Neom Nce MNL 001 - 01.00 Cost Estimation Manual

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COST ESTIMATION MANUAL

COST ESTIMATION POLICIES AND GUIDELINES
NEOM-NCE-MNL-001 Rev 01.00, May 2020

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Document History
Revision code Description of changes Purpose of issue Date

Issued for
Rev 01.00 First Issue 13.05.2020
Implementation
Document Approval
Name
Prepared by
Dr. Abdullah AlOmani
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Saad Al Sheikh
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Job Title Engineering Manager - ESCD Executive Director - ESCD
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DOCUMENT CODE : NEOM-NCE-MNL-001 REVISION CODE: 01.00 PAGE 2 OF 37

Contents
1. PURPOSE .................................................................................................................. 6
2. SCOPE ....................................................................................................................... 6
3. DEFINITIONS AND ABBREVIATIONS ...................................................................... 7
4. RELATED NEOM DOCUMENTS ............................................................................. 10
5. COST ESTIMATION METHODOLOGY AND POLICY CONSIDERATIONS ............ 11
6. ASSESSMENT / ANALYSIS / TASKS ..................................................................... 19
7. METHODS OF MEASUREMENT ............................................................................. 23
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8. PROCEDURE FOR THE PREPARATION AND REPORTING OF COST ESTIMATES

AS NEOM PLAN OF WORK .................................................................................... 25
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9. SOFT COST ESTIMATES ........................................................................................ 30
10. LIFE CYCLE COSTS................................................................................................ 33
11. KEY PERFORMANCE INDICATORS....................................................................... 36
12.
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PRE-CONTRACT CHANGE CONTROL .................................................................. 37
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13. PRE-CONTRACT REPORTING ............................................................................... 37
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13. REFERENCES ......................................................................................................... 38

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List of Tables

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List of Figures
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1. Purpose
The purpose of this Cost Estimation Manual (“Manual”) is to set and establish NEOM’s overall integrated
cost estimation guidelines, policies and procedures, and KPI’s for accurately and consistently
estimating the costs as ‘best practice’ during the lifespan of NEOM multiple mega Projects in multiple
regions, and as defined by the NEOM Economic Sectors and the NEOM Vision.
This Manual also addresses the review and approval of Order of Cost Estimates and Elemental Cost
Plans (collectively referred to as Cost Estimate(s) hereafter) for CAPEX and life cycle costs
(maintenance and operational expenditure), along with the monitoring and checking of compliance with
the policies procedures required at defined key stages of project implementation.
Moreover, this Manual shall outline and ensure:
1. The Cost Estimation Service is standardised across NEOM.

2. The key processes the Estimator might usually expect to meet and deal with during the lifespan
of a Project are addressed.
3. Efficient Cost Estimation Service utilising standard documentation wherever possible.
4. The quality of service is not compromised and is always based on best industry practices of the
highest quality.
5. Full consideration of the various NEOM Sectors and Asset Categories and procurement routes.
6. The NEOM brand is identified in the external market.
7. Safeguards to the business and its staff.
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The implementation of projects and the development of Cost Estimates are intrinsically linked to the
Stage Gateway Review Process, under which budgets are assessed and funding approved. These key
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milestones formalise the determination of NEOM on whether projects are approved to proceed to the
next stage, or not.
The assessment of the budgets and approval of funding relates to both CAPEX and life cycle costs for
a project.
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NEOM is the owner of the Manual and it is the responsibility of NEOM to give instruction to amend and
update the Manual, as necessary. It is however the responsibility of all staff to assist in the development
of the cost estimation service and any suggestions and comments for improvement should be sent to
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the NEOM Representative for consideration. Should a function or task require departure from the
Manual, the Estimator must discuss and reach agreement with the NEOM Representative responsible
for the project.
2. Scope
The scope of this Manual is to describe NEOM’s overall integrated cost estimation guidelines, policies
and procedures, and KPI’s for management and delivery through Strategic Definition (Stage 1),
Structure Plans & Concept Masterplan (Stage 2A), Detailed Masterplan & Infrastructure Masterplan
(Stage 2B), Asset Brief (Stage 2C), Concept Design (Stage 3A), Developed Design (Stage 3B), Detailed
Design and Tender Documents (Stage 3C), Tendering Stage and IFC (Stage 3D), and Operation &
Maintenance (Stage 5). Moreover, this Manual also addresses life cycle costs, and the associated
documentation, reports and other materials to enable approvals at each stage.

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3. Definitions and Abbreviations

The following terms are in use throughout this Manual.
Table 1: Table of definitions
Term Definition
As-Built As-Built documents, including drawings and notes that depict the final as-
constructed state.
Asset Refers to the required physical buildings or infrastructure such as
residential, business facilities, commercial & retail facilities, media center,
recreation, entertainment & sports facilities, marinas, hospital, medical
clinics, religious facilities, school, library, fire stations,
roads/streets/bridges, infrastructure system, and utility networks. Also, it
relates to components of buildings and structures that need to be tracked
and managed.
BIM An integrated digital process of designing, constructing, and/or operating a
building or infrastructure asset using electronic object-oriented information
throughout all project stages.
BIM Execution Plan A strategic document prepared by the Project Team Member. The BEP
(BEP) defines the expected deliverables and specifies the collaborative process
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to achieve a coordinated project.
Bill of Quantities (BOQ)1. A detailed statement of work, prices, dimensions, and other details, for the
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erection of a building by contract.
CAPEX Money spent to acquire or upgrade physical assets such as buildings and
infrastructure works.
Cost Breakdown Financial breakdown into cost targets for packages of work and into
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Structure hierarchical levels e.g. Program, project and elemental levels and develops
throughout the entire life cycle of the Program.
Commercial Report Forms part of a NEOM Plan of Work Stage Design Report which includes
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a Cost Estimate and other key information for the purpose of providing
information for decision making and follow up actions.
Cost Estimate Collective term for an Order of Cost Estimate and/or an Elemental Cost
Plan.
Cost Prediction Umbrella term for price and cost forecasting, and estimating across clients,
consultants and contractors considering a cost system of inputs, process,
and outputs for development stage estimates.
CostX ® Software by Exactal for Estimators to perform measurement, cost
estimates, tenders and BOQ production. The software supports quantity
take-offs for 3D BIM models as well as 2D drawings.
CROME Capital construction costs and future life cycle cost predictions, the
prediction of costs for construction, renewal, operation, maintenance and
end of life.
Department Different entities and divisions constituting NEOM organization, which may
include the Project Department, Operations Department,
Proponent/Sponsor, Urban Department, Environment Department, Loss
Prevention & Fire Safety Department, etc.

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Term Definition
Elemental Cost Plan Breakdown of the cost limit for the building(s) and/or infrastructure works
(elemental cost into cost targets for each element of the building(s) and/or infrastructure
estimate or cost plan) works. It provides a statement of how the design team proposes to
distribute the available budget among the elements of the building(s)
and/or infrastructure works, and a frame of reference from which to develop
the design and maintain cost control. It also provides both a work
breakdown structure (WBS) and a cost breakdown structure (CBS), which,
by codifying, can be used to redistribute work in elements to construction
works packages for the purpose of procurement.
Final Price Estimate A pricing document (also known as a pre-tender estimate) with rated items
contained in the final BOQ based on accurate measurements from the final
design information issued at tendering stage and as updated through the
tender query and clarification process and submitted to the NEOM
Representative prior to tender opening.
Go/no-Go Decision to proceed with or hold proceeding to the next stage as per the
plan of work. A Go no go decision will be supported by technical and
commercial justification.
Gross Internal Floor The area of a building measured to the internal face of the perimeter walls
Area (GIFA) at each floor level.
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Collaborative, high level, international standards for cost reporting and data
collection developed.
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KPI A type of performance measurement. KPI is to evaluate the success of an
organization or of an activity in which it engages.
LCC A tool to assist in assessing the cost performance of construction work,
aimed at facilitating choices where there are alternative means of achieving
the client’s objectives and where those alternatives differ, not only in their
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initial costs but also in their subsequent operational costs. It allows these
alternatives to be compared on the same basis. It is used for budgeting and
for option appraisal.
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Master Plan Cost Plan Collective term for a Cost Plan based on the Master Plan for the delivery
(MPCP) of the Program to be used in the establishment of the budget requirements
and a continuing frame of reference as design development progresses.
NEOM Representative Appointed Project Management Consultant, Supervision Consultant, other
Consultants or NEOM Departments.
NEOM Plan of Work The objectives and activities during project implementation through
business case, master planning, design, construction, and operation and
maintenance stages.
OPEX Money a company spends on an ongoing, day-to-day basis in order to run
a business or system.
Order of Cost Estimate Determination of possible cost of a building(s) and/or infrastructure works
early in design stage in relation to the employer’s fundamental
requirements. This takes place prior to preparation of a full set of working
drawings or bills of quantities and forms the initial build-up to the cost
planning process.
Out-turn Cost The actual total construction cost calculated at the end of the project.
Project Refers to the development and delivery of an NEOM Asset or a group of
NEOM Assets.

