Lecture Note1 Cost Studies

Cost Planning, Cost Control and Cost Analysis

Introduction
Cost planning and cost control of buildings is not a new technique, which has been in use
for many years.
Costing mean applying prices to schedule of items of labour and materials in order to
obtain an approximation of the cost of a construction project. Cost planning and cost
control is not only to determine the probable cost of a building but to control the design
development throughout the project, and to provide the client with value for money
it can also dictate the nature of the most important characteristic of the embryo design,
the plan shape, storey height, type of finishes and so on.
Time must be spent in the early stages of design sequence for cost planning so that
careful cost control by monitoring of variations can be operated during construction stage
to the settlement of account to be effective.

clients requirements for an accurate forecast of the overall cost is due to:-

resources such as land and materials becoming scarce and expensive.

modern buildings becoming more complex,
fluctuation in labour and material cost etc
What is Cost Analysis?

The analysis and presentation of actual costs to facilitate cost planning.

It is a systematic breakdown of cost data according to the element for cost so as to facilitate
examination.

A cost analysis is a record of how the cost has been distributed over the elements of a building; it
includes a brief description of the overall nature of the project and specification notes on the
general level of finishes, and so on.

What is Cost Planning?

Method of controlling the cost of a project, within a predetermined sum, during the design
process and includes the preparation of the cost plan as well as the subsequent stages of cost
checking.

Techniques for arriving a cost plan or cost limit.

Cost plan is a statement of the intended cost to spend on each element of a proposed building
within a total sum and in relation to a defined standard of quality.

The allowances set against each element are cost targets.

Cost plan is prepared by finding a cost analysis of a similar project to the one under
consideration, and by studying how the cost was allocated in the old project, in order to prepare
an estimate for the new scheme.
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Lecture Note1 Cost Studies

The cost information cannot be used directly from the cost analysis, and some degree of
modification will have to be made.

These modifications are usually for differences in

price level
Quantity
Finishes and standards

What is Cost Control?

Techniques for protecting the cost plan.

Generic term embracing all methods of controlling the cost of a building throughout its various
stages from inception to completion.

Process of cost checking required the estimated cost of each element to be checked against the
target set set in the cost plan.

The Reasons for Pre Contract Cost Planning and Pre Contract Cost Control.

To determine the probable cost of a project development.

To provide a yardstick to control the design of the development throughout the project.

To provide the client with value for money

The Project Sequence

(based on the RIBA Plan of Work 2007).

Preparation

A. Appraisal
B. Design Breif
Design

C. Concept
D. Design Development
E. Technical Design
Pre- construction

F. production Information
G. Tender documentation
H. Tender Action
Construction
J. Mobilisation
K. Construction to Practical Completion

Use
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L. Post practical Completion

Description of key tasks at each stages

Preparation

a. Appraisal
Identification of clients needs and objectives, business case and possible constraints on development.
Preparation of feasibility studies and assessment of options to enable the client to decide whether to
proceed.
b. Design brief
development of the clients initial statement of requirements into the design brief by or on behalf of the
client confirming key requirements and constraints.
identification of procurement method, procedures, organisational structure and range of consultants and
others to be engaged for the project.
Design
c. Concept

implementation of a design brief and input to the project brief. preparation of a concept design including
outline proposals for structural and building services systems, outline specifications
and preliminary cost plan. review of procurement route .
d. Design development

preparation of a developed design to include structural and building services systems, updated outline
specifications and cost plan.
completion of the project brief.
application for detailed planning permission.
e. Technical design

preparation of technical design(s) and specifications, sufficient to co-ordinate components and elements
of the project and information for statutory standards and construction safety.
pre-construction
f. Production information

f1. preparation of production information in sufficient detail to enable a tender or tenders to be obtained.
application for statutory approvals.
f2. preparation of further information for construction required under the building contract.
g. Tender documentation

preparation and/or collation of tender documentation in sufficient detail to enable a tender or tenders to be
obtained for the project.
h. Tender action

identification and evaluation of potential contractors and/or specialists for the project.
obtaining and appraising tenders; submission of recommendations to the client.
Construction

j. Mobilisation
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letting the building contract, appointing the contractor.
issuing of information to the contractor.
arranging site handover to the contractor.
k. Construction to practical completion

administration of the building contract to practical completion.

provision to the contractor of further information as and when reasonably required.
review of information provided by contractors and specialists.
Use
l. Post-practical completion
l.1 administration of the building contract after practical completion and making final inspections.
l.2 assisting building user during initial occupation period.
l.3 post-occupation evaluation: review of project performance in use.

