Design economics and cost planning
| Question | Answer |
|---|---|
| What is Design economics? | Design economics is an understanding of the economics associated with the design of the building. parameters that incorporate design economics: Identifying how changes in parameters of a building will have an impact on its cost. Recognising that many elements influence the cost of a building. Prompting architects to design for the client in a manner that fulfils the values and requirements of the client. |
| Which design factors affect cost of building? | 1. Shape – Square shape more economical than L-shape or irregular shape, 2. Grouping of buildings – 2 or more buildings with common areas will be more economical, 3. Number of storeys – tall buildings inherently more expensive due to services, buildability risk, operation & maintenance, 4. Storey height – wall to floor ratio will increase leading to higher facade cost, 5. Size, 6. Circulation space, 7. Internal layout, 8. Specifications, 9. Working conditions |
| Which site factors affect cost of building? | 1. Location 2. Topography 3. Geology 4. Environmental 5. Access to site 6. Existing services 7. Existing site use 8. Size of site 9. Adjoining properties |
| Which economic factors affect cost of building? | 1. Amount of works available 2. Availability of resources 3. Desirability of the project 4. Cost of borrowing 5. Tendering firms – future workload 6. State of the construction market 7. State of the economy – locally and globally 8. Interest rates |
| Why may construction costs be different for different locations? | climate, labor markets, material availability and state regulations, access to site, existing services |
| Why should design be economical? | – Efficient use of resources – reduce wastage of areas, materials, cost, time etc. – provide Value for money to the Client |
| Please explain your understanding of the term wall to floor ratio? | This shows the relationship between the wall area and floor area. It is used to show the cost efficiency of the building as the lower the ratio, the cheaper the building is to construct as there is less external envelope required in comparison to the floor area. The wall to floor ratio of a building is calculated by dividing the external wall area by the gross internal floor area. An efficient ratio for a typical office building is between 0.40 to 0.50 with anything below a ratio of 0.35 considered as inefficient. |
| What is a Cost plan? | Elemental cost plan (or cost plan) – is the critical breakdown of the cost limit for the building(s) into cost targets for each element of the building(s). It provides a statement of how the design team proposes to distribute the available budget among the elements of the building, 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. |
| What is Cost planning? | 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. |
| What is not included in cost plan? | 1. Land cost 2. Advertisement cost 3. Finance cost 4. Legal fees 5. Employer’s operational cost 6. Feasibility study cost 7. Cost of future authority requirement changes |
| What is the main purpose of cost planning? | The main purpose of elemental cost planning is to: (a) ensure that employers are provided with value for money; (b) make employers and designers aware of the cost consequences of their desires and/or proposals; (c) provide advice to designers that enables them to arrive at practical and balanced designs within budget; (d) keep expenditure within the cost limit approved by the employer; and (e) provide robust cost information upon which the employer can make informed decisions. |
| What are the types of Cost plan? | As per NRM 1 Formal Cost Plan – RIBAWork Stage 1 – 2: Concept Design 2 – 3: Spatial Coordination 3 – 4: Technical Design Elemental cost plan Trade cost plan |
| What are the stages of a Cost plan? | 1. Preparation of cost plan 2. Cost checking 3. Cost control |
| What information should be included in a Cost plan report? | (a) executive summary; (b) project title; (c) project description; (d) status of cost plan; (e) a statement of cost (including cost limit); (f) details of the information and specification on which the cost plan was prepared; (g) a statement of the floor areas; (h) the cost plan; (i) basis of cost estimates (i.e. assumptions); (j) estimate base date (i.e. to which inflation has been applied); (k) reasons for changes to previous cost targets (explaining the transfers and adjustments that have taken place against the previous cost plan); (l) estimated costs of and a request for decisions on any alternative proposals; (m) value engineering options; (n) conclusions; (o) recommendations; (p) cash flow forecast, where appropriate; and (q) inclusions and exclusions |
| What is an Elemental cost plan? | The elemental cost plan is a detailed cost plan which is broken down into a series of elements such as substucture, superstructure, finishes etc. |
| What is a Trade cost plan? | Cost plan based on trades such as concrete, shutter, rebar etc. |
| What is a contingency? | Contingencies are downside risk estimates that make allowance for the unknown risks associated with a project. |
