Quantification & Costing

Question 1

What are Standards of measurement

Answer 1

Provide a uniform basis for measuring building works for industry-wide consistency and to allow benchmarking, encourage the adoption of best practice and help avoid disputes.

Provides a structure for the information that should make up the descriptions.

Defines unit of measurement for each item - m, m2, m3, number, tonnes, and so on.

Provides rules as to what is included within each item.

Question 2

NRM

Answer 2

provide a standard set of measurement rules for estimating, cost planning, procurement and whole-life costing for construction projects.

NRM1- provides guidance on quantification of building works in order to prepare order of cost estimates and cost plans, as well as approximate estimates.

NRM2- establishes detailed measurement rules allowing the preparation of bills of quantities, quantified schedules of works and schedules of rates.

NRM3- allows the quantification and description of maintenance works. Can be used for initial order of cost estimates, general cost plans and asset-specific cost plans.

Question 3

SMM7

Answer 3

Provides detailed information, classification tables and rules for measuring building works. This has since been replaced by NRM2.

Question 4

RICS Code of Measurement Practice guidance note

Answer 4

Code which provides guidance and definitions for the accurate measurement of buildings, the calculation of the sizes (areas and volumes) and the description or specification of land and buildings on a common and consistent basis

Code defines gross internal area, gross external area, and net internal area detailing the inclusions and exclusions, how to use them and when each is most suited to be used.

Gross external area (GEA)- the area of a building measured externally at each floor level e.g. rating council tax to houses/ bungalows

Gross internal area (GIA)- the area of a building measured to the internal face of the perimeter walls at each floor level e.g. the valuation of new homes for development purposes

Net internal area (NIA) the usable area within a building measured to the internal face of the perimeter walls at each floor level e.g. estate agency/ valuation of offices

Question 5

Methods of measurement for cost plan

Answer 5

Initial cost appraisal
Elemental cost plan
Approximate quantities cost plan
Pre-tender estimate
Tender pricing document
Contract sum

Question 6

Initial cost appraisal

Answer 6

studies of options prepared during the feasibility study stage

Question 7

Elemental cost plan

Answer 7

Prepared during the project brief stage and carried through to detailed design.

Focuses on estimating costs for different elements or components of a construction project. It provides a detailed breakdown of costs associated with each element such as; foundations, structures, finishes, services.

Question 8

Approximate quantities cost plan

Answer 8

(from the end of detailed design through to tender). First attempt to measure defined quantities from drawings

Question 9

Pre-tender estimate

Answer 9

(prepared alongside tender documentation). BoQ with approximate rates, plus the Employer internal costs etc.

Question 10

Tender pricing document

Answer 10

(strictly speaking this is not a priced document but is part of the tender documentation issued to the contractor for pricing). BoQ which is issued to tenderers for them to populate with their rates.

Question 11

Contract sum

Answer 11

(agreed with the contractor during the tender period and adjusted during the construction period). Sum of the populated BoQ. This is adjusted by CE’s during the project lifecycle.

Question 12

What is a PES

Answer 12

A PES is a Project Estimate Summary. It details all the costs associated with a project splitting the costs out into the different project stages (feasibility, concept, detailed design, construction ,handover) as well as the different elements (TfL staff, internal TfL services, surveys/ design, implementation/build, risk) and across the financial years.

Assumptions are crucial for the PES as well as stating where the pricing has come from. We have internal estimating guidance which can be used to provide guidance on the percentage of costs to allocate towards risk/ our internal staff.

Depending on the stage the project is at and the information available will depend on the accuracy and detail of the PES. This will also impact the tolerances for accuracy.

The PES is then used to advise on the appropriate budget number for a project.

Question 13

How was OLBI PES produced

Answer 13

Initial meetings held with PM, CM and SPM to understand project requirements and timelines.

The PES included all internal labour to support these works e.g. engineering, construction management, management overheads etc. A reasonable percentage for internal labour was used based on the general guidance for internal labour support from the estimating guidance and also looking at other projects within the portfolio. The portfolio projects often have less internal labour costed to the project as the core team- PM, PE & CM get charged to a separate staff line.

The risk was calculated again using a percentage based on the estimating guidance and previous PES. I also took into account the discussions with the PM regarding the potential risks which could result in a cost increase.

The third party costs for the R&D for new OLBI’s and the install were taken from a recent quotation received with inflation applied using the BCIS TPI.

