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Week 8 - Cost Planning and Cost Control
Week 8 - Cost Planning and Cost Control
(DQS 256)
COST PLANNING AND COST CONTROL
PRESENTED BY:
KUMALASARI BINTI KIPLI
DEPARTMENT OF QUANTITY SURVEYING
FACULTY OF ARCHITECTURE PLANNING AND SURVEYING
UiTM SAMARAHAN, SARAWAK
COST PLANNING
DEFINITIO
N
▪ CP starts with the development of a figure (or cost) to allow the client to decide whether the project is
feasible.
▪ It starts with unit cost method, refine using the elemental method; component elements &
sub-elements.
▪ The development of elemental method enables the cost of a scheme to be monitored during the
various stages of design development.
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TERMS
Cost and price
Cost - refers to the amount incurred by a client
Price - amount offered by a contractor.
Cost control
Embracing all methods of controlling the cost of a project from its inception to
completion
Cost planning
Method of controlling the cost of a project so that it will not exceed the preliminary
estimate at the design stage and including cost planning preparation process and
subsequent cost checking processes.
Cost plan
A cost statement in terms of how a designer intends to design each element or part of a
building.
definitions
Cost analysis
It is a systematic breakdown in accordance with the elements intended to facilitate the cost
checking.
Element
It is the main element of a building that performs the same functions regardless of difference in
specification and design.
Cost limit
It is the client’s maximum budget for clearly defined
client requirements.
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Disadvantages of cost planning system
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▪ A QS need to be equipped with vast experience and
knowledge pertaining to cost and factor affecting cost -
system
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COST PLANNING
AGREED OUTLINE COST PLAN
COST LIMIT COST PLAN COST ANALYSIS
FINAL COST CHECKS
PRELIMINARY COST ADVICE COST CHECKS
SCEME DESIGN
INFORMATION
PRODUCTION
COMPLETION
OPERATIONS
TERMINOLOGY
FEASIBILITY
MANAGEMENT
QUANTITIES
PROPOSALS
FEED BACK
INCEPTION
PLANNING
HANDBOOK
OUTLINE
BILLS OF
PROJECT
TENDER
ACTION
DESIGN
DETAIL
R.I.B.A.
SITE
M
G
K
A
D
B
L
F
TERMINOLOGY
PREPARE COST PLAN OF POSSIBLE SOLUTION
SKETCH
USUAL
BRIEFING WORKING DRAWINGS SITE OPERATIONS
PLAN
DETAIL DESIGN
OUTLINE DRAWINGS
CONTRACT RECORD
DESIGN PILOT DETAILS DRAWINGS DRAWINGS
PLANS
CONFIRMATION OF SCHEME PRODUCTION
COST LIMIT DESIGN INFORMATION QS TASKS IN COST PLANNING PROCESS
PLANS DRAWINGS
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Cost data Cost per unit Cost m2/GFA 1)Cost m2/GFA Element Unit Rate Schedule of Rates
2)% total cost of major
elements
Cost calculation Cost study of 1) Preliminary Estimate based on major Estimate based on individual Approximate quantities
techniques similar buildings estimates based on elements. It uses area method elements in which the Element method
based on unit area method where and its % total cost of major Unit Quantity X Element Unit
method cost data will be elements Rate
chosen using
interpolation method
2) Financial method
– preparation of cash
flows*
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The cost target must be realistic, total must be sufficient to complete a project that caters to all client’s needs.
500m2
The cost limit of a project can only be obtained by adding the building cost to other
costs like infrastructure, site cost, consultant cost, interest rate and profit.
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No. of Buildings 7
Common range
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SUMMARY
Preparation of ‘First Estimate’ by ‘Interpolation Method’
1. A range of ‘Cost analysis’ of the same ‘type’ of building as the proposed building is assembled.
2. This range is examined to find the ‘cost analysis’ of the building whose ‘quality’ approximates
most closely to that desired by the client.
3. The initial brief of the proposed building and ‘all’ of the information given in the cost analysis are
studied in order to ‘isolate’ the ‘major differences’ between the two building.
4. ‘Allowances’ are made for each of these ‘major differences’ (including, of course, differences in
floor area and general market level).
5. Finally, an allowance is made as a reserve against price rises between the general market price
level at the date of ‘preparation’ of the ‘first estimate’ and the ‘contractor’s’ price level of the
tender.
Phase 2 – Cost plan
▪ The main objective at this stage is to plan and to determine how estimates should be allocated among the
parts or elements of a building.
▪ The cost plan has to be provided based on estimate and the client’s brief.
▪ The cost plan helps to provide quality buildings within the limited budget but it is not produced the cheapest
building.
