RICS New Rules of Measurement

Order of Cost Estimating and Elemental Cost Planning

“Black
Black Book
Book”
Introductory Seminar
Warsaw, May 20th 2009
I i Leyden,
Iain L d RICS Polska
P l k MManagementt Board
B dM Member
b
Program - 20th May 2009
Introduction - what do the NRM cover? (30 minutes)
•
•
•
An overview of the document’s
document s purpose
Structure of the document
Use of document
NRM
• Understanding how the NRM are linked to RIBA work stages and
OGC Gateway processes
RICS new rules
Estimating and cost planning process – as defined by the NRM (40 of measurement
meas rement
minutes) Order of cost estimating
• Overview of the types of estimates and cost plans and how they fit and elemental cost planning
into the RIBA Plan of Work and OGC Gateway Process
• Defining
f the purpose off an order off cost estimate (OCE)
(OC )
• Information Required for OCE
• OCE Format
• Defining the purpose of elemental cost planning
• Information Required for Formal Cost Plans (FCP)
• Measurement rules for Building Work
Benefits of regulating cost estimating and cost planning (10 minutes)
Question and Answer Session (10 minutes)
Purpose of NRM
Best Practice Guidance and Standardizing Measurement
Rules
Understandable by Employer and all
parties to construction p
p project
j

Direction on how to describe and deal with cost

allowances not reflected in measurable building
work

Based on UK Practice with Worldwide

A li ti
Application
Structure of the Document
• Part 1 – Places cost estimating and elemental cost planning in context of RIBA
Plan of Work and the OGC Gateway Process

• Part 2 – Describes Order of Cost Estimate and its contents, sets out rules for
measurement and reporting

•Part 3 – Describes Elemental Cost Planning, defines its constituents and how to
prepare an elemental cost plan

•Part 4 – Tabulated Rules of Measurement

•Appendices
A di
Use of RICS new rules of Measurement: Order of cost
estimating and elemental cost planning
• Represent the essentials of Good Practice

• S
Structured basis for
f measuring building work

• Consistent approach from inception to completion of each project

NRM in Context of RIBA
Plan of Work and OGC
Gateways
Purpose of an order of cost
estimate
Establish Affordability for the Employer

Set Cost Limit -

( during RIBA Work Stages A: Appraisal and B:
Design Brief or OGC Gateway 1 (Business
Justification) and 2 (Delivery Strategy)
Information requirements for OCE preparation
F
From Employer
E l
• Location and availability of site
• Statement on use of Building
• Initial Project/Design Brief
• Details of enabling works,
works decanting or other specific requirements
• Indicative programme/Time Schedule
• Details of particular constraints to be imposed by the employer, statutory or
government bodies
• Details of Site Conditions
• Budget/Cashflow Constraints
• Initial views on Procurement
• Life span of the building
• MEP Particular requirements
• Treatment of Project/Design team fees
• Approach to other development/project costs
• Treatment of inflation
• Treatment of VAT
• Other considerations
Information requirements for OCE Preparation
F
From Architect
A hit t
• Design Study Sketches for development options if
possible floor plans; roof plan; elevations; and sections
to suitable scale
• Schedule of GEA, GIFA, NIA, SA
• Minimum Storey Height
• Schedule of Accommodation
• Car Parking Spaces
• Design Intent or indicative specification
• Indicative environmental/sustainability strategy d
• Advice on likely site constraints
• Advice
Ad i on lik likely
l Pl
Planning
i C Constraints
t i t
• Definition of fit-out
• Initial risk register/log
Information requirements for OCE Preparation
F
From Mechanical
M h i l andd El
Electrical
ti lE Engineer
i
• Indicative design intent/specification for building services
• Indicative environmental strategy/sustainability strategy
• Advice on availability and/or adequacy of utilities services
connections to site
• Initial risk register/log

From Structural Engineer

• Advice on Probable ground conditions
p g intent for structure
• Indicative specification/design
• Initial risk register/log
Constituents of an order of cost
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Constractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
[( ) ( ( )) ( ( )) ( ( )) ( ( ))]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]

