Cost Planning Flashcards
(26 cards)
What are the advantages of hiring equipment?
- Only have to pay for when needed
- Expert operators/company who use machines/plant everyday
- Offset hiring costs against taxes
- No initial high up front cost
- Money, time and resources saved on maintenance
Five Factors to consider when hiring or buying plant?
- Current financial situation
- Cost of ownership vs cost of hiring
- Length of project or job frequency
- Equipment availability & usage
- Fleet maintenance & Inventory control
Further Questions to ask about hiring or buying?
- How well did past hire/buying decisions work?
- Were they profitable?
- Is ongoing support part of the deal?
- Were safety issues covered?
- Is there a resale value?
- Can equipment be shared with other parts of the company to make more efficient use of funds?
- Can the equipment be rented to other firms when no t in use?
- How easy is plant to transport from site to site?
What are the advantages of Buying Plant?
- You retain ownership over the asset
- You will have more flexibility in how to deploy on site
- You will have the equipment ready at little notice
- You will have no paperwork to deal with
- If you are VAT registered you can claim the VAT back in the period you buy the equipment
Factors to consider with Plant costs (do we hire or buy)
- Larger bulky items will usually be rented - depending on size and frequency of use
- Transportation to and from site affect decision making
- Storage on site
- Security of Plant on and off site
- Labour capabilities to operate the plant
- Maintenance of the plant
What is included in the ‘All in’ Labour rate?
- Productive time (Hourly rate)
- Non - productive overtime
- National working rules
- Holiday Pay
- Sick Pay
- National Holiday Pay
- National Insurance
- Retirement cover scheme
- Pension contributions
- Severance pay and sundry costs
- Employers liability and third party insurance
What factors need to be considered when deciding to hire or buy plant?
- Which is cheaper?
- How often is the equipment needed both now and in the future?
- Can we afford to buy the equipment or do we need to borrow to finance the purchase of it?
- What is the second hand market like for this equipment?
- What are the risks associated with buying the plant?
- What are the running and maintenance costs associated with buying the equipment?
- What is the yearly depreciation value of the equipment?
- What is the expected life of the equipment?
What are the two ways preliminaries can be charged in a Bill of Quantities?
- Can be priced as normal in a preliminaries section of the Bill
- Some contractors do not price the preliminary section of the bill and instead incorporate prelims costs into the unit rates within the measured section of the Bill
How can a contractor apportion overheads and profit to his rates in the Bill?
- Up front loading
- Profit in the preliminaries
- Distribution among unit rates
Definition of Value Management
An organised approach to providing the necessary function at the lowest cost
Purpose of Value Management
- Motivating People
- Developing skills
- Promoting co-operation and collaboration
- Facilitating innovation
What is the aim of Value Management?
Maximising overall performance of an organisation
Value Management
- Does not propose to find optimal answers
- Concerned with establishing a common framework around which participants can think and communicate
- The process by which the functional benefits of a project are made explicit and appraised consistent with value system determined by the client
Value Engineering
- A more prescriptive process
- Involves searching for an optimal design solution
- The process of identifying and eliminating unnecessary cost during design and construction
What are some of the typical objectives of Value Engineering?
- Reducing capital cost without reducing quality or performance
- Selecting the best option (whilst satisfying all requirements at the lowest cost)
- Choosing between component types such as structural steel or reinforced concrete
What are some of the typical objectives of Value Management?
- Developing guiding principles for planning/design at briefing stage
- Selecting the best concept design from a range of options
- Developing proposals to enhance value for money at concept or detailed design stage
Resolving planning & design issues
What is the typical focus of Value Engineering and Value Management?
VE - ‘Hard’ Technical focus - physical building or component parts
VM - ‘Soft’ Concepts, ‘‘people activities’’, preferences, ethos
What stage of the project is Value Engineering typically used?
During construction stage - especially when the project is running over on time and/or money
What stage of the project is Value Management typically used?
Early stages of a project development, even before a brief has been prepared
What are some of the reasons/the need for Value Management on a construction project?
The adversarial nature of operation and contractual relationships
A need for integration in the supply chain
A need for simplicity in contractual language and arrangements
A need to move away from the cheapest option towards the ‘best value’ option
RICS published an article ‘‘A Fresh Perspective’’ - Latest Thinking to Improve Success, what were some of the methods proposed?
1) Accelerate Professionalism
2) PM offices increasingly adopted
3) Project planning and estimating improved
4) Proprietary methodologies adopted
5) Projects should be value - not output - driven
6) Projects should be considered as social enterprises
7) Project marketing
8) Associated professions engaged throughout
9) Adapt to organisational cultures
10) Effective portfolio management precedes effective Project Management
Value Management is about getting the right project
Value Engineering is about getting the project right
Value Analysis??
This relates to the improvement of a construction, manufacturing or management process and also to a post project review to establish value achievement
What are the benefits of Value Engineering?
- Review of functions - sometimes forgotten by designers and clients
- Occupier satisfaction - the building performs well for the occupier
- Best Value - possibly a reduction in cost & increase in quality can be achieved
- Group Decision - the final decision of a design choice (e.g. Sustainability) not left with one person
- Group Dynamics - Value Engineering - Motivates the team to achieve and integrate with consultants/contractors who may work as separate entities
- New Technologies - the Value Engineering team will look for alternate methods/products far better than being stuck in the past
