CONTENT

INTRODUCTION......................................................................................................................1
COST PLANNING....................................................................................................................2
DEVELOPMENT OF THE COST PLANNING PROCESS................................................2
COST AND PRICES.............................................................................................................4
COST MODELLING.............................................................................................................4
COST PLANNING TECHNIQUES......................................................................................5
COST PLANNING DONE IN THE VARIOUS PROJECT STAGES.................................6
COST CONTROL..................................................................................................................6
METHODS OF PROCUREMENT........................................................................................7
COST PLANNING DOCUMENTATION............................................................................7
LIMITATIONS PREVAILING IN THE COST PLANNING PROCESS............................7
STUDENT EXAMPLES........................................................................................................7
COST INFORMATION.............................................................................................................8
USES OF COST DATA ........................................................................................................8
RELIABILITY OF COST DATA..........................................................................................8
SOURCES OF COST DATA................................................................................................9
COST INDICES.....................................................................................................................9
CONCLUTION........................................................................................................................11
REFERENCES.........................................................................................................................12
ANNEXES...............................................................................................................................14

INTRODUCTION
Cost planning is a very much familiar term for the quantity surveyors which is a part and
parcel of their common duties in practicing cost management for construction projects.
However the terms cost planning and preliminary estimating can be confusing for a student
where the process involved and their objectives and outcomes being closely related. Further
the cost information plays a major role in the cost planning process where the accuracy and
the reliability of the cost plan developed depend heavily on the quality of the cost information
available. Therefore this report was a great opportunity to identify the above factors clearly.
The first chapter is on cost planning which discusses its development from the earlier days,
traditional and modern techniques used in the cost planning process, cost control which s an
essential part of cost planning and finally the limitations of the cost planning process.
The second chapter discusses about the cost information which provides the background for
the effective cost planning which includes sources, types and reliability of the available data.
It is our ultimate wish that the reader would benefit from the effort we have put forward.

CHAPTER 01
COST PLANNING

COST PLANNING
To prepare a cost plan it is necessary to sub divide the building into series of elements each of
which can be separately valued within the overall framework of the approximate estimate.
Choice of elements will be based on the nature of the building and on any particular services
or features it contains.
It is essential to use the same basic elements wherever possible to maintain continuity in
compiling cost information.
During the detail design stage of a project any number of alternative designs and
specifications may be considered for each element. These can be valued for the purpose of
comparison and to enable the architect to see how various design decisions may affect the
cost and how he can make the best use of employers money. The value of each element may
be based on cost information from previous comparable projects or on approximate
quantities.
DEVELOPMENT OF THE COST PLANNING PROCESS
From the earliest days people have needed some idea of what the cost of a new building is
before they start work on it. However forecasting the cost of a building is not the same as the
planning of the cost things may turn out very different from what was expected for reasons
quite out of the forecasters control.
With people commissioning large buildings being increasingly cost conscious and the
projects being increasingly technologically complex in its nature has required for a price in
advance system which is still practiced to date. However this placed an additional burden on
the architect in the sense that it required complete drawings and specifications to be prepared
before prices could be obtained. Prices were normally obtained by competitive tender.
Some disadvantages of this method are

The client had already committed good deal of other expenditure by his stage which
could not be recovered if it was found he cant go ahead because cost is too high.

The architect and the other consultants involve would have completed most of their
work and would require a substantial portion of their fees.

The client probably would have bought the land for the project and this money would
be locked up in an unproductive asset.

The expected revenues and profits from the project would be lost.

As an alternative, complete redesigning and calling fresh tenders can be done which would
involve additional time and money and would not recover the already spent money.
Therefore it was important that the client should have a good idea of what the building was
likely to cost before he has committed too far which gave rise to approximate estimate.
This would be prepared at a very early stage when even the basic drawings would be
rudimentary and there will be little or no supporting information.
However well such an estimate is prepared, it suffers from a vital
drawback; it was not possible to relate the cost of the work which was shown on the detailed
drawings to the estimate during the progress of the design stage. It is not possible to decide
whether any particular part of the building was extravagantly designed and there is no
indication how cost could be reduced most economically. The only available option at such a
situation is to substitute more high class design sections with lower quality, which is not at all
same as producing an economically efficient design.
Due to these reasons a system of cost planning and cost control came in to practice. This
system was called elemental cost planning and enabled the cost of the scheme to be
monitored during the design development, as well as facilitating the rational allocation of cost
among the various elements of the building structure, finishes and services.
Todays cost planner needs to be able to do much more than merely use techniques to obtain
an acceptable tender price. He needs to work with the client from the inception to the
completion of the project and handing over which requires a flexible approach to be adopted.
Therefore there is no single tailor made set of procedures that can be learned and applied
without much thought; what is required is a thorough understanding of the issues involved
and the solutions available.
The role of the cost planner is now so important that he must be prepared to take his full
share of social responsibility in the advice which he gives and the work which he does. In
particular, he must be able to understand the needs and points of view of the client, the
architect and community in relation to the project and balance them as far as possible within
his brief. His concern should be value rather than minimum cost, and this often goes far
beyond things that can be easily quantified in monitory terms. A broad education and a wide
range of social and cultural interests are necessary for him to do his job well, in addition to
common sense and a feeling for practical probabilities.

