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Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 1
School of Architecture Construction and Planning (14/07/99)
COST PLANNING: TECHNIQUES - PART 1
CONTENTS
INTRODUCTION
LEARNING OUTCOMES FROM THIS TOPIC
CHOOSINMG THE RIGHT TECHNIQUE
UNIT METHOD
Definition
Operation
Sources of data
Use
Example
Student example
SUPERFICIAL METHOD
Definition
Operation
Sources of data
Use
Example
Student example
CUBE METHOD (COST PER CUBIC METRE)
Definition
Operation
Sources of data
Use
Example
Student example
FUNCTIONAL AREA METHOD
Definition
Operation
Sources of data
Use
Example
Student example
STOREY ENCLOSURE METHOD
Definition
Operation
Sources of data
Use
Example
Student example
SUMMARY
REFERENCE LIST FOR THIS TOPIC
SELF ASSESSMENT QUESTIONS
ANSWERS TO STUDENT EXAMPLES
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 2
School of Architecture Construction and Planning (14/07/99)
INTRODUCTION
To complete a task successfully, you must have a good idea how best to carry it out.
Having a good knowledge of the options, the different methods to complete the task
will give you the best chance of being successful.
It is no different with cost planning. Knowing the various techniques means that
you can apply the appropriate method in the right situation to give the most
accurate answer. Note, this did not say "the accurate answer".. There is never a
guarantee that you have the right answer. However, there are means by which you
can limit the opportunity for error in cost planning.
In this next set of notes we will start to look at some of the techniques used in cost
planing.
LEARNING OUTCOMES FROM THIS TOPIC
Having attended the lectures and tutorials it is expected that you will be able to offer
answers to the following questions:
Which method of costing is appropriate given varying levels of information
available?
With what degree of accuracy can each of the available methods provide a cost
for a project?
What are the single price rate methods of costing?
Which methods are more commonly used?
Where is the source of information for various costing techniques?
CHOOSING THE RIGHT TECHNIQUE
Cost planning in the early stages of a design can only provide an approximate cost
because of the lack of information available. The techniques at this stage in the
project life cycle are considered to be approximate estimating techniques. The primary
function of approximate estimating is to produce a forecast of the probable cost of a
future project, before the building has been designed in detail and contract
particulars prepared. In this way the client is made aware of his likely financial
commitments before extensive work is undertaken (Seeley, 1996, p154).
It must be emphasised at the outset that no approximate estimate can be any better
than the information on which it is based (Seeley, 1996, p154). The quantity
surveyor should always emphasise that an estimate based on inadequate
information cannot be precise, and in such a situation would be well advised to give
a range of prices, as an indication of the lack of precision that is obtainable (Seeley,
1996, p154). This fact cannot be emphasised strongly enough. The cost planner
cannot be seen to offer to the client an estimate of the cost which has been artificially
inflated (to protect the cost planner) because it will become obvious later when the
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 3
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costing becomes more precise. Neither can the cost planner offer an estimate which
is too low, otherwise the client will have set aside insufficient funds to cover the
project. There is only a narrow band in which the cost planner can set the cost.
Understanding the limits (or range) that would be acceptable to the client is a
product of experience.
The choice of method employed will be influenced by the information and time
available, the experience of the cost planner and the amount and form of the cost
data available (Seeley, 1996, p154). Techniques can vary in the time they require and
the complexity of the calculation. Estimates may be prepared on the back of the
ubiquitous envelope with little or no significant information, or may take days and
weeks based on the most extensive and complex information (Smith, 1998, p119).
The result of the estimates will have significant implications for the project and
project team. As Smith (1998, p119) suggests "clients and design teams will act upon the
advice derived from such estimates which can result in changes of design, layout, content,
materials, and in extreme cases, could result in the cancellation of the project".
Consequently, the way in which the cost is reported to the client is critical. The cost
planner must always accompany any estimate of cost with an explanation of the
likely level of accuracy.
Having established the fundamental importance of the costs being submitted it
reinforces the need to use the right tool for the job. Let us now look in more detail
at each of the methods for approximate estimating.
