Lesson No. 6 Total Project Cost

EMILIO AGUINALDO COLLEGE ISO 9001: 2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

City of Dasmariñas,Cavite
TOTAL PROJECT
COST
VIRTUE EXCELLENCE SERVICE

TOTAL PROJECT COST

• Project Costs means the sum total of all costs incurred in the
development of a project which are approved by the authority as
reasonable and necessary.
• A simplified model for total project cost is developed in this paper to
meet the numerous request from decision makers for a model that
can be used to estimate the total project cost from the estimated
cash flows and to check the accuracy of the project costs estimates in
feasibility studies that require prudent decisions.

COST ASSOCIATED WITH CONSTRUCTED FACILITIES

• The costs of a constructed facility to the owner include both the initial capital cost and the subsequent
operation and maintenance costs. Each of these major cost categories consists of a number of cost
components. The capital cost for a construction project includes the expenses related to the initial
establishment of the facility:
• Land acquisition, including assembly, holding and improvement
• Planning and feasibility studies
• Architectural and engineering design
• Construction, including materials, equipment and labor
• Field supervision of construction
• Construction financing
• Insurance and taxes during construction
• Owner's general office overhead
• Equipment and furnishings not included in construction
• Inspection and testing
LEGAL, LAND,
ADMINISTRATION,
STAFFING AND FINANCIAL
COSTS
These costs which include audits, cost
of issuing bonds, land costs, and
interest for borrowed money during
construction
These are part of the probable total

project cost and can be estimated in
cooperation with the client because
they are usually outside the
knowledge and control of the Civil
Engineer.

LEGAL AND LAND COSTS

• It is the purchase of the land itself, the price for which is the result of
purchase negotiations. In complex joint ventures, the land owner may
become a partner in the project and enjoy a share in the project's
profits, or take a percentage of sales.
• On the other hand, a straight sale for a fixed price is a simpler deal
and doesn't depend on the developer's performance.

LEGAL AND LAND COSTS

• Physical construction costs associated with the land include rough
grading and clearing, constructing roads and utilities, as well as
drainage and environmental protection features.

ADMINISTRATION AND STAFFING COSTS

• A large, multi-project builder will have production managers, site
supervisors, sales managers, and sales and clerical staff on the
payroll.
• Many of these people will move from project to project as

communities sell out and new ones open. Some supervisory staff may
be overseeing more than one project, allocating their time between
the different jobs.

ADMINISTRATION AND STAFFING COSTS

• Of particular note is that this category includes items that are time-
sensitive. For example, the longer the project takes to complete, the
longer on-site staff and services will be needed (and their costs
incurred).
• This can happen if, for example, the market slows down and the
development takes longer to sell out.

FINANCIAL COSTS
• Project financing is an area for which strategies vary widely, from
builder to builder, and from project to project.
• While there is probably no standard approach, one not uncommon

financing scenario would have a land purchase loan cover a large part
(but not all) of the land acquisition costs, and short-term project
financing cover all other development costs as they are incurred.

FINANCIAL COSTS
• Both of these loans would be repaid with calculated payment
allocations per house as each home sale is closed. Interest charges
would be incurred on the outstanding balance of these loans until
they are completely paid.
• In order to calculate the project’s financing needs and the amount of

interest that will be charged, we have to anticipate the timing of
when costs will be incurred and when revenues will be available to
pay the loans back. This requires preparing a cash flow analysis.

CONTINGENCY ALLOWANCE
• Estimate of probable total project cost should be periodically revised
by the engineers as the design moves forward and more information
becomes known.
• The client is normally responsible for providing estimates of those

costs which may lie outside the Civil Engineers knowledge or
expertise, such as those in the legal, land, administrative, and
financial areas.

CONTINGENCY ALLOWANCE
• To provide for intangible costs, contingencies should routinely be
added to the basic cost estimate. It is common practice to add 20% or
more to the estimated probable total project cost at the completion
of the study end report phase, reducing this to perhaps 10% at the
completion of the final design and perhaps to 5% when the
construction bids become known.
• Larger or more complex may require higher contingencies.

