Cost Planning Workshop

JAMES R. KNOWLES

www.jrknowles.com 1JRK Seminars

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Cost Planning WorkshopCost Planning Workshop

September 2008

JAMES R. KNOWLES


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Purpose of WorkshopPurpose of Workshop

• To provide guidance to RICS APC candidates with regards to typical questions on the Design Economics and Cost Planning competency

• To discuss theory and how it relates to practice for those who want to improve their cost planning skills

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APC Levels to be coveredAPC Levels to be covered

• Design Economics and Cost Planning – Level 3 for those who work for Professional

Practice– Level 2 if optional subject for those working for

Contractors

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Design Economics and Cost PlanningDesign Economics and Cost Planning

• Level 1 - Explain– main factors that affect design economics over

the whole life of a building. – how cost planning assists in the financial control

of projects during the design development stage.

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Design Economics and Cost PlanningDesign Economics and Cost Planning

• Level 2– Knowledge of the cost management of design

development on a project from feasibility to design

completion.

– Prepare and submit cost data to in-house and/or

external data collection agencies.

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Design Economics and Cost Design Economics and Cost PlanningPlanning

• Level 3– Give strategic and reasoned advice, including the

preparation and presentation of reports with reference to

cost, time, quality and buildability.

– Advise on various market factors and trends in

construction costs. Comment on accuracy and risk

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Cost PlanningCost Planning

• You need to understand the– Why, – when, – how and – issues

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Management CycleManagement Cycle

• Control cyclePlan

MonitorAdjust

Report

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Cost planning Cost planning -- theorytheory

• A MUST! Plan, create Baseline - initial cost plan

• Review further drawings ( could be at different design stages /Gateways)

• Report (why the costs have changed)• Adjust – client decision for design changes /

VE etc• Repeat as design develops

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Cost DataCost Data

• Analyse Bills of Quantities• Collect data from your own projects to form a

data base• Have a standard approach to analysing into

elements• Know how to adjust historic data to create

your cost plan

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Typical formatsTypical formats

• BQ -Trade order– Separate bills for specialists– Depends on SMM used

• Analysis – BCIS elemental– Specific guidelines on what is included in each

element.They don’t match!

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Collecting Cost DataCollecting Cost Data

• Establish an appropriate data baseExercise no 1• What useful information ( from an existing

project) do you need for planning the cost of future projects

• Cost per m2 = Overall cost/gross internal floor area?

• Others?

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BCIS elemental formatBCIS elemental format

• Building Cost Information Service– Part of RICS, in UK collect data, analyse and

present for use in cost planning• Standard approach to allocating costs to

elements• Some information is available from

www.bcis.co.uk but you need to be a subscriber to get full details

http://www.bcis.co.uk/

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Presenting Cost dataPresenting Cost data

3. BCIS SUMMARY ELEMENT

CONSTRUCTION WORKS: COST (AED) COST/ AREA (AED/ m2)

Extensive ground works due to poor Sub-Structure 187,613,058 358

Super-Structure 546,697,151 1,042

Internal Finishes 221,524,743 422

F,F&E 87,030,662 166

Services 671,493,003 1,280

External Works and services 51,851,928 99

Preliminaries 240,624,850 459

TOTAL 2,006,835,396 3,825

ALL ELEMENTS

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Presenting Cost DataPresenting Cost DataMAIN MALL

COST (AED) COST/ AREA (AED/ m2)AVERAGE COST (AED)/

LETTABLE UNIT

109,726,845 407 254,587

387,575,509 1,438 899,247

178,885,920 664 415,049

80,037,151 297 185,701

473,693,924 1,758 1,099,058

0 - 0

188,223,343 699 436,713

1,418,142,693 5,263 3,290,354

MAIN MALL COST

Sub‐Structure 8%

Super‐Structure

27%

Internal Finishes13%

F,F&E 6%

Services33%

External Works and services

0%

Preliminaries 13%

AVERAGE COST/ LETTABLE UNITSub‐Structure

8%

Super‐Structur

27%

Internal Finishes13%

F,F&E 6%

Services33%

External Works and services

0%

Preliminaries 13%

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Summarising cost dataSummarising cost data

• We should now look at a typical example of the development of a cost data base, collecting cost plans as the design develops.

• Used to assist in cost planning other projects• Level of detail will vary

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Cost Planning Cost Planning –– the needthe need

• Various design stages, typically– Feasibility – Outline Cost plan – Detail design – Construction

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Cost PlanningCost Planning-- What Should You Do? What Should You Do?

