Design Economics & Cost Planning Flashcards
(80 cards)
1
Q
What are the typical responsibilities of the cost manager on a construction project?
A
Pre-contract:
- Producing OoCEs
- Analysing tender bids
- Producing tender recommendation reports
Post-contract:
- Assessing contractor’s interim payment applications (valuations)
- Producing cost reports
- Producing cost plans
- Negotiating and agreeing final accounts.
(Value engineering, Preparing pricing documents for tendering)
2
Q
What things do you benchmark?
A
- Rates
- Costs
- Key metrics (£/ft2 GIA, £/ft2 NIA, £/functional unit, £/key, wall:floor, net:gross).
3
Q
What is wall:floor ratio?
A
- Calculated by dividing the total external wall area by the GIA (excludes any basement floor area).
- Indicates the proportion of external wall required to enclose a given floor area.
- Lower wall:floor values are more efficient and economical - allows comparison of different proposals
4
Q
How can wall:floor ratio be improved?
A
- Lower storey height
- Reduce floorplate perimeter length
- More efficient façade articulation e.g. not zig zag
- Less inset balconies (these give higher wall:floor ratios)
5
Q
What’s a typical wall:floor ratio for a commercial building?
A
Typially between 0.35 - 0.5
Wall:floor can vary a lot across different buildings. On Project Vista it is 0.43 (so around average). This is influenced by:
- Relatively average storey height of 3.85m
- Fairly efficient floorplate shape (rectangular/square)
- Efficient façade articulation
- No inset balconies.
- However, building is split into 2 towers on 8 storeys, so less efficient in that respect.
6
Q
What is a typical storey height of a commercial building?
A
Typically between 3.8-4m
This is influenced by:
- floor build up
- slab type
- floor to ceiling height
- ceiling void requirements (influenced by MEP and frame)
7
Q
What is net:gross ratio?
A
- Calculated by dividing the total NIA by the total GIA
- Indicates the proportion of usable area in the building
- Higher net:gross values are more efficient - allows comparisons of different proposals
8
Q
How can net:gross ratio be improved?
A
- Suitable plant strategy e.g. plant on roof
- Reduce core sizes
- Suitable building frame
- Reduce façade thickness
- Increase nr of stories
- Change floor plate shape
- Less BoH requirements
- Use class split
- Multi-tenant let floors
9
Q
What’s a typical overall net:gross for a commercial building?
A
Typically between 63-70%, depends on building’s floorplate size and nr of storeys
10
Q
What’s a typical ground & above net:gross for a commercial building?
A
Typically between 67-80%, depends on building’s floorplate size and nr of storeys
11
Q
What’s a typical net:gross of a typical upper floor in a commercial building?
A
Typically between 70-85%, depends on building’s floorplate size and nr of storeys
12
Q
If you are producing estimates and cost plans, which measurement rules represent industry best practice for capital building and building maintenance works in the UK?
A
New Rules of Measurement (NRM)
13
Q
What is NRM1?
A
New Rules of Measurement 1 - Order of cost estimating and cost planning for capital building works
Provides guidance on:
- quantifying building works for preparing order of cost estimates and cost plans.
- quantifying wider costs such as prelims, OH&P, project and design team fees.
14
Q
What is the structure of NRM1?
A
- General Introduction
- Contextualises cost estimating in terms of RIBA Plan of work and OGC Gateway process
- Purpose
- Use - Measurement rules for order of cost estimating
- OoCEs: purpose & constituents.
- Floor area, functional unit, elemental methods
- Measurement rules for MC prelims, OH&P, project & design team fees etc for OoCEs - Measurement rules for cost planning
- Cost Plans: purpose & constituents.
- Measurement rules for MC prelims, OH&P, project & design team fees etc for cost plans - Tabulated rules of measurement for elemental cost planning
- Explains how to measure the elements of a cost plan, for each component it gives a UoM, measurement rules, inclusions and exclusions.
Group elements 0-14 (Facilitating works, sub, super, internal finishes etc…)
- Element
- Sub-element, Component, UoM, Measurement rules for components, Inclusions, Exclusions.