PROFESSIONAL ENGINEERING COST

A civil engineer is often engaged to make a study and to render a planning
report on the contemplated project including alternative solutions, layouts, and
locations along with initial estimates of the probable project cost. This may involve
alternative or phase implementation schemes which add flexibility to the project.
• Professional engineering costs.
• Construction cost.
• Legal and land costs.
• Owners cost, including project administration, staffing, financing and
overhead.
• Contingency allowance for unknowns.

CONSTRUCTION COST
The probable total capital cost, often used to establish budgets for a typical project, is made up of:
• To provide for intangible costs, contingencies should routinely be added to the basic cost
estimate. It is common practice to add 20% or more to the estimated probable total project cost
at the completion of the study end report phase, reducing this to perhaps 10% at the completion
of the final design and perhaps to 5% when the construction bids become known. Larger or
more complex may require higher contingencies.
• The costs really depend on how big you want your house is. Local homebuilders reveal that the
cost of constructing a house designed for a middle-class family in the Philippines currently
ranges from Php 15,000 to Php 20,000 per square meter based on the total floor area of the
house.

• Meanwhile, according to the 2016 Construction Cost Handbook of construction

consultancy services provider Langdon & Seah Philippines Inc., terraced houses and
average standard homes (one to two bedrooms) tend to cost between Php25,700 and
Php31,000 per square meter.
Terraced Houses Average Standard Homes

• Detached houses and high-end residences, on the other hand, the cost is between Php 53,900 and
Php 63,150 per square meter. These values, as per Langdon & Seah, are already inclusive of the
expenses for mechanical, electrical, and plumbing services.
Detached House High-end Residences

• Those figures are based on an aggressive estimate and are meant for budgetary purposes. Of course,
it goes without saying that the bigger your house is and the fancier your materials are, the more
expensive constructing your house would cost you. Bear in mind that this cost estimate doesn’t
even include things like lighting fixtures, grills, a perimeter fence that has a gate, landscaping, and
outright costs such as house design fees and processing fees for building permits.

THANK YOU!

References:
https://prezi.com/xp715r6rbava/section-5-total-
project-cost/
https://www.myaccountingcourse.com/accounting-
dictionary/total-cost
http://plannersweb.com/2013/12/pro-forma-101-how-
much-money/

Lesson No. 6 Total Project Cost

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EMILIO AGUINALDO COLLEGE ISO 9001: 2015 CERTIFIED

QUALITY MANAGEMENT SYSTEM

VIRTUE EXCELLENCE SERVICE

TOTAL PROJECT COST

VIRTUE EXCELLENCE SERVICE

COST ASSOCIATED WITH CONSTRUCTED FACILITIES

These are part of the probable total

VIRTUE EXCELLENCE SERVICE

LEGAL AND LAND COSTS

VIRTUE EXCELLENCE SERVICE

LEGAL AND LAND COSTS

VIRTUE EXCELLENCE SERVICE

ADMINISTRATION AND STAFFING COSTS

• Many of these people will move from project to project as

VIRTUE EXCELLENCE SERVICE

ADMINISTRATION AND STAFFING COSTS

VIRTUE EXCELLENCE SERVICE

• While there is probably no standard approach, one not uncommon

VIRTUE EXCELLENCE SERVICE

• In order to calculate the project’s financing needs and the amount of

VIRTUE EXCELLENCE SERVICE

• The client is normally responsible for providing estimates of those

VIRTUE EXCELLENCE SERVICE

• Larger or more complex may require higher contingencies.

VIRTUE EXCELLENCE SERVICE

PROFESSIONAL ENGINEERING COST

VIRTUE EXCELLENCE SERVICE

VIRTUE EXCELLENCE SERVICE

• Meanwhile, according to the 2016 Construction Cost Handbook of construction

Terraced Houses Average Standard Homes

VIRTUE EXCELLENCE SERVICE

Detached House High-end Residences

VIRTUE EXCELLENCE SERVICE

VIRTUE EXCELLENCE SERVICE

VIRTUE EXCELLENCE SERVICE

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