11th Presentation - Design Economics and Cost Planning - July 2021

Design Economics and Cost Planning
“Elemental cost planning is a system of

Cost planning and Cost control,
typically for buildings, which enables
the cost of a scheme to be monitored
during design development.”
- Ramesh Palikila BTech, FIS, FAIQS, FRICS

Source by Dinesh D Dabasia BSc (Hons) MRICS
DESIGN ECONOMICS AND COST PLANNING
Various &
Design Economics Levels
Cost of Knowledge
Planning Main Objectives
This competency covers the impact of design and other factors on cost throughout the life of the building and the control
of cost during the pre-contract stage, including how design decisions and construction processes impact on construction
and operational costs. They must have a thorough understanding of techniques used to manage and control costs pre-
contract.
2
Various Stages of Project

MANAGER Vs QS
Contents
– Overview & RICS APC expectation

– Design Economics
– Cost Planning
• Practical tips
– Measurement
– Pricing
– Risks
– Factors that really affect cost
Design Economics and Cost Planning

Page 6
Definitions
• Design economics is an understanding of the economics
associated with the design of building.
• Cost Planning is the technique by which the budget is allocated

to the various elements of an intended building project to
provide the design team with a balanced cost framework within
which to produce a successful design.
PROFESSIONAL CQS
• Client Brief SERVICES
• Development appraisal • Contract formation
• Contract documentation
• Viability of Project • Conttact Administration
• Project evaluation Pre-Contract
• Commercial
Management
• Procurement Strategy • Change Mangement
Management
• Cost Planning • Post Contract issues
• Vartaitions
• Pretender Estimate Dispure QS • Valuations
Post Contracts
• Tendering process resoltions
Management
Consultants Management
• Final account
Services
• Contarctual provisions
• Conflicts Avoidance in
• Claims procedures
Pre-contract stage
• Claims submissions
• Conflicts to Dispute
Claims • Review and analysis
• Contractual process Management • Evaluation
• Dispure resolution
• Determination
processes
• Negotiations
• ADR (Alternate Dispute
• Consultations
resolution ) Methods
• Conclusion
• Arbitration
• Litigation
02. PROJECT BRIEF AND DEVELOPMENT

Preparation of the project Development appraisal involves
brief is likely to be research into constraints and
coordinated by the lead opportunities evolving from the location,
consultant. legal and planning aspects of potential
sites as well as their physical
characteristics.
“The project brief is the
final stage in the process
of defining the client’s “A development appraisal is
requirements a financial assessment to
for the development of enable a developer to
a built asset”. establish the viability of a
project.” 9
Client’s requirements
Time : Time and Quality : Quality Risks : Risks, which

Flexibility :The need Costs : Effective
timing, which are of goals, which have to have to be identified,
to adapt to changing financial planning and
the essence, with be properly defined if quantified and
circumstances and cost management are
costs and project they are to be managed – and
keep projects on track essential throughout.
processes inextricably achieved. avoided wherever
whatever happens.
linked. possible.
Client’s wants and needs
Preparation of Project brief
Preparation of the project brief is likely to be coordinated by the

lead consultant. As well as gathering information about physical
requirements, the briefing process should:
1. Verify the objectives and priorities of the project.

2. Ensure space, time and budget parameters are aligned with the client’s vision and needs.
3. Ensure expectations are reasonable and attainable.
4. Clarify client roles and the project structure.
5. Establish how much the client knows already and their level of experience; do they already
have a clear brief?
6. Gather contextual information.
7. Gather user information.
8. Establish the building life span and flexibility requirements.
Core members
involve in
Project brief
03. PRE-CONTRACT COST MANAGEMENT
Project brief and development appraisal
Design Economics
Cost Advice Cost Plan
Cost Planning Process
Pre-tender estimate
Tendering
Tendering process and evaluation
Finalization of the Contract award
Contract
award
04. DESIGN COST ADVICE ,COST PLANNING AND ECONOMICS
Few Definitions
An element (for cost

analysis/planning purposes) is a Services
major physical part of a building

FF& E
that fulfils a specific function or
functions irrespective of its
design, specification or
construction.
Superstructure
“Elemental cost planning is a system of Sub-structure

