Quantification and Costing of Construction Works Flashcards
Why were the New Rules of Measurement introduced?
- Prev Standard Method of Measurement (SMM7) purely designed for BoQ production for tender purposes
- Therefore lack of guidance and uniformity when preparing cost estimates and cost plans
- NRM introduced to provide common and consistent basis, to give employers more confidence around what’s been included
If producing estimates and cost plans, which measurement rules represent industry best practice for capital building and building maintenance works in the UK?
NRM (new rules of measurement)
Why should you use the NRM?
- Common and consistent basis for production of cost documents
- Adds confidence to clients
- If QS / firm pursued for negligence, NRM (if followed)would provide means of defence - represents best practice
- If not following NRM, would need good defence why this approach taken
Can you name the 3 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?
NRM 1
- Guidance for quantification of building works for purpose of preparing cost estimates and cost plans
- ‘Cornerstone’ of good cost management of construction projects, enables effective and accurate cost advice to be given to clients and other project team members
- Facilitates better cost control
NRM 2
- Prep BoQ and quantified schedules of works
- Rules invaluable for designing and developing standard / bespoke schedules of rates
NRM 3
- Guidance for quantification and description of maintenance works for purpose of preparing initial order of cost estimates
- Rules aid procurement and cost control of maintenance works
How is risk dealt with under NRM?
- Risk allowances not a standard percentage
- Should be properly considered assessment of risk, considering completeness of design and other uncertainties such as extent of site investigation undertaken
What are the 4 categories of risk identified in NRM?
- Employer change
- Employer other (funding risks, policy / spending practices)
- Design development (items of work missed as design developed)
- Construction (site risk, contamination, obstruction)
Why is it important to measure the works according to industry standards and best practice?
- Greater consistency and accuracy of pricing
- Ensure all parties price on same basis, reduce risk of dispute
Is it mandatory for Chartered Surveyors to follow procedures set out in NRM?
No, however when allegation of professional negligence made against a surveyor, the adjudicator / court likely to take account contents of any relevant guidance notes published by RICS in deciding whether surveyor acted with reasonable competence
Structure of NRM 1?
- Intro
- Measurement rules for order of cost estimating
- Measurement rules for cost planning
- Tabulated rules of measurement for elemental cost planning
- Appendices (definitions for GIA, NIA, functional units, elemental breakdowns, templates, general info for cost plan productions)
How does NRM define the ‘cost limit’ for the project?
NRM 1
Max expenditure the client is prepared to make related to completed building (inc construction, professional services, other project costs, items required post completion, during operation and risk allowances
How does NRM define the ‘base cost estimate’ for the project?
NRM 1
Evolving estimate of known factors without allowances for risk / uncertainty / inflation. Sum of works cost estimate, project and design team fees estimate, other development and project costs
Structure of NRM 2?
- General Introduction
- Detailed measurement of building works
- Rules of measurement for building works
- Appendices
Key headings for contractor preliminaries identified in NRM 2?
- Employer’s requirements
- Site accommodation
- Site records
- Completion and post-completion requirements
- Main contractor’s 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, guarantees, warranties
Types of BoQ under NRM2?
Firm
- Reliability of tender price increases in relation of accuracy of quants provided. If no design changes, firm BoQ at tender stage = final cost
Approximate
- Not enough detail to prepare firm, decided by client that time/cost to produce firm one not warranted
- No lump sum price provided, but tender price totals
- Qty’s subject to remeasurement on completion by QS / cost manager
How do you measure structural steelwork under NRM 2?
Section 15 - measured in tonnes, itemised according to lengths (n.e. 1m / 1-9m / >9m), weight (n.e. 25kg/m / 25-50kg/m / 50-100kg/m) and type (columns, beams, rafters, bracing, purlins, cladding rails)
What items would you measure in association with structural steelwork under NRM 2?
- Framing erection
- Permanent formwork
- Cold rolled purlins and cladding rails
- Isolated structural member
- Filling hollow sections
- Surface preparation and treatment
- Localised protective coatings
How do you measure brickwork walls under NRM?
Masonry- section 14
- Measured in sqm, itemised according to wall thickness, type of construction and method of formation
Other items to measure in association with brickwork / masonry?
- Chimney stacks
- Arches
- Brick reinforcement
- Forming and closing cavities
How do you deal with ground water under NRM 2?
Section 5 - Excavating and Filling
- Measured on itemised basis, original below ground level stated and reference to whether water is polluted
- If post contract water level differs from pre-contract level, measurements must be taken and revised accordingly
- Method and place of discharge left to discretion of contractor unless stated otherwise
What are levels 1, 2, 3 [and 4] mentioned in NRM?
