Design Economics & Cost Planning

Question 1

What is the difference between a cost estimate and a cost plan?

Answer 1

• Cost estimate is produced earlier in the RIBA stages and is used to set a realistic cost limit for the project and assess whether a project is affordable.
• Cost plans are used by the QS to control costs during design development and make sure that the project cost limit is not exceeded.

Question 2

What typically happens to your cost plan as you progress through the design stages?

Answer 2

• It becomes longer and more detailed as more design information is available.
• It becomes more accurate as specifications are provided and therefore market testing can be used to achieve more precise prices.

Question 3

Why is cost planning so important to your client? What does it inform?

Answer 3

It ensures that design development doesn’t make the project exceed its cost limit.

Question 4

Please list out the RIBA Stages.

Answer 4

0 = Strategic definition
1 = Preparation & Brief
2 = Concept Design
3 = Spatial Coordination
4 = Technical Design
5 = Manufacturing & Construction
6 = Handover
7 = In Use

Question 5

What is a functional estimate?

Answer 5

• Based on the prime use of building multiplied by a rate.
• Functional unit examples are included in NRM1.

Question 6

What is a GIFA estimate?

Answer 6

Where a £/sqft or £/m2 is applied to the gross internal area of the building. These rates can change based on the function of the space.

Question 7

What is an elemental estimate?

Answer 7

Each element within NRM 1 is measured and costed. This then totals full cost estimate which can be broken down into elements.

Question 8

What sources of data do you use to benchmark information?

Answer 8

• Internal sources include in-house data from previous jobs, previous tender returns, and CSAs.
• External sources such as BCIS and market testing.

Question 9

What is NRM? What is it used for? What is its purpose?

Answer 9

• New Rules of Measurement
• To standardise measurement, cost estimate and cost plans structures.

Question 10

Can you tell me the 3 types of NRM?

Answer 10

• NRM 1 = Order of cost estimating and cost planning for capital building works
• NRM 2 = Detailed measurement rules
• NRM 3 = Order of cost estimating and cost planning for maintenance building works

Question 11

When would you use NRM 1?

i.e. what types of pricing documents would you produce with it.

Answer 11

For cost plans and cost estimates

Question 12

When would you use NRM 2?

i.e. what types of pricing documents would you produce with it.

Answer 12

For more detailed pricing documents such as BOQs.

Question 13

When would you use NRM 3?

i.e. what types of pricing documents would you produce with it.

Answer 13

For cost plans and cost estimates relating to maintenance building works.

Question 14

When would you produce an order of cost estimate rather than a cost plan?

Answer 14

Earlier in the RIBA stages when less design information is available.

Question 15

Can you tell me some factors that impact design economics?

Answer 15

• Geographical locations – North vs. South England
• Localised location – site constraints
• Time – adjusting for inflation.
• Shape of a building – how much external envelope, wall:floor ratio.
• Net:Gross.

Question 16

How does geographical location impact design economics?

Answer 16

Labour is cheaper in the north than in London.
Plant hire cheaper in North.
Localised area – such as a tight site, site constraints – increased prelims costs.

Question 17

How does the shape of a building impact design economics?

Answer 17

A building that has more wall area to floor area, will be less cost efficient.

Question 18

Can you tell me what Wall:Floor ratio means? What does it show?

Answer 18

• It shows how cost efficient the building is.
• The correlation between the wall area and floor areas and is calculated by dividing the external wall area by the above ground GIA.

Question 19

What is considered a good wall:floor ratio?

Answer 19

0.3 to 0.4 is a good wall:floor ratio.

Question 20

Why is it important to design efficiently?

Answer 20

The façade package is a large driver of the overall construction cost, accounting for 15-20% of the cost.

Question 21

How do you improve the wall:floor ratio?

Answer 21

• Plan shape of the building – striving for a circle or square.
• Reducing the floor to ceiling heights if they are excessive (must remain compliant).

Question 22

Can you tell me what Net:Gross means?

Answer 22

The relationship between the net area and the gross area, calculated by dividing the NIA by the GIA.

Question 23

Why is Net:Gross ratio important?

Answer 23

I want to maximise the amount of lettable NIA for the gross area of the building. This maximises the return for the client.

Question 24

How does the structure of a cost estimate differ to a cost plan?

Answer 24

The amount of detail available increases in the cost plan, so the document will be longer.

Question 25

What’s the structure of NRM 1?

Answer 25

1. General (introduction) 1. Measurement rules for order of cost estimating 1. Measurement rules for order of cost planning 1. Tabulated measurement rules for elemental cost planning

Question 26

What is a cost reconciliation document?

Answer 26

It shows the difference between cost plans e.g. from Stage 2 to 3 and itemises the reasons behind the cost changes.

Question 27

How did you present your cost reconciliation document for OMERS?

Answer 27

* I created a long list, package by package, that illustrated the change between design stages and the reason why. * I simplified this into a dashboard and presented the key reasons for change and the associated cost.

Question 28

How do you go about interrogating historical cost data?

Answer 28

* I need to understand the date it was quoted from, and uplift it to the current day. * I would use G&T’s TPI to understand the percentage differences between then and now, and apply this to the rate.

Question 29

How else can you obtain relevant cost information other than using previous contract sums?

Answer 29

* Market testing * Recent tender returns * BCIS

Question 30

Do you report anticipated change within your cost report / Final Account? Why is this important?

Answer 30

* I do report anticipated change / advanced warnings. This may be something that I have picked up from discussions with the client or on site. * Better reflects the anticipated final account, which can alert the client as to whether they have a saving or need to account for additional funding. * In turn, this influences the client’s attitude to introducing additional client led design change.

Question 31

What is the structure of your cost report?

Answer 31

* Title & Contents Page * CSA and AFA * Agreed, unagreed and advanced warnings. * Psum schedule * Cashflow forecast * Dashboard & Exec summary

Question 32

What was the £/sqft for your Mayfair project?

Answer 32

£450/sqft

Question 33

What was driving the £/sqft for your Mayfair project?

Answer 33

o Investment banking / trading firm so MEP resilience is key. o High end specification of materials o Lots of client led design change

Question 34

What index do you use to adjust for inflation?

Answer 34

TPI – Tender Price Index

Question 35

What is G&T’s current inflation rate at the moment?

Question 36

What are your thoughts on inflation at the moment? | NG TO UPDATE

Answer 36

* Expect tender prices to rise modestly in 2025. * Contractor insolvencies such as ISG in Nov 24, are likely to create a lagged ripple effect across the supply chain. Couple of RAF subbies went bust. Increases financial pressure on subbies. Further reduces market capacity. * Planning delays, regulatory capacity issues, skills shortages and constricted contractor market = significant challenges that will likely up prices.

Question 37

On OMERS, tell me about how you communicated the cost of the existing staircase to the client?

Answer 37

* Cost I had allowed for = £15,000 * Cost of the additional items were c.£40,000 to £50,000 * Upon receipt of the architect’s pack, I undertook an OCE. * In a meeting with the client, I presented the cost alongside it’s impact on the budget overall – how much would need to be taken out of contingency. At this point, there was no design risk allowance remaining so it would come out of the construction risk allowance. I advised the client that because this is BOH / not seen by many, that their money may be best used elsewhere.