A review of the inclusions, exclusions & assumptions of the quotation was had with the PM to ensure no additional activities/ plant/ labour/ materials needed to be allowed for.

Question 14

BCIS

Answer 14

Building Cost Information Service (BCIS). It can be used to forecast the cost of a building project using actual not synthesised prices. The BCIS construction data helps with creating particular estimates for option appraisals, providing early cost advice and planning costs and benchmarks. Includes a full range of building tender, cost and output indices and average building prices. Pricing and estimating information.

Question 15

Inflation indices

Answer 15

Inflation indices are used to adjust pricing based on different market conditions such as time and location. The base cost is from the date pricing is obtained (year & quarter), the appropriate indexation rate can then be calculated adding the quarterly/ yearly indexation between base date and expected date. The base cost is then multiplied by the indexation to provide a more accurate estimate.

Question 16

OLBI PES use of inflation indices

Answer 16

For the OLBI PES I was provided with pricing from August 2022 (2Q 22) and the estimate was to be updated and aligned with programme showing 2Q 23 for the first tranche, and 2Q 24 for the second tranche. I used the TPI index from December 2021 and identified the inflation indices for each date (3.3 for T1 and 8.4 for T2) the quoted costs were multiples by these indices to reflect the expected change in prices.

Question 17

Pricing documents

Answer 17

Activity schedule
Bill of Quantities
Schedule of Rates

Question 18

Activity schedule

Answer 18

(used for Option A or C contract)- the works are split out into activities and a cost/ % of the total cost is allocated to each activity so on completion of that activity the cost can be paid. New activities can be added under the CE process, or the cost of existing activities can be adjusted via the CE process.

Question 19

Bill of Quantities

Answer 19

(used for Option B or D)- provides project specific descriptions and measured quantities for the work to be undertaken. Against each item in the Bill of Quantities, the Tenderer inserts their unit rate for that work and then extends it by the stated quantity to arrive at the total cost for the work described in that Bill of Quantities item. All extended amounts are then totalled to arrive at the tender amount.

Question 20

Schedule of Rates

Answer 20

Schedule of rates may be used for contracts where the scope is yet to be defined so a detailed take off or an activity schedule can not be produced.

The Employer may request for certain materials/ labour/ plant rates to be specified plus a mechanism for yearly price adjustments (if applicable) which can then be used to form the basis of the works.

-An example of this is a fixed price for the annual maintenance of gas compressors in the form of an activity schedule was requested and then a schedule or rates was requested detailing the likely labour for any ad-hoc maintenance required. The evaluation process included a simple CE model to financially score and compare the SoR element of the tender.

Question 21

Negotiation techniques for contract sum

Answer 21

Negotiation of a contract sum may include the omission of certain activities/ risk/ inflation e.g. contractor on PAS tried to add a price increase on the fixed price for their works owing to steel increase, however a copy of the quotation from the supplier showed that it was valid through to the date of award.

Question 22

Negotiation techniques for variations

Answer 22

Negotiation of variations/ CE’s could include discussion on the rates being used, application of price adjustment indexation if applicable/ quantity/ measurement of the works. It is important to work with the contractor QS and follow the contract to come to an agreed value. Communication and collaboration are key skills for negotiation, as well as record keeping/ documentation of negotiations to provide evidence/ reminder of discussions.

Question 23

Negotiation techniques for final account

Answer 23

A final account is an agreed statement concerning the amount of money to be paid at the end of a building contract by the employer to the contractor. This may require negotiation if there are still unagreed CE’s/ variations, there could also be negotiation required over the application of liquidated damages. This is why it is important to try to resolve CE’s/ variations/ disallowed cost as and when they arise in the contract to prevent prolongation of completion at the end of a project.

Question 24

OSR negotiation & quantification of ELF

Answer 24

I produced a liabilities schedule for subbie accounts, identifying the fixed price for measured work reviewing additional items presented to date as either CE’s, contra charge or disallowable cost. I identified further allowances in the latest forecast allocating these into the three identified categories.

I held regular meetings with the appropriate contractor’s administrators discussing and obtaining additional information to allow items to be correctly assessed and categorised. Clear communication was vital for successfully establishing contractual principles, negotiating and agreeing the valuation of the subcontractor EFCs.

I adjusted the price adjustment indexation for staff rates to the correct index (BCIS PAFI not RPI) and identified additional items within prelims which relate to programme and should be included within the fixed price.

