The document provides an overview of open book costing for construction projects and frameworks. It outlines 10 steps to develop an open book cost model including establishing workload, labor costs, material costs, plant/tools requirements, risk costs, overhead costs, and profit margin. The document also discusses qualifications needed to win frameworks like trade certifications and accreditations. It emphasizes the importance of collaboration, continuous improvement, and focusing on client needs to work profitably on frameworks.

1. Paul Wintle CITB
Construction Futures Wales
Programme Manager

2. Understanding Your Costs
Ian Widdrington & Joe McCarthy
Construction Futures Wales

3. • Introduction to Construction Futures Wales
• Definitions of Frameworks and Open Book Costing
• Steps to Develop Your Own Open Book Costing
• Working on a Framework for the First Time
• Top Tips For Tenders and PQQs
• Introduction to Accreditations being requested by Buyers
• Culture, Technology, and How to work Profitably on a
Framework
• Questions and Answers
Agenda

4. Exercise
How do you currently Estimate/Cost Jobs?
What are your experiences of Open Book
Costing to date?
Take 10 mins in Table Groups

5. Open Book Costing
The Basic Requirements

6. Your Costs!
• Cost of Labour
• Cost of Material
• Cost of Plant / Tools
• Cost of Risk
• Cost of Quality
• Overheads

7. Step 1 Establish the Workload
• The Customer/Client needs to define the
‘Workload’
– Is it Planned Maintenance? (Kitchens, Elec, Heating, Decoration)
– Is it Reactive Maintenance? (Base on past inc. geographical areas)
– Is it New Build? (What type of works and Max/Min)
– Others? (FM, Security etc.)

8. Step 2 Establish the Labour who
may be working on the
Framework
• Identify each Operatives Role
• Name them (ideally)
• Can include sub contract and specialists
• Organisation Charts help

9. Step 3 Establish Availability
of Staff
• For Example:
– Works 40 hours/week or 40 x 52 = 2080 annual
working hours
– Minus 20 days holiday 20 x 8 hours = 160 hours
– Minus Statutory Bank Holidays 8 x 8 Hours = 64
hours
– Total Available Time = 2080 – 160 – 64 = 1856
hours / year

10. Step 4 Establish Full
Payroll Burden
• Salary £15,000
• Bonus £250
• NI £1325.44
• Pension/Healthcare?
• Total £16575.44
• Employer’s NI Contributions
• Earnings Threshold -£4895
• NI Calculated On £10,355
• NI @ 12.8% £1325.44
Do this for all staff, including
Management that may be
involved in the clients
workload.
To get total Hourly Rate divide
Total Salary by Total Hours
Changing Regs on Workplace
Pensions – Check your Staging
Date

11. Step 5 Establish Labour
Requirements
• Example
– On a typical Kitchen
• 2 Carpenters for 48 Hours
• 1 Plumber for 8 Hours
• 1 Electrician for 4 Hours
– On a 200 Kitchen Refurbishment Project
• Carpenters 200 x 48 = 9600 hours
• Plumber 200 x 8 = 1600 hours
• Electrician 200 x 4 = 800 hours
• Risk is always a key consideration
Repeat for Management time required for the project

12. Step 6 Establish Material
Costs
• Normally identified in the clients Scope of
Works
• Use your data from previous projects /
invoices
• Identify the ‘Average Perfect Project’
material cost
– Do not include extra for damage and rework
• Include Sub-Contractor Work Packages here

13. Step 7 Establish Plant /Tools
Requirements
• Vans (Operatives) / Cars (Management)
– Include Insurance, Maintenance, Tax and Fuel
• Consumables
• Tools / Plant
• Waste Disposal
• Workwear
• Mobile Phones / ICT / Trackers
Apportion the costs as best possible e.g. Van used for 40% of the
time on this framework apportion 40% of the cost to the
project

14. Budgeting
• Zero Based
– Incremental Budget?
– Root and Branch Review on an Annual Basis
• Activity Based Costing (ABC)
– Management Information
– Activities / Functions that drive Cost Base

15. Step 8 Establish The Cost of
Risk
• Material Cost Increases
• Bad weather
• Fuel Cost Increases
• Client / Design changes
– Scoped and Unscoped Changes
• No access
• Sickness / Holiday Cover
The Risk Money doesn’t necessarily get paid, it will only be used
if the Risk materialises – it is a Client contingency

16. Step 9 Establish The Cost of
Overhead
• Identify in last years Accounts
• Exclude items covered in other sections of the
Cost Model
• Apportion based on turnover:
– If this contract is 30% of the turnover of the business
then 30% of the Overheads need to be recovered in
the Cost Model

17. Step 10 Establish The Profit
• Calculated from the last 3 years Accounts:
– Establish what the Net Pre Tax Profit is as a percentage
– Apply to the project on a annual basis
2012 2013 2014
Sales 233,383 321,679 332,345
Cost of Sales 67,034 97,116 98,668
Overheads 141,600 179,361 182,025
Profit 24,749 45,202 51,652
% of Profit 10.60 14.05 15.54 Average 13.4%
Working in Collaboration, reduction in waste
and efficiency improvements will increase
profits over time