| How would you assess the amount required in the contingencies in Cost plan? | Contingencies are often expressed in terms of percentages. The percentage contingencies applied are at their greatest in the early stages of the project when there are the greatest number of possible risks. But they can then be reduced as better particulars about the project become available and some risks have passed or been overcome. An example of how a contingency might be reduced during a project is set out below: At the preliminary business plan stage, total cost estimates might include a 15% contingency. In the elemental cost plan this might reduce to 10% of fees and construction costs. On awarding the contract, 5% of the contract value might be included as contingency in the cost plan. |
| What is the difference between a cost estimate and a cost plan? | Cost estimated from a completed design Cost plan, cost is fixed and design is made to fit within the cost |
| What is cost analysis? What may cost analysis be used for? | It involves a full appraisal of the costs involved in previously constructed buildings aimed at providing reliable information which will assist in accurately estimating the cost of future buildings. |
| What is an Order of cost estimate? What is the purpose of an order of cost estimate? | As per NRM 1, it is an estimate based on benchmark data for a similar type of project based on the client’s strategic definition or initial brief. Its purpose is to establish affordability of a proposed development for a client. It takes place prior to the preparation of a full set of working drawings or bills of quantities and forms the initial build-up to the cost planning process. Order of cost estimates are a method of cost prediction. It is prepared during RIBA stage 1: Preparation and Briefing |
| Can you please explain the difference between an order of cost estimate and a cost plan? | A cost estimate is prepared earlier on in the design process, typically between RIBA Work Stages 0 (Strategic Definition) to Stage 2 (Concept Design). This is when the level of design information is more limited and allows a cost estimate to be prepared on a cost per m2 or cost per functional unit basis. A cost plan is produced typically at each RIBA Work Stage from Stage 2 onwards. As the design progresses more information can be included to eventually break down the estimated cost of the development elementally into each of its component’s parts such as sub-structure, superstructure, services & professional fees into an elemental cost plan format. |
| What Is a Feasibility Study? | Feasibility studies are preliminary investigations undertaken in the very early stage of a project to assess whether the project is viable. They tend to be carried out when a project is relatively large or complex, or where there is some doubt or controversy regarding the proposed development. |
| What Is a Viability Study? | It’s a detailed analysis that helps to determine if your proposed project is technically and financially viable. Feasibility is the possibility and ability for something to be done. Viability is that something’s ability to survive. |
| What is the difference between Budget and Estimate? | Budget is a fixed amount set by Client to complete the project. Estimate is a forecast of final costs based on design. It differs in different stages. |
| What are the types of Estimates? | 1. Preliminary/Approximate/Abstract/Rough cost estimate a. per functional unit basis e.g. cost per bed for hospital, cost per key for hotels etc. b. Plinth area basis c. Cubic content basis 2. Approximate quantity method estimate 3. Detailed estimate |
| What is a Feasibility estimate (Class 4)? | Feasibility estimates (AACE Class 4) are prepared to allow comparison of the economic viability of various project options. |
| What information do you need to carry out a feasibility estimate? | What is the function of the project? Type of building? New or refurbished specifications? Low, mid or high end? |
| What is Options appraisal? | Options appraisals are undertaken following the completion of feasibility studies. Their purpose is to assess a number of potential options before developing a concept design for the preferred option. After assessing the feasibility studies, the client will decide which options the consultant team should develop. Ideally there will be no more than four options at this stage. Options appraisals might include diagrammatic options studies that enable the client to understand the broad pros and cons of the available options so that a preferred option can be selected. |
| What are the 3 types of finishes in terms of specification? | Basic / low end Standard / medium Premium / high end |
| What is the percentage accuracy of a feasibility estimate generally? | -30 to +50% |
| What is Rough Order of Magnitude ? | rough order of magnitude (ROM) estimate. It is used for the initial screening projects for capital expenditure planning. Since several projects are initially available, estimating each would require a tremendous amount of time and effort. Range from + 50% to – 50% |
| What is Definitive Estimate? | The definitive estimate is the most exact type of estimate defined in the PMBOK. Its accuracy ranges from -5% to +10% |
