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RICS APC QS (JL) > Design Economics and Cost Planning > Flashcards

Design Economics and Cost Planning Flashcards

1
Q

What is a Section 106 agreement?

A

Agreements between local authorities and developers- negotiated to grant planning consent

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2
Q

What is contingency?

A

Sum included in estimate to cover unknown expenses / unmitigated risks during project

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3
Q

How is contingency assessed?

A
  • Should reflect risks, unknown specific items associated with project
  • Early design stage, may be % (say 5-10%)
  • As risk register is compiled throughout project, this total can be included as contingency
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4
Q

What is meant by a base date within a cost estimate?

A
  • Date where rates and prices within cost estimate based on
  • Included for basis of calculations (i.e. starting point for inflation adjustments)
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5
Q

What RIBA stage is an OCE typically produced?

A

Stage 0 - 1

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6
Q

What RIBA stage is a Cost Plan typically produced?

A

Stage 2 - 4

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7
Q

What are the RIBA stages of work?

A
  1. Strategic definition
  2. Preparation and briefing
  3. Concept design
  4. Spatial coordination
  5. Technical design
  6. Manufacturing and construction
  7. Handover
  8. Use
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8
Q

What information do you receive at Stage 0 and 1?

A
  • Architectural brief with unit aspirations
  • Level of specification
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9
Q

What information do you receive at Stage 2?

A

Floor plans, elevation drawings, structural, civil, M&E notes, proposals, reposts and strategies

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10
Q

What information do you receive at Stage 3?

A

Coordinated design packages from architectural, civil, structural and M&E

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11
Q

What information do you receive at Stage 4?

A

Fully detailed technical design, enough to produce BoQ or schedule of works

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12
Q

What are the changes from RIBA Plan of Work 2013 to 2020?

A
  • Stage 3 - develop design -> spatial coordination
  • Stage 5 - construction -> manufacture and construction
  • More recognition of MMC and focus on sustainability
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13
Q

What is construction to ‘shell and core’?

A
  • Basis structure, services and building envelope
  • Usually includes fitout of landlord and common areas (i.e. main reception, bathrooms, lifts, stair cores)
  • Base services typically terminated at entry points to each lettable floor plate
  • Life safety services infrastructure typically provided
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14
Q

What is a CAT A fit out?

A

‘developer’s fit out’
- Generic fit out items to suit most developers, i.e. safety elements, basic fittings (suspended ceiling tiles, raised floors, lighting, power distribution to floor plates)

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15
Q

What is CAT B fit out?

A
  • Additional works to CAT A provision, such as bespoke elements specific to building user needs, enables tenant to occupy and use space
  • Typically includes partitions, power distribution to floor boxes, data cabling, artwork and branding, toilet finishes
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16
Q

Where can you find definitions for levels of fit out?

A

BCO (British Council of Offices) fit-out guide

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17
Q

What is an order of cost estimate (OCE)?

A

NRM1 definition
- method of cost prediction- estimate based on benchmark data for a similar type of project, based on strategic definition / initial brief
- purpose to establish affordability of client’s proposed development
- takes place prior to full set of working drawings, forms initial build up to cost planning process

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18
Q

Purpose of an order of cost estimate?

A

Establish if proposed building project is affordable and, if affordable, establish a realistic cost limit
(cost limit = max expenditure the client is prepared to spend on proposed building project)

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19
Q

Difference between an order of cost estimate and cost plan?

A
  • OCE typically stage 0-2, provides possible cost based on higher level info- Initial phase of cost planning process, usually completed with sqm areas or functional units
  • Cost Plan typically stage 2 onwards more detailed elemental breakdown, shows how costs are distributed across project, based on a more detailed, specific design
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20
Q

Difference between feasibility study, order of cost estimate and cost plan?

A
  • Feasibility - sets budget
  • Order of cost estimate - reviews options
  • Cost plan - analyses how budget is being spent
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21
Q

Can you explain the term ‘cost per functional unit’?

A

NRM1 definition - Unit rate that, when multiplied by no. functional units gives building works estimate
- Can help recommend cost limit

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22
Q

What typical information accompanies an order of cost estimate?

A
  • Covering letter / email
  • Executive summary
  • Cost limit
  • Notes, assumptions and exclusions(i.e. on spec)
  • Drawing and info on which the estimate is based
  • Schedule of value enhancing options
  • Risk register
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23
Q

Format of a feasibility / order of cost estimate?