18. Frameworks

19. Frameworks
Why Are They Needed?
Long term frameworks provides organisations with:
–Work smoothed contracts
–Protected Margins
–Business Certainty
–Opportunities to recruit, develop and retain the workforce
–Opportunities to eliminate waste and inefficiencies
–Shared Innovation, knowledge and expertise
….. Leading to a Sustainable Business

20. Frameworks
What do you need to win?
A ‘fit’ Organisation
– Strong Leadership
– Values and Culture founded on Learning, Openness & Honesty
– Motivated, skilled, dedicated workforce / Supply Chain
– Competent Management Team
– Simple adaptable processes and systems
Understands the proposed Customer/Client needs
– Who are they?
– What motivates/drives them – Culture and Values
– Who are their customers?
– What are their aspirations

21. Frameworks
What do you need to win?
Informed of Best Practice
– Egan and Latham
– Collaborative Working
– Innovation
– Continuous Improvement
– Lean Principles
Are appropriately Qualified and Accredited
– Trade Qualifications
– ISO
– CE
– Q-Mark

22. Frameworks
What do you need to win?
• To get through the Pre-Qualification
Process – Hurdle / Filter
• To Write a winning Bid at Tender stage
– Technical Assessment
• Good Interview Technique and
Presentation

23. PQQ
Typical Questions Based On?
• Organisation
• Financial Information
• Business Activities
• References
• Quality Assurance
• Health and Safety
• Equal Opportunities
• Environmental Management
• Professional and Business Standing
• Collaborative Working/Partnering

24. PQQ
Maximising Points?
• Ask for the weighting for each of the criteria
• The higher the weighting the more important to the
client/project
• The higher the weighting the more attention it needs
• Attend industry days
• Review the PQQ before submission
• Ask Questions
• Adhere to word count…… use pictures!
• Develop re-useable ‘chunks’ of information and apply CI

25. What do Clients Want?
Tasty food
Nice presentation
Good Value
Cheap
No waiting
Polite service
Doesn’t poison you
Quality
Cost
Delivery
Health & Safety
What do you want when buying a meal?

26. Free from Defects
On budget
On time
No Accidents
Quality
Cost
Delivery
Health & Safety
What do Clients want from a Project?
What do Clients Want?

27. Tender/Bid
Technical Assessment
• To Evidence your Capability – your Co. and Supply Chains
• Real ‘Glory Stories’
• Client Testimonials
• Time, Cost, Quality, Health & Safety
• Continuous Improvement/Innovation
• Benchmarking
• Value Management
• Suggest alternate business solutions to the client
• Value Engineering
• Understanding your own business to come up with alternative solutions
• Social Benefits
• Local employment, Reinvestment in Local Economy, Social Inclusion

28. Tender/Bid
Maximising Points
• Tell the Client what they want
• Not what you like to tell them
– Review your Bid again and again and then again!
• Don’t keep it to yourself
• Accuracy is paramount
– Don’t underbid the Real Cost of Delivery
• Will lead to reduced capacity, looking for variations,
lower quality, accidents, reputation damage etc.

29. Formatting

30. Interview
What’s Required
• The Real Thing
• Practice, Practice, Practice
• Not presented by Marketing
• Involve the Team
• Including Operatives and Sub Contractors
• Use Real Life Examples
• Give real answers to real questions
• Be ‘Who You Are’
Remember - People Buy People

31. Interview
What do Clients Look for?
• An Organisation that:
• Empowers its People and Shares Learning
• Communicates freely with all parties
• Demonstrates Trust and Integrity with a ‘No Blame’ Culture
• Focuses on Client Needs
• Focuses on Overall Benefits (not just their own)
• Lives an Promotes Success
And…..
Enthusiasm, Belief, No Notes – From the Heart, Want It!

32. Frameworks
Where to find them
Sell 2 Wales www.sell2wales.co.uk
Tenders Electronic Daily http://ted.europa.eu/
Tenders Direct (endorsed by OJEU)
http://www.tendersdirect.co.uk/default.aspx?source=GoogleC1AG2&gclid=CJTcrKqHlJICFQSKMAo
Tender Match
http://www.tendermatch.com/?crcat=payperclick&crsource=google&crkw=ojeu+notices

33. Accreditations
An Introduction
Clients want appropriately Qualified and Accredited Contractors and
Manufacturers
– Trade Qualifications
– ISO 9000, 14000, OHSAS 18000, BS11000, ISO 27000
– CE Structural Steel, Structural Timber, Individual Products, anything
that has a European Harmonised Standard
– Q-Mark e.g. Doors, Fire Doors, Windows, Glass, Paint, Timber
Panelling, Ply etc.
– Achilles
– Construction Line etc.

34. Culture and Technology
Working Profitably on a Framework
• Continuous Improvement
– Lean Techniques
• Teamworking and Collaboration
• Measurement and Control
• ‘No Blame’ Culture
• Good Leadership and Management
• Empowerment and Training
• Focussed on Client needs
• Sharing Best Practice

35. Culture and Technology
Working Profitably on a Framework
• Vehicle Tracking
• Tablet / Phone
– Issuing Work / Signing Off
• Appropriate Stock
– Type, Quantity, Replenishment Systems
• Timeliness of reporting
• Billing / Invoicing
• Acting on Facts
• Keeping the ‘Eye on the Ball’

36. Any Questions?
Ian 07717 862797
ian.widdrington@enterprise.uk.com
Joe 07538 413678
joe.mccarthy@enterprise.uk.com