Design economics and cost planning (L1) Flashcards
1
Q
What is cost planning?
A
- It is a budget distribution technique implemented during the design stage
- It involves a breakdown of the client’s budget for the building into cost targets for each element of the building
- These cost targets are the recommended expenditure for each element (e.g. substructure, frame, upper floors and roof)
- The resulting elemental cost plan is a statement of how the project team proposes to distribute the available budget among the elements of the building
- This provides a frame of reference from which to develop the design and maintain cost control
- Elemental cost planning is an iterative process, performed in steps of increasing detail as more design information comes available
2
Q
What is the purpose of cost planning? KEMPP
A
- Keep expenditure within client budget
- Ensure clients are provided with value for money
- Make clients and designers aware of the cost consequences of their requirements
- Provide advice to designers that enables them to arrive at balanced designs within budget
- Provide robust cost information with which the client can make informed decisions
3
Q
What are the formal cost plan stages?
A
- RIBA Stage 2 Concept Design – Formal Cost Plan 1
- RIBA Stage 3 Spatial Coordination – Formal Cost Plan 2
- RIBA Stage 4 – Technical Design – Formal Cost Plan 3
4
Q
What are the constituent parts of a cost plan under NRM?
A
- Facilitating works estimate
- Building works estimate
- Main contractors preliminaries estimate
- Main contractors overheads and profit
- Project Design Fees estimate
- Other project costs estimate
- All of which equal the Base Cost Estimate which should exclude allowances for risk or inflation as these are separate constituents that are added to the Base Cost Estimate
5
Q
What are standard methods of measurement?
A
- They are guidelines and protocols used in the measurement and quantification of construction works.
- They provide a structure for the information that should make up descriptions
- Defines units of measure for each item i.e. m, m2, m3, etc
- Provides rules as to what is included in each item
6
Q
What are the benefits of standard methods of measurement?
A
- Consistency enabling reliable comparisons and benchmarks.
- Accuracy leading to more accurate cost estimates
- Reduces potential for disputes
- Transparency fostering trust among clients and contractors
7
Q
What are the risks of deviating from a standard method of measurement?
A
o Inconsistency across project – makes benchmarking and using historical data difficult
o Inaccurate cost estimates – due to increased risk or inaccurate measurement which can cause incorrect pricing
o Miscommunication and disputes – due to different interpretations can lead to misunderstanding and disagreement
o Loss of transparency – which may lead to reduced trust if deviations lead to cost and time overruns
8
Q
What are New Rules of Measurement?
A
- NRM provides a standard set of measurement rules for construction projects and maintenance works
- The NRM suite comprises three separate volumes
- 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
9
Q
What is NRM 1?
A
- NRM 1 is used during the feasibility and early design stages of a project specifically for producing order of cost estimates and cost plans for capital building works.
10
Q
When is NRM 1 used?
A
NRM 1 is used during feasibility and early design stages to produce:
- Initial Cost Estimates to establish if a project is financially viable
- Cost Plans during the design development to guide the design process by ensuring that the project stays in budget
11
Q
How many group elements are there in NRM 1 and can you give me some examples?
A
- There are 15 group elements 0-14
- Group element 0 is Facilitating Works
- Group element 1 is Substructure
- Group element 2 is Superstructure
12
Q
How is NRM 1 set out?
A
- The rules are tabulated and are based on 4 levels.
- Level 1 to 3 relate to the actual work items and are split into group element, element and sub-element e.g. Superstructure, Frame, Concrete
- Level 4 is the rule of measurement for the each component of the sub-element i.e. columns and beams
13
Q
What is NRM 3?
A
- NRM3 is used for order of cost estimating and cost planning for building maintenance works.
- They provide a standardised approach for measuring and estimating the costs of maintenance, repair, and renewal work in existing buildings.
14
Q
What is SPONS?
A
SPONS is a series of 4 pricing books covering the most frequently specified items in
- Building Works
- External and landscaping works
- Civil engineering and highway works
- M&E works
15
Q
When would you use SPONS price book?
A
- When producing an elemental order of cost estimate or elemental cost plan
- Specifically when the element can be measured and thus an element unit quantity provided
- SPONS would be used to provide an element unit rate
16
Q
What is BCIS?
A
The BCIS is an independent provider of cost and price information for the construction industry which can be used for the purposes of benchmarking
17
Q
When would BCIS be used?
A
- Used for benchmarking purposes and
- Where insufficient information is available for an element the elemental unit quantity is based on the GIFA
18
Q
What is an order of cost estimate?
A
- It is an estimate based on benchmark data for a similar type of project
- Its purpose is to establish if a project in financial viable for the client
- It 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
19
Q
What is the purpose of an order of cost estimate?
A
- To establish if a project is financial viable for a client and
- to establish a realistic cost limit
- The cost limit is the maximum expenditure that the client is prepared to spend on the project
20
Q
What are the different methods in which an order of cost estimate can be prepared?
A
- Floor area method
- Functional unit method (e.g. cost per bed space, or m2 of retail area)
- Elemental method (i.e. individual elements of a building)
21
Q
What is a cost limit?
A
The maximum expenditure that the client is prepared to spend on the proposed building project
22
Q
What is a cost target?
A
The recommended expenditure for an element (of a building e.g. upper floors)
23
Q
What is an element unit quantity?
A
- A unit of measure that relates solely to the quantity of the element or sub-element itself
- They are provided when producing an elemental order of cost estimate or elemental cost plan
- Specifically when the element can be measured and due to sufficient information and thus an element unit quantity provided
24
Q
What is an element unit rate?
