Cost Planning

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Quantity Surveyors can provide a full system of Cost Planning for our clients in order to control expenditure, ensure that the client receives better value-for-money in both design & construction, and that the project cost is kept within the agreed budget.

In providing Cost Planning for clients, several advantages can be achieved which includes,
1. 2. 3. 4. 5. The tender sum is more likely to equate with the approximate estimate There is less possibility of addendum bills of quantities being required Cost-effectiveness and a value-for-money design are more likely to be achieved A balanced distribution of expenditure is likely to produce a more rational design Cost considerations are more likely to be taken into account because of the greater involvement of the Quantity Surveyor during the design process The amount of pre-tender analysis by the architect and quantity surveyor should enable more decisions to be taken earlier, resulting in a smoother running of the project on site Cost planning provides a basis for comparing different projects

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Apart from providing a full system of cost planning, as quantity surveyor we can assist the architect with comparative costs for alternative systems of construction or finishings. This may involve, for example, comparing different plan shapes in terms of cost, or external cladding. As quantity surveyor he should be able to advise on the total cost implications of a particular method of construction.

The Cost Planning Proces The cost planning process consists essentially of three phasess,
1. The first of these involves the establishment of a realistic first estimate (Preliminary Approximate Estimate) The second stage plans how this estimate should be spent among the various parts or elements of the project (Cost Plan) The final stage is a checking process to ensure that the actual design details for the various elements can be constructed within the cost plan (Cost Checking)

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The cost planning process commences with the preparation of an approximate estimate by the quantity surveyor, and then the setting of cost targets, which are based upon elements. As the design evolves these cost targets are checked for any under-oroverspending against the architect's details. The prudent quantity will also always be looking for ways of simplifying the details, without altering the design, in an attempt to reduce the tender sum. Tost planning over the last decade is increasingly becoming a valuable service that the client is expecting from the quantity surveyor, to ensure that he receives better value-formoney, expenditure is controlled, and that the project cost is kept within the agreed budget. To undertake this service effectively it is necessary for the quantity surveyor to be appointed at the earliest possible stage, in order to make positive contribution at the brief and feasibility stages. It attempts to keep the designer fully informed of all the cost implication of the design.

The various stages of Cost Planning during the design & construction phases is shown in

the diagram below,

Estimate Cost for Each Element In Cost Plan

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In previous headings some features of a cost plan and steps in preparation of a cost plan have been discussed into some extent. Finally it is supposed to come up with an estimated cost for each element in the project. Before decide elemental cost of each element estimator has to finalize the total budget referring available information of the project at this very early stage. Then all the elements which are coming under this project should be listed out. Generally building project consists of around 33 elements. The next step is identifying most significant elements within that project. This will differ with the scope of the project and purpose of the project. Based on that estimator has to allocate money for each element. This allocated amount of money consider as the target cost of the specific element. As an example this project being a housing construction in Kandy town area client may require good aesthetic appearance. Then estimator has to allocate considerable amount of money for finishes and external works comparing to rural area housing construction.

In this process estimator could be able to maintain overall quality of the project, available time period and estimated total budget. Because if there is big quality differences among elements it leads to failure of total cost plan.

ASSUMPTIONS FOR SPECIFIC PROJECT IN PREPARATION OF COST PLAN

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Coursework scenario clearly mentioned that this cost plan to be prepared at the very early stage of the project. There is only little information available such as Location, Shape, Size and Height of the project. Therefore estimator has to come up with some assumptions for the purpose of building up a cost plan at the very early stage of the project.
Maximum time period for project Required services (hot water, security system etc) Construction methods Quality requirement Manage space into partitions (rooms, lobby, bathrooms) Suitable materials for project (tile or asbestos roof etc.) Construction schedules

ADJUSTMENTS AND ALTERATIONS OF INFORMATION TO PREPARE COST PLAN

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As previously mentioned in this report, available information plays a big role during pre contact stage even in the Cost Planning process. But this available information is obviously out dated and referring to previous project. Therefore estimator cannot use this available information as it is and that data should adjust in appropriate way. Any kind of

data relate to any project will cover Cost, Quality or Time of the project. Following list express what are the adjustments and alterations should do.
a. Time Factor: - Reference project is out dated one. Therefore estimator has to introduce a factor to adjust unit rate of an activity. These factors can be produced by analyzing price indexes or number of previous projects. b. Location factor: - Cost of Labour, plant and materials are different from place to place. Therefore before building up target cost for an element, available data should alliterate with suitable location factor. c. Quality factor: - Though reference project scope is similar to proposed project quality of the work items may be different. As an example previous data relate to grade 2 timber doors and windows and proposed project will be used grade 1 timber. Therefore there should be a correction factor to correct that different. d. Size: - With the different of size of the project total cost plans will be change. Therefore there should be a method to adjust size of the project.

