Quantification and Costing Flashcards
If you are producing estimates and cost plans, which measurement rules represent industry best practice?
New Rules of Measurment (NRM)
Can you name the 3 documents in the NRM suite?
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
Provide a brief overview of NRM1
Provides guidance on 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
Provide a brief overview of NRM2
Written mainly for preparing BoQ and quantified schedule of works
Provide a brief overview of NRM3
Guidance on quantification and description of maintenance works for the purpose of preparing initial order of cost estimates.
Rules also aid procurement and cost control of maintenance works
What is the structure of NRM 1
Part 1 - General introduction
Part 2 - Measurement rules for order of cost estimate
Part 3 - Measurement rules for cost planning
Part 4 - Tabulated rules of measurement for elemental cost planning
Appendices
What is the structure of NRM 2
Part 1 - General introduction
Part 2 - Rules for detailed measurement of building works
Part 3 - Tabulated rules of measurement for building works
Appendices
What is the structure of NRM 3
Part 1 - General Introduction
Part 2 - New rules of measurement for building maintenance works
Part 3 - Measurement rules for order of cost estimating (Renewal and maintain)
Part 4 - Measurement rules for cost planning of renewal and maintain works
Part 5 - Calculation of annualised costs for renewal and maintain works
Part 6 - Tabulated rules of measurement for 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?
Not mandatory
However in case of allegation of professional negligence court likely to take account of contents of any relevant guidance notes published by RICS in deciding whether surveyor acted with reasonable competence
What are the key headings for contractors prelims identified in NRM2?
Employers Requirements
- Site accommodation
- Site records
- Completion and post completion requirements
Contractor cost items
- Management and staff
- Site establishment
- Temp services
- Safety and enviro protection
- Control and protection
- Mechanical plant
- Temp works
- Site records
- Cleaning
- Fees and charges
- Site services
- Insurances / bonds/ guarantees/ warranties
How is risk dealt with under NRM?
Recommends that risk allowances are not a standard % but properly considered assessment of risk
- Considering completeness of design and uncertainties such as extent of site investigations
How does NRM define the ‘cost limit’ of the project?
Cost Limit - maximum expenditure that the employer is prepared to make in relation to the completed building
Can you tell me what you understand by the term benchmarking?
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 price offered by contractor is in line with market conditions
How would you undertake a benchmarking exercise for your client?
Produce 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
Endeavour to justify cost anomalies for flagged items
What is a provisional sum?
Provisional sums generally allowance or estimate included within contract price that are;
1) Not sufficiently defined, detailed to allow accurate determination of its cost at the time contract is entered into.
2) Work employer may or may not wish to carry out
How are PS expended?
CA (JCT Contracts) should issue an instruction for its expenditure
Where contract includes a PS, the final amount payable will be adjusted (the PS is omitted and replaced with actual cost of the work)
How are PS dealt with in the final account?
By the time the project has reached its final account stage, the CA will issue instructions to expend all PS.
The instruction will show an add / omit, the instructions are then accounted for in the usual way.
How does NEC contract incorporate PS?
- Unamended NEC contract do not provide for use of PS
- NEC Approach - if scope of works is unclear and not able to provide price with level of certainty, item should be excluded until it can be properly defined.
What type of provisional sums are there?
Defined and Undefined
Whats a defined PS?
Contractor is deemed to have allowed for programme and prelims within the contract
What is an undefined PS?
The contractor does not allow for planning, programming and prelims implications. This means contractor may be entitled to an EoT and or additional prelims when the actual works are undertaken
Would the contractor be entitled to claim additional prelims and or EoT when expending a defined PS?
No, PS is defined, contractor should have allowed for programme and prelims within their price
What are Prime Cost Sums?
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 £36/m2
It is a supply only rate for materials or goods where the precise quantity is unknown.
PC sums exclude all costs associated with fixing or installation, all ancillary and sundry materials and goods required for the fixing or installation of the materials or goods
What is the difference between PC sums and Defined PS?
Prime cost is limited to cost of supplying item and does not include cost of any work that relates to it
Defined PS includes allowances for supplying item and related work to be performed by contractor
Can you name some of the pricing documents we might use a tender stage?
BoQ Schedule of rates CSA Schedule of work Priced activity
Can you name some of the pricing options for construction contracts?
- Lump Sum
- Cost Reimbursable
- Remeasurement
- Target cost
- Guaranteed Maximum Price (GMP)
What is a lump sum contract?
Fixed price or lump sum provides for payment of a set amount.
The amount of the fixed price is determined by a contractor by estimating their cost to provide the work and then adding OH&P
Advantages of lump sum contracts?
Contractor takes on the pricing risk but stands to benefit from increased profit if actual costs turn out to be below estimated costs
Cost certainty for employer
disadvantages of lump sum contracts?
presents higher risk to contractor. If contractor underestimates their cost, the profit margin decreases and may disappear altogether
Additional risks faced by the contractor - will increase their tender price
What is a cost plus (reimbursable) contract?
Involves the employer paying the contractor for the costs incurred during the project, plus a pre agreed percentage of profit.
What are the key advantages of cost plus contracts?
Cost plus (Reimbursable) contracts are flexible in nature, inaccuracies in the initial bid aren’t as detrimental as they are with lump sum contracts
Allows employers to make design changes along the way, contractors know they’ll be paid for the extra time or materials which those changes incur.
what are the disadvantages of cost plus (reimbursable) contracts?
