Cost Management

Are you regularly involved in construction projects where having an accurate idea of costs is important? Most people in the construction industry and design professions would say yes, particularly if public funds are being used where there are specific funding limits.

For many design professionals, the pressure to deliver a project “within the budget” clouds objective decision making particularly during planning and design stage. Sometimes there is a stated assumption of “we can’t afford that” or a fear of “what happens if we come in over budget?” The way to confront these concerns head-on is with accurate cost information at each stage of the project.

During primary budgeting, the basic scope of the project needs to be defined, with as much detail as may be reasonable to help avoid overlooking critical components that need to be accounted for. For example, saying there is a need for higher class office space can produce a reasonable range of budget numbers, but if the need for a large, the temperature-controlled computer center is needed within that office space, and is not accounted for in budgeting, then there is a disconnect between program needs and budget. Similarly, indicating a need for storage space can be fairly straight forward unless the hazard level is overlooked and does not account for special types of construction or mechanical/ electrical requirements.

Cost planning is a statement of the proposed expenditure for each section of a building related to a standard or quality.

Cost Planning

The design has progressed now and information available such as:-

1. Design team appointed including cost advisor
2. Drawings - Site plan, floor plans, sections through the building and Elevations 
3. Outline spec from client
4. Detailed spec from architect
5. Engineers/services engineers specification
6. Ground reports
7. Planning submitted
8. Surveys carried out

The cost limit is established and split into cost targets. These targets are checked as the design

Figure - 01

Target Cost for Lump Sum Cost

Figure-02

The philosophy of cost planning can be divided into two main ideological groups;

1. Costing a Design
2. Designing to the Cost 

Costing a Design

Refers to methods of estimation that can arrive at a cost for a given (predetermined) design. Formal drawings need to be in existence for this process to function.

Designing to a cost

Guiding the development of a scheme so that it not only sets a budget amount but ensures the project does not exceed but provides the client with the greatest value for money possible.

Basic competences are;

1. Understand the impact of early strategic decisions on project life cycle costs
2. Recognize the importance of sustainability through a wider understanding of how buildings perform in use
3. Harness benefits of interdisciplinary collaborative working with other professionals within the teams
4. Engage with the design team
5. Develop effective risk management strategies

Measurement for Cost Plan

Unit quantity and rate to tie up and Look at the units in the cost plan;

GF slab rn², Pile caps-Nr, Ground beams-m, Piling-m
Frame tonnage plus fittings & secondary steelwork
Doors-Nr 
Windows-m² or Nr
Upper floors- m²
Roof-m² and Eaves, Verges, Ridges-m
External walls-m² for different spec with deductions for openings
Internal walls-m² with deductions for openings (optional)
Finishes-m²
Skirting, WW boards-m
Fittings-NrMechanical & Electrical m² of GIA or a particular area

Builder’s work in connection % (BWIC)
External works m² for the area of hard standings and landscaping and m for curbs etc..
Drainage and Incoming services Item
Preliminaries - %, cost/week, cost/month
Contingencies - %

Checking the Quantities

Check GIA against floor and ceiling finishes

Check ground floor area against GF GIA

Check upper floors against UF GIA

Roof area to building footprint or ground floor

Wall finishes are Ix ext wall areas + 2x internal walls and partitions

Where you have used GIA you have incorporated correct

Completing the rates

Use past BOQ with similar nature construction

Rebase the costs using indices for time and location/ Rebase them argument basis.

Ensure the rate reflects the unit of measurement

Check your inputting is a correct example; decimal point in the right place

Check formulas correct

Services and provisional sums

Some costs are cost/m2 of GIA some are cost/m2 of a specific area

Enter currency and unit to each item

Lump sums should be included as an Item

Line through all sums when entered into cost plan

Cross checking the cost plan to specification

     All spec items are included somewhere in the detailed cost - IF NOT either add in or exclude

     Check that all the relevant sections of the cost plan are completed

These are the area must include in the Front Sheet;

Title of the project, date report Number

Parties

Procurement route and program

Schedule of areas (GIA)/exclusions

Site area

Ratio of building footprint to the site area

Cost summary

Review example cost plan

Aim of Reports

To record the benchmarking process that you have carried out on your cost plan

To note the checks you have carried out and what changes you made as a result

You are accountable to the client!

