Cost Planning and Control in Construction

The Cost Planning is a method of cost controlling the cost of a project within a pre-determined sum up to the tender stage.

Cost Planning give advice to client how much will be project cost. As well, cost planning will advise when the expected expenses will most possible occur. Hence it’s important for get required project finance and for determining possible project profit. Therefore cost planning process essential to success of project.

Methods of Estimating for Cost Planning

There are some significant estimating methods uses in construction industry for Cost planning process. Those methods give preliminary estimate, hence Quantity Surveyor has to modify predetermine data considering the followings, such as , market conditions, Size, number of storeys, specification level, inclusions & exclusions, service, site & foundation conditions and other factors.

Conference Estimating Method

RIBA Stage A of Options Appraisal and stage B Design Brief,

These method uses for preparation of the initial price estimate give to the client. It is based on a cooperative view of a group of persons, and not quantify in any particular way.

Financial methods

RIBA Stage A of Options Appraisal and stage B Design Brief,

This method fixes a cost limit on the building design, according to the unit of accommodation or rental values.

For example,

Unit method 

RIBA Stage A of Options Appraisal and stage B Design Brief,

The unit method is multiplies desire standard unit of accommodation by an approximate cost per unit. Not required specific drawings, specifications, only the concept of the project relevant to the required function.

For example:

Schools – costs per pupil enplace

Hospitals – costs per bed enplace

Car parks – cost per car space

Estimate = Standard units of accommodation x Cost per unit

Cube method 

Design Stage

This is the superseded method because of inherent disadvantages; this method needs some sketch drawings, historical cost data, and also important estimator experience. It is based on association between building volume and unit cost.

For example:

Superficial area method

RIBA Stage B Strategic Briefing and also can be used for Stage C

This is presently most common use method, its use for early price estimating purposes. The area of each of the floors multiplied by the cost per square meter. Mostly important Storey heights, plan shape and methods for when choose on the rate need be used.

For example:

Story enclosure unit method

This technique use weightings for the estimating the building elements

Elemental Cost estimating

Detail Design Stage (Production information Stage F)

This can use to establish the approximate cost of a construction project. It analyzes, the cost of the project on an elemental basis using from other similar projects. Also provides cost advice during the design process. Detail drawings are required.

For example:

Approximate Cost estimating

Approximate quantities present additional detailed approximate estimate. No particular rules of measurement exist, Also significantly more information is required from the designer..

For example:

Resource analysis

(Pre Construction Stage Tender Documentation -G)

This method is traditionally adopted by contractors’ estimators to determine their individual rates for measured items in bills of quantities. All individual measured items are analyzed into its element parts such as labour, materials and plant. This method is not a pre-tender method of price prediction strictly.

For example:

Explain the pre-contract cost planning and cost controlling process with respect to the RIBA plan of work a client/ consultant may adopt during each stage

What Is Pre-contract Cost Planning?

Pre Cost planning is very important to successful planning, design and construction of projects and is aimed at providing best value solutions. Essentially it is a pre-costing method of a project. As well as Pre-estimation of a design proposal will give clear picture about the cost to the employer and design team to make decisions regarding the project to make sure value for money.

Pre-Contract Cost Planning Process

The pre-contract cost planning process according to the RIBA plan of work 1998; it can be described as follows.

Graph – 2.1

Pre-stage A (Establish the budget)

Client is the appointing client management team (Consultants) such as, client representative, cost consultant, according to his requirements.

Identify objectives, physical scope of project, standard of quality of building and services, timeframe and establishing the budget.

Emphasis nature of client’s problems and functional requirements on proposed project.

Work Stage A (Options Appraisal)

Consultant has to identify of client prerequisite and possible limitation on development and cost of the ideal solution.

Prepare technical, functional and cost studies by consultant and then it should enable to the client to take decision on his project weather he can continue the first proposal or could do some changes to the first proposal etc. also select the possible procurement method.

Work Stage B (Strategic Brief)

Consultant has to prepare initial cost suggestion to the client based on an outline statement of client’s needs, also to determine target cost. This establish an initial budget for client

Client has to investigate availability of finance for the project and value of money framework.

