2. CONTENTS
4.1 Introduction to Cost Planning
4.2 Types of Client and Their Needs
4.3 Objectives of Cost Planning
4.4 Principles of Cost Planning
4.5 Advantages and Disadvantages Of Cost
Planning
4.6 Cost Planning Process
3. 4.1 INTRODUCTION TO
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.
4. 4.1 INTRODUCTION TO
COST PLANNING (CONT’D)
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
5. 4.1 INTRODUCTION TO
COST PLANNING (CONT’D)
Purpose of cost plan:
oTo determine the probable cost of a project
development.
oTo provide a yardstick to control the design of
the development throughout the project.
oEnsuring the client receives value for money
oEnsuring both client and designer are aware of
the implications of their decision on cost
oIntegrating cost with time and quality
6. 4.2 CLIENT’S NEED
One of the measurement of project
success is to ensure that the client’s
needs are met
A good cost planning system will take
into account all the client’s needs
especially those pertaining to cost
Design
Criteria
Client’s Need
Time
Quality/
Performance
Cost
Cost
Function Appearance
7. 4.2 CLIENT’S NEED
(CONT’D)
Client’s Need
•Price certainty
•Project constructed
within budget
•Project complete on
time
•Best quality possible
based on reasonable
price
Contractor’s &
Consultant’s Need
•Reasonable return for
the risk taken
•Payment on time
•Clients who do not
keep changing their
minds
•Client satisfaction
•Future projects from
the client
8. 4.2 TYPES OF CLIENT
1. A client with clear/good knowledge of
building requirements but not on the cost
implications.
2. A client who possess maximum cash and knows
the type of project or building to be built but lacks
confidence in the actual total amount to be spent.
3. A client who knows requirements of his building and has
fixed money to be spent.
9. 4.3 OBJECTIVES OF COST
PLAN
Client receive value for
money end product
The overall expenditure
is within the amount
agreed by the client
A reasonable
expenditure between
sections of the building
by relating the design
and the specifications to
the client’s budget
10. DEFINITION OF TERMS
COMMONLY USED IN
COST PLANNING
Cost and Price Cost refers to the amount paid by a purchaser and price is the
amount received by a seller
In a tender, cost refers to the amount incurred by a client while
price is the amount offered by a contractor.
Cost Control This is a generic term embracing all methods of controlling the
cost of a project from its inception to completion
Cost Planning This refers to the method of controlling the cost of a project so
that it will not exceed the preliminary estimate at the design
stage and including cost planning preparation process and
subsequent cost checking processes.
Cost Plan A cost statement in terms of how a designer intends to design
each element or part of a building
Cost Analysis It is a systematic cost breakdown in accordance with the
elements intended to facilitate the cost checking
Element It is the main element of a building that performs the same
functions regardless of difference in specification and design
Cost Limit It is the client maximum budget for clearly defined client
requirement
11. 4.4 PRINCIPLES OF COST
PLANNING
There are standard framework available for each identifiable
part of the building. I.e., WBLFF, structural works, external
walls, etc. The purposes are to enable :
the performance characteristics to be related to each reference
the cost to be distributed in a balanced way throughout the building
the analysis of previous projects be classified in the same manner
The cost planning can be adjusted to design requirement.
It allows the costs to be checked as the design develops with
the amount allocated.
It allows the designer to take necessary measures or actions
before any decision on the final design is made.
It takes into account contingency cost and design reserve.
It enables costs to be presented in a logical and orderly way
for clients from time to time during the design process.
12. 4.5 ADVANTAGES
The tender value will be either close to or similar to the
client's estimate.
Since there is a checking system on the cost, there is
possibility that less changes will be made to the bills of
quantities. Discussions among designers can be made
before the production of the final design. This will definitely
save time in making adjustment to any changes to the cost
and design.
The effectiveness of cost and value for money can be
achieved with cost planning process.
A balanced expenditure distribution may produce a more
rationalized design.
Cost consideration will be given more attention since the
quantity surveyor is involved in the early stage of the design
process.
The bills of quantities can be prepared more easily since
the quantity surveyor is already familiar with or skilful in the
project and thus has clear understanding of what is to be
achieved by a designer.
13. 4.5 DISADVANTAGES
It requires a lot of preparation at the early stage of
the design process.
The designers may have some limitations in their
work style.
The quantity surveyor needs to be equipped with
vast experience and knowledge pertaining to cost
and factors influencing the cost.
