Project finance/ Design Eco and Cost planning/ Quantification Flashcards
What are the typical responsibilities of the cost manager on a construction project?
Subject to the scope of service, typical responsibilities may include:
Manage risk allowance expenditure.
Initiate action to avoid overspend.
Prepare pricing documents for tendering.
Evaluate and analyse tender bids.
Prepare interim valuations.
Value variations and compensation events.
Assess the contractor’s financial claims.
Negotiate and agree final accounts.
Issue financial reports or statements.
Provide initial cost advice on capital investment costs.
Produce cost estimates and cost plans.
Provide advice on whole life costs.
Produce cost reports, estimates and forecasts.
Prepare and maintain the cash flow forecast.
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 the three documents in the NRM suite?
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.
Can you provide a brief overview of each of the NRM documents please?
NRM 1
Provides guidance on the quantification 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.
NRM 2
Is written mainly for the preparation of bills of quantities and quantified schedules of works, although the rules will be invaluable for designing and developing standard or bespoke schedules of rates.
NRM 3
Gives guidance on the quantification and description of maintenance works for the purpose of preparing initial order of cost estimates. The rules also aid the procurement and cost control of maintenance works.
What is the structure of the NRM 1 ?
1: General introduction.
2: Measurement rules for order of cost estimating.
3: Measurement rules for cost planning.
4: Tabulated rules of measurement for elemental cost planning.
Appendices.
What is the structure of the NRM 2?
1: General introduction.
2: Detailed measurement of building works.
3: Rules of measurement for building works.
Appendices.
What is the structure of the NRM 3?
1: General introduction.
2: Measurement rules for building maintenance works.
3: Measurement rules for order of cost estimating.
4: Cost planning of R and M works.
5: Calculation of annualised costs for R and M works.
6: Elemental cost planning.
Appendices.
Why is it important to measure the works according to industry standards and best practice?
To provide consistency and greater accuracy of 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 had acted with reasonable competence.
What are the key headings for contractor preliminaries identified in NRM 2?
Prelims
Employers requirements
Site accom
Site records
Completion and post completion requirements
Main contractor cost items
Management and staff
site establishment
temporary services
safety and environmental protection
control and protection
mechanical plant
temporary works
site records
completion and post completion requirements
cleaning
fees and charges
site services
insurance bonds garantees and warranties
totals
How is risk dealt with under NRM?
NRM recommends that risk allowances are not a standard percentage, but a properly considered
assessment of the risk, considering completeness of the design and other uncertainties such as the
extent of site investigation undertaken.
Can you tell me the 4 risk categories identified in NRM?
Employer Change Risk.
Employer Other Risk.
Design Development Risk.
Construction Risk.
How does NRM define the ‘cost limit’ for the project?
NRM 1 definition - 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?
NRM 1 definition - An evolving estimate of known factors without any allowances for risk and uncertainty, or 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 is an order of cost estimate?
NRM 1 definition - An estimate based on benchmark data for a similar type of project based on the client’s strategic definition or initial brief. Its purpose is to establish 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.
Which RIBA Stage is the order of cost estimate typically produced?
RIBA Stage 1 - Preparation and Briefing.
What are the RIBA Stages of Work?
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.
Stage 6 - Handover.
Stage 7 - Use.
What is the difference between an order of cost estimate and cost plan?
An estimate provides a possible cost based on the employer’s requirements and is the initial phase of the cost planning process. The estimate is usually completed using m 2 areas or functional units.
A cost plan is a more detailed elemental breakdown and 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’?
NRM 1 definition - The unit rate that, when multiplied by the number of functional units, gives the total building works estimate (i.e. works cost estimate minus main contractor’s preliminaries and main contractor’s overheads and profit). The total recommended cost limit (i.e. the cost limit, including inflation) can also be expressed as a cost per functional unit when reporting costs.
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.
A schedule of value enhancing options.
Risk register.
Cash flow information.
What is a cost plan?
NRM1 definition - In the context of Cost prediction, RICS professional statement, a cost plan is ‘an estimate based on a specific design. A statement showing an apportionment of an estimate of or an agreed budget between cost headings. This would not necessarily be in elemental form. Cost planning is a method of cost prediction.
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 decisions.
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 on site date.
Construction period.
Completion date.
How do you structure an elemental cost plan? NRM 1
Facilitating works
Substructure
Superstructure
internal finishes
fittings, furnishings and equipmrnt
services
prefab building and building units
work to existing buildings
external works
MCPs
Design 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 BCIS (Building Cost Information Service); data is available on a wide range of building types.