(Bulk of NRM1)
Appendices
- Commonly used functional units
- Condensed and expanded elemental cost plan templates
15
Q
What is NRM3?
A
New Rules of Measurement 3 - Order of cost estimating and cost planning for building maintenance works
Provides guidance on:
- quantifying maintenance works for preparing order of cost estimates and cost plans,
- as well as for cost reporting of renewal and maintenance works.
16
Q
What is the structure of NRM3?
A
- General introduction
- Contextualises cost estimating in terms of RIBA Plan of work and OGC Gateway process
- Purpose
- Use - Measurement rules for building maintenance works
- Sets out the basis for NRM3, including explaining the process of cost estimating and cost planning, and how the measurement rules are to be applied. - Measurement rules for order of cost estimating
- OoCEs: purpose, contituents.
- Floor area, functional unit and elemental methods
- Measurement rules for maintenance contractor’s OH&P, consultants’ and specialists’ fees etc - Cost planning of R and M works
- Cost Plans: purpose, constituents.
- Measurement rules for maintenance contractor’s OH&P, consultants’ and specialists’ fees etc - Calculation of annualised costs for R and M works
- Describes the measurement rules for the annual cost of maintenance works and explains the calulation methods used - Elemental cost planning (bulk of NRM3)
- Measurement rules for elemental cost planning of maintenance works
- Group elements 0-14 (Facilitating works, sub, super, internal finishes etc.)- Elements
- Sub-element, component, UoM, Included (aligns with NRM1), Maintenance descriptor (R/M), Measurement rules for maintenance works.
- Elements
Appendices
- Commonly used functional units to condensed and expanded reporting templates for elemental cost plans for R and M works;
17
Q
Why is it important to measure the works according to industry standards and best practice?
A
- Provides consistency, parties pricing on the same basis reduces risk of dispute and makes tenders easier to compare
- Provides greater accuracy of pricing
18
Q
Is it mandatory for Chartered Surveyors to follow the procedures set out in NRM?
A
No. However, if an allegation of professional negligence is made against a surveyor, the court will likely look at relevant RICS guidance notes to decide whether the surveyor had acted with reasonable competence.
19
Q
What types of estimate are there?
A
- ORDER OF COST ESTIMATE
- Floor area method
- Functional unit method
- Elemental method (–> elemental cost model)
- COST PLAN
(NRM1, p21)
20
Q
What is an order of cost estimate?
A
According to NRM1:
- Estimate used during RIBA stages 0 and 1 –> based on limited information (client’s strategic definition or initial brief) –> high dependence on assumptions
- Provides indicative cost of proposed project - establishes affordability for client.
- Can use floor area, functional unit or elemental method in NRM1.
21
Q
What typical information would you include in an OoCE?
A
- Project title and description
- Executive summary (incl. cost limit and indicative project cost)
- Estimate base date
- Key basis, assumptions, inclusions & exclusions (–> client aware of risks/assumptions)
- Area schedule
- Summary of option costs
22
Q
What are the RIBA Stages of Work?
A
RIBA Plan of Work 2020 says:
Stage 0: Strategic Definition
- Determined whether a building is the best way to achieve client’s requirements. If so, proceed to stage 1.
Stage 1: Preparation and Briefing
- Project brief approved by client and confirmed it can be accommodated on-site.
Stage 2: Concept Design
- Architectural concept approved by client and aligned to project brief.
Stage 3 - Spatial Coordination
- Architectural and engineering information spatially coordinated.
Stage 4: Technical Design
- All design information required to manufacture and construct project complete.
Stage 5: Manufacturing and Construction
- Manufacturing, construction and commissioning completed.
Stage 6: Handover
- Building handed over, aftercare initiated and building contract concluded.
Stage 7: Use
- Building used, operated and maintained efficiently.
23
Q
What type of estimate is produced at each stage?
