DESIGN ECONOMICS & COST PLANNING Flashcards
If you are producing a estimate or cost plan what rules do you follow?
New Rules of Measurement
What are apart of the NRM suite
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 maintenance works
Outline NRM1
Provides guidance on the quantification of building works for the purpose of preparing cost estimates and cost plans. It is the ‘cornerstone’ of good cost management of construction projects, enabling more effective and accurate cost advice to be given to clients and other project team members, as well as facilitating better cost control.
Outline NRM 2
Is written mainly for the preparation of bills of quantities and quantified schedules of works, although the rules will be invaluable for designing and developing standard or bespoke schedules of rates.
Outline NRM 3
Gives guidance on the quantification and description of maintenance works for the purpose of preparing initial order of cost estimates. The rules also aid the procurement and cost control of
maintenance works.
What is the structure of the NRM 1?
-Part 1 : General introduction
-Part 2: Measurement rules for order of cost estimate
-Part 3: Measurement rules for cost planning
-Part 4: Tabulated rules of measurement for elemental cost planning
-Appendices
What is the structure of the NRM 2?
-Part 1: General introduction
-Part 2: Rules for detailed measurement of buildings works
-Part 3: Tabulated rules of measurement for buildings works
- Appendices
What is the structure of the NRM 3?
-Part 1: General introduction
-Part 2: New rules of measurement for building maintenance works
-Part 3: Measurement rules for order of cost estimating (renewal and maintain)
-Part 4: Measurement rules for cost planning of renewal (R) and maintain (M) works
-Part 5: Calculation of annualised costs for renewal (R) and maintain (M) works
-Part 6: Tabulated rules of measurement for elemental cost planning
- Appendices
Why is it important to measure the works according to industry standards and best practice?
-To provide consistency and greater accuracy of pricing.
-To ensure that all parties price on the same basis and therefore reduce the risk of dispute.
Is it mandatory for chartered surveyors to follow the procedures set out in NRM?
No, However, when a allegation of professional negligence is made against a surveyor, the court is likely to take account of the contents of any relevant guidance notes published by RICS in deciding whether they had acted with
reasonable competence.
What 2 sub sections are set out in NRM 2 relating to Prelims
ERs and Contractor cost items
List some ER Prelims
-Site accommodation.
-Site records.
-Completion & post completion requirements.
List some Contractor Cost Items Prelims
-Management & staff.
-Site establishment.
- Temporary services.
-Safety and environmental protection.
-Control and protection.
-Mechanical plant.
- Temporary works.
-Site records.
-Completion & post-completion requirements.
-Cleaning.
-Fees & charges.
-Site services.
-Insurances, bonds, guarantees and warranties.
How is risk dealt with under NRM?
- Not a standard Percentage
-assessment of the risk, considering completeness of the design and other uncertainties such as the extent of site investigation undertaken.
Risk categories in NRM
-Employer Change Risk.
-Employer Other Risk.
-Design Development Risk.
-Construction Risk.
What is cost limit?
The maximum expenditure that the
employer is prepared to make in relation to the completed building
What is the base cost estimate and what should it include?
A evolving estimate of known factors without any allowances for risk and
uncertainty, or element of inflation.
The base cost estimate is the sum of the works cost estimate, the project/design team fees estimate and the other development/project costs estimate.
What is an order of cost estimate?
Term used in NRM, purpose to establish if the proposed project is affordable
How are professional fees presented in the order of cost estimate?
Fees can be presented as an item (if actual 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
Name all RIBA Stages
Stage 0- Strategic Definition.
Stage 1 - Preparation and Briefing.
Stage 2 - Concept Design.
Stage 3 - Spatial Coordination.
Stage 4 - Technical Design.
Stage 5 - Manufacturing and Construction.
Stage 6 - Handover.
Stage 7 - Use
What additional information should accompany an order of cost estimate?
.
-Covering letter
-Executive summary.
-Cost limit.
-Specification notes.
-Assumptions.
-Exclusions.
-Drawings and other information upon which the estimate is based.
-A schedule of value enhancing options.
-Risk register.