VAT Assessment
VAT Assessment
Constituents of an order of cost
Floor Area Method
Building Works estimate =
GIFA x cost/m²
Functional Unit Method
Building Works estimate =
N b off ffunctional
Number i l units
i x
cost per functional unit
Elemental Method
Building Works estimate =
Sum of element cost targets
Cost target (for element) =
element unit quantities EUQ x
element
l t unit
it rate
t EUR
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
[( ) ( ( )) ( ( )) ( ( )) ( ( ))]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]
VAT Assessment
VAT Assessment
Constituents of an order of cost
Cost estimate for main
contractor’s preliminaries
At this stage in the process is
expressed as a percentage of
the building works estimate
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
[( ) ( ( )) ( ( )) ( ( )) ( ( ))]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]
VAT Assessment
VAT Assessment
Constituents of an order of cost
Cost estimate for main
contractor’s overheads and
profit
At this stage in the process is
expressed as % of sub-total
sub total 3
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
[( ) ( ( )) ( ( )) ( ( )) ( ( ))]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]
VAT Assessment
VAT Assessment
Constituents of an order of cost
Risk Allowance given more Constituent
significance at this stage. 1 Building Works estimate
2 Main Contractor's preliminaries estimate
Acknowledgement of the rise of 3 Sub‐total [(3)=(1)+(2)]
risk management within the 4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
industry and the need to properly 6 Project/Design team fees estimate
identify, assess, monitor and 7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
control risks during the project 9 Base cost estimate [(9)=(7)+(8)]
cycle 10 [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]

VAT Assessment
VAT Assessment
Constituents of an order of cost
Tender inflation and Construction Constituent
inflation 1 Building Works estimate
2 Main Contractor's preliminaries estimate
Both expressed as a percentage 3 Sub‐total [(3)=(1)+(2)]
which can be computed using 4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
Works cost estimate [(5)=(3)+(4)]
published indices such as: 6 Project/Design team fees estimate
•Retail price index 7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
•Tender price index 9 Base cost estimate [(9)=(7)+(8)]
•Building
Building cost indices (BCIS) 10 [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer's change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]

VAT Assessment
VAT Assessment
Order of cost estimate reporting
Minimum content
a) Project Title
b) Project description
c) Statement of cost (including cost limit)
d) Details of the information and
specification on which the cost plan was
prepared
e) A statement of floor areas
f) Basis of cost estimate (i.e. assumptions)
g) Estimate base date (to which inflation
has been applied)
h) Estimated costs of and request for
decision on any alternative proposals
i) Inclusions and exclusions
Purpose of elemental cost planning
To p
provide advice to designers
g to enable a p
practical and
balanced design within budget

To provide robust cost information upon which the

employer can make informed decisions

Keep expenditure within cost limit approved by the employer

ensure that employers are provided with value for money

To develop employer and designers awareness of cost

consequences of desires and proposals
Information requirements for Formal Cost Plan 1
F
From Employer
E l
• Confirmation of the cost limit
• Confirmation of the project/design brief
• Confirmation of Programme/Time Schedule
• Procurement Strategy
• Contract Strategy
• Phasing
• Facilitating works
• Treatment of project/design fees
• Insurances
• Approach to dealing with other development/project costs e.g. Tree
Cutting
• Treatment of Employers risk, inflation, VAT, and other considerations
• Post Completion requirements
• Authority to commence RIBA Work Stage or OGC Gateway Approval
Information requirements for Formal Cost Plan 1
F
From Architect
A hit t
• Concept drawings to a suitable scale including GA plans,
General Elevations, General Sections, external
landscaping, plan of key building functions, detailed
elevations, sketches showing key details, concept design
for rooms common areas and site constraints plan.
• Schedule of GEA, GIFA, NIA, SA
• Outline Specification
• Room
R D
Data
t Sh
Sheets t
• Schedule of Key FFE
• Strategies for environmental/sustainability, car parking,
vertical movement, IT, Fire, Acoustics, Disabled Access,
window cleaning,
cleaning refuse/waste disposal
disposal, security
• Topographical survey and desktop studies
• Definition of fit out
• Risk Register/log
Information requirements for Formal Cost Plan 1
From Mechanical and Electrical Engineer
•Concept Design Drawings to a suitable scale
•Outline Specification information
• Strategies for environmental/sustainability, vertical movement, removal/decommissioning of
existing plant and or equipment
•Underground services survey
•Details of utilities connections
•Methodology of facilitating works
•Risk register/log