These are the major adjustments and alterations should refer when preparing very early stage of the preparing cost plan, because at very early stage of the project there is little information about the project.

WHAT IS THE INFORMATION THAT YOU NEED TO PREPARE A COST PLAN

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Once the sketch design has been completed and approved by the client, the task of allocating sums to the various elements can be taken place. The sum of these element cost targets should of course the total cost target for the whole scheme. In the case of elemental cost planning where cost limit apply, it is particularly important that this so. The following information will generally require for the preparation of a cost plan:
Brief description about project: - At least this description should clearly mention about scope of the project, project details such as location, time period etc. It is not required more detailed description at very early stage. Drawings: - Which should at least include plans and elevations in sketch form. Then estimator can get an idea about quantitative data about physical product. That is useful to allocate money for elements.

 Materials/Quality: - Clients requirement of the Quality of the project. Depend on quality requirements cost planner can forecast cost for the materials for the overall project. Then estimator can allocate money from coat plan. Suppliers and Sub contractors: - To estimate cost for the project need these details as well as when preparing target cost for specific items like elevator systems these information should available. Even costing major elemental costs it requires supplier details. Contractual information: - Such as the method of securing tenders, bonds and guarantees, contract period etc. for allocate funds and select methods to provide that money. A comparable cost analysis from a previous project: - This is the most important information. Having this type of analysis planner can decide suitable method to prepare cost plan and forecast some budget for items. Not only can that using similar type of project cost plan estimator adjust that one for current usage. Schedule of work items: - This is the major way to preparing financial flow of the total project. Therefore this is very important information for preparing cost plan.

Selecting Proper Information

The easy method to prepare a cost plan is analyzing previous same kind of projects and build up estimate, cost plan etc for proposed project. That is the method that most Sri Lankan projects refers to prepare their project documents like project plans, cost plans, day work schedules etc. Therefore it is necessary to be aware of selecting proper information for preparing cost plan. When selecting proper information several things have to be considered.
Scope of current project: - All the reference documents such as previous BOQs, Contract Documents, Schedules and current findings like cost indices etc. should be relate to proposed project scope. As an example for proposed housing project cannot be used school building project in Kandy area. Reliability of data: - Depend on scope of the project data; information which required preparing the cost plan can be selected. But all these information come out from the reliable source. Estimator cannot just imagine and use those things. Otherwise cost plan will be mislead total project. Accuracy of data: - If the information is reliable in order to establish a probable cost plan those information should be correct, because source is trusted one that may be not accuracy due to misleading or misunderstanding.

 Market condition: - Reference materials should prepare under the same type of market condition. As an example current situation of economy is under the recovery period, so reference project should be prepared same type of recovering market conditions. Up dated information: - Under same type of market condition selected data should be updated as appropriate to expected market values at the time of project completion stage.

PURPOSE OF PREPARING A COST PLAN

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Cost planning determines the fiscal feasibility of a construction project. After the owner has set a maximum cost, cost planning will determine whether that cost cap can be met. If not, the project is not feasible in its current state and should be reworked to reduce costs. Cost planning informs the owner exactly when finance installments will be needed, so the owner can keep current with billings. Cost planning typically involves two features. The first is an overall budget for the project. This is the total amount that the project is expected to cost. This amount is based on the current project scope and design and can be determined through various types of estimates. The second feature of cost planning is the allocation of costs over time. This involves predicting when along the project schedule costs will actually be incurred and paid. The general advantages of cost planning include the following
The tender sum is more likely equate with the approximate estimates. There is less possibility of addendum bills of quantities being required Cost effectiveness and a value for money design are more likely to be achieved. A balanced distribution of expenditure is likely to produce a more rational design Cost considerations are more likely to be taken into account because of the greater involvement of the quantity surveyor during design process. This will result in the BOQ preparation becoming easier, since the quantity surveyor will be more familiar with the project and have a greater understanding of what the designer is attempting to achieve. The amount of pre tender analysis by the architect and quantity surveyor should enable more decisions to be taken earlier, resulting in a smoother running of the project on site.

 Cost planning provides a basis for comparing different projects.

The aims of cost planning are as follows

Ensure that the clients cost limit is not exceeded- The client should be aware of any financial differences due to design change. Addition to that the QS should control and have to do proper cost check to ensure that the clients limits are not exceeded. To establish a realistic cost limit which is determined by clients availability of money , market demand, consultants estimate Ensure that the client obtain good value for money Design is economical: Standard amenity, finish and equipment specified by client at the least cost consistent with good design. Rational realistic distribution of money spent on the design. No need to spend whole money offered by client, if suitable standard can be achieved for less cost.