Take off (Depends on design stage, GIA, or elemental units or approximate quants )Schedule out in Elemental or BCIS HeadingsGive as much detail and description as possibleInterrogate Architect /Engineers / Client to fill gaps in information

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Cost Planning Cost Planning --What Should You Do? What Should You Do?

Insert costs using current data from relevant similar projects or own data base

Understand the market at the base date of any historical costs and the contract used as these will influence the costs/m2 and adjust to suit your project ( most important part)

Benchmark and market testDetail assumptionsDetail exclusions – inflation?

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Cost Planning Cost Planning –– Feasibility stageFeasibility stage

• This is part of the project appraisal process;• Client could provide budget cost/m2 and

want to know what could be built for this;• Client could ask for guidance on an

appropriate cost for a scheme

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Establishing Cost /mEstablishing Cost /m22

Simplistically• Cost = Value(sales or rental) less

[Fees+contingencies+profit]• Establishes target to be designed to• Benchmark with other projects to see what is

possible

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Providing the Cost /mProviding the Cost /m22

• Check design and specification against similar projects currently being built

• Adjust rate to cater for this project’s particular features /current market situation /design factors

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What affects the accuracy?What affects the accuracy?

• Source of data• How it was collected• How it was analysed• Stability of market place• Experience of person using the data

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Accuracy of cost plansAccuracy of cost plans

– Feasibility typically + or – 30% or more– Outline Cost plan typically + or – 15-20%– Detail design typically + or – 10-15%– Construction typically + or – 5%

As design develops and more accurate /detailed measure is made the accuracy improves.

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Design EconomicsDesign Economics

• Understand how a change in design affects the cost

• What affects the cost of the construction element by element

• Also appreciate what changes in the following can do, – plan shape – storey height

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Plan ShapePlan ShapePlan 1 2 3 4 5 6 7 8 Storey 3m 3m 5m 5m 3m 3m 5m 5m Height Floor Area 196m2 484m2

14m x 14m

7m x 28m

14m x 14m

7m x 28 m

22m x 22m

11m x 44m

22m x 22m

11m x 44m

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Cost ComparisonCost ComparisonWall Length m 56 70 56 70 88 110 88 110 Wall Area m2 168 210 280 350 264 330 440 550 Roof area m2 196 196 196 196 484 484 484 484 £ £ £ £ £ £ £ £ Wall Fndn Costs

£140/m 7840 9800 7840 9800 12320 15400 12320 15400

Wall costs £90/m2 15120 18900 25200 31500 23760 29700 39600 49500 Roof costs £180/m

2 35280 35280 35280 35280 87120 87120 87120 87120

Floor costs £100/m2

19600 19600 19600 19600 48400 48400 48400 48400

TOTAL 77840 83580 87920 96180 171600 180620 187440 200420 cpm2 cpm2 cpm2 cpm2 cpm2 cpm2 cpm2 cpm2 Foundation 40.00 50.00 40.00 50.00 25.40 31.80 25.40 31.80 Walls 77.14 96.40 128.60 80.35 49.10 61.30 81.80 102.30 Roof 180.00 180.00 180.00 180.00 180.00 180.00 180.00 180.00 Floor 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 TOTAL Cost /m2 gross area

397.14 426.40 448.6 490.70 354.50 373.10 387.20 414.10

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Cost drivers Cost drivers -- Wall/Floor RatioWall/Floor Ratio

A B

30m90m

900m² 900m²30m 10m

Wall area = 120m x 4m = 480m²

W/F = 480900

= 0.53

Wall area = 200m x 4m = 800m²

W/F = 800900

= 0.89

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Benchmarking and market testingBenchmarking and market testing

Talk to other members of your commercial teamInvestigate your company data basesCreate your own data baseTalk to specialist sub-contractors regarding packages –obtain quotations

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M&E Cost PlanningM&E Cost Planning

Speak to the Specialists

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M & E Cost PlanningM & E Cost Planning

M&E and the APC

David Lee

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IntroductionIntroduction

What is M&E?What Should You Do?What is likely to be included in the APC?

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What is M&E?What is M&E?

Services within buildingsMechanical (Heating, Air Conditioning, Ventilation, Plumbing etc)Electrical (Power, Lighting, Security etc)LiftsBCIS Cost Elements 5A to 6C

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What is M&E?What is M&E?