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Term Definition
Program A group of related projects managed in a coordinated manner to obtain
benefits not available from managing them individually.
Quantitative Risk A quantitative risk analysis is a further analysis of the highest impact risks
Analysis during which a numerical or quantitative rating is assigned.
Request for Proposal A document that an organization posts to elicit bids from potential vendors
(RFP) for a desired solution. The RFP specifies what the Employer is looking for
and establishes evaluation criteria for assessing proposals.
Risk Allowances Also known as contingencies, are identified in the Risk Management Plan,
accounting for the assessment of unknown / unquantifiable items and
unexpected events, and for scope creep and variations, and project risk, to
cover: design development risks, construction risks, employer's change
risks and employer's other project related risks.
ROME Future life cycle cost predictions, the prediction of future costs for Renewal,
Operation, Maintenance and End of life (derived from acronym CROME).
Soft Costs Non-physical works, for example architectural and engineering design
services, program management, specialist consultancy, legal, marketing,
studies, and the like.
Soft Cost Estimate Collective term for a cost estimate for fees and the like for architectural and
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engineering, project management, master planning, legal, studies, events
and the like, throughout the life cycle of the Program.
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Stage Gateway A key decision point where a decision can be made to progress to the next
stage of a project.
Stage 1 Strategic Definition.
Stage 2 Master Planning & Asset Brief.
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Stage 2A Structure Plans & Concept Masterplan.

Stage 2B Detailed Masterplan & Infrastructure Masterplan.
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Stage 2C Asset Brief.

Stage 3 Design & Tendering.
Stage 3A Concept Design.
Stage 3B Developed Design.
Stage 3C Detailed Design and Tender Documents.
Stage 3D Tendering Stage and IFC.
Stage 4 Construction, Handover & Close-out.
Stage 5 Operation & Maintenance.
Estimator Collective term for the NEOM Cost Estimation Team or Cost Consultant.
Works Encompass all associated engineering, services, procurement,
construction (including temporary and permanent), installation, pre-
commissioning, commissioning and performance tests that are essential to
accomplish the required Asset.
Work Breakdown A hierarchical structure of the work to be executed on the Project with key
Structure (WBS) objectives to achieve the project commitments and create the required
deliverables. It also serves to organize and define the total scope of the
Project as well as provide the basis for Project progress measurement.

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Term Definition
2D Two-dimensional geometric representation (x,y).
3D Three-dimensional geometric representation (x,y,z).
4D The combination of three-dimensional geometric representation and time,
including all the construction sequencing, scheduling of resources, and
quantities information, creates the fourth dimension.
5D The intelligent linking of individual 3D CAD components or assemblies with
time schedule constraints and then with cost-related information.
Table 2: Table of abbreviations
Abbreviation Description
BIM Building Information Modelling.
BEP BIM Execution Plan.
BOQ Bill of Quantities.
CAPEX Capital Expenditure.
CESMM4 Civil Engineering Standard Method of Measurement (4th Edition)
CROME Construction, renewal, operation, maintenance and end of life.
D&B Design & Build.
GIFA Gross Internal Floor Area.
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ICMS
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Institute of Civil Engineers.
International Construction Measurement Standards.
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IFC Issued for Construction.
KPI Key Performance Indicator.
KSA Kingdom of Saudi Arabia.
LCC Life Cycle Costing.
MPCP Master Plan Cost Plan.
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NRM New Rules of Measurement.

OPEX Operational Expenditure.
POMI Principles of Measurement International.
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RFP Request for Proposal.

RICS Royal Institution of Chartered Surveyors.
ROME Renewal, operation, maintenance and end of life (derived from CROME)
WBS Work Breakdown Structure.
4. Related NEOM Documents

The requirements contained in the following documents apply to the extent specified in this Manual.
Table 3: Table of related engineering procedures
Document Code Document Name

NEOM-NEN-PRC-005 Design Stages Deliverables Procedure
NEOM-NEN-PRC-007 Value Engineering Procedure
Table 4: Table of related cost estimation manual and procedures
Document Code Document Name

NEOM-NCE-PRC-001 Cost Estimation Procedure
NEOM-NCE-PRC-002 Key Performance Indicators Procedure

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5. Cost Estimation Methodology and Policy Considerations
Overview
It is required that a common design basis, criteria and standards, engineering assumptions, design
guidance and directive drawings are used as a standard basis from which to develop designs through
NEOM Plan of Work Stages 1 to 3 and 5, and sub-stages, from which, in turn, standard item assemblies
and cost estimate quantities used in preparing the Cost Estimates can be developed. Appropriate
estimating methods or procedures at a given planning or design stage will be based on the actual levels
of project engineering and scope definition present at that time.
The goal of using established estimating methodologies is to assure that project estimates are prepared
in a consistent and uniform manner, organised and standardised in methods, and formatted in order to
facilitate estimate review and reporting.
Should a function or task require departure from the Manual, the Estimator must discuss and reach
agreement with NEOM Representative responsible for the project.
Policy Considerations
Estimating Format
A consistent format is required against which construction and life cycle costs are classified, measured,
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recorded, analysed and presented. This Manual sets out the standard CBS and WBS which will be
implemented for individual projects and at a Program level.
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Preparation of Cost Estimates within the structured framework provided by the CBS and WBS shall
provide consistency and the ability to sort the Cost Estimate by numerous combinations of elements.
Using the same CBS and WBS and elements which will flow through to the elemental structure of tender
pricing documents will facilitate efficiency in the analysis and comparison of tender prices against Cost
Estimates and budgets.
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Estimating Software
In order to provide for uniformity in reviewing Cost Estimate data, a commercially available database
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software system, is to be implemented. In order to facilitate data sharing and integration with the Cost
Database, the outputs of the Estimator preparation, compilation and reporting of Cost Estimates shall
be exportable to Microsoft Excel. These reporting outputs shall also conform to the CBS and Cost
Estimate Summary template detailed in the Appendices.
It is intended that the Cost Database will function from a central server controlled by NEOM. Strict
controls will be managed by NEOM Representative to restrict access to only to those within NEOM for
those persons who have the relevant delegated authority regarding confidential budget information.
Implementation of the Cost Database will provide for consistency of reporting and enable analysis of
cost data across the Program.
A common database / item library structure, based on the CBS, will be used across all Areas. NEOM
shall develop and maintain the Cost Database with the latest live estimate data and tender price
information. The information in these databases shall be analysed and compared by the NEOM
Representative to the Cost Estimates for trends, sensitivities and benchmarking. When reviewing Cost
Estimates and reporting recommendations to NEOM, the NEOM Representative shall be able to
reference, and benchmark data and market knowledge captured across all NEOM projects.
The estimating and tender price information will be fully integrated with Primavera P6 by way of a cost
loaded program that can be used for monthly payments. This will be managed via the CBS adopted
across all NEOM projects.
A 5D BIM solution shall be used in the preparation of Cost Estimates and BOQ Production for take-offs
and quantification from 3D BIM Models and 2D drawings.

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Whenever possible, the 5D BIM solution shall use information from the model live-linked to user-defined
rates in the Cost Database under one program. A networked environment shall allow instantaneous
information sharing with others working on the server.
Master Plan Cost Plan

The MPCP is used in the establishment of the budget requirements for the delivery of the NEOM
Development and a continuing frame of reference as design development progresses.
The MPCP shall also form the basis for cash flow forecasts following establishment of the Master Plan
Program which outlines the phasing and sequencing of delivery for the NEOM Development. It is normal
for the MPCP to be prepared during or after the approval of the Master Plan by the relevant authority
department.
Once the MPCP is “approved” by NEOM, the Estimator shall not issue a revised MPCP simply to update
the team on how costs have moved unless specifically instructed to do so. Use MPCP Financial Reports
to monitor cost movement against any revision to an “approved” MPCP.
Cost Estimates
The Cost Estimate demonstrates the level of capability and sets out many of the projects’ requirements.
The earlier a Cost Estimate is produced the earlier influence can be made to the Project and control the
design as it is developed.
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The Cost Estimate should set the budget for the project and should be signed off as “approved” by
NEOM at each Stage Gateway unless a specific relaxation is considered by NEOM on an Asset by
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Asset basis.
In alignment with the NEOM Plan of Work, up to 8 number Cost Estimates are to be prepared during
stages 1 to 5 (excluding Stage 4) and sub-stages as detailed in Table 5:
Table 5: NEOM plan of work
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Development Stage Sub-Stage

Stage 1: Not applicable.
Strategic Definition
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Stage 2: Stage 2A:

Master Planning & Asset Brief
Structure Plans and Concept Masterplan
Stage 2B:
Detailed Masterplan & Infrastructure Masterplan
Stage 2C:
Asset Brief
Stage 3A:
Stage 3: Design & Tendering
Concept Design
Stage 3B:
Developed Design
Stage 3C:
Detailed Design and Tender Documents
Stage 3D:
Tendering Stage and IFC
Stage 4: Not applicable to Cost Estimation
Construction, Handover & Close-out