A
  • Presented on cost per sqm/functional unit/elemental basis, potentially as a range
  • Range -> i.e. for element rates for main elements
  • Considerations for any site abnormal costs / enabling works
  • Prelims, contingency (risk), inflation, location factor adjustments
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24
Q

What is a functional unit?

A
  • unit of measurement considering prime use of building
  • i.e. how many apartments / beds / bedrooms
  • i.e. retail - net lettable retail space
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25
Q

Where would you get your rates for a preliminary estimate?

A

Previous similar projects, historical cost data, in house models, Spon’s, BCIS

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26
Q

What information do you need to be able to carry out an order of cost estimate?

A

No established minimum information, but availability affects accuracy and detail

  • Building location and type / purpose
  • Floor area / no. functional units
  • Assumed storey height and whether RAF / suspended ceilings envisaged
  • Initial floor plans and drawings
  • Indication of spec, M&E
  • Budget and cashflow restraints
  • Site conditions
  • Indicative professional fees
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27
Q

What is a cost plan?

A

NRM1 definition
- Estimate based on specific design
- Statement showing apportionment of estimate / agreed budget between cost headings
- Method of cost prediction

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28
Q

Purpose of a cost plan?

A
  • Cost consultant document to control design development
  • Identify agreed cost limit and how money allocated to different building elements
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29
Q

When would you do a cost plan?

A
  • Typically between RIBA Stage 2-4, increasing detail throughout project
  • Stage 4 typically forms basis of PTE (to compare against tender submissions)

PTE no longer referenced in RIBA plan of work

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30
Q

What benefits does a cost plan provide to a project and its team?

A
  • Help predict final project cost
  • Designers aware of cost implications and proposals to help arrive at practical and balanced designs
  • Provides info for the employer to make informed commercial decisions
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31
Q

Do you need a programme to complete the cost plan?

A
  • Would be helpful- prelims presented as a weekly rate in developed cost plan, so programme or at least high level dates would be required
  • Key info required = design and tendering periods, start on site date, construction period, completion date
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32
Q

How do you structure an elemental cost plan? / Typical components?

A

In accordance with company templates, which follows NRM recommended structure:
- Elemental summary, then breakdowns on separate sheets (facilitating, substructure, superstructure etc)
- Area schedule
- Depending on info, I would provide a cost for contractor’s prelims based on weekly rates / benchmarking / programme
- Add % for OH&P, professional fees, other project costs, then any risk and inflation
- List of drawings and information used

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33
Q

What is a cost plan risk allowance?

A

NRM1 definition
- Quantitative allowance set aside as precaution against risk and future requirements, to allow for uncertainty of outcome

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34
Q

How do you quantify risk on a cost plan?

A
  • Benchmark from similar projects, consider any abnormals
  • Risk register as design develops to work out expected monetary value, build priced risk register
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35
Q

When calculating the total fee estimate for a project, what fees might be included?

A
  • Consultant fees (design team, consultants)
  • Contractor fees (management and staff)
  • Others (statutory undertaker, planning permission application)
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36
Q

What benefit does the client get out of accurate cost planning?

A
  • Confirms to the client whether scheme is affordable or not
  • Places client in informed position to make commercial decisions
  • Acts as value management tool- ensure client gets building meeting their needs and representing best value
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37
Q

How would you deal with a cost plan which is over budget?

A
  • Analyse costs to assess sources of increase
  • Communicate matter to client and project team clearly
  • Identify any abnormally high elements of work
  • VE- identify where potential savings can be made, or offer scope reduction
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38
Q

How can the cost manager help control the design to keep the project within budget?

A
  • Explain where cost plan is vs budget, discuss limitations
  • Identify areas where design may not be economical
  • Regular project risk reviews, focus on mitigating key design risks
  • Explain how design changes have impacted the cost plan
  • Contribute to VE / cost saving sessions
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39
Q

What are some key reasons for cost overrun on a project?

A
  • Ambiguous client brief
  • Changes in later stages of project
  • Project risk not properly managed
  • Inadequate management of control and change processes
  • Design not coordinated
  • Changing external factors / market conditions (inflation, pandemic, legislation updates)
  • Unsuitable selection of procurement strategy
  • Statutory authority influences (i.e. onerous planning permission conditions)
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40
Q

What is BWIC?

