Order of cost estimating

The NRM1: Order of cost estimating and cost planning for capital building works, 2nd edition, have been compiled to be used for the following activities:

• pre-construction cost estimates;
• order of cost estimates;
• cost planning;
• construction phase cost management;
• analysis of cost data.

The recommended quantification methods when using NRM1 are:

• floor area;
• functional unit;
• elemental.

Functional unit method

Cost per functional unit (or functional unit cost) – is the unit rate which, when multiplied by the number of functional units, gives the total building works estimate (i.e. works cost estimate less main contractor’s preliminaries and main contractor’s overheads and profit). The total recommended cost limit (i.e. cost limit, including inflation) can also be expressed as a cost per functional unit when reporting costs.

Functional units are a unit of measurement used to represent the primary use of a building or part of a building. Each functional unit includes all necessary circulation areas and examples of commonly used ones are:

• Hotels – cost per bedroom;
• Schools – cost per pupil;
• Football stadia – cost per seat.

Therefore, in the case of a hotel the cost per bedroom would include for; all works to the reception area, kitchen and other service areas. The total cost of a new hotel project would therefore be determined by multiplying the total number of units (bedrooms) by the cost per bedroom. To this figure must be added the costs of all external and site works.

Floor area method

Cost per m² of gross internal floor area (or cost/m² of GIFA) – is the unit rate which, when multiplied by the gross internal floor area (GIFA), gives the total building works estimate (i.e. works cost estimate less main contractor’s preliminaries and main contractor’s overheads and profit). Other cost estimates which form part of an order of cost estimate or a cost plan should also be converted to costs/m² of GIFA when reporting costs to the employer and project team (i.e. to express cost targets for group elements, elements, sub-elements, as well as the cost limit). They are also used in cost analyses and benchmarking as a means of documenting costs of previously completed building projects.

Elemental method

This method considers the cost of a building in terms of the major elements of a building, an element being described as a part of as building described according to the function that it performs, for example, substructure, frame, roof. NRM1 contains tabulated rules of measurement for elemental cost planning. The following table illustrates the full list of recommended elements based on the BCIS Standard form of cost analysis, 4th edition:

A cost plan is an estimate presented in a standard elemental format. The BCIS list of elements is the industry norm. The estimate is based on a cost analysis of a previous project that is adjusted to suit the new project. The characteristics of elemental cost planning are:

• showing costs related to individual elements of the building, a feature that is not possible achieve using other methods of estimating that produce a lump sum estimate;
• ability to see from an early stage in the design sequence how much of the project budget has been allocated to various aspects and elements of the project;
• Initial cost are allocated over the BCIS groups of elements:
  • substructure;
  • superstructure;
  • internal finishes;
  • fittings;
  • services;
  • external works;
  • preliminaries a contingencies.
• the estimate increases in detail as the design development progresses;
• by the design development stage it should be possible to allocate costs over the full range of BCIS elements. This transparency allows costs to be reallocated while keeping the overall target cost the same;
• costs are based on a cost analysis of a previous similar project and adjusted for a range of factors as described below,

Costs are presented in a variety for ways, for example cost of preliminaries, overheads and profit, risk and inflation shown separately.

Presentation of cost analysis data

This illustration shows that the cost per m2 of gross floor area is £62.6, whereas the element unit rate is £313.00 per m2 of element. Given the choice, the more accurate cost information is the element unit rate as it reflects the actual cost of providing a specific element, where as the cost per m2 of floor area can be corrupted by other factors such as building plan shape.