Introduction to cost planning process

CP as a process is difficult to define concisely as it involves a variety of procedures and

techniques used concurrently by the QS or building economics.
Traditional CP will usually follow the conventional outline design, detailed process.
In practical sense, the CP starts with the development of a figure (or cost) to allow client to decide
whether the project is feasible.
The feasibility estimate is usually calculated on a unit cost method, refine using the elemental
method, component elements and sub-elements.
The elemental method is a system of cost planning and control that enables the cost of a scheme
to be monitored during the various stages of design development.
Cost planning is a system that required total coordination of the project form its commencement
to completion.
It involved a systematic framework procedure and demand high commitment from the design
team to cooperate with the QS to ensure that the objectives in terms of costs, time and quality are
achieved.
The cost planning process can be regarded as a means of getting an optimum result that offers the
best value for money or saving and is economical.
Without cost planning, an analysis has no scientific basic and thus all estimates are at risk unless
proven
otherwise and with cost planning errors can be minimized.

OBJECTIVES OF COST PLANNING

The client receives value of money, not necessarily lower than the initial cost. There must be a
balance between quality, usage suitability, initial cost and life cycle costing for the entire span of
the element.
A reasonable expenditure between sections of the building by relating the design and the
specification to the clients budget so that more balance design is obtained.
The overall expenditure is within the amount agreed by the client. The tender received should not
be higher than the amount agreed by the client.
Integrating cost with time and quality.
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PRINCIPLES OF COST PLANNING

frame of reference (cost limit);

method of checking (cost target);

means of remedial action (cost check).

Frame of reference
Establishing a realistic first estimate; planning how this estimate should be spent among the elements of
the building.

Method of Checking
The cost planner, in conjunction with all members of the design team, must detect and measure variances
from the cost targets previously established
Variances between the sum total of the cost targets and the overall cost limit will require remedial action
to be taken

Remedial Action
The remedial action must be taken quickly and, ideally, as soon as the cost overruns become known and
the decisions communicated to everyone in the team.
Remedial action thus ensures that total project expenditure is contained within the cost limit.
Occasionally, suitable remedial action is impossible, and additional finances must be obtained to complete
the project.
The presentation to the client of a carefully completed and detailed revised budget is the most convincing
argument to justify the need for additional funds
1. There is a standard framework reference available for each identified part of the
building(example WBLFF, structural works, etc). The purpose are to enable:
The performance characteristics to be related to each reference.
The cost to be distributed in a balanced way throughout the building.
The analysis of previous projects be classified in the same manner.
2. The cost planning can be adjusted to design requirement.
3. It allows the costs checked as the design develops with the amount allocated.
4. It allows the designer to take necessary measures or actions before any decision on the final
design is made.
5. It takes into account contingencies cost and design reserve.
6. It enables costs to be presented in a logical and orderly way for clients from time to time during
the design process.
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ADVANTAGES OF COST PLANNING

The tender value will be either close to or similar to the clients estimate.
Since there is a checking system on the cost, there is possibility that less changes will be made to
the BQ. Discussions among designers can be made before the production of the final design. This
will definitely save time in making adjustment to any changes to the cost and design.
The effectiveness of cost and value for money can be achieved with cost planning process.
A balanced expenditure distribution may produce a more rationalized design.
Cost consideration will be given more attention since the QS is involved in the early stage of the
design process.
The BQ can be prepared more easily since the QS is already familiar with or skilful in the project
and thus has clear understanding of what is to be achieved by a designer.
Cost planning provides basic information on cost comparison between different project.

DISADVANTAGES OF COST PLANNING

It requires a lot of preparation at the early stage of the design process.

The designers may have some limitation in their work style.
The QS need to be equipped with past experience and knowledge pertaining to cost and factors
influencing the cost.
Both designer and QS are involved with a lot more work at the design stage as compared to when
no cost planning is used.

