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Rics Order of Cost Estimating and Elemental Cost Planning

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					          RICS New Rules of Measurement
Order of Cost Estimating and Elemental Cost Planning
                    “Black Book
                     Black Book”
                            Introductory Seminar
Warsaw, May 20th 2009
Iain L d         P l k Management Board M b
I i Leyden, RICS Polska M       t B d Member
Program - 20th May 2009
Introduction - what do the NRM cover? (30 minutes)
      •
      •
      •
          An overview of the document’s purpose


          Use of document
                              document s
          Structure of the document                                            NRM
      •   Understanding how the NRM are linked to RIBA work stages and
          OGC Gateway processes
                                                                               RICS new rules
Estimating and cost planning process – as defined by the NRM (40                  meas rement
                                                                               of measurement
     minutes)                                                                  Order of cost estimating
      •   Overview of the types of estimates and cost plans and how they fit   and elemental cost planning
          into the RIBA Plan of Work and OGC Gateway Process
      •       f                  f          f               (OC )
          Defining the purpose of an order of cost estimate (OCE)
      •   Information Required for OCE
      •   OCE Format
      •   Defining the purpose of elemental cost planning
      •   Information Required for Formal Cost Plans (FCP)
      •   Measurement rules for Building Work
Benefits of regulating cost estimating and cost planning (10 minutes)
Question and Answer Session (10 minutes)
Purpose of NRM
Best Practice Guidance and Standardizing Measurement
   Rules
                       Understandable by Employer and all
                       p                       project
                       parties to construction p j

Direction on how to describe and deal with cost
allowances not reflected in measurable building
work




    Based on UK Practice with Worldwide
    Application
    A li ti
Structure of the Document
 • Part 1 – Places cost estimating and elemental cost planning in context of RIBA
 Plan of Work and the OGC Gateway Process

 • Part 2 – Describes Order of Cost Estimate and its contents, sets out rules for
 measurement and reporting

 •Part 3 – Describes Elemental Cost Planning, defines its constituents and how to
 prepare an elemental cost plan

 •Part 4 – Tabulated Rules of Measurement

  A    di
 •Appendices
Use of RICS new rules of Measurement: Order of cost
estimating and elemental cost planning
•     Represent the essentials of Good Practice

•     S                f
      Structured basis for measuring building work

•     Consistent approach from inception to completion of each project
NRM in Context of RIBA
Plan of Work and OGC
Gateways
Purpose of an order of cost
estimate
Establish Affordability for the Employer

Set Cost Limit -
( during RIBA Work Stages A: Appraisal and B:
Design Brief or OGC Gateway 1 (Business
Justification) and 2 (Delivery Strategy)
Information requirements for OCE preparation
              From Employer
              F    E l
              • Location and availability of site
              • Statement on use of Building
              • Initial Project/Design Brief
                                     works
              • Details of enabling works, decanting or other specific requirements
              • Indicative programme/Time Schedule
              • Details of particular constraints to be imposed by the employer, statutory or
                government bodies
              • Details of Site Conditions
              • Budget/Cashflow Constraints
              • Initial views on Procurement
              • Life span of the building
              • MEP Particular requirements
              • Treatment of Project/Design team fees
              • Approach to other development/project costs
              • Treatment of inflation
              • Treatment of VAT
              • Other considerations
Information requirements for OCE Preparation
                From Architect
                F    A hit t
                • Design Study Sketches for development options if
                  possible floor plans; roof plan; elevations; and sections
                  to suitable scale
                • Schedule of GEA, GIFA, NIA, SA
                • Minimum Storey Height
                • Schedule of Accommodation
                • Car Parking Spaces
                • Design Intent or indicative specification
                • Indicative environmental/sustainability strategy d
                • Advice on likely site constraints
                  Advice        likely Planning C
                • Ad i on lik l Pl                 t i t
                                            i Constraints
                • Definition of fit-out
                • Initial risk register/log
Information requirements for OCE Preparation
               From Mechanical and El t i l E i
               F    M h i l d Electrical Engineer
               • Indicative design intent/specification for building services
               • Indicative environmental strategy/sustainability strategy
               • Advice on availability and/or adequacy of utilities services
                 connections to site
               • Initial risk register/log