A
- It is a rate that is multiplied by the element unit quantity to derive at the total cost for the element
- SPONS would be used to provide an element unit rate
- Element unit rates include the cost of all materials, labour and plant but exclude main contractor prelims, H&P, design fees, risk allowances and inflation as these are other constituent parts of an order of cost estimate or cost plan.
25
What is a floor area method?
- The total GIFA of the building is measured and multiplied by an appropriate cost/m2 of GIFA
26
What is a functional unit method?
- A unit of measure used to represent the prime use of a building (e.g. per bed space)
- This is then multiplied by an appropriate cost per functional unit
27
What is a elemental method?
- It is an order of cost estimate based on an elemental breakdown of the building project (e.g. substructure, frame, upper floors and roof)
- The choice and number of elements used used to breakdown the cost of the building works will be dependent on the information available
- Where insufficient information is available for an element the elemental unit quantity is based on the GIFA
28
What information do you need to be able to carry out an order of cost estimate?
- Building location
- Type of building
- Floor area or number of functional units
- Storey height
- Initial floor plans, roof plans, elevations and sections
- Indication of specification and quality
- Site conditions
29
What is the different between an order of cost estimate and a cost plan?
- an estimate is used to see if the project is financial viable for the client whereas
- A cost plan is produced during design development to guide the design process by ensuring the project stays within budget
30
How would you proceed if the cost plan exceeds the project budget/ initial cost estimates?
- 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 is identified I would then look to propose value engineering options to the client and design team to bring the cost plan back in line with the project budget
31
What do you understand about benchmarking?
o Usually carried out during the feasibility stage to establish a cost limit before to much time and cost is spent on developing a design
o Repeating benchmarking exercises throughout the design development process should be considered
o Important that the benchmark data is properly analysed to arrive at a like-for-like comparison
o Aanalysis may reveal aspects that are not similar to the proposed building which may therefore need to be removed and replaced with more appropriate project data
32
What market factors can impact on cost?
o Fluctuations in raw material prices – supply-demand dynamics, global trade or tariffs
o Supply chain disruptions – e.g. Suez Canal
o Labour costs – where skilled labour is scarce wages maybe higher
o Regulatory compliance – changes in regulations and standards e.g, Reg31 approved materials
o Market demand and competition – increase demand will lead to higher costs and increased competition should reduce costs
o Inflation and Economic conditions – General inflation which can impact wages, materials prices and equipment costs
o Geopolitical events – can cause labour shortages or instability on material exporting
o Fuel and Energy costs
o In terms of cost planning, such market factors should be dealt with under risk allowances.
33
Talk me through the ethos behind the NRM suite of documents
o They are written to provide a standard set of rules that are understandable to anyone involved in a construction project
o This enables:
Consistency enabling reliable comparisons and benchmarking
Accuracy leading to more accurate cost estimates
Reduces potential for disputes and
Transparency fostering trust among client and contractors
34
What does NRM1 represent for you as a QS?
o It provides a clear framework that supports accurate cost estimating and cost planning, measurement consistency and effective cost control during design development, making it a crucial tool in the QS’s role of managing construction costs
35
Talk me through the risk headings under NRM1
o There are 4 risk headings under NRM 1
Design development risk
* To cover risk associated with design development, changings in estimating data, third party risks (e.g., planning), statutory requirements, procurement methodology and tendering delays
Construction risks
* To cover risk associated with site conditions (e.g. access), ground conditions, existing services and statutory undertaker delays
Employer change risks
* To cover risk associated with client driven changes (e.g. changes in scope)
Employer other risks
* To cover risk associated with other client risks (e.g. early handover, acceleration, postponement)
36
What things do you need to be aware of when using published cost data?
o When using published cost data you must ensure:
It is accurate and update to date
Factor in location, time and project specific adjustments and
Ensure the data is applied consistently with the measurement rules to avoid inaccuracies in costing
37
What sort of factors/ adjustments may be required when preparing cost estimates, other than rate per item?
o Tender inflation – to cover inflation between the estimate base date and tender return date and
o Construction inflation – to cover inflation between the tender return date and the mid-point of construction
38
What is the difference between defined and undefined provisional sums?
o Defined provisional sum is accounted for within contractor price (for preliminaries) and programme
o Undefined provisional sum is not accounted for in the contractors price (for preliminaries) and programme
o Define is used when information in regards to the nature and extend of work can be provided
o Undefined is when information in regards to the nature and extend of work cannot be provided
39
How does that differ from a prime cost sum?
o A prime cost sum is a supply-only rate for materials or goods where the precise quality of those materials and goods is unknown
40
Are you aware of the implications of ICMS on the industry?
o The International Cost Management Standard (ICMS) is a principle-based international standard that sets out how to classify, define, measure, record, analyse, present and compare construction project life cycle costs in a structured and logical way
o It promotes consistency and transparency across international boundaries
o It does not include detailed measurement rules
41
How does this relate to NRM?
o NRM1 and NRM3 elemental cost breakdown structure can be mapped to the ICMS high-level cost structure
42
What is an approximate quantities cost plan?
o It is a first attempt to measure defined quantities from drawings
43
What is a construction cost breakdown structure?
*It is developed based on the Work Breakdown Structure
*Used to allocate cost to each part of the building project or asset in case on UU
*The WBS and CBS provide a baseline for cost management of the project during construction and
*Enable costs to be captured in a structured manner
