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QTS 534 CONSTRUCTION COST INFORMATICS

, LECTURE NOTE ON:

COST INFORMATION AND SOURCES OF COST INFORMATION

LEARNING OUTCOMES:

1. Understand the Importance of Cost Information

2. Understand why some budget estimates were often Incorrect
3. Identify the sources and contents of cost Information
4. Understand issues of Reliability of Cost Information
5. Objectively select cost data in practice

COST INFORMATION
· Cost planning is a method of providing cost data which will assist the design teams in making
design decisions. The system used should provide the information in a form which is easily
understood by all the design.team and also the client.

A pre-requisite of any kind of cost management system, including cost planning, is the need
for reliable, cost data in the form of cost information which reflects the range of cost
management being undertaken. In fact, it was through the recognition of this need and that an
abundant and readily available source of cost data existed, in a form which could readily be
processed to form useful, extensive and reliable cost information that provided the catalyst for
the cost planning process to be established.

Cost planning aims at ascertaining costs before many of the decisions are made relating to
the design of a building. It provides a statement of the main issues, identifies the various
courses of action, determines the cost implications of each course and provides a
· comprehensive economic picture of the whole. The architect and the quantity surveyor should
be continually questioning whether a specific item of cost is really necessary, whether It is
giving value for money or whether there is not a better way of performing a particular function.

The collection, analysis, publication and retrieval of cost and price information together
comprise a very important facet of all sectors of the construction industry. Contractors and
surveyors will tend, wherever possible, to use their own generated data in preference to
commercially published data, since the former incorporate those factors which are inherent to
themselves. Published data will therefore be used for back-up purposes. The existence of a
wide variety of published data leads one to suppose, however, that they are much more greatly
relied on than is sometimes admitted.

Therefore, the basis of any cost control system would be a suitable library of COST
INFORMATION which would include cost analysis and many other sources of cost
information, all suitably classified to allow easy access to the information.

So why was tt that the budget estimates were often incorrect? The answer probably lies
somewhere in a combination of the following features that were prevalent at that time:

• Inflation is becoming a more significant feature of the Nigeria economy, which of

course meant that cost prediction into the future was becoming more difficult to carry
out with reasonable accuracy.
 • There is a rapid increase in construction activity that led to mismatches in supply and
demand. Thus, the supply of contractors to meet the increase in demand for new
construction work could not be met, which led to increased tender bids by the tendering
contractors that again led to less objectivity and accuracy in cost prediction .

• A further pressure on cost prediction was the fact that construction solutions and
choice of materials became more numerous and varied. This again made cost
prediction more difficult as there was less familiarity in terms of design and construction
solution availability.

In responding to the problem above, the quantity surveyor has the responsibility for providing
accurate and timely cost advice throughout the duration of a project to a variety of
organisations including the client and architect by sourcing his or her cost information from a
reliable source.

Cost planning of new projects is dependent on accurate and well-documented cost

information. Cost analysis has been considered as one of the most accurate sources of cost
information especially if it is prepared by the Quantity Surveyor's owns office. Cost Analysis is
the process of analysing and recording the cost data of projects once tender information has
been received.

It should be noted that not all cost information has the same reputation for accuracy and
reliability and care should be exercised when choosing cost data for a new estimate.

SOURCES OF COST INFORMATION:

Source Annlication
1 Cost limits and cost yardsticks Preliminary budgets and cost limit
estimates.
2 Cost information published in Price Preliminary budgets, cost limit estimates, early preliminary
Books approximate estimati!)g_ section. estimates. Outline cost clan.
3 Gost information published in the Cost plans, cost checks, final cost checks
measured work section of Price Books.
4 Details of measured rates published in Cost plans, cost checks, final cost c~ecks.
professional and -trade journals,
5 Cost analyses published in trade Preliminary budgets, cost limit estimates, early preliminary
journals. estimates and outline cost plans (in many cases there is
insufficient information to use for cost~ lans).
6 Cost analyses published by the RICS All preliminary estimates and elemental cost plans and
in the Building Cost Information parts of comparative cost plans.
Service (BCIS) or NIQS
7 Cost analyses prepared in the quantity All preliminary estimates and elemental cost plans and
surveyo(s own office. parts of comparative cost plans. This source Is generally
more reliable than the sources in (5) and (6) as the surveyor
can use his own knowledge of
site conditions, economic climate etc of the
analysed projects
8 Priced bills of quantities of previous Cost plans, cost checks, final cost checks. The total figures
projects. may be used for calculating preliminary estimates but some
adjustment for differences in size or standard of building is
usually necessary. Composite rates may be built up from
the bill rates which may also be used for
preliminary estimates.
r 9 Rates worked out during the settlement These can be used in a similar way to the priced bill of
quantities for building up composite rates and for preparing
of final accounts and rates calculated
from a knowledge of builders' material cost plans and carrying out cost checks. A record of agreed
costs and labour rates. Application costs for unusual items
Preliminary budgets and cost limit may be of use for future projects.
estimates. Preliminary budgets, cost
limit estimates, early preliminary
estimates. Outline cost plan.
Cost plans, cost checks, final cost
checks Cost plans, cost checks, final
cost checks. Preliminarv

Cost analysis and cost models produced by the Quantity Surveyor in-house. Depending on
the size of an organisation, is perhaps the most reliable source of cost information, partly due
to the fact that it is easier to ensure good quality control on the data as mentioned above. Also
data presented in this format will be easily understood and interpreted. A disadvantage is the
time and cost taken to prepare and store the information.

