Construction Cost Management Systems

Lecture 1: Course Introduction, Basics of Cost Management, Intro to IS 1200

 Course Introduction
CM 643: Construction Cost Management Systems

Module I - Measurement of Quantities (15%)

Knowledge of standard method of measurement (IS 1200) issued by Indian Standard Institution, measurement of
construction work, Measuring "Net-In-Place, Take Off items, formulas and perimeter centre line calculations
Module II - Estimating Process and Preliminary procedures (20%)
Conceptual estimate, preliminary estimate, methods of estimating, specifications and estimation of quantities (site
work, excavation, piling, Concrete work, masonry work, steel fabrication and erection), building services, finishes
and interior works, road work.
Module III - Pricing Construction Material and Equipment (25%)
Introduction to different cost components, Standard material cost and analysis of rates, labour and equipment cost
(renting versus purchasing cost, depreciation, maintenance and repair, taxes, insurance and storage cost, fuel and
lubrication), Standard Cost of Construction (various activities), pricing subcontractors work.
Module IV - Cost Estimation and Budgeting (20%)
Plan cost management, Estimate Costs, Budgeting, cost control Inputs, techniques & outputs , Earned value
analysis (PV, AC,AV etc.) , Datum creation; Preparation of BOQs, time cost analysis, project phasing and
budgeting.
Module V - Cost Control and Value Engineering (20%)
Strategic planning and cost programming; Cost planning; Control curves; Total project cost, Potentiality of cost
reduction during different phases of a project, Role of value engineering and management, Effect of cost on design
parameters, Role and purpose of value management (VM) job plan, Steps of VM job plan, General phase, Project
selection phase, Information phase
CM 643: Construction Cost Management Systems

Reference Books
Jha, K.N. (2011), Construction Project Management - Theory and Practice, Pearson
Education, New Delhi.
Project Management Body of Knowledge (PMBOK), (5th Ed.), Published by Project
Management Institute, USA, (2013).
Apfelbaum, A. (2005), Construction Cost Management: Cost Engineering, Cost Controls
and Controlled Bidding, Author House
Schexnayder, C. and Mayo, R.E. (2004), Construction Management Fundamentals,
McGraw Hill.
RICS Black Book
Potts, K. (2008), Construction Cost Management: Learning from Case Studies, Taylor
and Francis
Construction Cost Management System in China, A report by RICS, 2012
Delhi Schedule of Rates
 Session Plan
CM 643: Construction Cost Management Systems

Assignment CT/QUIZ
Week Module Lecture Theme
Mensuration and course basics
Week 1 1 Introduction to Measurements and Costs

Week 2 1 Measurement techniques, IS 1200 provisions for measurements

Week 3 2 Estimation Processes & Preliminary procedures

Group Presentation on IS 1200
Week 4 2 Development of project estimates including types

Week 5 2 Estimating Quantities concrete, formwork, finishing works

Week 6 3 Pricing Construction Material

Quiz 1
Week 7 3 Pricing Construction Plant

Week 8 3 Pricing Construction Labour

Week 9 3 Markup

Week 10 4 Cost Estimation Class Test

Week 11 4 EVM

Week 12 5 Cost Planning , cash flow, control curves

Quiz 2
Week 13 5 Time cost trade off

Week 14 5 Cost Control Systems

Week 15 5 Value Engineering and Value Management
 Assessment
CM 643: Construction Cost Management Systems

10 marks for Group Assignments/presentations and viva

5 marks for written Quiz (2 quizzes to be done. Best out of two to be considered)
10 marks for class test
05 marks Attendance
70 marks End-term Written Examination

- No re-test would be conducted for Quiz and the class test. If you are unable to
make it to the quiz/test, please inform the concerned faculty and seek prior
permission for taking the test on a later date.
- Assignments would be shared during the course of the semester.
 Course Pre-requisites
CM 643: Construction Cost Management Systems

Basic Knowledge of Mensuration : Topic dealing with the use of

formulae to calculate Perimeters, Areas and Volumes of plain shapes
and solid ones (prisms etc).
Eg. Calculation of volume of cube, cuboid etc.