| What is Ball park estimate? | A ballpark estimate, is a rough initial estimate based on high level client objectives, and a large margin of uncertainty. The deliverables are not clear yet, therefore out of necessity, this estimate must be a rough guess. |
| What is Budget Estimate ? | The budget estimate approximates the time and resources needed to plan and complete a project and develop and implement a viable budget. |
| What is Pre-Tender Estimate? | A pre-tender estimate is the last cost check of the project before it is issued to tender. |
| What is Post Tender Estimate? | A post tender estimate should be prepared after tender evaluation and any tender negotiations or tender adjustments have been completed, but before the final decision to invest is made by the client. |
| What is Base Cost Estimate? | As per NRM 1, The base cost estimate is the sum of the works cost estimate, the project and design team fees estimate, and the other development and project costs estimate without any allowances for risk and uncertainty, or element of inflation. |
| What is Conference estimate? | Pools together data and knowledge from expert sources to prepare estimate. Input from different functional and operational departments across the business are considered. It prevents decision making in silo. |
| What is Cross Estimating Method? | It is a technique that involves using data from similar completed projects to estimate the cost of a new project. |
| What is Unit rate of occupancy or Functional unit estimate? | the unit rate which, when multiplied by the number of functional units, gives the total building works estimate (i.e. works cost estimate less main contractor’s preliminaries and main contractor’s overheads and profit) e.g. per bed space for hospital, per key for hotel and per m2 of retail area |
| What is Superficial estimate? | Superficial estimating method (SEM) is the easiest way to determine probable construction cost of a project. Estimator measures the covered area of construction project and multiply with rate per unit, derived from any of the same prior completed project |
| What is Cube or Volumetric estimate? | The cube method estimating is a single rate method of estimating based on the cubic content of a building. Cost per cubic metre method is specific for building projects and aims to overcome the current criticism floor area method that does not take into account possible variations of the storey height. |
| What is Storey-Enclosure method of estimate? | Storey enclosure method is a single rate method estimating, this method has largely unused in practice. It measures the area of external walls, floors and roof areas (effectively enclosing the building) and multiplying them by an appropriate weighting factor. |
| What is Three point estimate? | Three-point estimating is a method of estimating a task or project by considering three different estimates: The most optimistic estimate. The most pessimistic estimate. The most likely estimate. wo popular formula: 1. Triangular distribution: Triangular Distribution: E = (o + m + p ) / 3 where E is Estimate; o = optimistic estimate; p = pessimistic estimate; m = most likely estimate 2. Beta (or PERT): Beta Distribution (PERT): E = (o + 4m + p ) / 6 |
| What is Top down estimate? | Top-down estimating is a cost estimation method that starts with the overall project and highlights the significant components of the work as percentages of the overall cost. Top down estimates are often based on past projects with similar characteristics. The top-down cost estimation approach is usually fast and less accurate. Owners and contractors for project managers use this method to evaluate the cost in the early stages of a project and when operating with a fixed budget. |
| What is Bottom up estimate? | The bottom up approach looks at the project from the most specific practical level producing estimates for individual tasks or elements that have been defined at that stage of the project. These estimates are then compiled to create a total budget. Bottom up estimates are generally more accurate than their top down counterparts. Bottom up estimates can be more expensive and time consuming to create. |
| What is Guess estimate (Guesstimate)? | It is defined as an estimate made without using adequate or complete information, or, more strongly, as an estimate arrived at by guesswork or conjecture. |
| What is a benchmark? | A benchmark is a pre-determined standard or point of reference against which other things, people, costs, time or activities can be measured. It is regarded as an achievable standard which a failure to achieve could deem the work in question to be unsatisfactory. |
| What is benchmarking? | Project benchmarking is a process by which the estimated performance (such as cost) of a project is compared to other similar projects. This can highlight areas of the design that are not offering good value for money and can help in the assessment of tenders from suppliers and contractors. |
| What are the key steps in benchmarking? | Data collection Data comparison Data analysis Action |