UNIT METHOD
Definition
The unit method of approximate estimating consists of choosing a standard unit of
accommodation and multiplying this by an approximate cost per unit (Ashworth,
1994, 79). The method is also known as the cost per functional unit method and is
one of the simplest and most coarse in application (Smith, 1998, p120). The NPWC
(1993, p5.2-1) defines functional units as " the units of performance or occupancy for
which a building or section of a building is functionally designed".
Examples of cost per functional unit are:
Schools, universities, colleges - costs per pupil place
Hotel, hospitals - cost per bed
Restaurants - cost per seat
Car parks - cost per car space.
Operation
According to Ashworth (1994, p79) the technique is based on the fact that there is
usually some close relationship between the cost of a construction project and the
number of functional units it accommodates and these functional units are the
factors which express the intended use of the building better than any other. Smith
(1998, p120) suggests that this method can only be used where the building's use can
be analysed consistently in terms of its functional units and comments that it is
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 4
School of Architecture Construction and Planning (14/07/99)
almost impossible to define a relevant and consistent functional unit for some
buildings.
The method of counting the number of functional units is extremely simple, but
considerable experience is necessary in order to select an appropriate rate. These
rates can be obtained by the careful analysis of a number of recently completed
projects of a similar type, size and construction. (Ashworth, 1994, p80).
Adjustments based on professional judgement will always need to be made to take
into account varying site conditions, specification changes, market conditions,
regional changes and inflation. (Ashworth, 1994, p80).
Sources of data
Smith (1998, p121) suggests the following sources of data for this method:
i) Number of functional units
Obtained from clients who may express their requirements in functional
units. (ie they want a 100 seat cinema complex)
ii) Cost per functional unit
From analysis of previous functional unit costs or from published building
price books such Rawlinsons Australian Construction Handbook and the
Building Economist.
Use
According to Ashworth (1994, p80) this method is one of the simplest and quickest
methods to implement, but it must be used with care. It has a lack of precision and
at best can only be a rather blunt tool for establishing general guidelines (Ashworth,
1994, p80). Smith (1998, p122) suggest that it can only be used during the very early
stages of a project (ie Brief stage). Estimates are very approximate and will vary
greatly depending upon the type of construction and standard of finish. It has been
used in the past by government departments to set general guidelines for their work.
It sets the expected cost range for specific building types (ie primary schools, police
stations, etc).
Example
Smith (1998, p120) uses the following example:
The total estimated costs for a new teaching hospital would be:
Number of functional units 640 beds
Cost per bed $16,000
Total estimated cost = 640 x $16,000 = $10,240,000
Student example
Try the following example using data obtained from the Building Economist (See
figure 1.1)
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 5
School of Architecture Construction and Planning (14/07/99)
Figure 1.1 - Building costs (Building Economist, June 1999)
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 6
School of Architecture Construction and Planning (14/07/99)
Calculate the total cost for a medium to high rise city hotel - mainly
accommodation, fully serviced, with restaurants and bars etc, high class
finish to reception areas, restaurants and bars, standard finishes to rooms.
The number of units will be 85. The hotel is in Brisbane.
NOTE: All answers to student examples are given after the Self Assessment
Questions at the end of these topic notes.
SUPERFICIAL METHOD
Definition
This method (also known as the floor area method) uses a single rate technique (cost
per square metre) of estimating to calculate the cost of a building (Smith 1998, p123).
The area of each of the floors is measured and then multiplied by a cost per square
metre.
Operation
According to Ashworth (1994, p80) it is still the most common method in use for
early price estimating purposes. The manner in which the result is calculated is
easily understood by the industry and average construction industry clients (Smith,
1998, p123). The area of the building in square metres is multiplied by a suitable rate
per square metre. It is comparatively easy to calculate the floor area of a building
(Seeley, 1996, p159) and most published cost data is expressed in costs per square
metre (Smith, 1998, p128).
