#5 Understanding the tools for Cost management/control

Price Lists / Regulerbare ydelser

The rates in the bill of quantities (BoQ), provide a basis for estimation of variations of work. Additional rates, received as part of the Price Lists, which should be part of the bill of quantities (BoQ), can also be used to calculate the prices of other components not specifically described in the BoQ.

These conditions should be specifically described as part of the tender special conditions, so that the process is clear for all parties when requesting extra work.

#3 Understanding the tools for Cost management/control

Post-tender estimate / Skøn efter udbuddet

The purpose of this estimate is to corroborate the funding level required to complete the building project by the developer, including rates adjustments, fees, as well as other development and project costs.

After all tender offers have been received and evaluated, it is possible to produce a Post-tender estimate, that will be based on the outcome of any negotiations with the final contractors, including rates and quantities adjustments, clarifications of scope and the like.

This estimate will take into account the actual known construction costs and any residual risks, and the uncertainties of market conditions became clear. This estimates are used as the control estimate during construction, as it defines the basis of all the works going forward and all updated agreed quantities.

All possible future variations will be checked against the post-tender estimate.

#4 Understanding the tools for Cost management/control

Cost planning / Omkostningsplanlægning

The aim of a Cost Plan is to redistribute the elements into works packages for the purpose of budget and cost control during the design phases, for procurement while defining the tender strategy and during the tender phase and for cost control during the construction phase of the building project.

Cost planning is a constant and reiterative process, that develops in steps of increasing detail as more design information becomes available. A cost plan provides both a work breakdown structure and a cost breakdown structure.

It provides cyclic information for future feasibility studies, and allows to focus value engineering efforts by understanding main cost impacts of the different packages to the over all project economy.

Having a standard Cost Plan breakdown for all projects, ensures the company will be able to take intelligence decisions for future development projects, based on actual and historical information.”

#2 Understanding the tools for Cost management/control

Pre-tender estimates / Skøn før udbuddet

Pre-tender estimates are prepared immediately before calling the first tenders for construction. This is the final cost-check undertaken by the cost manager before tender bids for the building project, or any part of the building project, are obtained.

Therefore, it is essential that the design has finalized, the project has been quality checked, and no more changes to the project material are done after the Quantity Surveyor begins the Tender estimate.

This way, the estimate is based on the very same conditions that the different contractors will base their own offers in the tender. This allows as well to prepare the basis for the tender analysis later on, and allows to compare side by side all offers received against the pre-estimate expected.

When a bill of quantities (BQ) is the basis of obtaining a tender price, the pre-tender estimates will be based on the BQ.

#1 Understanding the tools for Cost management/control

Bill of Quantities / Tilbudslister

Almost more important than a good process for commercial management, are the tools implemented in the project to carry on this task.

The most used tool for this purpose would be a standardized Bill of Quantities.

The main purpose of a bill of quantities (BoQ) is to present a coordinated list of components/items, together with their identifying descriptions and quantities that encompass the building works, so that the tendering contractors are able to prepare tenders efficiently and accurately.

Having a standardized BoQ will assure parity of tendering, as all bidders will base their offers on the same conditions and contents.

For a quantity surveyor/cost manager, the BoQ becames a vital tool, as it will be used to manage and control the costs of the building project. Cost management and control uses include:

  • Pre-tender estimates;
  • Post tender estimates;
  • Cost planning;
  • Pricing variations; and
  • Interim valuations and payment.

Commercial management in Denmark and the need of an specific local education

Last week, the founder of KOSMOS, Ross Griffin, was interviewed by Berlingske for their Ejendomme section, to talk about commercial management in Denmark and the need of an specific local education to bring more Danish professionals to the industry. Access to the full interview: https://lnkd.in/gZckYsr

BIM maturity: 5D Cost

BIM in relation the 3D aspect seems to be well established and strong processes are implemented in almost every single construction firm in the country. Now, we need to begin thinking on what is next, and in the case of BIM, the development will need to focus on 4D (time) and 5D (cost), but not just in the execution phase.

