Project Finance Control & Cost Reporting, Design Economics and Cost Planning, & Quantification and Costing Flashcards
What are the typical responsibilities of the cost manager on a construction project?
Subject to the scope of service, typical responsibilities include. Managing risk allowance expenditure, initiate action to avoid overspending, prepare pricing documents for tendering, evaluating, and analysing tender bids, preparing interim valuations, value CE’s, negotiate and agree final accounts, issues financial reports, provide initial cost advice on whole life costs, produce cost estimates and cost plans, produce cost reports, estimates, and forecasts, prepare, and maintain cash-flow forecasts.
If you are producing estimates and cost plans, which measurement rules represent industry best practice for capital building and building maintenance works in the UK?
New Rules of Measurement (NRM)
Can you name three NRM documents?
NRM1 – Order of Cost Estimating and Cost Planning for Capital Building Works
NRM2 – Detailed measurement for building works
NRM3 – Order of Cost Estimating and Cost Planning for Building Maintenance Works
Can you provide a brief overview of each of the NRM documents please?
NRM1 – Provides guidance on the quantification and costing of building works for the purpose of preparing cost estimates and cost plans. It is the ‘cornerstone’ of good cost management of construction projects, enabling more effective and accurate cost advice to be given to clients and other project team members, as well as facilitating better cost control.
NRM2 – Is written mainly for the preparation of bill of quantities and quantified schedule of works.
NRM3 – Gives guidance on the quantification and description of maintenance works for the purpose of preparing initial order of cost estimates. The rules also aid procurement and cost control of maintenance works.
What is the structure of NRM1?
General Introduction, Measurement rules for order of cost estimating, Measurement rules for cost planning, Tabulated rules of measurement for elemental cost planning, Appendices.
What is an example of a measurement rule in NRM1?
Soil Stabilisation is to be measured in M2 and the area measured is the area affected by the soil stabilisation.
Where you could find guidance on what is included and excluded in the GIFA?
The Code of Measuring Practice guidance by RICS
What is the structure of NRM2?
General introduction, Detailed measurement of building works, Rules of measurement for building works, Appendices.
What is CROME references in NRM3?
Construction, renewal, operation, maintenance, end of lift costs.
Why is it important to measure the works according to industry standards and best practice?
To provide consistency and greater accuracy in pricing. To ensure that all parties price on the same basis and therefore reduce the risk of dispute.
Is it mandatory for Chartered Surveyors to follow the procedures set out in NRM?
Following NRM is not a mandatory requirement. However, when an allegation of professional negligence is made against a surveyor, the adjudicator or court is likely to take account of the contents of any relevant guidance notes published by RICS in deciding whether the surveyor acted with reasonable competence.
What are preliminary costs?
Necessary costs which are not usually tangibly reflected in the finished works.
What are the key headings for contractor preliminaries identified in NRM2?
Employer’s requirements, Site accommodation, Site records, Site establishment, Temporary Services, Mechanical Plant, Temporary Works, Cleaning, Fees and Charges, Insurance, Bonds, guarantees, warranties.
How is risk dealt with under NRM?
NRM recommends that risk allowances are not standard percentages, but a properly considered assessment of the risk, considering the completeness of the design and other uncertainties such as the extent of site investigation undertaken.
Can you tell me the 4 risk categories identified under NRM?
Employer Change Risk, Employer Other Risk, Design Development Risk, Construction Risk.
Name some examples of Employer Change Risk?
Changes in scope of works or project brief, changes in quality, changes in time.
Name some examples of Employer Other Risk?
Inadequate or unclear project brief, unrealistic design and construction programmes, contractual claims, acceleration of construction works, delay in payment.
Name some examples of Design Development Risk?
Inadequate or unclear project brief, inadequate site investigation, use of provisional sums.
Name some examples of Construction Risk?
Inadequate site investigation, ground water, tree preservation orders, contaminated ground.
How does NRM defined the ‘cost limit’ for the project?
NRM1 – The maximum expenditure the client is prepared to make in relation to the completed building. Includes construction costs, the cost of professional services, certain other project costs, items required post completion and during its operation, and risk allowances.
How does NRM define the ‘base cost estimate’ for the project?
NRM1 – An evolving estimate of known factors without any allowances for risk and uncertainty, or an element of inflation. The base cost estimate is the sum of the works cost estimate, the project and design team fees estimate, and the other development and project costs estimate.
What are ‘other development and project costs’?
Costs not necessarily directly associated with the cost of constructing the building. Lands acquisition is an example.
What is an ‘order of cost estimate’?
NRM1 – An estimate based on benchmarked data for a similar type of project based on the client’s strategic definition or initial brief. Its purpose is to establish the affordability of a proposed development for a client. It takes place prior to the preparation of a full set of working drawings or bills of quantities and forms the initial build-up to the cost planning process. Order of cost estimates are a method of cost prediction.
What RIBA stage is the order of cost estimate typically produced?
RIBA Stage 1 – Preparation and Briefing
What are the RIBA stages of work?
RIBA Stage 0 – Strategic Definition
RIBA Stage 1 – Preparation and Briefing
RIBA Stage 2 – Concept Design
RIBA Stage 3 – Spatial Coordination
RIBA Stage 4 – Technical Design
RIBA Stage 5 – Manufacturing and Construction
RIBA Stage 6 – Handover
RIBA Stage 7 – Use
What is the difference between an order of cost estimate and a cost plan?
An Order of Cost Estimate provides a possible cost based on the employer’s requirements and it is the initial phase of the cost planning process. The estimate is usually completed using m2 areas or functional units.
A cost plan is a more detailed elemental breakdown that shows how the costs are distributed across the project. A cost plan is an estimate based on a specific design.
