COST CONTROL CONCEPT

A client is very much concerned with quality, cost and time: he wants the building to be soundly
constructed at a reasonable cost and within a specified period of time. Cost control aims at ensuring that
resources are used to the best advantage. In these days of ever-increasing costs, the majority of promoters
of building work are insisting on projects being designed and executed to give maximum value for money.
Hence, quantity surveyors are employed to an increasing extent during the design stage to advise
architects on the probable cost implications of their design decisions. As buildings become more complex
and building clients more exacting in their requirements, so it becomes necessary to improve and refine
the cost control tools. Rising prices, restrictions on the use of capital and high interest rates have caused
building clients to demand that their professional advisers should accept cost as an element in design, and
that they should ensure suitably balanced costs throughout all parts of the building, as well as an
accurately forecast overall cost.

NEED FOR COST CONTROL

It is vital to operate an effective cost control procedure during the design stage of a project to keep the
total cost of the job within the building client's budget. Where the lowest tender is substantially above the
initial estimate, the design may have to be modified considerably or, even worse, the project may have to
be abandoned. Pressures combine to stress the importance of effectively controlling building costs at the
design stage.

*COST PLANNING
This can be defined as controlling the cost of a project within a predetermined sum during the design
stage. This involves preparing a cost plan and doing cost checks.
*COST CONTROL
Seeley (1993) defines Cost Control as “all methods of controlling the cost of building projects within the
limits of a Predetermined Sum throughout the design and Construction stages.

IMPORTANCE OF COST CONTROL

1. The need to complete building projects is becoming increasingly important to clients. Very few
clients will tolerate delays arising from the need to redesign schemes when tenders are too high.
2. The needs of building clients are increasingly becoming more complex as a result of which
estimation of probable costs is becoming more difficult. In turn, more effective systems of cost
control are required for projects from inception up to the completion of the final account as well
as controlling costs during the life cycle of the scheme.
3. Clients of the construction industry are becoming larger, more efficient and adopting more
sophisticated techniques for forecasting and controlling costs. As a result, the Construction
Industry requires professional advisors for building projects to demonstrate a high degree of
efficiency and expertise in advising on costs.
4. The trend of modern designs, new construction techniques, new materials and new methods of
construction give designers a wider choice of products. The result of this growing trend is a wider
variety in construction products. Efforts to produce balanced designs and achieve value-for-
money using traditional methods of estimating have severe limitations, which demonstrate the
need for effective ways of controlling costs.
5. Existing estimating methods have sometimes not been adequate in giving estimated costs. When
this happens, the project involved may receive a lot of adverse publicity.
6. In a bid to win more tenders, most contractors may reduce their profit margins. With reduced
profit margins, there is now a greater cost-consciousness ton ensure that any possible losses are
avoided through effective cost control.
7. The increasing emphasis on the elimination of waste in construction and the need to use the
world’s diminishing resources judiciously calls for improved methods of forecasting and
controlling the costs of construction.
 8. The cost of capital for construction has become very high as a result of inflation and high interest
rates. Coupled with a general shortage of investment capital for construction as a result of global
economic trends and restrictions on the use of capital, these all make effective cost control very
important.
9. The rising demand for integrated design that efficiently delivers both building and services
elements in complex developments like hospitals, airports etc., require effective cost planning to
ensure that the design solution delivers value-for-money.