Cost planning and Cost control, typically
for buildings, which enables the cost of a
scheme to be monitored during design
development.”
Cost Plan Format

Hard Cost
Elements
breakdown
Soft Cost Reference: NRM1

Using Standard
methods
• POM(I)
• RICS –COMP
• SMM7
• CESMM3
• NRM
• CSI –UNIFORMAT
New Rules of Measurement ( NRM) by RICS
The rules have been written to provide

a standard set of measurement rules
that are understandable by all those
involved in a construction project.
They provide advice and best practice
guidance to RICS members involved in
the cost management of construction
projects worldwide.
Design Economics
– What is the most efficient shape of a building you can design?
Desirable Less Desirable

– Why?
Design Economics and Cost

August 3, 2021 Page 18
Planning
Example cals for Wall to Floor Ratios
A. SQUARE SHAPE BUILDING
4 stories (G+3); storey height 3.0m
Wall Thickness
Gross Floor Area
150mm
40m 40 x 40 x 4 = 6,400m²
40m
Perimeter: Wall to Floor Ratio

4 x 40m =160m 1,920m² / 6,400m² =
Façade Area: 0.30
160m x 4m x 3 = 1,920m²

Planning
Wall to Floor Ratios
B. RECTANGLE SHAPE BUILDING
4 stories (G+3); storey height 3.0m
Wall Thickness Gross Floor Area
16m
150mm
100 x 16 x 4 = 6,400m²
100m
Perimeter
Wall to Floor Ratio
2x16 + 2x100 = 232m
2,784m² / 6,400m² =
Wall Area =
0.435
232 x 4 x 3.0 = 2,784m²

Planning
Wall to Floor Ratios : Comparison between A Vs B
– In these examples the W:F of A is 0.30 and of B it is 0.435

– Therefore B requires 45% more cladding to build the same floor area.
So, if the building is to cost £1,500/ m² (GIA) then in each example
– You have the following amounts to spend of the facades :
(A) £1,500 x 6,400m² = £9.60Million (M) x 0.30 = £2.88M / 1,920m² = £1,500/m²
(B) £2.88M / 2,784m² = £1,034/m²
(cost must stay the same – as the Building has to be £1,500/m² GIA)
The building with a less desirable W:F ratio cannot have the same façade material if you are to stay within
same cost envelope
Planning
RIBA Stages of Cost Planning
RIBA- 2020 PLAN OF WORK
aiqs.com.au
The RIBA Plan of Work published by the RIBA in 2020 defines spatial a spatially coordinated design is a: 'Design in which the client's
requirements as: 'A schedule of rooms and/or spaces that will achieve Spatial Requirements and the spaces required for any Building
the Client Requirements. The Spatial Requirements for the building as a Systems – such as structural and building services engineering
whole are set at Stage 0 (strategic definition). aspects, including grids, risers and plant rooms – have been
determined and fixed to allow Stage 4 to progress
info@aimsintlqs.com © All Rights Reserved
25
Design Vs Cost
Design economics is an understanding of

the economics associated with the design
Concept of building.
Design
Cost Plan 01
Developed Cost Planning is the technique by which

Design
the budget is allocated to the various
elements of an intended building project
to provide the design team with a
balanced cost framework within which to
Cost Plan 02
produce a successful design.
Technical
Design
Final Cost Plan – PTE
info@aimsintlqs.com © All Rights Reserved

Elemental cost plan for design and Cost Planning Process
construction
• Client’s requirements
• Quantification process
• Standard Method of
measurements
Cost plans are generally prepared by cost • Pricing methods
consultants (often quantity surveyors). They • Rates database
evolve through the life of the project, • Assumptions
• Exclusions
developing in detail and accuracy based on • Inclusions
the nature of the design, and then actual • Marked-up drawings /List
• Contingencies
prices are provided by specialist contractors, • Risk Register
contractors and suppliers. They range from • Control of documents and
distributions
very early initial cost appraisals through to • Revisions
tender pricing documents. • Value Engineering options
• Design Economics options
• Revised Cost Plans
• Comparative Cost Plan
• Bench Marking
• BCIS/NRM Cost Analysis.
Reference:
NRM1
AIA ( American Institute of Architects) - Stages of Work
Concept Schematic Detailed

