Week 8- construction costs and procurement Flashcards
what is procurement
Procurement does not simply mean purchasing
Narrow meaning; the choice to be made among 3 contractual methods
Procurement embraces everything from arrangements to purchase of the land to the ongoing management of the finished property
procurement is effected by 3 factors
o Time
o Cost
o Performance (quality)
Different stakeholders would have different weights on each factor
Cost projections:
Methods of estimating building costs:
- Superficial area
- Elemental cost
- Quantity surveyor’s approach – most accurate method of cost analysis
define superficial area
Involves calculating n appropriate all-in cost that will approximate to the total cost of the development of all components of the building
limitations of superficial area cost projection
o Every point is different
o Individually built and tailored to meet varied requirements including ground conditions, access, market conditions etc – as each project is different
therefore in accurate
explain element cost method
Provides more detail than superficial, achieving greater accuracy
This method requires the build elements of the building to be divided into elemental components for more accurate cost estimation
explain quantity surveyor cost approach
The most detalided and accurate approach.
Requires the building to be broken down into it’s building components. Each being accurately measured and estimated, with accurate cost per unit attached to each
limitations of quantity surveyor cost approach
Not suitable for someone who is not QS
Requires detailed information about the project to justify use of this method (and the information of not always readily available
Contractors can provide good source of cost projections as a cheaper price
explain other costs such as professional fees
o Sources of cost information, do not include the cost of employing professional team
o These cost are not fixed and will commonly vary depending on project size, scope, complexity, relationship and negotiation.
o Fees for a project of low complexity are around the 10% of the building sots.
o However, the average cost of these items ranges from 8-15
explain contingency
Construction contingency means allowance for risk in the construction.
Such risk factors include, but not limited to, changing ground conditions, adverse weather, impact of design changes, (unanticipated) inflation, sudden change in cost, etc.
To be on the safe side, conservative estimation is commonly used.
explain the different types of method of procurement
Design-Bid-Build
Design and Build
Management Contracting
Public Private Partnership
explain design BID and build
Suitable for small to medium sized schemes
Developers appoint their own professional team who are responsible for designing the building to meet the specified requirements, for supervising the construction phase and for administering the contract
Progressive payments;
advantages of design bid and build
Competitive equity and fairness
Design-led facilitates high quality design
Reasonable price certainty based on market forces with reduced unknowns
Acceptable strategy in terms of public accountability and transparency
Well known procedure and proven approach.
Flexibility: changes are easy to arrange and with limited effect on value
disadvantages of design bid and build
Strategy is potentially open to abuse resulting in less certainty.
Overall construction timeframe may be longer than other options because there is no parallel working.
No ’buildability’ input from contractor
The strategy can lead to adversarial relationships between the parties
Approach is not fully promoted by all stakeholders
explain Design and build:
• Contractor actually assumes the risk and responsibility for the design and construction of the scheme in return for a fixed-price lump sum
- Use contractor who has experience and expertise
- Lump sum fixed price
- Design and build is a fast track strategy
- More widespread now due to dissatisfaction and the problems encountered with splitting design and construction responsibilities