-Cash flow information
What is a cost plan
-Estimate of actual project cost is likely to be
- Produced by cost consultant
-Identifies clients cost limit and how money is allocated
Benefits of cost plan
- predicts final cost
-Enables practicality and balance designs from designers as they can see how their designs influences cost
-Employer can make commercial decisions of info
Is a Programme needed to produce a cost plan?
Preliminaries are typically presented as a weekly rate in developed cost plans; therefore, a programme or at least some high-level dates will be required.
The key information usually required is:
-Design and tendering periods.
-Start on site date.
-Construction period.
-Completion date
Name sources of data
-BCIS
- Pricing Books like SPONS
- Previous market tested rates from legacy projects
- In house cost analysis and models
-Speaking direct to contractors
How do you take account of the project location and why?
A location factor is usually applied to recognise differences in construction prices. For example, a project in London is typically more expensive than a similar project in the midlands
What is a cost plan risk allowance?
A sum included to cover unknown costs or unmitigated risks during the project
What fees might be included in the fee estimate?
Consultant fees - project & design teams, surveys & specialist consultants
Contractor fees - management and staff, design management fees
How would you deal with a cost plan which is 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 redesign.
What is BWIC?
-Builder’s work in connection and is usually set as a percentage of the services cost.
-BWIC refers to builder’s work that is necessary to allow other works to proceed (typically mechanical
and electrical services but also other specialist installations)
Why is VAT excluded
Employers may incur different levels of VAT (some might be exempt). Therefore, VAT is usually
excluded to ensure the incorrect tax rate is not applied.
What is benchmarking
-Benchmarking is the use of historical data from projects of a similar nature.
-Can be used as a comparison or check for cost planning purposes.
-Benchmarking can highlight areas of design that are not value for money; or, if the price offered by the contractor is in line with market conditions.
How would you undertake a benchmarking exercise for your client?
Produce a clear document which shows the various cost plan elements side-by-side with the
benchmark project(s). This process will identify items which are considered abnormal, I would then endeavour to justify cost anomalies for flagged items
How are subcontractor’s preliminaries captured in the cost plan?
NRM 1 - Costs associated with subcontractor’s preliminaries are to be included in the unit rates applied
to sub-elements and individual components
What is OHP
Over heads and profit is the profit made after accounting all costs and expenses.
What factors affected OH&P
-Project Location
-Project Type and value
-Market Conditions
What is a provisional sum?
Provisional sums are generally an allowance or estimate induced within the contract price that are:
Not sufficiently defined to allow an accurate cost
NEC stance on Prov sums
If the scope of works is so unclear that a price cannot be provided with a level of
certainty, the item should be excluded until it can be properly defined
What is defined and undefined Prov Sum?
Defined - the contractor has allowed programming & prelims
Undefined - hasnt done above will need EOT
What is prime cost?
Supply only rate, excludes fixing of material etc
Prelims?
Preliminaries are typically items which are necessary for the contractor to complete the works but will not actually become part of the works once the project is complete.
Key considerations for prelims
-Length of contract.
-Type of project (new build, refurbishment, infrastructure etc.)
-Size of project and overall build cost.
-Need for temporary works.
-Security requirements.
What is fixed and time related prelims
Fixed - one off - site security equipment
Time related - tower crane
What is inflation?
Means an upward movement in the average level of prices and or costs
What are the two types of inflation as defined in NRM1?
Tender inflation - means an allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment, and materials during the period from the estimate base date to the date of tender return.
Construction inflation - means an allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment, and materials during the period from the date of tender return to the mid-point of the construction period.
What is it and what does it do TPI?
Tender Price Indices - They measure the movement in prices agreed between clients and contractors at ‘commit to construct’ normally when the tender is accepted.
These indices are typically used for adjusting estimates and budgets to different date
What is meant by the term ‘functional unit’?
A unit of measurement used to represent the prime use of a building or part of a building (e.g. per bed space, per house and per m2 of retail area). It also includes all associated
circulation space.
GIFA?
Gross internal floor area (GIFA) is the area of a building measured to the internal face of the
perimeter walls at each floor level.
GEA?
Gross external area (GEA) is the area of a building measured externally (i.e. to the external
face of the perimeter walls) at each floor level.
What is wall-to-floor ratio?