               From Structural Engineer
               • Advice on Probable ground conditions
                               p              g
               • Indicative specification/design intent for structure
               • Initial risk register/log
Constituents of an order of cost
                        Constituent
                      1 Building Works estimate
                      2 Main Contractor's preliminaries estimate
                      3 Sub‐total [(3)=(1)+(2)]
                      4 Main Constractor's overheads and profit
                        Works cost estimate [(5)=(3)+(4)]
                      5 Works cost estimate [(5)=(3)+(4)]
                      6 Project/Design team fees estimate
                      7 Sub‐total [(7)=(5)+(6)]
                      8 Other development/project costs estimate
                      9 Base cost estimate [(9)=(7)+(8)]
                                                  [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                     10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
                     10 (a) Design development risk estimate
                     10 (b) Construction risk estimate
                     10 (c) Employer's change risk estimate
                     10 (d) Employer other risk estimate
                     11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                     12 Tender Inflation Estimate
                     13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                     14 Construction inflation estimate
                     15 Cost Limit (including inflation) [(15)=(13)+(14)]

                       VAT Assessment
                       VAT Assessment
Constituents of an order of cost
                                   Constituent
                                 1 Building Works estimate
                                 2 Main Contractor's preliminaries estimate
                                 3 Sub‐total [(3)=(1)+(2)]
Floor Area Method                4 Main Contractor's overheads and profit
Building Works estimate =          Works cost estimate [(5)=(3)+(4)]
                                 5 Works cost estimate [(5)=(3)+(4)]
                                 6 Project/Design team fees estimate
GIFA x cost/m²                   7 Sub‐total [(7)=(5)+(6)]
Functional Unit Method           8 Other development/project costs estimate
                                 9 Base cost estimate [(9)=(7)+(8)]
Building Works estimate =                                    [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                                10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
N b of f         i   l i
Number f functional units x     10 (a) Design development risk estimate
                                10 (b) Construction risk estimate
cost per functional unit        10 (c) Employer's change risk estimate
Elemental Method                10 (d) Employer other risk estimate
                                11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
Building Works estimate =       12 Tender Inflation Estimate
Sum of element cost targets     13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
Cost target (for element) =     14 Construction inflation estimate
                                15 Cost Limit (including inflation) [(15)=(13)+(14)]
element unit quantities EUQ x
 l
element unit rate EUR
        t it t                    VAT Assessment
                                  VAT Assessment
Constituents of an order of cost
                                     Constituent
                                   1 Building Works estimate
                                   2 Main Contractor's preliminaries estimate
                                   3 Sub‐total [(3)=(1)+(2)]
                                   4 Main Contractor's overheads and profit
                                     Works cost estimate [(5)=(3)+(4)]
                                   5 Works cost estimate [(5)=(3)+(4)]
Cost estimate for main             6 Project/Design team fees estimate
                                   7 Sub‐total [(7)=(5)+(6)]
contractor’s preliminaries         8 Other development/project costs estimate
                                   9 Base cost estimate [(9)=(7)+(8)]
                                                               [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                                  10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
At this stage in the process is   10 (a) Design development risk estimate
expressed as a percentage of      10 (b) Construction risk estimate
                                  10 (c) Employer's change risk estimate
the building works estimate       10 (d) Employer other risk estimate
                                  11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                                  12 Tender Inflation Estimate
                                  13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                                  14 Construction inflation estimate
                                  15 Cost Limit (including inflation) [(15)=(13)+(14)]