A

Builder’s work in connection
- Builder’s work necessary to allow other work to proceed (typically M&E / speciallist installations -> drilling, fixing, cutting, penetrations)
- Usually put within cost plans as % of services cost

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41
Q

Why is VAT usually excluded from the cost plan?

A
  • Not a tax specialist - we wouldn’t know correct rate unless informed
  • Employers may incur different levels of VAT
  • Therefore usually excluded to ensure incorrect rate not applied
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42
Q

How are subcontractor’s preliminaries captured in the cost plan?

A

Should be included in unit rates applied to components and sub-elements

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43
Q

What allowance would you make for contractor OH&P in the cost plan?

A

% varies, depending on:
- Location
- Perceived level of risk
- Project type and value
- Market conditions

44
Q

What are the elements in the elemental cost plan?

A
  • Substructure -> excavation, disposal, foundations
  • Superstructure -> frame, upper, floors, external walls, roof, finishes
  • Services
  • External works
45
Q

What is usually excluded from a cost estimate?

A
  • Professional fees
  • VAT
  • Loose FF&E
  • Inflation
  • Removal of asbestos / contamination
  • Section 106 agreement
  • Land purchasing costs
  • BREEAM
46
Q

What is life cycle costing?

A
  • Objective method for managing lifetime costs of any project/asset
  • Enables design options to be compared from lifetime perspective, view to reduce overall costs associated with owning and/or operating asset (repairs, operation, maintenance, cleaning)
47
Q

What are life cycle costs?

A

Costs incurred over defined period for managing a building (inc operating, maintaining, cleaning)

48
Q

Key advantages of LCC?

A
  • Long term value, even if upfront costs not significantly reduced
  • Mechanism for identifying and addressing potential issues in original design
  • Promotes better durability, less maintenance, fewer financial risks, operational efficiency
  • Can help increase building lifespan
  • Green building certification credits
  • Help plan future maintenance requirements
  • Informed decision on material selection
49
Q

Disadvantages of LCC?

A
  • Components not always replaced due to end of life- changes in needs, style, fashion can be impossible to assess in design phase
  • Costs associated with defects (by poor workmanship / design faults) can’t be predicted
  • Uncertainty in inaccurate data can influence design-making process
  • Selecting wrong discount rate can heavily affect accuracy
  • Maintenance costs could always be deferred
50
Q

Typical analysis period to calculate LCC?

A
  • Determined by client
  • Could be length of lease, anticipated functional life
  • Typically have experience in 30 or 60 years
51
Q

Key cost categories to consider when calculated LCC?

A

Costs for:
- Construction
- Maintenance, operation, occupancy
- End of life costs
- Non-construction costs (land, fees etc)

52
Q

In your opinion, how accurate is LCC?

A
  • Based on lots of assumptions, i.e. inflation, historic data, market conditions
  • If calculated over a long analysis period, analysis likely to reduce
53
Q

Where can you get information about maintenance costs?

A
  • BCIS
  • Spon’s
  • Contractors, subcontractors
  • In-house data / prev projects
54
Q

How can LCC be used in a value engineering exercise?

A

Component / element has high capital cost, however maintenance and replacement costs significantly less than cheaper capital cost alternative

55
Q

What costs should be considered in life cycle costing?

A
  • Capital
  • Operational
  • Maintenance
  • Replacement
  • Disposal
56
Q

How does the payback period method work?

A
  • Judges investment in terms of time period from investment is returned in cost savings
  • Higher quality increased component costs could save more money down the line
  • Best options repay investment in shorter tops
57
Q

What sort of materials is the payback period method used for?

A
  • Sustainable technologies
  • Particularly high initial capital costs, but reduced running costs
58
Q

Why might a client accept higher capital costs?

A
  • Prestige / aesthetics
  • When considering replacement/repair/maintenance is cheaper / easier
59
Q

What sources of cost information and data are available when preparing a new estimate or cost plan?

A
  • BCIS (including building cost models)
  • Spon’s
  • Pricing documents, info from previous projects, tender submissions
  • Cost analysis and benchmarking info / models produced in-house
  • Obtain quotes from contractors, subcontractors, suppliers
  • Ask client for existing information
60
Q

How do you take account of the project location and why?

A
  • Look at BCIS regional indices to make adjustment
  • Done to recognise construction price differences in different locations (i.e. London compared to some places up north)
61
Q

How might you adjust cost data?

