COST PLANNING

• Cost planning is the cost control at the design

stage.
• There are two techniques: elemental cost
planning & comparative cost planning.
• Cost planning consist of 3 phase:
– Establishing the cost limit/estimate
– Preparing cost plan.
– Cost checking.
 Elemental cost planning

• Otherwise referred to as ‘designing to a cost’.

• Procedures-
• Set a total cost limit for the building which must
not be exceeded.
• Allocate cost to each element based on cost
analysis of previous similar project.
• Ensure the cost allocations to all elements (cost
target) do not exceed the estimated cost limit.
 Advantages of elemental cost planning

• The method allows a good building to be

produced within a limited budget but not the
cheapest building even if it is attainable.
• The architect restricted in his design proposals.
• It gives the client and the design team the
opportunity to know whether the final costs
will be within the budget at the early stage of
the design process.
Procedure 1: Establishing the cost estimate

• Cost limit has to be established for the project.

• This is done using approximate estimating
techniques.
• Single rate estimating methods; unit, cube, etc
are more desirable.
• Dual rate method may not be adequate
because of only little information is available
at the early stage- feasibility stage.
 Establishing the cost estimate (Cont’d)

• Cost limit may also be set by the client.

• For government project cost limit may be
calculated by an established formula.
• The estimate must be realistic to meet the basic
requirements of the client.
• Preliminary cost plan may be necessary to show
the breakdown of the estimate over major
building elements so as to guide the architect on
the cost target for each element.
 Establishing the cost estimate (Cont’d)

• All the elemental costs are expressed as N/m2

gfa.
• Brief cost analysis could be done at this stage.
 Procedure 2: Preparing the cost plan

• The building is broken down into elements.

• Cost expressed in N/m2 gfa is allocated to each
element based on cost analysis of previous project.
• Detailed cost analysis is used as the basis.
• Costs from previous cost analysis are adjusted for
time and locational factors as well as specification
and quantity variations.
• Ensure that the total of the cost targets for all
elements does not exceed the cost limit/ estimate.
 Procedure 3: Cost checking

• At the detailed design stage all the elements

are finally designed.
• The draft drawings and specifications are
passed to the quantity surveyor for cost
checking using approximate quantities
method to ensure that the total of the cost
targets for all elements does not exceed cost
limit/estimate.
 Cost checking (Cont’d)

• If the total of the cost targets for all elements exceeds the
cost limit/estimate, adjustment must be made to the
design or specifications.
• If the total of the cost targets for all elements is, however,
lesser than the cost limit/estimate, some elements could
be improved.
• After these checks, the final drawing can be produced with
the assurance that the cost is within the set cost limit.

•
 Cost checking (Cont’d)

• The extent of cost checking depends on:

• The amount of extra time which the quantity
surveyor can be allowed; if lack of time prevents
essential cost checks, then the whole process of
cost planning may largely be a waste of time.
• If the cost plan was based upon a very similar
project for the same architect and client and details
of specification and design were fairly known well,
the cost check may not take much time.
 Cost checking (Cont’d)

• The degree of confidence which exists

between the quantity surveyor and the
architect; for cost conscious architect, cost
check may not be very important.
• Importance of the element; when time for the
cost checking is limited, some of the smaller
elements can be ignored.
 Comparative cost planning
• This is referred to as ‘costing a design’.
• The emphasis here is not on cost target but on
investigation of sections of design.
• Range of alternative designs for various
elements of the building which satisfy the
requirements of the client in term of function,
specification and construction are considered.
• The architect selects the optimum design.
 Comparative cost planning (Cont’d)

• The alternatives are cost using approximate

quantities method.
• The cost limit here is merely the upper limit, and
it may not be spent in full.
• Any design proposal that meets the client’s
requirement is ok so far the total of the cost
targets for all elements does not exceed cost
limit/estimate.
• This method requires extensive use of cost study.
 Procedure 1: Preparing the estimate

• Do this as in elemental cost planning.

 Procedure 2: Preparing the cost plan
• The architect would prepare a number of designs which provide
alternative solutions for element of the building.
• The quantity surveyor prepares the estimates for these alternative
solutions.
• The best alternative for each element is selected through cost-in-
use.
• The costs of the elements are totaled and checked against the cost
limit for the project.
• If the cost limit is exceeded, a combination of other alternatives
would be considered.
• Unlike elemental cost planning, the method relies on cost study of
previous project rather than cost analysis
 Procedure 3: Cost checking

• The quantity surveyor need to do little or no

cost checking.
• The specifications of the different elements
would have been decided during the
preparation of cost plan.
• The quantity surveyor only ensures that the
architect keep to the decisions at the detailed
design stage.
 Advantages of cost planning
• The preliminary estimate is likely to be more
reliable because of the cost checks made in the
earlier stages of design.
• Because of cost checking, there is less
likelihood of amendment to the bills of
quantities being necessary. This saves time
being wasted by the quantity surveyor and
contractor in agreeing the amendments and
the architect redrawing detailed drawings.
 Advantages of cost planning (Cont’d)

• The design is likely to be more economical because detailed

costs are studied at the early stage and random cutting out
of items after tenders are received should not be
necessary.
• Due to the division of the cost of the project into sections
or elements, a rational distribution of expenditure
throughout the design can be achieved.
• The quantity surveyor and the architect become familiar
with each other ideas at the early stage of the project. This
closer alliance between the members of the design team
will assist in the understanding of each other’s difficulties.
 Advantages of cost planning (Cont’d)