Both the designer and quantity surveyor are
involved with a lot more work at the design stage as
compared to when no cost planning is used.
14. 4.6 COST PLANNING
PROCESS
Cost Planning
Elemental Cost Plan
• Also known as ‘Target
Cost Plan’
• The cost limit is fixed or
stated by the client and
architect must prepare a
design that does not
exceed the cost limit
• Commonly employs by
client from public sector
• ‘Designing to a cost’
Comparative Cost Plan
•Also known as ‘Costing to a
design’
•The cost plan is prepared based
on a completed design
•Cost limit stated by client usually
high, but not to be utilised to
maximum
•Architect may have the freedom
to design – few alternatives – the
chosen alternatives must not
exceed the target
15. 4.6 COST PLANNING
PROCESS
All types of cost planning contain three main phases:
Phase 1:
Estimating or
establishing
the cost target
Phase 2:
Cost plan
Phase 3:
Cost check
16. PHASE 1 –
ESTIMATING AND
ESTABLISHING COST TARGET
Main objective of Phase 1 is to establish a
preliminary estimate that is the cost target or a
realistic cost limit
The figures calculated must be realistic – ‘accurate,
reasonable, realistic and reliable’.
Phase 1 covers stage A and B in RIBA
Methods can be used floor area, unit or volume
Method chosen depends very much on the details
and specification available
17. The total of proposed building = Cost/m² GFA
(analysed) x GFA (proposed)
Example: estimate the cost limit of a bungalow house
that has a gross floor area (GFA) of 500m². A similar
bungalow was completed at RM1,500.00/m² GFA.
Total cost of proposed building = Cost/m² GFA (analysed) x GFA
(proposed)
= RM1,500.00 x 500
= RM750,000.00
18. PHASE 2 – COST PLAN
Main objective at this stage is to plan and to
determine how estimate should be allocated among
the parts or elements of a building
The cost plan has to be provided and prepared
based on estimate and the client’s brief. The key
point to cost plan is to obtain a cost target.
At Phase 2, there are two stages involved in RIBA,
Stage C (outline Proposal) and D (Scheme Design).
19. METHODS IN PREPARING
COST PLAN
In establishing the cost plan, the building has to
divided into several elements.
The common yardstick used to express the cost in
the cost plan is the price per m² of Gross Floor Area.
1. Obtained the target Cost
a. By referring to several previous Cost Analyses of
similar buildings
b. By using approximate quantities method, if
there are details and sketches
c. By using a combination of cost analysis and
approximate quantities method
Target = Cost/m2 GFA (analysed) x GFA
(proposed)
20. Total cost of proposed building = Cost/m² GFA (analysed) x GFA
(proposed)
= RM1,500.00 x 500
= RM750,000.00
Target = Cost/m2 GFA (analysed) x GFA
(proposed)
2. Cost then Distributed to Several Elements of
Building
Cost Limit
Substructure
(20%)
Furniture & fittings
(13%)
Superstructure
(40%)
Services
(12%)
Finishes
(15%)
21. Total cost of building group elements
GFA = 500m²
Total Cost/m² GFA = RM1,500
Cost/m² (group element) = % x Total Cost/m² GFA
Total Cost = GFA x Cost/m² GFA (group element)
Group Element Percentage (%) Cost/m² GFA (RM) Total Cost (RM)
Substructure 20 300.00 150,000.00
Superstructure 40 600.00 300,000.00
Finishes 15 225.00 112,500.00
Furniture and fittings 13 195.00 97,500.00
Services 12 180.00 90,000.00
Total building cost 1500.00 750,000.00
External
works/infrastructure
15% of building
cost
112,500.00
Total building cost +
infra
862,500.00
Preliminaries 3 % of building
cost and infra cost
25,900.00
Sub total 888,400.00
Contingencies 5% of sub total 44,400.00
Total Project Cost 932,800.00
22. PHASE 3 – COST CHECK
Main objective at this stage is to secure a genuine design
for elements that can be built based on the cost plan and
design, which have been prepared within the cost limit
At phase 3, there is a stage involved in RIBA, stage 5
(Detailed Design)
The cost check method often employed by the QS is the
approximate method.
Costs check method: ensure that the cost check is carried
out continuously.
