Cost studies

Topic [1]

Introduction

Choice, scarce resources to ensure maximum return.

Construction Economics

a. Efficient use of resources available
b. Increase the rate of growth of construction work
c. Consists:-
i.
Application of the techniques
ii.
Expertise of economics to construction projects
iii.
Secure cost-effectiveness for the client

Objective Construction Economics

a.
b.
c.
d.
e.

Achieve maximum return

Minimize construction costs
Maximize social benefits
Minimize risk and uncertainty
Maximize safety, quality & public image

Analysis Construction Economics

a. Clients requirement
i.
Meets their needs
ii.
Available for occupation on the specified date for completion
iii.
Project kept within available funds, provided by the client
iv.
Final account closely estimates, completed project can maintained at reasonable cost.
v.
Possible effects on the surrounding areas will be affected if the development is carried.
vi.
Cost implications
vii.
Design variables
viii.
Construction techniques
ix.
Contractual procedures
x.
Assessment and establishment, initial cost
xi.
Methods and procedures, cost planning and cost control.
xii.
Estimation life of building and materials involves life cycle costing and value management.

Importance Study Construction Economics

a. Rapid technological and sociological change

i.
Managing risks
ii.
Avoiding unpleasant surprises
iii.
Ensuring value for money
iv.
Speeding up project
v.
Delivery time is important for clients
b. Construction projects are more complex
i.
Clients requirements more complicated and demanding
ii.
Complexities mean - more opportunities cost project to get out of hand
iii.
Effective system needed for strict control of costs

c. Increased number of groups interests in a particular project

i.
Effective coordination between various parties crucial for successful completion of both design and
construction
d. Modern practice in design
i.
New ideas techniques, materials and components are used
ii.
Traditional methods of estimating are unable to cope to achieve value for money and more balanced design

e. To reduce possible losses

f. Elimination of waste and a greater emphasis on the use of the worlds scarce resources

g. Cost-effectiveness
h. World recession
1

Cost studies
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Building Economics

a.
b.
c.
d.

Choice scarce or limit resources to be allocated between their possible uses.

Employs accepted principles and procedures to determine real cost community or organization
Concerns with building product more efficient, effective and economic
Cost studies ensuring clients receive the best value for money for the projects that they construct.

Cost Studies

a. Understanding and application of costs to building and other structures

b. Ensure that scarce and limited resources
c. Led to the needs to control project costs within the stipulated budget

Purpose of Cost Control

a. Limit the clients expenditure Tender Sum = Final account

b. Achieve a balanced design expenditure
c. Provide the client with a value-for-money project

Cost Control Principles

Principle One
There must be a frame of reference or set of condition which must be adhered to, consists of two stages:
a. Establishing a realistic first estimate accurate, reliable and realistic
b. Planning how this estimate should be spent among the parts of the building involves splitting the cost limit into a
number of smaller cost limits, according to elements

Principle Two
Method of checking or a feedback system

Principle Three
Remedial actions - mean re-designing the element, changing the specifications or seeking alternative solutions.

Actions taken should ensures that expenditure is contained within the amount agreed between the client and design team

What is Cost Management

a. Process of planning and controlling the budget of a business

b. Form of management accounting that allows a business to predict impending expenditures to help reduce the chance of
going over budget
i.
ii.
iii.

Design
Process of producing the required model of a building
Cost
Amount of money client expects to hand over to a builder, usually during and on completion of the building
Management
responsibility for ensuring that the functions of planning, control and feedback are successfully brought about
in terms of design, cost, time and quality

Basic Approaches To Design Management

Cost studies
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Construction Economics Terminology

Cost studies
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a. Cost Check
Process of checking the estimated cost of each element of the building as the detailed
b. Cost Analysis
Systematic breakdown costs involved in previously constructed projects which will assist in accurately estimating cost
of future projects
c. Approximate Estimating Determination of possible cost early in design stage in relation to clients fundamental
requirements

Takes place prior to preparation of full set of working drawings or bill of quantities
d. Element
Part of a building fulfils specific function irrespective of its design, specification or construction, such as walls, floors
and roofs
e. Costs in Use
Total costs of building projects
i.
Capital costs
ii.
Maintenance
iii.
Running costs

f.

Cost Control
All methods of controlling the cost of building projects within the limits of a pre- determined sum, throughout the
design and construction stage.

g. Cost Planning
Implemented during the design stage involves

h. Cost Limit
Maximum expenditure client is prepared to make in relation to completed building

i.

Unit Costs
Applied to a unit of work such as

Concrete foundation slab

Ground floor construction

A door including frame

Ironmongery

Painting

Cost studies
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Accuracy in Estimating

International Cost Estimates and Analysis Association (2007)

A prediction of quantities cost of price of resources required by the scope of an investment option, activity, or project

Measuring Accuracy of Estimates

a.
b.
c.
d.

Estimate reflects skew direction of estimate in under or over estimating

Accuracy measured by using standard deviation which measures variation defection across all estimates data
Theory of coefficient of variation adopted to address estimate consistencies
Coefficient of variation evaluates - estimates in overall probability distribution

Influence on the Accuracy of Estimates

a. Accuracy of estimates referred to several factors

i.
Project type
ii.
Project size
iii.
Location
iv.
Market conditions
b. Other findings on project accuracy
i.
Selection of provisional sum expenditures
ii.
Historical data validity
iii.
Factors affecting the accuracy
iv.
Model house base rate

Clients Need

SUCCESS CRITERIA = SUCCESSFUL PROJECT

Davies T (2002)
a. Completes within schedule
b. Completes within budget
c. Meet the required quality
d. Appreciation by Stakeholders

Cost studies
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Importance of Estimation in Building/Construction Projects and Works

Estimator plays important role in preparing estimates

Information must be:-
a. Assembled
b. Organized
c. Stored

Estimating Techniques at Different Stages of Construction Project

The Process of Preparing Cost Estimate

Use of Cost Estimate

Design Process

Cost studies
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General Rule in Estimating Process 4 General Rules

a. Forecasting
Information such:-
i.
Cost per m2 for various type of building
ii.
Elemental unit rates
iii.
BQ rates
iv.
All-in unit rates applied to quantity
Information would arise from analysis of past project to updated current cost

b. Comparison
Comparison between item with similar function between different design

c. Balancing
Breakdown of cost into smaller unit. How money allocated to various component of building accordance
clients requirement. Important for checking purposes and cost strategy for development.
d. Analysis

Cost studies
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Reflection

Can see further and detailed calculations need to done in order to increase estimating accuracy.

Cost Estimating At Feasibility Study

Several estimating techniques available

Cost studies
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Preliminary Estimates at Outline Cost Plan -

Approximate Quantities

In this stage, some information regarding
project should ready:-
a. Design
b. Layout as well as the size