Design Economics and Cost Planning

Question 1

Why is the purpose of cost plans?

Answer 1

To detail how the budget is being distributed among the elements of the project and provide the expected financial position of the project for the Client and Design Team. Can help to identify areas of overspend.

Ensures the Client is provided with value for money.

Question 2

What is an order of cost estimate?

Answer 2

A cost estimate is usually carried out at RIBA Stages 0-1 on varying levels of information. Used to determine the feasibility of projects for a Client and set cost limits / budgets.

Question 3

What information would you require in order to create an order of cost estimate?

Answer 3

The information available can vary, but the minimum would be the nature of project, location, size (area or functional unit), Client desired budget, indicative programme. Previous cost data to inform rates.

Question 4

What documents are there to assist in producing an order of cost estimate?

Answer 4

RICE Code of Measuring Practice and NRM 1

Question 5

What is the Code of Measuring Practice?

Answer 5

Code of Practice issued by the RICS to provide a succinct, precise definition to permit accurate measurement of buildings and land.

Question 6

Do you use IPMS?

Answer 6

International Property Measurement Standards brings about the international harmonisation of national property measurement standards with the aim of providing internal standards understood by all in the built environment.

Question 7

What design information would you expect at RIBA Stage 2?

Answer 7

General arrangement drawings and area schedules at minimum. Cost Plan built up elementally but largely still produced on a £/m2 basis throughout. A design report detailing some finish standards to assist with informing rates.

Question 8

Why is it important to qualify your cost plans and estimates?

Answer 8

To detail the basis and assumptions made when costing the works where there is not sufficient information. This informs the Client and Design Team what the cost is based on and helps facilitate design decisions.
Also protects the QS should the final design be considerably higher spec and as such, higher cost.

Question 9

What is the NRM?

Answer 9

RICS New Rules of Measurement. A suite of documents issued by the RICS which intend to standardise cost estiming / cost planning / detailed measurement of building works to facilitate consistency, benchmarking and avoid disputes.

NRM1: Order of cost estimating and elemental cost planning.

Provides a structured basis for measuring building works and presents consistent approach for other key cost components (preliminaries, risk) when cost estimating / cost planning.

NRM2: Detailed measurement of building works.

Detailed measurement for the purpose of obtaining a tender price.

NRM3: Order of cost estimating / cost planning for building maintenance works.

Question 10

What the key components of a cost estimate?

Answer 10

Facilitating works
Building works
Preliminaries
OHP
Risk allowance
Inflation

Question 11

What is meant by a functional unit?

Answer 11

Where building use can be easily defined by a particular function. For example, £/seat of a stadium.

Question 12

What would you typically expect on a £/seat for a stadium?

Answer 12

Of course this is dependent on the level of sport and client requirements. We delivered Headingley Stadium at £3000/seat however some lower league stadiums can be around the £1900/2000/seat mark.

Question 13

What is the BCIS?

Answer 13

Building Cost Information Service. A database produced by the RICS containing cost and price information for the construction industry.

Question 14

What is the current TPI from the BCIS?

Answer 14

2020 showing -1.8% however is showing inflation of +2.3% for 2021.

Question 15

Why might you use your in house indices instead of the BCIS?

Answer 15

We have a dedicated in house team for analysing tender returns from within the firm. As a result, these indices are likely to be more applicable to the projects I am working on than the BCIS, which takes account of all tenders across the built environment.

Question 16

How do you calculate a % increase in TPI from index numbers?

Answer 16

Simple percentage equation. Forecast date index - base date index x 100

Question 17

What is the different between tender and construction inflation?

Answer 17

Tender inflation is calculated from the base date to the date of tender return. Construction inflation is taken from the date of tender return to the mid-point of the construction programme.

(Fluctuations in the basic prices of labour, plant, equipment and materials)

Question 18

What is the RIBA Plan of Work?

Answer 18

National model for categorising the process of building works from inception to use into key stages.

