T1. DESIGN ECONOMICS & COST PLANNING Flashcards
What is the difference between an order of cost estimate and a cost plan?
- A cost estimate is prepared earlier on in the design process typically between RIBA Work Stages 0 to Stage 2.
- Estimates prepared with more limited design information i.e. £/m2 or £/functional unit.
- Cost plans are prepared from RIBA Stage 2 onwards. As design progresses estimated costs are broken elementally into each of its component’s parts.
What is the difference between cost and price?
- The cost is the total cost of labour, plant, materials and management deployed for a specific activity.
- The price is the amount a purchaser or client will pay for an item or product and is made up of the cost plus the main contractor’s profit margin.
How do you proceed if the cost plan exceeds the project budget?
- I would 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.
- Once identified, I would then propose VE options to my client and design team to bring the forecast back in line with the project budget.
What is buildability?
- The ease and efficiency with which a design can be constructed.
What are the advantages of buildability?
- Buildability can result in better programming, sequencing and construction methods.
What is a wall to floor ratio?
- The relationship between the wall area and floor area.
- Used to show the cost efficiency of the building.
How would you prepare an estimate for M&E works?
- I would ask an M&E specialist surveyor to undertake the estimate.
- For feasibility estimates the M&E amount would be included in the m2 or functional unit rate.
What is a Section 106 agreement?
Agreements between local authorities and developers that are negotiated in the context of granting planning consent.
What is meant by the term ‘shell and core’?
- The basic structure, services and envelope of the building.
What is a CAT A fit out?
Provides generic fit-out items to suit most developers for example life safety elements and basic fittings such as suspended ceiling tiles, raised floors, carpets, lighting and power distribution
What is a CAT B fit out?
Overlays the CAT A provision with bespoke elements that are specific to the needs of the building’s user.
What is BWIC?
Covers any drilling, fixing, cutting and penetrations to enable the services installation.
What is an order of cost estimate?
The determination of the possible cost of a building early in design stage.
What is the purpose of an order of cost estimate?
To establish affordability and set a cost limit.
What is the format of a feasibility estimate or order of cost estimate?
- Usually a cost per m2, functional unit or elemental basis.
- Other inclusions are Preliminaries, Contingency, Inflation and location factor adjustments.
What is a functional unit?
A unit of measurement that considers the prime use of the building i.e. number of beds in a hospital.
Where would you get your rates from for a preliminary estimate?
Previous similar projects and historical cost data such as previous tender submissions or a contract sum analysis.
What information do you need to be able to carry out an order of cost estimate?
- Building Location.
- The type of building.
- Floor area or number of functional units.
- Specification
- Programme
- Client budget
What is a cost plan?
A more detailed estimated of cost in an elemental format
What is the purpose of a cost plan?
- To control the development of the design.
- To identify how the cost is allocated to the different elements of the building.
When would you complete a cost plan?
- A formal cost plan is typically issued following the concept design at RIBA Stage 2.
- Cost plan is updated as and when design information becomes available, usually at RIBA 3 and 4.
What are the principal components of a cost plan?
- Construction costs.
- Preliminaries.
- Contractor’s OH&P.
- Contingency.
- Inflation.
- Assumptions.
- Exclusions.
- Area Schedule.
- List of Drawings & Specifications adopted.
Name the main elements of an elemental estimate?
- Substructure.
o Excavation.
o Disposal.
o Foundations. - Superstructure.
o Frame.
o Upper floors.
o External walls.
o Roof.
o Internal finishes.
o Services.
o External works.
What is usually excluded from a cost estimate?
- Professional fees.
- VAT.
- Client decant costs.
- Loose fixtures and fittings.
- Inflation.
- Site acquisition costs.
- Section 106 Agreement.
- Removal of asbestos.
Why is VAT excluded from a cost estimate?
- Because different clients will incur different levels of VAT, for example charities may not be subject to VAT.
- We would not be in a position to know the correct rate unless informed of it.
What is contingency?
A sum to cover unknown expenses or risks that occur during the project.
How is contingency assessed?
- The amount included should reflect the risks and unknown specific items associated with the project.
- During the early design stages a contingency allowance can be included as an overall percentage of the cost estimate at around 5%-10%.
What are the stages of the RIBA Plan of Work?
0 - Strategic Definition
1 - Preparation and Briefing
2 - Concept Design
3 - Spatial Coordination
4 - Technical Design
5 - Manufacturing and Construction
6 - Handover
7 -Use
How do you take account of inflation when preparing a cost estimate?