A
NRM1 p19 says:
Stage 0 - Strategic Definition –> Order of Cost Estimate
Stage 1 - Preparation and Briefing –> Elemental Cost Model
Stage 2 - Concept Design –> Cost Plan 1
Stage 3 - Spatial Coordination –> Cost Plan 2
Stage 4 - Technical Design –> Cost Plan 3
Stages 6/7 - Handover/Use –> Cost Plan 4 (renew/maintain - NRM3);
24
Q
What is OGC?
A
- Office of Government Commerce.
- A UK Government office established in 2000, closed in 2011.
- The OGC gateway process examines programmes and projects at critical stages in its lifecycle to provide assurance that it can successfully progress to the next stage. Leads to more predictable costs and outcomes.
25
Can you explain the term 'cost per functional unit'?
NRM1 says:
The unit rate that, when multiplied by the number of functional units, gives the total building works estimate (sub, super, internal finishes... external works.)
26
What are the main considerations/information required when producing an estimate?
(e.g. A client is planning to refurb a building. What cost advice would you give him?)
- Project type – refurb or new build? Cat A, Cat B, S&C?
- Scope of works - Demo required (e.g., knock down core walls)? Windows replaced? Column strengthening required?
- Is there an existing building? Available building information – surveys required? e.g. asbestos surveys, ground investigation survey
- Design information: GAs - plans, sections, elevations etc, outline specifications
- Quality
- Location
- Use
- Site constraints
- Nr of storeys
- Specialist works
- Intended start on-site
- Procurement route
(Date to be constructed by? Nr of functional units?)
27
You’re preparing a quick feasibility estimate based on a 120-bed hotel. What considerations should you make?
- PROJECT TYPE: Refurb? New build? --> type of fit out? S&C, Cat A or Cat B?
- QUALITY: Quality of shell and core and of fit out? --> 1* to 5* hotel?
- LOCATION
(Nr of storeys?)
(Nr of functional units?)
28
What is a cost plan?
NRM1 says:
- Estimate used during RIBA stage 2 onwards --> based on detailed information --> low dependence on assumptions.
- Provides a detailed anticipated project cost - shows how the costs are apportioned across the project.
- Can be in elemental form (NRM1).
29
What typical information would you include in a cost plan?
- Project title and description
- Executive summary (incl. cost limit, detailed anticipated project cost)
- Cost plan summary (elemental breakdown)
- Reconciliation (previous to current stage)
- Estimate base date
- Key basis, assumptions, inclusions & exclusions (--> client aware of risks/assumptions)
- Area schedule
- Summary of option costs
Appendices:
- GIA and NIA markups
- Detailed elemental cost plan breakdown
(Summary of construction costs, Market (anticipated effect of inflation), Benchmarking, Storey heights, Cash flow forecast where appropriate, VE options, Conclusions & recommendations)
30
What is the difference between an order of cost estimate and cost plan?
OoCE:
- Less detailed estimate in RIBA stages 0 and 1 based on limited information.
- Provides indicative project cost.
- Can use floor area or functional unit method in NRM1.
Cost Plan:
- More detailed estimate in RIBA Stage 2 onwards based on detailed information.
- Provides detailed anticipated project cost and shows how the costs are apportioned across the project.
31
Other than predicting the final project cost, what other benefits does the cost plan provide to the project and project team?
- QS can control costs and stop packages going over budget by making designers aware of the cost implications of their proposals.
Client:
- Confirms whether the scheme is affordable
- Provides information upon which the client can make informed commercial decisions.
- Can act as a value management tool to ensure the client gets a building which meets their needs, but also represents best value.
32
Do you need a programme to complete the cost plan?
Preliminaries are typically presented as a weekly rate in developed cost plans, therefore a programme or at least some high-level dates are required: design, tendering and construction periods
33
What sources of cost information and data are available when preparing a new estimate or cost plan?
External:
- BCIS online (Building Cost Information Service) - data on wide range of building types
- Pricing books e.g. Spon's and BCIS (information may need adjusting for inflation)
- Speaking directly to contractors, subcontractors and suppliers for cost information
Internal:
- Benchmark data
- Pricing documents from past projects
- Cost models
34
How would you put together a cost plan?
