mobilisation), K (Construction), L (After practical completion)

Question 24

What is Cost Control in Proactive terms?

Answer 24

• Cost Control is NOT an estimating technique!
• Cost Planning is where cost is used as a tool to manage a project.
• Cost Control is where the project cost is managed to ensure that the project is delivered on budget.

Question 25

What are the main issues with proactive cost control?

Answer 25

• Cost control involves the adoption of a pot-porri of estimating techniques.
• The principal techniques used however is that of Elemental Estimating.
• At each RIBA stage you need to communicate enough information about your design to enable cost control to be undertaken as competently as possible.
• COST is meaningless unless tied back to a level of provision as well as the quality required.

Question 26

What are methods of calculating?

Answer 26

• Floor area method
  GIFA Gross Internal Floor Area
• Functional unit method
  Must include all circulation space
  External works measured separately
• Elemental Method
  • Considers major elements and provides an order of cost estimate based on an elemental breakdown of the building project.

Unit rates – these are applied to measured quantities applicable to the method of measurement used.