C - Design economics and cost planning Flashcards

Question

What are the principal components of a cost estimate?

Answer 1

1) Construction Cost 2) Preliminaries 3) Overheads & Profit 4) Risk / Contingency (Design development, Construction, Employer change, Employer other) 5) Inflation 6) Assumptions 7) Exclusions 8) Area Schedule 9) Basis of estimate - Drawings, specification etc

Answer 2

A sum included in the estimate to cover unknown expenses or unmitigated risks during the project. NRM 1 identified 4 types of risk 1) Design Development 2) Construction 3) Employer change 4) Employer other

Answer 3

The amount included should reflect the risks and unknowns specific to the project. Early estimates - when little information is available it is common to include a %. At the end of stage 2, this is typically 10% This should reduce as more information becomes available and unknowns decrease. In stages 3 - 4, it is usually 5% (2.5% design and 2.5% construction)

Answer 4

Costs that cannot be attributed to specific items of work. A guide to preliminaries can be found in NRM

Answer 5

1) Length of Contract 2) Location - accessibility, space restrictions, accommodation possibilities 3) Type of project 4) Size of project 5) Need for temporary works 6) Need for security 7) Limitations on method and sequencing of works, working hours - supervision requirements 8) Sectional completion 9) Availability of services 10) Level of Contractor's designed works

Answer 6

1) Professional Fees 2) GST 3) Client direct costs 4) Loose fixtures and fittings 5) Inflation 6) Site acquisition costs 7) DA requirements 8) Removal of asbestos 9) Special furniture, fixtures and equipment (FF&E)

Answer 7

Different Clients incur different levels of GST, it may not be applicable. We would not be in a position to know the correct rate unless informed of it.

Answer 8

Building Cost Information Service Self financing, non-profit arm of the RICS Provides construction costs and price information through publications, online services and price books

Answer 9

BCIS - Available online for free, published in standard format. Useful for calculating cost forecasts Published price books - Published annually which means that information is several months old Priced BoQ's from previous projects - Cost information tenders to be current In-house cost data - Perhaps the most reliable, easier to ensure quality control on the data. Disadvantage - time and cost required to prepare and store

Answer 10

Tender Price Indices Reflect changes in the level of pricing contained in the lowest accepted tenders for new work to take account for market conditions

Answer 11

To account for inflation when benchmarking / estimating

Answer 12

Through the application of location indices

Answer 13

Different market conditions in different locations, this can affect cost of materials, wage rates etc and impact upon tender levels

Answer 14

Stage 3 - Developed Design Stage 4 - Technical Design

Answer 15

It presents the estimated cost into a structural elemental or functional format. It shows how the design team proposes to distribute the available funds across the elements of the proposed building

Answer 16

It is used by the cost consultant to control the development of the design. It defines the Client's agreed cost limit and how the money is to be allocated to the different parts of the building. They provide a work breakdown structure and a cost breakdown structure which, through coding, can be used to redistribute works in elements to trade works packages for the purpose of procurement

Answer 17

Cost Estimate - An approximate forecast of construction cost Cost Plan - Details costs associated to elements of the building, this is established to monitor costs against

Answer 18

Depends upon the amount of information available Typically 5% accuracy is accepted for a cost plan.

Answer 19

1) Ensure the employers are provided with value for money 2) Make employers and designers aware of the cost consequences of their desires or proposals 3) Provide advice to designers that enables them to arrive at practical and balanced designs within the budget 4) Keep expenditure within the cost limit approved by the employer 5) Provide robust cost information upon which the employer can make informed decisons

Answer 20

The NRM provides a list of elements and guidance e. g. 1) Substructure 2) Superstructure 3) Internal Finishes 4) Fittings, furnishings and equipment

Answer 21

Usually an elemental review of costs against the cost plan. Can be very time consuming if there are major discrepancies between the cost plan and the architect's final design. Time can be saved when the surveyor has provided the architect with detailed cost plan and specification descriptions and where the architect has stuck to them

Answer 22

Inform the design team and proceed in one of three ways 1) Redesign the element back within the target cost 2) Approve the change in the element, but re-examine other elements to achieve savings in order to maintain budget 3) Approve the change and cost implications. The Client must be informed of the proposal and accept or decline

Answer 23

A comparison in cost of similar projects, in order to review levels of pricing

Answer 24

1) Highlights areas of the design that are not offering good value for money 2) Can be used to support business cases 3) Supports project estimates

Answer 25

The process of providing all the required functions at the lowest cost

Answer 26

VALUE IS FLEXIBLE It means different things to different people, it comes down to perception. COST IS FIXED A product or service will have a predetermined cost attached to it, irrespective of what an individual may think it is worth

Answer 27

Value is a complex concept It is a measure of worth A relative measure of usefulness of something in relation to the cost paid for it.