1. Measure GIAs and NIAs --> produce area schedule and markups
2. Identify and list all elements for cost plan
3. Measure required quantities and apply rates to get total cost, then add all appropriate percentages.
4. Provide front end with key basis, assumptions, inclusions & exclusions so client knows risks/assumptions and information used.
5. Create Executive summary
35
How would you check the reliability of your cost plan?
- Area Schedule: check areas are measured in line with COMP6, cost plan flows from this
- Basis: check information cost plan is based on is up to date;
- Assumptions: check assumptions align with client brief;
- Exclusions: appreciate these are limitations of the cost plan.
- Benchmark rates, costs and key metrics (£/ft2 GIA, £/ft2 NIA, £/key, wall:floor, net:gross) against similar past projects in commercial sector.
- Source data: check validity and acceptability.
Check cost plan aligns with:
- Project scope e.g. a cost against demolition is a red flag where there is no demo in the scope of works
- Contract/programme length e.g. number weeks of prelims
alinea’s quality assurance: comp check and partner sign off before issuing.
(Indices: check the type is correct and up to date. Appreciate their limitations.)
36
How and why do you take account of the project location?
- A location factor is applied to the cost to recognise differences in construction prices depending on location
- e.g. a project in Central London is typically more expensive than a similar project in Reading.
37
How would you deal with a cost plan which is over budget?
- Communicate the matter to the client and project team in a clear and concise manner.
- Identify value engineering opportunities, e.g. change of material.
38
How can the cost manager help control the design to keep the project within budget?
- Explain how changes in design will impact the cost plan.
- Identify and communicate areas of design which may not be economical.
- Contribute to VE sessions.
39
In your view, what are some of the key reasons we have cost overrun on a project?
- Statutory authority influence e.g. planning delay
- Inflation and changing market conditions
- Unknown external factors (e.g. covid, Ukraine etc)
40
What is BWIC?
Builder's work in connection (BWIC):
- Builder's work that is necessary to allow other works to proceed (typically mechanical and electrical services but also other specialist installations)
- Usually a percentage of the services cost
- e.g. creating openings in walls, floors or ceilings to allow services to pass through.
41
What is benchmarking?
- Using data from similar past projects as a comparison or check for cost planning purposes.
- Can highlight areas of design that are not value for money.
- Can highlight estimates which may be incorrect.
(or if tender submitted by contractors or suppliers align with market conditions)
42
How would you undertake a benchmarking exercise for your client?
- Identify relevant similar past projects
- Produce a clear document showing the cost plan elements side-by-side with the benchmark projects elements.
- This would highlight any cost anomalies which I would then justify.
43
How does NRM define the 'base cost estimate' of a project?
NRM1 says:
- An estimate of the known factors
- Base cost estimate = Works cost estimate + Project and design team fees and other project costs estimate
- Excludes risk allowance and inflation allowance.
44
How does NRM define the 'Cost limit (or project budget)' of a project?
NRM1 says:
- The maximum expenditure the client is prepared to make in relation to the completed building.
- Cost Limit (excl. VAT) = Works cost estimate + Project and design team fees and other project costs estimate + Risk allowance estimate + Inflation allowance
(Cost Limit (excl. VAT) = Base cost estimate + Risk allowance + Inflation allowance)
45
What are the group elements in NRM1?
(or How do you structure an elemental cost plan?
What are the key constituents in NRM1?)
NRM1 p464 recommends a column for the elements, a cost/m2 of GIFA column and a total cost column. The elements are:
Facilitating works and building works (facilitating works, sub, super, internal finishes etc)
+ MC's prelims
+ MC's OH&P
= WORKS COST ESTIMATE
+ Project & design team fees
+ Other project costs
= BASE COST ESTIMATE
+ Risk allowance estimate
+ Inflation allowance
= COST LIMIT (excludes VAT assessment)
46
What are the elements in NRM1?
- Facilitating works
- Substructure
- Superstructure
- Internal finishes
- Fittings, furnishings and equipment
- Services
- Prefabricated buildings and building units
- Work to existing buildings
- External works
47
What are MC preliminaries?
