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APC QS 2022 > Design Economics > Flashcards

Design Economics Flashcards

1
Q

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

A

A cost estimate is prepared earlier on in the design process typically between RIBA Work Stages 0 to Stage 2.
This is 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 basis.

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2
Q

What is the difference between cost and price?

A

The cost is the total cost of labour, plant, materials and management deployed for a specific activity.
The price is the amount a purchaser or client will pay for an item or product and is made up of the cost plus the main contractor’s profit margin.

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3
Q

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

A

I would analyse the costs to assess the source of the increase and identify whether any element of work is abnormally high against the order of cost estimate.
When the reason for the overspend is identified I would then look to propose value engineering options to my client and design team to bring the forecast back in line with the project budget.

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4
Q

What is buildability?

A

Buildability is harnessing the contractor’s expertise and knowledge during the design stage to generate ideas for effective and efficient methods of construction.

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5
Q

What is a wall to floor ratio?

A

It is calculated by dividing the external wall area by the gross internal floor area.
It is used to show the cost efficiency of the building.
The lower the ratio, the cheaper the building is to construct as there is less external envelope to construct in comparison to the floor area.
0.45-0.50 considered a good ratio.

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6
Q

How would you prepare an estimate for M&E works?

A

I would ask an M&E specialist surveyor to undertake the estimate.
If they are unable to price the works due to other commitments, I would issue the drawings to M&E subcontractors and ask them to price the works.
For feasibility estimates the M&E amount would be included in the m2 or functional unit rate.

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7
Q

What is construction to ‘shell and core’?

A

Shell and core is the basic structure, services and envelope of the building.
This normally includes the fit out of landlord and common areas for example the reception, toilets, lifts & stair cores.

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8
Q

What is BWIC?

A

BWIC stands for Builders Work In Connection and is usually set as a percentage of the services cost.
BWIC accounts for the Main Contractor to perform any drilling, fixing, cutting and penetrations to enable the services installation.

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9
Q

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

A

Previous similar projects and historical cost data such as previous tender submissions or a contract sum analysis.
Other sources may include estimating price books such as SPONS or the Building Cost Information Service or specialist contractors.

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10
Q

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

A

Location of site
Statement of floor area
Floor plans
Roof plan
Elevations
Sections
Storey heights
Initial risk register
Details of professional fees, development costs, VAT and treatment of inflation.

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11
Q

What is a cost plan?

A

The cost plan presents the estimated cost of the development into an elemental or functional format.
A formal cost plan is typically issued between RIBA Work Stage 2 to Stage 4 when the design information is further developed. The detail progresses through the RIBA stages.

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12
Q

What is an order of cost estimate?

A

NRM 1 definition:-
An estimate based on benchmark data for a similar type of project based on the clients strategic definition or initial brief. Its purpose is to establish affordability of a proposed development for a client.

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13
Q

What are the principal components of a cost plan?

A

Construction costs.
Preliminaries.
Contractor’s OH&P.
Contingency.
Inflation.
Assumptions.
Exclusions.
Area Schedule.
List of Drawings & Specifications adopted.

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14
Q

Name the main elements of an elemental estimate?

A

Substructure:-
Excavation.
Disposal.
Foundations.
Superstructure:-
Frame.
Upper floors.
Roof.
Stairs.
External walls.
Windows and external doors.
Internal walls and partitions.
Internal doors.
Internal finishes.
FF&E
Services.
External works.

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15
Q

What is usually excluded from a cost estimate?

A

Professional fees.
VAT.
Loose fixtures and fittings.
Inflation.
Site acquisition costs.
Section 106 Agreement.
Removal of asbestos.

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16
Q

Why is VAT excluded?

A

Because different clients will incur different levels of VAT, for example charities may not be subject to VAT.

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17
Q

What is contingency?

A

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

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18
Q

How is contingency assessed?

A

The amount included should reflect the risks and unknown specific items associated with the project.
During the early design stages a contingency allowance can be included as an overall percentage of the cost estimate at around 5%-10%.

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19
Q

What are the stages of the RIBA Plan of Work?

A

Stage 0 - Stategic Definition
Stage 1 - Preparation and Brief
Stage 2 - Concept Design
Stage 3 - Spatial Coordination
Stage 4 - Technical Design
Stage 5 - Manufacturing and Construction
Stage 6 - Handover
Stage 7 - Use

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20
Q

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

A

I take into account inflation through the use of Tender Price Indices and include adjustments for Construction Inflation and Tender Price Inflation.

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21
Q

What time period would Construction Inflation be included for?

A

I would allow for Construction inflation from the anticipated start of the project to the mid-way point of the project.

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22
Q

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

A

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

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23
Q

What does TPI stand for?