- Trough the use of Tender Price Indices and include adjustments for Construction Inflation and Tender Price Inflation.
What time period would Construction Inflation be included for?
- I would allow for Construction inflation from the anticipated start of the project to the mid-way point of the project.
What time period would Tender Price Inflation be included for?
- I would allow for Tender Price inflation from the estimate base date to the anticipated tender return date.
What is meant by the base date within a cost estimate?
- The date on which rates and prices contained within a cost estimate are based.
What does TPI stand for?
- Tender Price Indices.
What do TPIs show?
- They reflect changes in the level of tender prices over a period of time.
Where can you obtain Tender Price Index information from?
Building Cost Information Service but also produce our own in-house
Why do you need to take account of location?
Construction costs vary from region to region.
What is the BCIS?
Provides construction cost and price information through publications, online services and price books.
Where do you get cost information from?
- Previous Tender Submissions.
- Previous Contract Sum Analysis.
- BCIS.
- SPONS and other price books such as Laxtons.
- Specialist sub-contractors and suppliers.
What do you understand by the term VE?
Value Engineering the organised approach aimed at providing the necessary functions of the building taking into account the clients objectives at the lowest cost, without detrimental affects to quality, reliability, performance or delivery.
What do you understand by the term VM?
Value Management 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.
What is the difference between VE and VM?
- Value Management (VM): The strategic approach of defining project scope, objectives, and requirements to ensure the best value for the client.
- Value Engineering (VE): The analysis of components, systems, and processes to identify cost-saving opportunities without compromising functionality.
What is value, what does value mean?
Value is a measure of worth.
What happens during the VE process?
The design team will typically be brought together to discuss various proposals.
What is life cycle costing?
LCC considers costs related to the construction, maintenance, operation, and disposal of the asset.
LCC includes:
* Construction costs (planning, design and construction)
* Maintenance
* Refurbishment
* Operational
* Occupancy and
* End of life costs
What are the advantages of life cycle costing?
- Life cycle costing allows consideration of the long-term implications of a decision.
- It enables informed decisions to be made on material selection.
- Life cycle costing can result in lower operational, maintenance and replacement costs.
What are the disadvantages of life cycle costing??
- Future costs are optional and the costs of maintenance can always be deferred.
- Components are not always replaced due to end of life which is impossible to assess at design stage.
What costs should be considered in life cycle costing?
- Capital costs.
- Operational costs.
- Maintenance costs.
- Replacement costs.
- Disposal costs.
Where can you get information about maintenance costs?
- Building Maintenance Cost Information Service (BMCIS) – part of BCIS.
Why might a client accept higher capital costs?
- When considering that the replacement or repair may be inconvenient even if the solution is cheaper.
What is NRM 1?
- Order of cost estimating and cost planning for capital building works
What is the purpose of NRM1?
- Provides guidance and best practice on the quantification of building works for the purpose of preparing cost estimates and cost plans.
- Provides a standard set of measurement rules to ensure that construction work is priced consistently and accurately
What is the structure of NRM 1?
- Part 1: General - contextualises cost estimating and cost planning in relation to RIBA and OGC Gateways.
- Part 2: Order of Cost Estimate - explains how to prepare an order of cost estimate and sets rules for measurement.
- Part 3: Cost Plans - explains how to prepare cost plans.
- Part 4: Tabulated Rules - comprises rules of measurement for the preparation of formal cost plans.
- Appendices: GIA examples, templates etc.
What are the Group Elements of NRM1?
Group element 0: Facilitating works
Group element 1: Substructure
Group element 2: Superstructure
Group element 3: Internal finishes
Group element 4: Fittings, furnishings and equipment
Group element 5: Services
Group element 6: Prefabricated buildings and building units
Group element 7: Work to existing buildings
Group element 8: External works
Group element 9: Main contractor’s preliminaries
Group element 10: Main contractor’s overheads and profit
Group element 11: Project/design team fees
Group element 12: Other development/project costs
Group element 13: Risks
Group element 14: Inflation
What is the RIBA Plan of Work?
- An industry recognised framework that organises the process of managing and designing building projects and administering building contracts into a number of key Work Stages.
What are the RIBA Work Stages?
Stage 0: Strategic Definition - Defining the Client Requirements.
Stage 1: Preparation and Briefing - Developing the detail of the brief.
Stage 2: Concept Design - Ensuring the look/feel of the building is in line with the client’s vison, brief and budget.
Stage 3: Spatial Coordination - Coordinating the design before preparation of detailed information.