Items necessary for the contractor to complete the works but do not become part of the works once the project is complete, e.g.:
- Site accommodation
- Management and staff
- Mechanical plant
- Temporary services
- Insurance, bonds, guarantees and warranties
48
How can you calculate MC preliminaries?
NRM1 says:
OoCE and Cost Plan:
- Applied as a % addition: MC prelims estimate = building works estimate * MC prelims %
- % based on assessment of past project preliminaries and the construction programme.
Also for Cost Plan:
- Part or all of the MC prelims can be assesed as a lump sum
Works cost estimate = Building works estimate + MC prelims + MC OH&P
(subcontractor prelims should be included in the unit rates applied to measured quantities)
(Build up lump sum based on MC prelim items, e.g. site staff, cranes etc OR prelims = management and staff + site establishment + temporary services etc OR cost/week or month if you know the programme?);
49
When assessing the costs for contractor preliminaries (at tender stage) what are the key considerations to determine if they are fair and reasonable?
- Contract length
- Project type (new build, refurbishment, infrastructure etc)
- Project cost
- Need for temporary works e.g. scaffolding
- Security requirements
- Method and sequencing of works (working hours, supervision, management etc)
- Extent of contractor's design responsibilities
50
Can you give me examples of contractor preliminaries which might be considered abnormal (over and above a 'standard' project)?
- Tower cranes
- Evening/weekend working
- Closing roads or train lines
51
What is the difference between fixed and time-related preliminaries?
Fixed preliminaries are one-off costs whereas time-related preliminaries are dependent on duration. E.g:
- Time-related: tower crane weekly hire
- Fixed: purchasing site security equipment
52
How are subcontractor's preliminaries captured in the cost plan?
NRM1 says:
Subcontractor's preliminaries should be included in the unit rates applied to sub-elements and individual components.
53
What is OH&P and how do you calculate it?
NRM1 says:
Contractor’s head office administration costs proportioned to each building contract plus the contractor’s return on capital investment.
OoCE and Cost Plan:
- Applied as a % addition: OH&P estimate = (building works estimate + MC prelims) * OH&P %
- % based on assessment of MC OH&P from past projects.
Also for Cost Plan:
- Overhead and profit can be calculated together or separately.
Works cost estimate = Building works estimate + MC prelims + MC OH&P
(cost plan % varies depending on project type, value and location, risk, market conditions)
54
What are project and design team fees and how are they calculated?
NRM1 says:
Fees associated with the project and design team and other specialist consultants required for the project (i.e. consultants fees). MC pre-construction fees are also included here.
OoCE:
- Applied as a % addition: Project and design team fees estimate = works cost estimate * project and design team fees %
Cost Plan:
- More detailed approach: Project and design team fees estimate = consultants' fees + MC's pre-construction fees (if applicable) + MC's design fees (if applicable)
Base cost estimate (i.e. risk-free estimate) = works cost estimate + project and design team fees estimate + other project costs estimate
55
What are consultants' fees and how are they calculated?
NRM1 says:
Fees for consultants required for the project (Project and design team consultants e.g. QS, architect. Other consultants e.g. ecologist, asbestos consultant. Site investigation e.g. trial pits. Specialist support consultants e.g. planning consultant, letting agent).
Cost Plan:
- Applied as a % addition: consultants' fee estimate = works cost estimate * % for consultant fees
- % based on assessment of such fees on similar past projects and accounts for type of service required and project duration.
(Include any known fees, ensure scope of services is covered in fee, account for novation of design team if D&B (transfer from consultants' fees to MC's design fees))
56
What are main contractor's pre-construction fees and how are they calculated?
NRM1 says:
If client decides to employ a MC to provide pre-construction advice and/or other services, an allowance for the fee for providing such services is required.
Cost Plan:
- Applied as a lump sum OR % addition: MC pre-construction fees estimate = works cost estimate * MC pre-construction fees %
- Either must be based on assessment of fees charged on similar past projects, account for type of service and pre-construction period duration, and allow for MC OH&P on the fee;
57
What are main contractor's design fees and how are they calculated?