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Development Stage Sub-Stage

Stage 5: Not applicable
Operation & Maintenance
Note: LCC may occur at each development stage.
Capital Cost Estimation and Life Cycle Cost Methodologies
Development Stages
Estimation methodologies are not static and must be flexible enough to adjust to the needs of the
project’s stage in the development process. The development process is described by the overall level
of engineering design associated with the major development stages, for NEOM:
1. At Stage 1, Strategic Definitions: an ‘Order of Cost Estimate’ prepared by the Estimator

to determine the business case for the construction cost of the NEOM Development as a
means of business justification.
At this Stage, an Order of Cost Estimate is wholly dependent on the availability and
sufficiency of information.
2. At Stage 2A, Structure Plans and Concept Master Plan: a MPCP based on a concept
Master Plan prepared by the Estimator to aid in the establishment of the budget
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requirements for the delivery of the NEOM Development and a continuing point of
reference as design development progresses.
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3. At Stage 2B, Detailed Masterplan & Infrastructure Masterplan: a MPCP based on a
detailed Master Plan prepared by the Estimator to aid in the establishment of the budget
requirements for the delivery of the NEOM Development and a continuing point of
reference as design development progresses.
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4. At Stage 2C, Asset Brief: a ‘Cost Estimate’ is prepared by the Estimator to aid in the
establishment of the business case for the development and delivery of individual NEOM
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Assets to provide the basis for the initial go/no-go decision before proceeding with
development of the Asset.
5. At Stage 3A, Concept Design: a ‘Cost Estimate’ is prepared by the Estimator for the
options being considered and the costs are included in the Final Stage 3A Design Report.
6. At Stage 3B, Developed Design: a ‘Cost Estimate’ is prepared by the Estimator and
included in the Final Stage 3B Design Report.
7. At Stage 3C, Detailed Design and Tender Documents: a ‘Cost Estimate’ is prepared by
the Estimator and included in the Final Stage 3C Design Report.
8. At Stage 3D, a ‘Final Price Estimate’ based on tender documents to be issued to the
Tenderers and an updated ‘Final Price Estimate’ based on IFC documents after tender
queries and clarifications is prepared by the Estimator.
9. At Stage 5, an ‘LCC Estimate’ is prepared by the Estimator for the options being
considered and the costs are included in the Final LCC Report.
Stage 4 has not been considered as this does not form part of the Cost Estimation Process.
The Cost Estimate stages correspond with each Stage Gateway in accordance with the Project
requirements, and aligned with the NEOM Plan of Work, as detailed in Table 5.
The Stage Gateways formalise the determination of NEOM on whether projects are approved to
proceed to the next stage, or not. NEOM approval process shall be applicable for all development

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stages. Under no circumstances should a previous Cost Estimate be overwritten or adapted in the
production of a new Cost Estimate.
It is the Estimators’ responsibility to ensure adherence to and use of the latest NEOM documentation
for all reports or Cost Estimates produced.
To establish and set the budgetary requirements, a MPCP as a continuing frame of reference forms the
basis for cash flow forecasts following establishment of the Master Plan Program which outlines the
phasing and sequencing of delivery for the NEOM Development shall be produced.
Design development shall be monitored throughout the lifespan of the Project and provide continuous
advice relating to potential variances from the current established Stage Gateway Cost Estimate.
The Cost Estimates progressively monitor the forecast cost throughout the design development and
tendering stage duration of the Project to provide an overall vision of the following:
• Performance of the Project Teams including the Estimator,
• Asset delivery process,
• Performance targets and KPIs,
• Benchmark comparisons, and
• Status against budget and the requirement for implementation of value engineering and / or
cost mitigation strategies.
Estimation Methodology
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For the estimation methodology, the ICMS shall be followed.
The ICMS provides principles-based international standards that provide consistency in classifying,
defining, analysing and presenting global construction cost data at a project, regional, state, national or
international level.
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The ICMS provides consistency to Cost Prediction, and a global standard that aligns to national cost
measurement standards. Figure 1 shows ICMS hierarchy (also known as the CBS):
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Figure 1: ICMS hierarchy
Figure 1 is shown and described in the procedure ref. NEOM-NCE-PRC-001, Cost Estimation
Procedure.

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The ICMS hierarchy draws on the WBS and the Asset Categories to produce a breakdown by cost
centres (i.e. Cost Categories) and supplier. This breakdown, in turn, will be the main source for
preparing the formal document setting out the financial estimate for the Program and Projects.
The CBS Cost Categories map to the WBS Level 2 Asset Categories so that the different cost elements
can be rolled up from the lowest level right up to the completed Asset at Project or Program level.
The CBS showing details of all the Cost Categories can only be completed when the WBS and Asset
Categories are as complete as possible, although the process of assembling information can begin as
soon as some of the WBS is known.
The ICMS incorporates life cycle costs and a framework for construction costs and life cycle costs to
be classified, measured, recorded, analysed, and presented. It uses the acronym CROME
(construction, renewal, operation, maintenance and end-of-life costs).
Although the ICMS provides a classification for costs (refer Figure 1; “ICMS Hierarchy”), there is no
agreed international terminology for Cost Prediction; organisations have their own classifications. The
ICMS sets out a model with six levels (referred to as development stages hereinafter) and five Stage
Gateways for the Cost Prediction process. Each level is characterised by the level of the inputs.
The intention of the levels is to provide a framework for consistency, so NEOM is clear about the level
of granularity for the Cost Prediction. The Estimator should adopt this framework.
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Figure 2: Cost prediction process
Note: In Figure 2, the ICMS levels categorisation shall be aligned with the NEOM Plan of Work in Tables
5 and 6.
For clarification, the ICMS levels categorisation is compatible with the development stages in the NEOM
Plan of Work.
Table 6: Comparison of ICMS levels and NEOM plan of work development stages

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Level No. ICMS Level Description NEOM Plan of Work Development Stage
1 Business case estimate Stage 1 & 2C
2 Conceptual estimate Stage 3A
3 Developed estimate Stage 3B
4 Mature estimate Stage 3C
5 Construction estimate Stage 3D
6 Post-completion estimates Stage 5
Note: Stages 2A & 2B, Masterplan and Stage 4, Construction is not captured in Table 6.
The development stages define the input requirements to progress from one development stage to the
next through a Stage Gateway. Figure 2 shows the Gateways, assuming a traditional sequential
approach.
Each development stage relates to the Cost Prediction process and the maturity level of the inputs
(design, data, and information) and applies regardless of the procurement method adopted. The
process is dynamic with the maturity of the inputs dictating the development stage of the Cost
Prediction. During construction, the Estimator may be predicting the Out-turn Cost, while, during
occupation, it would be a prediction of the full life cycle costs (LCC may also be predicted from Gateway
1 onwards).
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In Figure 2, the arrows reflect the iterative nature of Cost Prediction, responding to the changing
availability and/or maturity of the inputs. Design is iterative; there are always gaps in information due to
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unknown factors and this is where the professional judgment, experience, and skill of the Estimator is
required. Also, design maturity may be more advanced at some points in the project than others.
The development stages are not distinct stages with clear boundaries due to the dynamic nature of the
inputs; depicted by the blue input arrows. Inputs can be data, information, productivity, construction
materials, construction methodology or time.
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During construction, commissioning and handover, it is likely that changes will occur, reducing the Risk
Allowance. The effect of any variation should be evaluated. Abortive work will also have an impact on
cost and time. The Estimator should keep NEOM informed about the extent of the reduction to the Risk
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Allowance and the likely revised Out-turn Cost of the Project until the Out-turn Cost has been settled.
LCC will similarly need to be managed and monitored during the post-occupation or use period of the
Asset. The Estimator should review the scope of the life cycle Cost Prediction and the allowance for
risk. Assumptions regarding the discount rate, period of analysis and performance of the Asset should
also be periodically evaluated and assessed.
The quantities used at each of the development stages are derived by the inputs into the Cost Prediction
system, for example, materials, labour, time, quality requirements, special requirements etc., which will
all be at different stages of maturity across the development stages of the Cost Prediction process. The
inputs can come from different sources, including analysed information from past projects. Typical
inputs are shown in Table 7:

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Table 7: Typical inputs to cost prediction process
Similarly, data gathering and analysis shall follow Figure 3. Inputs should be presented on a comparable
basis for Cost Prediction. For comparability of cost data, the following should be considered:
• Date at which costs are current with stated assumptions,
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Level for which the cost prediction is being made,
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• Level of information available about the project and the assumptions,
• Method and order of undertaking the works, and
• Data provenance, (life cycle) status, context, and quality.
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Figure 3: Data analysis
The Estimator should rely on unit costs and should apply these to the relevant quantities. Unit costs
can include:
• Per hour or day of labour and plant,
• Per unit of output,
• Per unit of floor area,
• Per length of road,
• Per unit component or element, and
• Outputs per hour or day (productivity).
Costs can be direct or indirect. Direct costs are those associated with a specific activity or component,
while indirect costs are those incurred as a result of carrying out the work but are not themselves part
of the work, e.g. project insurances, site hoardings, site cleaning, etc.