Stage 4: Technical Design - Developing the information required to manufacture and construct the building.
Stage 5: Manufacturing and Construction - The manufacture and construction of the building.
Stage 6: Handover - Closing out any defects and completing the tasks required to conclude the Building Contract.
Stage 7: Use - Building is in use, lasting until the building reaches the end of its life.
How does the RICS propose that estimates and cost plans are structured with the RIBA Stages?
- RICS has determined a series of formal cost estimating and elemental cost planning stages relative to the RIBA Plan of Work and OGC Gateway Process.
- I would always check with the employer as some employers may require cost plans at different Work Stages
What is the OGC Gateway Process?
- An alternative framework to the RIBA Plan of Work adopted by public sector.
- Examines projects and programmes at key decision points in their life.
What are the OGC Gateways?
OGC Gateway 0: Strategic Assessment.
OGC Gateway 1: Business Justification
OGC Gateway 2: Delivery Strategy (or procurement strategy)
OGC Gateway 3: Investment Decision
OGC Gateway 4: Readiness for Service
OGC Gateway 5: Operations Review & Benefits Realisation (or benefits evaluation)
What is an Order of Cost Estimate?
An estimate to determine the possible cost of a building(s) early in design stage in relation to the employer’s fundamental requirements.
What is the purpose of an Order of Cost Estimate?
Establish affordability and set cost limit.
What information would you require to prepare an Order of Cost Estimate?
- Location of the site.
- A statement of building use.
- A statement of floor area (or number of functional units).
- Requirements for refurbishment.
- Initial project/design brief, including statement of quality, sustainability requirements and ‘fit-out’ requirements.
- Details of any enabling works, decanting or other specific requirements.
- Indicative programme, including key dates.
- Site conditions/constraints.
- Budget constraints.
What are the methods available for preparing order of cost estimates?
- Floor area method – is the unit rate which, when multiplied by the GIA, gives the total building works estimate (i.e. Works cost estimate less main contractor’s preliminaries and main contractor’s overheads and profit).
- Functional unit method – a budget-setting technique which consists of selecting a functional unit of use for the project (Prime Use), and multiplying the projected number of units by an appropriate cost per functional unit.
- Elemental method - a budget setting technique which considers the major elements of a building and provides an order of cost estimate based on an elemental breakdown of a building project. The method involves the use of element unit quantities (EUQ) and element unit rates (EUR).
When would you use the functional unit method?
- For a high level cost where a clients prime use requirement for i.e. nr of hospital beds, is known.
When would you use the floor area method?
- For a high level cost where a the floor area of the proposed site is known.
When would you use the elemental method?
- For a more detailed cost estimate and to set cost limits for elements if suitable information is available.
How accurate is an Order of Cost Estimate?
- Dependent on the quality of the information supplied
What are the rules governing the preparation of elemental cost plans?
The equation for calculating the cost target for an element is:
Cost target = EUQ x EUR
If suitable information is available, then EUQs are measured for a group element or element in accordance with the rules and priced with suitable element unit rates (EUR) to ascertain the cost target for an element.
Where insufficient information is available for a particular element, the EUQ for that element is to be the GIFA.
What is useful about an elemental cost plan?
- Sets cost limits for elements and guide design development
How does the iterative cost planning process inform the development of the design?
If elemental cost plan exceeds the clients budget. Key cost drivers can be identified early in the design process, and engineered to a reasonable cost.
What are the various types of cost data?
In-house data: BOQ’s, final accounts, cost analyses/benchmarking
Published sources: price books, BCIS
When would you use in-house cost data?
For cost plans but some adjustment for date, location and/or specification is usually necessary
When would you use published sources such as BCIS?
For order of cost estimates and cost plans but only up to RIBA 2
What is the Base Date of cost data?
The date on which rates and prices contained within cost analyses or benchmark analyses are taken as a basis for calculations.
On Project Ward 7 South, why did you use the floor area method?
I used the floor area method as at the time of preparing the order of cost estimate, I was in possession of a floor plan due to it being an internal refurbishment,
Why did you use historical in-house cost data over, say, SPONS?
In-house data is usually more reliable, as the surveyor can use his or her own knowledge of the site conditions, economic climate etc of the project detailed in the analysis.
Are there different forms of in-house data?
Yes. In-house cost data can be obtained from previous projects i.e. final accounts, pricing documents, tender returns and benchmarking cost information.
What is the BCIS PUBSEC indices?
A tender price indices which measures the movement of prices in tenders for building contracts in the public sector in GB.