COST AND PRICES

There are two ways in which building costs can be estimated or analysed, based on the prices
charged for the finished building or parts thereof; and on the cost of the resources required
to create them.
In fact any figure is simultaneously both a price and a cost, it just depend on the view point of
the person. It can be generally said that the sellers price is the buyers cost; builder price is
the clients cost, sub contractors price is the builders cost, and the suppliers price is the sub
contractors cost of materials.
Most of the cost planning and cost control procedures traditionally used by quantity
surveyors on behalf of the client or the design team depend upon prices for finished work
in place, obtained from the bill of quantities or elsewhere. These prices may be little more
than notional breakdowns by the builder of his tender offer and may have more of a
marketing than a cost basis.
Both the finished product price approach and the resource cost approach have their strengths
and weaknesses, and the good cost planner should understand these and know when each
should be used, rather than simply adopting the one normally used by his profession in the
past.
COST MODELLING
This can be defined as the symbolic representation of a system expressing the content of that
system in terms of the factors which influence its cost. The model attempts to represent the
significant cost items of a cash flow, building or component in a form which will allow
analysis and prediction of cost to be undertaken according to changes in such factors as the
design variables, construction methods, timing of events etc. For QS it means estimating
the cost of a building design at an early stage to establish its feasibility.
What is required is a technique, by which the original estimate can be prepared on the basis
of a known and economic standard of construction and finish, and whereby this estimate can
be constantly checked against the working drawings and any necessary adjustments made to
one or the other. By the time job goes out to tender the probable cost will be known within
close limits and during the progress of the work cost control/monitoring can be done.
A cost plan without cost control is simply an approximate estimate.

Traditional cost models

In taking measurements for the preparation of bill of quantities quantity surveyors has been
representing the building in an form suitable for the contractors estimator; and when prices
are applied to the measured quantities the bill becomes a representation(model) of the cost of
the building. By altering the quantity/measured items or changing the price according to
variations in specification it would be possible to evaluate the effect on cost of manipulating
certain design variables.
However an estimate obtained from a bill would also be too late to give the client an
indication of his likely cost commitment at the outset of the project or allow any cost
controlling to be exercised. Therefore much simpler models are needed at the earlier stages of
design to overcome the above problem. The complexity of the model depends very largely
on the amount of information the designer can give the cost planner.
Refer annexes for some of the more traditional models developed over the years to suite the
various stages of the design process.
Single price rate methods had the disadvantage of the estimate being not able to relate the
cost of the work shown on drawings to the estimate during the subsequent progress of the
design.
Approximate quantities method had other disadvantages. The quantity surveyor required
extra time and substantial additional fee for the work involved, the drawings had to be fairly
complete, and whole of the building work had to be dealt with. Further even if the
approximate quantities when priced by the surveyor showed a far higher total than the
original estimate the discrepancy could not be traced, and rational measures to remedy the
situation were difficult.
COST PLANNING TECHNIQUES

Product based cost models

A product based cost model is one that models the finished project rather than the process
of its construction. It therefore has to be based on data relating to finished work.