The wall-to-floor ratio of a building is calculated by dividing the external wall area by the gross internal
floor area. This indicates the proportion of external wall required to enclose a given floor area.
This may reveal how efficient the design is and may also help inform the construction cost
NIA?
Net internal area (NIA) is the usable area within a building measured to the internal face of
the perimeter walls at each floor level.
Why would you use a BoQ instead of a schedule of work?
SoW - breaks works down into section less detailed then BoQ
BoQ - simplifies tender as contractors price the same quant
Adv + Dis of BoQ?
Adv - simple tender analysis
Dis - errors when measuring & expensive and time consuming
Cash Flow?
A cash flow projection (or forecast) is a financial planning tool that shows the predicted flow of cash in and out of a
project. This is typically shown month-by-month, for the duration of the project
Types of cashflow?
Organisational & project
Contractor and employer costs?
Contractor shows construction cost
Employer - Consultant fees, land acquisition and marketing
Importance of cash flow
- Allows expenditure planning
Construction cash flow projection - if payments to the contractor are behind the projection, what might
this indicate?
Works are behind programme
Construction cash flow projection - if the contractor’s monthly valuation is ahead of the cash flow
projection, what might this indicate?
The project is ahead of programme, or the contractor is overclaiming
What is the purpose of post-contract cost reporting?
- Overview of current financial commitment , showing outlay, savings and forecasting
Difference between cost and price
Cost -total of labour, plant, materials
Price is the amount the employer pays fir the work to be completed
What is life cycling costing?
Life cycle costing (LCC) is a method for measuring the lifetime costs of any project or asset. In construction, it enables design options to be compared from a lifetime perspective with a view to understand and reduce overall costs associated with owning and/or operating the asset
What is the purpose of post-contract cost reporting
To provide an overview of the clients financial commitment.
To inform the client of the likely outturn of cost of the project and forecasts cost as variance against the CSA
Info in Cost Report?
-Executive summary.
-Contract sum.
-Instructed variations/compensation events.
-Potential future variations as advanced warnings.
-Status of any claims.
-Cost plan.
-Value engineering options.
- Anticipated final account (forecast).
-Risk allowances.
-Final account progress (if applicable).
-Total of certified payments.
-Cash flow forecast.
-Recommendations and next steps
Adv & dis of LCC
ADV - Project reaches highest possible value , address issues within original design, promotes durability, reduced maintenance and fewer risk and more sustainable
DIS - Components are not always replaced due to end of life. Changes in style and fashion for example, are
almost impossible to assess in the design phase.
-Cost associated with defects (caused by poor workmanship or design faults) cannot be predicted.
-Uncertainty in inaccurate data may influence the decision-making process
Difference between Whole life and Life cycle cost?
-LCC focuses only on the construction, maintenance, operation and disposal of the asset
-WLC also includes client and user costs, such as project financing, land, income and external costs.
What is the typical analysis period to calculate LCC?
The LCC period of analysis should be determined by the client. It might be the length of a private finance initiative (PFI} concession, the length of a lease, the anticipated functional life of a whole
building, or time to first refurbishment
What are the key cost categories to consider when calculating WLC?
-Construction costs.
-Maintenance costs.
-Operation costs.
-Occupancy costs.
-End of life costs.
-Non-construction costs (land, fees, etc.).
-Income.
-Externalities.
How does LCC accuracy be affected
Trends, inflation and historic data, length of life cycle
How can LCC be used in a value engineering exercise?
Element of the design has a high capital cost, but its
maintenance and replacement costs are significantly less than a cheaper capital cost alternative.
QS role at each RIBA Stage
0 - Estimate on cost per m2 or functional - budget
1 -Order of cost estimate now more details have been provided & set budget
2- Initial cost plan based on concept design & spec
3 - Design studies & testing affordability with supplies and contractors
4-Update the formal Cost Plan iteratively – to a level of detail defined by the
Procurement Strategy & review tender returns
5- Payment & CEs
6 - Final Account + feedback
7 - Post occupancy feedback
Detail Construction Trends
Ukraine War - increase in raw material price
Lack of skilled labour - increased cost for professionals
Building Safety act - greater look on fire safety
