You are on page 1of 20

Cost Planning, Cost Control and Cost Analysis

Introduction Cost planning and cost control of buildings is not a new technique, which has been in use for many years. Costing mean applying prices to schedule of items of labour and materials in order to obtain an approximation of the cost of a construction project. Cost planning and cost control is not only to determine the probable cost of a building but to control the design development throughout the project, and to provide the client with value for money.
ss5 1

Cost Planning, Cost Control and Cost Analysis


Introduction it can also dictate the nature of the most important characteristic of the embryo design, the plan shape, storey height, type of finishes and so on. Time must be spent in the early stages of design sequence for cost planning so that careful cost control by monitoring of variations can be operated during construction stage to the settlement of account to be effective.

ss5

Cost Planning, Cost Control and Cost Analysis


Introduction clients requirements for an accurate forecast of the overall cost is due to: resources such as land and materials becoming scarce and expensive. modern buildings becoming more complex, fluctuation in labour and material cost etc.

ss5

Cost Planning, Cost Control and Cost Analysis


What is Cost Analysis? The analysis and presentation of actual costs to facilitate cost planning. It is a systematic breakdown of cost data according to the element for cost so as to facilitate examination. A cost analysis is a record of how the cost has been distributed over the elements of a building; it includes a brief description of the overall nature of the project and specification notes on the general level of finishes, and so on.
ss5 4

Cost Planning, Cost Control and Cost Analysis


What is Cost Planning? Method of controlling the cost of a project, within a predetermined sum, during the design process and includes the preparation of the cost plan as well as the subsequent stages of cost checking. Techniques for arriving a cost plan or cost limit. Cost plan is a statement of the intended cost to spend on each element of a proposed building within a total sum and in relation to a defined standard of quality. The allowances set against each element are cost targets.
ss5 5

Cost Planning, Cost Control and Cost Analysis


What is Cost Planning? Cost plan is prepared by finding a cost analysis of a similar project to the one under consideration, and by studying how the cost was allocated in the old project, in order to prepare an estimate for the new scheme. The cost information cannot be used directly from the cost analysis, and some degree of modification will have to be made. These modifications are usually for differences in
price level Quantity Finishes and standards
ss5 6

Cost Planning, Cost Control and Cost Analysis


What is Cost Control? Techniques for protecting the cost plan. Generic term embracing all methods of controlling the cost of a building throughout its various stages from inception to completion. Process of cost checking required the estimated cost of each element to be checked against the target set set in the cost plan.

ss5

Cost Planning, Cost Control and Cost Analysis


The Reasons for Cost Planning and Cost Control. To determine the probable cost of a project development. To provide a yardstick to control the design of the development throughout the project. To provide the client with value for money

ss5

Cost Planning, Cost Control and Cost Analysis


The Project Sequence
(based on the RIBA Plan of Work). Inception Feasibility Outline Proposal Scheme Design Detail Design Production Information Bill of Quantities Construction Completion

ss5

Cost Planning, Cost Control and Cost Analysis


Phases of Cost Planning. Inception
At the initial stage, client wishes to know:
how much will the idea cost? How best might available capital be spent?

Feasibility
Develop a brief indicating:
location floor areas type of accommodation nature of the site indicative cost etc

Is the project feasible:


Yes : proceed with the design No : review/cancel the project
ss5 10

Cost Planning, Cost Control and Cost Analysis


Outline Proposal
Develop the optimum design solution to satisfy the brief. Indicates size, type, location, number of storeys, plan shape etc.

Scheme Design
Ensure the overall design is the most cost effective. To establish the final cost plan (limit of cost) indicates dimensioned sketch plans, elevations, sections, early structural information, early specification, site layout etc. Preparing brief cost summary/the elements of cost plan.
ss5 11

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design
The lump sum estimate must not be split down into the amount of money it is intended to spend on each element (See Figure 1).

Figure 1
Target cost lump sum estimate of $2,000,000

Elements

Cost Target $600,000

Cost Target $750,000

Cost Target $650,000

ss5

12

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design (Contd)
As the project design develops, the information available increases and perhaps changed somewhat. After detail design stage the general layout should not be radically altered. The constituent parts of a cost analysis are:
a summary of project, contract and design/shape information a summary of element costs an amplified analysis

ss5

13

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design (Contd)
A brief cost summary, which is a statement of how the target cost has been distributed over major groups of elements, such as:
useful in providing an outline proposals stage a broad but accurate cost allocation over these groups of elements. From these elements, the cost plan is prepared. The designer with the Q.S.s advice on the cost implications of various alternative forms of construction, finishes, and so on; will also examine the alternatives to meet the clients requirements. It also enable the Q.S. to examine how the cost is distributed and whether any element may be overloaded with capital, and it allows the Q.S. to alter the balance of cost within the overall target cost.
ss5 14

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design
Consider this situation, remembering all the time that the target cost must not be altered.

Figure 2
Target cost
$300,000

Element No. 1 Frame $150,000

Element No. 2 Roof $50,000

Element No. 3 Services $100,000

ss5

15

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design
After checking against the detail design, it becomes obvious that $150,000 for frame is an unrealistic target and that at least an additional $15,000 will be required for this element. To prevent the target cost from increasing to $315,000. Compensating reductions must be made to other elements i.e. it is found that element 3 or services can be reduced, it is decided that the installation to be substituted with a cheaper alternative. Performing this lending and borrowing exercise, the Q.S. runs the risk of tipping the balance of the design.
ss5 16

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design
Target cost $300,000

Element No. 1 Frame $170,000

Element No. 2 Roof $50,000

Element No. 3 Services $80,000

ss5

17

Cost Planning, Cost Control and Cost Analysis


Outline Proposal and Scheme Design
Care must be taken not to overload one element at the expense of another. It is also argued by some Q.S. that client would much prefer to pay the extra $15,000 than to have the projects overall standards reduced, or the balanced design abolished. Sometimes, the substitution of a less expensive alternative should not necessarily result in a lowering of standards, or an abolition of the balanced design.

ss5

18

Cost Planning, Cost Control and Cost Analysis


Detail Design Stage (Cost Control)
cost checks the Architects detailed design against the cost target set (at outline cost plan) to ensure that design does not exceed the budgetary cost estimate During this stage, the Q.S. will immediately performed cost check using the approximate quantities on each elements after being detailed against the cost target set. This is to allow any necessary redesign or reallocation of cost to be carried out before the final drawings are prepared for tender.

ss5

19

Cost Planning, Cost Control and Cost Analysis


Construction Stage (Cost Control)
Cost updates in the form of financial report provide control over variation or deviation made to the contract. This tool is vital for monitoring deviations or variations and ensuring that the design team and client are kept updated of changes made without compromising the budget. For new requirements, the cost updates on anticipated final cost will also provide the client and/or designer with an updated financial commitment so that he can decide whether to proceed or not.

ss5

20