AIQS

Dubai - UAE
COST PLANNING AND
COST MANAGEMENT IN
CONSTRUCTION
PROJECTS
Presented by :
Ramesh Palikila BTech, FIS, FRICS, FAIQS
Founder I CEO I Chief Mentor
Akhil International Management Solutions FZE (AIMS), UAE.
www.aimsintlqs.com
AGENDA

01 AIQS COMPETENCIES INTRODUCTION 06 CASE STUDY – COST PLAN

POST CONTRACT COST

02 PROJECT BRIEF AND DEVELOPMENT 07 MANAGEMENT

03 PRECONTRACT COST MANAGEMENT 08 COST REPORTS

DESIGN COST ADVICE & COST

04 PLANNING 09 CHANGE MANAGEMENT

05 PRETENDER ESTIMATE CONCLUSION

 01. AIQS COMPETENCIES INTRODUCTION

Published by The Australian

Institute of Quantity Surveyors
Copyright – All rights reserved ©

First printed March 1998

Revised and reprinted May
2012

ISBN 1-876389-02-8
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PROJECT COST MANAGEMENT COMPETENCIES
Project cost management involves various cost management and procurement procedures to
ensure that the Client's budget is properly established and maintained.

DESIGN COST ADVICE, COST PLANNING AND COST ENGINEERING COMPETENCIES

Cost management of a project includes establishing the budget and then effectively monitoring and
reporting against that budget on a regular basis, cost planning the evolving design, preparing
appropriate contract documentation and advising on variations and claims during the progress of the
project.

Additional Range Indicators

Strategies for gathering Analysis of data relating

Use of appropriate
data and carrying out to costing, budgeting and Application of principles
analysis and evaluation
research on current cashflows including of cost management and
techniques in reporting to
construction costs and financial implications of elemental cost analysis
the Client
future predictions various options

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 PROFESSIONAL CQS SERVICES

• Contract formation
• Client Brief • Contract documentation
• Development appraisal • Conttact Administration
• Viability of Project • Commercial Management
Pre-Contract
• Project evaluation • Change Mangement
• Procurement Strategy • Post Contract issues
• Cost Planning Management • Vartaitions
• Pretender Estimate • Valuations
• Tendering process Dispure QS • Final account
Post Contracts
resoltions Consultants Management
Management
Services
• Contarctual
• Conflicts Avoidance in Pre-
provisions
contract stage
• Claims procedures
• Conflicts to Dispute
Claims • Claims submissions
• Contractual process Management • Review and analysis
• Dispure resolution
• Evaluation
processes
• Determination
• ADR (Alternate Dispute
• Negotiations
resolution ) Methods
• Consultations
• Arbitration
• Conclusion
• Litigation aiqs.com.au
PROJECT DEVELOPMENT CYCLE

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 02. PROJECT BRIEF AND DEVELOPMENT

Preparation of the project brief Development appraisal

is likely to be coordinated by the involves research into
lead consultant. constraints and opportunities
evolving from the location, legal
“The project brief is the final stage and planning aspects of potential
in the process of defining the sites as well as their physical
client’s requirements characteristics.
for the development of a built
asset”.
“A development appraisal is a
financial assessment to enable
a developer to establish the
viability of a project.”
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Client’s requirements

Time : Time and

Quality : Quality Flexibility :The need Costs : Effective Risks : Risks, which
timing, which are of
goals, which have to to adapt to changing financial planning have to be identified,
the essence, with
be properly defined if circumstances and and cost quantified and
costs and project
they are to be keep projects on management are managed – and
processes
achieved. track whatever essential throughout. avoided wherever
inextricably linked.
happens. possible.