CHARACTERISTICS OF A GOOD COST PLANNING SYSTE

Ensure that the tender figure is as close as possible to the first estimate, or any likely difference is
anticipated and within acceptable range.
Ensure that the funds available for the projects are allocated effectively and economically to the
various elements and sub-elements.
Always involve the measurement and pricing of approximate quantities at some stages of the
process.
Aim to achieve good value at the desired level of expenditure.

PHASES OF COST PLANNING

Phase 1 : Defining the brief and setting the budget.

Phase 2 : The cost planning and control of the design process. This phase is critical importance
since decisions made at design have a direct impact on the whole life performance.
Phase 3 : The cost control of the procurement and construction stages. Unlike construction, the
procurement has changed where decisions are sometimes made prior to design in Phase 1. it is
essential that cost planning advice recognizes the impact of procurement decision on design and
construction.
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RIBA FRAMEWORK OUTLINE

A framework outlined and produced by the Royal Institution of British Architect (RIBA) has resulted in
procedure for architects in preparation and implementation of a development project.
In determining the viability of a development project, it is important that an agreement of all parties in the
design team be obtained in designing a framework plan that is appropriate and effective.
There are 12 stages in RIBA as per below :

Stage A Inception
A stage where client expresses his intention to build a building and appoints an architect and other
consultant. Cost also discussed, but not fixed as it might be change to clients need.
Stage B Feasibility

Lecture Note1 Cost Studies

The architect and consultant will study the clients needs. The clients financial will be observed in
determining the feasibility / profitability of a project. Can be done in 2 method :
a. Client provides cost estimates and consultants confirm the estimate.
b. Consultant provides estimates
Stage C Outline Proposal
The clients need is finalized and ready to be implemented. The design, layout and construction method is
determined to gain approval from authority. QS will prepare the Outline Cost Plan according to group
element to provide guidelines on cost for the team.
Stage D Scheme Design
All matters pertaining to approval must be obtained at this stage. Sketch drawing will be produced. QS
required to prepare Detailed Cost Plan that shows how consultants distribute money to individual
elements of a building.
Stage E Detailed Design
The complete design is produced. QS will required to carry out Comparative Cost Study on several
construction methods, materials and different types of services and coordinates cost distribution in Cost
Plan. It must include the costs of management and maintenance of the building.
Stage F Production Information
Final working drawing are prepared. QS will continue to cost check and advice the architect on the
contractual arrangement of the project.
Stage G Bills of Quantities
The BQ and related documents will be prepared and QS will prepare the pre-tender estimate.
Stage H Tender Action
Qualified tenderer are selected. The QS will prepare tender report to determine the most qualified
tenderer.
Stage J Project Planning
The site is handed over to the contractors. The contractor will prepared the work programme to monitor
the project.
Stage K On Site Operation
The contractors duty to implement and complete the works.
Stage L Completion
Handed over to client.

Lecture Note1 Cost Studies

Stage M Feed Back
Analysis on the overall management, construction and the performance of the project will be done. Used
for the future project.

References and Further Readings

Flanagan, R. and Jewel, C. (2005). Whole Life Appraisal for Construction. Blackwell, Oxford.
Kelly, J. and Hunter, K. (2005). A Framework for Whole Life Costing. SCQS.
Seeley, I.H. (1996) Building Economics: Appraisal and Control of Building Design, Cost and
Efficiency,Macmillan
Kelly, J., Male, S. and Drummond, G. (2004) Value Management of Construction Projects,
Blackwell Science
Seeley, I.H. (2001) Quantity Surveying Practice, Macmillan
Seeley, I. (1997). Quantity Surveying Practice. 2nd ed. Hampshire: Palgrave Macmillan.
Ashworth, A. (2004). Cost studies of Buildings. 4th ed. England: Wesley Longman Ltd.
Seeley, I. (1995). Building Economics. 4th ed. Hampshire: Palgrave Macmillan.
Ferry, D.J., Brandon, P.S. & Ferry, J.D. (1986) Cost Planning of Buildings. 7th ed.
Oxford:Blackwell Science Ltd.
Smith,J.,Jaggar, D. (2007). Building Cost Planning for the Design Team. 2nd ed. Elsevier Ltd.