Sources of data
i) Area to be used in the calculations
As mentioned earlier it is necessary to know the proposed area of the building. The
area to be used is called the Gross Floor Area (GFA). This is defined by the NPWC
(1993) as the sum of the fully enclosed covered area (FECA) and the unenclosed covered
area (UCA). As these terms will be used repeatedly throughout the notes, students
should have an understanding of what they mean. Both areas are measured in m.
Fully enclosed covered area (FECA)
The sum of all such areas at all building floor levels, including basements (except
unexcavated portions), floored roof spaces and attics, garages, penthouses, enclosed
porches and attached enclosed covered ways alongside buildings, equipment rooms, lift
shafts, vertical ducts, staircases and any other fully enclosed spaces and useable areas of
the building, computed by measuring from the normal inside face of the exterior walls but
ignoring any projections such as plinths, columns, piers and the like which project from
the normal inside face of exterior walls.
Unenclosed covered area (UCA)
The sum of all such areas at all building floor levels ... and any other trafficable covered
areas of the building which are not totally enclosed by full height walls, computed by
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 7
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measuring the area between the enclosing walls or balustrade (ie. from the inside face of
the UCA excluding the wall or balustrade thickness). When the covering element (ie. roof
or upper floor) is supported by columns, is cantilevered or is suspended, or any
combination of these, the measurements shall be taken to the edge of the paving or to the
edge of the cover, whichever is the lesser. UCA shall not include eaves overhangs, sun
shading, awnings and the like where these do not relate to clearly defined trafficable
covered areas, nor shall it include connecting or isolated covered ways.
There are various ways that the GFA can be ascertained:
By measurement - this will assume that drawings are provided showing the
footprint of the building
By planning assessment - knowing the size of the site and the plot ratio, the
allowable floor area can be calculated
By calculation on a unit basis - some spaces can be designed to suit a specific area
per person or per activity. For instance, an organisation may have specific area
allocations to each employee (ie a typist gets 3m, a director gets 15m etc).
Adding all the individual requirements will provide the area required for the
actual occupants. Additional area must be added for the non-allocated activities
(ie circulation links, toilets, etc)
Calculated from useable floor area - the client may dictate their requirements in
terms of Useable Floor Area (UFA) or in terms of Net Rentable Area (NRA).
The NPWC (1993, p 6.1-3) defines UFA as:
The sum of the floor areas measured at floor level from the general inside face of walls of
all interior spaces related to the primary function of the building. This will normally be
computed by calculating the Fully Enclosed Covered Area (FECA) and deducting
...areas supplementary to the primary function of the building ...
(The deductions are common use areas, service areas and non-habitable areas.)
The NPWC (1993, p 6.1-4) defines NRA as:
The sum of all rentable areas within a commercial type building, measured from the
inside face of exterior walls and windows at a height of 1.5m above floor level and
including the area occupied by structural columns, all in accordance with the
Recommended Guide for Measurement of Buildings issued by the Building Owners and
Managers Association of Australia Limited. [Now known as the Property Council of
Australia.]
(The deductions from NRA include stairs, toilets, cleaners cupboards, lift shafts,
escalators and tea rooms where provided as standard facilities in the building; lobbies
between lifts facing other lifts servicing the same floor, areas set aside as public space or
thoroughfares and not used exclusively by occupiers of the building, plant and lift
motor rooms, service vehicle and goods delivery areas and access ways and car parking
and access ways)
The cost planner must ensure if he or she is given an area in terms of UFA or NRA
that areas are added back for all the above-noted deductions (ie lift shafts etc.) in
order to ensure it is the gross floor area that is being used.
ii) Rates to be used in the calculations
The rate or cost per square metre used in the estimate is intended as a rate for the
cost of a standard or typical building within that function/quality range. The cost of
external works, alterations, abnormal items such as piling or unusual foundations,
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 8
School of Architecture Construction and Planning (14/07/99)
locality and contingency allowances, which are normally allowed for as lump sums
or percentages of the building cost, are added to the superficial area calculation
(Smith, 1998, p126).
