construction cost management
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04abefee9f8141c8c7db38ed30b874a07111exq___construction_cost_management___lecture_5___initial_cost_estimating1.pptx
7111EXQ – Construction Cost Management Estimating processes Dave Roberts
Dave Roberts
Session Aims
To explore the processes involved in different types of estimation
Incl
Functional Unit
Superficial Unit
Elemental cost planning
Pre tender estimating
What are they? Why are they used? When are they used? etc
Reading lists
Suggested Reading
RICS (2012), New Rules of Measurement (NRM2). 1st Ed., RICS.
RICS (1998), SMM7 Standard Method of Measurement, 7th Ed., RICS.
Ostrowski, S (2013) Measurement using the new rules of measurement. Wiley Blackwell.
Keily, P and McNamara, P. (2003) SMM7 Explained and Illustrated, RICS.
Seeley, I and Winfield, R. (1998) Building Quantities Explained, 5th Ed., Palgrave Macmillan.
Lee, S and Trench, W. (2014) Willis’s Elements of Quantity Surveying,
12th Ed., Wiley-Blackwell.
CIOB (2009), Code of Practice for Project Management for Construction and Development, 4th Ed., Ascot: Chartered Institute of Building.
Reading lists
Suggested reading
Danny, M (2016), Construction Economics: a New Approach, 4th Ed.,
Taylor & Francis.
RICS (2012), the New Rules of Measurement (NRM1). Order of Cost Estimating and cost planning for capital building works. 2nd Ed., RICS.
Brook, M (2000), Estimating and Tendering for Construction Work, 4th
Ed., Oxford: Butterworth-Heinemann.
Fleming, F. W. and Grant, F. E. K. (2003) Estimating for Builders and Surveyors. 2nd Ed., Oxford: Butterworth-Heinemann.
Useful Websites
RICS: The Royal Institution of Chartered Surveyors
isurv: Building Value for Knowledge
BCIS : Building Cost Information Service http://www.bcis.co.uk
CIOB: The Chartered Institute of Building
* ‘the New Rules of Measurement (NRM)’ and ‘SMM7 Standard Method of Measurement’ are available for downloading at www.isurv.com
Estimating
Irrespective of the size or nature of a construction project, an accurate estimate is required to;
Give a correct picture of costs involved to the client
For cost planning purposes
For a contractor to make a realistic offer
At the initial stages, this may be an approximation. The ability to
develop an accurate estimate increases as the design information is completed
The process of pricing work based on the information/specification and/or drawings
Standard methods of measurement
The Standard Method of Measurement of Building Works (SMM7)
Issued by RICS and the Building Employers Confederation
The 1st Edition was issued in 1922
7th Edition in 1988, revised in 1988
The New Rules of Measurement (NRM)
Issued by RICS and NRM 1 (1st Ed.) was issued in 2009.
NRM 1 (2nd Ed) and NRM 2 (1st Ed) were published in April 2012.
NRM3 (1st Ed) published in 2014.
The Civil Engineering Standards Method of Measurement (CESMM)
Issued by Institution of Civil Engineers
The 1st Edition was issued in 1976, the 3rd Edition in 1991 and the 4th Edition in 2012.
Industrial Engineering SMM
1st Published in 1984 by IQS, Association of Cost Engineers and RICS
Principal of Measurement International (POMI)
Issued by RICS
New Rules of Measurement
NRM1: Order of cost estimating and cost planning for capital
building works
Provides guidance on measuring building works for the purpose of cost estimating and cost planning
NRM2: Detailed measurement for building works (successor to SMM7)
Guidance on detailed measurement and description of building works for
the purpose of obtaining a tender price (e.g. to prepare detailed BoQ)
NRM3: Order of cost estimating and cost planning for building maintenance works
Provides guidance on measuring building works for the purpose of cost
estimating and cost planning of maintenance works
New Rules of Measurement (NRM) 1
NRM1 provides guidance on
Order of cost estimates, including ‘rough’ order of cost estimates Elemental cost models
Cost plans
Cost analyses Benchmark analyses
Order of Cost Estimates
Identifying possible cost of a building early in design stage in relation to the employer’s fundamental requirements
3 methods recommended for estimating building works towards this Floor area method
Functional unit method Elemental method
Stages of Initial Estimating
The stages available include
Unit Estimating
Elemental Cost Planning
Pre-tender estimating
And the RIBA stages are
Stage 0 and 1
Stage 2, 3 and 3+
Stage 4
Initial estimating
Functional unit method
Identify suitable functional units for following projects such as
Car park
Hospital
A new hospital project is proposed for Coventry with 200 beds. Estimated building
cost per bed is £4,500. What will be the building cost of the new project?
