COST PLANNING &

COST CONTROL
DBN 352
Construction economics
DEFINITION OF COST
PLANNING
o Method of controlling the cost of a project,
within a predetermined sum, during the design
process and includes the preparation of the cost
plan as well as the subsequent stages of cost
checking.
o Techniques for arriving a cost plan or cost limit.
o Cost plan is a statement of the intended cost to
spend on each element of a proposed building
within a total sum and in relation to a defined
standard of quality.
o The allowances set against each element are cost
targets.
o Cost plan is prepared by finding a cost analysis of
a similar project to the one under consideration,
and by studying how the cost was allocated in the
old project, in order to prepare an estimate for the
new scheme.
o The cost information cannot be used directly from
the cost analysis, and some degree of modification
will have to be made.
o These modifications are usually for differences in
o price level
o Quantity
o Finishes and standards
What is Cost Control?
o Techniques for “protecting” the cost plan.
o Generic term embracing all methods of controlling
the cost of a building throughout its various stages
from inception to completion.
o Process of cost checking required the estimated
cost of each element to be checked against the
target set in the cost plan.
In general, the purposes of
cost planning are:
o To determine the probable cost of a project
development.
o To provide a yardstick to control the design of
the development throughout the project.
o Ensuring the client receives value for money.
o Ensuring both client and designer are aware of
the implications of their decision on cost.
o Integrating cost with time and quality.
PRINCIPLES OF COST
PLANNING
o There are standard framework available for each identifiable
part of the building. I.e., WBLFF, structural works, external
walls, etc. The purposes are to enable :
o the performance characteristics to be related to each reference
o the cost to be distributed in a balanced way throughout the building
o the analysis of previous projects be classified in the same manner
o The cost planning can be adjusted to design requirement.
o It allows the costs to be checked as the design develops
with the amount allocated.
o It allows the designer to take necessary measures or
actions before any decision on the final design is made.
o It takes into account contingency cost and design reserve.
o It enables costs to be presented in a logical and orderly
way for clients from time to time during the design process.
ADVANTAGES
o The tender value will be either close to or similar to the client's
estimate.
o Since there is a checking system on the cost, there is possibility that
less changes will be made to the bills of quantities. Discussions
among designers can be made before the production of the final design.
This will definitely save time in making adjustment to any changes to
the cost and design.
o The effectiveness of cost and value for money can be achieved
with cost planning process.
o A balanced expenditure distribution may produce a more rationalized
design.
o Cost consideration will be given more attention since the quantity
surveyor is involved in the early stage of the design process.
o The bills of quantities can be prepared more easily since the
quantity surveyor is already familiar with or skilful in the project and
thus has clear understanding of what is to be achieved by a designer.
o Cost planning provides basic information on cost comparison between
different projects.
DISADVANTAGES
o It requires a lot of preparation at the early
stage of the design process.
o The designers may have some limitations in their
work style.
o The quantity surveyor needs to be equipped with
vast experience and knowledge pertaining to
cost and factors influencing the cost.
o Both the designer and quantity surveyor are
involved with a lot more work at the design
stage as compared to when no cost planning is
used.
Cost Planning
process during
pre-contract
o A framework outlined and produced by the
Royal Institution of British Architects (RIBA)
has resulted in a procedure for architects in
preparation and implementation of a
development project.
1. Inception