Answer 28

1) Identifying what values and objectives that the client holds 2) Considering design solutions within the context of these objectives 3) Deciding on which provides the optimum lifetime value to the client

Answer 29

- A team based approach, used to define the client's objectives and ensure best value whole-life solutions are selected to satisfy those objectives. - To achieve maximum benefit, VM should be carried out from very early stages of the project. Not simply introduced when a problem occurs. - Team needs to determine the best solution to achieve the greatest value to the client in terms of meeting their objectives.

Answer 30

1) There is a clear definition of what the owners and end users mean by value, this providing a precise basis for making decisions throughout the project 2) A tool for optimising the balance between differing stakeholder needs and expectations 3) A basis for creating a clear project brief that reflects the stakeholders priorities and expectations. This is expressed on the basis of value and function. It improves communication between all stakeholders so they can understand the other's constraints, expectations and requirements 4) A basis for ensuring the project is the most effective way of delivering the business benefits and satisfying business needs 5) A functional basis for design development and management through improved communication, mutual learning and collaborative working 6) A functional mechanism to measure value, taking into account monetary and non-monetary benefits and thus demonstrating value for money

Answer 31

A brainstorming exercise to ascertain the values perceived by the client. Identify everything that is required to ensure a certain level of value is achieved. Objectives should be ranked and weighted - primary objective, sub objective, sub sub objective Members need to agree that the value tree is a fair representation of design objectives

Answer 32

VM - Aims to ensure that the right decisions are made the first time VE - Used to correct decisions when things go wrong

Answer 33

Part of the value management process. It is a more systematic approach to providing the necessary functions at the lowest cost, without detrimental effect to quality It is used to solve problems and identify and eliminate unwanted costs while improving function and quality

Answer 34

1) Design team is brought together 2) Pool expertise, guided by the team leader 3) Higher chance of identifying and solving problems at an earlier stage - better value for money 4) Not a cost cutting exercise, this leads to reduced quality and value

Answer 35

1) Identifying the main elements of a product, service or project 2) Analysing the functions of those elements 3) Developing alternative solutions for delivering those functions 4) Assessing the alternative solutions 5) Allocating costs to the alternative solutions 6) Developing in more detail the alternatives with the highest likelihood of success

Answer 36

First stage in the value engineering process Where results of the functional analysis are presented Functional Analysis System Technique

Answer 37

Evaluation technique used within the value management process to decide whether or not to make the change It is used to determine whether the benefits outweigh the costs and by what margin. It serves the basis for comparing alternatives proposals and making informed decisions about whether to proceed. Suitable for smaller construction projects with a short time to completion. This is because greater accuracy in the cost estimating can be achieved. For larger projects with long programmes which may be exposed to more cost uncertainties analysis models such as net present value (NPV) and internal rate of return (IRR) may be more suitable.

Answer 38

An assessment used within the value engineering process which takes into account the total costs that the project will impose upon the client during the whole of its life. Assesses long term value rather than initial capital outlay

Answer 39

1) Not starting early enough 2) Not including appropriate stakeholders 3) Not enough time 4) Revisiting previous decisions 5) Lack of precision

Answer 40

The summation of the entire costs over the life of a building. Includes: - Costs to acquire (land, construction, consultants, design) - Costs of operating over the life of the building - Costs of maintaining over the lift of the building - Disposal costs TOTAL OWNERSHIP COSTS

Answer 41

A technique used to evaluate the life cycle cost of a component of the building Analyses costs that will be incurred over a period of time including supply and installation costs, maintenance costs and operating costs Identifying alternative means to achieve the clients objectives and providing better value for money Used for budgeting / cash flow projection and option appraisal

Answer 42

Whole life costs are the summation of the entire costs over the life of a building Life cycle costs relate to individual items e.g. cladding, carpet, lighting etc