Final price is uncertain until the end of the project
Contractor may deliberately incur higher costs to increase profit (no incentive for efficiency)
When might a cost plus (reimbursable) contract be appropriate to use?
Where the nature or scope of work cannot be properly defined at outset
pricing strategy would suit emergency work such as infrastructure repairs or immediate reconstruction following a fire
What is a remeasurement contract?
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Advantages of remeasurement contract?
Work is tendered on approx quants, the contractor will submit competitive prices in their tender
contractors risk is low compared to a lump sum
What is a target price contract?
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Advantages of target price contract?
Contractor and employer are incentivised to reduce costs
encourages active and equitable risk sharing, based on clearly defined allocation of risk agreed at the outset of the project
what are the disadvantages of target price contract?
Employer and contractor must share pain and gain, this exposes the employer to greater risk
Complex target price, pain/gain share may not easily be understood by all parties
If the employer wanted a target price contract using NEC form, which main option(s) would you use?
Option C - Target contract with activity schedule
Option D - Target contract with Bill of Quantities
What is guaranteed maximum price contract?
sets a limit that the employer will pay their contractor regardless of the actual costs incurred (i.e the contract sum will not exceed a specified max)
What happens if the actual cost is higher than that agreed in a Guaranteed maximum price contract?
The contractor must bear the additional cost
What happens if the actual cost is lower than that agreed in a Guaranteed maximum price contract?
The contract should set out which party will benefit from the savings. Usually, the savings will be split between the employer and contractor using a pre-agreed agreed formula or percentage
What are the advantages of GMP?
Establishes employers maximum financial commitment (subject to employer variations) - If costs exceed target cost only the target cost is paid to contractor
Both the contractor and employer have potential to benefit from savings
What are the disadvantages of GMP?
Contractor will have to share any savings made while taking on the risk of cost overrun.
What are contractor preliminaries?
Items which cannot be allocated to a specific element
Prelims are typically items which are necessary for the contractor to complete the works but will not actually become part of the works once project is complete
What is included within contractor prelims?
Management of staff site establishment temp services security safety and environmental protection insurances
When assessing the costs for the contractor prelims (at tender stage) what are the key considerations to determine if they are fair and reasonable?
length of contract type of project size of project and overall build cost need for temp works security requirements method and sequencing extent of contractor design responsibility
Can you give me examples of contractor prelims which might be considered abnormal (over and above a standard project)
Tower cranes
evening and weekend working
road closures / traffic management
Closing train lines
What is the difference between fixed and time related prelims?
Fixed prelims are one-off costs whereas time related prelims are dependent on duration
Time related - staff costs / plant hire
Fixed - purchasing site security equipment
What is meant by the term ‘functional unit’
NRM 1 - means a unit measurement used to represent the prime use of a building. e.g. per bed space, per m2 of retail area, per house.
It includes all associated circulation space
Can you explain what GIFA is?
NRM 1 - Gross Internal Floor Area
Area of a building measured to the internal face of the perimeter walls at each floor level
Can you explain what GEA is?
NRM 1 - Gross External Area
Area of a building measured to the face of the external perimeter walls at each floor level
What is wall to floor ratio?
Calculated by dividing the external wall area by the GIFA.
Indicates the proportion of external wall required to enclose a given floor area
May reveal how efficient a design is and may also help inform the construction cost
What is a good wall to floor ratio?
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Can you explain what NIA is?
NRM 1 - Net Internal Area
The usable area within a building measured to the internal face of the perimeter walls at each floor level
What does IMPS stand for?
International Property Measurement Standards
IPMS for industrial, office, residential and retail buildings have been drafted by the independent Standards Settings Committee and establishes a consistent methodology for measuring buildings around the world
What is a Bill of Quantities?
A means of breaking a project down into exact quantities which are measured in an industry wide recognised format
includes all components of a building as well as prelims
Usually based on mature drawings and spec, at tender stage, the contractor inserts their cost or rate against each item
The document then forms a precise tool for pre and post contract cost control (such as managing variations)
why would you use a bill of quants instead of a schedule of work?
Schedule of work break out the works sections down in less detail than a BoQ and do not contain any quantities for specific work items
BoQ simplifies the tender process because tendering contractors will be pricing the same quantities (rather than taking off quantities from drawings and spec themselves)
— Simplifies the tender analysis
What is a schedule of work?
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What are the key advantages of using BoQ?
Ideal for post contract cost control
Simplified tender analysis
Very detailed and comprehensive
All the tenderers are pricing the same items and quants
Effective document for interim payments and preparing final account
What are the key disadvantages of using BoQ?
Expensive and time consuming to produce
Potential for errors when measuring the project
What are the two key types of BoQ?
Firm BoQ
NRM 2 - Reliability of the tender price will increase in relation to the accuracy of the quantities provided
Where there is no design changes, then a firm BoQ would provide a price at tender stage, which would equal the final cost.
Approx BoQ
NRM 2 - Used when there is insufficient detail to prepare firm BoQ or where it is decided by the employer that the time or cost of a firm BoQ is not warranted
When would a BoQ with approx quants be used?
Since the quants are approx, this type of BoQ is suitable for a remeasurement form of contract