| Why can benchmarking be both beneficial and important for construction projects? | allow project teams to monitor their productivity, cost-efficiency, and other factors based on expected values and then learn from the process when the benchmarks do not align with reality. |
| Where can a QS find guidance on benchmarking? | RICS Guidance note: Cost analysis and benchmarking |
| What is the RIBA Plan of work? | RIBA Plan of Work – is a model procedure dealing with basic steps in decision making for a medium-sized building project. The RIBA Plan of Work sets out a logical structure for building projects, starting with the brief and ending with post-occupancy evaluation.The procedures identify the responsibilities of the design team at each stage of the design and contract administration process. Each step is referred to as a RIBA Work Stage |
| What are the different stages in RIBA Plan of work? | 0 – Strategic definition. 1 – Preparation and briefing. 2 – Concept design. 3 – Spatial coordination. 4 – Technical design. 5 – Manufacturing and construction. 6 – Handover. 7 – Use. |
| What are the benefits of recording historic cost data? | Accurate and detailed historical cost data enables construction companies to make more informed and realistic bids for new projects, increasing their chances of profitability and success. |
| What is Value Management (VM)? | Value management is a team-based approach used to define the client’s objectives and ensure best value, whole-life solutions are selected to satisfy those objectives. In the UK, value management (VM) is a process used to explore how value could be provided for a project at a strategic level by helping to develop the right project brief. Used effectively, it can reduce design and construction time by giving the team a clearer focus on the client’s priority requirements. |
| What is Value Engineering (VE)? | Value engineering is an exercise that involves most of the project team as the project develops. It is about taking a wider view and looking at the selection of materials, plant, equipment and processes to see if a more cost-effective solution exists that will achieve the same project objectives. |
| What is the difference between VM & VE? | In the UK, it is generally accepted that VM takes place during the earlier stages of a project and that, once designs and specifications have been developed, the same process becomes VE. |
| What are the benefits of VM and VE to clients and delivery teams? | 1. One benefit is to reduce project cost by focusing specifically on the functional requirements of the project and then considering what alternative approaches can be adopted. This targets unnecessary costs that may have been built into the project specification as a result of unchallenged assumptions. 2. The second key benefit is that earlier consideration of design, buildability and maintainability can encourage the different project team members to discuss ideas in a structured way and seek more efficient or effective ways of achieving the required project outcomes, improving the subsequent asset management. |
| When is it beneficial to carry out a VM / VE study? | There are opportunities to apply VM and VE throughout the design and construction process. The benefit to be derived from carrying out VM and VE studies, however, decreases as the project progresses. |
| What is Value? | Value can be thought of as a very simple idea – the ratio between the benefit derived from a course of action and the cost or effort required to achieve it. |
| What is the output from a VM/VE study? | The output from a VM study is a report outlining different approaches to the relationship between project objectives and business needs, or to strategic, project-related problems such as which site to select for a new development or which procurement route to use. The output from a VE study on the other hand is a summary of different approaches to achieving the required functionality for a particular material, component or system, the comparative costs of each of the approaches assessed, and a recommended approach that provides the best value for the project. |
| What is Configuration management? | Configuration management is the process of compartmentalising a design so that there is maximum opportunity to select alternative suppliers of particular equipment, provided of course that the performance specification is met. |
| What is the efficient shape of a building? | Theoretically, it is Circular shape due to least Surface area. But practically, cannot use areas efficiently in circulare shaped building, so Square is most efficient. |
| What is Investment appraisal? | An evaluation of the attractiveness of an investment proposal, using methods such as average rate of return, internal rate of return (IRR), net present value (NPV), or payback period. How much benefit will I get by investing in this project? |
| What is Project appraisal? | Project appraisal is the process of assessing, in a structured way, the case for proceeding with a project or proposal, or the project’s viability. It often involves comparing various options, using economic appraisal or some other decision analysis technique. e.g. to go for Residential or Commercial or Mix use project. |