Please read the additional reading material posted on LMS and complete the
mensuration problems (Tutorial 1)
What is meant by cost management?
 Cost Management
CM 643: Construction Cost Management Systems

Project Cost Management includes the processes involved in

planning, estimating, budgeting, financing, funding, managing, and
controlling costs so that the project can be completed within the
approved budget.
Includes preparation of Cost management Plan, which is a part of the
Project Management Plan.
 CM 643: Construction Cost Management Systems

Project Management Plan

Different components of the Project
management Plan contribute to the
cost management plan
 Project Life Cycle and Costs
CM 643: Construction Cost Management Systems

Different stakeholders will measure project costs in different ways and at different
times. For example, the cost of an acquired item may be measured when the
acquisition decision is made or committed, the order is placed, the item is delivered,
or the actual cost is incurred or recorded for project accounting purposes.

Opportunities for making changes

reduce as the project progresses,
and the cost of making such
changes increases.
Once the concept has been frozen,
about 80% of the total cost has
been committed even though no
design exists.
 Factors that are likely to impact Costs
CM 643: Construction Cost Management Systems

Land acquisition including legal fees;

Clients own organization costs allocated to the project (this obviously varies but can be as much as 10% of
the overall project budget);
Site investigation (frequently underrated and under-budgeted resulting in unnecessary extra costs and time
could be as much as 1% of budget);
Enabling works, decontamination;
Insurances (many major clients prefer to insure against the risks and take out a project insurance policy
covering both themselves and the contractor may be up to 1% of the budget);
Consultants fees including design (on large transportation and infrastructure projects this can be as much
as 1520% of the budget);
Construction costs (typically account for between 70% and 80% of the project sum) (excluding land);
Value added tax (VAT) (currently charged at 17.5%);
Contingency and risks (covers for the unknown and may be between 20% and 25%) or if project of long
duration the contingency factor could be double or triple these items;
Financing and legal costs (financing costs can be substantial depending on financing method chosen and
typical bank rate could be anything between 7% and 20%; lawyers are expensive anything up to 500 per
hour and
 Budget and Cost Management
CM 643: Construction Cost Management Systems

Preparation of budget is crucial for Cost management plan

Estimation is the essential element for development of Budget
Measurement is the means for estimation needed for quantification, quality,
payments and resolution of disputes. The standard method of measurement is
also desirable from considerations of:

Uniformity

Acceptability

Clarity

Conformity

Brevity

Accuracy

Cost Management Plan

Budget: Sum of Estimated costs
Estimate Costs ( Unit/Component)
Measure (Units, quantity of materials,)
 IMPORTANT INFORMATION
CM 643: Construction Cost Management Systems

DIA WEIGHT PER METER

1. kN/m3
Concrete 25 6mm = 0.222Kg
2. Brick 19 kN/m3 8mm = 0.395 Kg
10mm = 0.616 Kg
3. Steel 7850 Kg/m3 12mm = 0.888 Kg
4. Water 1000 Lt/m3 16mm = 1.578 Kg
20mm = 2.466 Kg
5. Cement 1440 Kg/m3
25mm = 3.853 Kg
32mm = 6.313 Kg
40mm = 9.865 Kg
 beam Shuttering
CM 643: Construction Cost Management Systems

Rainforcement
Concrete
De-shuttering
Curing
Element Trades Wall Finishes
Earthwork Excavation Brick Screeding
backfilling (A) Load Mortar Tiles
(A) Floor
sub-structure Excavation bearing (4.5 Concrete Mortar
finishes
foundation Soling inch & 9 inch) Rainforcement Adhesive
AAC blocks Wood
PCC
Brick Mortar
Water proofing Mortar Gypsum
concrete Concrete POP
shuttering Rainforcement (B)Wall finishes White wash
De-shuttering (B) Partition or AAC blocks Paint
rainforcement Non load Fly ash brick Distamper
ATT bearing wall Plaster board Wallpapers
Aluminium sheet Mortar
backfilling
Glasses POP
column Below column Plywood Gypsum
column at ground level Adhesive White wash
(C)Ceiling
column at upper floors ceiling Mortar Paint
finishes
Slab Soling POP False ceiling
Concrete Gypsum Plaster board
White wash Steel framing
Rainforcement
False ceiling Adhesive
Shuttering
Plaster board
De-shuttering Steel framing
Adhesive
Wood
CM 643: Construction Cost Management Systems

