Conceptual cost planning

The establishment of a library of cost analyses is an integral part of cost planning.

Where design details are sketchy in the early stages of a project, elemental costs for similar buildings give an early view on the likely costs of elements of the new scheme. This enables the cost planner to indicate the assumptions on which the estimate has been based. The importance of sticking rigidly to definitions of elements is obvious here, as the user can be sure that the costs of the different elements have been built up in the same way and can be transported to the new scheme.

Elemental cost breakdowns of previous schemes provide the user with the best sources of data and give an immediate framework from which to work. In compiling a new cost plan, the first step is to interrogate the database in order to access historic schemes. These should be as similar as possible to the proposed scheme, or may be used to define the assumptions made by the cost planner. Statistically, it has been shown  that more accurate cost plans are produced if based on information from a number of projects that are similarto the new scheme, rather than a single scheme that is identical.

The use of several projects avoids a situation where the vagaries of pricing of one project outweigh the advantages of similarity of design. Various sources are available, listed in order of importance:

1. historic cost data from schemes on which the surveyor has personally been involved - personal involvement means that any vagaries of pricing will be known in advance and can be allowed for in considering the costs;
2. schemes where there is personal involvement within a group - personal contact can be made with the personnel involved;
3. other schemes within the same company - allow a closer interface with the personnel involved;
4. BCIS - an online database service, part of RICS, and has provided elemental cost analyses of building projects for around 50 years. The analyses are in standard format and are provided by subscribers to the service;
5. other external sources - many of the construction journals publish studies on new and recently completed construction projects. These frequently contain elemental cost breakdowns, which can be used for future cost planning exercises if no other data is available.

The use of the standard definition is important, as it allows cost data to be used from a number of different schemes and permits a like-for-like comparison of elements.

Brief design notes accompanying the elemental cost breakdown enable a value judgment to be made as to how appropriate a particular element is for use in the cost planning process.

Updating historical costs

Historic data will need to be updated both for time and location. It is of paramount importance that all data is recorded with both the date of the cost data and the location of the build. These are the first steps for adjusting the historical information for comparison to the new development.

A series of tender price indices are prepared by the BCIS, the Department for Business Enterprise and Regulatory Reform (formerly the DTI) and a number of other industry sources in order to update historic data from the tender date to the present, or to project ahead to a future date.

Similarly, regional indices are available and can be used to adjust costs from one location to another.

Remember that sometimes the sample size for the indices may not be robust enough for a totally accurate prediction and the surveyor should make the final call for the index level to be used.

Fortunately, computer programs are now available to carry out most of this updating process more or less automatically. These programs can also provide a snapshot of current prices and enable 'what if' scenarios to be worked through.

Other comparisons

The size of the project is a major factor when deciding which projects to benchmark against; projects should be of similar size so that the costs are not distorted by use of projects either too large or small.

Secondary considerations include the type of construction; special features such as the need for piling, deep basements, and likely specification levels are worth noting, which may assist in the identification of suitable projects and the weeding out of inappropriate projects. At this stage the amount of information may limit the ability to adjust for these requirements depending on the experience of the surveyor.

Older projects may be constructed to older Building Regulations, such as Part L and the regulations affecting disabled access, and these should be factored in as well.

Not all buildings are the same. In considering the data to use, Central London offices are not comparable to regional city centre offices. While some cities such as Birmingham or Manchester are seeing the introduction of the ‘London office’ standard, it would be unwise to consider these for smaller regional centres.

Electronic communication

Most of the software systems for quantity surveyors will automatically produce cost analyses in Standard Form of Cost Analysis (SFCA) format, and many firms will have their own data-banks of cost analyses held electronically. BCIS has developed an XML schema for elemental cost analyses, which allows analyses to be exchanged between different systems.

This development will make it easier to use a mixture of in-house analyses and those stored in remote databases, be these from BCIS, a client or another consultant. Details of the XML scheme are available from BCIS.

The basic principles of cost planning are unlikely to change in the future. However, rapid changes in communications technology may well affect the availability of data and the transparency of the process.

The data library built up by the surveyor will include not just the costs for similar projects but also the rates to apply as extra cover costs for anticipated factors. These will be treated with the ‘soft fee’ treatment given the experience of the surveyor where he or she will take the cost and apply a rate that he or she feels is in-line with the additional factors.

One of the main failings is that these rates are usually retained in the personal library or head of the individual. They may not be recorded in an accessible format for others to use. This could have a detrimental effect on the accuracy and time spent by others if they become involved at the conceptual cost planning stage.

Example of selecting the data

Basis of estimate - 20,000m2 industrial shed

	GFA m2	£/m2	Date of tender	Location	Notes
Project 1	18,000	1,450	3Q13	West Midlands	High security elements required
Project 2	4,000	1,700	1Q15	North West
Project 3	25,000	1,200	4Q14	North West
Project 4	22,000	1,100	4Q12	Scotland
Project 5	20,000	1,500	2Q02	South East	Office fit out, extensive client requirements
Project 6	98,000	950	1Q15	East Midlands
Project 7	20,000	1,150	Unknown	West Midlands
Project 8	21,500	1,500	1Q10	North West	Large amount of dock levellers required
Project 9	25,000	1,450	3Q14	East Midlands
Project 10	18,000	1,200	2Q15	West Midlands

This worked example is for illustration only and does not constitute technical advice or methodology. In this case the surveyor has been asked to provide the costs for an industrial shed of approximately 20,000m2. Based on several reasonings, he or she can exclude some projects and use existing knowledge to amend others:

• Project 1 – will need adjusting to remove the security elements.
• Project 2 – should be excluded as too small.
• Project 5 – as it was built almost 10 years before the others the regulations may have changed too much to include. Buildings also evolve so this style may no longer be practical for today’s requirements.
• Project 6 – should be excluded as too large.
• Project 7 – this data cannot be adjusted as the date of tender wasn’t recorded.
• Project 8 – consider the dock levellers.

The projects will then be adjusted for date and location factors.

At this point he or she will apply the environmental factors as mentioned under Considerations to factor in.