▪ Several ways how the cost target can be prepared. These include :
i. Fixed cost target like expenditures on infrastructure, hospital building and school.
ii. The cost target can be calculated by obtaining the average cost of similar accommodation like cost/m2
iii. Prepare an estimate on the design chosen by the client.
Phase 2 – Cost plan
The preparation of cost plan is to check whether the cost target determined
during Outline Cost Plan within its limit. It is called as cost check.
It happens because the design may have changes from outline drawings to
detailed drawings.
The preparation of Detailed Cost Plan could have a number of revise cost plan due
to the changes in design proposals. The changes of design proposals happened
because of:
⚫ Cost check > cost target
⚫ Cost check < cost target
There are remedial actions to be conducted if the cost check > cost target or cost check < cost.
If the cost check = cost target, the planning to proceed with final cost plan.
3. Final cost plan - estimate based on approximate quantities
Ensure that cost targets do not exceed cost limit.
If yes, then designers will come out with tender drawings to prepare tender documents
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Definition
It is a process whereby the estimated cost is being checked against cost target set
or elements of building and takes place during the design stage of contract.
The checks are carried out by the Quantity Surveyor and the control exercise of the
Architect.
In another words, cost checking is the process of checking the estimated cost of
each section or element of the building as the detailed designs are developed,
against the cost target set against it in the cost plan.
Remedial Action
Result Action
▪ The cost planning process in practice may not follow the above steps thoroughly. The reasons are time
constraint, high consultant fees and it is a tedious process. Certain cost planning phases are to be
skipped e.g. detailed cost plan and final cost plan may not be needed if the proposed buildings are
standard and common in designs. However, the cost planning phases must be followed strictly if the
designs are complicated, one-off, high risks and expensive.
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There are three factors affecting element cost and adjustments are to be made to the cost
analysis. It should be done in this order of the factors:
1. Price Level (Tender Price / Location)
2. Quantity
3. Quality or standards and finishes
Adjustment is done on an elemental basis. All three factors are allowed for in each
methods used to prepare cost targets. These methods are:
1. Simple proportion
2. Inspection
3. Approximate quantities
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Notes:
The price and quantity adjustments are usually done before
the quality adjustment because
• Tend to have more effect on the total cost figure
than the quality adjustment
• The quality of an element is more likely to change
later in the design process than the quantity of the
element
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Example:
(where both price and quantity adjustments are needed)
The following information is for element ROOF
EUR in analysis = RM62.80/m2
EUQ in new project = 1416m2
Total cost of element = RM88,925.00
Index at tender date of Analysed building = 195
Index at date of cost plan = 211
No adjustment of quality is required
Target cost for ROOF = RM62.85 x 1416 x (211/195)
= RM96,298.00
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SIMPLE PROPORTION
This technique is based on the assumption that the cost of an element is
directly proportional to both the general market price level and the quantity
of the element.
This method can be used to adjust for price level, quantity and quality.
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INSPECTION METHOD
Elements or sub-elements such as doors and sanitary appliances, for which no effective
measure of quantity has been devised (for those element without EUQ and EUR).
This consists of assembling a range of costs of corresponding elements in previous
projects to suggest a pattern from which suitable cost targets can be chosen.
Element such as door, which is seldom of great cost significance in terms of total cost is
one where inspection technique may be used.
Inspection method should be used when measures of quantity (no EUQ) are not available,
considerable time would be required for measurement of approximate quantities, and the
quality standard of the element in question is not unusual.
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INSPECTION METHOD
Example: ELEMENT EXTERNAL DOORS
The cost of external doors in existing office building are as follows:
APPROXIMATE QUANTITIES
Used when a new requirement for the project is under consideration and can be reasonably
defined, so that some measurement can be made (when the design is available).
In this method, a relatively detailed specification is required (and prepared) for the element.
Approximate quantities are then measured from this specification and priced in the traditional
way.
At this stage, the specification prepared for this technique is not as detailed as the one prepared
during the tender document stage.
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APPROXIMATE QUANTITIES
Example: ELEMENT – INTERNAL FLOOR FINISHES
Analysed building – PVC tiles to all corridors, entrance and common area.
Proposed building – the architect has indicated that the entrance area finishes
should be of high standard and other circulation area should be of budget grade.
It is advised that floor finishes to the office area are the tennant’s responsibility.
The gross floor area of the project is 2216 m2.
The rates provided are composite.
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APPROXIMATE QUANTITIES
Quantity Rate Total Cost
Type of finishes
m2 RM/m2 RM
3 Building Cost Planning For The Design Team John Smith John Smith 2002
4 Cost Control in Building Design Flanagen, R & Tate, B Blackwell 1997
5 Cost Planning of Building (7th Edition) Perry, D & Brandon, PS Granada Publishing 1991