Design Economics and Cost Planning (T022)

For QSs working in private practice, design economics and cost planning are
issues that come up all the time, so in your APC exam, expect a grilling on this...
This article focuses on the core competency Design Economics and Cost Planning
(T022). As indicated in the RICS requirements and competencies guide it is more
likely that this option will be chosen by those working in the professional
practice/consultancy environment rather than those working in commercial
management or contracting areas. The competency covers a wide range of
issues in relation to design economics and cost planning, which needs to be
attained to level 3.
As a quantity surveyor working in private practice, design economics and cost
planning are issues that will be dealt with regularly and therefore you will be
expected to understand and respond in detail.
Level 1
The RICS guide outlines the requirements at Level 1 as demonstrate knowledge
and understanding of the main factors that affect design economics over the
whole life of a building and demonstrate knowledge and understanding of how
cost planning assists in the financial control of projects during the design
development stage. Competency at Level 1 is generally focussed on having a
knowledge and understanding of the competency knowing.
Question What do you understand by the term life cycle costing?
Answer Clearly you need to understand the term and briefly cover the key
points:
Consideration of costs over the whole life of a building not just the capital
costs
Consideration of capital cost against maintenance costs / replacement costs
Getting an understanding of what the clients requirements are in terms of
capital and life time costs.
Question Where do you source data from in order to prepare accurate cost
plans and provide the client with accurate cost advice at the front end of a job?
Answer Here you will need to demonstrate that you understand what cost data
is available and where it can be sourced from. You would be expected to cover:
BCIS database
In house cost data
Pricing books / published cost data
Clients own cost data
You should also make reference to understanding the data and what it is telling
you. In particular the fact that you will need to take account of location factors,
indexation, project specifications etc.

Question What is the difference between an elemental cost plan and a trade
cost plan?
Answer Understand the differences between different types of cost plans. An
elemental cost plan follows the standard elemental heading identified in the
Standard Method of Measurement and BCIS elemental breakdowns. A trade cost
plan follows trade packages often so it can be sent out for pricing to
contractors easily
Level 2
The RICS guide outlines the requirements at Level 2 as Apply your knowledge to
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. Competency at level 2 is generally focussed on having
an application of knowledge and understanding doing.
From a quantity surveying perspective this means demonstrating a working
knowledge of cost planning and how a cost plan develops throughout the project:
Question How did you develop your initial cost plan through the pre tender
phase of the job, ensuring all parties understand the financial position of the
project?
Answer Here you will need to describe the process of developing a cost plan
from scratch and identifying the drawings / source information from which it is
based. You would then be expected to communicate the cost plan to the client sit down with the client and talk them through the entire cost plan in detail
identifying areas of uncertainty and risk along with contingency allowances. The
client will need to understand everything in detail. You will also no doubt have a
similar meeting with the design team. As design develops, the cost plan must be
updated in accordance with the design information available. Contingencies and
risk are replaced with firm costings where appropriate. The key here is ensuring
that the differences between the current cost plan and the previous version are
explained in detail to all parties. You should also describe how if prepared
properly, the cost plan can be used as a very effective management tool to
control the pre contract design process.
Question How do you set about calculating the life cycle costs associated with a
wood pellet fired boiler against a standard system?
Answer You will need to describe here how you would undertake a life cycle cost
exercise. Capital costs of both systems will need to be identified. Then you will
need to look at the long term costs. Maintenance and parts replacement should
be considered you may need to speak to manufacturers here. You will also need
to look at other issues such as sourcing the fuel e.g. can you get wood pellets
locally at a cost effective price; where will they be stored etc.
Once you have undertaken your comparison then you need to provide the client
with a recommendation based upon your analysis, your understanding of the
project and the clients requirements as well as budget.
Level 3
The RICS guide outlines the requirements at Level 3 as 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. Competency at

Level 3 is generally focussed on the provision of reasoned advice and depth of

technical knowledge advising.
Question How would you deal with a cost plan that is over the clients budget?
Answer As identified in level 2, the communication of cost plans is extremely
important. It is the clients chance to understand the costs associated with the
project, and your opportunity to explain everything in detail. You need to do this
in a clear and concise manner. Often cost plans come in at more than a clients
budget. In these circumstances you need to approach matters in a positive
manner, identifying areas where potential savings can be made possibly in
terms of material specification or re-design. Reference needs to be made to
value engineering alongside the design team. A question like this presents a
good opportunity to refer to a project that you have actually worked on and draw
upon your practical experience of what actually happened.
Question How would you identify risk within the cost plan?
Answer There are several issues to cover here. Firstly, the cost plan should
include a level of contingency which generally covers unforeseen events on site
this needs to be explained to the client. Secondly you may have provisional or PC
sums within the cost plan. These need to be explained to the client along with
the risks of each. Finally, you may also have a risk register or risk schedule,
which will include risks identified by the project team. As the design develops
and the cost plan develops, hopefully the risks will either be designed out or
mitigated to a manageable level, to a point where the risk register only includes
a small number of risks.