Client’s wants and needs

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Preparation of Project brief

Preparation of the project brief is likely to be coordinated by the lead

consultant. As well as gathering information about physical requirements,
the briefing process should:

1. Verify the objectives and priorities of the project.

2. Ensure space, time and budget parameters are aligned with the client’s vision and
needs.
3. Ensure expectations are reasonable and attainable.
4. Clarify client roles and the project structure.
5. Establish how much the client knows already and their level of experience; do they
already have a clear brief?
6. Gather contextual information.
7. Gather user information.
8. Establish the building life span and flexibility requirements. aiqs.com.au
Core
members
involve in
Project brief

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 03. PRE-CONTRACT COST MANAGEMENT

Project brief and development appraisal

Design Economics Cost Plan

Cost Advice

Cost Planning Process

Tendering
Pre-tender estimate

Tendering process and evaluation Contract

award
Finalization of the Contract award
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04. DESIGN COST ADVICE ,COST PLANNING AND ECONOMICS

Few Definitions

An element (for cost Services

analysis/planning purposes) is a
major physical part of a building FF& E

that fulfils a specific function or

functions irrespective of its
design, specification or
construction. Superstructure

“Elemental cost planning is a system of

Cost planning and Cost control, typically
for buildings, which enables the cost of a
scheme to be monitored during design Sub-structure
development.”
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aiqs.com.au
 Cost Plan Format
Elements breakdown

Hard Cost

Reference: NRM1

Soft Cost

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RIBA- 2020 PLAN OF WORK

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aiqs.com.au
The RIBA Plan of Work published by the RIBA in 2020 defines spatial a spatially coordinated design is a: 'Design in which the client's Spatial
requirements as: 'A schedule of rooms and/or spaces that will achieve the Requirements and the spaces required for any Building Systems –
Client Requirements. The Spatial Requirements for the building as a such as structural and building services engineering aspects,
whole are set at Stage 0 (strategic definition). including grids, risers and plant rooms – have been determined and
fixed to allow Stage 4 to progress
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aiqs.com.au
 Design economics is an
understanding of the economics
Design Vs Cost associated with the design of
building.

Concept
Cost Planning is the technique by
Design which the budget is allocated to the
Cost Plan 01 various elements of an intended
building project to provide the
Developed
Design
design team with a balanced cost
framework within which to produce
a successful design.

Cost Plan 02

Technical
Design

Final Cost Plan – PTE

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 Cost Planning Process

Elemental cost plan for design and • Client’s requirements

• Quantification process
construction • Standard Method of
measurements
• Pricing methods
• Rates database
Cost plans are generally prepared by cost • Assumptions
consultants (often quantity surveyors). They • Exclusions
• Inclusions
evolve through the life of the project, • Marked-up drawings /List
developing in detail and accuracy based on • Contingencies
the nature of the design, and then actual • Risk Register
• Control of documents and
prices are provided by specialist contractors, distributions
contractors and suppliers. They range from • Revisions
• Value Engineering options
very early initial cost appraisals through to • Design Economics options
tender pricing documents. • Revised Cost Plans
• Comparative Cost Plan
• Bench Marking
• BCIS/NRM Cost Analysis.
Structure your Cost Plan

Executive summary

Outline of key risks Elemental cost planning

is a system of Cost
Assumptions
planning and Cost
Exclusions control, typically for
buildings, which enables
Information Used
the cost of a scheme to
Details be monitored during
design development.
Area schedule

TIP: Include a set of Marked up drawings

Preparation of BOQ

List of drawings

Specifications The Bill of Quantities (sometimes

referred to as 'BoQ' or 'BQ') is a
Standard Method of measurements document prepared by the cost
consultant (often a quantity surveyor)
Exclusions that provides project specific
measured quantities of the items of
Information Used
work identified by the drawings and
Details specifications in the tender
documentation.
Other schedules ( BBS, Cost breakdown etc., )

Preambles

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Measurement Construction Areas
– Traditional measure / BIM
• GIA, GEA, NIA, NLA - when are they
– Focus on areas with greatest value applicable?
– Focus on areas that take longest to measure
• BCIS - all costs expressed against
– TIP: Think about what is not on the drawings GIA(Definition as RICS Code)
• Plant rooms

• Building maintenance unit • RICS Code of Measuring Practice - 6th

Edition August 2007 “The Code is for use in the
– TIP: Think outside the box UK only”

• If you were an auditor, where would you

• NRM ( New Rules of Measurement )
find gaps in a cost plan?