Worth 40% of the assignment one mark

Content of Report

Summary of headline details of the cost Plan

Benchmarking of the cost/m2 against two or three other SFCA or cost Models

Identify the main cost areas through pie diagrams etc and compare to the above

Look at % totals

Pareto rule!!

Figure-03

Summary of Report

Explain if rates, location, specification etc caused variances

Explain if your costs were re-adjusted after this exercise

'Why' is important and 'how'

Justify your costs

Look at floor/wall ratios

Look at site coverage

Planning Remember!

Compare like with like

Same time?

Same area?

Same specification?

Site specifics?

Procurement method?

Same size?

Cost Planning we have to consider!

Have all the residual risks been quantified and included

Have the costs been allocated effectively between the various elements of the cost plan

Do the elemental cost estimates reflect good value rather than cheap price?

Has a cost check been carried out?

Visual Presentation - Pie chart

Figure-04

Figure-05

Visual Presentation - Bar chart

Figure-06

Figure-07

What is the Quantity Surveyor (QS) ?

The Quantity Surveyor, also known as a Construction Economist, or Cost Manager, is one of a team of professional advisers to the construction industry. As advisers, they estimate and monitoring construction costs, from the feasibility stage of a project through to the completion of the construction period. After construction they may be involved with tax depreciation schedules, replacement cost estimation for insurance purposes and, if necessary, mediation and arbitration.

Quantity Surveyors work narrowly with Architects, Financiers, Engineers, Contractors, Suppliers, Project Owners, Accountants, Insurance Underwriters, Solicitors and Courts and with all levels of Government authorities.

Quantity Surveyors get their name from the Bill of Quantities, a document which itemizes the quantities of materials and labour in a construction project. This is measured from design drawings, to be used by the contractors for tendering and for progress payments, for variations and changes and ultimately for statistics, taxation, and valuation.

At the feasibility stage, quantity surveyors use their knowledge of construction methods and costs to advise the owner on the most economical way of achieving their requirements. Quantity Surveyors may use techniques such as cost planning, estimating, cost analysis, cost-in-use studies, and value management to establish a project budget.

During design, the Quantity Surveyor ensures that the design remains on budget through cost management. Essential additions are offset by identified other savings. On completion of design and drawings, the Quantity Surveyor may prepare a Bill of Quantities, which is issued with the specification, for use by contractors in submitting tenders. The contractor's quantity surveyors/estimators generally prepare tenders and may price alternatives for consideration.

During construction, the quantity surveyors are called on to fairly value progress payments at regular intervals. They will also value changes to design or quantities which may arise by reference to appropriate Bill of quantity rates. The contractors, Quantity Surveyor / Contract The administrator will have prepared claims for progress payments and additional work.

When construction is complete the quantity surveyor can produce depreciation schedules of the various project components and advise on realistic insurance replacement costs. In the case of construction disputes, the quantity surveyor is often called on as an expert witness, and some Quantity Surveyors act as Arbitrators. Both the contractors and owners Quantity Surveyors will be involved in this.

In addition to new projects, Quantity Surveyors also use their skills in the refurbishment of old buildings, alterations to existing buildings and insurance replacement estimates. In public authorities they maintain cost statistics on a state or nation-wide basis, and there are opportunities for academic careers in the building disciplines.

Quantity Surveyors must have orderly and analytical minds and be prepared to work to very rigid time schedules. As decisions involving large sums of money are often made using information produced by them they must be accurate in all aspects of their work.

Quantity Surveyors work in the private sector with consulting firms, in the public sector mainly with the State Government Departments / Authorities, and increasingly with Building Contractors, Financiers, Property Developers, Project Managers, and Universities.