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The process can use a variety of estimating techniques depending on the extent and type of data
available. The process should take account of:
• Market conditions,
• Site conditions,
• Procurement route,
• Location,
• Special quality requirements,
• Sustainability and environmental protection,
• Constraints that might apply, e.g. restricted site access, restricted working hours, working in
an occupied building, noise restrictions, and
• Any specific project requirements e.g. Program, delivery date, phased delivery etc.
The accuracy of the data process depends on the maturity, reliability and extent of the input data and
the method adopted to transform the data. The Cost Prediction and data selection are also based partly
on expertise and experience of the Estimator.
The outputs (also known as Cost Estimate) at the different development stages in the Cost Prediction
process reflect the maturity of the inputs. In the early levels, some inputs may be vague due to a lack
of design (or any other) information or slow decision-making by the authorities, so assumptions should
be made and clearly defined. As the project data and information evolves, more clarity will be possible
at the later levels.
The levels of accuracy and the methods used for estimation are shown in Table 8 as indicated by RICS
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guidelines. It is stressed that the indicative accuracy is dependent upon sector, data and market
maturity. It is provided as a guide for the relative accuracy of the Cost Prediction in accordance with the
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information stages.
Table 8: Indicative accuracy for cost prediction level
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The indicative accuracy of Cost Prediction is dependent upon sector, data and market maturity. NEOM
Representative shall agree a defined expected degree of accuracy at the outset of a Cost Estimate that
an Estimator is to be measured against for the Key Performance Indicators (refer to NEOM-NCE-PRC-
002 “Key Performance Indicator Procedure”.
Note: Table 8 does not follow RICS Cost Prediction Guidelines.
The construction Cost Prediction Process showing a list of inputs, processes and outputs is shown in
Table 9:

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Table 9: Inputs, processes and outputs in cost prediction process
INPUTS PROCESSES OUTPUTS
– 1. Functional output (end product)• 1. Quantification - design, duration Level 1 Feasibility

– 2. Feasibility/funding basis • 2. Quantification - locality estimate
– 3. Remit/scope of Cost Prediction• 3. Quantification - facilitation Level 2 Conceptual
– 4. Time - duration/schedule • 4. Rates - design, duration estimate
– 5. Basis for quantification • 5. Rates - locality Level 3 Developed
(concept/design) • 6. Rates - facilitation estimate
– 6. Specification/quality • 7. Productivity [factor on rates] Level 4 Detailed
– 7. Assumptions and exclusions • estimate
8. Life cycle costing
(associated with each input) Level 5 Tender estimate
• 9. Assumptions and exclusions
– 8. Site-related factors Level 6 Life cycle
(associated with each output)
– 9. Procurement strategy/contract estimate
• 10. Review/validation; market
type
testing
– 10. Program
• 11. Experience/judgment
• 12. Risk identification/analysis
Confidentiality
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Due to the nature of the project all Cost Estimates and cost data are considered confidential and may
not be released without the authorisation of NEOM. All persons working on cost data and Cost
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Estimates will be required to sign nondisclosure agreement (NDAs).
6. Assessment / Analysis / Tasks

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Roles and Responsibilities
For roles and responsibilities, refer to procedure ref. NEOM-NCE-PRC-001, Cost Estimation
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Procedure.
Cost Estimation
Task 1 – Order of Cost Estimate

The structure and accuracy of an Order of Cost Estimate, defined in NRM1, shall be dependent on the
quality of the information supplied and is at an early stage in a project i.e. initial project brief, business
case and concept. The more information provided, the more reliable the outcome will be. Where little
or no information is provided, the Estimator will need to qualify the Order of Cost Estimate.
For example, the quantities for building works shall be established by measuring the total GIFA of the
building(s) (using the floor area method) or by projecting the number of functional units (using the
functional unit method), but not limited to:
• Floor area method – the GIFA is measured and multiplied by an appropriate cost/m2 of GIFA,
and
• Functional unit method – units are enumerated and multiplied by an appropriate cost/unit e.g.
hotel keys.
Task 2 - Elemental Cost Plan under Work Breakdown Structure

A standard WBS shall be utilised to promote consistency, enable efficient analysis and comparison of
estimating data, and facilitate integration of the estimating data with Project Controls and Primavera P6.

(‘Stages
The structure and accuracy of an Elemental Cost Plan, defined in NRM 1, shall be dependent on the
quality of the information supplied and shall facilitate group elements of a building to be utilised across
all projects. The WBS is to be broken down as follows when preparing an Elemental Cost Plan (or may
apply to an Order of Cost Estimate):
i. Main Section Headings for works Level 1, Group element:
• Group element 0: Facilitating works

• Group element 1: Substructure
• Group element 2: Superstructure
• Group element 3: Internal finishes
• Group element 4: Fittings, furnishings and equipment
• Group element 5: Services
• Group element 6: Prefabricated buildings and building units
• Group element 7: Work to existing buildings
• Group element 8: External works
• Group element 9: Main contractor’s preliminaries
• Group element 10: Main contractor’s overheads and profits
• Group element 11: Project/design team fees
• Group element 12: Other development/project costs
• Group element 13: Risks
• Group element 14: Inflation
ii. T
Sub-divisions under the Main Section works elements based on the Work Classifications
structure in the NRM1, Level 1, Group Element 2: Superstructure, Level 2, Element, for
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example:
• 1: Frame
• 2: Upper floors
• 3: Roof
• 4: Stairs and ramps
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• 5: External walls
• 6: Windows and external doors
• 7: Internal walls and partitions
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• 8: Internal Doors
Section 6.2.2 items i and ii, and the like, are to be used in the preparation of Order of Cost Estimates
(where appropriate) and Elemental Cost Plans, as defined in NRM 1.
A consistent reporting format will be adopted, using the Cost Database for Cost Estimates using an
Elemental Cost Plan structure, where appropriate, and in alignment with ICMS, to facilitate standard
database structures and efficient data capture, knowledge sharing, analysis and trend forecasting. The
structured Stage Gateway Review process, assessment and reconciliation of estimates versus budgets
will promote the ethos of sharing lessons learnt and striving for continuous improvement to be made to
base estimating data and the information for NEOM reporting.
The Elemental Cost Plan structure will also facilitate the integration of the estimate data from the
estimating software into Primavera P6. This structure to be used at tender stage as part of BOQs.
Adopting this consistent structure will allow efficient comparison of Cost Estimates and tender prices.
Task 3 - BOQ Production

The BOQ production is typically based on the final detailed design and follows the format below:
i. Sub-divisions under the Main Section works bills based on the Work Classifications
structure, in NRM2, comprise the rules of measurement for typically building works, Table
10 for example:
Table 10: Work classifications structure, in NRM2

(‘Stages
Bill No. Work Sections

1 Preliminaries
2 Off-site manufactured materials, components and buildings
3 Demolitions
4 Alterations, repairs and conservation
5 Excavating and filling
6 Ground remediation and soil stabilisation
7 Piling
8 Underpinning
9 Diaphragm walls and embedded retaining walls
10 Crib walls, gabions and reinforced earth
11 In-situ concrete works
12 Precast/composite concrete
13 Precast concrete
14 Masonry
15 Structural metalwork
16 Carpentry
17 Sheet roof coverings
18 Tile and slate roof and wall coverings
19 Waterproofing
20
21
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Proprietary linings and partitions
Cladding and covering
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22 General joinery
23 Windows, screens and lights
24 Doors, shutters and hatches
25 Stairs, walkways and balustrades
26 Metalwork
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27 Glazing
28 Floor, wall, ceiling and roof finishings
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29 Decoration
30 Suspended ceilings
31 Insulation, fire stopping and fire protection
32 Furniture, fittings and equipment
33 Drainage above ground
34 Drainage below ground
35 Site works
36 Fencing
37 Soft landscaping
38 Mechanical services
39 Electrical services
40 Transportation
41 Builder’s work in connection with mechanical, electrical and transportation
installations
BOQ production shall include fully coded items of measured works for importing, in excel format, into
the cost database software to be used for tender evaluation and comparison and bench marking
purposes, and to ensure standardisation of documents across the Program.
ii. Within CESMM4, sub-divisions under the Main Section work elements, based on the Work
Classifications structure, comprise the rules of measurement for typically heavy civil
engineering / infrastructure works, for example:
• Class E: Earthworks

(‘Stages
• Class I: Pipework – pipes

• Class R: Roads and Pavings
Task 4 - Preambles to BOQ Production

The Preambles to the BOQ production shall be Project specific and not prepared in a generic form.
Task 5 - Development of Cost Details

