Pre-contract cost control on public building projects – lessons to be learned

• Recognize cost as a design factor. • Design to a cost target.

• Develop a realistic first estimate based on stringent Government cost limits. • Develop a cost plan based on an elemental cost analysis approach, cost-checking

throughout the design process.

• The architect and quantity surveyor should work together as a team (preferably in the same office) with close involvement of the building services consultant. • On schools projects consider the use of standard modular grids, standard components,

light and dry systems of construction and off-site prefabrication.

• Continually search for improvement, including liaison with component manufacturers. • Use value management/value engineering techniques on the project.

• Liaise with the Building Research Establishment.

• Utilize a central control unit to circulate best practice guides and information on successful projects to all local authorities.

• Share best practice through case studies and annual conferences. • Do not indulge in costly architectural styles.

In most cases, sound cost planning will produce tenders within budget. If, due to market conditions or late changes in designs and specification, adjustments need to be made to a tender, information on potential savings will need to be identified by the design team. If there are significant changes from the initial tender documents, consideration should be given to the need for seeking revised tenders.

Cost planning has evolved significantly over the years. Cost plans can now embody replace- ment costs, operation and maintenance costs, whole-life costs, Standard Assessment Procedure (SAP) energy ratings and the BRE’s Environmental Assessment Method (BREEAM). The move from ‘costing a design’ to ‘designing to a cost’ and the development of cost planning has enabled quantity surveyors to add a value-added service to their clients, whilst the concept of elements has been incorporated into the development of life-cycle costing and value management.

4.7 Conclusions

This chapter has briefly reviewed the key concepts of pre-contract cost management in the industrial engineering, civil engineering and building sectors in order to identify a suitable approach for construction works. Many similarities in the approach and techniques in the three sectors have been identified.

The cost manager’s systems should provide clients and project managers with the maximum possible advance warning of likely expenditure so that timely and appropriate actions may be considered.

It is necessary to identify what items are included in the estimate and which are excluded. Forecasts should not be single figures, implying a degree of accuracy that does not exist; they should be a range of figures within stated parameters. Ideally each estimate should be a logical development of its predecessor, reflecting the increased level of detail available.

In the periods between revisions of estimates and cost plans, the development of designs and programmes and the progress of procurement and commitment must be controlled.

A major factor in the management of costs is the identification and management of the risks. Risks are associated with the unknown. Therefore, as a project progresses from inception, through design, construction and use, the unknown elements should diminish and the risk allowance can be reduced accordingly.

4.8 Questions Question 1

Describe and discuss the range of cost models and show how they are useful at different stages in the design process.

Question 2

Discuss the steps that can be taken to ensure that cost planning and control keep the final cost of a building project within cost target.

Question 3

The primary function of producing estimates of the cost of construction works is to be able to advise clients of anticipated development costs. Discuss the various methods of providing such pre-contract estimates in relation to a proposed marina development.

4.9 References/further reading

Ashworth, A. (2004) Cost Studies of Buildings, 4th edition, Prentice Hall.

Bathhurst, P.E. and Butler, D.A. (1980) Building Cost Control Techniques and Economics, Heinemann. Ferry, D.J. et al. (1999) Cost Planning of Buildings, 7th edition, Blackwell Science.

Flanagan, R. and Tate, B. (1997) Cost Control in Building Design, Blackwell Science.

Flyvbjerg, B., Holm, M.S. and Buhl, S. (2002) ‘Underestimating costs in public works: Error or lie?’, Journal of American Planning Association, Vol. 68, No. 3, pp. 279–295.

Flyvbjerg, B., Bruzelius, N. and Rothengatter, W. (2003) Megaprojects and Risk; An anatomy of ambition, Cambridge University Press.

Highways Agency (2009) Procurement Strategy 2009: Delivering sustainable value through supply chain management: http://assets.highways.gov.uk/about-us/corporate-documents-procurement-strategy/ Procurement_Strategy_2009-10.pdf – accessed 20 September 2012.

HM Revenue and Customs: www.hmrc.gov.uk.

House of Commons Culture, Media and Sport Committee (2002) Wembley National Stadium Project: Into Injury Time, Sixth Report of Session 2001–02: www.publications.parliament.uk/pa/cm200102/ cmselect/cmcumeds/843/843.pdf – cited 16 October 2012.

Jameson, A. and Nugent, H. (2006) ‘Delays ahead as road costs soar’, The Times, 23 January 2006, p. 3. Joint Development Board (1997) Industrial Engineering Projects: Practice and procedures for capital projects

in engineering, manufacturing and process industries, E & FN Spon. Martin, J. (2009) ‘Supporting the NRM’, RICS Construction Journal, July–August. Morton, R. and Jaggar, D. (1995) Design and Economics of Building, E & FN Spon.

NAO (2009) Performance of PFI Construction, A review by the private finance practice, National Audit Office. Nichols, M. (2007) Report to Secretary of State for Transportation: Review of Highways Agency’s Major Roads Programme, Nichols Group: www.dft.gov.uk/pgr/roads/nicholsreport/nicholsreport.pdf – accessed 22 April 2009.

Nisbet, J. (1959) The Role of the Quantity Surveyor during the Design Stage, RIBA Journal, July 1959. Nisbet, J. (1989) Called to Account: Quantity surveying 1936–1986, Stoke Publications.

Norman, A. (1994) Cost Estimating, notes presented at the UMIST Project Management Course, UMIST. Potts, K. (2010) ‘The first estimate should equal the final account – quantity surveying and the development

of elemental cost analysis and cost planning’, RICS COBRA Conference 2010, 2–3 September, Dauphine Université, Paris.

RIBA (2013 forthcoming) Plan of Work: www.architecture.com/Files/RIBAProfessionalServices/Practice/ FrontlineLetters/RIBAPlanofWork2013ConsultationDocument.pdf – accessed 15 October 2012. RICS (1992) Cost Management in Engineering Construction Projects: Guidance notes, Surveyors Holdings

Limited.

RICS (1998) The Surveyors’ Construction Handbook, Surveyors Holdings Limited.

Saint, A. (1987) Towards a Social Architecture: The role of school building in post-war England, Yale University Press, New Haven and London.

Seeley, I.H. (1996) Building Economics: Appraisal and control of building design, cost and efficiency, Macmillan.

Shrimpton, F.S. (1988) ‘Cost management and reporting in civil engineering’, RICS/ICE Discussion Meeting, RICS Quantity Surveyors Division.

5 Cost management on