Design Economics SoE Q's

Question 1

What are the 3 documents in New Rules of Measurement?

Answer 1

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 building maintenance works

Question 2

What are the key constituents of an order of cost estimate?

Answer 2

• Executive Summary
• Cost limit
• Specification notes
• Assumptions
• Exclusions
• Information which estimate is based on

Question 3

Why is accurate cost planning important?

Answer 3

Confirms if the scheme if affordable or not

Allows the client to make informed commercial decisions

Can act as a value management tool

Question 4

You reference current market volatility – what are you currently experiencing in terms of volatility in material and labour costs?

Answer 4

Market volatility due to; Ukraine / Russia conflict, new covid waves, post-brexit impact, rising cost of energy and fuel

Shortages of labour

Lead in times and availability of materials

Steel prices increasing as per British Steel announcements

Question 5

What does NRM stand for?

Answer 5

• New Rules of Measurement

Question 6

What is the structure of a cost plan as stated in NRM1?

Answer 6

• Substructure
• Frame
• Upper Floors
• Roof
• Stairs
• External Walls
• Windows and External Doors
• Internal Partitions
• Internal Doors
• Wall Finishes
• Floor Finishes
• Ceiling Finishes
• FF&E
• Services
• Prefab
• Works to Existing Buildings
• External Works

Question 7

What is included within a cost plan?

Answer 7

Front Cover
Contents
Executive Summary
Basis for Pricing
Exclusions & Assumptions
Drawing Register
Area Schedule
Measured Work

Question 8

What are the stages of the RIBA Plan of Work?

Answer 8

• 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
• Stager 6 – Handover
• Stage 7 - Use

Question 9

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

Answer 9

The difference is an order of cost estimate is produced for budgeting purposes, typically between RIBA Stages 0-2. It is based on less detailed design information and typically based on m2 rates or functional unit basis.

A cost plan is typically produced between RIBA Stages 2-4 and is based on more detailed design information. It will be shown as an elemental breakdown.

Question 10

How do cost plans aid with the financial control of a project?

Answer 10

It provides the basis for a cash flow plan, allocating expenditure and income to the client’s year.

Allows them to plan and have an understanding of money for funding purposes.

Question 11

What factors would you apply to cost data? And why?

Answer 11

Time – To account for increase in pricing throughout the years

Location – To account for varying prices in different locations around UK

Inflation – To account for variance in the price of goods and services

Question 12

Where do you get information on inflation?

Answer 12

The Office for National Statistics provides information on inflation.

They provide information on both RPI and CPI.

Question 13

Tell me how you apply inflation to a cost plan?

Answer 13

I would use the BCIS indices to calculate the projected increase in costs from present day to mid-point of construction.

The calculation is made by using the indices and subtracting mid point from present day and dividing by present day.

Question 14

What would you do when you can only find similar items in your in-house data but not the exact item, e.g., you are looking for rate for supply and installation of luxurious floor carpet, but you can only have typical office carpet in any cost data source?

Answer 14

I would go to the market for a rate and have this priced by a supplier.

For example, on Alberton House there were a series of bespoke finishes that I did not have any cost data for so I went to the market to find a price.

Question 15

What is ‘inflation’ and what causes inflation? What is your personal forecast in inflation in coming two years?

Answer 15

Inflation is the rate at which the price of good and services rises, making the purchasing power of currency decrease.

In the UK the soaring cost of food and energy has caused inflation. This has been partly due to the war in Ukraine, meaning less availability.

It is predicted that inflation will half before the end of 2023, expecting to drop to around 5%. In March inflation was at 10.1%, and has already been seen to drop to around 8.7%.

Construction inflation was at around 7.3% at the start of the year and has since dropped to around 3.45%. This is as per RLB’s Tender Price Forecast.

Question 16

Why does ‘location’ affect costs?

Answer 16

Location affects costs as some locations in the UK are more difficult to reach, causing delay. For example, transporting materials into Central London is more arduous than it would be in the NW.

Construction Labour is also more expensive in London in comparison to The NW.

Question 17

What do you only calculate inflation to the mid point of construction?

Answer 17

This is due to the fact most of the work packages will have been let by mid point of construction.

Question 18

What is contingency in a cost plan?

Answer 18

A risk allowance set aside as a precaution against risks and future requirements to account for uncertainty.

Based on risk analysis and reduced as the design is developed.

Question 19

What types of risk are included in a cost plan? (NRM 1)

Answer 19

• Design development risk
• Construction risk
• Employer change risk
• Employer other risk

Question 20

What is Value Engineering?

Answer 20

Value engineering is the process of identifying areas of the work that can be reduced whilst still achieving the client’s main drivers and objectives.

Question 21

What is Value Management?

Answer 21

Ultimately a process which defines what value means to the client.

Question 22

Can you elaborate on how your in house measurement software is used?

Answer 22

My in house measurement software has two functions. The first being ROSS 5D which allows you to produce an NRM formatted cost plan, adding the relevant descriptions to measure against.

The second function is IDX which is the measurement side of the software. You upload the drawings and the relevant scale and measure against the items that you have uploaded to the ROSS 5D section.

Question 23

What have been some of the covid/brexit impacts on design economics and cost planning?

Answer 23

Some of the covid/Brexit impacts have been increase in material prices, with particular reference to steel and MEP elements.

There have also been longer lead times associated with construction elements.

Question 24

When should SPON’s be used in cost plans?

Answer 24

SPONs should be used in cost plans when you have no market tested data, or you are unable to acquire a quotation.