This task involves the development of construction unit prices for each of the construction activities that
will be identified and quantified from the design documents in accordance with Section 8. The unit prices
should be based on local market pricing data from Projects of a similar scope and nature within the last
three years, to the individual BOQ items. A clear statement by the Estimator shall be provided to the
NEOM Representative where pricing data has not been used within the last three years.
An analysis shall also be made, in close coordination with current Program schedule requirements, to
determine the need for construction methodologies / phasing and costs for such items. These factors
will be calculated and incorporated into the Cost Estimate. The Contractor’s preliminaries costs will be
detailed separately to the works items / activities in the Cost Estimates.
Unit prices will be expressed as present-day rates and will be adjusted to reflect any location factors
assessed and evaluated as necessary dependent on the geographical location of the Works in NEOM.
Task 6 – Quantity Take-offs

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This task involves preparing estimated quantities, either by direct measurement and calculation of
construction elements that are shown in design drawings, electronically calculated using CostX
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software for 3D BIM models as well as 2D drawings or established as an allowance quantity based on
professional experience and judgement. The intent is to quantify the scope of the project as completely
as possible. Should work activities be necessary to complete the final in place quantities but are not
defined on the drawings, these items must also be accounted for to give a complete calculation of cost
(i.e. support of excavation, temporary workarounds, etc.).
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The Estimator needs to understand how a model, its attributes and other data will be created and
conveyed at different stages of the project life. This will enable the Estimator to make suitable
adjustments to quantities, rates and other ancillary costs and modifications, at each work stage as
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appropriate.
There will be information that may not be generated by the model and it is important that these are
understood and agreement reached if the data is to be provided in alternative forms e.g. data sheets,
bar reinforcement schedules. It may be that some quantities required by the Estimator will not be readily
available through the model and will have to be measured by another method.
The design team need to identify where contraventions of the protocol occur in the model, for example:
• where columns are drawn through slabs (but it was agreed that the slab should be continuous).
Communication of such contraventions should be via the BIM Manager who is the first point of contact
for technical or process issues that arise regarding the BEP.
Models, documents, project information and specifications need to be organised to ensure compatibility
and allow the Cost Estimates to take place. Hence, a system needs to be put in place to classify the
BIM data. The system to be implemented shall be NRM 1, 2 and 3, CESMM4 and POMI, as required.
The Estimator needs to understand how the data has been organised in order to use it effectively. The
Estimator needs to check that the agreed system outputs and structure can align with the data required
and subsequent documents that are to be produced by the Estimator.
Construction projects can also be modelled virtually using BIM programs which create a database of
design information about the project. The database is represented in a 3D/4D view of the proposed
Project and the model will develop to reflect progression of design.

(‘Stages
Task 7 – Construction of Cost Estimate (including Risk Allowance)

This task involves the assembly and calculation of the Cost Estimates using data developed, including
the application of appropriate assessments for Risk Allowances.
Refer to procedure ref. NEOM-NCE-PRC-001, Cost Estimation Procedure.
Task 8 – Professional Design and Construction Management Fees (only MPCP)

This task involves establishing estimates for project related professional services for design and
construction management in a development budget. These allowances will be computed by applying
rates and percentages benchmarked in line with local market pricing data and for any other specialist
services which are deemed necessary in the evaluation of the project.
Soft Cost Estimates are detailed in Section 9.1.
Task 9 – Coordination with Project Control Functions

There are project controls disciplines that are typically associated with capital cost estimating that must
be considered during the development of this Manual. These include construction scheduling, cost and
change control, and risk management. The NEOM Representative shall be responsible for the
coordination between their project control functions, including preparation of construction schedules for
their respective Projects.
The NEOM Representative shall be responsible for compiling the overall project construction schedule
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based on the schedules prepared. This schedule will include all pertinent dates for each contract
including procurement of contracts.
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7. Methods of Measurement
Overview
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Cost Estimates shall generally be measured in accordance with the following:

• Royal Institution of Chartered Surveyors New Rules of Measurement 2nd Edition (NRM1 &
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NRM3)
BOQ Production shall generally be measured in accordance with the following:
• Royal Institution of Chartered Surveyors New Rules of Measurement 2nd Edition (NRM2)
• Civil Engineering Standard Method of Measurement 4th Edition (CESMM4)
An alternative method of detailed measurement of building works and civil engineering works is detailed
in Section 7.6.
For non-physical works (referred to as ‘Soft Costs’ hereinafter), there is no standard method of
measurement to be adopted due to the bespoke nature of the many different services. Section 9 covers
the methodology of Soft Cost Estimates.
The chosen method of measurement should provide succinct, precise definitions to permit the accurate
measurement of buildings and land, the calculation of the sizes (areas and volumes) and the description
or specification of land and buildings on a common and consistent basis. This may be required for
valuation, management, conveyancing, planning, taxation, sale, letting, or acquisition purposes.
All members of the Estimation team must use the correct documentation and guidelines available at all
stages of the cost estimation, detailed measurements for BOQ production and cost reporting process
where required for the duration of all projects.
The current RICS and ICE documentation under NRM1, 2 and 3, and CESMM4 is expanded in Sections
7.2 to 7.5.

(‘Stages
NRM1: Order of Cost Estimating and Cost Planning for Capital Building Works
This volume provides comprehensive guidance on the quantification of building works for the purpose
of preparing Cost Estimates. Direction on how to quantify other items forming part of the cost of a
construction project, but which are not reflected in the measurable building work items, is also provided
– i.e. preliminaries, overheads and profit, project team and design team fees, Risk Allowances, inflation,
and other development and Project costs.
NRM1 is the ‘basis’ of good cost management of construction projects – enabling more effective and
accurate cost advice, as well as facilitating better cost control.
Although written primarily for the preparation of Order of Cost Estimates and Elemental Cost Plans, the
rules will be invaluable when preparing approximate estimates.
In addition, the rules can be used as a basis for capturing historical cost data in the form required for
Order of Cost Estimates and Elemental Cost Plans, thereby completing the ‘cost management cycle’.
NRM2: Detailed Measurement for Building Works
This volume provides fundamental guidance on the detailed measurement and description of building
works for the purpose of obtaining a tender price. The rules address all aspects of BOQ production,
including setting out the information required from the Employer and other construction consultants to
enable a BOQ to be prepared, as well as dealing with the quantification of non-measurable work items,
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contractor designed works and risks. Guidance is also provided on the content, structure and format of
BOQ, as well as the benefits and uses of BOQ.
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While written mainly for the preparation of BOQ, quantified schedules of works and quantified work
schedules, the rules will be invaluable when designing and developing standard or bespoke schedules
of rates. Also, where there is no fully detailed design then a bespoke BOQ / schedule of rates can be
quantified and supplemented with relevant set of preambles to aid contractors’ pricing.
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These rules provide essential guidance to all those involved in the preparation of BOQs, as well as
those who wish to be better informed about the purpose, use and benefits of BOQs.
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NRM3: Order of Cost Estimating and Cost Planning for Building Maintenance Works
This volume provides a structured basis for measurement of building maintenance works,
encompassing the annualised maintenance and life cycle major repairs and replacements of
constructed Assets and building components – which are carried out post construction procurement
and throughout the in-use phases of the constructed Assets, or built environment.
The measurement rules are to provide consistent rules for the quantification and measurement of
building maintenance work items – for the purposes of producing Order of Cost Estimates, Elemental
Cost Plans and detailed Asset specific work Program, throughout the entire life cycle of a Project.
The measurement rules follow the same framework and premise as NRM1. Consequently, direction is
given on how to quantify and measure other items associated with maintenance works, but which are
not reflected in the measurable maintenance work items – i.e. maintenance contractor’s management
and administration charges, overheads and profit, other maintenance-related costs, consultants’ fees
and risks in connection with maintenance works.
Unlike capital building works projects, maintenance works are required to be carried out from the day a
building or Asset is used until the end of its life. Accordingly, while the costs of a capital building work
project are usually incurred by the building owner/developer over a relatively short-term, costs in
connection with maintenance works are incurred throughout the life of the building – over the long-term.
Consequently, the measurement rules provide guidance on the measurement and calculation of the
time value of money, guidance on using the measured data to inform life cycle of cost estimate and cost
plans and forward maintenance plans, as well as VAT, and taxation.

