Design Economics and Cost Planning Flashcards
1
Q
What is a cost plan risk allowance?
A
NRM1 definition
- Quantitative allowance set aside as precaution against risk and future requirements, to allow for uncertainty of outcome
2
Q
How do you quantify risk on a cost plan?
A
- Benchmark from similar projects, consider any abnormals (% allowance)
- Risk register as design develops to work out expected monetary value
3
Q
What are some key reasons for cost overrun on a project?
A
- 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)
4
Q
What allowance would you make for contractor OH&P in the cost plan?
A
% varies, depending on:
- Location
- Perceived level of risk
- Project type and value
- Market conditions
5
Q
How do you take account of the project location and why?
A
- 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)
6
Q
What’s meant by benchmarking?
A
- Use of historical data from projects of a similar nature
- Comparison / check for cost planning purposes
- Highlight if price is in line with expected values
7
Q
What are the risks of benchmarking?
A
- 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)
- Old projects may not be reflective of current market conditions
8
Q
What are some typical design ratios?
A
- NIA to GIA ratio
- Wall to floor ratio
- Glazing to external wall ratio
- Split between 1, 2, 3 bed apartments
- Units per core
9
Q
What efficiencies would you expect with the above ratios?
A
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
10
Q
How would you improve your NIA:GIA ratio?
A
- Less partiontioning
- Efective M&E planning to reduce Service Areas
- Reduction in common areas like lobbies, corridors, staircases
11
Q
How would you improve your wall:floor ratio?
A
- Simplify Building Shape
- Increase Floor Size
- Reduce Floor Height
- Incorporate Shared Walls
12
Q
What would you consider when looking at a glazed:solid wall ratio?
A
- Building use
- Requirements for thermal performance
- More glazing means more natural ventilation and potential internal temp control
13
Q
What is the difference between an order of cost estimate and a cost plan?
A
- An order of 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.
- A cost plan is produced typically at each RIBA Work Stage from Stage 2 onwards.
- As the design progresses more information can be included to eventually breakdown each element into its component’s parts.
14
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.
15
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.
16
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.
17
Q
What are the advantages of buildability?
A
- Buildability can result in better programming, sequencing and construction methods.
- A quicker more efficient programme can be achieved.
- Reduced capital and life cycle costs of the building can be obtained.
- The quality in the finished building’s performance and maintenance characteristics can be improved.
18
Q
What is a wall to floor ratio?
A
- This shows the relationship between the wall area and 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.
19
Q
What is the most efficient shape?
A
- In theory a building with a circular floor plate building would offer the most efficient design as there is less wall to floor area.
- However a circular floor plate has a poor lettable floor area and is difficult to fit out therefore a square floor plate is considered to be the most efficient.
20
Q
How would you prepare an estimate for M&E works?
A
- I would ask an M&E specialist surveyor to undertake the estimate.
- For feasibility estimates the M&E amount would be included in the m2 or functional unit rate.
21
Q
What is a Section 106 agreement?
A
S106s are agreements between local authorities and developers that are negotiated in the context of granting planning consent.
22
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.
- Base services are typically terminated at entry points to each of the lettable floor plates however life safety services infrastructure is normally provided.
23
Q
What is a CAT A fit out?
A
- A CAT A fit-out provides a functional, yet unfinished space that tenants can then customize to their specific needs, often through a subsequent CAT B fit-out.
- This provides generic fit-out items to suit most developers for example basic fittings such as suspended ceiling tiles, raised floors, carpets, lighting and power distribution, and air conditioning / heating.
24
Q
What is a CAT B fit out?
A
- A CAT B fit out overlays the CAT A provision with bespoke elements that are specific to the needs of the building’s user to enable the tenant to occupy and use the space.
- This would typically include partitions, power distribution to floor boxes, data cabling, artwork and branding, furniture, and kitchens.
25
Where could you find the definitions for CAT A & B fit out?
The British Council of Offices (BCO) fit-out guide
26
What is BWIC?
* 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.
27
What is an order of cost estimate?
* Under NRM this is described as the determination of the possible cost of a building early in design stage in relation to the employer’s fundamental requirements.
* This takes place prior to preparation of a full set of working drawings or bills of quantities and forms the initial build-up to the cost planning process.
28
What is the purpose of an order of cost estimate?
* To establish if the proposed building project is affordable and, if affordable, to establish a realistic cost limit.
* The cost limit is the maximum expenditure that the client is prepared to spend on the proposed building project.
29
What is the format of a feasibility estimate or order of cost estimate?
* This can be presented on a cost per m2, functional unit or elemental basis.
* It may also be presented as a range for example £700-£850/m2.
* This may consist of element rates for the main elements of the building for example Substructure, Frame, External Walls, Upper Floors & Roof.