Rates to be used in these calculations will come mainly from two sources (Smith,
1998, 127):
Internal office records (data being stored in standard formats from previous
projects undertaken by the office)
Published cost guides such as Rawlinsons Australian Construction Handbook or
the Building Economist
The cost planner should choose the rate carefully ensuring that it relates to the same
or a similar type of building, and of similar quality. If there are different parts to a
building, each having different functions, then there is no reason why the area
cannot be calculated for each of these and a specific rate applied to better reflect the
diversity of building types. For instance, there may be a rate per metre square for
universities complete. Whilst this may be appropriate it would be better if you
could measure the areas for each functional use (ie lecture theatres, classrooms,
administration areas) and then apply the relevant rate to each of these separate
areas. It is really only a matter of trying to get the estimate as accurate as possible
given the information available.
Use
By necessity, the method can only be used when the floor area of the build to be
costed can be assessed or measured reasonably accurately from drawings (Smith,
1998, p123) or can be obtained in one of the above-mentioned ways. As with the
unit method, it can only be used during the early stages of a project and should not
be use when better quality and more accurate information becomes available (Smith,
1998, p128).
Estimates are prepared quickly and are simple, although this simplicity may be
misleading, according to Smith (1998, p128) as it depends on choosing the
appropriate rate to use to make the answer valid.
According to Smith (1998, p128) one of the main disadvantages to the technique is
that it is difficult to make adjustments for storey height, quality, site conditions, etc.
He also recommends when using this technique that the cost planner check very
carefully what is included in the rate. Separate and additional allowances may have
to be made for items that are above the standard for this type of building such as
more complex footing designs and for work which occurs beyond the face of the
building such as external services and external works (Smith, 1998, p128).
Example
Calculate the total cost for a three storey warehouse building in Sydney (excluding
external works costs) FECA = 1400m UCA = 380m Rate = $750 / m
Total cost = GFA x cost / m
Total cost = (1400 + 380) x 750
= $1,335,000
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 9
School of Architecture Construction and Planning (14/07/99)
Student example
Calculate the total cost (excluding external works and services) for a new motel in
Sydney (using cost data from figure 1.1) FECA = 500m UCA = 120m
CUBE METHOD (COST PER CUBIC METRE)
Definition
The cube method of approximate estimating was used extensively at the beginning
of this century, but has since been superseded because of its inherent disadvantages
(Ashworth, 1994, p81). It is a traditional method extensively used by Architects
(Ashworth, 1994, p81). All quantity surveyor's offices used to keep a "cube book"
(Ferry and Brandon, 1984, p106). It is a single rate method of estimating, similar to
the superficial method, but based upon the cubic content of a building rather than
the floor area (Smith, 1998, p128).
Operation
Traditionally, once a contract was signed for construction of a building its costs
would be divided by the cubic content and entered into the office price book
(Ashworth, 1994, p81). The cost of a new job could then be determined by
calculating the volume and selecting an appropriate rate from the book (Ashworth,
1994, p81). The rules for measurement of the volume of a building are fairly
complex and are controlled by the RIBA (1954). It is not proposed to spend too long
discussing this techniques as it is now basically obsolete.
Sources of data
As this technique is all but obsolete in Australia, there are few sources of reliable
cost data supporting this method. Generally, these would now be the older
practising quantity surveying firms who might still choose to keep record of these
rates, although it seems highly unlikely nowadays that anyone would still be
recording such data.
Use
According to Smith (1998, p128) this method is now obsolete in both the UK and
Australia. T his technique was devised to try and incorporate the effects of changes
in storey height on the rates being used. The superficial method tends to ignore the
varying vertical aspects of a building (by ignoring differences in storey height).
Example
As the method is essentially obsolete it is not appropriate to spend any time in
explanations or examples.
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 10
School of Architecture Construction and Planning (14/07/99)
Student example
Examples are unnecessary. If the student wishes to learn more about this technique
they may do so by reference to the various texts on cost planning techniques.
FUNCTIONAL AREA METHOD
Definition
Functional area is defined by the NPWC (1993, p. 5.2-1) Cost Control Manual as:
Any group of accommodation which has a common work function within a
particular type of building.
