Order of cost estimate & Cost Planning

Question 1

801 What is an order of cost estimate?

Answer 1

NRM1 defines it as an estimate based on benchmark date for a similar type of project based on a Clients strategic definition or initial brief. The purpose is to establish affordability of a proposed development. It takes place prior to a full set of working drawings being produced. It forms the initial build up to the cost planning process. Order of cost estimates are a method of cost prediction.

Question 2

802 Which RIBA stage is the order of cost estimate produced?

Answer 2

Stage 1 preparation and briefing

Question 3

803 What are the RIBA stages of work?

Answer 3

0. Strategic definition
1. Preparation and brief (CE)
2. Concept design (CP)
3. Spatial coordination (CP)
4. Technical design (CP)
5. Manufacturing and Construction
6. Handover
7. In use

Question 4

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

Answer 4

An order of cost estimate is prepared using the Clients strategic definition or initial brief usually without a full set of working drawings. Usually based on m2 rates or other functional units. A cost plan will be based on a set of working drawings. A cost plan is an estimate based on a specific design.

Question 5

805 What is a cost per functional unit?

Answer 5

This takes the total cost of a building and spreads it across a number of functional units to give an indication of price per…. These costs usually are given in ranges to allow for a number of factors. One example would be if a hotel cost £1 million to build 100 bedrooms, then the cost per room would be £10,000.

Question 6

806 What information should be included with an order of cost estimate?

Answer 6

• Covering letter
• Executive summary
• Cost limit
• Specification notes
• Assumptions
• Exclusions
• Drawings and other information used
• Schedule of value enhancing options
• Risk register
• Cash flow information

Question 7

807 What is a cost plan?

Answer 7

An estimate based on a specific design. A statement showing an apportionment of an estimate between cost headings. This will not necessarily be in elemental form. Cost planning is a method of cost prediction.

Question 8

808 Other than predicting the final project cost, what other benefits does a cost plan provide the project team?

Answer 8

Confirms if the design still meets the budget. Allows options for VM or VE. Provides the employer information upon which they can make commercial decisions.

Question 9

809 Do you need a programme to complete a cost plan?

Answer 9

An outline programme would be beneficial as the prelims are priced on a weekly/monthly basis so something high level would be required. Key information required:
* Design and tendering periods
* Start on site date
* Construction period
* Completion date

Question 10

810 Structure of an elemental cost plan?
Fill in

Question 11

811 What sources of cost information and data are available when preparing a new estimate or cost plan?

Answer 11

• BICS
• Historic market data
• Current market data (speaking with contractors/subcontractors
• Pricing books such as SPONS
• Cost analysis and cost models
• Existing Client information – Benchmarking

Question 12

812 How do you take into account the project location and why?

Answer 12

The BCIS provides location based indices. Construction projects in different areas of the county may have a different cost due to factors like:
* Cost and availability of labour
* Access to resources (plant and materials)
* Access to infrastructure (roads, rail and runways)

Question 13

813 What is a cost plan risk allowance?

Answer 13

A pot of money set aside to deal with a known risk. For example contaminated ground

Question 14

814 What might be included in the fee estimate?

Answer 14

• Consultant fees:
• Design team fees
• Other specialist consultants
• Surveys
• Contractor fees:
• Management and staff
• Specialist support staff
• Contractor/subcontractor design fees
• Framework fees

Question 15

815 What benefit does the Client get out of accurate cost planning?

Answer 15

• Confirms of the scheme is affordable.
• Ensures the Client is in an informed position to make informed decisions.
• Can help with VM or VE decisions

Question 16

816 How would you deal with a cost plan that is over budget?

Answer 16

• Discuss with the Client
• Identify areas where potential savings could be made (material specification)

Question 17

817 How can the cost manager help control the design to keep the project within budget?

Answer 17

• Explain to the design team where the project sits in relation to the budget
• Identify areas of the scheme that may not be economical
• Hold regular project risk reviews and focus on mitigating key risks
• Explain how changes in the design will impact the cost plan
• Contribute to VE or cost saving sessions

Question 18

818 What are some reasons we have cost overruns in projects?

Answer 18

• Not fully understanding the scope
• Unrealistic cost estimates
• Changing market conditions/ inflation
• Not adequately managing risk
• Not making decisions early enough
• Not controlling Client change
• Unsuitable tendering or procurement decisions

Question 19

819 What is BWIC?

Answer 19

Building Work In Connection. These are works that are associated with work packages that tend to get misses out in the pricing of the packages. One example is penetrations in walls for services. The masonry contractor doesn’t price for forming the hole. The M & E contractor doesn’t price for making the hole his service goes through. So You end up costing these works separately. Usually allowed for as a percentage of the service packages.

Question 20

820 Why is VAT usually excluded from the cost plan?

Answer 20

Because VAT is usually calculated by specialists. This is because Clients individual tax situation needs to be taken into consideration. Some Clients pay reduced or zero tax. So it is usually excluded to ensure the incorrect rate is not applied.

Question 21

821 What is benchmarking?

Answer 21

• Is the use of historical cost data from similar projects
• Can be used as a comparison or check for cost planning
• Can highlight areas of the design that are not value for money
• Can confirm if a contractors price is in line with market conditions

Question 22

822 How would you undertake a benchmarking exercise for your Client?

Answer 22

Produce a clear document which shows side by side various cost plan elements with the benchmarking information. This process will identify which projects are considered abnormal. Then attempt to justify cost anomalies for flagged items.

Question 23

823 What is wall to floor ratio

Answer 23

This is an expression of how much floor area a building has in comparison to how much wall area it has. A high wall to floor ratio indicates that the building may be inefficient It is calculated by dividing the external wall area by the GIFA.

Question 24

824 How are subcontractors prelims captured in the cost plan?

Answer 24

These should be captured in the unit rates applied to subcontract elements.

Question 25

825 Define contractor OH & P?

Answer 25

Profit is the money the contractor makes after accounting for all costs and expenses. The percentage of profit the contractor makes may vary according to risk, workload and economic climate.
Overhead is the cost of running the business that is not directly involved with delivering the works. Seen as the cost of doing business. These costs are not readily chargeable to one particular project and are therefore spread out across all projects. These account for marketing, admin, HR, ICT etc.