PRINCIPLES, PURPOSE AND ARCHITECTURE OF COST PLANNING AND COST CONTROL

  100% Pass and No Plagiarism Guaranteed

PRINCIPLES, PURPOSE AND ARCHITECTURE OF COST PLANNING AND COST CONTROL

Design Economics:

-Influence of design on cost
-Storey height, total height, circulation, plan shape
-Design/cost/quality trade off
-Wall/floor ratio
-Early design decisions & avoiding variations
-Elements of good design coordination
-Important considerations in construction (contracts etc)

Introduction

-This week we concentrate on those cost planning activities, practices, and techniques undertaken during the pre-tender design stage.
-Four reporting stages of cost planning;
Stage A: Brief
Stage B: Outline Proposals
Stage C: Sketch Design
Stage D: Documentation
Important that these stages and how they relate to specific cost plans, are understood

Stages of design – alternative terminology

-Feasibility
-Scheme design
-Detailed design
-Tender documentation
-Contractor appointment
-Construction
-Defects Liability

Terminology – budget, cost estimate, cost plan

-The budget is the set limit of expenditure for a development. It may be determined after the preparation of a cost plan and based on the figures derived from the cost plan, or it may be fixed prior to the preparation of the cost plan and based on factors such as the client’s available funds, preferred profit margin or risk profile – grants, program – driven, moving target??
-A cost estimate is the prediction of the probable cost of a development or construction project. It is based on the known facts at a specific design stage and an evaluation and allowance for the uncertainties. An estimate should never be a ‘guess’. Most cost plans incorporate life cycle cost estimates as well as the more traditional construction, finance and business costs.
-The cost plan uses the cost estimate to distribute the proposed expenditure across the various elements of the building. A cost plan amount should never exceed the budget. The cost plan is a description of where and how the budget will be spent.

Principles of Cost Control

-Three basic principles; Cost control belongs to a family of control systems which is based on the following three basic principles:
-There must be a frame of reference – realistic first estimate and distribution of costs
-There must be a method of checking – variances from cost targets
-There must be means of remedial action – action to bring costs back on budget

Pressures for, and Purposes of, Cost Control

Control of building costs is critical
-Four main pressures;
-Rapidly changing nature of industry – new materials,construction techniques, procurement routes
-Client’s requirements are becoming more complex
-Client organisations are larger and smarter, well-informed
-Contractors are organised and well-versed in claiming for variations

Pressures for, and Purposes of Cost Control

-Cost control systems should focus on expenditure, while at the same time taking into consideration the other aims: quality and time.
The purpose of cost planning is to:
-ensure that clients are provided with value for money
-make clients and designers aware of the cost consequences of their design intent proposals
-ensure that the funds available for the project are allocated and distributed effectively and economically throughout the building depending on building type, sector, quality required etc.
-ensure that expenditure is kept within the limits determined by the client.

Peak Bodies in Construction Industry - background

APCC (formerly National Public Works Council)

APCC Home – Home

-The Australasian Procurement and Construction Council Inc (APCC) is the peak council whose members are responsible for procurement,construction and asset management policy for the Australian, State and Territory Governments and the New Zealand Government. Papua New Guinea is an associate member. The APCC is made up of 15 member agencies. View member authorities here.
-Over the past 45 years, the APCC has established itself as a leader in government procurement, construction and asset management strategies and practice. The work of the APCC is committed to procurement innovation, solutions and efficiencies designed to create savings and maximise service delivery to the communities of Australia, New Zealand and Papua New Guinea.
-The APCC promotes a cohesive government procurement environment and manages national projects for the Council of Australian Governments. It harnesses the benefits of nationally consistent approaches for its members.

Australian Construction Industry Forum

-Australian Construction Industry Forum (ACIF) is the meeting place for leaders of the construction industry in Australia.
-ACIF facilitates and supports an active dialogue between the key players in residential and non-residential building, and engineering construction, other industry groups, and government agencies.
-Our Members are the most significant Associations in the industry, spanning the entire asset creation process from feasibility through design, cost planning, construction and building and management.
Take some time to have a look at these websites for context to cost control and the role of these bodies.