* Any site abnormal costs or enabling works are also considered.
* Other inclusions are Preliminaries, Contingency, Inflation and location factor adjustments.
30
What is a functional unit?
* A functional unit is a unit of measurement that considers the prime use of the building.
* For example in the construction of a hotel or hospital the functional unit may be presented as a cost per bedroom or cost per bed.
* In a retail estimate the functional unit would be presented as the net lettable retail space.
31
Where would you get your rates from for a preliminary estimate?
* 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 Laxtons, the BCIS or specialist contractors.
32
What information do you need to be able to carry out an order of cost estimate?
* Building Location.
* The type of building.
* Floor area or number of functional units.
* Storey height.
* Whether raised access floors or deep suspended ceiling are envisaged.
* Initial floor plans, roof plans, elevations and sections.
* Requirements for refurbishment to existing buildings and enabling works.
* Indication of specification and quality.
* Indicative programme, procurement and contract strategy.
* Budget & cashflow constraints.
* Site conditions, probable ground conditions.
* Indicative M&E design intent, availability of utility services and the sustainability strategy.
* Details of professional fees, development costs, VAT and treatment of inflation.
33
What is a cost plan?
* The cost plan presents the estimated cost of the development into an elemental or functional format.
* It shows how the design team proposes to distribute the funds available on the different elements of the proposed building.
34
What is the purpose of a cost plan?
* It is used by the cost consultant to control the development of the design.
* It identifies the client’s agreed cost limit and how the money is to be allocated to the different elements of the building.
35
When would you do a cost plan?
* A formal cost plan is typically issued between RIBA Work Stage 2 to Stage 4.
* At stage 2 the Concept Design is made available and the cost plan may be produced at a fairly high level. The Cost Plan may be broken down into the different elements of the building based on an outline specification and Architectural concept drawings.
* At stage 3 the Spatial co-ordination of the building is undertaken, the schedule of accommodation may be adjusted and the cost plan is updated to reflect this accordingly.
* At stage 4 the technical design is made available and cost plan updated to reflect the Architect and Engineering technical designs. Specialist subcontractor designs may also be made available to support with refinement of the project costs.
* The cost plan at Stage 4 will typically form the basis of a pre-tender estimate to compare tender submission against although this is no longer referenced within the RIBA Plan of Work.
36
What are the principal components of a cost plan?
* Construction costs.
* Preliminaries.
* Contractor’s OH&P.
* Contingency.
* Inflation.
* Assumptions.
* Exclusions.
* Area Schedule.
* List of Drawings & Specifications adopted.
37
Name the main elements of an elemental estimate
* Facilitating Works
* Substructure
* Frame
* Upper Floors
* Roof
* Stairs and Ramps
* External Walls
* Windows and External Doors
* Internal Walls and Partitions
* Internal Doors
* Wall Finishes
* Floor Finishes
* Ceiling Finishes
* Fittings, Furnishings and Equipment
* M&E Services
* Externals Works
38
What is usually excluded from a cost estimate?
* Professional fees.
* VAT.
* Loose fixtures and fittings.
* Inflation.
* Site acquisition costs.
* Section 106 Agreement.
* Removal of asbestos.
39
Why is VAT excluded?
* Because different clients will incur different levels of VAT, for example charities may not be subject to VAT.
* We would not be in a position to know the correct rate unless informed of it.
40
What is contingency?
A sum included within the estimate to cover unknown expenses or unmitigated risks during the project.
41
How is contingency assessed?
* 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%.
* As more design information becomes available a risk register can be compiled and each item assigned a probability and cost impact. The total cost of risk register items can then be included as the project contingency.
42
What are the stages of the RIBA Plan of Work?
43
What is Stage 0 and what cost consultant duties are typical?
Stage 0: Strategic Definition
* Providing initial cost advice.
* Feasibility, limited to m2 / functional unit costs.
* Contributing to the project's cost strategy.
44
What is Stage 1 and what cost consultant duties are typical?
Stage 1: Preparation and Briefing
* Refining the project budget
* Order of Cost, mostly m2 / functional unit costs with some breakdown.
* Advising on procurement strategies.
45
What is Stage 2 and what cost consultant duties are typical?
Stage 2: Concept Design
* Developing elemental cost plans.
* Providing cost advice on design options.
* Monitoring the design's impact on the project budget.
46
What is Stage 3 and what cost consultant duties are typical?
Stage 3: Spatial Coordination
* Refining the cost plans with the developed design.
* Contributing to value engineering exercises.
* Monitoring cost implications of design developments.
47
What is Stage 4 and what cost consultant duties are typical?
Stage 4: Technical Design
* Preparing detailed cost estimates and bills of quantities.
* Advising on procurement and tendering.
* Managing cost risks.
48
What is Stage 5 and what cost consultant duties are typical?