It should be used as a last resort.

Question 25

What work elements did you receive market quotations for on Alberton House?

Answer 25

I received market quotations for internal finishes, these being wall, floor and ceiling finishes.

I also received quotations for FF&E elements, such as joinery items as these were bespoke.

Question 26

How did you calculate the inflation uplift for the 7th floor works at UoM?

Answer 26

I predicted when the mid point of construction would be and used the BCIS indices to calculate the inflation %.

The formula is mid point minus present day, divided by present day.

Question 27

Why does ‘scale of works’ affect costs?

Answer 27

Economies of scale refer to the cost advantage experienced when it increases its level of output.

It affects costs as the unit cost is reduced due to increased production.

It reduces per unit variable costs as the scale of production increased efficiency.

Question 28

Do you think COVID19 is still a valid reason for delay nowadays?

Answer 28

No, COVID19 is no longer classed as a global emergency, as recently informed by WHO.

There are also no requirements for self-isolation.

Question 29

What are the drawbacks of simply applying the BCIS TPI on the project at the University of Manchester? Can you suggest some improvement on this and why do you think those are improvement?

Answer 29

It may not account for those material items that saw the sharpest increases, like steel for example.

Question 30

What other pricing documents, apart from schedule of rates, are you aware of?

Answer 30

• Activity Schedule
• Schedule of Works
• Bill of Quantities
• Contract Sum Analysis

Question 31

What were the potential value engineering options you advised on at Strathclyde?

Answer 31

The value engineering options that were advised were leaving areas of raised flooring, whilst also keeping existing sanitaryware as opposed to replacing it for new.

Question 32

How did you assess the cost savings you advised on toby carvery project?

Answer 32

These were presented to the client in a report format, advising on the potential savings and where the costs would now sit in line with their budget.

Question 33

How does value engineering differ to value management?

Answer 33

Value engineering is one of the processes that sits beneath value management with the aim of reducing costs whilst delivering value for the client.

Question 34

What is the purpose of a pre tender estimate?

Answer 34

The purpose of a pre tender estimate is to give the client an understanding of pricing that may be returned during the tender period.

It is also used as a comparable in a tender report and can aid in highlighting areas of costs that are high.

Question 35

What was included in the tender report for St Wilfrid’s?

Answer 35

Included in the Tender report were the following items:
* Executive Summary
* List of tenders received
* Initial tender return totals
* Any qualifications
* Post-tender adjustments
* Revised tender sum
* Comparison of tender returns
* Comparison with pre tender estimate
* Recommendation

Question 36

What was the recommendation to the client On St Wilfrid’s?

Answer 36

The recommendation was to proceed with the lowest priced tender. All tenders that were returned were over budget, therefore the lowest priced tender was the only one feasible for the client.

Question 37

Where did you get the recently benchmarked costs from on St Wilfrid’s?

Answer 37

This was from our in house cost database called Pulse. You can refine this to show comparable developments and then apply the relevant uplifts.

Question 38

What was the uplift in % terms that you had seen through Covid-19 and Brexit?

Answer 38

The % uplift that was seen throughout Covid-19 and Brexit was at around 8%, according to RLB’s Tender Price Forecast.

Question 39

At the time of pricing the St Wilfrid’s project, what were the biggest material price increases and to what extent?

Answer 39

The largest pricing increases on St Wilfrid’s were the steel costs (40%), as well as the MEP elements (20%).

Question 40

How did you assess the latest market trends which may impact on construction prices?

Answer 40

I kept up to date with recent media publications, as well as internal updates from senior members of staff.

We receive updates through insight articles which keep us up to date with recent developments.

Question 41

You said you gave advice to the client on current market conditions, can you tell me what this advice consisted of?

Answer 41

I advised that at the time of pricing the market was very volatile and that we were seeing inflated pricing of all construction projects.

I provided an insight into the market changes by presenting a report which highlighted the change in price of some key construction materials.

Question 42

What changed during your stage 2/3/4 cost plans on Alberton House?

Answer 42

As the design developed and I had a greater level of detail, the risk allowance was reduced.

The level of detail also increased, with more elements under an elemental breakdown.

Question 43

For Toby Carvery and Inn Keepers Collection, assume the ‘budget’ is based on your cost plan which are priced based on the agreed schedule of rates. Why was the project still over-budget?

Answer 43

The project was still over budget as the client instructed changes which were implemented by the contractor.

There was also a series of unforeseen works that were required in relation to making good of the bathrooms at the IKC.

Question 44

Why is there an ‘agreed’ schedule of rates before tendering? Who were the parties in the agreement?

Answer 44

An agreed schedule of rates is used as part of a serial tendering process.

It is an agreement between a contractor and client for them to procure works moving forward at a quicker rate.

Question 45

What would you consider when suggesting value engineering works?

Answer 45

The value engineering options that were presented on Strathclyde were in relation to leaving areas of raised flooring, as well as keeping existing sanitaryware instead of replacing.

Question 46

Why did COVID19 and Brexit have impact on construction costs?

Answer 46

It was more difficult to obtain certain materials and as such the costs increased.

It was a simple case of supply and demand.

Question 47

What key challenges does the global recession present to surveying?

Answer 47

Rising inflation has caused the Bank of England to raise interest rates and as such, borrowing has increased.

Greater pressures on builders and developers due to the increase in costs associated with borrowing.

Demand for logistics space and data centres has remained strong which is closely linked to the growth of online retail and big tech companies.

Rising inflation has resulted in a net reduction in fees.