The objective '... of functional analysis is to derive functional areas and costs for use
in budgeting' (NPWC 1993).
Smith (1998, p129) suggests that it is useful to quote directly from the NPWC (1993,
pp. 5.2-1, 5.2-2) to gain a better understanding of the background to the technique:
Functional analysis is essentially a budgeting tool ... it provides greater flexibility
and accuracy to cost budget procedures, and identifies those functional areas of
different quality and thereby cost ...
One way in which functional analysis may be used in budgeting is:
to identify the functional areas from the brief and to price these using rates
developed from previous functional cost analyses.
To calculate the gross floor area (GFA):
it is necessary to determine and apply an accurate percentage allowance (called the
Grossing Factor) ... for circulation, travel and engineering areas ...
According to Smith (1998, p130), the functional area method of estimating combines
or integrates the functional unit method with the superficial method of estimating. It
refines both methods to provide a technique based upon the costing of functional
areas with appropriate rates per square metre, or costs per functional unit.
In NPWC (1993), a list of functional areas (section 6.5) is presented for the following
building types:
Primary schools
High schools / secondary colleges
TAFE Colleges
General Hospitals
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 11
School of Architecture Construction and Planning (14/07/99)
Operation
Essentially, the major disadvantage for this method of estimating is that it requires a
large database of buildings previously analysed into functional area costs. This is
not so common these days, cost planners preferring to use other methods.
The process for functional analysis of previous projects requires an elemental cost
analysis (based on the actual tender) to be completed first and then the elemental
costs are divided between the various functional spaces. This is complex and time
consuming. Once the database of functional rates is available then the proposed
building can be measured according to the NPWC guidelines and the areas allocated
to the relevant functions. The functional area rates are then multiplied by the
functional area (as measured) for each function and then totalled to give an overall
estimate for the new building.
Sources of data
Data can only be obtained from analysis of many previous projects. As this is time
consuming, it is not a cost effective method of estimating to use unless it is going to
be used regularly. This may well be the case for a government department (ie the
Education Department) who can also afford to pay for the database and associated
analyses to be prepared.
Use
It can be used at the early stages of a project where the client and designer are
talking about the allocation of space between various functional groups within the
new building. Using this technique allows the cost planner to be involved in
discussions on allocation of space and provide advice on the effects of adding
additional space to one functional area in preference to another. There are some
particularly complex issues to be resolved when measuring the respective areas and
also in the costing of division walls between each area.
Smith (1998, p132 suggests "this technique is not recommended for the 'one-off' or
individual building projects"
Example
As this technique is less common, we will not consider a specific example. Students
wishing to read more about this technique can refer to the texts, in particular Smith
(1998, p129 onwards).
Student example
Students will not be required to go through a practical example of this technique.
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 12
School of Architecture Construction and Planning (14/07/99)
STOREY ENCLOSURE METHOD
Definition
According to Seeley (1996, p160) the origins of this method date back to 1954 when
an RICS study group had the objective of developing a better system of estimating
that would take into account the following:
Shape of building
Total floor area
Vertical positioning of floor areas within the building
Storey heights
Some aspects of the design would still need costing separately. The storey
enclosure method measures the areas of enclosing components and then multiplies
the result by a given rate
Operation
The areas of the various floors, roof and containing walls are measured, each then
being weighted by a different percentage and the resultant figures totalled to give
the number of storey enclosure units. The number of storey enclosure units are
multiplied by a given rate (built up from previous projects) to give the overall cost of
the building, to which must be added the external works and services costs.
Sources of data
Unfortunately, the technique had little opportunity to gain wide acceptance because
it was superseded by elemental estimating. No cost data was collected to any
significant degree (Smith, 1998, p132)
Use
According to Ferry and Brandon (1984, p108) the technique was not widely used,
and with a consequent lack of data on which to accurately base any estimates, it
seems the technique will disappear over time.
Example
As this technique is less common, we will not consider a specific example.
Student example
Students will not be required to go through a practical example of this technique.
