Design Economics & Cost Planning

Question 1

What is NRM 1?

Answer 1

Order of cost estimating and cost planning for capital building works – it sets the best practice standard for setting out elemental cost plans and cost estimates for building works.

Question 2

What is NRM 2

Answer 2

Detailed measurement for building works - it sets the best practice standard for preparing bills of quantities or schedules of rates for obtaining a tender price.

Question 3

What is NRM 3?

Answer 3

Order of cost estimating and cost planning for building maintenance works – sets out the best practice standard for setting out estimates and cost plans for building maintenance works.

Question 4

What are some elements of a cost plan?

Answer 4

Facilitating Works
Substructure
Superstructure
Internal Finishes
FF&E
Services
Pre-Fab Buildings
Work to Existing Buildings
External Works

Question 5

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

Answer 5

Cost estimates are less precise (usually calculated RIBA 0-1) and a based on limited data available. It’s used to establish affordability.

Cost Plans are a more comprehensive analysis of associated project costs (produced RIBA 2 onwards) measured against specific working drawings.

Question 6

What are some examples of reliable cost data?

Answer 6

Recent tender returns, the BCIS, pricing books such as SPONS.

Question 7

What is a location factor and how do you apply it?

Answer 7

It’s a figure used to recognise differences in construction prices in different regions. If you have costs for Region A, you’d divide the costs by the Region A location factor and multiply by the location factor for Region B.

Question 8

How do you apply inflation to construction costs?

Answer 8

Tender Inflation – covers price increases during the period from the estimate base date (the date at which costs are reported in the latest estimate or cost plan) to the date of tender return.

Construction Inflation – covers price increases from the construction base date (date of tender return) to the midpoint of construction.

Question 9

What is the current inflation rate?

Answer 9

3.2% Q4 2024

Question 10

What is the G&T Tender Price Index?

Answer 10

This is an internal tender price index which reflects movements in market conditions over time. It’s based upon BCIS cost indices as well as market costs for steel, wood, concrete and oil.

Question 11

What are the benefits of benchmarking?

Answer 11

Benchmarking uses historical data from similar projects, it’s used to check whether the design is good value for money or a contractor’s return is in line with market conditions.

Question 12

How do you benchmark at cost plan?

Answer 12

Prepare a comparison document of cost plan elements side-by-side. Identify elements that are abnormal with possible reasons for why.

Question 13

What is value engineering?

Answer 13

A specific exercise that is used to eliminate unnecessary cost and increase value of a specification or product.

Value is subjective and doesn’t necessarily relate to cost, it could be increased efficiency, functionality or appearance.

Question 14

What is value management?

Answer 14

Value Management is a holistic approach to maintaining good value for your Client over a projects lifecycle.

Question 15

Can you talk me through the value engineering exercise on The Connection project?

Answer 15

Following the completion of RIBA 2 cost plan, the project was approximately 2 million over budget.

Produced an “Option B” cost plan highlighted some alternative design options and the potential savings.

VE options included:

• Changing from a curved staircase to a straight - £350k saving
• Changing from bespoke timber paneling to off the shelf cladding option: £1.2M
• Reusing a number of riser doors that have been kept and were in good working order: £50K

Question 16

Can you talk me through how you benchmarked the façade measure on Keele University? What was the approximate cost per m2 on the façade package?

Answer 16

• Façade cost approx. £689 / m2 – includes cladding and windows and doors.
• Benchmarked against student accommodations and high-rise residential predominately in the northwest, but extending across the UK.
• Rebased for Keele.
• Found to be offering good value for money.

Question 17

What is a reinstatement valuation?

Answer 17

This is an estimate of the costs to reinstate building following total loss or substantial damage where the entire building needs to be demolished and rebuilt.

Question 18

How did you benchmark and use location factors on the reinstatement valuation for 5 St Philips Place?

Answer 18

I looked at valuations for similar projects in Manchester and London and used location factors to re-base these costs for Birmingham to determine whether what I had estimated was in line with the market.

Question 19

Why didn’t you include for inflation in your cost plans for Mill Studios?

Answer 19

Due to the fast track nature of the programme, the tender and construction of the project was planned to be within a single quarter, so I deemed inflation to be negligible in this instance.

Question 20

What was your allowance for design development & construction risk on Mill Studios?

Answer 20

2% design development – limited client brief, design development required
1% construction risk – listed building but surveys and existing information from the mill owner was comprehensive
0% employer change
2% employer other risk – limited client brief, tight programme and elements of design may require listed building consent

Question 21

Did this change through the RIBA Stages?

Answer 21

RIBA 2 – design development dropped to 1% but construction risk and employer other risk remained as programme remained tight and still unclear about the listed building consent timeframes.

Question 22

Talk me through the process of comparing the first stage tenders on Mill Studios?

Answer 22

Compiled an ITT made up of:

Preliminaries
Employer’s Requirements (Drawings and Specs)
Form of Tender
Instructions to Tenderers
Schedule of PCSA Services
Tender Sum Analysis

Tenders returned and I produced a comparison document, normalising the tender returns by “plugging” figures using the highest return cost whilst waiting for pricing from the tenderer.

I compiled a tender report, sent this to the client and arranged a meeting to discuss in detail.

Question 23

What do you include in your tender report?

Answer 23

Executive Summary

Talk through tender process, who tenders were sent out to, when they were turned, anyone who declined and why

Individual Analysis of each tender return

Comparison and Analysis of returns

Recommendation to the Client and next steps

Question 24

What is a functional unit and can you give some examples?

Answer 24

A unit of measurement that represents the prime use of the building. Multiply cost per functional unit by the number of functional units to get the building cost estimate

Examples include cost per parking space, cost per bedroom, cost per student for a school

Question 25

What are the benefits of a cost plan?

Answer 25

Confirms affordability of a scheme
Puts the Client in an informed position to make commercial decisions
Acts as a value management tool to ensure the Client is getting best value

Question 26

Do you need a programme to complete a cost report?

Answer 26

No but some high-level indicative dates for tender periods, start on site, length and completion date will help with calculating inflation and producing a cash flow.

Question 27

What makes up preliminary costs?

Answer 27

Site Accommodation
Management and Staff
Temporary Services
Plant
Temporary Works
Cleaning
Fees
Bonds/Insurances

Question 28

What are the two types of Prelims?

Answer 28

Time Based – rate per week, can increase if programme length changes
Fixed Charges – a fixed rate of the programme length

Question 29

What is a prelim cost that is both?

Answer 29

Scaffolding or Cranes – a fixed rate for mobilisation/set up/demobilisation, time-based for weekly hire

Question 30

What is VAT usually excluded from cost plans?

Answer 30

Not insured to advise on VAT, different entities may have different levels of VAT, so VAT is usually excluded to ensure the wrong VAT rate isn’t applied.

Question 31

What is wall-to-floor ratio?

Answer 31

Calculated by dividing wall area by GIFA, informs on how much wall space is required to enclose the floor area. Informs on building efficiency. Low wall to floor, more efficient, lower cost (as façade costs are normally significant).

Question 32

What was the cost per m2 for the reinstatement of 5 St Philips Place

Answer 32

£4,700 / m2

Question 33

What is the difference between a defined and an undefined provisional sum?

Answer 33

A defined provisional sum is inclusive of associated preliminary costs.

An undefined provisional sum does not allow for any associated prelims.

Question 34

What is a reasonable wall to floor ratio for a commercial office?

Answer 34

0.4 or greater

Question 35

What is a reasonable GIA:NIA ratio?

Answer 35

85% or greater