Production
Design Design Design

Planning
Types of Estimates
• Feasibility Estimates - Functional

e.g. Cost per key, Cost per bed, Cost per pupil
• Elemental
e.g. Cost/m² based on elemental areas
• Detailed
e.g. Cost/m² of detailed measurements

Planning
1.Feasibility Estimates
– Used during inception and feasibility stages of the project
(RIBA Work Stages A & B / AIA Concept Stage)
– Provides indicative cost only of future project
– Costs driven by Gross Floor Area
– Based on limited information (high dependence on
assumptions)
– Largely based on historical data (Benchmarking)
– Crucial for development appraisals
– State as a cost range in £/m² or per functional unit

Planning
Feasibility Estimates Common Pitfalls
– Specification
– Plan shape (W:F Ratios)
– Mixed functions (parking / offices )
– Compare apples for apples
Project: 3 World Centre The Walbrook
Storeys: 80 13
Use: Office/Retail Office/Retail
Location: New York London
Built: 2016 2010

Planning
2.Elemental Estimates
– Used during Outline Proposal and Scheme Design stages
of the project (RIBA Work Stages C & D / AIA Schematic)
– Provides preliminary order of cost of the project
– Costs driven by Elemental Areas and Spot Items
– Based on outline information (medium dependence on
assumptions)
– Largely based on historical data (Cost Analysis)
– Crucial for monitoring design development
– Stated as an order of cost / Notional Estimate

Planning
3.Detailed Estimates
– Used during Detailed Design and Production Information
stages of the project (RIBA Work Stages E & F)
– Provides a detailed anticipated cost of the project
– Costs driven by Measured Items (quantities)
– Based on detailed information & Specifications (medium
dependence on assumptions)
– Based on sub-contractor quotations built up rates
– Crucial for project cost monitoring
– Stated as an out-turn cost

Planning
Preparing a Cost Plan
– What does the Client want?
Design Economics and Cost August 3, 2021 Page 36

Planning
Preparing a Cost Plan
– What does the Client want?
• Agree structure, formats, timescale
• Agree appropriate level of detail
• What the budget needs to cover e.g. Fees
– Site visit
– Review information
– Establish Principal Cost Drivers (80 – 20 rule)
– Key functional areas, Principles of Measurement (BCIS /
POMI)
– Pricing

Planning
Structure your Cost Plan
– Executive summary
– Outline of key risks
– Assumptions
– Exclusions
– Information Used
– Details
– Area schedule
– TIP: Include a set of Marked up drawings

Planning
Measurement
• Traditional measure / BIM
• Focus on areas with greatest value
• Focus on areas that take longest to measure
• TIP: Think about what is not on the drawings
oPlant rooms
oBuilding maintenance unit
• TIP: Think outside the box

oIf you were an auditor, where would you find gaps in a cost plan?
• Understand your building function

• Know your stuff!
Planning
Construction Areas
–GIA, GEA, NIA, NLA - when are they applicable?

–BCIS - all costs expressed against GIA
(Definition as RICS Code)
–RICS Code of Measuring Practice - 6th Edition August 2007 “The Code
is for use in the UK only”
–CEEC Code of Measurement for Cost Planning

–NRM

Planning
Levels of Pricing
Global Rates Feasibility Estimates
Factories for letting - £200-300/m²

Offices, high rise a/c - £1,250 - £2,000/m²
Elemental Rates Initial Estimates
Upper floors & frame - £200/m²

External Cladding - £550/m²
Item Rates Cost Plans
250mm thick Reinforced Concrete Wall - £100/m3

Formwork to walls - £35/m²

Planning
Other considerations
–Building / site risks

• Contamination
• Blast protection
• Occupied sites
• Accessibility
• Existing buildings
• Ecological issues
• Planning consent

Planning
Pricing
– Procurement
– Location
– Size of project
– New build / refurbishment
– Market conditions
– Rates of construction
– Others