Total cost target (individual elements) = Cost target (group
elements) = Cost Limit
23. Result of checks:
Result Action Taken
Cost check more
than cost target
• Borrow from elements with surplus
• Change quality / design
• Ask for additional money from the
client
Cost check less than
cost target
• Use excess to assist with problematic
elements
• Keep extra as savings
• Improve quality / design
Cost check equals
cost target
• Cost is established and agreed upon.
Production information process can
be continued.
24. ADJUSTING & UPDATING
PREVIOUS ANALYSIS
Almost all cost plans are produced using information from
analysed building.
The proposed building will definitely differ in size, shape,
specification with the analysed building.
Adjustments will have to be made on the analysis to
produce cost plans.
Three (3) of broad adjustments are usually undertaken that
are:
Adjustment to price
Quantity
Quality
25. 1. PRICE LEVEL
The costs in the analysis illustrate the conditions of price
level at the particular time (tender date).
Important that these cost be updated to the current price
level.
Change in market condition and price levels between the
preparation date of the cost plan and the tender date can
be evaluated via:
Projection of current indices
Utilization of personal experiences on the effects of future change to
price (effects to labours and material changes)
Current price level depends on:
Differences to market price level due to different tender dates
Differences in the contractor’s price levels and the market price level
Differences in condition of site and location
Differences in contract condition
26. Example of adjustments:
Proposed building
GFA = 500 m2
Cost/m2 = ?
Index = 215
Analyzed building
GFA = 450 m2
Cost/m2 = RM
1,500
Index = 185
Year
2009
Year
2008
Formula:
Price adjustment = Current index (proposed) x Cost/m2 GFA
(analysed)
Base index (analysed)
= New cost ie. Cost per m2 of proposed building
Total cost = Cost/m2 GFA x GFA (proposed)
(proposed)
Cost/m2 GFA = 215 x RM1,500.00 = RM 1,743.24
(proposed) 185
27. 2. QUANTITY
The quantity of an element refers to its total quantity in
the building.
If the quantity of a proposed and analysed buildings
differs, prepare the adjustments in qnty between the two.
This is can be done in three (3) ways that are:
Proportion – use of the quantities factors of both
buildings.
Approximate quantities estimate – involves
dimensional calculation.
Inspection - the proportion method cannot be used.
Measurement by quantity is difficult to do & when
time is limited
28. 3. QUALITY
Quantity could be adjusted in similar manner to
adjustments in quantity, but note that detailed
specification are not yet available when the cost plan
is prepared.
It is common to adjust quality by combining the
inspection method with simple calculation.
29. EXAMPLE 1
Adjustment to price, quantity and quality.
Estimate the cost of the roof and roof finishes for the proposed
building below
Analysed Building Proposed
Building
EUR RM110.00 ?
EUQ 300 m2 455
m2
GFA 1400 m2 1600
m2
Index 161 171
Changes Increase
in material
price/quality by 15%
EUR: Element Unit Rate
EUQ: Element Unit Quantity
30. ANSWER
1. Price adjustment
Cost/m2 (new) = Proposed index x EUR
(analysed
Analysed index
= 173 x RM110
161
= RM118.20
2. Quality adjustment
Cost/m2 (new) = RM118.20
Quality adjustment 15% + 17.73
EUR (new) = RM135.93
3. Quantity adjustment
Cost/m2 GFA (new) = RM135.93
EUQ (proposed) = 455 m2
Total cost target = EUR (new) x EUQ
= RM135.93 x 455 m2
= RM61,848.15
Cost/m2 GFA (proposed) = Total Cost Target
RM61,848.15
31. EXAMPLE 2
Prepare an outline cost plan for a proposed building by using the
information below:
Analysed Building Proposed
Building
Building type Office
Office
GFA 2800 m2 3500
m2
Index 177 195
Cost/m2 GFA RM1,000.00 ?
The quality of the building is anticipated to increase by 20%. The cost
of service and facilities is expected to increase by 10%. The cost of
external works is 30% of the building cost and the cost of preliminary
works is 5% of the total construction cost.
32. ANSWER
1. Price adjustment
Cost/m2 GFA (new) = Proposed index x cost/m2 GFA
(analyzed)
Analyzed index
= 195 x RM1000
177
= RM1101.69
Total building cost = Cost/m2 GFA (new) x GFA
(proposed)
= RM1101.69 x 3500m2
3,855,900.00
Quality improvement @ (20% x 3,855,900)
771,200.00
4,627,100.00
Increase in cost of service & facilities @
(10% x 4,627,100)
462,700.00
5,089,800.00
External works @ (30% x 5,089,800.00)