In order to build good standards and grow maturity around these areas, it is necessary to involve the planners and commercial specialists in the BIM strategy development process. Only in this way will the process take into account the output required by these 2 disciplines. This is necessary in order to take full advantage of the information produced and incorporate it in the project design.

IKT agreements must include minimum requirements and conditions on how to produce the project material, not only for the final delivery, but also along the design process to facilitate the control around these 2 specialist discipline deliveries.

Active Commercial Control helps to reduce rework during Design Phases.

Technology presents great opportunities to improve productivity and increase efficiency during the Design stages.

However, the design process still under-performs, and it is often that the projects end up over budget or with considerable delays (affecting the costs too).

While quantity take off is becoming easier for us, quantity surveyors, our work will be substantially affected when a project is delayed (because the time we have to deliver gets cut short), or its quality is poor (meaning there will be a large number of inconsistencies and our work will became harder).

A proactive project management plan, instead of reactive planning, would mitigate inefficient practices, like re-work, that lead to poor quality and delays. The less time the project has for actual design, the poorer the quality.

ACTIVE Commercial Control helps to reduce rework during Design Phases.

First Gathering of Quantity Surveyors in Denmark

The first gathering of Quantity Surveyors in Denmark took place in September. Our own Ross Griffin, along with Antonio Contegiacomo & Adam Wrighton from Aurora Construction Consultancy, led a very interesting debate and open discussion on the opportunities, the issues and the future of this profession in Denmark.

In association with the RICS, our goal is to develop the profession in Denmark, so that we deliver high quality to agreed industry standards.

Please join us in this community, where we will be discussing the profession and using this platform to collaborate in this development.

Main considerations that will prevent your project from costs overruns

1) Realistic initial budget:

  • Calculated using relevant bench marking but also specific project conditions, for example time/location/quality/logistic factor expected.
  • In accordance with the actual project procurement strategy.
  • A total project economy covering for all possible necessary expenses (Direct; Indirect; Client expenses; VAT; Contingencies; Risks; Inflation…).

2) Minimise scope changes:

  • From the client: defining clear requisites in the program and foreseen circumstances that may appear, covering for them with sufficient, but realistic, contingency allowances. If there are end users involved, they should be consulted prior to the design competition tender and budget calculation, what are their absolute needs, and what would be “nice to have”.
  • From the design team: allowing themselves provisional allowances to cover for design development when presenting the competition proposal, or errors in the design that will lead to major project changes. This allowances should be controlled and reduced as the project develops and uncertainties are been removed. -From the contractor: with a strong and consistent contract and a good quality project design, reducing issues discovered during the execution phase.

3) Quality commercial control during the design process:

  • Consider the impact of the overall project economy when making decisions.
  • Analyse the commercial viability of the design choices against the target budget before presenting to the client.
  • Quality estimates at each design gateway, preventing the design from developing too far from the client’s budget.
  • While developing the design also focus on specific cost drivers to reduce the risk of the project.

4) Quality of the design when tendering:

  • Reduce the contractor’s uncertainties and risk by clear and decisive design material.
  • Securing there is no missing scope on the tender offer.
  • Strong project specific contract between parties.
  • Good quality tender lists/Bills of Quantities to assess the offers and control the costs in execution

5) Preventing time delays:

  • During the design phase, have good quality time schedules with clear milestone deliveries but also with penalties for delaying the project.
  • Avoid extra expenses by considering all directly related impacts due to the new time plan (winter, interfaces with ongoing projects around, temporary relocation when not handing on time,…).
  • Assuring time allocated to certain tasks is not cut down, causing a poor quality delivery.

6) Foreseen economical market changes:

  • Proposing an attractive procurement strategy to increase interest and competitive bids.
  • Acknowledging busy production lines delivering certain materials, and preparing alternative design options. All these points may look frequent and inevitable, however, the reality is that with a structured and planned Commercial Strategy, it is possible to detect and mitigate all these risks that affect the project economy, turning them into opportunities. A commercial manager would, with this mindset, manage these issues, while coordinating with the team to highlight any issues that might impact the economy or project delivery.