DESIGN VARIABLES AFFECTING THE COSTS OF BUILDINGS

The cost of a building may be influenced by several factors including the shape, size, storey heights and
total height among other building characteristics. It is essential that quantity surveyors be fully aware of
the effect on costs of changes in any of these factors. The unit commonly used in comparing the cost
implications of alternative designs is the square metre of floor area measured between the main enclosing
walls i.e. the inner faces of the walls. This method makes no deductions for staircases, lift shafts, internal
walls or other circulation space. Costs may be expressed this way for either the whole or part of the
building. In practice however, allowance has to be made when using this method for differing conditions
on different projects and sites. For example, two similar buildings constructed on different sites with
different soil conditions will have different foundation costs and thus different overall costs.
- Effect of Plan Shape on Building Costs
Generally, simpler shapes cost less to build than more complex shapes. This is because the longer,
narrower, more complicated or irregular a shape gets, the higher the perimeter/ floor area ratio gets and in
effect the higher the unit cost. Then again, irregular outlines yield increased costs for other reasons such
as increased setting out costs, increased costs for site works, drainage works which tend to be more
complicated and thus more expensive.
In practice however, cost control considerations have to be made in the light of practical and functional
aspects of the building like daylighting requirements as well as aesthetics. There is the Quantity Surveyor
needs to be able to maintain balance between cost savings, function and appearance. Cost saving
alternatives should function satisfactorily and be aesthetically desirable.
- Effect of Size of Building on Cost
Increasing the size of buildings generally lead to a reduction of unit costs, e.g. cost per square metre of
floor area. This is because the costs of transportation, erecting or dismantling site buildings, material
storage, water supply to site, temporary roads etc. may be fixed and would not change considerably even
if the size of the project is increased. In larger projects also, the wall/floor ratios are reduced. Rooms may
be larger with less need for internal partitions, skirting and decorations yielding overall cost savings. In
high-rise buildings, lifts serve a larger floor area and a larger number of occupants which gives a cost
advantage.
- Effect of Perimeter / Floor Area Ratio on Cost
The wall to floor area ratio gives an indication of the planning efficiency of buildings. This is calculated
by dividing the external wall area (including of windows and doors) by the gross floor area. This ratio can
be used to compare different plans. In general, the lower the wall / floor ratio, the more economical a
design proposal is.
Circular buildings give the best wall to floor ratios but then the cost of circular work compared to that in
straight walls offsets any savings due to the lower wall to floor ratio.
- Effect Of Circulation Space On Cost
Entrance halls in buildings, passages, corridors, stairways and lift wells are generally described as
‘Circulation Space’ otherwise described as ‘dead space’. These may be very expensive to maintain e.g
cleaning, heating, cooling, decorating costs. They however do not serve profitable purposes apart from
providing means of access between different parts of the building. Spacious entrances and corridors may
also add to the glamour and impressiveness of prestige buildings. To ensure economy in designs, it is
important to reduce circulation to the barest minimum that ensures that the building functions
satisfactorily. Cost however should not be the only consideration. Aesthetic and functional qualities
should also be considered. E.g. the fire escape functions of corridors.
Circulations ratios are defined as the proportion of Circulation Space to the Gross Floor Area.
- Effect Of Storey Heights On Building Costs
Although variations in storey heights do not change the floor area, they alter the cost of buildings. The
major elements of a building affected by changes in storey height are walls and partitions and their related
finishings and decorations. Other possible changes arising variations in storey height include:
i. An increase in the volume to be heated / cooled which would require larger heat /
cooling sources and increased pipework or cables.
ii. Longer service pipes and waste pipes to sanitary appliances.
iii. Costs to hoist roof members into place may increase.
iv. Staircases and lifts (where available) will cost more to build.
v. Ceiling finishings and decorations may cost more to apply.
vi. In some cases, substantial increases in storey height may result in increased
foundation costs to support the additional load.
- Effect Of Total Height Of Buildings On Cost
Increasing heights of buildings result in increased construction costs. In practice however, the extra costs
due to the increased height may be offset in part by the better utilization of expensive land as well as a
reduction of external circulation works. Generally, in the development of private blocks of flats, it is
cheaper to keep heights low. However, in cases where the costs of acquiring the site are very high and
there is a potential for luxury rents, high rise private blocks may be advisable. Similarly, whilst tower
block offices tend to be more expensive than low rise buildings, yet if the tower has around 1000m sq on
each floor, the rents potential rent can offset the additional costs.

THE PROJECT LIFE CYCLE

The acquisition of a constructed facility usually represents a major capital investment, whether its owner
happens to be an individual, a private corporation or a public agency. Since the commitment of resources
for such an investment is motivated by market demands or perceived needs, the facility is expected to
satisfy certain objectives within the constraints specified by the owner and relevant regulations. With the
exception of the speculative housing market, where the residential units may be sold as built by the real
estate developer, most constructed facilities are custom made in consultation with the owners. A real
estate developer may be regarded as the sponsor of building projects, as much as a government agency
may be the sponsor of a public project and turns it over to another government unit upon its completion.
From the viewpoint of project management, the terms "owner" and "sponsor" are synonymous because
both have the ultimate authority to make all important decisions. Since an owner is essentially acquiring a
facility on a promise in some form of agreement, it will be wise for any owner to have a clear
understanding of the acquisition process in order to maintain firm control of the quality, timeliness and
cost of the completed facility.
From the perspective of an owner, the project life cycle for a constructed facility may be illustrated
schematically in Figure 1-1. Essentially, a project is conceived to meet market demands or needs in a
timely fashion. Various possibilities may be considered in the conceptual planning stage, and the
technological and economic feasibility of each alternative will be assessed and compared in order to
select the best possible project. The financing schemes for the proposed alternatives must also be
examined, and the project will be programmed with respect to the timing for its completion and for
available cash flows. After the scope of the project is clearly defined, detailed engineering design will
provide the blueprint for construction, and the definitive cost estimate will serve as the baseline for cost
control. In the procurement and construction stage, the delivery of materials and the erection of the
project on site must be carefully planned and controlled. After the construction is completed, there is
usually a brief period of start-up or shake-down of the constructed facility when it is first occupied.
Finally, the management of the facility is turned over to the owner for full occupancy until the facility
lives out its useful life and is designated for demolition or conversion.