• If the same quantity surveying staff are used to

prepare the cost plan and to take off quantities,
then the preparation of the bill of quantities
would be simpler.
• Cost planning provides a better chance of
comparing different projects.
• Due to the increased pre-tender planning, the
working details are likely to be available sooner
and the contractor’s site planning would be easier.
 Disadvantages of cost planning

• More preparation is necessary in the early

stages of design.
• The architect is likely to be restricted in his
method of working.
• The quantity surveyor would probably require
a greater knowledge of pricing and of the
design factors that affect cost than he has
needed in the past.
 Worked example
• Question 1
• Kogi State government has proposed to construct a warehouse
in the industrial estate in Lokoja, Kogi State, over a period of
24 months with the commencement date of August 1, 2019.
The post construction cost analysis (Table 1) of a similar four-
storey warehouse with total storey height of 15.0m
constructed by the Federal Ministry of Housing and Urban
Development in Abuja in 2005 has been considered suitable to
provide a good basis for preparing a cost plan for the project.
The average inflation index in 2005 was 9.25 and this is
projected to have increased to 13.75 by August 1, 2019.
 Worked example (Cont’d)

• Question 1 (Cont’d)
• Locational adjustment indices for Abuja and Lokoja are 1.05
and 0.90 respectively. Moreover, the site visit report has
indicated that the swampy nature of the site of the
proposed project would likely increase the cost of
substructure of the project by 20%. The costs of external
and internal wall are assumed to take up to 23% and 22%
respectively of the total cost of superstructure.
• Prepare a concise cost plan for the proposed five-storey
warehouse. The outline design for the project is shown in
the attached Appendix 1.
 Worked example (Cont’d)

• Question 1 (Cont’d)
• Insert drawing here.
• 5-storey 18.45m x 10.45m rectangular.
• Floors 1,2,3,4 & 5 are 3.20m high.
• Floor 6 is 3.00m high.
 Worked example (Cont’d)
• Question 1 (Cont’d)
• Table 1: Concise cost analysis
Element Total cost of element Total cost of element Cost/m2 gfa Cost/m2 gfa
(N‘000,000) including excluding including
preliminaries preliminaries preliminaries (N‘000)
(N‘000,000) (N‘000,000)

Substructure 97.500 100.900 0.813 0.561

Superstructure 250.350 255.050 0.522 0.236

Internal finishes 140.750 148.850 0.293 0.138

Fittings & Furnishings 39.755 43.355 0.083 0.040

Services 152.610 155.460 0.318 0.144

External work 305.600 308.800 0.637 0.286
Preliminaries 25.85      
Total excluding 1,012.415 1,012.415    
contingencies
 Solution
• Substructure
• Cost/m2 = N560,000.00
• Adj.
• 20% increase in cost = 120 x 560,000.00
• = N672,000.00/m2
• Superstructure
• Cost/m2 = N236,000.00
• Gross floor area (gfa) = [(18.45-0.45) x (10.45-0.45)]
• = 18.00 x 10.00
• = 180.00m2
• gfa = 180.00 x 6 = 1,080m2
 Solution (Cont’d)
• Gross external wall area (gew) = 2[18.45 +
10.45] x [(3.20 x 5) + 3.00]
• = 57.80 x 19.00
• = 1,064.00m2
•  
• Adjustment for gew/gfa
• gew/gfa index = 1,064/1,080
• = 0.96
 Solution (Cont’d)

• Storey height adjustment index

• = 19.00/15.00 = 1.27
• Adjustment for cost of superstructure
• Cost/m2 = N236,000.00
• 
• The costs of external wall is assumed to take up to
23%.
• The costs of internal wall is assumed to take up to
22% .
 Solution (Cont’d)
• Cost of external wall = N236,000.00 x 0.23 x 0.96 = N52,108.80/m2

•  
• Cost of internal wall = N236,000.00 x 0.22 x 1.27 = N65,938.40/m2

•  
• Cost of other elements of superstructure
• = 236,000.00 x [1- (0.23 + 0.22)]
• = 236,000.00 x 0.55
• = N129,800.00/m2
• Total cost of superstructure = N52,108.80/m2 + N65,938.40/m +
N129,800.00/m2
• = N247,847.20/m2
 Solution (Cont’d)

• Cost of Finishes
• Cost/m2 = N138,000.00
• Cost = N138,000.00 x 1.27 = N175,260.00/m2
• Cost of Fittings & Furnishings
• = N40,000/m2
 Solution (Cont’d)

• Cost of Services
• Cost/m2 = N144,000.00
• Cost = N144,000.00 x 1.27 = N182,880.00
•  
• Cost of external work
• = N286,000.00/m2
•  
• Inflation adjustment index = 13.75/9.25 = 1.49
•  
• Locational adjustment index = 0.90/1.05 = 0.86
 Solution (Cont’d)
• Concise cost plan for the project
Element Cost/m2 gfa Gross floor area Inflation & location Total cost of element
including (gfa) m2 adj. indices including
preliminaries (1.49 x 0.86) preliminaries
(N‘000,000)

Substructure 672,000.00 1,080 1.28 928,972.80

Superstructure 247,847.20 1,080 1.28 342,623.97

Internal finishes 175,260.00 1,080 1.28 242,297.42

Fittings & Furnishings 40,000.00 1,080 1.28 55,296.00

Services 182,880.00 1,080 1.28 252,813.31

External work 286,000.00 1,080 1.28 395,366.40