(‘Stages
Civil Engineering Standard Method of Measurement (CESMM4): Detailed

Measurement for Civil Engineering Works
CESMM, fourth edition, published in 2012 (referred to as CESMM4) as approved by the Institution of
Civil Engineers and the Civil Engineering Contractors Association for use in works of infrastructure and
civil engineering construction.
The document is ‘contract neutral’ as it does not depend on any particular form and is ‘National Standard
neutral’ as there is limited reference to British or other national standards and that information must be
given elsewhere on the drawings or in the specification.
While written mainly for the preparation of BOQ, quantified schedules of works and quantified work
schedules, the rules will be invaluable when designing and developing standard or bespoke schedules
of rates. Also, where there is no fully detailed design then a bespoke BOQ / schedule of rates can be
quantified and supplemented with relevant set of Preambles to aid contractors’ pricing.
These rules provide essential guidance to all those involved in the preparation of BOQs, as well as
those who wish to be better informed about the purpose, use and benefits of BOQs.
Alternative Methods of Detailed Measurement for Building Works
Overview
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As noted in Section 7.1, an alternative method of detailed measurement for building works used in the
BOQ production may be considered, where appropriate, as listed below:
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Principles of Measurement International (POMI)
POMI first published by the RICS Business Services Ltd in 1979, is an internationally used method of
measurement in construction projects. Many countries have developed their own more detailed
standard methods.
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It is widely used in the construction and operation of buildings across the Middle East.
POMI should still be considered as an alternative method measurement particularly for building works
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of a less complex nature albeit not preferred over NRM2. Over time and as the KSA construction market
better adjusts to changes in the method of measurement, it is anticipated that POMI may be fully
replaced with NRM2.
The Estimator may request to use POMI as an alternative method of measurement stating reasons with
justification, in writing, to the NEOM Representative.
The NEOM Representative shall approve an alternative method of measurement, in writing, to the
Estimator. For non-approval, the NEOM Representative shall state reasons with justification.
8. Procedure for the Preparation and Reporting of Cost Estimates as NEOM

Plan of Work
Overview
Figure 4 shows the Cost Estimation process from NEOM Plan of Work Stage 1 through to Stage 5.
Stage 4 has not been included in Figure 4 as this Stage does not form part of the Cost Estimation
Process:

(‘Stages
Figure 4: Cost estimation process
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Prior to commencement of any measurements or Cost Estimate preparation, agreement is to be
reached with the NEOM Representative as to what Sector and/or Asset class the Project(s) to be
worked on falls under.
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NEOM Plan of Work Stage 1
A Cost Estimate given prior to a formal Cost Estimate shall be entitled ‘Order of Cost Estimate’ or
‘Business Case Estimate’. NEOM Plan of Work Stage 1 (‘Stage 1’) Cost Estimate shall be based where
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functional parameters have been estimated but no or limited design information exists.
An Order of Cost Estimate is wholly dependent on the availability and sufficiency of information at this
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stage and applies to all the Projects comprising the NEOM program.
Soft Cost Estimates shall also be assessed based on the available information and benchmarked.
Cost advice given at an initial or early stage of the development shall have a significant effect on the
NEOM strategy and in making decisions to proceed or not.
NEOM Plan of Work Stage 2A
A MPCP during NEOM Plan of Work Stage 2A (‘Stage 2A’) is used in the establishment of the budget
requirements for the delivery of the NEOM Development and a continuing frame of reference as design
development progresses.
Program which outlines the phasing and sequencing of delivery for NEOM Development. It is normal
department.

(‘Stages
NEOM Plan of Work Stage 2B
A MPCP during NEOM Plan of Work Stage 2B (‘Stage 2B’) is used in the establishment of the budget
requirements for the delivery of the NEOM Development and a continuing frame of reference as design
development progresses.
Program which outlines the phasing and sequencing of delivery for NEOM Development. It is normal
department.
NEOM Plan of Work Stage 2C
A Cost Estimate given prior to initiation of design of a Project shall be entitled ‘Order of Cost Estimate’
or ‘Business Case Estimate’. NEOM Plan of Work Stage 2C (‘Stage 2C’) Cost Estimate shall be based
where functional parameters have been estimated but no or limited design information exists.
The Business Cost Estimate is wholly dependent on the availability and sufficiency of information at this
stage and shall be included in a business case for the development and delivery of individual NEOM
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Assets to provide the basis for the initial go/no-go decision before proceeding with development of the
Asset.
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Soft Cost Estimates shall also be assessed based on the available information and benchmarked.
Cost advice given at this early stage of the development of a Project shall have a significant effect on
the NEOM strategy and in making decisions to proceed or not.
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NEOM Plan of Work Stage 3A
At NEOM Plan of Work Stage 3A (‘Stage 3A’), that being the first formal Cost Estimate at outline
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proposal stage, is a statement of the probable cost of the Project which sets out the cost targets for the
main elements of a building, together with their approximate quantity and quality parameters. The
method of preparation should be appropriate to the level of detail available for each element and form
part of a Stage 3A Design Cost Report.
NEOM Plan of Work Stage 3B
The Cost Estimate at NEOM Plan of Work Stage 3B (‘Stage 3B’) is a statement of the cost of a selected
design which details the cost targets for all elements of a building, together with the quantity and quality
parameters described by the scheme and detailed drawings and specifications.
The preparation is by measurement of approximate quantities and/or BOQs from the proposed
developed (also known as schematic) drawings. The degree of detail to be measured should relate to
the cost significance of the elements in the particular design. The pricing should be similarly related.
Some elements may still be most suitably priced on an elemental unit rate basis, where the cost
significance is low. Major elements will normally need to be priced in greater detail.
The Stage 3B Cost Estimate will be an enhancement of the Stage 3A Cost Estimate and will increase
the level of accuracy reported as the level of design and specifications expected at this stage will allow
for more detailed measurements of all areas of the project to be undertaken. The BOQ and tender
document production will commence after the issue of these reports and approval by NEOM.

(‘Stages
NEOM Plan of Work Stage 3C
The Cost Estimate at NEOM Plan of Work Stage 3C (‘Stage 3C’) is a statement of the cost of a selected
design which details the cost targets for all elements of a building, together with the quantity and quality
parameters described by the scheme and detailed drawings and specifications.
The preparation is by BOQs from the proposed detailed design drawings. The pricing should be on
measured quantities on an itemised BOQs in an elemental basis in accordance with NRM2, CESMM4
or POMI.
The Stage 3C Cost Estimate will be an enhancement of the Stage 3B Cost Estimate and will increase
the level of accuracy reported as the level of design and specifications expected at this stage will allow
for detailed measurements of all areas of the project to be undertaken.
As part of this Stage 3C, the final BOQ shall be used for the pricing of a Final Price Estimate for
comparison and tender evaluation.
NEOM Plan of Work Stage 3D
A Final Price Estimate shall be prepared based on the BOQ at NEOM Plan of Work Stage 3D (‘Stage
3D’). During the tendering process of tender queries and clarifications, the Final Price Estimate shall be
updated.
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This updated Final Price Estimate shall be used for tender comparison purposes with the submitted
tenders.
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NEOM Plan of Work Stage 5
Refer to Section 9, Life Cycle Costs.
NEOM Plan of Work Stages 1 to 5 Procedure

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For preparation and reporting of the Cost Estimates and MPCP for NEOM Plan of Work Stages 1 to 5
in Sections 8.2 to 8.9, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
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Risk Allowances
For Risk allowances, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
Inflation
Overview – Policy
Workloads are anticipated to continue to rise in the coming years as the Government continues its
significant capital investment across major projects under the KSA Vision 2030.
Rising demand and supply chain constraints could impact on consultants’ and contractors’ capacity
utilisation levels and further affect input costs (staff, labour, materials, plant & equipment) driving up
prices.
There is no governmental index specific to the construction industry for inflation available in KSA.
Inflation Procedure
For inflation, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.

(‘Stages
5D BIM Solution
Overview – Policy
A 5D BIM solution shall be used by the Estimator in the preparation of Cost Estimates, and BOQ
Production for take-offs and quantification from 3D BIM Models (“Model”) and 2D drawings.
The main objective in a BIM environment is to:
• Utilise Model data rather than traditional manual measurement for quantities take-offs.
It is imperative that the BIM Manager is fully aware of the needs of the Estimator in performing their
measurement role in a BIM environment.
The 5D BIM solution is wholly dependent on the quality of the data of the project team. There will be
information that may not be generated by the Model and it is important that these are understood and
agreement reached if the data is to be provided in alternative forms e.g. data sheets for reinforcement.
It may be that some quantities required by the Estimator will not be readily available and will have to be
measured by another method.
Whenever possible, the 5D BIM solution shall use information from the model live-linked to user-defined
rates in the Cost Database under one program. A networked environment shall allow instantaneous
information sharing with others working on the server.
5D BIM Solution Procedure

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For 5D BIM Solution, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
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Quantitative Risk Assessment
Overview – Policy
Within the Cost Estimates at all NEOM Plan of Work Stages, the Estimator shall include costs for risks
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which are identified in the Risk Management Plan, accounting for the assessment of the likely impact
on direct cost impact risks and costs associated with schedule impact risks.
The Risk Management Plan and associated cost impacts shall be reviewed and updated on an ongoing
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basis. A Risk Register for the project will be included in the Estimator’s Commercial Reports.
Figure 5: Cause and effect of risks

(‘Stages
The cause of any risk needs to be analysed to understand its potential effect (refer Figure 5). A risk can
be measured with its likelihood (probability) and consequence (impact). Sources of risk should be
identified with appropriate allowances reflected in the Cost Prediction, including any methods of
analysis.
Common practice is to express Risk Allowances as a contingency or as a percentage mark-up on the
Cost Prediction to allow for the unexpected. This approach can be improved through a risk management
process.
In this process, the Risk Allowances are added to a project budget as items of possible expenditure,
and then monitored throughout the project. The total project budget is a base estimate of known
elements plus contingency allowances (the latter being the identified and valued risk items, i.e. the Risk
Allowance).
As the Cost Prediction process moves through the Cost Prediction stages (development stages), project
risks will decrease. However, some items identified as risks at an earlier stage might be resolved and
their value added into the Cost Prediction or eliminated if the risk is mitigated at zero.
The allowance for risk and uncertainty shall be through Quantitative Risk Analysis requiring estimating
the probability of occurrences and modelling the costs arising from them. This leads to a full probabilistic
model of total project costs. Typically, these models can only be evaluated by Monte Carlo simulations
using specialist software.
Procedure for Evaluation

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For Quantitative Risk Assessment, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
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Value Engineering
For Value Engineering, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.