A
  • According to date and time
  • Abnormals- procurement route, tendering strategy, scale of project, sequencing
62
Q

What’s meant by benchmarking?

A
  • Use of historical data from projects of a similar nature
  • Comparison / check for cost planning purposes
  • Highlight areas of design not value for money
  • Highlight if contractor price is in line with market conditions
63
Q

Purpose of benchmarking?

A
  • Accurately compare and obtain pricing data
  • Like for like comparison on efficiences, rates, costs, elements
64
Q

How would you undertake a benchmarking exercise for your client?

A
  • Document with clear table showing elements of current project alongside benchmark projects
  • Compare on like-for-like basis
  • Identify abnormal items to justify anomalies and reasons for flagged items
65
Q

What do you need to consider when obtaining benchmarking data?

A

Time, location, abnormals (i.e. procurement and tendering strategy, size of project)

66
Q

What are the risks of benchmarking?

A
  • Not properly considering abnormal - data obtained isn’t accurate
  • Data doesn’t include for certain items (i.e. external drainage could be on roof / sometimes external works)
  • Indices applied may not be fully reflective of current market conditions
67
Q

Can you give an example of when you have benchmarked?

A

Undertaking high level estimates on projects, obtained BCIS project data for similar projects, looked at previous projects for indication of rates and % applied

68
Q

What is inflation?

A

NRM1 definition:
- Sustained increase in general price level of resources
- Can be included in cost estimates for fluctuations in basic prices of labour, plant, equipment and materials

69
Q

What are the 2 types of inflation as defined in NRM1?

A

Tender (TPI) and construction inflation (BCI)

70
Q

What time period would tender price inflation be included for?

A

Estimate base date to anticipated tender return date

71
Q

What time period would construction inflation be included for?

A

Date of tender return / start of project to midway point of construction

72
Q

What does TPI stand for?

A

Tender price indices

73
Q

What do TPIs show?

A
  • Movement in prices between clients and contractors, usually when tender accepted
  • Account level of inflation depending on current and forecast market conditions
  • Indices typically used to adjust estimates and budgets to different indices
74
Q

Where can you obtain TPI index information from?

A
  • BCIS
  • Look at internal forecasts / other larger consultancies
75
Q

How do you take account of inflation when preparing a cost estimate?

A

Use BCIS and internal inflation index to make adjustments for construction inflation and tender price inflation

76
Q

What is the current inflation rate?

A

10.1% (Bank of England, May 2023)

77
Q

What sources have you cited for inflation advice?

A
  • Take a view when choosing source, either in-house or BCIS TPI
  • In-house more applicable location wise to where my projects are
78
Q

How do you calculate inflation and where would you obtain this equation?

A
  • Equation in NRM1
  • Obtain data based on quarters (BCIS database)
  • New TPI / old TPI index numbers for % to apply to total construction cost
79
Q

What is Building Cost Index?

A

Similar to TPI but concerns cost of materials, plant, labour

80
Q

What does BCIS stand for?

A

Building Cost Information Service

81
Q

What does BCIS do?

A

Provides cost and price information via publications, online services, price books

82
Q

How do you market test?

A
  • Go to material supplier - may have list of approved installers
  • Send own take off where possible to get required level of info and comparable quote returns
83
Q

What are considerations when market testing?

A
  • Lack of competition if only going to one / limited suppliers
  • Wasting sub-contractor resource especially if not chosen for the job, may not put most precise costs
  • Some projects commercially sensitive so info can’t be shared
  • Needs to be tested in appropriate area for the job
  • With a range, hard to get accurate feedback from the market - best to use highest / average / conduct further market testing
84
Q

What are the benefits of market testing?

A
  • Accurate pricing for bespoke items
  • Obtain latest cost data and trends
  • Data obtained despite limited benchmarking sources
85
Q

When is the best point of design to market test?

A
  • Stage 3 onwards - specification and detailed design to price accurately
  • OR any point in design when encountering bespoke item difficult to price (i.e. playground fittings)
86
Q

Can you give an example of when you have market tested?

A
  • Bespoke elements (playground fittings)
  • Facade cladding
  • Roof finishes
87
Q

What are some typical design ratios?

A
  • Net to gross
  • Wall to floor
  • Glazed to solid ext walls
  • Split between 1, 2 and 3 bed apartments
  • Units per core
88
Q

What efficiencies would you expect with the above ratios?

