Design Economics & Cost Planning

Question 1

What RICS documents are you aware of to assist with cost planning?

Answer 1

• NRM1 (Order of cost estimating and cost planning for capital building works).
• NRM1 (Contingency guidance).

Question 2

What sources of cost data are you aware of?

Answer 2

1. Previous tender submissions.
2. Previous CSAs.
3. In house benchmarking.
4. BCIS.
5. Building cost models.
6. SPONS and other price books.
7. Specialist sub-contractors and suppliers.

Question 3

What is BCIS?

Answer 3

Building Cost Information Service – provides cost and price information through publications, online services and price books.

Question 4

What is Tender Price Indices?

Answer 4

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.

Question 5

You mention BCIS can re-base construction costs dependant on location. How and why?

Answer 5

Infation needs to be accounted for to anticipate the changes in prices of labour, plant and materials. Depending on the area, these 3 items may be affected differently. This is done to ensure accuracy of the estimate for the client.

Question 6

When would you typically include TPI up too?

Answer 6

Typically, I would recommend TPI is taken up to the start on site date to the midpoint of construction.

Question 7

During what RIBA stage would you expect to issue an Order of Cost Estimate?

Answer 7

Order of Cost Estimate: During RIBA Stage 0 to 1.

Question 8

During what RIBA stage would you expect to issue a Formal Cost Plan?

Answer 8

Formal Cost Plans: From RIBA Stage 2 to 4.

Question 9

When would you expect a Pre-Tender Estimate to be issued?

Answer 9

I would expect the RIBA Stage 4 cost plan to form the basis of a PTE.

Question 10

You mention design metrics, can you give me an example of some of these?

Answer 10

1. Wall to floor ratio
   a. Shows the relationship between the wall area and floor area.
   b. Used to show cost efficiency of the building.
   c. Lower the ratio, cheaper the building is to construct as there is less external envelope in comparison to floor area.
2. Net to gross
   a. A metric used to assess the efficiency of a building’s design.
   b. Optimal if the number is less than 1.

Question 11

What would you recommend to a client a good wall to floor ratio is?

Answer 11

Between 0.4 and 0.5.

Question 12

What would you expect the cost difference to be between wall to floor ratios?

Answer 12

A variation of 0.1 in the wall-to-floor ratio can change overall construction costs by 4 to 5%.

Question 13

What shape is the most efficient shape?

Answer 13

In theory, a circular floor plate would be the most efficient design, however this offers poor lettable floor area and is difficult to fit out. Therefore, a square would be the most efficient.

Question 14

What are the key components of a cost plan?

Answer 14

1. Construction costs.
2. Preliminaries.
3. Contractor on costs.
4. Contingency.
5. Inflation.
6. Assumptions.
7. Exclusions.
8. Area schedule.
9. Basis.

Question 15

What is the purpose of an order of cost estimate?

Answer 15

To establish if the proposed building project is affordable, and if so, to establish a realistic cost limit. The cost limit will be the maximum the client is prepared to spend.

Question 16

What is the format of an order of cost estimate?

Answer 16

1. Presented cost per m2, functional unit or elemental basis.
2. Abnormals and enabling works considered.
3. Prelims, contingency, inflation etc all factored in.

Question 17

What would you need to complete on order of cost estimate?

Answer 17

1. Location.
2. Type of building.
3. Floor area and / or nr of units.
4. Storey height.
5. Level of fit out etc.
6. Site conditions.

Question 18

What is NRM1?

Answer 18

Order of cost estimating and cost planning for capital building works.

Question 19

What does NRM1 consider?

Answer 19

1. RIBA Plan of Work 2020.
2. ICMS.
3. IPMS.

Question 20

You mention you produced an order of cost estimate for the octagon amenity fit out. What information did you have available at the time?

Answer 20

I had a basis general arrangement layout available at the time and assumptions were made based on finishes, the level of MEP required, and use of the building.

