Ramses Hilton

Renovation Project
Cairo

Client:

ACIHT

Cost Management Scope & Methodology

Prepared by
Concord Consulting Group
January 2017

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Table of Content

1. Proposal Outline………….…………………..3

1.1 Introduction……………………………...……..3
1.2 Project Understanding……………………....…3

2. Scope of Work………………………………....5

2.1 General…………………..…………………...…5
2.2 Project Development Cycle…………. .....….7
2.3 Key Determinants of Cost……………………..11
2.4 Cost changing Factors………… ………...…12
2.5 Risk Issues……………………………...…...…13

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1 Proposal Outline
1.1 Introduction

Artelia has invited Concord Consulting Group to manage the design and tender process
in respect of Cost management Services for Hilton Ramses, Cairo as a Sub-Consultant
to Artelia.
Please find hereafter our Cost Management Scope & Methodology concerning the
Design, Tender & Bidding Phase for the mentioned project.

1.2 Project Understanding

According to the received RFP, the purpose is to carry out the design and tender
process in respect of the Cost Management Services for the Following areas:

1. Design and tender for the lobby, entrances, reception areas, shops and elevator
cabins

2. Design and tender for the current Garden Court which is to become the Shisha
Lounge and part of the Levantine concept (Standard Hilton F&B concept). The
Shisha Lounge also has an outdoor terrace area which needs to included.

3. Design and tender for a bar/pub concept (Sportsman – Standard Hilton F&B
concept) next to the current Garden Court (currently Sherlock Holmes pub). This
could include a terrace.

4. Design and tender to the current Terrace Café and Citadel restaurants to be
combined into one restaurant area under the Levantine concept.

5. Design and tender for the soft refurbishment to the Maharaja Indian restaurant.

6. Design and tender for all ground floor, restaurant floor and pool floor circulation
areas.

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 7. Design and tender for the meeting rooms and ballroom plus pre function areas.

8. Design and tender for ground floor toilets, restaurant floor toilets and pool floor
toilets.

9. Design and tender for the pool deck and new bar concept around the pool.

10. Design and tender for any miscellaneous areas in the public spaces which
are not captured in the above.

11. Detailed design and tender for questroom floors 23, 24, 25, 26 & 27
including all guestrooms and corridors. This is continuation of an existing scheme
which has already been implemented on floors 28, 29 & 30.

Exclusions:

 Gym/fitness areas

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2 Cost Management Scope
2.1 General

Cost Management plan provides a detailed record of the processes that will be adhered to
ensuring project costs are properly managed. One of these processes that is critical to any
project’s successful completion is the one that defines the actions required when a cost
variance occurs.
Without careful and detailed planning project costs can be miss communicated to
stakeholders and its sponsor. This is because of a poor or lack of explanation as to what the
costs covers and any assumptions that have been made in the process of detailing these
costs. A project manager must have the processes and reporting structure in place to
ensure that costs are accurately monitored and controlled. This arrangement guarantees
that the cost base is well managed throughout the project’s duration and that the final
product is delivered to the approved budget.
The Work Breakdown Structure (WBS) along with the scope and schedule baselines allows
the costs of each activity to be properly estimated. An description of how these figures have
been calculated including what assumptions and where appropriate what constraints have
been made to arrive at this figure. The cost performance baseline is created and forms the
basis for presenting the final project budget to the sponsor and stakeholders for approval.
A project cost management plan has the following elements. Each will relate to the culture
of the organization and the nature of the project being undertaken.
 Unit of measure (used to create the estimates)
 Level of precision (extent of rounding up or down that has been used)
 Level of accuracy (e.g. 10%)
 Organizational procedures links (WBS gives the framework & control account for the
plan)
 Control thresholds (cost variance that will be tolerated before action is needed)
 Rules of performance measurement (e.g. EVM – Earned Value Measurement)
 Reporting formats & frequency
 Description of all cost processes.

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Cost management is concerned with the process of planning and controlling the budget of
a project or business. It includes activities such as planning, estimating, budgeting,
financing, funding, managing, and controlling costs so that the project can be completed
within the approved budget. Cost management covers the full life cycle of a project from
the initial planning phase towards measuring the actual cost performance and project
completion. This article will explain the different steps or processes in Project Cost
Management, in line with methods such as the PMBOK.

Step 1: Resource planning

In the initial phase of a project the required resources to complete the project activities
need to be defined. Work Breakdown Structures (WBS) and historical information of
comparable projects can be used to define which physical resources are needed. You can
think of the required time, material, labor, equipment, etc. Once the resource types and
quantities are known the associated costs can be determined.

Step 2: Cost estimating

Several cost estimating methods can be applied to predict how much it will cost to perform
the project activities. The choice for the estimation method depends on the level of
information available. Analogous estimating using the actual cost of previous, similar
projects can serve as a basis for estimating the current project. Another option is to
use parametric models in which the project characteristics are mathematically
represented. Estimates can be refined when more information becomes available during
the course of a project. Eventually this results in a detailed unit cost estimate with a high
accuracy. Remaining uncertainties in estimates that will likely result in additional cost can
be covered by reserving cost (e.g. using escalation and contingencies).