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Cash Flow Forecast

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Overview – Policy
Key areas for consideration for preparation and evaluation of cash flow forecast include the following:
• Forecast expenditure of preliminaries allowances,
• Maximum and minimum forecast monthly cash flow throughout project,
• Forecast annual expenditure for the project duration,
• Assumptions regarding early acquisition of long lead items, materials off site and materials on
site, and
• Assumptions with respect to expenditure of:
– Risk Allowances, and
– Inflation.
Cash Flow Forecast Procedure

For cash flow forecast, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
9. Soft Cost Estimates
Soft Cost Estimate Guidelines
Soft Costs are related to the provision of various consultancy services for a project. There are several
methods of compensation for these services. Common methods of compensation include:

(‘Stages
• Lump Sum Fee,

• Remeasured Fee (based on actual deployment, man hours spent, no. of drawings, etc.), and
• Percentage Fee (based on construction cost).
For the purpose of budgeting for NEOM projects, the estimated value of Soft Costs can be determined
by use of these guidelines.
Soft Cost Estimate Process
Refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
Design Fees Guidelines
This Section sets guidelines to assist NEOM Representative in determining an estimated fee for design
consultancy’s services.
Determining an estimate of the design fees is not a straightforward exercise as a wide range of project
requirements may affect design fees, examples of such requirements are included in Section 9.6,
Adjustment Factors.
These guidelines are the outcome of historical data gathered from projects in KSA and in the region.
Design fees can be computed as a percentage of the project construction cost as shown in Table 12
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for building projects and Table 14 for infrastructure projects. These percentages may have to be
adjusted by the NEOM Representative based on project requirements and particularities as shown in
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Section 9.6.
Building Design Services
Building design services fees as percentages of the estimated construction cost of the project are
based on project types as defined in Table 11.
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Table 11: Building project type

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Building Project Type Building Description

Type 1 Low to medium rise residential building
Type 2 Medium rise commercial buildings
Malls and shopping centres
Industrial buildings
Schools
Type 3 Universities
Banks
Clinics and Laboratories
Hotels
Governmental Buildings
Convention Hall, Exhibition Building
Sport facilities
Type 4 Resorts
Museum
Hospitals
Highrise buildings
The design percentage fees are determined by cross referencing the project type (detailed in Table 11)
to the estimated construction cost as shown in Table 12.
These percentages are based on project with medium complexity level, where the design consultant is
providing basic design services as detailed in NEOM-NEN-PRC-005 “Design Stages Deliverables
Procedure”.

(‘Stages
Table 12: Building design services fee guidelines
Construction
0-25,000,000 SAR
100,000,000 SAR
250,000,000 SAR
500,000,000 SAR
500,000,000 SAR
50,000,000 SAR
Cost
100,000,000-
250,000,000-
25,000,000-
50,000,000-
Exceeding
Building Project
Type
Type 1 7.5% 7.0% 6.5% 6.0% 5.5% 5.0%

Type 2 8.0% 7.5% 7.0% 6.5% 6.0% 5.5%
Type 3 8.5% 8.0% 7.5% 7.0% 6.5% 6.0%
Type 4 9.0% 8.5% 8.0% 7.5% 7.0% 6.5%
Infrastructure Design Services
Infrastructure design services fees as percentages of the estimated construction cost of the Project
are based on project types as defined in Table 13.
Table 13: Infrastructure project type
Infrastructure
Project Type
Infrastructure Description T
AF
Type 1 Simple Bridges
Simple waterfront facilities
Railways, highway and local roads
Site development
Dry and wet utilities network
R
Type 2 Water, wastewater, and industrial waste treatment plants

Complex Bridges
Tunnels
Pumping stations
D
Power plants and distribution systems,

Airports
Railway station
The design percentage fees are determined by cross referencing the project type (detailed in Table 13)
to the estimated construction cost as shown in Table 14.
These percentages are based on project with medium complexity level, where the design consultant is
providing basic design services as detailed in NEOM-NEN-PRC-005 “Design Stages Deliverables
Procedure”.
Table 14: Infrastructure design services fee guidelines
0-25,000,000 SAR
Construction
100,000,000 SAR
250,000,000 SAR
500,000,000 SAR
500,000,000 SAR
50,000,000 SAR
Cost
100,000,000-
250,000,000-
25,000,000-
50,000,000-
Infrastructure
Project Type
Type 1 6.5% 6.0% 5.5% 5.0% 4.5% 4.0%
Type 2 9.0% 8.5% 8.0% 7.5% 7.0% 6.5%

(‘Stages
Adjustment Factors
Design fees as a percentage of the project construction cost shown in Sections 9.4 and 9.5 must be
adjusted by the NEOM Representative based on project requirements and particularities. Examples of
adjustment factors include:
a) Project Complexity:
Suggested guidelines are based on medium complexity level. The NEOM Representative
may apply adjustment factor for simple (simple design, conventional requirements, basic
elements, etc.) or complex projects (several packages, extensive coordination, complex
design, multiple interface, etc.)
b) Project Location (Services to be provided on site or in consultant office):
Project location and site conditions: in case services are to be provided on site or within
NEOM premises, the design consultant shall allow in his fees for mobilization,
demobilization and other related fees depending on RFP conditions and contract
requirements. For such type of project, the NEOM Representative may consider an
adjustment factor aligned with these requirements.
c) Project Duration:
Fast track projects imply additional fees; the design consultant may need to prioritize the
project, allocate more resources and work on double shift. For such type of Project NEOM
Representative may consider an adjustment factor aligned with schedule requirements.
d) BIM Requirements:
T
AF
The design consultant may be required to develop all designs and the project
documentation using BIM. This may require additional effort and result in an adjustment to
the consultant fees.
e) Application of Innovative Ideas:
Application of innovation may increase consultant fees. Increased fee is generally related
R
to:
• Unknown risks in using new products or systems that don’t have a track record,
D
• Potential involvement of specialist consultants, and

• Additional research leading to additional effort in performing the services.
f) Contract Type:
For design services related to Design Build projects, design consultant shall perform
services related to Stage 3A (30%) and Stage 3D (10%) based on NEOM-NEN-PRC-005
“Design Stages Deliverables Procedure”, thus an adjustment factor of 0.5-0.6 will be
applied on above percentages for Design Build projects.
10. Life Cycle Costs
Overview – Policy
Operating Expenditure for the purposes of NEOM’s cost estimation policies and procedures refers to
LCC. This is the economic evaluation of the costs associated with the running of an Asset over a
specified period of analysis. The cost categories deemed form part of LCC follow the CROME
mnemonic as per NRM3 and as shown in Figure 6:

(‘Stages
Whole Life Costs
Non- Construction Life Cycle Cost

Income Externalities
Costs (LCC)
Construction
Renewal Costs Operation Costs Maintain Costs End of Life Costs
Costs
Occupancy Cost
Figure 6: Whole life costs
Whilst NRM focuses on and the renewal (R) and maintenance (M) costs of Assets, the operation and
occupancy costs (O) are not covered in the NRM 3 and as such these follow the cost classification as
provided within ISO 15686-5:2017 Buildings and constructed Assets - Service life planning Part 5: Life-
cycle costing and it’s UK Supplement PD 15686 Standardised Methods of Life Cycle Costing for
Construction Procurement. Table 15 provides the relevant categories / sub-categories:
Table 15: Life cycle cost categories / sub-categories
T
AF
Life Cycle Cost Category Sub-category
Construction Costs - Cost of works and other construction related costs as provided
by Estimator
Renewal Costs - Major repairs/ replacement
R
- Refurbishment and upgrade works

- Redecorations
Maintain Costs - Planned maintenance (scheduled tasks)
D
- Unplanned maintenance (unscheduled tasks)

- Proactive maintenance (inspection/ monitoring)
Operation Costs - Cleaning
- Utilities (gas, oil, water, electricity etc.)
- Staff costs in relation to staff servicing and managing the building
Inc. security if necessary
- Waste management
Occupancy Costs - User support costs relating to the occupation of the building are
considered non-construction costs within the ISO but can be
demanded by certain clients (specifically in the UK) to form part
of the LCC study. These costs are typically dependent on Asset
Category/ building use and are to be advised by NEOM
Representative. These Cost categories include (among others):
Reception; Post/ Mail room, Catering, Laundry, Vending
Like the capital cost estimation methodologies, the LCC should adjust to the project’s stage in the
development process as follows:
1. At Stage 1, an ‘Order of Life Cycle Cost Estimate’ prepared by the Estimator to determine LCCs
and support its economic feasibility as a means of business justification.
An Order of Life Cycle Cost Estimate is wholly dependent on the availability and sufficiency
of information at this stage.

