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Pre-contract costing
Acknowledgement
This report reflects the combined efforts of many professionals in the University of Moratuwa. Their observations, conclusions, recommendations, are a product of intensive investigation upon us. Those became as precious assets to achieve the task of our project. So many people deserve credit, which is impossible to identify all of them individually. Mr. B.V. Prasath Sanjeewa, senior lecturers of the department of building Economics contributed skills and their dedication was made our project success. A project like this, necessasarily required the assistance of many people. H.A.E.C. Jayasena has assigned us to reach the task in a flexible manner. The lecturers in charge of computer labs helped and guided us to obtain knowledge by providing the facilities to access internet to collect information for our project work. Here this project work is acknowledged to the Department of building Economics in the University of Moratuwa as to show our gratitude to above professionals and future professionals. Your acceptation will be courage to our career in this field of Quantity Surveying and Facilities Management.
Pre-contract costing
Table of Content
1.0 Introduction ................................ ................................ ................................ ................................ ........1 2.0 Pre-contract cost planning ................................ ................................ ................................ ...................2 2.1 Types of Cost plans produced in different stages ................................ ................................ ............ 2 3.0 Pre-contract cost planning process in the RIBA plan of work ................................ .............................. 3 3.1 Feasibility Studies ................................ ................................ ................................ .......................... 3 3.2 Outline Proposal................................ ................................ ................................ ............................. 5 3.3 Scheme Design Stage ................................ ................................ ................................ ..................... 7 3.4 Detail Design to Production Information stage ................................ ................................ ............... 8 3.5 Bill of Quantities stage and Documentation ................................ ................................ .................... 8 4.0 Preliminary Estimating techniques used in stages of RIBA plan ................................ .......................... 9 5.0 Pre-contract cost controlling................................ ................................ ................................ .............. 11 5.1 Basic Principles of cost controlling ................................ ................................ .............................. 11 6.0 Pre-contract cost controlling process in the RIBA plan of work................................ ......................... 12 7.0 Pre construction cost control line diagram ................................ ................................ ......................... 14 8.0 Pre-contract cost control flow chart ................................ ................................ ................................ ... 15 9.0 Conclusion ................................ ................................ ................................ ................................ ........ 16 10.0 References ................................ ................................ ................................ ................................ ...... 17
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Pre-contract costing
1.0 Introduction
The cost of a project should be predetermined before the implementation of the construction due to the scarcity of investments in the project, so the client requires knowing the cost of construction which fulfills his design and other functional, structural and aesthetical requirements. The objectives of this report are to set out the procedures which are necessary to enable a chartered quantity surveyor to carry out comprehensive pre-contract cost plan and control for a proposed project from the formulation of the clients brief, through the various design stages until a contractors tender is finally accepted. Pre-contract cost planning and cost controlling are processes which go together, in other words pre contact cost planning cannot sustain alone without pre-contract cost controlling or vice versa. Cost control and planning during the construction process is fundamental to ensure the success of a project. The most complex projects share the common theme that they are fraught with risks and uncertainty that can cause cost escalations, cost control is the process of controlling of cost performance against the c plan, ost adjusting one or the other reference to the changing circumstances in the project's financial environment. This is a process that should be continued throughout the construction period to ensure that the final cost of a building project within the target cost. The cost control can be divided into three major areas, they are during the design stage, during the tendering stage and after the construction commencement controlling is done by the client. Ideally, cost control should be provided from inception to completion of the project. Such that the estimated final cost of project is always known. However, Pre-contract cost controlling is quite different to the post-contract cost controlling. So to identify the function plays in pre contract stage is detailed throughout this report and the illustration of diagrams will enhance the understandability of how the planning and estimating is provided under these stages in the RIBA plan of work. This course work contains about pre contract cost planning and cost control related with the RIBA plan of work and estimating techniques used in the cost planning process and cost controlling which is an essential part of cost planning. As quantity Surveyors, it is essential to have the idea of estimating prior to the preparation of the Bill of Quantities and pricing its items, which is given the overall idea and the estimating acts as a reference to the Bill of Quantities.
Pre-contract costing
Pre-contract costing
Pre-contract costing
From the services 1. Advice on areas of building which will require specialist engineering services. engineer 2. Advice on availability of public utility services.
From the structural 1. Advice on probable ground conditions. engineer 2. Advice on probable floor loading.