Stage 5: Manufacturing and Construction
* Monitoring construction costs.
* Managing variations and changes.
* Providing cost reports and forecasts.
49
What is Stage 6 and what cost consultant duties are typical?
Stage 6: Handover
* Finalising project costs.
* Preparing final accounts.
* Providing cost information for asset management.
50
What is Stage 7 and what cost consultant duties are typical?
Stage 7: Use
51
How do you take account of inflation when preparing a cost estimate?
I take into account inflation through the use of Tender Price Indices and include adjustments for Tender Price Inflation and Construction Inflation.
52
What time period would Tender Price Inflation be included for?
I would allow for Tender Price inflation from the estimate base date to the anticipated tender return date.
53
What time period would Construction Inflation be included for?
I would allow for Construction inflation from the anticipated start of the project to the mid-way point
of the project.
54
What is meant by the base date within a cost estimate?
* The base date refers to the date on which rates and prices contained within a cost estimate are based on.
* These are included for the basis of calculations for example if adjusting the rates for inflation in the future, the base date can be used as the starting point from which inflation would be adjusted.
55
What does TPI stand for?
Tender Price Indices
56
What do TPIs show?
* They reflect changes in the level of tender prices over a period of time.
* The price adjustments take into account the level of inflation depending on current and forecast market conditions.
57
Where can you obtain Tender Price Index information from?
* The service I use to obtain Tender Price Indices is the Building Cost Information Service.
* Larger cost consultancies also produce their own in-house tender price forecasts.
58
Why do you need to take account of inflation?
* Inflation needs to be accounted for to anticipate the changes in the prices of labour, plant and materials.
* We need to account for inflation from the date the cost estimate is produced to the anticipated start date of the project.
* This is to ensure accuracy of the estimate for the client and to ensure the project remains within the cost limit that has been established.
59
What does BCIS stand for?
Building Cost Information Service
60
What is the BCIS?
The BCIS provides construction cost and price information through publications, online services and price books.
61
Where do you get cost information from?
* Historic in-house cost data
* Benchmarks against previous similar projects
* The BCIS
* SPONS and other price books such as Laxtons
* Specialist sub-contractors and suppliers
62
What do you understand by the term VE?
* 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.
63
What do you understand by the term VM?
* VM stands for Value Management.
* Value Management is the proactive understanding the client's objectives and ensuring that the project outcomes align with these goals.
* 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.
64
What is value, what does value mean?
* Value is a measure of worth taking into account the overall usefulness and benefits that are delivered in relation to cost being paid for it.
* Value is a complex concept and means different things to different clients.
65
What happens during the VE process?
* 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 chairperson of the meeting should monitor the proposals against the clients’ objectives around value.
* It is the chairperson and teams responsibility to deliver increased value for money by offering cost effective solutions without compromising the overall usefulness of the building when considering the clients objectives.
66
What are the phases of the VE process?
* Information phase.
* Speculation phase.
* Evaluation Phase.
* Development Phase.
* Presentation Phase.
67
What happens during the "Information phase" of the VE process?
* Understanding the clients objectives around value.
* Defining the clients objectives and key criteria governing the project.
* Understanding background decisions that have influenced the design development of the project.
68
What happens during the "Speculation phase" of the VE process?
* Listing creative ideas to generate a lesser capital or life cycle cost.
* Generating ideas to provide the necessary functions of the building at the most efficient price.
* Judgement of each of the ideas is prohibited.
69
What happens during the "Evaluation phase" of the VE process?
* The criteria for evaluation of the ideas generated during the speculation phase are defined.
* Each of the ideas are assessed against the evaluation criteria.
* The ideas that are considered to offer the greatest potential cost savings and value improvement are retained.
* The ideas considered not worthy or impractical are discarded.
70
What happens during the "Development phase" of the VE process?
* Ideas retained from the evaluation phase are developed and expanded into workable solutions.
* This will include developing a description of the proposed design change with advantages and disadvantages.
* Cost comparisons and design calculations will be undertaken as part of the development phase.
71
What happens during the "Presentation phase" of the VE process?
* The retained ideas are presented to the client in a written report.
* A briefing or verbal presentation may also be provided to build the clients understanding.
* The rationale and background on why the proposals are being recommended is explained.
* As well as referencing monetary benefits, a wider communication of delivering the clients specific objectives should be provided.
* Decisions are taken by the client and design team on what proposals are accepted or discarded.
72
Why is VM needed?
* Each construction client has their own specific objectives and definition of what value means to their organisation.
* Client organisations are sometimes made up of different working groups with contrasting priorities.
* If agreements concerning the definition of value are not reached then chances of perceived failure of the project increases.
* 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.
73
What are life cycle costs?