Different types of buildings have different services requirements.Data Centre 80% of total costHospitals 45-50%Cat A Office 25-30%High Quality Residential 25-35%

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What is M & EWhat is M & E

All you have to be is part;DesignerSalesmanLawyerProject managerContractorAccountant

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What Should You Do? What Should You Do? M&E Cost PlanningM&E Cost Planning

Same Skills but applied to technologyCost Modelling, Take off, Billing, Benchmarking, Procurement as for buildingOptions are huge. You need to appreciate all the systems or get specialist advice where you do not.Design may not be very advanced or detailed

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HVAC/Comfort Cooling to a CAT A Office Do you install;

– VAV– VRV– 2 Pipe Fan Coils– Chilled Beams

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VAV ISSUESVAV ISSUES

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VAV ISSUESVAV ISSUES

All air system particularly favoured in large scale developmentsHigh running costsMore plant / riser space requiredHigher Capital CostIncreased Ceiling Void depth required 500-700mmHighly flexible for end user requirementsGreatest level of user definable control True Air Conditioning System particularly favoured by North American Clients

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2 PIPE FAN COIL ISSUES2 PIPE FAN COIL ISSUES

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2 PIPE FAN COIL ISSUES2 PIPE FAN COIL ISSUES

Water based system which is still the most popular design solution in the marketEase/familiarity of installationHigh running costsAverage plant and riser space requirementsAverage Capital CostAverage ceiling void requirements 500-600mmGood end user flexibility

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Ask QuestionsWhat are the Cost Drivers?Capital Cost Nett Lettable Void restrictions Running Costs LEED

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80 130 180 230 280Capital Cost £/m2

Variable Air Volume

4 Pipe Fan Coil System - PerimChilled Ceiling with Displ Vent

4 Pipe Fan Coil System - CeilingChilled Beam ActiveChilled Beam Passive2 Pipe Fan Coil System - ceiling2 Pipe Fan Coil System - Perim

VersatempChilled CeilingCassette SystemSplit System(VRF/VRV) Heat RecoveryDisplacement Ventilation

Variable Refrigerant Flow

Air Conditioning to Offices Capital Costs

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Electrical Capital CostsElectrical Capital Costs

0 10 20 30 40 50 60 70 80 90

£/m2 GIFA

HV

LV

Small Power

Lighting

Lighting Control

Emergency Lighting

E For M

Earthing & Bonding

Lightning Protection

Standby Generation

Fire Alarms

Comm's Wireways

Analysis of Cat A Office Benchmark Costs(Electrical Only)

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Take off (Points/lengths, numbers of Fan Coils, schedule of main plant)Major cost is in Equipment (Plant)Room Data Sheets if appropriate or availableSchedule out in BCIS HeadingsGive as much detail and description as possibleInterrogate Engineers / Clients to fill gaps in information (Plant duties etc)

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Insert costs using current data from relevant similar projects or data basesBenchmarkDetail assumptionsDetail exclusionsMarket TestingResign before tenders come back

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What are you likely to be asked? What are you likely to be asked? M&E Cost PlanningM&E Cost Planning

Likelihood of M&E specialist interviewerHow did you deal with the M&E costs on a previous project?How did you procure the M&E services?Beware the trick question e.g. Design Liability

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What are you likely to be asked?What are you likely to be asked?Do’s & Don’tsDo’s & Don’ts

Do not pretend to be an M&E expertDo not be afraid to defer an answerWhere possible give considered, logical answers

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M&E and the APCM&E and the APC

• QUESTIONS

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Typical APC QuestionsTypical APC Questions

• Level 1– Please could you explain what is meant by

design economics

– Please could you explain how cost planning assists in the financial control of projects during the design development stage.

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Typical QuestionsTypical Questions

• Level 2– Please can you tell us from your experience where you

have collected cost data and how you have used this knowledge in the cost management of the design development on a project.

– How would you prepare a comparison between the cost of constructing a building using a concrete frame or a steel frame and what factors would you include.

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• Level 3– Your client has heard that his brother had an office

small development built for AED 4000 /m2 and wants you to explain to him why his office development is costing nearly twice as much.

– How would you prepare such a report and what information would you need to include.

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• Level 3• How would you advise a client to make due

allowance for inflation and other risks associated with a project in the current economic climate.

Documents

Cost Planning Workshop