                                    VAT Assessment
                                    VAT Assessment
Constituents of an order of cost
                                     Constituent
                                   1 Building Works estimate
                                   2 Main Contractor's preliminaries estimate
                                   3 Sub‐total [(3)=(1)+(2)]
                                   4 Main Contractor's overheads and profit
                                     Works cost estimate [(5)=(3)+(4)]
                                   5 Works cost estimate [(5)=(3)+(4)]
                                   6 Project/Design team fees estimate
                                   7 Sub‐total [(7)=(5)+(6)]
Cost estimate for main             8 Other development/project costs estimate
                                   9 Base cost estimate [(9)=(7)+(8)]
contractor’s overheads and                                     [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                                  10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
profit                            10 (a) Design development risk estimate
                                  10 (b) Construction risk estimate
                                  10 (c) Employer's change risk estimate
At this stage in the process is   10 (d) Employer other risk estimate
                                  11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                     sub total
expressed as % of sub-total 3     12 Tender Inflation Estimate
                                  13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                                  14 Construction inflation estimate
                                  15 Cost Limit (including inflation) [(15)=(13)+(14)]

                                    VAT Assessment
                                    VAT Assessment
Constituents of an order of cost
Risk Allowance given more           Constituent
significance at this stage.       1 Building Works estimate
                                  2 Main Contractor's preliminaries estimate
Acknowledgement of the rise of 3 Sub‐total [(3)=(1)+(2)]
risk management within the        4 Main Contractor's overheads and profit
                                    Works cost estimate [(5)=(3)+(4)]
                                  5 Works cost estimate [(5)=(3)+(4)]
industry and the need to properly 6 Project/Design team fees estimate
identify, assess, monitor and     7 Sub‐total [(7)=(5)+(6)]
                                  8 Other development/project costs estimate
control risks during the project  9 Base cost estimate [(9)=(7)+(8)]
cycle                                                        [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                                 10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
                                              10 (a) Design development risk estimate
                                              10 (b) Construction risk estimate
                                              10 (c) Employer's change risk estimate
                                              10 (d) Employer other risk estimate
                                              11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                                              12 Tender Inflation Estimate
                                              13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                                              14 Construction inflation estimate
                                              15 Cost Limit (including inflation) [(15)=(13)+(14)]

                                                VAT Assessment
                                                VAT Assessment
Constituents of an order of cost
Tender inflation and Construction Constituent
inflation                         1 Building Works estimate
                                  2 Main Contractor's preliminaries estimate
Both expressed as a percentage 3 Sub‐total [(3)=(1)+(2)]
which can be computed using       4 Main Contractor's overheads and profit
                                    Works cost estimate [(5)=(3)+(4)]
                                  5 Works cost estimate [(5)=(3)+(4)]
published indices such as:        6 Project/Design team fees estimate
•Retail price index               7 Sub‐total [(7)=(5)+(6)]
                                  8 Other development/project costs estimate
•Tender price index               9 Base cost estimate [(9)=(7)+(8)]
 Building
•Building cost indices (BCIS)                                [( ) ( ( )) ( ( )) ( ( )) ( ( ))]
                                 10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
                                              10 (a) Design development risk estimate
                                              10 (b) Construction risk estimate
                                              10 (c) Employer's change risk estimate
                                              10 (d) Employer other risk estimate
                                              11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                                              12 Tender Inflation Estimate
                                              13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                                              14 Construction inflation estimate
                                              15 Cost Limit (including inflation) [(15)=(13)+(14)]

                                                VAT Assessment
                                                VAT Assessment
Order of cost estimate reporting
Minimum content
a) Project Title
b) Project description
c) Statement of cost (including cost limit)
d) Details of the information and
   specification on which the cost plan was
   prepared
e) A statement of floor areas
f) Basis of cost estimate (i.e. assumptions)
g) Estimate base date (to which inflation
   has been applied)
h) Estimated costs of and request for
   decision on any alternative proposals
i) Inclusions and exclusions
Purpose of elemental cost planning
                p                     g                 practical and
             To provide advice to designers to enable a p
             balanced design within budget