Fittings Faade Stone Services

Wood Brick Wire
Plywood Wood Switch board
Glasses Lights
Tiles
(A) Doors Electrical fittings
Aluminium Mortar (A)
Cable
Iron Adhesive Electrical
Transformer
Steel Glasses Trenching
Wood Steel framing Conduiting
Plywood Green faade PVC pipe
Glasses Paint Lift
(B)Windows
Aluminium External External water supplies Machines
Iron services External gas supplies (B) AC
Steel Mechanical Transportation
External fire protection system
Fans External sewer drainage Fire protection
lights External Stormwater PVC pipe
Switches Drainage CI pipe
(C )Fitments Commodes External Electric Light and (C GI pipe
Wash basin Power )Plumbing Sanitary work
Tabs Water supply
Ironmongery Gas supply
 Measurement books
CM 643: Construction Cost Management Systems

To be issued centrally by competent authority

 Safe custody
 Joint measurements
 Technical check
 Audit check
 Test check
 Basic document for payments/dispute resolution

17
 Quantity-Takeoff
CM 643: Construction Cost Management Systems

First step of estimation

Process of measuring the work of the project in the form of a series of
quantified work items.
Step for Quantity Take-off:
Break down the design shown on the drawings and described in the specifications
into predefined activities (work items)
Note that quantities of work are measured in the takeoff process, not quantities of
materials.
Cross check the work items against Catalogue of Standard Items.
Sample Take-off sheet
 Takeoff
CM 643: Construction Cost Management Systems

An estimate begins with a quantity takeoff. A quantity takeoff is a process of measuring

the work of the project in the form of a series of quantified work items.
To prepare the takeoff, an estimator has to break down the design that is shown on the
drawings and described in the specifications into predefined activities (work items) that
correspond to the operations the contractor will perform to complete the work of the
project.
Many estimators maintain a catalog of standard items that represent activities
encountered on a large variety of projects, but it is not unusual to have to deal with a
new category of work unique to the project under consideration. The catalog of standard
work items is often used as a checklist during the takeoff process, especially by junior
estimators, to help ensure that all the categories of work in the project are accounted for.
The estimator should note that quantities of work are measured in the takeoff process,
not quantities of materials. The difference between work quantities and materials
quantities is a subtle one and can be difficult to grasp.
 Quantity take-off: Why?
CM 643: Construction Cost Management Systems

Owner perspective:

Initial (preliminary) estimate of the project costs at the different stages of the project.
Preparing the BOQ as a requirement of the contract documents.
Estimating the work done for issuing the contractor payments.
Pricing different work items.
Identifying the needed resources (Labor, Equipment, etc.).
Project schedule.
Preparing invoices for work done.
Subcontractors payments.
Review and control of crews production rates.
 Taking off quantities
CM 643: Construction Cost Management Systems

Principles of taking off quantities

Standard method of measurements to be adopted
Correct mensuration formulae to used
Vertical/horizontal format to be used
Measurements to be neatly recorded
Measurements not to be crowded
Over writing to be avoided and cuttings initialed
Check of measurements/taking off essential
References/contra references essential
 Measuring Net in Place
CM 643: Construction Cost Management Systems

Quantities of work are measured net in place in a takeoff for a cost estimate.
Quantities are calculated using the sizes and dimensions indicated on the drawings with
no adjustments to the values obtained for waste factors etc.

