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RICS APC - QS > Design economics and cost planning (L1) > Flashcards

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
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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
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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
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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
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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
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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
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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

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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
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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.
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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

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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
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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
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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.
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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

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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
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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

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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
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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
Q

What is a floor area method?

A
  • The total GIFA of the building is measured and multiplied by an appropriate cost/m2 of GIFA
26
Q

What is a functional unit method?

A
  • 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
Q

What is a elemental method?

A
  • 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
Q

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

A
  • 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
Q

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

A
  • 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
Q

How would you proceed if the cost plan exceeds the project budget/ initial cost estimates?

A
  • 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
Q

What do you understand about benchmarking?

A

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
Q

What market factors can impact on cost?

A

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
Q

Talk me through the ethos behind the NRM suite of documents

A

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
Q

What does NRM1 represent for you as a QS?

A

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
Q

Talk me through the risk headings under NRM1

A

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
Q

What things do you need to be aware of when using published cost data?

A

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
Q

What sort of factors/ adjustments may be required when preparing cost estimates, other than rate per item?

A

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
Q

What is the difference between defined and undefined provisional sums?

A

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
Q

How does that differ from a prime cost sum?

A

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
Q

Are you aware of the implications of ICMS on the industry?

A

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
Q

How does this relate to NRM?

A

o NRM1 and NRM3 elemental cost breakdown structure can be mapped to the ICMS high-level cost structure

42
Q

What is an approximate quantities cost plan?

A

o It is a first attempt to measure defined quantities from drawings

43
Q

What is a construction cost breakdown structure?

A

*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

RICS APC - QS (33 decks)

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