A new football stadium is proposed for Aston Villa with 10,000 capacity. A 17,500 capacity stadium built in Watford has costed £10million. What will be the cost of the new Villa stadium?
| Functional unit rate = | Cost of the completed project |
| Nr of functional units |
walkthrough
New job – new secondary school building for 750 students in Great Yarmouth to be completed in Q4 2022.
Old Job 1 – 850 students in Greater London in 2018 Q3 cost £8,500,000.00
Old Job 2 – 650 students in Cumbria in 2014 Q1 cost £4,750,000.00
Old job 3 – 750 Students in Coventry in 2019 Q3 cost £7,000,000.00
Great – look at BCIS and find out all of the adjustment rates you need
TPi
Q4 – 2022 - 385
Q3 – 2018 - 320
Q1 – 2014 - 247
Q3 – 2019 - 333
LF
Great Yarmouth - 98
Greater London - 131
Cumbria - 97
Coventry - 93
Process is
Old Job 1 – 8,500,000 divided by 850 students = £10,000 per student
Adjust for Tpi = divide by old (320) and multiply by new (385) = 12,031 per student
Adjust for LF = Divide by old (131) and multiply by new (98) = 9,000 per student
Old Job 2 = 475000 / 650 = 7308 / 247 x 385 = 11391 / 97 x 98 = 11508
Old job 3 = 7000000/750 = 9333/333 x 385 = 10791/93 x 98 = 11371
Average now equals 9000 + 11508 + 11371 = 31879 / 3 = 10626 per student.
10626 x 750 = 7969500 ( given as a range of 7.5m to 9m (roughly 10%)
Range
Range
As we have no idea what the basics of the build are, what departments etc, we have to give a range
Typically for Unit estimating we will give a 5-10% range which evidences the lack of knowledge.
So
We tell the client approx. £7,500,000 to 9,000,000.
This type of estimating is at inception stage and so is only used as an indication of whether to proceed with the project or not.
notes
The more examples you use the more accurate it will be
Remove any outliers
Go as accurate in your adjustments as you can discover (ie use Camden not inner London, use Barrow in Furness rather than Cumbria etc)
Also consider the standard of finish on the build if you know (High or Low quality etc)
The BCIS do have this detail for you to use.
Initial estimating
Functional unit method Summary
Advantages?
Easy and simple Quick to produce
Disadvantages?
Crude method
Does not take a lot of cost significant factors into account for e.g. plan shape, number of floors, ground conditions (thus foundation types), quality of works etc
Risky to use except at the early project stages
Measurement of Building Works for order of cost estimating
Floor area method (Superficial method)
The total gross internal floor area (GIFA) of the building or buildings is measured and multiplied by an appropriate cost/m² of GIFA. The equation for calculating the total estimated cost of building works is therefore:
c = a x b
where:
a = GIFA
b = cost/m² of GIFA for building works
c = building works estimate (i.e. total estimated cost of building works)
Initial estimating
Initial estimating
Floor area method
Example 1
GIFA of a proposed university building is 4,200m2. Cost/m² is estimated at
£1,650. What would be the estimate cost of the building works?
Example 2
Your client wants to build a 2,000m2 large concert hall. You have worked on a similar project before, which has a floor area of 3,200m2. The cost of the previous project was £5.2m. What will be the building cost of the new concert hall?
Don’t forget adjustment for historic and location data can still apply.
Summarised as …
Cost/m²(updated)
Cost/functional unit (updated)
| Cost/m² GIFA(updated) = | Cost/m² GIFA X | TPI(proposed) | X | LF(proposed) |
| TPI(existing) | LF(existing) |
| Unit rate (updated) = | Unit rate | X | TPI(proposed) | X | LF(proposed) |
| TPI(existing) | LF(existing) |
Cost Data other than own historical data
It is possible to use other sources of cost information such as price books, websites etc
Its always best to use your own data as this gives a purer indication and you know more about the job.
For example BCIS will give you a rate to use for hospitals, but it is not possible to see a lot of information about where it has come from.
Where to find cost information…
In-house cost data/information or models
BCIS – Building Cost Information Services
w w w.b c is.c o .uk Quotations
Trade Publications
Published Cost Data – e.g. www.building.co.uk Published Building Price Books
Spons , Wessex, Laxtons, Griffiths
Adjusting for time and location
Any job that is built in the past is unlikely to cost the same today or at some specified point in the future
Also any job that is built in the middle of Coventry is unlikely to cost the same as a job that is built in the middle of London, or on the Shetland isles.
Adjustments come in the form of the Tender price index (Tpi) which is published by the RICS through their BCIS service (that you have to pay for)
BCIS
BCIS
Analysis section provides some historic jobs
Indices provides a link to the Tpi
Tender price studies gives you the Location Factor (LF)
Remember each cost you use must be adjusted for Tpi and LF
