COST PLANNING AND ESTIMATION

1. COST PLANNING AND ESTIMATION Wong Chear Ching

2. Course outline • Overview of Cost Planning • Cost Planning Techniques • Approximate Estimating • Elemental Method • Cost Planning at Various Stages of Design • Resource Analysis • Cash Flow • Valuation • Final Accounts

3. Teaching Scheme

4. 6. Resource Analysis 6.1 Estimating and Tendering 6.2 Resource Analysis 6.3 Analogous Rates or Pro-Rata Rates 6.4 Introduction to Overheads and Profit

5. 6.1 Estimating and Tendering Project Procurement Procurement is the acquisition of goods or services in line with a client’s requirements and main components are: • Procurement route – this is the arrangement of roles, responsibilities, contractual relationships and the allocation of risk to meet the client’s requirements in terms of time, cost and quality • Tendering – this is how the price for the works will be determined and agreed • Contract selection – this is how we select the most suitable form of contract to meet the client’s requirements, taking in to account the procurement route and type of tendering

6. 6.1 Estimating and Tendering Project Procurement

7. 6.1 Estimating and Tendering Project Procurement A procurement route is defined by a range of criteria: • Roles and responsibility of the parties involved with the project • Contractual relationships of team members • Allocation of risk amongst the team • Impact on the project programme – overall length, certainty of end date • Impact on cost – overall cost, cost certainty, cost control • Impact on quality – control of design, construction quality • Design flexibility – ability of client to implement change

8. 6.1 Estimating and Tendering Tendering Tendering is the process of establishing a price for the works. This might be a lump sum, a target figure, or agreeing the basis on which the final account will be assessed (e.g. re-measurement, cost reimbursable). This is done either by asking one party to suggest a price in competition with others, or by negotiation. The tendering process covers consultants, suppliers, as well as contractors and subcontractors. Tendering is a part of the procurement process.

9. 6.1 Estimating and Tendering Tendering Public procurement often with “Open Tender” with a Tender Notice published on GeBIZ. Private procurement often with “Selective Tender” with an Invitation Letter is sent to limited tenderers, selected based on their past completed projects or recommendation.

10. 6.2 Resource Analysis Unit rate of a work is the cost to achieve the deliverables of one unit of that work. Example: Unit rate for concrete = $180/m3 Meaning the cost of 1m3 of concrete is $180 $180/m3 = Labour cost/m3 + Plant cost/m3 + Material cost/m3 + Profits for Contractor

11. 6.2 Resource Analysis Build up all-in-rate All-in-rate = Labour cost + Plant cost + Material cost + Profits for Contractor How much for painting of 1m2 of wall?

12. 6.2 Resource Analysis Build up all-in-rate Labour cost • Salary, bonuses, allowances, CPF, cost of supervision, levy, insurance etc. Plant cost • Rental/ initial capital sum, maintenance, fuel, consumable stores, operator etc. Material cost • Discount, quality, quantity, wastage, different source of suppliers etc. Profits for Contractor • Overhead, turnover, availability of resources, type of work etc.

13. 6.2 Resource Analysis Factors affecting rate • Type/ Method of construction • Location • Time • Minimum quantity order • Quality/ Workmanship • Profits • Market condition • Error

14. 6.3 Analogous Rates or Pro-Rata Rates

15. 6.3 Analogous Rates or Pro-Rata Rates If 102.5mm thick common brickwork cost $35.10/m2, how much is it for 215mm thick? A quick estimated cost is $35.10 / 102.5 x 215 = $73.62/m2

16. 6.4 Introduction to Overheads and Profit