Can you explain the term ‘cost per functional unit’?
NRM1 – The unit rate that, when multiplied by the number of functional units, gives the total building works estimate. I.e. works cost estimate less main contractor’s preliminaries and main contractor’s overhead and profit. The total recommended cost limit can also be expressed as a cost per functional unit.
What is a ‘functional unit’?
A unit of measurement used to present the prime use of a building or part of a building (I.e. per bed space, per house, per m2 of retail area, per m2 of a library).
What typical information should accompany an order of cost estimate?
Covering letter, executive summary, cost limit, specification notes, assumptions, exclusions, drawings and other information upon which the estimate is based on, risk register, cash flow information.
What is a cost plan?
NRM1 – In the context of cost prediction, a cost plan is ‘an estimate based on a specific design’.
Other than predicting the final project cost, what other benefits does the cost plan provide to the project and project team?
Designers are aware of the cost implications of their proposals, which enables them to arrive at practical and balanced designs. Provides information upon which the employer can make informed commercial designers.
Do you need a programme to complete the cost plan?
Preliminaries are typically presented as a weekly rate in developed cost plans; therefore, a programme or at least some high-level dates will be required. The key information usually required is: Design and tendering periods, start date on site, construction period, completion date.
How do you structure an elemental cost plan?
I would structure it in-line with NRM1. Facilitating works, Substructure, Superstructure, Internal finishes, Fittings, Furnishings, and Equipment, Services, Prefabricated buildings and building units, Work to existing buildings, external works, Main contractor’s preliminaries, Main contractor’s overheads and profit, Project and design team fees, Other project costs.
What sources of cost information and data are available when preparing a new estimate or cost plan?
Information produced by the Building Cost Information Service (BCIS), Published price books such as SPONS, Benchmarked data from previous projects, Speaking directly with Contractors, Subcontractors, and Suppliers for cost information.
How do you take account of the project location, and why?
SPONS has its own location factor near the front of the book. BCIS allows you to re-base cost data based on location. It is important to do so as London’s prices are typically more expensive than a similar project in Salford.
What is a cost plan risk allowance?
NRM1 – A quantitative allowance set aside as a precaution against risks and future requirements to allow for uncertainty of outcome.
When calculating the total fee estimate for a project, what component fees might be included?
Consultant fees, Contractor fees, other fees such as planning permission application and statutory undertaker fees.
How would you deal with a cost plan that is over budget?
Communicate the matter with the client and project team in a clear and concise manner. Identify areas where potential savings can be made, possible in terms of material specification or re-design.
How can the cost manager help control the design to keep the project within budget?
Explain to the design team where the cost plan sits against the budget and discuss the limitations, identify, and communicate areas of design which may not be economical, regular project risk reviews and asking the design team to focus on mitigating key design risks, explain how changes in the design will impact the cost plan, contribute to value engineering and/or cost saving sessions.
You mention a BoQ preparation for skirting and architraves? How did you go about doing this?
I first went to site and carried out my own linear measurements of the skirting and architraves using a measuring tape and laser measure. I knew this was to be measured in linear meter after checking NRM2 Work section 22: General Joinery. I then used the tendered rate for the same specification and re-based the rates since they were 3 years ago. To do this I do the BCIS TPI from the date of tender to the current quarter.
In your view, what are some of the key reasons cost overrun on a project?
Ambiguous client briefs or changes in the later stages of a project, unrealistic cost estimates, project risk is realised or not properly managed, inadequate management control or processes, uncoordinated design, unknown external factors (COVID), unsuitable procurement strategy, Statutory authority influences such as planning permission, inflation or changing market conditions.
What is BWIC?
Builders work in connection refers to the builder’s work that is necessary to allow other works to proceed (typically mechanical and electrical services).
Why is VAT usually excluded from the cost plan?
Employers may incur different levels of VAT. We are not VAT experts.
Can you tell me what you understand by the term benchmarking?
Benchmarking is the use of historical data from projects of a similar nature. It can be used as a comparison or check for cost planning purposes. Benchmarking can highlight areas of design that are not value for money, or if the price offered by the contractor is in line with market conditions.
How would you undertake a benchmarking exercise for your client?
Produce a clear document that shows the various cost plan elements side-by-side with the benchmark projects. This process will identify the items which are abnormal, I would then endeavour to justify cost anomalies for flagged items.
What is wall-to-floor ratio?
The wall-to-floor ratio is calculated by dividing the external wall area by the gross internal floor area. This may reveal how efficient the design is and may help inform the construction cost.
How are subcontractor preliminary costs captured in the cost plan?
Costs associated with the subcontractor’s preliminaries should be included in the unit rates applied to sub-elements and individual components.
Can you define contractor overhead and profit (OH&P)?
Profit can be defined as the money the contractor makes after accounting for all costs and expenses. General overheads are those not readily chargeable to one particular project, they constitute the contractor’s cost of doing business. These costs may include head office expenses, marketing, administration, IT equipment.
What allowance would you make for contractor OH&P in the cost plan?
The percentage will vary due to various factors such as: Project location, level of perceived risk, project type and value, market conditions.
What is a provisional sum?
Generally, an allowance or estimate included within the contract price that are: not sufficiently defined, designed, or detailed to allow an accurate determination of its cost at the time the contract.
How are provisional sums expended?
The contract administrator (JCT) should issue an instruction for its expenditure. Where a contract includes a provisional sum, the final amount payable will be adjusted.
How does the NEC contract incorporate provisional sums?
Unamended NEC contracts do not provide for the use of provisional sums. NEC approach – if the scope of works is so unclear that a price cannot be provided with a level of certainty, the item should be excluded until it can be properly defined.
What types of provisional sums are there?
Defined and Undefined.