Question 25

What is the difference between cost plan and cost estimate in early stages of a project

Answer 25

Cost plan in the early stages may just be a single number e.g. per unit

Cost estimate in early stages will show the provisional breakdown of costs

Question 26

NRM1

Answer 26

Order of cost estimating and elemental cost planning

Question 27

NRM2

Answer 27

Detailed measurement for building works

Question 28

NRM3

Answer 28

Order of cost estimating and cost planning for building maintenance works

Question 29

Rail Method of Measurement

Answer 29

RMM1 – Cost planning
RMM2 – Detailed measurement
RMM3 – Operational maintenance

Question 30

Civil Engineering Standard Method of Measurement 4

Answer 30

• Published by the Institution of Civil Engineers (ICE)
• Incorporates measurement rules for the newest technologies
• Has an updated rail section
• Contract-neutral and can be used with any contract e.g. NEC, bespoke T&Cs

Question 31

Difference between tender inflation and construction inflation

Answer 31

Tender inflation is an allowance included in the estimate for fluctuations in the prices during the period from the estimate base date to the date of tender return, whereas construction inflation is from the date of tender return to the mid-point of the construction period.

Question 32

Benefits of cost reimbursable/ Option E as a pricing mechanism

Answer 32

If there is uncertain/ complex works the ability to price a reasonable risk value would be difficult

Contractor would often price a very high risk value due to uncertainty

Therefore ability to pay actual cost plus fee means the client is not paying a very high risk value which may never be actualised (however still risk it will be and more which they would be accountable for)

Question 33

Benefits of Option A/ lump sum as a pricing structure

Answer 33

cost certainty for the client

contractor has the ability to manage there own costs/ efficiencies within this to maximise profit

Question 34

Can you provide an example of when you have negotiated/ advised on construction cost on OSR during the construction phase?

Answer 34

On a subcontract account i reviewed the main contractor’s assessment, for a groundworks CE and advised that the correct increase thickness for a concrete slab had been used (5mm) inflating the cost and negotiated the labour rates weekend uplift. No agreed uplift in the contract, they applied double rates for a full shift & I negotiated time and a half which was more aligned to other subcontractors.

Question 35

Can you provide an example of when you have negotiated/ advised on construction cost on OSR during final accounting?

Answer 35

I negotiated the final account for the fire suppression contractor which required resolution of a prolongation CE. Whilst reviewing the programme analysis evidencing the impact on critical path and completion I identified that the calculation they had used was for calendar days not working days so this had a higher number of weeks. The rate for the project manager was also not aligned with what was in the subcontract which I had access to due to clause 26 in the contract.

Question 36

What RICS guidance/ standard have you referred to when quantifying construction works

Answer 36

RICS professional standard on cost prediction sets out what members must do in regarding to predicting cost. I made sure when producing the OBLI PES i complied with this, as well as my companies requirements.

• produce a reliable prediction of costs appropriate for the needs and best interests of the client, taking account size, complexity, etc. (OLBI PES took account of complexity by increasing usual risk values)
• Consider and agree with the client the appropriate method for reporting costs (identified the appropriate PES template for OLBI)
• Provide the sources of the data (part of OLBI PES template sets out where information is from)
• Identify the key assumptions, including any exclusions and how they can be managed (part of OLBI PES template set out assumptions & exclusions)
• State the change in predicted cost since the last report (for OLBI PES stated change since last PES & during periodic forecasting stated any changes)
• Commensurate with the size and complexity of the project, provide an estimate of the accuracy or level of uncertainty of the cost prediction (OLBI template states level of confidence, mine was at concept design so +/- 20%)

Question 37

Whats difference between a provisional sum and a prime cost sum?

Answer 37

Both are allowances for items that cannot be accurately priced when tenders are sought.

Provisional sums relate to items for which there is insufficient information

Prime cost sums relate to suppliers or sub contractors that are nominated by the client, such as specialist equipment suppliers for example.

Question 38

How does the NEC deal with provisional sums?

Answer 38

The NEC does not allow for provisional sums, the guidance is if there is insufficient information to define the works the tender should be delayed.

The only way unknowns could be accounted for under NEC is if Z clauses are added or it is included in the project risk register.

Question 39

When building up costs what different types of cost data can you use?

Answer 39

• Previous projects & pricing books