| What is the difference between Hard costs and soft costs? | Hard costs are part of the construction building. E.g. Material costs, labour costs. Soft costs are not part of the final product, but required for the completion of the project. E.g. fees, land cost etc. |
| What is BCIS? | The Building Cost Information Service (BCIS) provides cost and price data for the UK built environment, for construction, insurance and life cycle costing. People in many capacities – both professional and personal – regularly rely on BCIS information. Quantity surveyors use BCIS data to give early cost advice, to budget and benchmark projects and to prepare life cycle cost plans. Insurers use rebuilding cost data to quote more accurate and competitive premiums for buildings insurance. BCIS historic data goes back 50 years; while their forecasts will help you plan for the next five years. |
| What are the different Pricing books? | Spon’s Middle East Construction Costs Handbook MEED AECOM EC Harris RS Means data |
| What is Retail Prices Index (RPI)? | It measures the average change from month to month in the prices of goods and services purchased by most households |
| What is Consumer Prices Index (CPI)? | The Consumer Price Index measures change over time in the prices paid by consumers for a representative basket of goods and services. The CPI measures inflation as experienced by consumers in their day-to-day living expenses. |
| What is Tender Price Index? | Tender price indices track the prices agreed between the client and the contractor at the point of ‘commit to construct’, which may come from a tender process or direct negotiation. Essentially, TPIs capture the price levels agreed for a construction project, reflecting the movement in market conditions and competitiveness over time. These prices set the basis for payments under the contract, which can span several years and may be adjusted based on fluctuation agreements in the contract. |
| What is Buildability? How it helps in Design economics and Cost planning? | Buildability is a pre-construction exercise that assesses designs from the perspective of those that will manufacture, install components and carry out the construction works |
| What is CAPEX? | Capital expenditure or capital expense (abbreviated capex, CAPEX, or CapEx) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof. |
| What is OPEX? | An operating expense (opex) is an ongoing cost for running a product, business, or system. For example, the purchase of a photocopier involves capex, and the annual paper, toner, power and maintenance costs represents opex. |
| What is the RICS code of measuring practice? | The Code of Measuring Practice is a UK guidance note published by the Royal Institution of Chartered Surveyors (RICS). The purpose of the Code is to 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.’ |
| What is GEA, GIA, NIA? | Gross external area (GEA) – is the area of a building measured externally (i.e. to the external face of the perimeter walls) at each floor level. Gross internal floor area (GIFA) (or gross internal area (GIA)) – is the area of a building measured to the internal face of the perimeter walls at each floor level. Net internal area (NIA) – is the usable area within a building measured to the internal face of the perimeter walls at each floor level. |
| What would you expect the percentage of NIA to GIA / GEA to be? | GIA:GEA = 90% (Residential uses, Office) 95% (Industrial) NIA:GIA = 75% (Residential uses) 85% (Office) 95% (Industrial) |
| What is Risk? Why and how do we manage it? | A risk is the chance of something happening that will have a negative effect. Identify the risk. Analyze the risk. Prioritize the risk. Treat the risk. Monitor the risk. |
| What are the types of risks? | 1. Design development risks – risks associated with design development, changes in estimating data, third party risks (e.g. planning requirements, legal agreements, covenants, environmental issues and pressure groups), statutory requirements, procurement methodology and delays in tendering. 2. Construction risks – risks associated with site conditions (e.g. access restrictions/limitations, existing buildings, boundaries, and existing occupants and users), ground conditions, existing services and delays by statutory undertakers. 3. Employer change risks – risks of employer driven changes (e.g. changes in scope of works or brief, changes in quality and changes in time). 4. Employer other risks – e.g. early handover, postponement, acceleration, availability of funds, liquidated damages or premiums on other contracts due to late provision of accommodation, unconventional tender action and special contract arrangements |
| What is a Risk register? | A document listing all the risks identified for the project, explaining the nature of each risk qualitatively and quantitatively. |
| What is a Functional unit? | Functional unit – means a unit of measurement used to represent the prime use of a building or part of a building (e.g. per bed space, per house and per m2 of retail area). It also includes all associated circulation space. |
| What is Life-cycle costing (LCC)? | ‘Methodology for the systematic economic evaluation of life cycle costs over a period of analysis, as defined in the agreed scope.’ |
