Quantification And Costing

Question 1

Can you name the 3 documents in the NRM suite?

Answer 1

NRM1 - Order of cost estimating and cost planning for capital building works
NRM2 - Detailed measurement of building works
NRM3 - order of cost estimating and cost planning for building maintenance works

Question 2

What sources of cost information are available when preparing a new estimate or cost planning?

Answer 2

• BCIS (building cost information services)
• published price books such as Spons
• in house data
• going out to market

Question 3

What benefits does the client get out of accurate cost planning?

Answer 3

They know if they will be able to afford the scheme or not.

Question 4

How would you deal with a cost plan that is over budget?

Answer 4

I would communicate this to the client in a clear and concise manner. I would then identify areas where potential savings could be made and consult with the designer on these options

Question 5

What are some reasons cost may overrun on a project?

Answer 5

Inadequate management control process
Inflation or changing market conditions
Uncoordinated design
Ambiguous client brief or changes in later stages of the project
Statutory authority influence such as onerous planning permission conditions

Question 6

What is meant by the term benchmarking?

Answer 6

Using historical data from projects of a similar nature to use as a comparison or check for cost planning purposes

Question 7

How would you undertake benchmarking for a client ?

Answer 7

Produce a clear document with the cost plan elements side by side to the project being used for benchmarking. This will allow the identification of any items considered abnormal, I would then aim to justify cost anomalies

Question 8

What is a provisional sum?

Answer 8

It’s an allowance in the cost estimate for works that haven’t been fully designed.

Question 9

How are provisional sums expended

Answer 9

The Contract Administrator should issue an instruction for its expenditure.
Where a contract includes a provisional sum, the final amount payable will be adjusted (the provisional sum is omitted and replaced with the actual cost of the work.

Question 10

How are provisional sums dealt with in the final account.

Answer 10

By the time the project has been reached final account stage, the contract administrator will have issued Instructions to expend all provisional sums. The instruction will show and add and omit (add actual costs and omit the provisional sum), the instructions are then accounted for in the usual way.

Question 11

Please explain the deferral between defined and undefined provisional sums.

Answer 11

Defined

The contractor is deemed to have allowed for programming and preliminaries within the contract

Question 12

What are prime cost sums (PC sum)?

Answer 12

A sum of money included in a unit rate to be expended on
N materials or goods from suppliers (e.g. supply-only ceramic wall tiles at £50/m2
It is a supply - only rate for materials or goods where the precise Quality of those materials and goods is unknown.
PC sums exclude all costs associated with fixing , installation, fees, OH&P etc.

Question 13

What is the difference between prime cost sums and defined provisional sums?

Answer 13

A prime costt is limited to the cost of supplying the relevant item and does not include the cost of any work that relates to it
( such as its installation).
In contrast, defined provisional sums include allowances for supplying the item and all related work to be performed by the contractor.

Question 14

What is a lump sum contract?

Answer 14

Fixed sum or lump sum pricing, as the name indicates, provides for payment of a set amount.
The amount of the fixed price or lump sum is determined by a contractor by estimating their cost to provide the work, then adding overhead and a profit margin

Question 15

What are the key advantages of lump sum contracts.

Answer 15

The contractor takes on the pricing risk but stands to benefit from increased profit if actual costs turn out to be below the
estimated costs. Cost certainty for the employer

Question 16

What are the key disadvantages of lump sum contracts.

Answer 16

A lump sum agreement presents a higher risk to a contractor. If the contractor underestimates their cost, the profit margin decreases and may disappear altogether.
As a result of the additional risks faced by the contractor, they may increase their tender price

Question 17

What is a cost-plus contract?

Answer 17

Cost - plus contracts otherwise known as cost reimbursable contracts , involves the employer paying the contractor for the costs incurred during the project, plus a pre-agreed percentage for profit.

Question 18

What are the key advantages of cost - plus contracts?

Answer 18

Since cost-plus contracts are flexible by nature, inaccuracies in the initial bid aren’t as determined as they are with lump sum contracts .
Cost-plus contracts allow employers to make design changes along the way, contractors know they’ll be paid for the extra time or materials which those changes incur.