- [Section 4 and] Appendix B of NRM2, describes the logic and arrangement of the levels for elemental cost planning, in increasing amounts of detail
L1 - group element (i.e. facitating works)
L2 - element - key part of group element (i.e. major demolition works)
L3 - sub-element (i.e. soft strip works)
[L4 in Section 4 - component- building work forming sub-element)]
Structure of NRM 3?
- General introduction
- Measurement rules for building maintenance works
- Measurement rules for order of cost estimating
- Cost planning of repair and maintenance works
- Calculation of annualised costs for repair and maintenance works
- Elemental cost planning
- Appendices
Can you name some of the pricing documents we might use at tender stage?
- Bill of quantities (BoQ)
- Schedule of rates (SoR)
- Contract sum analysis (CSA)
- Schedule of work (SoW)
- Priced activity schedule
Why might a CSA make it difficult to agree post contract cost changes?
- Higher level breakdowns (usually elementally) so contractor substantiation is required to agree costs post contract
- More difficult to determine if an item has been costed for and how priced
Name some of the pricing options for construction contracts?
- Lump sum
- Cost plus / cost reimbursable
- Remeasurement
- Target cost
- Guaranteed maximum price (GMP)
How are obstructions dealt with on site? What package do you see them included?
- Usually as a prov sum
- Included in groundwork / earthwork contractor’s package (responsible for excavating foundations)
What is a preamble?
- Explanation of a document, commonly found in contracts, specs and BoQ
- Can help with document interpretation
- Includes description of parties to the contract
- Measurement procedures adopted
The client has requested to use a Standard form of building contract. Explain the different types of SBC available and what level of pricing document you would expect to use for each.
- SBC with quantities, with approximate quantities, without quantities
- Pricing document depends on size and complexities of the project, typically you would expect:
- With quants -> full BoQ prepared by PQS
- With approx -> BoQ used on re-measurable basis
- Without quants -> pricing schedule / BoQ may or may not have qty’s to be verified by tendering contractor
What is a lump sum contract?
- Provides payment of set amount
- Amount determined by contractor estimating their cost to provide the work and add OH&P margin
Key advantages to lump sum contracts?
- Contractor takes on pricing risk, benefits from increased profit if actual costs turn out to be below estimated costs
- Cost certainty for the employer
Disadvantages of lump sum contracts?
- Higher risk to a contractor if they underestimate costs- decreased profit margins
- This can result in higher claims for variations
- May increase tender price as a result of additional risks faced
What is a cost-plus contract?
Cost reimbursable contracts - involves employer paying contractor for costs incurred during project + pre-agreed profit percentage
What are the key advantages of cost-plus contracts?
- Flexible, so inaccuracies in initial bid aren’t as detrimental as lump sum contracts
- Allow employers to make design changes along the way and contractors know they’ll be paid for extra time / materials for changes
Key disadvantages of cost-plus contracts?
- Final contract sum uncertain until the end
- No incentive for efficiency- contractor may deliberately incur higher costs to increase profit
When might a cost-plus strategy be appropriate to use?
- Where nature / scope of work can’t be properly defined at outset
- Pricing strategy would suit emergency work (i.e. infrastructure repairs / immediate reconstruction following a fire)
How would you undertake an audit on a cost reimbursable contract?
- Upon submission of application, ensure provided in agreed format and detail
- Review costs incurred for labour, plant, materials, staff, OH&P
- Reconcile info against fee schedules and rates
- Check timesheets, staff grades and rates, project codes, invoices, etc.against contract rates
- Make any adjustments necessary
What is a remeasurement contract?
- Works carried out based on pre-agreed unit rates
- Actual work qty measured and tendered rates applied
- Contractor paid for actual work so final project value derived based on unit prices and exact quantities
Advantages of remeasurement contracts?
- Works tendered on approximate quantities, so contractor still incentivised to submit competitive tender prices
- Contractor’s risk comparatively low (compared to lump sum)
Disadvantages of remeasurement contracts?
- Less cost certainty until project complete
- Less general accuracy of cash flow forecasting
- Higher employer risk (compared to lump sum)
What is a target price contract?
- Target cost set early in project
- Upon completion, cost savings / overrum shared between employer and contractor based on pre-agreed formula or %
- ‘Pain and gain’ mechanism
- Mechanism for sharing risk and opportunity (main difference between this and conventional contract)