Priced bills of quantities from previous projects. A useful source of information as the
cost information tends to be current. As with other forms of cost data, there is a need to
adjust for differences in location, etc.

Reliability of Cost Information

It is often disconcerting when one realises that the sources of information for cost planning are all
subject to much variation. In the case of published data further factors may need to be considered. The
publishers of measured rates may be using average prices and the method used to obtain the average
may be statistically suspect. The published rates may only be recalculated at infrequent intervals and
there may not be any indication of the last revision date (this applies to some trade periodicals). With
published analyses, the items included in the elements may not be the same in each case. This may be
due to:

1. differences in the requirements of the publishers;

2. inefficiency or lack of knowledge on the part of the person· analysing;

3. genuine mistakes including printing errors.

Because there are variations in the cost data this does not invalidate its use, but the user must be capable
of interpreting cost information in its context and adjusting it correctly in order to re-use it. A few well-
chosen examples of data about which the surveyor has personal knowledge of the circumstances
surrounding the pricing of the jobs is often better than the indiscriminate use of averages based on
sources whose backgrounds are little known. A great deal of handling and systematic recording of cost
data is required to enable the quantity surveyor to know what are reliable figures.

It is desirable, in order to derive reliable cost information from as many sources as possible, that there
should be standardisation of the elements into which building costs are analysed. The elements are now
fairly standard but some of the trade publications are still using methods which do not fit in which the
generally accepted lists. The new BCIS list of elements now differs from most of the other forms in
many ways. Slight variations do however occur between the elements in all analyses so that a careful
study is necessary when using any published analysis.

The interpretation of cost da~a is partly a matter o~ opinion a?d not a completely mathematically
accurate operation. The analytical approach to the detail does provide an explanation for some variations
 and reduces to a minimum the chances and size of differences which may appear to exist in the initial
investigation of the cost data.

It has been suggested that bills of quantities should be divided in a different way from the traditional
trade sections. Some bills· have been prepared in elemental form, others in operational or locational
form, but in practice the disadvantages of the increased number of items and the difficulties involved
in pricing have outweighed the advantages claimed . With the use of computers, it is possible to procure
several layouts for bills with very little extra effort so that the ordinary trade bill can be produced for
tendering purposes, and the computer can then be supplied with details of pricing and a priced elemental
bill produced for analysis purposes.

Information Library

All quantity surveyors' offices should have a library of cost information which includes:

I. Normal trade literature and price lists, referenced using some systematic scheme with an
adequate index and cross-referencing system.

2. Analyses of all office tenders based on the priced bills of quantities and well classified in
accordance with the standard code for building types.

Because of the increased complexity of the building industry and the amount of literature now being
produced, most architects and surveyors have changes to the standard coding system which provides
for a great number of sections.

standard classification
I. Civil Engineering Works
2. Transport, Industrial Buildings
3. Administrative, Commercial Buildings
4. Health and Welfare Buildings
5. Refreshment, Entertainment, Recreational Buildings
6. Religious Buildings
7. Educational, Cultural, Scientific Buildings
8. Residential Buildings

The main headings only are given above and for further details you should refer to the Construction
Indexing Manual published by the RIBA.

3. Analyses published in professional and trade periodicals classified as above

4. Cost indices from various published sources.

5. Special information on cost trends published in periodicals together with details of any facts
likely to affect future costs.

6. Special details on planning and social factors published in periodicals (eg Architects' Journal)
which are likely to affect the cost of buildings.

7. Any special cost information collected for a particular project which required original research
in order to obtain the data.

8. Data contained in the literature sent out to subscribers to the Building Cost Information Service
of the RICS. Before s_ub_mitting cost details, quantity surveyors should obtain permission from
the contractor, the bu1ld111g owner and the architect.
The information provided includes:
• Cost indices and cost trend details.
• Cost analyses in two forms:

a. A concise analysis with brief details

b. An amplified analysis giving sufficient details to make precise adjustments to
individual elements for differences. An example of a page of an amplified analysis is
given on page 68 of this paper.
• Publications digest
• Cost studies. These are articles on particular building problems undertaken by the service
or submitted by members or local study groups.
• Current prices and wages.