Conceptual cost planning

The capital cost of a major scheme can be difficult to control. 'Pareto's Law', or the 80:20 rule, applies in the design of most construction projects - by the time 20% of the design is complete, 80% of the costs are committed. The ability to control costs at the early stages of the design is therefore essential.

Cost planning techniques can provide an 'order of costs' figure for a new construction project based on previous, similar schemes, even before any sketch plans are available. Intelligent guesswork and knowledge of a particular client will allow a professional to use suitable existing data to come up with a rough and ready cost plan based on similar schemes.

The development of a detailed cost plan enables the total cost of a scheme to be controlled as the design develops. As additional architectural and engineering information becomes available, the cost plan can be progressively developed to incorporate this data. As more design information is known, the selection of historic data can be carried out more efficiently, while the individual elements can be manipulated to allow for different specifications and to produce progressively more detailed cost targets. Successful elemental cost planning enables the cost of a scheme to be controlled, in order to stay within budget. Once the cost plan has been agreed, it is important to remain within the cost limit for each element.

Exceeding the cost plan should only be sanctioned if alternative design solutions for that element have been explored and no way has been found to stay within the agreed limit. Where the cost limit for an element has to be exceeded, there is the possibility of diverting resources from another element that is under budget in order to stay within the overall cost limit. In exceptional circumstances, if the cost limit of an element will be exceeded, extra money will need to be signed off by the client.