Pre Contract Cost Control

Generally Pre contract cost controlling process is implement from this stage according to the RIBA work plan mentioned chart 1.2,

Pre Contract Cost Control process give to ensure the cost of the project is within the client’s budget or not. Hence pre contract cost control is very essential in a project since it is planning, design finalizing and tendering and selecting a suitable contractor too.

Outline Proposals- Stage C

Consultant involves preparing outline proposal and estimate of cost as initial cost plan.

Investigate the site conditions and preliminary sketches for requirement of cost plan by consultant.

Evaluate strategic brief through consideration of time, cost, risk and environmental issues.

Establish design management procedures and prepare initial cost plan, project program, and cash flow.

Detailed Proposals – Stage D

At this stage, consultant prepares full detailed proposals for the client, and also prepares firm cost plan & detailed elemental cost plan etc.

Clint tem evaluate outline proposals for make final decision,

Receive design and cost input from client appointed team and extend detailed design solution.

Development control submission.

Review procurement advice.

Final Proposals – Stage E

Consultant has to prepared final proposal for the project at this stage.

Carry out cost check of the design as it develop against the cost plan, hence it Confirmation of the cost limits for the project.

Most cost effective in satisfying level of project brief to confirm or put final budget and to check the elemental cost targets.

Cost checks design against cost plan.

Decide on procurement methods.

Consultant, they attending to review design and cost plan.

Consultant has to prepare all required submission for legal approvals.

Production Information – Stage F

All legal approvals should have completed when at this stage.

This is the assessment of lowest acceptable tender price based on completed contract documents.

Ensure that the completed designs are controlled within the cost limits.

Prepare all co-ordinate production information including location.

Arrange bring together all component drawings, schedules and specifications.

Supply all required information for final cost checks of design against cost plan.

Explain the term life cycle costing and related terminology.

Definition of the life cycle costing

According to definition of Hoar and Norman (1990) appropriately defined the life cycle cost of an advantage as the present value of total cost of the asset over its operating life including initial capital costs, occupational costs, operating costs and the cost or benefit of the eventual disposal of the asset at the end of its life.

Hence life cycle costing related with the time stream of costs and benefits that flow throughout the life of the project.

There are number of term use in industry to identify different stages in the life cycle costing techniques, hence flowing are the specially use in construction industry.

Life cycle cost analysis (LCCA)

Quantity surveyor assist to prepare this, based on collection and analysis of historic data on actual costs of occupying building (running cost and performance).

Life cycle cost management (LCCM)

Actually it is derived from life cycle cost analysis and identities, by this way client can be compare building cost and controlling occupancy cost throughout the life of building to get maximum value.

Life cycle planning (LCCP)

This is as part of life cycle cost management; it is constitute the prediction of total costs of a building, part or individual element taking account of initial capital costs, subsequent running cost and residual values.

Life cycle costing Terminology

Explain the Quantity Surveyor’s role as a cost manager, in the life cycle of the project.

Role of the Quantity Surveyor as a Cost Manager

Quantity surveyor is the person/ firm who manage the cost relating to the construction projects, such as new constructions, maintenance work and renovations. Quantity surveyor monitors the cost of every aspects of a construction project as a cost manager, as well as seeks to minimize the costs of the project and to make more cost savings while ensuring the total cost of project does not exceed the estimated cost.

Furthermore when study about Quantity Surveyors in Cost manger position also have to be identified their duties and Responsibilities properly.

He should conducting feasibility studies and writing procurement reports at project inception stage.

He should manage estimating and cost planning process and presenting the final cost plan.

He should manage the procurement process, and make certain that all phases with pre-qualification, enquiry, analysis, selection and contract preparation are carried out effectively.

Ensuring that post-contract cost variances and change control tasks are directed effectively.

Involving with cost checking and valuation works to manage them effectively.

Preparation of monthly post-contract cost reports and presenting them to the client.

Preparation of value engineering and life cycle costing, and also final accounts negotiated and agreed process.

Give leadership role mange the client and other consultants, at all project phases.

Working with top managers and directors, and identify and performing new opportunities to improve the cost management procedures.