From Structural Engineer

•Reports on environmental contamination, geotechnical properties
•Concept drawings to a suitable scale
•Environmental risk assessment
•Advice on gground conditions
•Formation and excavation levels
•Outline specification information
•Estimates of reinforcement content and mass of steelwork in framing
•Methodologies of facilitating the work
•Risk register/log
Constituents of an elemental cost plan
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Contractor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate [(6=(6(a))+(6(b))+(6(c))]
j / g [( ( ( )) ( ( )) ( ( ))]
(a) Consultants' fees
(b) Main contractor's pre‐construction fee estimate (if applicable)
(c) Main Contractor's design fee estimate (if applicable)
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
B t ti t [(9) (7)+(8)]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]

VAT Assessment
Constituents of an elemental cost plan
Quantities for building works
shall be determined in
accordance with Part
4:Tabulated Rules of
Measurement for elemental
cost planning (i.e. group
elements 1 to 9)
Constituent
1 Building Works estimate
2 Main Contractor's preliminaries estimate
3 Sub‐total [(3)=(1)+(2)]
4 Main Constrictor's overheads and profit
5 Works cost estimate [(5)=(3)+(4)]
6 Project/Design team fees estimate [(6=(6(a))+(6(b))+(6(c))]
j / g [( ( ( )) ( ( )) ( ( ))]
(a) Consultants' fees
(b) Main contractor's pre‐construction fee estimate (if applicable)
(c) Main Contractor's design fee estimate (if applicable)
7 Sub‐total [(7)=(5)+(6)]
8 Other development/project costs estimate
9 Base cost estimate [(9)=(7)+(8)]
B t ti t [(9) (7)+(8)]
10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
10 (a) Design development risk estimate
10 (b) Construction risk estimate
10 (c) Employer change risk estimate
10 (d) Employer other risk estimate
11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
12 Tender Inflation Estimate
13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
14 Construction inflation estimate
15 Cost Limit (including inflation) [(15)=(13)+(14)]
VAT Assessment
Group elements for estimating building works
Group Element 1 Substructure

Group Element 2 Superstructure

Group Element 3 Internal Finishes

Group Element 4 Fittings, furnishings and equipment

Group Element 5 Services

Group Element 6 Completed Buildings and building units

Group Element 7 Work to existing buildings

Group Element 8 External works

Group Element 9 Facilitating works

Other Group elements
Group Element 10 Main contractor’ s preliminaries

Group Element 11 Main contractor’s overheads and profit

Group Element 12 Project/design team fees

Group Element 13 Other development/project costs

Group Element 14 Services

Group Element 15 Completed Buildings and building units

Benefits of regulating cost estimating and cost
planning •Provides a common and consistent basis on which to measure areas
and building works items – for new works and rehabilitation works
•Presents a clear framework that facilitates a systematic approach to
compiling cost estimates and cost plans
•Establishes
Establishes formal cost estimating and cost planning stages that are
aligned to both the RIBA Plan of Work and the OGC Gateway
Process
•Covers modern construction methods including modular units and
complete
l t b
buildings
ildi
•Defines preliminaries that can be used for any procurement or
contract strategy (including prime contracting and PFI)
•Defines categories
g of risk,, dispensing
p g with the term “contingency”
g y
•Promotes the view that risk allowances should not be a standard
percentage, but a properly considered assessment of the risk
Benefits of regulating cost estimating and cost
planning •Helps with value engineering
•Gives transparency to cost estimates and cost plans
•Acts as an aide memoir
•Helps with improving the accuracy of cost estimates and cost plans
•Promotes
Promotes clear and effective communication between the employer
and project team members and ensure that risks associated with the
project are identified, analysed and responded to
•Provides a method for codifying elemental cost plans so that they
can be
b converted
t d tto works
k packages
k ffor procurementt andd costt
management during the construction stage
•Provides robust basis for capturing historical cost data in the form
required
q for future cost estimates and cost p plans,, thereby
y completing
p g
the “cost management cycle”
•Can be integrated into an organisation’s quality management
system.
RICS New Rules of Measurement:

Order of cost estimating and

NRM
elemental cost planning RICS new rules
of measurement
meas rement
Order of cost estimating
RICS Books www.ricsbooks.com and elemental cost planning

RICS Books
ISBN: 9781842194461
Item Code: 17792
310 Pages
Paperback
Mar 2009
Price: £45.00