The cost of works can be defined as the total cost of the entire project including all fees associated with client resource input, all professional fees associated with legal advice, design, cost consulting, banking/funding arrangements, land acquisition, Section 105 stipulations, building regulations, planning approvals, build contractors, contingency as well as any marketing and sales that are necessary in order to ensure the end user populates the finished product as envisaged pre-project.
Prior to carrying out any cost plans or producing budgetary information in relation to the cost of works to be undertaken, careful consideration must be given to define the exact scope of works and sign off by all parties must take place at this point in time. An un-agreed scope will lead to change and out dated and inaccurate cost plans will result in incorrect budgets being set.
Once ‘The Scope’ has been set and out turn objectives understood, the next decision which is vital at this stage is to define and agree the procurement route. The procurement routes fall into two broad categories, however modern practice tends to lead to an amalgamated mix of choice elements of each method.
Traditional procurement in which the client appoints a Professional team, generally consisting of Contract Administrator/ Project Manager, Quantity Surveyor, Architect, M&E consultants and Structural Engineer to take the clients brief forward to the point of construction, through design and ultimately procurement of Contractor services to carry out the build phase whilst managing the programme and costs associated with the build phase.
The other method is through Design and Build procurement which ultimately puts the project design, construction and commercial governance with the Principle Contractor. Whilst the client must still seek to employ the services of the Contract Administrator, all design work and risk associated with the build phase is passed over to the construction contractor for an agreed and guaranteed maximum price (GMP). Where traditional procurement routes may rack up additional cost through variation and change, save for any client forced change to the project the costs should remain static as well as limiting the scope for design change.
The cost plan must allow for all costs associated with the project. All costs means all non-construction related costs i.e. internal resource costs, Property Purchases and Financing Costs as well as all design and management costs, construction costs, contingencies and inflationary adjustments which may become evident throughout the project duration.
The structure of a typical cost plan is appended below which shows typical non-construction related elements as well as construction related headings.
There are various ways in which to populate the cost data for the construction phases of the works. The construction costs are the main area of risk when costing the works as there are many variables to each element and potentially many unknowns to make contingency for.
The quickest and simplest way to put budgetary figures to the construction elements is by applying square meterage rates to the project area. This can be done with only a basic knowledge of construction and engineering. Budgetry m2 rates for various build projects can be found in pricing books such as Spon’s or Laxton’s which are published for Architects and Builders and compiled by Professionals from the industry.
Without any knowledge of construction and its elemental build constituents a Quantity Surveyor or cost consultant should be employed at this time to populate the cost plan and provide accurate budgets for the build and contingency pots. Additional cost will be incurred for this service and should be allowed for in the plan.
Quotations should be sought from the Professional staff although a point to be aware, in general, Professional services connected with the construction i.e. Architect, M&E Consultant, Structural Engineer etc, propose fees based on a percentage of the cost of construction, so can be budgeted for in advance of receiving a quotation for the works. Again these budgets can also be found in pricing books and are ok to use for this purpose.
Once populated the cost plan will form the budget for the works as all associated costs should have been identified. It is then down to good management and procurement skills to ensure the budgets are not exceeded.
Continual change must be avoided as this is the most aggressive way to ensure the costs of the project will spiral out of control. As stated earlier, agree the scope prior to setting the budgets and then stick to it. There will always be changes on a construction project, we cannot look into the crystal ball and set the scope perfectly, however, it is important that the fundamentals of what you are trying to achieve is set in stone to eliminate overspend during construction. Changes of colours to walls should not increase costs dramatically, if at all, however changing the walls and types of finish can and will impact upon the cost plan as well as the timeline.
Professional appointment is critical to ensure that the team has the correct experience for your type of work. Inexperience of the Professional team will lead to unsuitable design solutions which therefore kick starts the change process.
The way in which actuals are reported against the budgetary figures must be accurate and up to date. Ensure commitments are revised on an on-going basis and reviewed in line with the budgets set. Good commercial management will help ensure that budgets are achieved.
Price books
Spon’s Architects’ and Builders’ Price Book http://www.pricebooks.co.uk/
Laxtons http://www.laxtonslive.com/