| Why is LCC carried out? | LCC is carried out for one of two primary reasons: • to predict a cash flow (perhaps to construct a budget) or • to carry out an option appraisal (to decide which option is preferable in cost terms). |
| Why do we discount future costs to base date? | To compare alternative options with differing costs and timing on a comparable basis, costs need to be brought to a common basis. This is the process of discounting future costs to the base date. |
| What is the difference between LCC & WLC? | The difference between LCC and WLC is that LCC focuses only on the construction, maintenance, operation and disposal of the asset, whereas WLC also includes client and user costs, such as project financing, land, income and external costs. |
| When should LCC be done on a project? | The earlier in the design and development process that the LCC model is constructed, the sooner control of the financial aspects of the project can be carried out on the basis of cost of ownership. |
| What costs are included in LCC? | 1. Construction costs (equivalent of total development costs in NRM 1) including: • site costs or opportunity costs of the site already in ownership (includes legal fees, stamp duty, etc. – not site acquisition costs) • finance charges • professional fees (architect, quantity surveyor, engineer, etc.) • construction and infrastructure costs • tax allowances (capital equipment allowance, capital gains, corporation tax, etc.) • statutory charges • development grants • planning gain and • third party costs – rights of light, oversailing charges, wayleaves and easements, etc. 2. Maintenance costs, often referred to as hard facilities management costs; commonly interpreted to mean all costs incurred in ensuring the continued specified functional performance of the asset, including: • redecoration • periodic inspection activity • periodic maintenance and component replacement activities • unscheduled corrective and responsive maintenance and component replacement and repair and • planned and preventative maintenance and component replacement. 3. Operation costs, often referred to as soft facilities management costs; commonly interpreted to mean all costs incurred in running and managing the facility, including: • general support services, letting fees, facilities management fees, and caretaker and janitorial services • service transport, e.g. internal deliveries • IT services • laundry and linen services • catering • cleaning • waste management • rent • rates and other local taxes and charges • insurances and • energy, specifically heating, lighting, air conditioning, lifts, etc. 4. Occupancy costs, i.e. those additional services sometimes included within the soft facilities management definition, specifically to support the occupier’s explicit operation. Costs of staffing the building to facilitate the user’s occupation. This is in addition to general support services mentioned above and typically includes security, but may also include mail room staff, switchboard operators, ICT support staff, car park attendants, laboratory technicians and other user-specific support staff. 5. End of life costs. This specifically includes disposal and demolition, but may include end of life incomes, including: • residual values – the monetary value assigned to an asset at the end of the LCC period of analysis • terminal values – the scrap value of a component or asset at the point of its replacement • end of life costs, other than those directly associated with the building, are not part of LCC (e.g. marketing and fees prior to sale, site clean-up costs postdemolition – but these may influence residual values). |
| What costs are included in WLC? | In addition to LCC, following costs are also included: 6. Non-construction costs (land acquisition, fees, rental costs, relevant tax liabilities, etc.). 7. Income. 8. Externalities – costs associated with an asset but not reflected in the transaction costs of the acquisition. For example, a new hotel may require the water company to install a new water main, so a cost is incurred but not by the client or contractor. Externalities are not commonly included in LCC calculations. |
| What are the benefits of LCC to clients? | • LCC encourages analysis of business needs and then communicating this to the project team. • Costs of ownership (through construction, purchase or renting) of alternative options are evaluated over their whole life. • Total cost of ownership/occupation is optimised by balancing initial capital and running costs. • Analysis of risks and costs of loss of functional performance due to failure or maintenance are included. • LCC promotes realistic budgeting for operation, maintenance and repair. • LCC encourages discussion and recording of decisions about the durability of materials and components at the outset of the project. • LCC makes it more probable that the best value for money solution is adopted. • LCC provides data on actual performance and operation compared with predicted performance for use in future predictions and benchmarking. |