The information from the quantity surveyor to design team members To the client 1. The budget, with alternatives if appropriate. 2. A statement of the basis of the budget calculation including any important assumptions made. 3. A statement setting out the time for design and construction which the budget cost will meet. 4. Cash flow forecast. 5. A statement of items not included. To the architect 1. A copy of document sent to the client. 2. A more detailed statement of quantity and quality parameters included in the calculation. To consultants other 1. Such quality and quantity parameters as relate to their area of design.
Method of preparation The method of preparation will depend on the type of project involved. Unusual projects, projects of great complexity and projects containing large element of alterations cannot normally be accurately budgeted at an early stage. For many other types of projects, it is possible to build up a budget using the parameters set out. The main elemental quantities of hypothetical buildings can be easily generated using agreed parameters, to which rates applicable to agreed quality and performance standard can be applied. Once the budget has been calculated in this way it provides the first cost plan for the project, and therefore the framework for the actual design to develop Inflation The prediction of future inflation may not be necessary for some clients, and a statement of cost at current prices may be adequate. Where an assessment of inflation is required for more than a few months ahead, a range of probable inflation is best provided. This can be computed using predictions published by the BCIS, Architects Journal or the PSA projections. The assumptions upon which the prediction is made may need to be stated. Some public sector clients have their own rates, sometimes they are unrealistically low, and in such circumstances professional judgment is exercised.
Pre-contract costing
Pre-contract costing
The information from the quantity surveyor to design team members To the client 1. A statement of cost 2. A broad indication of specification. 3. A statement of floor areas. 4. A request for decisions on any alternative proposals. To the architect To consultants 1. A copy of documents sent to the client. 2. The cost plan. other 1. Such quality and quantity parameters as relate to their area of design and target costs.
Methods of preparation The method of preparation will either be by the measurement of approximate quantities and the application of rates to the quantities generated, or from comparison of the requirements with analyses of previous projects of a similar character. Evaluation should be made of the alternative forms of the construction of the key elements. The key elements always vary and it is anticipated that major financial consequences almost always include structural and services elements. Design and Construction Period In establishing the outline cost plan, the quantity surveyor must take into account the consequences of the proposals made by the other members, because when the completion dates are critical, the selection of components or systems should be made with a view to there being acceptable alternatives in case of speed up the construction. Inflation Where the client has been given a forward projection of inflation and where this prediction is significantly changed, it should be reported periodically.
Pre-contract costing
From the services 1. Scheme drawings and scheme specifications. engineer 2. Detailed design parameters.
From the structural 1. Scheme drawings and scheme specifications. engineer 2. Confirmation on floor loading and the like. 3. Provisional indication of weights where appropriate. From the specialist 1. Scheme drawings and scheme specifications. consultants
Pre-contract costing
The information from the quantity surveyor to design team members To the client 1. A statement of the cost. 2. A statement of the specification. 3. A statement of the floor areas. 4. A statement of the proposed design and construction programme. 5. A cash flow forecast, where appropriate. 6. A statement of the relevant life cycle cost where appropriate. To the architect To consultants 1. A copy of documents sent to the client. 2. The cost plan. other 1. Such quality and quantity parameters as relate to their area of design and their target costs.
Methods of Preparation The method of preparation should normally be by measurement of approximate quantities from the proposed scheme drawings. The degree of detail to be measured should be related to the cost significance of the elements in the particular design. Likewise pricing should be similarly related. Some elements may still be most suitably priced on an elemental unit rate basis, where the cost significance is low. Major elements will normally need to be priced in greater detail. The preliminary engineering and specialist services scheme drawings and outline specification notes will be required from the consulting engineers, from which approximate quantities of equipment can be measured and priced using all-in rates. Pipe work and cables will normally still need to be priced on an overall basis related to floor area or service points at this stage. This also ensures that the likely builders work implications are understood by the design team and costs are taken into account
Pre-contract costing
feasibility Stage
No need of drawings and specifications. Only the concept of the project in respect of function is required. Only required historical data and the experience of the estimator in adjusting those historic data to the current figures. Estimate = Standard units of accommodation x Cost per unit
Scheme Stage
design 4. Cube method This method needs some of sketch drawings, purpose and function of the project. Required the historical cost data and experience of the estimator is required. This method is base on relationship between building volume and unit cost. Estimate = volume of the building x Unit cost (cost/m3 )
5. Superficial area method Requirements are as above. This method is based on relationship between building Area and unit cost (cost/m2). Estimate = Area of the building x Unit cost (cost/m2 )
6. Story enclosure unit method Detail Stage Production Information Stage Requirements are as above. This technique use weightings for the estimating the building elements. Detail drawings are required The method analyses the cost on an elemental basis. Attempting the use of cost data of similar projects.