Why did you use PUBSEC over the TPI?
The PUBSEC indices provided for a more realistic inflation calculation as it does not include contracts for housing, civil engineering, mechanical engineering, electrical engineering, minor alterations projects or for repair and maintenance work.
How did you adjust the costs for inflation?
I took the index figure from the anticipated start date of the project and divided it by the index figure of the Base Date of the cost data. I then multiplied the base data by the answer.
On Project Ward 7 South, why did you not complete a cost plan at RIBA Stage 4?
This project was let at RIBA Stage 3 as a design and build contract
What are the benefits of in-house cost data?
In-house cost data is beneficial as the user can utilise his/her knowledge of the data, what environment the works took place in, any site constraints etc to get the most accurate data.
Cost data is readily available.
What are the benefits of current and consistent cost data?
The cost advice being provided out of our office is consistent and up to date.
On Project Bull Elephant, how did you ensure that your cost advice aligned with the client’s objectives and budget constraints?
I reviewed the available budget and discussed the client’s key objectives, which focused on cost efficiency while maintaining a robust and aesthetically acceptable boundary solution
My recommendation struck a balance between cost savings and design intent, ensuring affordability without compromising functionality.
On Project Bull Elephant, how did the design modifications impact the programme, procurement, and construction sequencing?
Reduced procurement costs by enabling bulk ordering of standard steel sections.
Shortened fabrication lead times due to fewer, uniform components.
Fewer columns simplified setting-out, excavation, and installation.
Minimized on-site cutting, reducing labour costs and delays.
Enhanced buildability, streamlined the programme, and lowered risk of overruns.
On Project Bull Elephant, how did you communicate your cost recommendations to the client, and what evidence did you provide to support your advice?
I communicated my cost recommendations through comparative cost modelling, which demonstrated potential savings associated with various design modifications.
On Project Bull Elephant, How did your advice influence the client’s decision-making process, and what was the final outcome?
By demonstrating the cost savings achievable through minor design modifications, I reassured the client that an alternative solution could deliver the same functional outcome at a significantly reduced cost.
On Project Bull Elephant, if the client had insisted on the original undulating design despite budget concerns, how would you have managed their expectations?
I would have recommended that the client explore options to value engineer other areas of project scope to potentially free up additional budget.
What is benchmarking?
The process of collecting and comparing data within an organisation
How did you use benchmarking to validate the contractor’s tender submission?
I compiled a select number of projects of a similar size, construction type and specification. I then rebased these projects to the same location and price. I then prepared a table to compare the data with the contractor submission shown on a cost per m2 basis, to indicate whether the tender submission demonstrated value.
What were the external factors affecting the modular project in your report your client report?
There were a number of external factors affecting the modular industry in 2022, when this project was procured most notably: COVID-19 and geopotical issues such as the Russian invasion of Ukraine. This affected the price of steelworks which had a significant impact being an essential competent of a modular building.
On Project Staff Wellbeing Hub, you noted VFM due to external factors, can you tell me how you’d advise a client on the current market conditions?
I would advise the client that current market conditions are driving cost pressures due to several factors:
- Inflation is expected to remain above target levels into 2025 and 2026, keeping construction costs high.
- Interest rates are likely to remain elevated, impacting borrowing costs for developers.
- Labour costs are rising due to the recent increase in Employers’ National Insurance Contributions (NIC) and the National Living Wage.
- Material costs likely to be affected by supply chain disruptions, with geopolitical tensions and protectionist trade policies (particularly from the US) driving up commodity prices.
How would fuel price increases impact modular costs?
Increased supply chain costs: Suppliers of raw materials will see increased costs which will then be passed on up the supply chain.
Increased manufacturing costs: Factory-based approach is energy intensive.
Increased transportation costs: Transportation of raw materials from overseas, i.e. steel, as well as transportation of modules from factory to site will increase.
On Project PET Centre, what was the conclusion on the benchmarking? How would procurement route impact benchmarking data?
The benchmarking exercise revealed that an outlier in the dataset was inflating the overall cost per m2.
By excluding this cost data it allowed for a more accurate order of cost estimate, providing the client with a realistic cost expectation based on relevant historical data.
Negotiated Procurement Costs tend to be higher due to reduced competition, which can skew benchmarking data if such projects are included in the dataset.
What are the drawbacks of in-house data?
Might not represent wider industry practices
Maintaining and updating in-house cost data can be time-consuming and resource-intensive.
In-house cost data may not account for variations in local labour rates, materials, or regulations.