Planning
Pricing
What do we price ?
– Ensure everyone reading the cost plan have a clear
understanding of what is included
– Clear and concise description of element / item
– TIP: “If you can’t measure / describe it you can’t build it”
– Example:
“Allowance for new half hour timber single door with overall size of 1050
x 2700mm high, with a glazed vision panel with overall size of 100 x
500mm high, including doorframe and ironmongery and finishes.”
– If you do not provide detailed descriptions, ensure you list

clearly in the notes, assumptions and exclusions what is
included.
Planning
Risks
– Employer risks
• Cash flow restrictions
• Employer variations
• Funding
– Design team risks

• Design co-ordination
• Investigations
• Lack of design
• Inappropriate design
– Procurement risks
• Currency fluctuations
• Design responsibility

Planning
Project Circumstances that REALLY affect Cost
–The Team and Design

• Who is your Client?
• Who is your designer?
• Who is your end user
• Vital stats
• Quality of design
information

Planning
–The Site
• Location
• Existing Condition
• Neighbours – proximity & impact
• Overhead and
Underneath
• Vacant or Occupied

Planning
– What does “15% prelims” mean?

– Urgency
– Phasing requirements
– Temporary requirements
– Legislation

Planning
Know your market
– Key materials (steel,

rebar etc)
– Procurement from
overseas
– Timing of procurement
– Workload of
Contractors
– Check Quarterly
Market Reviews

Planning
Keep your pulse on Inflation
–Project programme
–Base date
–Start on site
–Tender price index
–Construction
materials

Planning
BCIS
Building Cost Information Services - BCIS, the RICS' Building Cost Information
Service, is the leading provider of cost information to the construction industry
and anyone else who needs comprehensive, accurate and independent data
It is a centralised data base of cost of materials. This can be used as a

benchmark and used for elemental cost analysis
Successful delivery of QS services in a Construction Project
BROAD
PERSEPECTIVE
MARKET LATERAL
ANALYST THINKING
Special
abilities of
BEST
COMMUNI
Cost ANALYSE
RISKS
-CATOR Manager
SELECTION OF
GOOD RIGHT
NEGOTIATOR PROCUREMENT
STRATEGIES
09. CHANGE MANAGEMENT
CHANGE MANAGEMENT
D] Successful delivery of QS services with team working
55
Global Service Delivery - Successful Project Collaboration
Understand &
Selecting and accommodate
balancing the team differences in working
practices and cultures
Ensuring accuracy Communicate

and timely effectively and
Delivery transfer
knowledge
Wrapping up…
▪ Format of cost plan

▪ Area Schedule
▪ Reconciliation with previous
▪ Preliminaries
▪ Procurement Route
▪ Quick Checks
▪ Forgotten Items
Design Economics and

Cost Planning
Remember….
▪Know your team, your client and your project
▪Visit site and consider logistics
▪Understand all existing conditions
▪Think about programme and sequencing
▪Know how to interpret benchmarking information
▪Market testing (e.g. quotes, recent tenders)
▪Will conditions overseas affect your project?
Design Economics and

Cost Planning
Role of QS in Pre-Contract Cost Management services

Cost Planning Procurement and Tendering
• Client’s requirements • Global procurement methods
• Quantification process
• Standard Method of measurements • Client’s requirements
• Pricing methods • Time. Cost, Quality, HSE and Sustainability
• Rates database • Advice on Procurement route/ method
• Assumptions
• Exclusions • Preparation of Tender documents
• Inclusions • Tendering Methods
• Marked-up drawings /List • Pre-qualification process
• Contingencies
• Risk Register • Tendering procedures
• Control of documents • Instructions to Tenderers
• Revisions • Floating of Tenders
• Distributions
• Recommendations : Value Engineering options • Tender returns
• Design Economics options • Tender opening protocols
• Revised Cost Plans • Rate Analysis methods and adjustments
• Comparative Cost Plan
• Bench Marking • Commercial Analysis
• BCIS Cost Analysis • Technical Analysis
• Tender Reports
• Tender recommendation and award 60
Contract
PROJECT TEAM MEMBERS – OFFICE ENVIRONMENT
Successful delivery of QS services in a Construction Project
THANK YOU…..ANY QUESTIONS?

