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A real estate developer has inked a contract with a known hotel operator
and have agreed to construct a 4 star hotel. Following the agreement, the
developer hired an Architect and a Project Manager to prepare the design
and manage the construction of the hotel respectively. The developer also
hired a Cost Consultant to helped them manage the cost.
After the design was completed, the Project Manager has tendered the
design to the market and eventually have awarded the construction of the
hotel project to the successful Contractor. 8 months has passed since the
Contractor has been awarded the contract and they have achieved
significant progress.
During the past 8 months of the project, the hotel operator have gradually
revised their requirements to increase the quality of the hotel from 4 star to
5 stars which resulted into significant design changes. In addition, the
market conditions have recently seen volatilities in terms of the cost of
prime commodities in particular steel. Because of this, the developer
wants to know what are the cost impact of said design changes as well as
impact of the current market conditions and what is the Anticipated Project
Cost at the end of 9 months.
ACTION REQUIRED:
Prepare the Consultant’s Cost Report for Month 9 (August 2015)
1 using the cost movements shown in the succeeding slide using the
template shown earlier.
Key Cost Information of Consultant Cost Report at Month 8 (July 2015)
Total Assessment
Current of Un-agreed Estimated Anticipated
Original Budget Approved Budget Total Contracted Agreed Variation Variation Liability / Claims Project Cost
Sn Description [A] [B] [C] [D] [E] [F] [G]=[C]+[D]+[E]+[F]
• CONSTRUCTION
1 Engineers Instruction issued 5 August 2015 (site conditions) – AED 350,000
Provisional Sum Expenditure (Finalized the last PS Package, Anti Termite
2
Package w/ PS Amount AED450,000) – AED 500,000
3 Agreed Variation to Architect due to design changes - AED 2,500,000;
Approved Variation Request from Contractor, CRVO Amount AED 510,000 –
4
AED 450,000
Extension of Time Claim by Contractor due to design changes – AED
5 4,000,000 (Entitlement verified, cost and time impact for
verification/assessment by the Engineer)
6 Estimated Cost impact (Construction) of the design changes – 10,000,000
• PROFESSIONAL FEES
1 Agreed additional consultant fees due to design changes – AED 1,000,000
2 August Fee for ID Consultant at AED 825,000
3 ID Reimbursable - travel expenses at AED 100,000
4 Travel expenses for hotel operator staff at AED 50,000
• PROJECT MANAGEMENT
1 Development Fee – AED 200,000
2 Additional Development Office Furniture – AED 80,000
• ESCALATION - AED 0
• CONTINGENCY - AED 0
• FINANCE CHARGES
1 Additional Advertisement – AED 300,000