NRM1 says:
Where design liability is transferred to the MC for the entire project (e.g D&B contract), and all or some consultants in the design team are novated, the consultants’ fees due after novation should be transferred from consultants’ fees to MC’s design fees.
Allowance based on assessment of MC design fees on similar past projects
58
What fees might be included in the fee estimate?
NRM1's 11 Project and design team fees...
11.1 Consultants' fees:
- Project and design team consultants' fees
- Other (specialist) consultants' fees
- Site investigation fees
- Specialist support consultant's fees
11.2 Main contractor's pre-construction fees (if applicable):
- Management and staff fees
- Specialist support services fees
- Temporary accommodation, services and facilities charges
- Main contractor's overheads and profit
11.3 Main contractor's design fees (if applicable):
- Fees for main contractor's design consultants
59
What are other project costs and how are they calculated?
NRM1 says:
Costs that aren't necessarily directly associated with the works costs or project and design team fees, but form part of the client's total project cost (e.g. land acquisition, planning fees, fees in connection with party wall awards).
OoCE & Cost Plan:
- Lump sum allowance ascertained in conjunction with client.
Base cost estimate (i.e. risk-free estimate) = works cost estimate + project and design team fees estimate + other project costs estimate
60
What are risk allowances and how are they calculated?
NRM1 says:
An allowance for risk, future requirements and uncertainty of outcome. Risk allowances reflect the client's risk exposure.
OoCE and Cost Plans:
- Recommends separate allowances for design development, construction, employer change, employer other risks.
- Risk allowance estimate for design development risks = base cost estimate * % risk allowance for design development risks
- Risk allowance estimate for construction risks = base cost estimate * % risk allowance for construction risks
- Risk allowance estimate for employer change risks = base cost estimate * % risk allowance for employer change risks
- Risk allowance estimate for employer other risks = base cost estimate * % risk allowance for employer other risks
- Risk allowance = design development risk + construction risk + employer change risk + employer other risk
- Risk allowances aren't standard %s, they're based on a formal risk analysis which identifies the client's risk exposure.
- The allowances account for the completeness of design and other uncertainties such as the extent of site investigation undertaken to date.
(Risk registers and risk estimates should be reassessed at regular intervals throughout the RIBA stages to ensure estimates reflect the potential impact of any residual risks).
(Cost limit (excluding inflation) = base cost estimate + risk allowances estimate)
(Recommends potential cost increases caused by tendering conditions and changes in the market are initially dealt with under risk allowances).
61
What is main contractor's design development risk?
NRM1 says:
Risk allowance that the MC may incorporate in its tender price as the risk of accepting the novation of all, or some, of the client’s design team members (e.g. the architect, structural engineer etc).
Therefore, if design liability is transferred to the MC (e.g. D&B Contract), it recommends allowing for MC's design development risk in the design development risk allowance.
62
Why would you have contingency in a cost plan?
Sufficient contingency ensures the client can still afford the project in the event of design development risks, construction risks, employer change risks or employer other risks occurring e.g. additional asbestos removal required or unexpected archaeological finds.
(contingency is an allowance for the unknown risks in a project, could also cover e.g. adjustment of provisional sums, variations <-- design development risk)
63
What is inflation?
NRM1 says:
- Sustained increase in the general price level of resources.
- Included as an allowance in the OoCE or cost plan for fluctuations in the basic prices of labour, plant, equipment and materials.
64
What are the two types of inflation as defined in NRM1?
NRM1 definitions:
Tender inflation: An allowance in the OoCE or cost plan for fluctuations in the basic prices of labour, plant, equipment and materials between the estimate base date and tender return date.
Construction inflation: An allowance in the OoCE or cost plan for fluctuations in the basic prices of labour, plant, equipment and materials between the tender return date and the mid-point of the construction period (as contractor would've contracted all subcontractors by then).
65
What is the estimate base date?
NRM1 says:
The date on which the cost limit (excluding inflation) is established as a basis for calculating inflation, changes or other related variances.