A

Tender Price Indices.

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24
Q

What do TPIs show?

A

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

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25
Q

Where can you obtain Tender Price Index information from?

A

The service I use to obtain Tender Price Indices is the Building Cost Information Service.

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26
Q

Why do you need to take account of location?

A

Inflation needs to be accounted for to anticipate the changes in the prices of labour, plant and materials, based on location.

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27
Q

What does BCIS stand for?

A

Building Cost Information Service.

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28
Q

What is BCIS?

A

Building Cost Information Service.
The BCIS provides construction cost and price information through publications, online services and price books.

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29
Q

What do you understand by the term VE?

A

VE stands for Value Engineering.
VE is an organised approach aimed at providing the necessary functions of the building taking into account the clients objectives at the lowest cost, without detrimental affects to quality, reliability, performance or delivery.

30
Q

Where do you get cost information from?

A

Previous Tender Submissions.
Previous Contract Sum Analysis.
BCIS.
SPONS and other price books such as Laxtons.
Specialist sub-contractors and suppliers.

31
Q

What do you understand by the term VM?

A

Value Management is the proactive process of defining what value means to a client and putting procedures in place to ensure that maximum value is delivered for the client, first time.
In comparison, Value Engineering forms one of the processes under Value Management and is a reactive procedure to bring the anticipated cost of the development back in line with the project budget when a potential overspend is identified.

32
Q

What happens during the VE process?

A

The design team will typically be brought together in a meeting including the Client, Quantity
Surveyor, Architect, Engineers and potentially the Main Contractor and specialist subcontractors.
The team will pool together their expertise and suggest different value engineering proposals.
The team will aim to deliver increased value for money by offering cost
effective solutions without compromising the overall usefulness of the building when considering the clients objectives.

33
Q

Why is VM needed?

A

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.

34
Q

What are life cycle costs?

A

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

35
Q

What are the advantages of life cycle costing?

A

It enables informed decisions to be made on material selection.
Life cycle costing can result in lower operational, maintenance and replacement costs.
It can also be used to plan future maintenance requirements ensuring easier access and less disruption to the operation of the building.

36
Q

What are the disadvantages of life cycle costing?

A

Future costs are optional and the costs of maintenance can always be deferred.
Components are not always replaced due to end of life which is impossible to assess at design stage.
The cost of defects caused by bad workmanship and design faults cannot be predicted.
It is hard to predict life spans, future inflation and maintenance requirements over long periods.

37
Q

Where can you get information about maintenance costs?

A

Building Maintenance Cost Information Service (BMCIS) – part of BCIS.
From sub-contractors and suppliers.

38
Q

What costs should be considered in life cycle costing?

A

Capital costs.
Operational costs.
Maintenance costs.
Replacement costs.
Disposal costs.

39
Q

How can LCC be used in a value engineering process?

A

It may be the case that an element has a hight capital cost, but the cost of maintenance and replacement are significantly less than a cheaper capital cost alternative.

40
Q

How does the payback period method work?

A

It judges an investment in terms of the time period over which the invested sum is returned in cost savings.
The increased expenditure on a higher quality component is viewed as 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 time.

41
Q

Do you need a programme to complete the cost plan?

A

Prelims are usually presented as a weekly rate in developed cost plans.
Therefore, a programme or some high level dates will be required.

42
Q

What fees might be included in a fee estimate?

A

Consultant fees:-
Project and design team
Other specialist consultants
Survey fees

43
Q

What benefit does the client get out of accurate cost planning?

A

Confirmation the scheme is affordable.
The client is informed and in a position to make commercial decisions.
Cost plan can act as a value management tool, to ensure the client gets a building that meets their needs but represents best value.

44
Q

How can a cost manager help control the design to keep it within budget?

A

Identify and communicate areas of the design which may not be economical.
Project risk reviews and ask the design team to mitigate any key design risks.
Contribute to value engineering sessions.

45
Q

In your view, what are some of the key reasons we have cost overrun?

A

Unrealistic cost estimates.
Uncoordinated design.
Unsuitable tendering and/or procurement strategy.
Inflation or changing market conditions.

46
Q

What do you understand by the term benchmarking?

A

It is the use of historical data from projects of a similar nature to be used as a comparison for cost planning purposes.

47
Q

How would you undertake benchmarking?

A

Produce a document that shows the cost plan elements side by side with the benchmark projects.

48
Q

How are subcontractor’s preliminaries captured in the cost plan?

A

They should be included in the unit rates.

49
Q

What is WLC?

A

Whole Life Costing.

50
Q

L1 - What level of information would you expect in order to produce an Order of Cost Estimate?

A

Location of site
Statement of floor area
Floor plans
Roof plan
Elevations
Sections
Storey heights
Initial risk register
Details of professional fees, development costs, VAT and treatment of inflation.