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 13
School of Architecture Construction and Planning (14/07/99)
SUMMARY
In this seventh Topic we introduced the student to estimating techniques. All of
these techniques are called Single Price Rate Methods. The techniques included the
unit method, superficial method, cube method, functional area method and storey
enclosure method, We have looked at what determines the choice of method for a
particular situation and discussed the accuracy than can be achieved at various
stages using the various techniques. The last three methods (cube, functional, and
storey enclosure) have been included in the discussions because student should be
aware of their existence. However, as discussed previously, they are seldom used
and will reduce further in popularity because there is a lack of data from which to
develop an appropriate rate. In the next topic notes we will conclude our discussion
of the various methods available for approximate estimating.
REFERENCE LIST FOR THIS TOPIC
Ashworth, A. 1994. Cost Studies of Buildings. 2
nd
Ed. Longman Scientific & Technical,
Harlow, UK.
Ferry, D. and Brandon, P. 1984. Cost Planning of Buildings. 5
th
Ed. Granada
Publishing, London, UK.
NPWC. 1993. Cost Control Manual. National Public Works Council Dickson, ACT,
Australia (students should note that the copyright for this has now been purchased
by the AIQS, who will ultimately be responsible for sales of the manual)
Seeley, I. 1996. Building Economics: Appraisal and Control of Building Design and Cost
Efficiency. 4
th
Ed. Macmillan Press, Basingstoke. UK.
Smith, J. 1998. Building Cost Planning for the Design Team. Deakin University Press,
Geelong, Victoria, Australia.
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SELF ASSESSMENT QUESTIONS
Question 1: Your client, an architect, is designing a new hotel development and
has some idea of the number of hotel bedrooms he wants to include
in the development. He has asked you to give him an approximate
cost for the development. Describe the technique you would use to
do the costing and give an explanation to your client why this is the
best method.
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 14
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Question 2: Briefly describe each of the following approximate estimating
techniques:
Unit method
Superficial method
Cube method
Functional area method
Storey Enclosure method
Question 3: Hospitals comprise a series of different departments (ie the x-ray
section, the operating theatres, the general wards) and each of these
has different building and equipment requirements. Your client, a
private hospital developer, has asked you to provide an early stage
approximate estimate for a new hospital and has given you the floor
areas for each department within the hospital. Given the above-
noted peculiar characteristics of a hospital and the amount of
information available, describe which approximate estimating
technique would be most appropriate and give your reasons.
Question 4: Using the superficial method and cost data from Figure 1.1 (in the
notes) provide a cost for a double storey hotel in Perth having a
fully enclosed covered area of 1200m and an unenclosed covered
area of 200m. AND Describe the advantages and disadvantages
of using the superficial method of approximate estimating.
ANSWERS TO STUDENT EXAMPLES
Student example for Unit Method
1. Decide on the most appropriate unit to be used to cost a hotel:
per bedroom unit
2. Look for the rate in the Building Economist which best matches the
proposed building's specification
Brisbane, $120,000 per bedroom unit
3. Calculate the cost based on the number of units in the proposed
development
85 x $120,000 = $10,200,000
(it would be wise to round this up to $10,500,000 at this stage)
(this would exclude all the fit-out costs such as soft furnishings,
crockery, cutlery, etc and would also exclude any additional costs for
external works, car parking, etc)
Cost planning: Techniques - Part 1 Topic No. 7
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Curtin University of Technology, 1999 T 7 / 15
School of Architecture Construction and Planning (14/07/99)
Student example for Superficial Method
1. Ascertain the proposed gross floor area (GFA) for the building:
FECA (500m) + UCA (120m) = 620m (GFA)
2. Look for the rate in the Building Economist which best matches the
proposed building's specification
Sydney, $1,150 per m
3. Calculate the cost based on the GFA for the proposed development
620 x $1,150 = $713,000
(it would be wise to round this up to $750,000 at this stage)
(this would exclude all the fit-out costs such as soft furnishings,
crockery, cutlery, etc and would also exclude any additional costs for
external works, car parking, etc)

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