Cost Planning

The Architect has finished the design… and it’s been agreed. The feasibility study has been carried out, so there is a reasonable understanding of the likely costs. The scheme has probably been presented for planning and it is now time to find out what it’s really going to cost. Accuracy is crucial to allow for the budgeting of all the essentials, plus those little luxuries that were sought after.

Getting a couple of quotes from local builders or tradesmen seems to be the favorite first approach. But in their efforts to win the contract, they could be tempted to leave bits off their estimate and add them later as extras. This old trick occurs more frequently as building work becomes harder to find. In addition, it’s very hard to keep a track of estimates written on the back of cigarette packets, or even worse, given verbally.

A main contractor  would provide a detailed and properly scheduled, quantified price. An employed professional estimator normally carries this out, probably using computer-estimating software. This process has to be paid for and remember those contractors probably only get about 25% of any work they price. The cost of all of the abortive estimates has to be included within the overheads for the jobs they do get. This is perfectly reasonable, as there are no free lunches in this life.

Any fixed price quotation received from a builder or main contractor will be tied to a specification produced by them. Hopefully they will have allowed for all the clients requirements and all the details in the architects design drawings and specifications. They will decipher the architects design and the specification, which is usually generic and they will in all honesty try to do it as well as they can…. In reality a truly fixed price is not attainable as any deviations from the specification, which will occur throughout any construction process, will obviously invite variations to the price.

Any quotes you get will all be different …and not just in their price. In very small and apparently insignificant ways, they will all be different. This is not normally an attempt to confuse; it’s merely the result of different eyes reading the same details. Diverse minds processing the many items of information that make up any building design and then calculating those using different systems and software. Little wonder there can be confusion and disputes later. Just trying to read and appraise the various quotes when they return, is a task of epic proportions and most untrained people probably just plump for what looks the most professional… or the nicest guy to present his case.

The Cost Plan should be just that. A Plan.  It must lay out all the costs associated with the building works as specified by the architect and also of any additional items the self-builder wants to spend their money on. It should show how much each individual item is going to cost at today’s prices and then allow for any inflationary increases. It ought to also contain a realistic element of contingency…just in case. The system used needs to be flexible enough to make any changes without all the teeth sucking and head shaking usually associated with the dreaded ‘extras’. It should also ensure that during the tender process, everyone is singing from the same hymn sheet.

There are computer programmes that can assist in doing this job and several companies who specialise in that market. Their software is clever and looks very professional. They all utilise Microsoft Excel or similar spreadsheets. The main problem associated with using these systems is that unless the self-builder is technically proficient and fully understands the design drawings and specifications, the wrong data could easily be entered giving incorrect results. These estimating programmes are designed to take a generic view of the build process and the information used for costing is based on broad national averages. Untrained use of these systems on smaller ventures can lead to major detail errors and many variations, with subsequent cost and time overruns.

A Quantity Surveyor could be used. However, their work is mostly in the commercial area and they tend to treat estimating as a theoretical excercise, using a process known as Standard Method of Measurement (SMM) and now the latest attempt to standardise by the Royal institute of Chartered Surveyors(RICS) The New Rules of Measurement (NRM) which both have their own set of stringent generic rules.  Oh right, that’s easy then! These systems have been formulated mainly for use on large commercial projects where variations to contracts are endemic and where quantity surveyors are employed full time…. Using it on a single dwelling is costly and unnecessary. Any decent construction manager should be able to carry out this work, someone who understands the practicalities of working on personalised smaller projects. Most of us are trained in estimating and costing as a part of our normal duties.

Self-build projects require a specific bespoke Cost Plan formulation. They need it because the self-builder is not versed in the technical niceties of SMM7 or NRM or even the very language of the quantity surveyor. It is required to provide evidence for arranging finance and for every other step along the project’s path. It ought to provide quantities and values for all materials and labour requirements and it must be adaptable to changes when they occur. It should also provide the information to enable cashflow forecasts to be produced, enabling funds to be available when required.

Unless there are unlimited means, it is crucial to maintain stringent control over the budget during the construction phase. This can only be carried out if the system used to create the budget is both flexible to change and yet accurate. It needs to be included within a system of checks and balances that enable the user to determine where they are in the process and how that influences the projected costs and programme. In order to do this the system should be designed to suit the particular project and it’s form of management. In the construction field there are no ‘one size fits all’ solutions.

SFS Management Contracting can either help the clients to do this work themselves, or do it for them. Our advice would be to let us do this. The task can be mind-blowingly tedious and the technical accuracy required demands that the job be carried out by an experienced mind. Quantities, Prices, Hourly Rates, PC sums etc. etc. All these things conspire to make what is a difficult task… well…difficult. Using custom spreadsheet estimating tools tailored to suit each individual project, adjustments can made for the reality of any given situation, instead of relying on the ‘book price’. Using a multi-sheet format means that changes are simpler to achieve and the budget spreadsheet can later be linked to other customised costing analysis tools assisting with the control of expenditure.

The cost of formulating a budget is more than repaid with the savings made on efficiency and a well-formulated budget is a godsend when used for the tendering and cost control phases of the project. It should be somewhere in the region of 0.5% of the estimated nett budget, that is the build cost with no fees or VAT. Small price to pay for peace of mind!

Project Management

What is this and why should we use it for our building project?
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Feasibility

What should we look for?
Can we afford to do this?
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Budgeting

Finding out what it should all cost.
Keeping those costs under control.
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Programming

How it can really help a project.
How to do it properly.
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Tender Process

Making sure the build team is properly chosen and prepared.
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Procurement

Finding the best value materials.
Making sure they stay that way.
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Site Management

Working with the whole team,
helping everyone to get it right.
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CDM 2015 Regulations

Carrying out the Principle Contractor Role For CDM 2015 Regulations
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