Victorian Department of Health

-Cost planning ensures value for money and responsible management of public monies of a capital project’s finances, including the requirements set out in the code of practice for the building and construction industry.
-Utilising all the cost planning estimates templates (CPA, CPB, CPC1, CPC2, CPD), guarantees that a project can be costed as accurately as possible, as well as assist in the determining of them economic building lifespan and all future redevelopments that may occur and their estimated costing.
-Cost planning is to allow for options to be analysed and may be required to determine best value for money by assessing recurrent costs over the life of the facility, as well as the capital cost. The cost planning and analysis may include a comprehensive cost-benefit analysis or cost-effectiveness analysis for the preferred option.
-Throughout the life of a project; project objectives, client requirements or social, economic and environmental conditions may change. This can affect the budget and costs of the identified delivery options. If there is significant change to the service plan, asset and property configurations or similar, that impact on the preferred option(s), consideration should be given to reworking the options analysis process.
-Cost plans for Capital Works Projects are prepared by consultants in conjunction with the development of successive stages of planning and design. Project Managers and PCGs use the cost plans to exercise financial monitoring and control.
-PCGs will then be able to use the cost plan categories to exercise better financial monitoring and control. It is expected that sufficient funds will be available to introduce energy efficiency and waste management measures and cover additional items such as FFE and IT requirements.

Cost Plan Estimates

• The five cost plan estimates are strategically placed at each of the major design and development stages of a project for Ministerial and other approvals, which are required prior to proceeding to the next stage.
• The flowchart below illustrates the placement of the cost plan estimates in relation to a capital project lifecycle.
• The most critical cost plan estimate, Cost Plan C, occurring at the Schematic Design phase, determines the budget for final scope of works and recurrent operating costs. It is at this stage that final approval for a project budget is sought for the capital project.
• The project budget includes contingencies required for all capital cases likely to arise during the design and construction stages of a project. The cost plan C is used to support the development of the business case proposal/initiatives.
• The financial component of the business case ensures stakeholders are aware of the financial impact of a capital and the recurrent cost planning with consideration to the specific issues such as from compressed timelines and/or changes to the scope.

Pre-Construction Cost Control

Briefing Stage

Two component activities
- inception and feasibility
-Aim of this stage – Provide a first cost indication only to the Client based upon an outline statement of the Client’s need.
-The indicative cost is intended as a guide for feasibility and planning purposes, it is not an estimate and may not be quoted as such Criticality of brief in formulating costs plans in terms of distribution of costs to elements, time v cost v quality etc.
-Need to avoid ‘scope creep’
-Note list of omissions, qualifications, purpose of the estimate etc
-Brief accuracy and sign off
-Objective of this stage – To establish an initial budget for the Client, or if already prepared, to confirm or otherwise, the accuracy of the budget provided

Outline Proposals

-This is the first ‘proper’ cost estimate, and is prepared on the basis of the Client’s brief, investigated site conditions, and preliminary sketches. At this stage, it may be necessary for the consultant to evaluate the comparative cost of various outline proposal options (and sites??)
-Objective of this stage – to assist in identifying the optimum design solution and placing a cost on it to satisfy the requirements of the brief
-When the outline proposals stage cost plan has been signed off by the Client, the important preliminary stages of cost planning are brought to a close

Sketch Design Stage

-This is the second cost estimate for a project and it is based upon detailed sketch plans. It sets the cost limit for the project. The tender price for the project must not exceed this estimate except where extraordinary cost escalation, and/or significant Client changes in the scope of works occur (scope creep) – budget top up?
-Objective of this stage – To ensure that the design is the most cost effective in satisfying the requirements of the brief; to confirm to or set the final budget; and to establish elemental cost targets
-This is the stage when the budget is split between the various elements to eventually become the cost targets for the next more detailed cost planning stage (tender documentation stage)

Tender Documentation Stage

-Objective of this stage – to continue to ensure that the completed design is contained within the cost limit

-The responsibilities of the cost planner:
-Carry out all cost checks on each element as the design details are developing
-Undertake cost checks with the cost plan prepared in the sketch plans stage, and progressively report on variances using a reconciliation statement
-Ensure that the design team is aware of the cost implications of its developing drawings and specifications so that the completed design is contained within the agreed cost limit
-Closely liaising with the project team at all times to ensure all parties in the team make best use of their time and are all well-informed (secondary steelwork?)
-Identify and advise the team of any possible cost savings in elements which may impact the design of other elements
-Objective of this stage – to continue to ensure that the completed designcontained within the cost limit

The responsibilities of the cost planner:
-Carry out all cost checks on each element as the design details are developing
-Undertake cost checks with the cost plan prepared in the sketch plans stage, and progressively report on variances using a reconciliation statement
-Ensure that the design team is aware of the cost implications of its developing drawings and specifications so that the completed design is contained within the agreed cost limit
-Closely liaising with the project team at all times to ensure all parties in the team make best use of their time and are all well-informed (secondary steelwork?)
-Identify and advise the team of any possible cost savings in elements which may impact the design of other elements

Cost Limits and Cost Targets

-Assists in determining the preferred design
-Establishes a realistic cost estimate for the preferred design
-Sets out how the estimate should be allocated among the elements or parts of the building
-There are 46 standard elements in the APCC list