o This is a stage where a client expresses his

intention to build a building, provides
administrative organization and appoints an
architect and other consultants if necessary. The
cost is also discussed at this stage but as long as
there are still changes to the client's needs, an
estimate of the project cannot be fixed.
 2. Feasibility/ viability
o At this stage, the architect and the consultants will
study the client's needs. The design team should
cooperate in giving suggestions and advice to the client
so that the best possible decision can be made. This
stage is very important in determining the feasibility
and profitability of a project. An effective cost control
system needs to be established in order to produce a
realistic first estimate, known as the cost limit.
2. Feasibility/ viability
(Cont’d)
o The procedure that needs to be observed in
estimating and cost planning is solely dependent on
the client's financial needs of a project. In most
cases, the budget of a project is determined by
using one of the following methods:
a) Client provides cost estimate and consultant's
confirm the estimate
In this case, a client will state his needs/brief on the
total cost or budget to be spent, type of building that
is most suitable and economical that can be built to
the architect or the project manager. At the same time,
the design team should ensure that the project could
be completed within the cost specified by the client.
2. Feasibility/ viability
(Cont’d)
b) Consultant provides an estimate
o This is the usual method used especially by private clients.
The client receives a guideline on cost calculation from the
architect and the quantity surveyor. With this, the client is able
to make initial decision based on the explanation given by the
design team. The design team is required to produce its own
estimate, of which if accepted by the client, will become a
realistic cost or budget.
o The design team may repeat this stage several times. Any
changes made to the budget at this stage must involve the
client and a new budget must be communicated to the design
team and client. At this stage, the design team may need some
relevant information to produce the budget Amongst the
information needed are the gross floor areas, standard of
accommodation, building function or use and the site condition.
3. Outline Proposal
o The general approach on the design, layout and
construction method is determined at this stage in
order to gain approval from the authority concerned.
The client's needs at this level are finalised and
regarded as ready to be implemented. The site has also
been investigated and surveyed. The architect
meanwhile can investigate alternative design and
construction. At the same time, studies on customer
needs, technical problems, designs, planning and cost
will be carried out.
o A number of drawings will be produced at this stage
and the QS is required to provide guidelines on the cost
and consequently the financial implications towards the
design alternatives. The QS will prepare the Outline
Cost Plan according to group elements.
4. Scheme Design
o The main purpose of this stage is to complete the
client's brief and decide on proposal that include
planning arrangement, appearance, construction
method, specification and cost. All matters
pertaining to approval must be obtained at this
stage. The client's needs will be completed or
finalised and major planning problems are solved.
Sketch drawings will be produced. These include
sketch drawings on sections, elevations, services
and finishes, etc.
o The quantity surveyor is required to prepare a
Detailed Cost Plan that shows how consultants
distribute money to individual elements of a
building.
5. Detailed Design
o This is an important stage whereby all final decisions are
made on each problem. The complete design of each
building part and component or any other factor related to
a building is produced. Plans will be completed and several
detailed drawings are produced. It is best that the
design is approved first by the client to avoid any
amendments in the future.
o The quantity surveyor is required to carry out a
Comparative Cost Study on several construction
methods, materials and different types of services and if
necessary coordinate cost distribution in the Cost Plan. The
Comparative Cost Study is expected to include future costs
of management and maintenance of the building.
o The quantity surveyor also needs to carry out continuous
Cost Check to ensure the design matches the Cost Plan.
ELEMENTAL COST
ANALYSIS
Elemental Cost Analysis
(ECA)
Elemental cost analysis is defined as:
o The systematic breakdown of cost date generally as
the basis of an agreed elemental structure to assist in the
preparation of cost plans for future schemes
o The analysis is actually done to be used by the designer
and the client for future projects and therefore,
comparison between two or more buildings can be made
o This is a brief project cost information gathered from bills
of quantities
o Apart from the cost analysis, information such as brief
project specification and the overall project information
are also included in the ECA.
 Reasons for ECA
o The reasons the cost analysis for a building is prepared are:
o To show the cost relationships between several sections
/parts of the building if there are any
o to allow comparisons of cost with other different projects.
o The cost that is obtained from the cost analysis is insufficient to
determine actual price. It has to take into account the
conditions and the details of the and the quality and quantity of
work involved. The cost analysis has been in to provide cost
information especially for the process of cost planning.
Uses of ECA
o Appreciation
o It enables clients and designers to know and
appreciate how cost is distributed among the
functional components of a building and compared to
the overall cost of a building.
o Judgement
o It enables clients and designers to develop ideas as to
how element costs could have been allocated to obtain
a more balanced design. This judgement is important
to measure the effectiveness of cost and quality of a
building.
Uses of ECA (Cont’d)
o Belated remedial action
o Allows corrective action to betaken on receipt of high
tender, by revealing the sources of over - expenditure
that is by making comparisons between estimated
costs and tender price. This will enable belated
remedial action to be taken.
o Planning
o The cost analysis could be used as a source of cost
information to help with the cost planning of future
building projects.
Components of Elemental
Cost Analysis
There are three main components of the analysis in
quantitative form:
o Which characteristic of the costs is to be analysed?
o Which sub-units are to be given due consideration?
o What is the best method/benchmark to express the result?

o Cost
This can be calculated by evaluating the actual cost paid by
the client or the contractor. As the initial reason and the
use of the cost analysis are for the benefit of the professional
and the client, hence, it is clear that the cost analysis done
should be on the costs borne by the client. This actual cost can
be obtained from the Final Account. However, as explained
earlier, the cost analysis is done based on tender price.
Components of Elemental
Cost Analysis (Cont’d)
o Element/ Sub-unit

To relate the cost to the function of the building. An

analysis is based on trade-by-trade is inappropriate
because trades do not relate the cost to the function. In
addition each trade may be involved in several elements.
For example, trade of brickwork is used for elements of
internal walls and partitions, external walls and external
works
Components of Elemental
Cost Analysis (Cont’d)
o Best method/Benchmark

This is a way to express cost, to enable comparisons to be

made for buildings with different sizes and use. Cost based
on 'functional unit evaluation' is restricted to the use
and the type of building.

Cost based on ‘volume/cubic content' is also

inappropriate. The volume method does not take into
account variations in cost due to different heights. It is
easier for clients to associate cost to area rather than
volume.

Therefore, the yardstick often used is cost/m2 GFA. Cost is

easily adjusted by using the area as compared to volume.
It is also easier to relate the cost to the area of building.
Thank You