Design Economics and Cost Planning Flashcards
What is a Section 106 agreement?
Agreements between local authorities and developers- negotiated to grant planning consent
What is contingency?
Sum included in estimate to cover unknown expenses / unmitigated risks during project
How is contingency assessed?
- Should reflect risks, unknown specific items associated with project
- Early design stage, may be % (say 5-10%)
- As risk register is compiled throughout project, this total can be included as contingency
What is meant by a base date within a cost estimate?
- Date where rates and prices within cost estimate based on
- Included for basis of calculations (i.e. starting point for inflation adjustments)
What RIBA stage is an OCE typically produced?
Stage 0 - 1
What RIBA stage is a Cost Plan typically produced?
Stage 2 - 4
What are the RIBA stages of work?
- Strategic definition
- Preparation and briefing
- Concept design
- Spatial coordination
- Technical design
- Manufacturing and construction
- Handover
- Use
What information do you receive at Stage 0 and 1?
- Architectural brief with unit aspirations
- Level of specification
What information do you receive at Stage 2?
Floor plans, elevation drawings, structural, civil, M&E notes, proposals, reposts and strategies
What information do you receive at Stage 3?
Coordinated design packages from architectural, civil, structural and M&E
What information do you receive at Stage 4?
Fully detailed technical design, enough to produce BoQ or schedule of works
What are the changes from RIBA Plan of Work 2013 to 2020?
- Stage 3 - develop design -> spatial coordination
- Stage 5 - construction -> manufacture and construction
- More recognition of MMC and focus on sustainability
What is construction to ‘shell and core’?
- Basis structure, services and building envelope
- Usually includes fitout of landlord and common areas (i.e. main reception, bathrooms, lifts, stair cores)
- Base services typically terminated at entry points to each lettable floor plate
- Life safety services infrastructure typically provided
What is a CAT A fit out?
‘developer’s fit out’
- Generic fit out items to suit most developers, i.e. safety elements, basic fittings (suspended ceiling tiles, raised floors, lighting, power distribution to floor plates)
What is CAT B fit out?
- Additional works to CAT A provision, such as bespoke elements specific to building user needs, enables tenant to occupy and use space
- Typically includes partitions, power distribution to floor boxes, data cabling, artwork and branding, toilet finishes
Where can you find definitions for levels of fit out?
BCO (British Council of Offices) fit-out guide
What is an order of cost estimate (OCE)?
NRM1 definition
- method of cost prediction- estimate based on benchmark data for a similar type of project, based on strategic definition / initial brief
- purpose to establish affordability of client’s proposed development
- takes place prior to full set of working drawings, forms initial build up to cost planning process
Purpose of an order of cost estimate?
Establish if proposed building project is affordable and, if affordable, establish a realistic cost limit
(cost limit = max expenditure the client is prepared to spend on proposed building project)
Difference between an order of cost estimate and cost plan?
- OCE typically stage 0-2, provides possible cost based on higher level info- Initial phase of cost planning process, usually completed with sqm areas or functional units
- Cost Plan typically stage 2 onwards more detailed elemental breakdown, shows how costs are distributed across project, based on a more detailed, specific design
Difference between feasibility study, order of cost estimate and cost plan?
- Feasibility - sets budget
- Order of cost estimate - reviews options
- Cost plan - analyses how budget is being spent
Can you explain the term ‘cost per functional unit’?
NRM1 definition - Unit rate that, when multiplied by no. functional units gives building works estimate
- Can help recommend cost limit
What typical information accompanies an order of cost estimate?
- Covering letter / email
- Executive summary
- Cost limit
- Notes, assumptions and exclusions(i.e. on spec)
- Drawing and info on which the estimate is based
- Schedule of value enhancing options
- Risk register
Format of a feasibility / order of cost estimate?
- Presented on cost per sqm/functional unit/elemental basis, potentially as a range
- Range -> i.e. for element rates for main elements
- Considerations for any site abnormal costs / enabling works
- Prelims, contingency (risk), inflation, location factor adjustments
What is a functional unit?
- unit of measurement considering prime use of building
- i.e. how many apartments / beds / bedrooms
- i.e. retail - net lettable retail space
Where would you get your rates for a preliminary estimate?
Previous similar projects, historical cost data, in house models, Spon’s, BCIS
What information do you need to be able to carry out an order of cost estimate?
No established minimum information, but availability affects accuracy and detail
- Building location and type / purpose
- Floor area / no. functional units
- Assumed storey height and whether RAF / suspended ceilings envisaged
- Initial floor plans and drawings
- Indication of spec, M&E
- Budget and cashflow restraints
- Site conditions
- Indicative professional fees
What is a cost plan?