Life cycle cost (LCC) refers to the total cost of a building or asset over its entire lifespan, from initial design and construction to operation, maintenance, repairs, replacements, and eventual demolition or disposal.
74
What are the advantages of life cycle costing?
* Life cycle costing allows consideration of the long-term implications of a decision.
* 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.
75
What are the disadvantages of life cycle costing?
* 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.
76
What costs should be considered in life cycle costing?
* Capital costs.
* Operational costs.
* Maintenance costs.
* Replacement costs.
* Disposal costs.
77
What are examples of Capital costs?
* Land acquisition
* Construction costs
* Permitting and approvals
* Equipment and machinery
78
What are examples of Operational costs?
* Energy costs
* Security costs
* Insurance costs
* Annual taxes
79
What are examples of Maintenance costs costs?
* Insepctions
* Servicing
* Repair costs
* Preventive maintenance (pro active)
80
What are examples of Replacement costs?
* Roofing replacement
* Plant / equipment replacement
* Window and door replacement
* Building replacement
81
What are examples of Disposal / End-of-Life costs?
* Demolition costs
* Disposal costs
* Site restoration costs
* Refurbishment costs
82
Where can you get information about maintenance costs?
* Building Maintenance Cost Information Service (BMCIS) – part of BCIS.
* From sub-contractors and suppliers.
83
How does the payback period method work?
* 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.
84
What sort of materials is the payback period method used for?
* This is often used to evaluate the options for incorporating sustainable technologies.
* It is considered suitable for elements that have a very high initial capital cost but will ‘pay back’ this initial investment over a period of time in terms of reduced running costs.
85
Why might a client accept higher capital costs?
* For prestige reasons.
* When considering that the replacement or repair may be inconvenient even if the solution is cheaper.
* Cheaper running cost
* Shorter payback period
86
You are working on a new commercial office building project. The client has requested a cost plan at the early design stage. What steps would you take to prepare this cost plan?
* Understand the Project Brief: Gather detailed information about the project scope, including the client's requirements, site conditions, and any specific constraints.
* Develop a Cost Breakdown Structure: Create a detailed cost breakdown structure (CBS) that categorizes all elements of the project.
* Estimate Quantities: Use the design drawings and specifications to estimate the quantities of materials and work required.
* Apply Unit Rates: Apply appropriate unit rates to the estimated quantities to calculate the cost of each element.
* Include Contingencies: Add contingencies to cover any uncertainties or risks identified during the early design stage.
* Review and Validate: Review the cost plan with the design team and validate it against similar projects or benchmarks.
* Present to Client: Present the cost plan to the client, explaining the assumptions and methodology used.
87
During the construction phase, the client requests several design changes. How would you manage the impact of these changes on the project cost?
* Assess the Changes: Review the proposed design changes in detail to understand their scope and impact on the project.
* Update Quantities and Rates: Adjust the quantities and unit rates in the cost plan to reflect the changes.
* Calculate Additional Costs: Calculate the additional costs associated with the changes, including any impact on preliminaries, overheads, and profit.
* Review with Design Team: Discuss the changes with the design team to ensure all aspects are considered.
* Update Cost Plan: Update the cost plan to include the additional costs and any potential savings from the changes.
* Communicate with Client: Communicate the updated cost plan to the client, explaining the reasons for the cost changes and any potential impact on the project timeline.
* Seek Approval: Obtain the client's approval for the revised cost plan before proceeding with the changes.
88
The project you are working on is experiencing cost overruns. What steps would you take to identify and address the causes of these overruns?
* Review Cost Reports: Analyze the latest cost reports to identify areas where costs are exceeding the budget.
* Investigate Causes: Investigate the root causes of the cost overruns, such as design changes, scope creep, or unforeseen site conditions.
* Engage Stakeholders: Engage with the project team and stakeholders to gather insights and feedback on the cost overruns.
* Implement Cost Control Measures: Implement cost control measures, such as value engineering, to reduce costs without compromising quality.
* Update Cost Plan: Update the cost plan to reflect the current project status and any corrective actions taken.
* Monitor Progress: Continuously monitor project progress and costs to ensure that the measures are effective.
* Report to Client: Report the findings and corrective actions to the client, providing transparency and seeking their approval for any necessary changes.
89
What can you tell us about NRM?
NRM provides guidance and a standard set of measurement rules, there are 3 in total:
* NRM 1: Order of cost estimating and cost planning for capital building works
* NRM 2: Detailed measurement for building works
* NRM 3: Order of cost estimating and cost planning for building maintenance works
90
When would you use NRM 1?
This is primarily used during the early stages of a project, such as the conceptual design phase.
91
When would you use NRM 2?
his is used during the tendering and procurement phases.
92
When would you use NRM 3?
This is used for the post-construction phase, focusing on the building's lifecycle.
