Design Economics and Cost Planning Flashcards
What is life cycle costing?
objective method of measuring and managing the lifetime costs of any project or asset.
Enables design options to be compared from a lifetime perspective with view to understand and reduce overall costs associated with owning and operating the asset.
What are the key advantages of LCC?
1) Long term value
- ensures project has highest possible value even if upfront costs are not significantly reduced.
- Process promotes better durability, reduced maintenance, fewer risks and operational efficiency leading to increased life span of the building.
2) Green building certification credits
- LCC credits are included in many green building cert schemes such as BREEAM.
3) Reliable planning and reduced risk
- enables informed decisions to be made on material selection
- can be used to plan future maintenance requirements
What are the key disadvantages of LCC?
Costs associated with defects cannot be predicted
Components not always replaced due to life span - changes in style and fashion - impossible to assess in design phase
Whats the difference between LCC and WLC?
LCC - Focuses on construction, maintenance, operation and disposal of the asset
WLC - includes client and user costs such as project financing, land, income and external costs
What is the typical analysis period to calculate LCC?
LCC period of analysis should be determined by the client. It might be the length of a private finance initiative concession, length of a lease or time to first refurb
What are the key cost categories to consider when calculating WLC?
- Construction cost
- Maintenance cost
- Operation Cost
- Occupancy cost
- End of life costs
- Non construction costs (Land, fees, etc.)
- Income
- Externalities
In your opinion how accurate is LCC?
LCC requires various assumptions to be made on trends, inflation, historic data. Precision relies on accuracy of assumptions.
Longer analysis period that LCC is used the more likely the accuracy will fall.
Where can you get information about maintenance costs?
BCIS Pricing books - SPONS Contractors / sub contractors In house data Previous projects
How can LCC be used in a value engineering exercise?
May be that a component or material in the design has a high capital cost but from using LCC can be seen to have significantly lower maintenance and replacement costs compared to a cheaper capital cost alternative
What is an order of costs estimate?
Term used by RICS under NRM1 for capital building works
Key purpose is to establish if proposed building project is affordable and if so, to set a realistic cost limit for the development project
How are the professional fees presented in the order of cost estimate?
Can be presented as an item (if fees are known) or a percentage applied to the works cost estimate
Which RIBA stage is the order of cost estimate typically produced?
RIBA Stage 1 - Preparation and Briefing
What are the RIBA stages of work?
Stage 0 - Strategic Definition Stage 1 - Preparation and Briefing Stage 2 - Concept Design Stage 3 - Spatial Coordination Stage 4 - Technical Design Stage 5 - Construction Stage 6 - Handover Stage 7 - Use
What’s the difference between an order of cost estimate and cost plan?
Estimate provides possible cost based on employers requirements and is initial phase of the cost planning process. - Completed using m2 areas or functional units
Cost plan is more detailed elemental breakdown and shows how the costs are distributed across the project
What additional information should accompany an order of cost estimate?
- Covering letter
- Exec summary
- Cost limit
- Specification notes
- Assumptions
- Exclusions
- Drawings
- Risk Register
- Cashflow information
What is a cost plan?
typically prepared by the cost consultant and provides an estimate of what the actual project cost is likely to be
cost plan identifies the clients agreed cost limit and how the money is allocated to the different parts of the project
Other than predicting the final project cost, what other benefits does the cost plan provide to the project and project team?
Designers are aware of cost implications of their proposals which enables them to arrive at practical and balanced designs
Provides information upon which employer can make informed commercial decisions
Do you need a programme to complete the cost plan?
Prelims are typically presented as weekly rate in developed cost plans therefore a programme or atleast some high level dates will be required. Key info;
- Design and tendering periods
- SoS
- Construction period
- Completion date
How do you structure a cost plan?
NRM recommends a template to be followed (NRM 1 - Appendix G - Template for elemental cost plan)
0 - Facilitating works 1 - Subs 2 - Super 3- Internal finishes 4 - Fittings, furnishings and equipment 5 - Services 6 - Prefab buildings and building units 7 - Works to existing building 8 - External Works
9 - Main contractor prelims
10 - Main contractor OH&P
11 - Design team fees
12 - Other development costs (S278 etc)
Risk
cost limit excluding inflation
Inflation
cost limit including inflation
What sources of cost information and data are available when preparing a new estimate or cost plan?
- Info by BCIS
- Published pricing books - SPONS - info may be outdated and will need adjusting for inflation
- Pricing docs and info from previous projects
- Cost models and cost analysis produced in house
- Speaking to contractors, suppliers for cost info
- Existing client info - benchmark data for prev projects
How do you take account of project location and why?
Location factor is usually applied to recognise differences in construction prices. E.g. project in London typically more expensive than similar project in London
What fees might be included in the fee estimate?
Consultant Fees
- Project and design team
- Other specialist consultants
- Survey fees
Contractor Fees
- Management and staff
- Specialist support staff
- Contractors design management fees
- Contractors design team fees
- Framework fees
What benefit does the client get out of accurate cost planning?
The cost plan confirms to the client the scheme is affordable
Cost planning places the client in an informed position to make commercial decisions
Cost plan can act as a value management tool to ensure the client gets a building which meets their needs, but also represents best value
How would you deal with a cos plan being over budget?
Communicate the matter to the client and project team in a clear and concise manner
Identify areas where potential savings can be made, possibly in terms of material specification or re design
How can the cost manager help control the design to keep the project within budget?
Explain to the design team where the cost plan sits against the budget and discuss limitations
Identify and communicate areas of design which may not be economical
Regular project risk reviews and ask the design team to focus on mitigating key design risks
Explain how changes in the design will impact the cost plan
Contribute to VE and or cost saving sessions
What are some of the key reasons we have cost overrun on a project?
- Ambiguous client brief or changes in the later stages of the project
- Unrealistic cost estimates
- Project risk is realised or not properly managed
- Inadequate management control or processes
- Uncoordinated design
- Unknown external factors
- Inflation or changing market conditions
What is BWIC?
Builders Work in Connection and is usually set as a % of the services cost
BWIC refers to the builders work that is necessary to allow other works to proceed
Why is VAT usually excluded from the cost plan?
Employers may incur different levels of VAT. Therefore, VAT is usually excluded to ensure the incorrect tax rate is not applied
How are subcontractors prelims captured in the cost plan?
NRM1 - Costs associated with SC prelims are to be included in the unit rates applied to sub elements and individual components
Can you define contractor OH&P?
Profit can be defined as the money the project makes after accounting for all costs and expenses
The % of profit a contractor may apply to their tender price will vary according to risk, workload and economic climate.
Overheads
Costs not readily chargeable to one particular project, they constitute contractors cost of doing business - Head office expenses, marketing, admin, IT equipment etc.
What allowance would you make for contractors OH&P in the cost plan?
Vary dependent on
Project Location
Project Type and Value
Market Conditions
What is inflation?
NRM 1 - An upward movement in the average level of prices and or costs.
Its included as an allowance in the order of cost estimate or cost plan for fluctuations in the basic pricing of labour, plant, equipment and materials.
What are the types of inflation as defined in NRM 1?
both are an allowance for fluctuations in basic prices for material, labour, plant and equipment
Tender Inflation - allowance from estimate base date to date of tender return
Construction Inflation - allowance from date of tender to mid point of construction
What does TPI stand for?
Tender Price Indices
What do TPI’s show?
Measure the movement in prices agreed between clients and contractors at ‘commit to construct’ normally when the tender is accepted
Indices are typically used for adjusting estimates and budgets to different dates