NRM1 definition
- Estimate based on specific design
- Statement showing apportionment of estimate / agreed budget between cost headings
- Method of cost prediction
Purpose of a cost plan?
- Cost consultant document to control design development
- Identify agreed cost limit and how money allocated to different building elements
When would you do a cost plan?
- Typically between RIBA Stage 2-4, increasing detail throughout project
- Stage 4 typically forms basis of PTE (to compare against tender submissions)
PTE no longer referenced in RIBA plan of work
What benefits does a cost plan provide to a project and its team?
- Help predict final project cost
- Designers aware of cost implications and proposals to help arrive at practical and balanced designs
- Provides info for the employer to make informed commercial decisions
Do you need a programme to complete the cost plan?
- Would be helpful- prelims presented as a weekly rate in developed cost plan, so programme or at least high level dates would be required
- Key info required = design and tendering periods, start on site date, construction period, completion date
How do you structure an elemental cost plan? / Typical components?
In accordance with company templates, which follows NRM recommended structure:
- Elemental summary, then breakdowns on separate sheets (facilitating, substructure, superstructure etc)
- Area schedule
- Depending on info, I would provide a cost for contractor’s prelims based on weekly rates / benchmarking / programme
- Add % for OH&P, professional fees, other project costs, then any risk and inflation
- List of drawings and information used
What is a cost plan risk allowance?
NRM1 definition
- Quantitative allowance set aside as precaution against risk and future requirements, to allow for uncertainty of outcome
How do you quantify risk on a cost plan?
- Benchmark from similar projects, consider any abnormals
- Risk register as design develops to work out expected monetary value, build priced risk register
When calculating the total fee estimate for a project, what fees might be included?
- Consultant fees (design team, consultants)
- Contractor fees (management and staff)
- Others (statutory undertaker, planning permission application)
What benefit does the client get out of accurate cost planning?
- Confirms to the client whether scheme is affordable or not
- Places client in informed position to make commercial decisions
- Acts as value management tool- ensure client gets building meeting their needs and representing best value
How would you deal with a cost plan which is over budget?
- Analyse costs to assess sources of increase
- Communicate matter to client and project team clearly
- Identify any abnormally high elements of work
- VE- identify where potential savings can be made, or offer scope reduction
How can the cost manager help control the design to keep the project within budget?
- Explain where cost plan is vs budget, discuss limitations
- Identify areas where design may not be economical
- Regular project risk reviews, focus on mitigating key design risks
- Explain how design changes have impacted the cost plan
- Contribute to VE / cost saving sessions
What are some key reasons for cost overrun on a project?
- Ambiguous client brief
- Changes in later stages of project
- Project risk not properly managed
- Inadequate management of control and change processes
- Design not coordinated
- Changing external factors / market conditions (inflation, pandemic, legislation updates)
- Unsuitable selection of procurement strategy
- Statutory authority influences (i.e. onerous planning permission conditions)
What is BWIC?
Builder’s work in connection
- Builder’s work necessary to allow other work to proceed (typically M&E / speciallist installations -> drilling, fixing, cutting, penetrations)
- Usually put within cost plans as % of services cost
Why is VAT usually excluded from the cost plan?
- Not a tax specialist - we wouldn’t know correct rate unless informed
- Employers may incur different levels of VAT
- Therefore usually excluded to ensure incorrect rate not applied
How are subcontractor’s preliminaries captured in the cost plan?
Should be included in unit rates applied to components and sub-elements
What allowance would you make for contractor OH&P in the cost plan?
% varies, depending on:
- Location
- Perceived level of risk
- Project type and value
- Market conditions
What are the elements in the elemental cost plan?
- Substructure -> excavation, disposal, foundations
- Superstructure -> frame, upper, floors, external walls, roof, finishes
- Services
- External works
What is usually excluded from a cost estimate?
- Professional fees
- VAT
- Loose FF&E
- Inflation
- Removal of asbestos / contamination
- Section 106 agreement
- Land purchasing costs
- BREEAM
What is life cycle costing?
- Objective method for managing lifetime costs of any project/asset
- Enables design options to be compared from lifetime perspective, view to reduce overall costs associated with owning and/or operating asset (repairs, operation, maintenance, cleaning)
What are life cycle costs?
Costs incurred over defined period for managing a building (inc operating, maintaining, cleaning)
Key advantages of LCC?
- Long term value, even if upfront costs not significantly reduced
- Mechanism for identifying and addressing potential issues in original design
- Promotes better durability, less maintenance, fewer financial risks, operational efficiency
- Can help increase building lifespan
- Green building certification credits
- Help plan future maintenance requirements
- Informed decision on material selection
Disadvantages of LCC?