               To provide robust cost information upon which the
                         employer can make informed decisions


      Keep expenditure within cost limit approved by the employer


           ensure that employers are provided with value for money



                To develop employer and designers awareness of cost
                consequences of desires and proposals
Information requirements for Formal Cost Plan 1
              From Employer
              F    E l
              • Confirmation of the cost limit
              • Confirmation of the project/design brief
              • Confirmation of Programme/Time Schedule
              • Procurement Strategy
              • Contract Strategy
              • Phasing
              • Facilitating works
              • Treatment of project/design fees
              • Insurances
              • Approach to dealing with other development/project costs e.g. Tree
                Cutting
              • Treatment of Employers risk, inflation, VAT, and other considerations
              • Post Completion requirements
              • Authority to commence RIBA Work Stage or OGC Gateway Approval
Information requirements for Formal Cost Plan 1
                From Architect
                F    A hit t
                • Concept drawings to a suitable scale including GA plans,
                  General Elevations, General Sections, external
                  landscaping, plan of key building functions, detailed
                  elevations, sketches showing key details, concept design
                  for rooms common areas and site constraints plan.
                • Schedule of GEA, GIFA, NIA, SA
                • Outline Specification
                  Room D t Sh t
                • R       Data Sheets
                • Schedule of Key FFE
                • Strategies for environmental/sustainability, car parking,
                  vertical movement, IT, Fire, Acoustics, Disabled Access,
                           cleaning               disposal,
                  window cleaning, refuse/waste disposal security
                • Topographical survey and desktop studies
                • Definition of fit out
                • Risk Register/log
Information requirements for Formal Cost Plan 1
               From Mechanical and Electrical Engineer
               •Concept Design Drawings to a suitable scale
               •Outline Specification information
               • Strategies for environmental/sustainability, vertical movement, removal/decommissioning of
                existing plant and or equipment
               •Underground services survey
               •Details of utilities connections
               •Methodology of facilitating works
               •Risk register/log




               From Structural Engineer
               •Reports on environmental contamination, geotechnical properties
               •Concept drawings to a suitable scale
               •Environmental risk assessment
               •Advice on ground conditions
                           g
               •Formation and excavation levels
               •Outline specification information
               •Estimates of reinforcement content and mass of steelwork in framing
               •Methodologies of facilitating the work
               •Risk register/log
Constituents of an elemental cost plan
                           Constituent
                          1 Building Works estimate
                          2 Main Contractor's preliminaries estimate
                          3 Sub‐total [(3)=(1)+(2)]
                          4 Main Contractor's overheads and profit
                          5 Works cost estimate [(5)=(3)+(4)]
                          6 Project/Design team fees estimate [(6=(6(a))+(6(b))+(6(c))]
                               j /      g                     [( ( ( )) ( ( )) ( ( ))]
                           (a) Consultants' fees
                           (b) Main contractor's pre‐construction fee estimate (if applicable)
                           (c) Main Contractor's design fee estimate (if applicable)
                          7 Sub‐total [(7)=(5)+(6)]
                          8 Other development/project costs estimate
                           Base cost estimate [(9)=(7)+(8)]
                          9B       t ti t [(9) (7)+(8)]
                         10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
                         10 (a) Design development risk estimate
                         10 (b) Construction risk estimate
                         10 (c) Employer change risk estimate
                         10 (d) Employer other risk estimate
                         11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                         12 Tender Inflation Estimate
                         13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                         14 Construction inflation estimate
                         15 Cost Limit (including inflation) [(15)=(13)+(14)]