Design Cost Advice, Cost
Planning, and Cost Engineering
Cost management of a project includes establishing the budget

and then effectively monitoring and reporting against that budget
on a regular basis, cost planning the evolving design, preparing
appropriate contract documentation and advising on variations and
claims during the progress of the project.
Additional Range Indicators :
▪ Strategies for gathering data and carrying out research on current construction costs and
future predictions
▪ Analysis of data relating to costing, budgeting and cash flows including financial
implications of various options
▪ Use of appropriate analysis and evaluation techniques in reporting to the Client
▪ Application of principles of cost management and elemental cost analysis
Unit 3- Cost estimating
Unit 4 -Cost Planning
Design Cost Advice, Cost Planning, and Cost Engineering
Q1.Explain Value Management?
▪What? Value Management (VM) is the process of delivering

value throughout the project lifecycle. Value can be
optimized, through early interventions such as Objective
Setting and Option Appraisal.
▪Why? Business decisions, Strategic advice based on analysis
▪How? Stages of analysis (Information, Functional Analysis,

Brainstorming, Evaluation, Proposal Development, Recommendation &
Implementation)
Note: Explain with an example from your experience, if any.
Stages in value management

1. Information An information gathering process that focuses Define and understand the nature
attention on the client’s business drivers for of the problem.
the project. Particular importance is given to
the use of facilitated workshops.
2. Speculation Creative-thinking techniques are utilised to Generate alternative ideas as to

generate alternative ways to provide the how the problem may be solved.
business drivers identified in stage 1.
3. Evaluation The solutions generated are evaluated in terms Evaluate the feasibility of the
of their feasibility and cost. Ideas are ideas so generated.
combined and consolidated to produce a list of
perhaps five or six that are worthy of further
consideration.
4. Development The surviving ideas are developed in detail, Fully develop and test the ideas
ensuring that all of the interfaces with the judged to be the most suitable.
client’s business are taken into account.
5.Recommendation/ The most suitable solution is identified and a Decide upon the best solution,
implementation formal recommendation made to the client for and act
implementation.
Q2. Explain Value Engineering?
▪What? A systematic approach to improve the value of a

element or product without compromising its
functional requirements.
▪Why? Use as a decision making tool when selecting

option.
▪How? Stages of analysis (Same as VM)

Note: Explain with an example from your experience, if any.
Q4. What do you understand by the term “life cycle costing”?

Answer:
You need to understand the term and briefly cover the key points:
LCC (Life Cycle Cost)
• Total cost throughout its life including planning, design,
construction, maintenance, operation, replacement cost, etc.
• Explain with an example from your experience, if any.

(Examples:- Compare Cladding systems)
Q5. What are the preliminary cost estimate methods

available?
Answer :
▪ Unit method
▪ Superficial area method
▪ Cube method
▪ Elemental method
Q6. How do you develop cost plan through the pre tender
phase of job ensuring all parties understand the financial
position of the project.
Answer :
▪ Describe the process of developing a cost plan
▪ Establish and agree on the format
▪ Identifying drawings/sources of information basis of
cost plan
▪ Communicate the cost plan to the client
▪ Sit with client and talk them through the entire cost
plan in detail
Q7. What is the purpose of cost plan?
Answer :
▪ To set realistic cost limit
▪ To decide how money is to be spent
▪ To check that the money is being spent as intended
▪ To test viability
▪ Design guideline (To establish parameters)
Q8. What information would typically submit together with budget

estimate/Cost plan for a construction project?
Answer :
▪ A covering letter
▪ Executive summary
▪ Scope of works
▪ Specification notes
▪ Assumptions
▪ Exclusions
▪ Cash flow information
▪ Drawings and other information upon which the estimate is based
▪ A list of value enhancing alternative suggestions or options
▪ A risk register
▪ Etc
Q9. How would you deal with risk in cost plan ?