Bills of quantities

Elemental cost analysis

Standard form of cost analysis

Resource based cost models

Resource programming techniques

Bar charts

Network diagrams

COST PLANNING DONE IN THE VARIOUS PROJECT STAGES

The following sequence is adopted for a project which is to be designed prior to the
contractor selection and which is to be let on the basis of main contractors tendering for the
whole project on a bill of quantities.
1) Brief stage preliminary estimate based on floor area
2) Sketch plan outline elemental cost estimates
3) Approved sketch design elemental cost plan
4) Production drawings cost checks
5) Receipt of tenders tender reconciliation
6) Construction stage post contract (real time) cost control
Please refer annexes for a full description of cost planning done at design stages.
COST CONTROL
As the design is developed and decisions taken the cost plan must be checked to ensure that
such decisions will not adversely affect the intended expenditure. If the value of any element
in the cost plan is seriously altered by a decision taken at this stage it will be necessary to
review the value of other elements in the cost plan.
Cost checking should continue throughout the period of the contract when variations should
be considered in the same way that the design decisions are considered during the pre
contract period. To enable this it is necessary to compare the tender with the cost plan and to
revise the cost plan in the light of the prices contained in the contract bill of quantities. On
completion of the contract a similar comparison should be made of the cost plan and the final
account so that all matters relating to the cost of the building can be properly recorded to
provide detailed cost information for use on subsequent occasions.

METHODS OF PROCUREMENT
Since the nature and the terms of the contract materially affect the cost control of the project
the options available should be considered.
Please refer annexes for detailed classification of methods of procurement
COST PLANNING DOCUMENTATION
Processes of cost planning and cost checking are continuous and therefore a form of
documentation which provides for a continual updating of the relevant information is
important. Some of the documents used are;

Elemental cost summary sheet

Amplified cost plan/check sheet

Approximate estimate note sheet

LIMITATIONS PREVAILING IN THE COST PLANNING PROCESS

Design cost planning is based upon techniques and data forms that were developed
many years ago. Although these techniques have been refined and further developed,
especially with the introduction of information technology the principles remain little
changed.

They reflect the finished product of construction rather than the process of
construction.

When units of finished work are presented in the bill of quantities, location which is a
critical factor is ignored.

STUDENT EXAMPLES
Please refer annexes

CHAPTER 02
COST INFORMATION

COST INFORMATION
Value and success of approximate estimates and cost plans are dependent upon the accuracy
and interpretation of the cost information used in their preparation. The most effective cost
information is that derived from the analysis of the cost of work dealt with in ones own
office, because only in these cases one has intimate knowledge of the job.
USES OF COST DATA
To incorporate all the uses of data they can be classified under 4 main headings.

Forecasting of cost

Comparison of cost

Balancing of cost

This strategy attempts to spend money in accordance with the clients requirements by
allocating sums of money to the various major components of the building. Data for this use
is normally obtained from past projects and may be in the form of actual costs or as a
proportion of the total cost of a similar project.

Analysis of cost trends

RELIABILITY OF COST DATA

Nearly all data used in cost planning techniques are processed in some way, very often with a
corresponding loss in accuracy and some loss of context.
Refer annexes for traditional cost retrieval and planning practice.
Problems with data obtained from sites

Labour and material costs are recorded at site for the purpose of contract management
which involves payment of wages, checking of invoices and monitoring progress of
site. The format in which these data are recorded doesnt facilitate the purpose of the
estimator which is the preparation of the bill of quantities.

Performance of the labour force may vary considerably depending on factors such as
weather, supervision, obstruction by other trades and physiological measures.

Plant cost will depend on good site management, the amount and type of plant
available from stores or on hire, and amount of disruption affecting the contract
period.

SOURCES OF COST DATA

The technical press

Builders price books

Information services

Government literature

Technical information systems

Other sources of information are
Cost analyses published in the technical press
Cost analyses and cost studies published by the Building Cost Information Service of
the RICS.
Cost limits and other cost information published by government departments for use
in certain classes of public work
Other factors which influence the cost of project to be considered
Cost trends in the industry, local and national
Changes in rates of wages , either agreed or under consideration
Changes in the other elements of the cost of labour, - holidays with pay, national
insurance, tool money, travelling allowancesetc.
Fluctuations in prices of materials
Influence of other work in the district that affect the availability of labour and
materials
COST INDICES
One of the most important items of cost data, particularly with regard to forecasting
techniques which rely on historic information, is a cost index. The objective of the cost index
is to measure changes in the cost of an item or group of items from one point in time to the
other.
A base date is chosen and is usually given the value 100, all future increases and decreases
being related to this figure.