- Components not always replaced due to end of life- changes in needs, style, fashion can be impossible to assess in design phase
- Costs associated with defects (by poor workmanship / design faults) can’t be predicted
- Uncertainty in inaccurate data can influence design-making process
- Selecting wrong discount rate can heavily affect accuracy
- Maintenance costs could always be deferred
Typical analysis period to calculate LCC?
- Determined by client
- Could be length of lease, anticipated functional life
- Typically have experience in 30 or 60 years
Key cost categories to consider when calculated LCC?
Costs for:
- Construction
- Maintenance, operation, occupancy
- End of life costs
- Non-construction costs (land, fees etc)
In your opinion, how accurate is LCC?
- Based on lots of assumptions, i.e. inflation, historic data, market conditions
- If calculated over a long analysis period, analysis likely to reduce
Where can you get information about maintenance costs?
- BCIS
- Spon’s
- Contractors, subcontractors
- In-house data / prev projects
How can LCC be used in a value engineering exercise?
Component / element has high capital cost, however maintenance and replacement costs significantly less than cheaper capital cost alternative
What costs should be considered in life cycle costing?
- Capital
- Operational
- Maintenance
- Replacement
- Disposal
How does the payback period method work?
- Judges investment in terms of time period from investment is returned in cost savings
- Higher quality increased component costs could save more money down the line
- Best options repay investment in shorter tops
What sort of materials is the payback period method used for?
- Sustainable technologies
- Particularly high initial capital costs, but reduced running costs
Why might a client accept higher capital costs?
- Prestige / aesthetics
- When considering replacement/repair/maintenance is cheaper / easier
What sources of cost information and data are available when preparing a new estimate or cost plan?
- BCIS (including building cost models)
- Spon’s
- Pricing documents, info from previous projects, tender submissions
- Cost analysis and benchmarking info / models produced in-house
- Obtain quotes from contractors, subcontractors, suppliers
- Ask client for existing information
How do you take account of the project location and why?
- Look at BCIS regional indices to make adjustment
- Done to recognise construction price differences in different locations (i.e. London compared to some places up north)
How might you adjust cost data?
- According to date and time
- Abnormals- procurement route, tendering strategy, scale of project, sequencing
What’s meant by benchmarking?
- Use of historical data from projects of a similar nature
- Comparison / check for cost planning purposes
- Highlight areas of design not value for money
- Highlight if contractor price is in line with market conditions
Purpose of benchmarking?
- Accurately compare and obtain pricing data
- Like for like comparison on efficiences, rates, costs, elements
How would you undertake a benchmarking exercise for your client?
- Document with clear table showing elements of current project alongside benchmark projects
- Compare on like-for-like basis
- Identify abnormal items to justify anomalies and reasons for flagged items
What do you need to consider when obtaining benchmarking data?
Time, location, abnormals (i.e. procurement and tendering strategy, size of project)
What are the risks of benchmarking?
- Not properly considering abnormal - data obtained isn’t accurate
- Data doesn’t include for certain items (i.e. external drainage could be on roof / sometimes external works)
- Indices applied may not be fully reflective of current market conditions
Can you give an example of when you have benchmarked?
Undertaking high level estimates on projects, obtained BCIS project data for similar projects, looked at previous projects for indication of rates and % applied
What is inflation?
NRM1 definition:
- Sustained increase in general price level of resources
- Can be included in cost estimates for fluctuations in basic prices of labour, plant, equipment and materials
What are the 2 types of inflation as defined in NRM1?
Tender (TPI) and construction inflation (BCI)
What time period would tender price inflation be included for?
Estimate base date to anticipated tender return date
What time period would construction inflation be included for?
Date of tender return / start of project to midway point of construction
What does TPI stand for?
Tender price indices
What do TPIs show?
- Movement in prices between clients and contractors, usually when tender accepted
- Account level of inflation depending on current and forecast market conditions
- Indices typically used to adjust estimates and budgets to different indices
Where can you obtain TPI index information from?
- BCIS
- Look at internal forecasts / other larger consultancies
How do you take account of inflation when preparing a cost estimate?
Use BCIS and internal inflation index to make adjustments for construction inflation and tender price inflation
What is the current inflation rate?
10.1% (Bank of England, May 2023)
What sources have you cited for inflation advice?
- Take a view when choosing source, either in-house or BCIS TPI
- In-house more applicable location wise to where my projects are
How do you calculate inflation and where would you obtain this equation?
- Equation in NRM1
- Obtain data based on quarters (BCIS database)
- New TPI / old TPI index numbers for % to apply to total construction cost
What is Building Cost Index?
Similar to TPI but concerns cost of materials, plant, labour
What does BCIS stand for?
Building Cost Information Service
What does BCIS do?
Provides cost and price information via publications, online services, price books
How do you market test?
- Go to material supplier - may have list of approved installers
- Send own take off where possible to get required level of info and comparable quote returns
What are considerations when market testing?