(cost limit (excluding inflation) = the sum of the works cost estimate, project/design team fees estimate, other development/project costs estimate and risk allowance estimate)
66
How do you calculate inflation?
NRM1 says:
OoCE & Cost Plan:
- Recommends having two separate allowances for tender and construction inflation.
- Tender inflation estimate = cost limit (excl. inflation) * tender inflation %
- Cost limit (excl. construction inflation) = cost limit (excl. inflation) + tender inflation estimate
- Construction inflation estimate = cost limit (excl. construction inflation) * construction inflation %
- Cost limit (incl. inflation, excl. VAT) = cost limit (excl. construction inflation) + construction inflation estimate
- The % for tender inflation and construction inflation can be calculated using published indices (i.e. TPIs, BCIs or RPIs).
- OR: % addition can be derived from in-house sources of indices.
Considerations:
- Ensure rates used are adjusted to reflect current prices at the time the estimate is prepared.
- Consider cost increases caused by tendering conditions and changes in the market e.g. materials shortage (initially dealt with under risk allowances)
Note for Cost Plans:
- If a project is procured using separate work packages, a separate allowance for construction inflation is necessary for each work package, based on the procurement programme for each work package. This is because each work package will be procured at different times throughout the construction period.;
67
What are indices?
- Statistical indicator measuring movement in prices over time for a given market or industry.
- Can be used to adjust variables such as cost on a like for like basis.
68
What is TPI?
- Tender Price Index
- Measures the movement in contractor's pricing levels over time, i.e. client's cost
(used for calculating tender inflation and construction inflation in order to adjust estimates to different dates)
69
What are the %s of inflation used to calculate the alinea TPI over the next 3 years?
2022: 9% (forecast)
2023: 2.5% (forecast)
2024-2026: 2.75% (long run average)
See latest version (R:\1. TPI);
70
Why don't we use BCIS TPI instead of alinea TPI?
BCIS TPI accounts for projects across the UK, whereas alinea TPI represents the London market.
71
What is BCI?
- Building Cost Index.
- Measures movement in costs of labour, plant and materials i.e. contractor's cost.
72
What is the difference between TPI and BCI?
TPI measures movement in client's costs,
whereas BCI measures movement in contractor's costs.
73
How is VAT assessed?
NRM1 says:
- VAT in relation to buildings is a complex area.
- Therefore recommended that VAT is excluded from OoCEs and cost plans.
- Recommends specialist advice is sought on VAT matters to ensure that the correct rates are applied to the various aspects of a building project.
(capital allowances for taxation purposes, land remediation relief and grants are all excluded too)
74
What is life cycle costing (LCC)?
NRM3 says:
The economic evaluation of project lifetime costs over a period of analysis.
75
What are the key advantages of LCC?
- Achieving value in the long run by considering renewal and maintenance costs as well as capital costs
- LCC credits are included in many green building certification schemes e.g. BREEAM.
- Lower financial risks
76
What are the key disadvantages of LCC?
- Can't predict costs associated with defects,
- Can't predict replacement of components due to changes in style and fashion (instead of end of life).
- Choosing the wrong discount rate will heavily affect the LCC accuracy.
77
What is the typical analysis period to calculate LCC?
This is determined by the client, examples are:
- anticipated functional life of a building
- lease length
- time until first refurbishment
78
What are the key cost categories to consider when calculating WLC?
NRM3 says:
- Non-construction costs e.g. land acquisition. (fees etc).
- LCCs:
- C: Construction costs
- R: Renewal costs
- O: Operation and occupancy costs
- M: Maintenance costs and
- E: Environmental and/or end of life costs.
- Income
- Externalities e.g. wider social and business costs
79
In your opinion, how accurate is LCC?
Depends on:
- the accuracy of the assumptions and data on which the LCC is based e.g. inflation.
- the discount rate used
- the period of analysis, the longer it is the less accurate it is.
80
How can LCC be used in a VE exercise?
- A component of the design may have a high capital cost, but its renewal and maintenance costs are significantly less than a cheaper capital cost alternative.
- In this way, costs are saved in the long run.