Uses of index numbers

Updating elemental cost analyses

Updating for research

Extrapolation of existing trends

Calculation of price fluctuations

Identification of changes in cost relationships

Assessment of market conditions

Methods of constructing an index

The use of a notional bill

Semi intuitive assessment

Analysis of unit rice for buildings of similar function

Factor cost index

Tender based index

CONCLUTION
Cost planning is an important aspect in any type of project due to the increased cost
consciousness among people in general. For the construction industry this has become an
integral part from its initial development due to the very nature of the product it procures.
This is because the construction industry produces one off products which involve a huge
capital cost and if proper attention is not paid for managing the cost, it can result in client
being bankrupt which is not a rare incidence.
Therefore cot planning and cost controlling became an important aspect which gave rise to
the development of the quantity surveying profession.
However, the cost planning techniques can have several limitations as discussed which may
prevent the cost plan being 100% accurate. Further cost controlling is also essential to ensure
that project doesnt deviate in terms of cost from the cost plan to a great extent. The
complexity and the accuracy of the predictions obtained through cost planning techniques
heavily depend on the quantity and quality of cost information available.
However in the real practice, these techniques are not used in their original form which poses
a question of accuracy.

REFERENCES
1. Ferry, D.J & Brandon, P.S 1996, cost planning of buildings, Blackwell Science, Germany
2. Smith, J & Jaggar, D 2007, Building cost planning for the design team, ButterworthHeinemann, Great Britain

ANNEXES

ANNEXES
RIBA STAGE
Initial appraisal

Optional appraisal

Strategic briefing

PLANNING ACTIVITIES

COST PLANNING AIMS

Receive client's instructions.

Advise client on the need to obtain
statutory approvals and of the duties
of the Client under the regulations.
Receive information about the site
from the Client.
Receive information about the site
from the Client.
Carry out studies to determine the
feasibility of the Client's requirement.
Review with client alternative design
and construction approaches and the
cost implications.

Emphasis is on functional
requirements and nature of
clients problem.
Establishing the initial budget.

Preparation of strategic brief

confirming key requirements and
constraints.

Outline Proposal Cost Commence development of Strategic

Brief into Project Brief.
Prepare Outline Proposal.

Detailed proposals

Identification of clients
requirements and possible
constraints on development.
Cost studies prepared to
enable client decide whether
to proceed.
Identify the cost of the
preferred solution.
Determine the target cost.
Decide whether confirm or
reject the feasibility of the
budget.
Provide an approximation of
construction costs or provide
information for cost planning.
Provide means to isolate the
optimum design solution to
satisfy the requirements of
brief.

Complete developments of Project

Ensure the overall design is
Brief.
the most effective available as
expressed in the brief.
Develop the Detailed Proposal from
approved Outline Proposals.
Confirm cost limit.
Prepare a cost estimate or provide
Establish elemental targets.
information for preparation of cost
estimate.
Obtain Client approval to the Detailed
Proposal showing spatial
arrangements, material and
appearance, and a cost estimate.
Prepare and submit application for full
planning permission.

Final proposal

Design Final Proposals from approved

Detailed Proposals.
Revise cost estimate.
Obtain Client approval to type of
construction, quality of materials, and
standard of workmanship and revised
cost estimate.
Advise on consequences of any
subsequent changes on cost and
programme.

Permit the coordination of all

component parts and
elements of the project.
Provide means to cost
checks.
Finalize the cost limit.

Production
information

Prepare production information for

tender purposes.
Prepare and make submissions under
building acts and/or regulations for
other statutory requirements.
Prepare further production
information for construction purposes.

Provide information for

preparation of tender pricing
documents.
Ensure the completed design
is contained within the cost
limit.

Tender document

Prepare and collate tender documents

in sufficient detail to enable a tender
or tenders to be obtained.
Reconcile all differences, physical,
qualitative and financial.
Prepare pre-tender costs.

Tender action

Dealing with any pre tender enquires

and confirming tenderers to client.
Providing bids to tenderers, answering
their queries, receiving and opening
bids.
Appraising all valid bids.
Carrying out negotiations with bidders
with the approval of client.

Forecast tender sum.

Ensure the final projected
cost does not exceed the
established cost limit.

Identify and evaluate

potential contractors for the
successful construction of the
project.

METHODS OF PROCUREMENT

Cost reimbursement

Cost plus percentage

Cost plus fixed fee

Target cost

Management based projects

Direct labour

Price in advance

Lump sum

Contract based on bill of quantities

o Competitive tender
o Competitive tender with Bill of approximate quantities
o Negotiated tender
o Serial contracting

Schedules of prices

Design and build

Managed projects

Management contracting

Construction management

Project management

Single rate estimating models

Unit method
Cube method
Superficial area method
Story enclosure method