Building Design Cost Management
Chapter One - Fact Files
This section of the site provides the fact files given in the textbook itself. These factfiles are varying in number and length, so it was decided to place them on separate pages from the main chapter pages within the website
There are various methods of procuring new construction work, all of which have their relative merits and demerits, which are addressed in Chapters 3 and 4, as it is important that tthe reader is made aware of how such changing trends impact upon design cost management
These changing trends are not considered in depth in these chapters. For a more detailed and comprehensive treatise of the various procurement strategies highlighted, the reader is recommended to consult the literature
(Aqua Group 1990, Masterman 1992, Morton and Jaggar 1995, Rowlinson and McDermott 1999)
It was recognised by quality surveyors in the formative years of cost planning that bills of quantities used in most building contracts at that time provided a rich source of cost information. They contained in a consistent and easily understood form the contractor's financial implications of a tendered building contract. This was in terms of the quantity, specification and cost.
Bills of quantities had been developed in the middle of the last century as a basis to aiding the process of contractor selection using lump sum competitive tendering based on a completed design solution being supplied to a number of interested contractors. So successful did these documents become that the profession of quantity surveying developed on being the custodians and producers of these documents. Formal rules of measurement were developed first in 1922, which were established and agreed between the quantity surveyors and the recipients of the bills as a basis for the contractors and, more precisely, the estimators.
For a more detailed development of the history of surveying and quantity surveying the reader is recommended to study
Chartered Surveyors. The Growth of a Profession (Thompson 1968)
Bills of Quantities became so successful for the following reasons:
Bills of Quantities used by contractors also aid financial management, including planning and control, of the task of construction. However because essentially the unit of measurement is that of finished work this use is somewhat limited and not entirely accurate as contractors utilise resources to achieve the finished product. This issue has been much debated and various attempts have been made to try and enhance the relationship between the product of construction and the process of construction, but there is still a considerable distance between the resolution of this issue, although SMM& (CPI 1998) rules did move someway towards this by the recognition and incorporation of method related charges recognising non-quantity related information in the Preliminaries of bills of quantities. Reference will be made to this later
Fact File 6
During the 1950's a connection was made that it might be possible to reprocess the information contained in the priced Bills of Quantities into functional breakdowns, termed elemental cost analyses, which gave a better understand of what made up the costs of buildings. Initially the technique was used to find out or analyse why a given building cost what it did, rather than as a technique to predict the costs of future buildings. The use as an analytical technique arose initially because of central government wishing to understand better why buildings, especially those concerned with the rapidly expanding housing and schools programme, seemed to cost more or less in different parts of the country to try and ensure that proper value for money was being obtained on behalf of society being served by the various local governments.
It was then quickly recognised that this technique could be used to predict the future costs of buildings and the technique of design cost management based on elemental cost analysis was established
Fact File 7
Reasons for development of design cost management:
It was quickly recognised that for the system to become reliable and helpful, a degree of consistency was required, together with guidelines as to how best to carry out the process. As a result, the "think tank" was established by the Royal Institute of Chartered Surveyors in the 1950s, and the idea of design cost management based on the use of elemental cost
analyses was given formal backing. Support was also given to the establishment of a nationally agreed set of conversions for the establishment of cost analyses together with the linking of the process to the RIBA plan of work
(RIBA 1998)
As a result a standard form of cost analysis was established, which laid down the following:
Fact File 8
A more subtle argument that actually questions the whole philosophy of the tendering process is the use of what is termed 'social opportunity costing'. Here the tendering contractors actually build up their tender bids on what the market expects to bear. An interesting experiment was conducted some years ago (Fines 1974), where one set of tendering contractors was asked to prepare bids for a building shell described as a barn, and another set of contractors was asked to prepare bids for the same shell, but identified as a repertory theatre. Remarkably the bids for the theatre were in the region of 10 times that of the bids received for the barn, (£3,000,000) for the theatre and £30,000 for the barn). This reinforces the need to match building type and functions and highlights the problems associated with market driven prices as will be discussed later in Chapters 3, 5 and 12.
Fact File 9
It is perhaps worth making the point at this stage that the process of design cost management and all the techniques used to bring it about, such as those being described here, is very much dependent upon the experience of the construction economist. To that end, the context of the particular project under consideration must always be taken into account when giving cost advice. An example, that one of the authors experienced, which demonstrates the need to think, not just about the building project, but its relationship to the general infrastructure within which it is to be located, occured whilst on a visit to Riyadh in Saudi Arabia. Although there appeared to be an abundance of land upon which to build, and bearing in mind that generally the taller the building the more expensive it is likely to be, all buildings were multi-storey solutions. Why? The answer on further investigation proved to be simple: basically there was no infrastructure in terms of roads, mains sewage, electricity etc, except within a confined area in and around the city. Thus, the only realistic solution was to minimise the footprints of the buildings by building multi-storey solutions.
Fact File 10
Procurement Strategies and Context Setting
Elemental design cost management developed due to problems of early cost prediction within lump sum competitive tendering strategies and paradoxically it was this very process, based invariably on the use of priced bills of quantities, as described above, which provided this rich database under the custodianship of the BCIS and also as developed within a number of practicing quantity surveying environments. Such tendering strategies were invariably the norm due to the well established procedures for their management, inertia within the industry, the influence
of the professions, education, public accountability and ease of implementation. However, in later years, initally through client dissatisfaction with the approach there was considerable demand for improvement led by initiatives such as the British Property Federation (BPF) system (1983) and in the USA towards the situation we have today, where design and build and other alternative forms of procurement are becoming more dominant.
Website Development Partners
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| Building Cost Information Services |
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| BCIS Online |
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| Liverpool JMU |
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| Royal Institute of Chartered Surveyors |
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| The University of Melbourne |
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| Edith Cowan University |