Design Economics and Cost Planning

Optional Competency at Level 2 / Core Competency - Level 3

Luay N. Azzam, FRICS FAIQS ACIArb

Executive Director
Nabih Elias Azzam & Partners (NEA & Partners)
www.iiqsglobal.org

Indian Institute of Quantity Surveyors

IIQS-Matrix

Competency Requirements
At Level 1
Demonstrate knowledge & Understanding

At Level 2
Apply your knowledge

At Level 3
Give advice & prepare reports

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Agenda - Design Economics and Cost Planning

Definition of Pre-contract Cost Planning & Cost Management

Objectives

Design Stages

Source of Cost Information?

Life Cycle Costing

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Definition of Pre-Contract Cost Planning & Cost

Management
The Surveyors Construction Handbook published by the RICS defines Pre Contract
Cost planining & Cost Management as follows:

Cost Planning:
..is the technique by which the budget is allocated to the various
elements of an intended building project to provide the design team with a
balanced cost framework within which to produce a successful design.

Cost Management :
..is the total process which ensures that the contract sum is within the
client s approved budget or cost limit. It is the process of helping the
design team design to a cost rather than the quantity surveyor costing a
design.

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Objectives
To ensure that the client obtains an economical and efficient project in accordance
with the agreed brief and budget

To make the design process more efficient

To ensure that all requirements arising from the clients brief to the design team are
included in the cost planning process

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Design Stages
The RIBA Plan of Work refers to the main stages through which a project design
typically passes: (also refer to NRM1 Published by RICS)
Design Stage

Quantity Surveyor

Stage B: Feasibility

Prepare feasibility studies & determine

the budget

Stage C: Outline Proposals

Consider with client & design team

alternative strategies and prepare cost
plan

Stage D: Scheme Design

Carry out cost checks & update cost plan

Stage E: Detailed Design

Cost Checks

Stage F: Production Info

Carry out cost checks

Stage H: Tender Action

Prepare reconciliation statement

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Design Stages (Contd)

The UAE industry mainly follows the following design stages (note the terminology
may defer but the overall methodology is similar):
Design Stage

Quantity Surveyor

Concept Stage

Prepare cost estimate for the project

from the Concept design drawings, this
should be derived from unit rates for
construction and calculation of square
meter areas.

Schematic Stage

On completion of Scheme Design,

prepare a Scheme Design cost
estimate. This type of estimate will be
priced based on approximate quantities
and elemental unit rates for the
measurable building elements

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Design Stages (Contd)

The UAE industry mainly follows the following design stages (note the terminology
may defer but the overall methodology is similar) Contd:
Design Stage

Quantity Surveyor

Detailed Development Stage

On completion of Design Development

Stage, prepare a detailed design cost
estimate. This type of estimate will be
priced based on more accurate
approximate quantities and elemental
unit rates.

Pre-tender Estimate

On completion of the Bills of Quantities,

price all items to arrive at a final budget
estimate to be compared with the
submitted Tenderers during Tender
stage.

General

Estimates will be regularly updated as

and when more information is made
available

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Design Stages (Contd)

Information Required:
At each design stage of a traditionally procured project, information should be
provided to the quantity surveyor to enable him/her to prepare the required cost
estimates etc. Generally Information would be obtained from the following:

a) the client
e.g. location of the site, the brief etc
b) the design team (all disciplines)
e.g. schedule of areas, drawings, specs. The level of information provided by
the design team would vary at each stage. More details will become available as
design progresses

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Design Stages (Contd)

Information Provided:
Generally the information provided by the Quantity Surveyor at each design would
include as a minimum the following:

- a statement of cost
- indication of specification
- statement of floor areas
- cash flow forecast

- assumptions & exclusions

- contingencies
- inflation

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Design Stages (Contd)

Factors affecting the preparation of the cost estimate:
There are many factors that should be considered while preparing a cost estimate.
These should be carefully looked into before submitting any estimate. Some of these
factors are listed below:

- location of the site

- ground conditions type of foundations, green/brown fields etc
- structure & MEP systems
- any demolition works

- extent of external works

- grid size
- program
- etc..

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Sources of Cost Information

Elemental Cost Analysis
e.g. BCIS, in house cost analysis of previous projects
Unit rate Information
e.g. in house priced boqs, specialist suppliers quotations, pricing
books, magazines
Published Indices
e.g. BCIS however not very common on Middle East & Gulf Region
The following points should be considered carefully when using any of the
published information:
- inflation
- regional variations
- initial quotations from specialists are likely to be low
- special project requirements
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Life Cycle Costing

The life cycle cost of an asset is defined as the present value of the total
cost of that asset over its operating life (including initial capital cost,
occupation costs, operating costs and the cost of benefit of the eventual
disposal of the asset at the end of its life)
Life cycle cost techniques can be used, for example to:

Evaluate design options at the elemental level

Determine optimum maintenance strategies

Evaluate total building options for example refurb Vs new build

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Main Reading List Design Economics and Cost Planning

Economics of design: Site density, Wall / floor ratio, Storey heights, Room sizes
Lettable / Non-Lettable
Sources of cost data - BCIS / in-house database / other external
Market inflation (tender / construction)

Location factors
Estimating
Cost Plans
Cost Planning
Life cycle costing - capital / running costs
Value Engineering & Value Management
Risk Management and Analysis

Contingencies
State of the construction market and Economy generally & Interest rates
Recession time effects on Cost Planning

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APC Questions will be based on following:

Design Economics and Cost Planning

Level 1 :

The main factors that affect design economics over the whole life of the building including capital and life cycle costs
How cost planning assists in the financial control of projects during the design development stage
The various stages of cost planning
Sources of cost data
Adjustments that may be required for factors including location, specification, time and market forces

Level 2 :

Producing estimates and cost plans

Carrying out life cycle costing exercises
Applying value engineering processes
Preparing cost reports
Preparing and submitting cost data to in-house and/or external data collection agencies

Level 3 :
Preparing and presenting reports with reference to cost, time, quality and buildability, including qualifications and exclusions
Evaluating building design efficiency
Assessing/evaluating market factors and trends in construction costs
Analysing the accuracy of predicted cost using benchmarking techniques
Interrogating historical cost data
Using value and risk management techniques.

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Model APC Questions : Design Economics and Cost Planning

THANK YOU AND WISH YOU ALL THE BEST

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