- Lack of competition if only going to one / limited suppliers
- Wasting sub-contractor resource especially if not chosen for the job, may not put most precise costs
- Some projects commercially sensitive so info can’t be shared
- Needs to be tested in appropriate area for the job
- With a range, hard to get accurate feedback from the market - best to use highest / average / conduct further market testing
What are the benefits of market testing?
- Accurate pricing for bespoke items
- Obtain latest cost data and trends
- Data obtained despite limited benchmarking sources
When is the best point of design to market test?
- Stage 3 onwards - specification and detailed design to price accurately
- OR any point in design when encountering bespoke item difficult to price (i.e. playground fittings)
Can you give an example of when you have market tested?
- Bespoke elements (playground fittings)
- Facade cladding
- Roof finishes
What are some typical design ratios?
- Net to gross
- Wall to floor
- Glazed to solid ext walls
- Split between 1, 2 and 3 bed apartments
- Units per core
What efficiencies would you expect with the above ratios?
Depends on nature of project
- Net to gross ~80%
- Wall to floor ~85%
- Glazed to solid ext walls ~ 30%
- Split between 1, 2 and 3 bed apartments ~50/35/15
- Units per core ~ 6-8nr
What is wall to floor ratio?
- External wall divided by GIA, indicates proportion of external required to enclose floor area
- Can reveal how efficient design is, may help inform construction cost
- Lower ratio = cheaper for building to construct (less external wall to construct)
What is the most efficient shape for a building?
- In theory, circular would be most efficient, with least wall to floor area
- In practice, more difficult to construct, fit out, apportion and let out
- Square plate considered the most efficient
How did you assess the design efficiency of external walls on xxx project?
- Wall to floor ratio - [74%] when expected at 50-60%. Due to (i.e. inset balconies)
- Glass to solid - 33% when equivalent projects at 25-30% so glazing could improve
- Consider impacts of curved walls too
How would you improve your NIA:GIA ratio?
- Smaller core spaces / external staircases
- More open plan spaces (less partitioning)
- Steel frame over concrete
- Smaller building footprint with same GIA
How would you improve your wall:floor ratio?
- Steel frame over concrete
- Simple square / rectangular building
- No inset balconies
- Deep building span
- Lower floor to ceiling height
What would you consider when looking at a glazed:solid wall ratio?
- Building use
- Requirements for thermal performance
- More glazing means more natural ventilation and potential internal temp control
What sources do you provide as basis for advising your clients on suitable metrics?
- Previous schemes
- Similar developments in the area
[- metric handbook]
What is value?
- Measure of worth, accounting for overall benefits being delivered compared to cost being paid for it
- Will have different implications for different clients
Difference between value management and value engineering?
VE
- Adds value to project on a component basis
VM
- More holistic process - assess client’s main drivers and aligning strategy to optimise value from whole project (including say maintenance)
What do you understand about the term VE?
- Value engineering
- Organised approach to accommodate the client’s needs in the most efficient, best value manner, either by reducing costs or ensuring they get more for these costs
- Does this without detrimental effect to quality, reliability, performance, delivery
What do you understand about the term VM?
- Value management
- Proactive process defining client’s needs and ensuring these are delivered with maximum value
- Overall process incorporating value engineering when/where there’s potential overspend identified
Why is VM needed?
- Clients have their own objectives and definition of value, can even be made up of different groups with contrasting priorities
- If value isn’t reached, perceived failed outcome from the project
- Needed to have shared understanding of objectives
What happens during the VE process?
- Design team meeting including client, QS, architect, engineers (and potentially contractor/specialist subcontractors)
- Team suggests VE proposals, monitored against client objectives
- Chairperson and team delivers increased value for money offering cost effective solutions without compromising overall building objectives
Phases of VE?
Information
Understand and define objectives, influences on existing design development
Speculation
List ideas to generate lesser capital / life cycle cost
Evaluation
Evaluate ideas against client criteria, ones with greatest potential savings and value improvement retained - discord impractical / unwanted ideas
Development
Retained evaluation ideas expanded into workable solutions, highlighting advantages, disadvantages, cost implications
Presentation
Present to client (report/verbally) with rationale for recommendation
Client decides which proposals accepted / discarded
Can you give an example of value engineering?
i.e. floor finishes -> finding the same specification by a different supplier
Can you give an example of value management?
- School projects - client is responsible for maintenance, so longer term value required
- Residential - affordable specification so specified items of lower spec requirements
Who owns the VE schedule?
QS, but client has final say. Whole project team likely to contribute
When is the best stage to consider VE and VM?
- VE - generally between Stage 2-3 where design is established but not necessarily at full level of detail required
- VM - better from outset of project, Stage 0-1 where strategy is aligned based on client objectives and values