Question 19

What are the key disadvantages of cost-plus contracts?

Answer 19

The final contract price is uncertain until the end of the project.
Contractor may deliberately incur higher costs to increase profit ( no incentive for efficiency).

Question 20

What might a cost-plus strategy be appropriate use?

Answer 20

A cost-plus strategy might be used where the nature or scope of work to be carried out cannot be properly defined at the outset.
This pricing strategy would suit emergency work such as infrastructure repairs or immediate reconstruction following a fire.

Question 21

What is a remeasurement contract?

Answer 21

Works are carried out based on pre-agreed unit rates.
The actual quantities of work carried out are measured and the tendered rates are applied to those quantities.
The contractor is paid for the actual work they have done so the final value of the project will be derived based on the unit prices and exact quantities.

Question 22

What are the key advantages of remeasurement contracts?

Answer 22

Since the work is tendered on appropriate quantities, the contractors will submit competitive prices in their tender.
The contractor’s risk is comparatively low (compared to a lump sum contract).

Question 23

What are the key disadvantages of remeasurement contracts?

Answer 23

There is less cost certainty until the project is complete.
General accuracy of cash flow forecasting .
The risk for the employer is higher (compared to a lump sum contract).

Question 24

What is a target price contract?

Answer 24

The main difference between a target and conventional contract is the mechanism for sharing risk and opportunity.
The target cost is set early in the project, upon completion cost savings or overruns are shared between the contractor and employer based on a pre - agreed agreed formula or percentage. This is often termed the ‘pain & gain’ mechanism.

Question 25

What are the key advantages of target price contracts?

Answer 25

The contractor and employer are incentivised to reduce costs. Encourages active and equitable risk sharing, based on a clearly defined allocation of risk agreed at the outset of the project.

Question 26

What are the key disadvantages of target price contracts?

Answer 26

The employer and contractor must share pain and gain , this exposes the employer to greater risk. Complex target price , pain/gain share may not easily be understood by all parties.

Question 27

If the employer wanted a target cost contract using the NEC form, which main(s) option would you use?

Answer 27

Option C: Target contract with activity schedule. Option D: Target contract with bill of quantities.

Question 28

What is life cycle costing (LCC)?

Answer 28

Life cycle costing (LCC) is an objective method for measuring and managing the lifetime costs of any project or asset.In construction, it enables design options to be compared from a life time perspective with a view to understand and reduce overall costs associated with owning and/or operating the asset . And residual value of disposal. .

Question 29

What are the key advantages of LCC?

Answer 29

Long term value. LCC ensures that the project has. The highest possible value, even if upfront costs are not significantly reduced. It provides a mechanism for identifying and addressing issues with the original design. The process will promote better durability, reduced maintenance, fewer risks, operational efficiency and can even lead to an increased building lifespan. Green building certification credits. LCC credits are included in many green building certification schemes such as BREEAM RELIABLE PLANNING AND REDUCED RISK. LCC is an excellent planning tool that covers long spans of time . With a properly conducted LCC, you can effectively avoid surprises and reduce financial risks. LCC will also promote: Consideration of the long term implications of a decision . Enables informed decisions to be made on material selection. Can be used to plan future maintenance requirements.

Question 30

What are the key disadvantages of LCC?

Answer 30

Components are not always replaced due to end of life. Changes in style and fashion for example, are almost impossible to assess in the design phase. Cost associated with defects ( caused by poor workmanship or design faults)cannot be predicted. Uncertainty in inaccurate data may influence the decision-making process. Choosing the wrong discount rate will heavily affect the accuracy.

Question 31

What is the typical analysis period to calculate LCC?

Answer 31

The LCC period of analysis should be determined by the client. It must be the length of a private finance initiative (PFI) concession, the length of a lease , the anticipated functional life of a whole building, or time to first refurbishment, etc.

Question 32

What are the key cost categories to consider when calculating WLC?

Answer 32

Construction costs. Maintenance costs, Operation costs, Occupancy costs, End of life costs, Non construction costs (land, fees, etc.).Income, Externalities.

Question 33

In your opinion how accurate is LCC?

Answer 33

Various assumptions based on trends, inflation,