Question 19

Why is the RIBA model useful?

Answer 19

Helps decide timelines for deliverables from the design team and informs fee proposals.

Question 20

What changed in the RIBA Plan of Work in 2020?

Answer 20

Incorporation of sustainability issues, digitisation of the the industry. Also timing in relation to planning applications and procurement.

Question 21

How does the level of design change as a project moves through the stages?

Answer 21

Stage 2: General arrangement drawings, some specification information, design reports, area schedules
Stage 3: Coordinated MEP and structures design, internal walls, doors, FF&E schedule
Stage 4: Technical design information suitable for constructing the works, all drawings and specifications, door schedules, finishes schedules

Question 22

When obtaining rates for a cost plan, what do you use? Which one do you think is most reliable and why?

Answer 22

Usually previous data from recent relevant projects, or rates from the market.

Rates from the market are accurate at the base date and hence could be considered the most reliable.

Question 23

What should be included within the cost plan document to support your costs?

Answer 23

Basis, notes, assumptions, area schedule, exclusions, cost summary, cost backup.

Question 24

What is inflation?

Answer 24

The upwards movement in the average level of prices or costs. The decrease in value of currency.

Question 25

Why do you calculate inflation to the mid-point of construction?

Answer 25

The assumption is that, by calculating to the mid-point of construction for the full value of the works, the first half of the s-curve expenditure is overestimated, and the second half is underestimated by the same amount.

Question 26

How does splitting works into phases cause a potential increase in overall capital cost of a project?

Answer 26

Overall longer time on site causes an increase in preliminaries costs, there is the additional inflation for the second phase is fluctuations are provided for within the contract, the employer might lose opportunity to procure works and materials on a larger scale which might provide cost benefit (economies of scale).

Question 27

What is value engineering?

Answer 27

A targeted process aimed at improving value for money for the Client.

Question 28

Should value not be guaranteed for the Client through the overall value management process on a project?

Answer 28

Whilst it is the role of the QS and Design Team to understand what value means to a particular Client and to deliver best value for money, a Clients requirements may change, or changes in the market might mean previous design decisions no longer provide best value for a Client.

Question 29

What is the difference between VE and VM?

Answer 29

VM is the overall process of providing best value for a Client, adopted throughout the design of a project. VE is a targeted process aimed at correcting decisions when best value has not been achieved.

Question 30

What are some examples of design development risks?

Answer 30

Change in planning requirements
Environmental Issues
Legal agreements

Question 31

What are some examples of construction risk?

Answer 31

Access restrictions
Ground conditions - antiquities
Existing buildings

Question 32

What are some examples of Employer Change Risk?

Answer 32

Change in scope
Change in quality
Change in programme

Question 33

What are some examples of Employer Other risk?

Answer 33

Early handover
Acceleration
Deferment of possession

Question 34

What does design economics mean to you?

Answer 34

The efficient design of building form / use in creating best value for Client, operators, tenants and users/

Question 35

How would you measure economic design?

Answer 35

Net:gross ratio. Expect it to be between 2.5 and 5% for an efficient building although no universal method in sport and leisure that I’m aware of due to the varying building forms.

Question 36

What are the benefits of a standard method of measurement?

Answer 36

• Reduces the likelihood of disputes if all measuring using the same method
• Defines how each item should be measured
• Facilitates good benchmarking
• Facilitates industrywide consistency
• Easily understood by all so those who may be unfamiliar or need to step into a project

Question 37

How do you keep your Client informed of changing costs throughout the design process?

Answer 37

As a Cost Plan is signed off by the Client at the end of an RIBA Stage, this design is then locked in. Beyond this, a change control process is implemented to ensure approved information is not changed without express consent from the Client.

Once a cost plan is produced, I undertake a reconciliation exercise with the previous approved cost plan to highlight areas in one place that have increased which can help focus the team onto VE opportunities.