Answer 43

Those that are concerned with overall value for money Clients that will have input into the day to day running of the building after construction If they intend to sell the building, there is little benefit to spend more capital upfront in order to reduce maintenance costs as they will not benefit from the saving

Answer 44

1) Consideration of the long term implications of a decision 2) Enables informed decisions to be made on material selection 3) This can result in lower operational, maintenance and replacement costs 4) Can be used to plan future maintenance requirements 5) Encourages sustainability - can be measured in terms of monetary value

Answer 45

1) Future costs are optional and costs of maintenance can always be deferred 2) Components are not always replaced due to end of life - can be replaced for aesthetic purposes before end of life - difficult to assess this at design stage 3) Costs of defects caused by bad workmanship / design faults cannot be predicted 4) Uncertainty of available data - hard to predict life spans, future inflation and maintenance requirements over long periods 5) The client may be selling the building after it is constructed 6) Choosing the wrong discount rate can render the exercise useless

Answer 46

1) Capital costs 2) Operational costs 3) Maintenance costs 4) Replacement costs - need to know life span of the item 5) Disposal costs

Answer 47

Capital Expenditure Relates to the purchase of fixed assets. The life of these purchases extend beyond the current accounting period in which they were purchased. Capital expenditure is recorded on the company Balance Sheet and cash flow statement Costs are recovered through depreciation across the useful life of the asset

Answer 48

Operating Expenditure The costs for a company to run its business operations on a day to day basis

Answer 49

1) Net present values | 2) Payback period

Answer 50

Where future costs are discounted to present values It represents an analysis of the difference between the present value of cash inflows and the present value of cash outflows for an investment. It is used to assess the profitability of different investment opportunities, LCC solutions. In order for an investment to be worthwhile it has to yield a positive NPV. A negative NPV indicates an investment will lose money.

Answer 51

- Future costs - maintenance / replacement etc are discounted to present values - Comparison of net present value for various alternatives

Answer 52

1) Time periods for replacement are assumed 2) Assumed maintenance and replacement costs 3) The discount rate

Answer 53

It assesses the time period over which an investment is returned in value Initial expenditure is considered the 'investment' and the savings provided in the form of future costs is viewed as the 'revenue' The best option would be the one that repaid the investment in the shortest period of time

Answer 54

Typically the incorporation of sustainable technologies e.g. higher outlay on solar panels, however, savings are achieved through reduced power bills Generally used for elements with a high initial capital cost but will pay back the investment over a period of time in terms of reduced running costs

Answer 55

1) Historical data 2) Data from models 3) Data from manufacturers, suppliers and contractors

Answer 56

Analysis relies on a lot of assumptions, accuracy relies on accurate assumptions As the time period of analysis grows, accuracy typically falls

Answer 57

Through sensitivity analyses Adjust the variables; time periods, costs and discount rates

Answer 58

1) Prestige reasons 2) Replacement or repair may be inconvenient even if cheaper 3) Reduced operational costs, improved payback

Answer 59

1) Reduction of the extent of wall tiling - only to walls visible to the customer 2) The use of LED lighting - higher capital cost, although reduced operational cost.

Answer 60

When attending store refurbishments my client will identify the 'affordability' of the project through running a series of numbers in their accounting system to understand what extent of spending that the store can support based on their KPI's - Payback period, return on investment From this, an initial scope will be developed based on key business drivers to establish a base scope. Various stakeholders will come together to provide their input into the design based on their needs. From this we will establish business critical needs along with stakeholder desires to establish the best outcome for the store. Stakeholders may request X, in which we will provide input to explain the cost of doing this and the required return on investment. Identifying that if we do X, we will need to achieve additional return on investment, or omit Y from the scope.

Answer 61

Value engineering is all about achieving value for money, selecting the best solution to meet the clients objectives at the lowest cost without affecting quality. Scope Reduction involves omitting items of scope from the project in order to reduce cost. This does not necessarily achieve value for money and may not meet the clients objectives. The concept of value engineering is very different on refurbishments as opposed to new builds. In refurbishments you may have the ability to omit scope as the existing item is suitable for reuse, however it could constitute value engineering as the money saved may be redirected towards something which will provide better return for the Client.

C - Design economics and cost planning Flashcards

(85 cards)