A

Depends on nature of project
- Net to gross ~80%
- Wall to floor ~85%
- Glazed to solid ext walls ~ 30%
- Split between 1, 2 and 3 bed apartments ~50/35/15
- Units per core ~ 6-8nr

89
Q

What is wall to floor ratio?

A
  • External wall divided by GIA, indicates proportion of external required to enclose floor area
  • Can reveal how efficient design is, may help inform construction cost
  • Lower ratio = cheaper for building to construct (less external wall to construct)
90
Q

What is the most efficient shape for a building?

A
  • In theory, circular would be most efficient, with least wall to floor area
  • In practice, more difficult to construct, fit out, apportion and let out
  • Square plate considered the most efficient
91
Q

How did you assess the design efficiency of external walls on xxx project?

A
  • Wall to floor ratio - [74%] when expected at 50-60%. Due to (i.e. inset balconies)
  • Glass to solid - 33% when equivalent projects at 25-30% so glazing could improve
  • Consider impacts of curved walls too
92
Q

How would you improve your NIA:GIA ratio?

A
  • Smaller core spaces / external staircases
  • More open plan spaces (less partitioning)
  • Steel frame over concrete
  • Smaller building footprint with same GIA
93
Q

How would you improve your wall:floor ratio?

A
  • Steel frame over concrete
  • Simple square / rectangular building
  • No inset balconies
  • Deep building span
  • Lower floor to ceiling height
94
Q

What would you consider when looking at a glazed:solid wall ratio?

A
  • Building use
  • Requirements for thermal performance
  • More glazing means more natural ventilation and potential internal temp control
95
Q

What sources do you provide as basis for advising your clients on suitable metrics?

A
  • Previous schemes
  • Similar developments in the area
    [- metric handbook]
96
Q

What is value?

A
  • Measure of worth, accounting for overall benefits being delivered compared to cost being paid for it
  • Will have different implications for different clients
97
Q

Difference between value management and value engineering?

A

VE
- Adds value to project on a component basis

VM
- More holistic process - assess client’s main drivers and aligning strategy to optimise value from whole project (including say maintenance)

98
Q

What do you understand about the term VE?

A
  • Value engineering
  • Organised approach to accommodate the client’s needs in the most efficient, best value manner, either by reducing costs or ensuring they get more for these costs
  • Does this without detrimental effect to quality, reliability, performance, delivery
99
Q

What do you understand about the term VM?

A
  • Value management
  • Proactive process defining client’s needs and ensuring these are delivered with maximum value
  • Overall process incorporating value engineering when/where there’s potential overspend identified
100
Q

Why is VM needed?

A
  • Clients have their own objectives and definition of value, can even be made up of different groups with contrasting priorities
  • If value isn’t reached, perceived failed outcome from the project
  • Needed to have shared understanding of objectives
101
Q

What happens during the VE process?

A
  • Design team meeting including client, QS, architect, engineers (and potentially contractor/specialist subcontractors)
  • Team suggests VE proposals, monitored against client objectives
  • Chairperson and team delivers increased value for money offering cost effective solutions without compromising overall building objectives
102
Q

Phases of VE?

A

Information
Understand and define objectives, influences on existing design development

Speculation
List ideas to generate lesser capital / life cycle cost

Evaluation
Evaluate ideas against client criteria, ones with greatest potential savings and value improvement retained - discord impractical / unwanted ideas

Development
Retained evaluation ideas expanded into workable solutions, highlighting advantages, disadvantages, cost implications

Presentation
Present to client (report/verbally) with rationale for recommendation
Client decides which proposals accepted / discarded

103
Q

Can you give an example of value engineering?

A

i.e. floor finishes -> finding the same specification by a different supplier

104
Q

Can you give an example of value management?

A
  • School projects - client is responsible for maintenance, so longer term value required
  • Residential - affordable specification so specified items of lower spec requirements
105
Q

Who owns the VE schedule?

A

QS, but client has final say. Whole project team likely to contribute

106
Q

When is the best stage to consider VE and VM?

A
  • VE - generally between Stage 2-3 where design is established but not necessarily at full level of detail required
  • VM - better from outset of project, Stage 0-1 where strategy is aligned based on client objectives and values

RICS APC QS (JL) (23 decks)

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