(‘Stages
2. At Stage 2A, MPCP prepared at concept Master Plan by the Estimator to determine LCCs and
aid in the establishment of the budget requirements for the delivery of the NEOM Development
and a continuing point of reference as design development progresses.
3. At Stage 2B, a MPCP prepared at detailed Master Plan by the Estimator to determine LCCs
and aid in the establishment of the budget requirements for the delivery of the NEOM
Development and a continuing point of reference as design development progresses.
4. At Stage 2C, Asset Brief: a ‘Cost Estimate’ is prepared by the Estimator to determine LCCs and
aid in the establishment of the business case for the development and delivery of individual
NEOM Assets to provide the basis for the initial go/no-go decision before proceeding with
development of the Asset.
5. At Stage 3A, a ‘Life Cycle Cost Estimate’ is prepared by the LCC Estimator for the options being
considered and the costs are included in the Final Stage 3A Design Report.
6. At Stage 3B, a ‘Life Cycle Cost Estimate’ is prepared by the LCC Estimator and included in the
Final Stage 3B Design Report and to support future budgetary requirements.
7. At Stage 3C, a ‘Life Cycle Cost Estimate’ is prepared by the LCC Estimator and included in the
Final Stage 3C Design Report to provide an estimate of the future life cycle costs associated
with the Asset.
T
8. At Stage 3D, a ‘Life Cycle Cost Estimate’ capturing life cycle implications of deviations from the
design stage Cost Estimates.
AF
9. At Stage 5, a ‘Life Cycle Cost Plan’ is prepared by the LCC Estimator based upon the final
BOQ and the Assets and sub-Assets which includes a detailed life cycle renewal profile
showing frequencies and timings of major replacement and repair activities.
The LCC Estimates at each stage will mirror the format and level of information as provided within the
R
capital Cost Estimates as shown in Figure 4: Cost Estimation Process:

Typically, LCC Estimates are prepared based on a period of analysis of 30 and 60 years as a standard
D
unless otherwise required by NEOM.

The net present value costs (discounting current day values and future benefits to present day values)
are derived based on a discount factor as relevant to NEOM.
As similarly identified for capital Cost Estimates, the inputs and outputs are shown in Figure 7 for each
life cycle cost category:

(‘Stages
Benchmark Costs/ estimate at design stage
Major repairs/ Planned Preventative

Cleaning Security
replacements maintenance
Utilities
Refurbish and Reactive maintenance
Reception
upgrade
Potential Waste Management
Outputs Other Admin/ user
Staff costs as relevant Proactive
Redecoration support Costs as
to NEOM maintenance
applicable to NEOM
Renewal Costs Operation Costs Occupancy Cost Maintain Costs
Construction Costs Utilities rates (i.e. Proposed level of

and cost splits electricity, gas etc.) Proposed security maintenance
Inputs and strategy
Minimum Design
Information
Lives for the project Utilities consumption Proposed
Required
(inc. spec/ audit trail) as estimated for the maintenance tasks/
Proposed reception
building strategies as per FM
Specific access and helpdesk strategy
considerations Strategy for cleaning
highlighted by design Maintenance
and waste Staffing numbers as
team contractor s on-costs
management as required for user
Design briefs at each advised by FM team support
Operating hours by
design stage functional area
Functional areas
Maintenance
contractor s on-costs
(if known) T
AF
Figure 7: Outputs and inputs for each life cycle cost category
Additional LCC support can be provided at each Stage Gateway to support the design team in making
cost informed and maximised value decisions in relation to the materials used or systems specified for
the specific project via LCC options appraisals.
R
Life Cycle Cost Procedure
For Life Cycle Costs, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.

D
11. Key Performance Indicators
Overview – Policy
This policy establishes the framework for review of the Estimators’ performance in fulfilling their
contractual obligations. It is used to define the standards and level of performance expected. The
performance measures will vary during different stages of the project but the expected standards
relating to any defined activity will not.
The performance evaluation of the Estimator is carried out, against a set of parameters which enables
NEOM to monitor and assess the implementation of systems established on the projects by the
Estimator. The areas for concerns and for improvements are highlighted during the quarterly
evaluations and the Estimator is rated in a range of ‘Unacceptable to Best in Class’ based on the
performance evaluation scores.
The NEOM Representative is responsible for ensuring that the performance evaluation has been carried
out within the specified timeframe by all the NEOM Representative’s Team Members and uploading the
agreed score into the Share point website. The NEOM Representative Team Members shall review and
discuss findings and the areas for improvement and agree an action plan for rectification of any areas
deemed unsatisfactory.

(‘Stages
Key Performance Indicators Procedure
For KPI’s, refer to NEOM-NCE-PRC-002 “Key Performance Indicators Procedure”.
12. Pre-Contract Change Control
Pre-Contract Change Control – Policy
Pre-contract financial control and reporting is a continuous process from the earliest “Order of Cost
Estimate” through design stages to tender and award, to ensure the Cost Estimate is within the NEOM
approved budget. It is a process which assists the design team, design to a cost rather than costing a
design.
Pre-contract financial control is part of this overall process but should not be radically different from
Post Contract Control – the same principles apply.
Evaluation of Change Procedure
For Evaluation of Change, refer to NEOM-NCE-PRC-001 “Cost Estimation Procedure”.
13. Pre-Contract Reporting

T
The ICMS provides principles-based international standards that provide consistency in classifying,
defining, analysing and presenting global construction cost data at a project, regional, state, national or
AF
international level.
The ICMS provides consistency to Cost Prediction, and a global standard that aligns to national cost
measurement standards.
R
14. References
1. AACE International Recommended Practice no. 56R-08, Cost Estimate Classification System – As
D
Applied for the Building and General Construction Industries, TCM Framework: 7.3 – Cost
Estimating and Budgeting, Rev December, 2012’NRM1.
2. Civil Engineering Standard Method of Measurement (4th Edition), published by Institute of Civil
Engineers, 2012.
3. Civil 3D by Autodesk.
4. CostX ® by Exactal.
5. International Construction Measurement Standards 2nd Edition, published by the RICS.
6. Principles of Measurement (International) for works of Construction, First Edition, June 1979 Royal
Institution of Chartered Surveyors New Rules of Measurement 2nd Edition (NRM1 & NRM3).
7. Royal Institution of Chartered Surveyors New Rules of Measurement 2nd Edition (NRM2).
8. Civil Engineering Standard Method of Measurement 4th Edition (CESMM4).
9. ISO 15686-5:2017 Buildings and constructed Assets - Service life planning Part 5: Life-cycle costing
and it’s UK Supplement PD 15686 Standardised Methods of Life Cycle Costing for Construction
Procurement.

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COST ESTIMATION MANUAL

NEOM-NCE-MNL-001 Rev 01.00, May 2020

Revision code Description of changes Purpose of issue Date

DOCUMENT CODE : NEOM-NCE-MNL-001 REVISION CODE: 01.00 PAGE 2 OF 37

6. ASSESSMENT / ANALYSIS / TASKS ..................................................................... 19

7. METHODS OF MEASUREMENT ............................................................................. 23

8. PROCEDURE FOR THE PREPARATION AND REPORTING OF COST ESTIMATES

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9. SOFT COST ESTIMATES ........................................................................................ 30

10. LIFE CYCLE COSTS................................................................................................ 33

11. KEY PERFORMANCE INDICATORS....................................................................... 36

13. REFERENCES ......................................................................................................... 38

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Moreover, this Manual shall outline and ensure:

1. The Cost Estimation Service is standardised across NEOM.

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3. Definitions and Abbreviations

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Stage 2A Structure Plans & Concept Masterplan.

Stage 2C Asset Brief.

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NRM New Rules of Measurement.

RFP Request for Proposal.

4. Related NEOM Documents

Document Code Document Name

Table 4: Table of related cost estimation manual and procedures

Document Code Document Name

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5. Cost Estimation Methodology and Policy Considerations

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Master Plan Cost Plan

Development Stage Sub-Stage

Stage 2: Stage 2A:

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Development Stage Sub-Stage

Note: LCC may occur at each development stage.

Capital Cost Estimation and Life Cycle Cost Methodologies

1. At Stage 1, Strategic Definitions: an ‘Order of Cost Estimate’ prepared by the Estimator

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Figure 1: ICMS hierarchy

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Figure 2: Cost prediction process

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Table 7: Typical inputs to cost prediction process

Figure 3: Data analysis

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Table 9: Inputs, processes and outputs in cost prediction process

INPUTS PROCESSES OUTPUTS

– 1. Functional output (end product)• 1. Quantification - design, duration Level 1 Feasibility

6. Assessment / Analysis / Tasks

Roles and Responsibilities

Task 1 – Order of Cost Estimate

Task 2 - Elemental Cost Plan under Work Breakdown Structure

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i. Main Section Headings for works Level 1, Group element:

• Group element 0: Facilitating works

Task 3 - BOQ Production

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