Consider the item 12 mm Plywood floor sheathing that is shown on the drawings applied
to a floor 40 feet long and 34 feet wide. Multiplying these dimensions gives a net quantity
of 1360 square feet.
The takeoff quantity will remain as 1360 square feet, and prices for the labor and any
equipment associated with this item of work will be applied to the quantity at a later stage
of the estimating process to establish the estimated cost of this item. When the material
component of this item is priced, however, a waste factor will be added to allow for cutting
and waste on the material.
If this item were measured so that plywood materials can be ordered for the floor under
construction, the person ordering the material will include in the calculations a waste factor
that will result in a gross quantity of, say, 1408 square feet. This inflated amount takes
into account the cutting and wastage of the material involved
 Measuring Net in Place
CM 643: Construction Cost Management Systems

Because field personnel are used to measuring gross quantities in this

way, they often find it difficult to adjust to measuring net for an
estimate, but there are a number of reasons why an effort should be
made to takeoff net in place quantities for cost estimates:
Consistency
Objectivity
Unit Price Contracts
Comparisons of Operation Efficiencies
CM 643: Construction Cost Management Systems

Measuring Net in Place

 Quantity takeoff for a cost estimate v/s Material Takeoff
CM 643: Construction Cost Management Systems

A quantity takeoff for a cost estimate is different in three major respects

1. Measurements are made net in place with cost estimate takeoffs. Materials
takeoffs measure gross quantities.
2. A materials takeoff often does not provide sufficient information for pricing.
For example 100 cubic metres of concrete may be adequate for a material
takeoff, but information about what the concrete is to be used for is required
in a takeoff for a cost estimate.
3. There are a number of work items measured in a cost estimate takeoff that
do not involve materials. For example, the item Hand Troweling has only a
labor price associated with it; what is measured for this work item is the plan
area of concrete to be troweled. There is no material to consider.
 Takeoff Rules
CM 643: Construction Cost Management Systems

1. Takeoff items comprise two components:

a. Dimensions that define the size or quantity of the item in accordance with the
required units of measurement for that item
b. A description that classifies the item in terms of the requirements of the standard
method of measurement
2. Dimensions are entered onto the takeoff in this order: length, width, and depth (or
height).
3. Dimensions are written in feet to two decimal places, thus 5'10" would be written into
a dimension column as 5.83. When using the metric system, record dimensions in
meters rounded to two decimal places. Thus, 3489 mm is written as 3.49 m and 1200
meters would be 1200.00 m.
4. If a dimension does not come directly from a tender drawing, provide side calculations
on the quantity sheet showing how it was determined; this should be done even for
the simplest calculation.
 Takeoff Rules
CM 643: Construction Cost Management Systems

1. Dimensions are rounded to the nearest whole inch. However, to avoid compounding
rounding errors, fractions of an inch are not rounded in side calculations until the end
result of the calculation is obtained.
2. Use dimensions obtained directly from drawings, or calculated from figured
dimensions, in preference to scaled dimensions. The estimator should use drawings to
obtain dimensions only as a last resort because drawings are not always accurately
drawn to scale
3. Deductions listed with the dimensions are written in red or enclosed in brackets < >
and noted as deductions
CM 643: Construction Cost Management Systems

IS Code

IS 1200 Parts I XXVIII Method of measurement of building and civil

engineering works

SP 27 Hand book of method of measurement of building works

(both IS 1200 and SP 27 are available for free download)

28
 Different Parts of IS 1200
CM 643: Construction Cost Management Systems
1200_1_EARTHWORK
1200_2_CONCRETE WORKS
1200_3_BRICKWORK
1200_4_STONE MASONRY
1200_5_FORMWORK
1200_6_REFRECTORY WORKS
1200_7_HARDWARE
1200_8_STEELWORK & IRONWORK
1200_9_ROOF COVERING
1200_10_CEILING AND LINING
1200_11_PAVING_FLOOR
FINISHES_DADO_SKIRTING
1200_12_PLASTERING & POINTING
1200_13_WHITEWASHING
1200_14_GLAZING
1200_15_PAINTING & POLISHING
1200_16_LAYING WATER & SEWER LINES
1200_17_ROAD WORK
1200_18_DEMOLITION & DISMNTLING
1200_19_WATER SUPPLY_PLUMBING_DRAINAGE
1200_20_GAS & OIL PIPE LINES
1200_21_WOODWORK & JOINERY
1200_22_MATERIALS
1200_23_PILING
1200_24_WELL FOUNDATIONS
1200_25_TUNNELING
1200_26_ACID RESISTANT LINING
1200_27_EARTHWOTK BY MECHANICAL APPLIANCES
1200_28_SOUND INSULATION WORK