51
Q

L1 - How does NRM influence your procedure?

A

NRM provides a standard set of measurement rules and essential guidance for the cost management of construction projects and maintenance works.

52
Q

L1 - How do you bring together cost data from different sources?

A

Apply appropriate uplifting factors including time and location. Include for inflation as well.

53
Q

L1 - How does a Cost Plan differ from an estimate?

A

A cost plan differs from an estimate as the level of design information is more progressed. A cost plan is an elemental breakdown comprising of measured items, whilst an estimate will be based on m2 rates.

54
Q

L1 - What do you understand by the term location factor?

A

A location factor represents the relative costs of direct construction within a presented location based on typical western building standards.

55
Q

L1 - What factor would you apply to a project from say Bristol to one in Central London?

A

I would review the BCIS indices and apply an appropriate location factor.

56
Q

L1 - When would you use Spons in a Cost Plan?

A

I would use Spons as a last resort when I could not find a comparable rate from benchmarked/historical data.

57
Q

L1 - What are the principal components of a cost estimate?

A

Construction cost.
Contractor’s preliminaries.
Contractor’s overheads and profit.
Fees.
Other development/project costs.
Risk allowances.
Inflation.

58
Q

L1 - Can you give me examples of site factors you would consider in preparing a cost plan?

A

The slope of the site
The size of the site
Positioning of trees/vegetation
Existing services

59
Q

L1 - What is the difference between an elemental cost plan and a comparative cost plan?

A

A comparative cost plan provides differing design options to the client, allowing the architect to make rational decisions in light of their individual cost and their cumulative effect on total cost.

60
Q

L1 - Can you give me some examples of benchmarking techniques?

A

Completing a side by side analysis of a tender return with historical data to ensure that it is complicit and displaying value for money.

61
Q

L1 - What is the difference between a cost plan and a cost analysis?

A

A cost analysis is reviewing the contents of a cost plan to ensure that the rates used are acceptable and at market level.

62
Q

L1 - What current challenges is Covid and/or Brexit bringing to Design Economics?

A

They presented difficulty in cost planning as material and labour prices were changing daily.
Inflation %’s were also changing regularly.

63
Q

L2 - Alberton - Cost Planning – do you have a view on recommended adjustments for inflation from Spons etc and how that may compare with the current market?

A

Spons recommendation are based on previous year data. It will give you an idea of what the market is like but it’s not accurate compared to current market.

64
Q

L2 - RLB – what is your view on the BCIS indices covering current market conditions?

A

It’s only as good and accurate as the information that has been published to BCIS.

65
Q

L2 - Did you have to consider any other issues for restart of the Chemistry Building 7th floor works?

A

We had to consider whether our fee and other consultant fees were still accurate. As well as this, we looked at sub contractor/contractor availability.

66
Q

L2 - In terms of cost planning can you advise where you have constructed an anticipated project cash flow?

A

When producing the financial statement for the GMMH I constructed an anticipated cash flow to give the client an understanding of monthly expenditure. I did this by reviewing the contractors programme to give me an understanding of value of work completed.

67
Q

L3 - Strathclyde - how much were the projects over budget and when you gave advice on the potential value engineering options did they cover the increased cost?

A

The costs were roughly £30,000 over on both the Toby Carvery and Inn Keepers. The value engineering options did not cover all of the increase, but the costs came down significantly. The client did not want to sacrifice some elements of design and they were able to explain this to obtain additional funding.

68
Q

L3 - On Strathclyde, did the client accept advice and projects proceed?

A

The client accepted advice on some of the elements, but some elements of design they did not want to sacrifice and they were able to obtain additional funding.

69
Q

L3 - St Wilfrid’s - what were the key movements in the cost plan?

A

The key movements in the cost plan included:
Movement from a raft foundation to piling.
Extent of external works has increased, with a lot more hard landscaping.

70
Q

L3 - On St Wilfrid’s, In percentage terms what was the impact of COVID-19 and Brexit on your allowance for inflation?

A

In % terms, our allowance for inflation was at 10%, when previously it had been at 5%.

71
Q

L3 - St Wilfrid’s - What advice did you give the client relating to the contingency and what were you proposing?

A

I advised the client that due to the unprecedented market conditions I had increased the contingency allowance to 7.5%. I further advised that I couldn’t be sure that recently tendered rates would remain the same. Items such as steel were changing in price on a daily basis.

72
Q

L3 - St Wilfrid’s - Explain how you advised the client of the current market conditions?

A

I showed the client a series of rates that had been returned from recently tendered projects to make them aware of current market levels. This was based on current contractor pricing at that time.

APC QS 2022 (40 decks)

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