Of course, the stages of development in Figure 1-1 may not be strictly sequential. Some of the stages
require iteration, and others may be carried out in parallel or with overlapping time frames, depending on
the nature, size and urgency of the project. Furthermore, an owner may have in-house capacities to handle
the work in every stage of the entire process, or it may seek professional advice and services for the work
in all stages. Understandably, most owners choose to handle some of the work inhouse and to contract
outside professional services for other components of the work as needed. By examining the project life
cycle from an owner's perspective we can focus on the proper roles of various activities and participants
in all stages regardless of the contractual arrangements for different types of work. In the United States,
for example, the U.S. Army Corps of Engineers has in-house capabilities to deal with planning, budgeting,
design, construction and operation of waterway and flood control structures. Other public agencies, such
as state transportation departments, are also deeply involved in all phases of a construction project. In the
private sector, many large firms such as DuPont, Exxon, and IBM are adequately staffed to carry out most
activities for plant expansion. All these owners, both public and private, use outside agents to a greater or
lesser degree when it becomes more advantageous to do so.
The project life cycle may be viewed as a process through which a project is implemented from
cradle to grave. This process is often very complex; however, it can be decomposed into several stages
as indicated by the general outline in Figure 11. The solutions at various stages are then integrated to
obtain the final outcome. Although each stage requires different expertise, it usually includes both
technical and managerial activities in the knowledge domain of the specialist. The owner may choose to
decompose the entire process into more or less stages based on the size and nature of the project, and thus
obtain the most efficient result in implementation. Very often, the owner retains direct control of work in
the planning and programming stages, but increasingly outside planners and financial experts are used as
consultants because of the complexities of projects. Since operation and maintenance of a facility will go
on long after the completion and acceptance of a project, it is usually treated as a separate problem except
in the consideration of the life cycle cost of a facility.
All stages from conceptual planning and feasibility studies to the acceptance of a facility for occupancy
may be broadly lumped together and referred to as the Design/Construct process, while the procurement
and construction alone are traditionally regarded as the province of the construction industry. Owners
must recognize that there is no single best approach in organizing project management throughout a
project's life cycle. All organizational approaches have advantages and disadvantages, depending on the
knowledge of the owner in construction management as well as the type, size and location of the project.
It is important for the owner to be aware of the approach which is most appropriate and beneficial for a
particular project. In making choices, owners should be concerned with the life cycle costs of constructed
facilities rather than simply the initial construction costs. Saving small amounts of money during
construction may not be worthwhile if the result is much larger operating costs or not meeting the
functional requirements for the new facility satisfactorily. Thus, owners must be very concerned with the
quality of the finished product as well as the cost of construction itself. Since facility operation and
maintenance is a part of the project life cycle, the owners' expectation to satisfy investment objectives
during the project life cycle will require consideration of the cost of operation and maintenance. Therefore,
the facility's operating management should also be considered as early as possible, just as the construction
process should be kept in mind at the early stages of planning and programming.

Value Engineering
Value engineering may be broadly defined as an organized approach in identifying unnecessary costs in
design and
construction and in soliciting or proposing alternative design or construction technology to reduce costs
without sacrificing quality or performance requirements. It usually involves the steps of gathering
pertinent information, searching for creative ideas, evaluating the promising alternatives, and proposing a
more cost effective alternative. This approach is usually applied at the beginning of the construction phase
of the project life cycle. The use of value engineering in the public sector of construction has been
fostered by legislation and government regulation, but the approach has not been widely adopted in the
private sector of construction. One explanation may lie in the difference in practice of engineering design
services in the public and private sectors. In the public sector, the fee for design services is tightly
monitored against the "market price," or may even be based on the lowest bid for service. Such a practice
in setting professional fees encourages the design professionals to adopt known and tried designs and
construction technologies without giving much thought to alternatives that are innovative but risky.
Contractors are willing to examine such alternatives when offered incentives for sharing the savings by
owners. In the private sector, the owner has the freedom to offer such incentives to design professionals
as well as the contractors without being concerned about the appearance of favoritism in engaging
professional services. Another source of cost savings from value engineering is the ability of contractors
to take advantage of proprietary
or unusual techniques and knowledge specific to the contractor's firm. For example, a contractor may
have much more experience with a particular method of tunneling that is not specified in the original
design and, because of this experience, the alternative method may be less expensive. In advance of a
bidding competition, a design professional does not know which contractor will undertake the
construction of a facility. Once a particular contractor is chosen, then modifications to the construction
technology or design may take advantage of peculiar advantages of the contractor's organization.
As a final source of savings in value engineering, the contractor may offer genuine new design or
construction insights which have escaped the attention of the design professional even if the latter is not
restrained by the fee structure to explore more alternatives. If the expertise of the contractor can be
utilized, of course, the best time to employ it is during the planning and design phase of the project life
cycle. That is why professional construction management or integrated design/construction are often
preferred by private owners.