                           VAT Assessment
Constituents of an elemental cost plan
                                    Constituent
                                   1 Building Works estimate
                                   2 Main Contractor's preliminaries estimate
                                   3 Sub‐total [(3)=(1)+(2)]
                                   4 Main Constrictor's overheads and profit
  Quantities for building works    5 Works cost estimate [(5)=(3)+(4)]
                                   6 Project/Design team fees estimate [(6=(6(a))+(6(b))+(6(c))]
                                        j /      g                     [( ( ( )) ( ( )) ( ( ))]
  shall be determined in            (a) Consultants' fees
  accordance with Part              (b) Main contractor's pre‐construction fee estimate (if applicable)
                                    (c) Main Contractor's design fee estimate (if applicable)
  4:Tabulated Rules of             7 Sub‐total [(7)=(5)+(6)]
                                   8 Other development/project costs estimate
  Measurement for elemental         Base cost estimate [(9)=(7)+(8)]
                                   9B       t ti t [(9) (7)+(8)]
  cost planning (i.e. group       10 Risk allowance estimate [(10)=(10(a))+(10(b))+(10(c))+(10(d))]
                                  10 (a) Design development risk estimate
  elements 1 to 9)                10 (b) Construction risk estimate
                                  10 (c) Employer change risk estimate
                                  10 (d) Employer other risk estimate
                                  11 Cost Limit (excluding inflation) [(11)=(9)+(10)]
                                  12 Tender Inflation Estimate
                                  13 Cost Limit (excluding construction inflation) [(13)=(11)+(12)]
                                  14 Construction inflation estimate
                                  15 Cost Limit (including inflation) [(15)=(13)+(14)]

                                    VAT Assessment
Group elements for estimating building works
               Group Element 1   Substructure

               Group Element 2   Superstructure

               Group Element 3   Internal Finishes

               Group Element 4   Fittings, furnishings and equipment

               Group Element 5   Services

               Group Element 6   Completed Buildings and building units

               Group Element 7   Work to existing buildings

               Group Element 8   External works

               Group Element 9   Facilitating works
Other Group elements
              Group Element 10   Main contractor’ s preliminaries

              Group Element 11   Main contractor’s overheads and profit

              Group Element 12   Project/design team fees

              Group Element 13   Other development/project costs

              Group Element 14   Services

              Group Element 15   Completed Buildings and building units
Benefits of regulating cost estimating and cost
planning •Provides a common and consistent basis on which to measure areas
             and building works items – for new works and rehabilitation works
             •Presents a clear framework that facilitates a systematic approach to
             compiling cost estimates and cost plans
              Establishes
             •Establishes formal cost estimating and cost planning stages that are
             aligned to both the RIBA Plan of Work and the OGC Gateway
             Process
             •Covers modern construction methods including modular units and
                   l t buildings
             complete b ildi
             •Defines preliminaries that can be used for any procurement or
             contract strategy (including prime contracting and PFI)
                           g            ,    p     g                      g   y
             •Defines categories of risk, dispensing with the term “contingency”
             •Promotes the view that risk allowances should not be a standard
             percentage, but a properly considered assessment of the risk
Benefits of regulating cost estimating and cost
planning •Helps with value engineering
         •Gives transparency to cost estimates and cost plans
         •Acts as an aide memoir
         •Helps with improving the accuracy of cost estimates and cost plans
          Promotes
         •Promotes clear and effective communication between the employer
         and project team members and ensure that risks associated with the
         project are identified, analysed and responded to
         •Provides a method for codifying elemental cost plans so that they
              be        t d to     k     k      for
         can b converted t works packages f procurement and costt d       t
         management during the construction stage
         •Provides robust basis for capturing historical cost data in the form
           q
         required for future cost estimates and cost p     ,        y     p
                                                      plans, thereby completingg
         the “cost management cycle”
         •Can be integrated into an organisation’s quality management
         system.
RICS New Rules of Measurement:

Order of cost estimating and
                                 NRM
elemental cost planning          RICS new rules
                                    meas rement
                                 of measurement
                                 Order of cost estimating
RICS Books www.ricsbooks.com     and elemental cost planning

RICS Books
ISBN: 9781842194461
Item Code: 17792
310 Pages
Paperback
Mar 2009
Price: £45.00

				
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