Pre-contract costing
8. Approximate Cost estimating Detail drawings are required Taking off is done for composite items by grouping together typically billmeasured items.
Bill
of Resource analysis To determine individual rates for measured items in the Bill of Quantities. Considering each items by analyzing of material , labour and plant and equipment requirement.
Quantities Stage
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Pre-contract costing
of This is to ensure that the expenditure is contain with the cost targets (cost limits). Remedial actions should take after the discussion with design team and the management/ client. The remedial action should take well before the stage where any damages done cannot be change back to the original budget. Therefore, this action should take before preparation of production information and Bills of Quantities.
(cost check)
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Pre-contract costing
Principles The method will vary according to the stage reached in the design process. Normally,
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Pre-contract costing
however, this takes the form of measurement of approximate quantities from the consultants drawings, to provide a check on the quantity and the quality of parameters set down in the appropriate cost plan. The gross floor area is the first check at any stage. The two dominant considerations in deciding the priorities for cost checking elements are as follows. The cost significant of an element related to the total cost of the project. The known variability of cost of an element i.e. where a wide range of cost is possible in an element, it will be necessary to cost check this before checking elements of low variability but of the same overall cost significance. Judgment must be applied before notifying the architect of possible excess expenditure in a particular element. If an excess revealed during cost checking is of such significance that is highly improbable that compensating savings will occur elsewhere, then this must be notified immediately and the design team must be asked to consider modification to the cost plan. If, however, the excess or saving revealed in the element is relatively small and there are still a number of elements to be checked, it is usually more appropriate to advice the architect of the difference and to suggest that no further action is taken until further cost checks have been carried out, since these may produce compensating amounts. It is important for the quantity surveyor to maintain proper records of the cost checking process, setting down on a summary the value of the elements cost checked compared with the cost plan targets, and to be especially clear as to the drawings or information upon which the cost check has been based. Bill Quantities of This stage will be the final check of cost controlling, which is giving the entire picture of the project cost after the controlling the entire process.
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Pre-contract costing
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Pre-contract costing
YES
Alter Brief
NO
NO
Procedures as appropriate
YES
YES
NO
NO
YES
Sketch Design Cost Plan Includes estimates of alternatives during sketch design development and Final Cost Budget Document if required
NO
Tender Document Cost Plan Includes cost checks during detail development and production of tender documents, cost statements and interim cost plan if required
NO
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Pre-contract costing
9.0 Conclusion
The cost plays a vital role in the construction industry due to the fact that the client has a limited budget so the work should within the range of the clients budget to satisfy his requirements. Pre contract costing flows from the inception to the documentation in the process of RIBA plan of work. Planning should go in conjunction with controlling to conclude on realistic cost plan of the project. It always updates at the presence of assumptions and the information available. Therefore the methods used in the preparation of estimate also moderate as it flows in the process. Cost plan develop with the clients brief with an unknown design and ends up with the priced bill of quantities where the summary in it give the final cost estimate of the construction at the consultants point of view. Estimating techniques could not help the design team to prepare a realistic estimate for a client at the early stage of the building design. It results to develop preliminary estimating techniques. The techniques used in the pre contract cost planning which is detailed in the project, is different and developed when the design reaches step by another in the RIBA plan of work. The plan is mainly depend on the appropriate technique used for the estimating and the estimators skills, knowledge and experience. For the required adjustments for the quantity, quality and time, the estimator must use his professional judgment in developing a realistic reasonable estimate prior to the implementation of the construction. Approximate quantities and single rate methods are important and are the methods most frequently employed today in both Cost planning and Cost controlling. The cost control is the governing the accuracy and the reasonableness of the estimate throughout the process. It is come across with certain principles that used to maintain the cost within the clients budget also conjunction with his required quality of the work. They are set up as cost limit, cost target and the cost check, where the estimator will do a compare, analyze on variation and update the budget with some other construction recommendation along with his scope. The line diagram and the flow chart is given a symbolic presentation of the Pre contract costing of planning and controlling as the overall picture of the report, It is highlighted where the estimator should obtain the clients approval to proceed with the work. As quantity Surveyor undergraduates it requires to gain the knowledge on planning and controlling the cost factor throughout the construction process.
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Pre-contract costing
10.0 References
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