– Understand your building function

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– Know your stuff!
Standard method of
Measurement

• POM(I)
• CESMM3
• SMM7
• NRM
• CSI –UNIFORMAT
(US)
• RICS –COMP

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New Rules of Measurement ( NRM) by RICS

The rules have been written to provide a standard set of measurement rules that are
understandable by all those involved in a construction project.
They provide advice and best practice guidance to RICS members involved in the cost
management of construction projects worldwide.
 Pricing Know your market

• Procurement • Key materials (steel, rebar

• Location etc)
• Size of project • Procurement from
• New build / overseas
refurbishment
• Timing of procurement
• Market conditions
• Rates of construction • Workload of Contractors
• Others • Check Quarterly Market
Reviews
 Risks

• Employer risks
• Cash flow restrictions
• Employer variations
• Funding

• Design team risks

• Design co-ordination
• Investigations
• Lack of design
• Inappropriate design

• Procurement risks
• Currency fluctuations
• Design responsibility

Presentation Title January 28, 2021

Page 27
05. PRETENDER ESTIMATE (PTE)

The pre-tender estimate (PTE) is the final estimate of the likely cost of the works that are
described in completed tender documents prepared to seek tenders (offers) from prospective
contractors.

1. PTE provides a final comparison with the budget, and along with the cash flow estimate enables
the client to confirm that sufficient funds are available before committing to seeking tenders.

2. PTE also gives a basis for assessing and comparing tenders when they are returned. If the pre-
tender estimate exceeds the approved budget, an explanation should be provided for the client to
consider and issue instructions.

3. PTE ensures that the tenders are easily compared with one another and with the pre-tender
estimate, and any anomalies or potential savings identified.

The pre-tender estimate should be prepared following a standard approach to estimating such as
that defined by the new rules of measurement (NRM).
06. CASE STUDY – COST PLAN

Please note: The AIQS does not take any responsibility for the opinions expressed by any third parties during an AIQS endorsed event.
Please note: The AIQS does not take any responsibility for the opinions expressed by any third parties during an AIQS endorsed event.
Please note: The AIQS does not take any responsibility for the opinions expressed by any third parties during an AIQS endorsed event.
Please note: The AIQS does not take any responsibility for the opinions expressed by any third parties during an AIQS endorsed event.
BENEFITS OF COST PLANNING

Better value for money

Improved building quality and performance

Budget and value accountability

Improved relationships between all project
participants
Design problems identified and solved
earlier

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 Pre-Contract Cost Management – Procurement and Tendering

PROCUREMENT TENDERING

• Client’s requirements • Tendering Methods

• Global procurement methods • Pre-qualification process
• Client’s requirements • Tendering procedures
• Time. Cost, Quality, HSE and • Tender documents
Sustainability • Instructions to Tenderers
• Procurement Strategies • Floating of Tenders
• Selection of right procurement route/ • Tender returns
methods • Tender opening protocols
• Contractual Relationships • Rate Analysis and adjustments
• Risk Analysis • Commercial Analysis
• Critical appraisal on selection • Technical Analysis
• Choice of form of contract • Tender Reports
• Procurement report • Tender recommendation
• Award Contract
07. POST CONTRACT COST MANAGEMENT

COST MANAGEMENT

• Establishing procedures
• Payment's process
• Change Management
• Variations
• Claims
• Contractual challenges
• Commercial Management
• Budget Control
• Cost Overrun
• Cost Reports
• Evaluation of additional costs
• Cost Tracking
• Cost Analysis
• Commercial closeout
08. COST REPORT

Cost Report – Contents

Contract Reference
Package name and reference
Budget associated with each contract / package
Contract Price
Instructed variations (agreed / not agreed)
Anticipated variations (forecast)
Claims / EOT

Forecast Out-turn Cost or Cost At Completion

Expenditure summary
Financial Status -Cumulative and for this month
09. CHANGE MANAGEMENT

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CHANGE MANAGEMENT

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10. CONCLUSION

BROAD
PERSEPECTIVE

MARKET LATERAL
ANALYST THINKING

Special
abilities of
BEST
COMMUNI
Cost ANALYSE
RISKS
-CATOR Manager

SELECTION OF
GOOD RIGHT
NEGOTIATOR PROCUREMENT
STRATEGIES
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 Any Questions?
Please contact

Ramesh Palikila BTech, FIS, FAIQS, FRICS

Founder I CEO I Chief mentor

Akhil International Management Solutions FZE,

United Arab Emirates.
M +971 50 3944772
[email protected]
www.aimsintlqs.com
www.facebook.com/aimsintlqs
careers...professional development…success

THANK YOU
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