| What are the various periods of analysis over which an LCC can be done? | • economic life – a period of occupation that is considered to be the least cost option to satisfy a required functional objective • functional life – the period until a building ceases to function for the same purpose for which it was built • legal life – the life of a building, or an element of a building until the time when it no longer satisfies legal or statutory requirements • physical life – life of a building or an element of a building to the time when physical collapse is possible • social life – life of a building until the time when human desire dictates replacement for reasons other than economic considerations and • technological life – life of a building or an element until it is no longer technically superior to alternatives. However, in the majority of studies the LCC period of analysis should be less than any of the periods described above. |
| What should be included in an LCC report? | The LCC report will include, inter alia, the following information: • the person/organisation for whom the report is produced, including an agreed statement of the information required by that person/organisation to support informed decision making • the primary reason for doing the study, e.g. an option appraisal of two construction solutions; office building with atria, office building without atria • the stage of the capital cost plan used by the LCC exercise, e.g. RIBA stage 2 concept design; • a statement of the LCC period of analysis, the base date and the discount rate used • a clear reasoned account of any assumptions made in doing the calculations including any sensitivity analysis • summary of the study results • recommendations and • appendices as required |
| What is NPV? | The net present value (NPV) is the total present day worth of a future cash flow discounted at a given interest rate. |
| What is AEV? | Annual equivalent value (AEV) is the loss suffered by investing a sum of money in a building rather than a bank. |
| What is a Contract Sum Analysis? | A contract sum analysis is generally prepared by a contractor as part of their tender on design and build projects. It breaks down the contractor’s price into a form allowing the client to analyse it and to compare it to other tenders, and may then be used as a basis for calculating payments due to the contractor as the works progress. |
| Can you please explain the difference between a defined and undefined provisional sum? | A defined provisional sum is one that relates to works that cannot be accurately measured but where there is sufficient information about the works including their nature, method, location, quantity and limitations to allow planning, programming and pricing of preliminaries to take place. The contractor would therefore only be entitled to claim for any increase in the cost of the physical works and is deemed to have included for preliminary costs within their tender. Where there is insufficient information, the works are classed as an undefined provisional sum entitling the contractor to claim costs for additional prelims and an extension to the programme as a result of carrying out the undefined provisional sum. |
| How would you review a Main Contractor’s application for payment under a cost reimbursable contract? | Upon submission of the application by the contractor, I would ensure this is provided in the agreed format and level of detail. I would then review all of the costs incurred to date in respect of labour, plant, materials, overheads and profit. This would then be compared against the fee schedules and rates within the contract. Timesheets, staff grades, rates, project codes, payroll burden, invoices, subcontract accounts, material invoices and delivery tickets would all be checked against the contract rates to enable adjustments to be made to the certified sum if required. |
| What is meant by the term construction to shell and core? | The term shell and core refers to the basic structure, services and envelope of the building. This normally includes the fit out of landlord and shared common areas of the building for example the reception, toilets, lifts, lobbies & stair cores. Base services are typically terminated at entry points to each of the lettable floor plates however life safety services infrastructure is normally provided within a shell and core fit out. |
| Please explain your understanding of the term CAT A fit out? | CAT A fit outs are also known as a ‘developer’s fit out’. This provides a generic fit-out of items to suit most developers for example life safety elements and basic fittings such as suspended ceiling tiles, raised floors, carpets, lighting and power distribution to floor plates. The intention is to provide a functional open space ready for customisation by the end user. Bespoke end user items required by the tenant such as specialist M&E installations, internal partitions to the floor plate areas and kitchen facilities are usually excluded under a CAT A fit out. |
| What is a CAT B fit out? | A CAT B fit out overlays the CAT A provision with bespoke elements that are specific to the needs of the end user or tenant to enable them to occupy and use the space for the purpose intended. This would typically include partitions, power distribution to floor boxes, data cabling, artwork and branding, upgrading CAT A finishes and toilet finishes. |