Answer :
▪You may have risk register or risk schedule, which will

include risk identified by the project team.
▪The cost plan should include a level of contingency which
generally covers unforeseen events on site.
▪Provisional or PC sum should include within the cost plan.
▪As design develops and cost plan develops, hopefully the
risks will be designed out or mitigated to a manageable level,
to a point where the risk register only include a small
number of risks.
Q10. It is 5.30pm on a Thursday afternoon. A client phones you and says that
they are on their way to a meeting to buy a plot of land. He wants to know
“how much hotels cost to build?” in order to calculate the price to pay for the
land. He wishes to have your advice within the next hour. How do you advise
the client?
Answer :
The assessors would look for a broad understanding that demonstrates the appropriate level of
competency. The candidate should clearly explain that their company could be liable to the client for
any information that is provided. They would expect the candidate to convey the difficulty in providing
accurate information in such a situation and explore the options to gain more time.
▪Try and contact a more senior member of staff or discuss with senior colleagues
• Request further information from the client regarding:
o Site location
o Site condition
o Development area (m2) / number of bedrooms
o Quality (star rating)
o Timescale
o Site access and service provision, Etc
▪ Based on AED/m2 then calculate a construction cost based on historic cost information (described
above). Make allowance for external areas.
▪ Provide a range of costs and be clear as to assumptions and exclusions. State a level of accuracy.
▪ Confirm conversation in writing.
Q11. How would you deal with a cost plan that is over the clients budget?
Answer:
The communication of cost plans is extremely important. It is the clients
chance to understand the costs associated with the project, and your
opportunity to explain everything in detail.
You need to do this in a clear and concise manner. In these circumstances you
need to approach matters in a positive manner, identifying areas where
potential savings can be made possibly in terms of material specification or
re-design.
Reference needs to be made to value engineering alongside the design team.
A question like this presents a good opportunity to refer to a project that you
have actually worked on and draw upon your practical experience of what
actually happened

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Design Economics and Cost Planning

“Elemental cost planning is a system of

- Ramesh Palikila BTech, FIS, FAIQS, FRICS

Various Stages of Project

– Overview & RICS APC expectation

Design Economics and Cost Planning

• Cost Planning is the technique by which the budget is allocated

02. PROJECT BRIEF AND DEVELOPMENT

Time : Time and Quality : Quality Risks : Risks, which

Preparation of the project brief is likely to be coordinated by the

1. Verify the objectives and priorities of the project.

03. PRE-CONTRACT COST MANAGEMENT

Project brief and development appraisal

Cost Advice Cost Plan

Cost Planning Process

Finalization of the Contract award

An element (for cost

major physical part of a building

“Elemental cost planning is a system of Sub-structure

Cost Plan Format

Soft Cost Reference: NRM1

New Rules of Measurement ( NRM) by RICS

The rules have been written to provide

– What is the most efficient shape of a building you can design?

Desirable Less Desirable

Design Economics and Cost

Perimeter: Wall to Floor Ratio

Design Economics and Cost

Design Economics and Cost

– In these examples the W:F of A is 0.30 and of B it is 0.435

So, if the building is to cost £1,500/ m² (GIA) then in each example

– You have the following amounts to spend of the facades :

(A) £1,500 x 6,400m² = £9.60Million (M) x 0.30 = £2.88M / 1,920m² = £1,500/m²

(B) £2.88M / 2,784m² = £1,034/m²

Design economics is an understanding of

Developed Cost Planning is the technique by which

Final Cost Plan – PTE

info@aimsintlqs.com © All Rights Reserved

Concept Schematic Detailed

Design Economics and Cost

• Feasibility Estimates - Functional

Design Economics and Cost

Design Economics and Cost

Use: Office/Retail Office/Retail

Location: New York London

Built: 2016 2010

Design Economics and Cost

Design Economics and Cost

Design Economics and Cost

Design Economics and Cost August 3, 2021 Page 36

Design Economics and Cost

Design Economics and Cost

oBuilding maintenance unit

• TIP: Think outside the box

• Understand your building function

–GIA, GEA, NIA, NLA - when are they applicable?

–CEEC Code of Measurement for Cost Planning

Design Economics and Cost

Factories for letting - £200-300/m²

Elemental Rates Initial Estimates

Upper floors & frame - £200/m²

Item Rates Cost Plans