Question 21

You mention the procurement route selected is a key risk until further defined, why is this?

Answer 21

The procurement route presents a risk as should the project be undertaken using a JCT traditional procurement route, the design will already be completed by the employer and therefore costs will be competitive and there should be minimal change.

However, if a JCT design and build procurement route is selected, due to the ongoing nature of the construction and design overlap, there is a change for design changes which could impact the budget.

Question 22

What is value engineering?

Answer 22

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 effects to quality, reliability, performance or delivery.

Question 23

What do you understand by the term ‘Value Management’?

Answer 23

VM is the proactive process of defining what value means to a client and putting procedures in place to ensure that maximum value is delivered for the client, first time.

Question 24

What is the difference between value engineering and value management?

Answer 24

Value management is proactive and aims to be done first time. Value engineering is reactive and falls under the VM scope and is utilised to bring the anticipated cost of the scheme back in line when projected to overrun.

Question 25

What is your understanding of the term value?

Answer 25

Value is the measure of worth taking into account the usefulness and benefits that are delivered in relation to the cost being paid for it.

Question 26

You mention you managed the value engineering process on the octagon amenity project, how did you manage this?

Answer 26

1. A meeting was arranged with the design team, QS, client and contractor.
2. All parties pool together their expertise and suggest different VE proposals.
3. I monitored the proposals against the clients objectives.
4. Design team updated their proposals, main contractor priced.
5. Client was shown a shopping list to choose from with key considerations.
6. Client selects various items to fit back in budget.

Question 27

What are the phases of value engineering?

Answer 27

1. Information – clients objectives.
2. Speculation – list of ideas.
3. Evaluation – comparison of ideas.
4. Development – design updates and cost reviews.
5. Presentation – client chooses.

Question 28

What is contingency?

Answer 28

A sum included within an estimate or cost plan to cover unknown expenses or unmitigated risks during the project.

Question 29

You mention on the battery project, the client, UCB requested advice on a suitable contingency level? Can you summarise how you did this?

Answer 29

1. This was during RIBA Stage 3 – more design information was available.
2. In accordance with NRM1.
3. I produced a price risk register, considering the following:
   a. Design development risks – unclear project brief, use of provisional sums etc.
   b. Construction risks – existing structure
   c. Employer change risks – change in scope of works etc.
   d. Employer other risks – end user requirement etc.
4. Based on the weighting and likelihood of happening.

Question 30

What are life cycle costs?

Answer 30

The costs that will be incurred over a defined period of operating and maintaining a building or an asset including report, maintenance, replacement, cleaning, decorating, services provision and disposal.

Question 31

What are the advantages of life cycle costing?

Answer 31

5. Allows consideration of the long-term implications of a decision.
6. Enables informed decisions to be made on material selection.
7. Can result in lower operational, maintenance, and replacement costs.
8. Can be used to plan future maintenance requirements ensuring easier access and less disruption to the operation of the building.

Question 32

What are the disadvantages?

Answer 32

5. Future costs are optional and costs of maintenance can always be deferred.
6. Components are not always replaced due to end of life which is impossible to assess.
7. Cost of defects from bad workmanship and design faults cannot be predicted.
8. Hard to predict lift spans, future inflation, and maintenance requirements over a long period of time.

Question 33

What costs should be considered in life cycle costing?

Answer 33

6. Capital costs
7. Operational costs
8. Maintenance costs
9. Replacement costs
10. Disposal costs

Question 34

How does the payback period method work?

Answer 34

4. Often used to evaluate the options for incorporating sustainable technologies.
5. It judges an investment in terms of the time period over which the invested sum is returned in cost savings.
6. Shortest time period optimal.

Question 35

Are you aware of Whole Life Cycle Costs?

Answer 35

I am, Whole-life costs consider all costs associated with the life of a building, from inception to construction, occupation and operation and disposal.

There is an RICS professional standard summarising WLC and also NRM3 utilises this.