COST PLANNING

Cost planning involves the allocation of sum to various element of the building within the
estimated total cost arrived at, in preliminary estimate.

Before allocating the cost to various element, a deduction is made for price and design risk. The
% is btw 5-20%.
% of price and design risk determination; The % is dependent on the following factor
- Complexity of Design
- Nature of Client
- Size of the Project
- Anticipated time of commencement date
- Market trend and conditions

After the deduction of the price and design risk, the balance is apportioned to the elements of the
building. The balance is allocated by simple proportion, approximate quantities or by inspection.
Ex. For a preliminary estimate of N200m and price and design risk of 5%

Substructure
Superstructure
Finishes
Fittings and fixtures 190m
Services
External work
Preliminaries and contingencies
Price and design risk 10m
200m

1. Using previous similar buildings used for calculating preliminary estimate

% Substructure = cost of substructure x 100 (previous similar bldg)

Total cost
Substructure = % substructure (similar) x 190m

Superstructure = same as other element.

 S/N Element % Initial cost Revised cost Details/special
plan plan features
1 Substructure 12 32m Bored piles; 22m
depth, 450mm
diameter
2 Superstructure 34 94m

Keywords
Budget Cost Planning Cost Analysis Cost Cost Plan
Cost Checking Cost Forecast Cost Target Cost Limit

Cost Target is associated with the fixed price and not a fixed figure. Money set aside to cover for
each element.

Cost Limit is the total projected cost of the project in the cost plan. It is the sum of all the elemental
cost target.

Cost Plan is set to be the document that shows and states how much is to be spent on each
functional element of a proposed building.

Cost Analysis: the systematic breakdown of cost data into standard element of the building.

Cost Checking: carried out by cost planner during the final proposal and production information
stages to ensure that neither the elemental cost target nor overall cost limit is exceeded.
 COST CHECKING
This involves the process of reviewing the cost plan and the revised cost plan so that it does not
exceed the client’s budget. At this stage, more detailed information is made available, which is
used to calculate the revised cost plan.
Element Initial cost plan (million) Revised cost plan (million)
Substructure 15 16
Superstructure 60 63
Finishes 30 35
Fitting and fixtures 13 13
Services 40 38
External work 20 17
Preliminaries and 10 10
contingencies
Price and Design risk 10 10
Total 200 210

There are 3 possible outcome when the revised cost plan is calculated
(a) The revised cost plan is less than initial cost plan
(b) The revised cost plan is equal to initial cost plan
(c) The revised cost plan is higher than the initial cost plan
If the situation is either a or b above, the commencement of detailed design can commence. But
when it is situation c, the following options should be evaluated
- Review the Material Components of Elements with higher cost differentials on the revised cost
plan
- Redesign the Elements with higher cost differentials on the revised cost plan
- Redesign the Whole Scheme in terms of no of floors, shape, height etc
- If option 1-3 does not reduce the revised cost plan, Abandon the Scheme, source for additional
funds or Evaluate Alternatives