Published pricing books such as Spon’s and BCIS (the information may need adjusting for inflation).
Pricing documents and other information from previous projects.
Cost analysis and cost models produced in-house.
Speaking direct to contractors, subcontractors and suppliers for cost information.
Existing client information - benchmark data from previous projects.
How do you take account of the project location and why?
A location factor is usually applied to recognise differences in construction prices. For example, a project in London is typically more expensive than a similar project in Nottingham.
What is a cost plan risk allowance?
NRM 1 definition - 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:
Project and design team.
Other specialist consultants.
Survey fees.
Contractor fees:
Management and staff.
Specialist support staff.
Contractor’s design management fees.
Contractor design team fees (if applicable).
Framework fees (if applicable).
Others:
Planning permission application fees.
Statutory undertaker fees.
What benefit does the client get out of accurate cost planning?
The cost plan confirms to the client the scheme is affordable (or not).
Cost planning places the client in an informed position to make commercial decisions.
The cost plan can act as a value management tool to ensure the client gets a building which meets their needs, but also represents best value.
How would you deal with a cost plan which is over budget?
Communicate the matter to the client and project team in a clear and concise manner.
Identify areas where potential savings can be made, possibly 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 ask 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.
in your view, what are some of the key reasons we have cost overrun on a project?
Ambiguous client brief or changes in the later stages of the project.
Unrealistic cost estimates.
Project risk is realised or not properly managed.
Inadequate management control or processes.
Uncoordinated design.
Unknown external factors (for example global pandemics).
Unsuitable tendering and/or procurement strategy selection.
Statutory authority influences such as onerous planning permission conditions.
Inflation or changing market conditions.
Why is VAT usually excluded from the cost plan?
Employers may incur different levels of VAT (some might be exempt). Therefore, VAT is usually excluded to ensure the incorrect tax rate is not applied.
Can you tell me what you understand by the term benchmarking?
Benchmarking is the use of historical data from projects of a similar nature.
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.
What is BWIC?
BWIC stands for builder’s work in connection and is usually set as a percentage of the services cost.
BWIC refers to builder’s work that is necessary to allow other works to proceed (typically mechanical and electrical services but also other specialist installations).
How would you undertake a benchmarking exercise for your client?
Produce a clear document which shows the various cost plan elements side-by-side with the benchmark project(s). This process will identify items which are considered abnormal, I would then endeavour to justify cost anomalies for flagged items.
What is wall-to-floor ratio?
The wall-to-floor ratio of a building is calculated by dividing the external wall area by the gross internal floor area. This indicates the proportion of external wall required to enclose a given floor area.
This may reveal how efficient the design is and may also help inform the construction cost
How are subcontractor’s preliminaries captured in the cost plan?
Costs associated with 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) please?
Profit can be defined as the money the contractor makes after accounting for all costs and expenses. The percentage of profit a contractor might apply will vary according to risk, workload and economic climate.
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 etc.
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?
Provisional sums are 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 is entered; and/or
Work that the employer may or may not wish to be carried out.
How are provisional sums expended?
The contract administrator (JCT contracts) should issue an instruction for its expenditure.
Where a contract includes a provisional sum, the final amount payable will be adjusted (the provisional sum is omitted and replaced with the actual cost of the work).
How are provisional sums dealt with in the final account?
By the time the project has reached final account stage, the contract administrator will have issued instructions to expend all provisional sums. The instruction will show an add and omit (add actual costs and omit the provisional sum), the instructions are then accounted for in the usual way.
What types of provisional sum are there?
Defined and undefined.
Please explained the deferral between defined and undefined provisional sums?
Defined
The contractor is deemed to have allowed for programming and preliminaries within the contract.
Undefined
The contractor does not allow for planning, programming and preliminaries implications. This means the contractor may be entitled to an extension of time and/or additional preliminaries when the actual works are undertaken.
Would the contractor be entitled to claim additional preliminaries and/or an extension of time when expending a defined provisional sum?
No, since the provisional sum is defined, the contractor should have allowed for programme and preliminaries within their price.
What are prime cost sums (PC sum)?
A sum of money included in a unit rate to be expended on materials or goods from suppliers (e.g. supply-only ceramic wall tiles at £50/ m 2 .
It is a supply-only rate for materials or goods where the precise quality of those materials and goods is unknown.
PC sums exclude all costs associated with fixing, installation, fees, OH&P etc.