Step 3: Cost budgeting

The cost estimate forms together with a project schedule the input for cost budgeting. The
budget gives an overview of the periodic and total costs of the project. The cost estimates
define the cost of each work package or activity, whereas the budget allocates the costs
over the time period when the cost will be incurred. A cost baseline is an approved time-
phased budget that is used as a starting point to measure actual performance progress.

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Step 4: Cost control
Cost control is concerned with measuring variances from the cost baseline and taking
effective corrective action to achieve minimum costs. Procedures are applied to monitor
expenditures and performance against the progress of a project. All changes to the cost
baseline need to be recorded and the expected final total costs are continuously
forecasted. When actual cost information becomes available an important part of cost
control is to explain what is causing the variance from the cost baseline. Based on this
analysis, corrective action might be required to avoid cost overruns.
Dedicated cost control software tools can be valuable to define cost control procedures,
track and approve changes and apply analysis. Furthermore, reporting can be enhanced
and simplified which makes it easier to inform all stakeholders involved in the project.

2.2 Project Development Cycle

Project Specification and Feasibility

The First stage of the project cycle the definition of what the requirements is and how it
can be satisfied. This includes deciding on the size and quality of facility that is required.
Different options will be discussed at this stage and evaluate d in terms of broad cost
estimated, expected operational performance and economic benefit. Preliminary cost
estimates may be attempted at this stage.

Concept Design

Work will then be undertaken to develop the plans for the project. These plans will
establish the general parameters of a scheme design and will include all the project’s
major components. The function of outline designs is to provide:

 The basis for the detailed design and accurate cost estimated of the scheme.
 The necessary information for the planning process.

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 The Project Development Cycle

Project Specification &

Feasibility

Concept Design

Schematic Design
Procurement Plan

Detailed Design

Finance
Priced Estimated BOQ

IFT &Tender Announcing

Bidding Analysis

Project Award & Handover

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Schematic Design

This stage seeks to define the general scope and conceptual design of the project
including scale and relationship between building components & materials. This is very
important for the Cost management phase since it outlines the cost regarding the material
selections. During this stage value engineering might be required.

Detailed Design

The detailed design of a project is used to assess the quantities of materials required and
the actual construction works involved in implementing a project. Drawings and lists of
quantities are then used to produce detailed project costs and to establish an
implementation timetable.

Priced Estimated BOQ

Upon concluding the detailed Design Stage and obtaining the material take off and
Quantities, the Cost Management team performs this exercise to give an estimate to the
project cost that should be roughly around 5% above or below to the actual price actually
paid.

Issue for tender and Tender Announcing

Upon completing the Tender package Different contractors are invited in order to bid for
the project execution based on their technical and financial offers, this stage provides cost
alternatives for the project based on the economical market status, Value engineering
maybe needed during this stage.

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Bidding analysis

Once Contractors have been approved both technically and financially, Priced BOQs are
compared to achieve the best offer and compared to the priced Estimated BOQ done to
achieve the best possible .cost and ensure it is within the expected and approved study
proposed.

Project Award and Handover

After a decision has been reached, and the Owners Consultants, and Project manager
reached a conclusion to the winning bid. The project is awarded to the Contractor, in which
case a LOA is issued depending on the Financial Specifications and offer issued in order
to serve best the project at hand.

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2.3 Key Determinants of Initial Project Costs

Project Costs are based on the actual costs of materials, equipment, and labour in the
region where the project is being procured. These basic costs will vary depending upon a
number of factors which are summarised in the below diagram

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2.4 Factors which change Costs over time
Once implementation begins, a project’s costs rarely remains static. As further information becomes
available the costs may be further defined. Yet, even when a cost become firmly fixed, there are
numerous factors that can lead to the cost increasing. Delays are a major factoe. Whatever the
reason, delays almost invariably increase budget cost. Many events may have contributed to the
dely – some which could have been foreseen and others which could not.
The below diagram illustrated some of the factors that result in projects being delayed or costing
more than originally planned.

The Diagram below shows the project development cycle in relation with the Risk Issues.

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 The Project
Development Cycle Risk Issues

Cost Time What feasibility work has been undertaken?

Risk Decreases
Has project sponsor experience of this type of projects?

Is the project dependent upon other phases or projects?

Has a project manager been appointed?

Does the outline design satisfy and specifications?

Who will be doing the detailed design?

Do cost estimated allow for changes to outline design?

What risks are allowed for in the contingency?

Have the relevant consents procedure been completed

including planning permission, EIA, operational
licenses, public consultation?

Has all land been acquired and compensation agreed

with owners?

What issues are outstanding from the above?

Is the outline design clear enough for detailed design

and costing to be completed satisfactorily?

Have bidders had enough time to prepare realistically

costed bids?

Has the project sponsor worked with this contractor

before? Is the contractor of sound financial standing?

Have ground conditions been properly investigated?

Is the risk of cost over-run dealt with in the contract?

Is the funding in place to pay the contractor?

Are project management arrangements working?

Are payments to the contractor being made on time?

Is the project currently on schedule and within budget?

Are any of the risks identified in the contingency

budget being experienced; how are these being dealt
with?

Is it clear in the contract exactly what works are

required for completion of the project?

Have handover procedure been established?

13 | P a g e What are the final payment arrangements?