Cost Planning Procurement and Tendering Dr Fiona Grant

Cost Planning Procurement and Tendering Dr Fiona Grant

Cost control during design and construction Pre-contract Cost Control Post-contract Cost Control 2

Project Procurement ◦ The framework within which construction is brought about, acquired or obtained. (CIB W 92 ) ◦ Covers the entire process from project definition through to construction, operation and recently of increasing importance, the disposal of the constructed facility ◦ Establishing a suitable framework to arrange and organise the appropriate resources 3

Project Procurement n The procurement process for a project includes. . ¨ Establishing client needs, objectives, brief and assessing and obtaining appropriate financial and physical resources ¨ Determining appropriate procurement path ¨ Identifying and obtaining designers and assessing & approving design ¨ Identifying and obtaining construction production organisations and approving & paying for actual production of the facility 4

Procurement Routes/Systems n n Traditional Increasing Traditional accelerated/sequential integration n Management contracting n Design & Build/Turnkey n Build-Operate & Transfer n Public Private Partnerships/PFI of design and construction 5

Tendering n Open Tendering Process - produce tender documents - advertise the project - forward documents to prospective bidders - receive tenders at due time and date - evaluate the tenders - Appoint contractor and sign contract agreement 6

Tendering n Open Tendering Advantages Maximum competition - Opportunity for all contractors - Only firms interested in project will tender - Allows smaller firms to expand - 7

Tendering n Selective Tendering Process - produce tender documents - Select bidders from a shortlist - forward documents to selected bidders - receive tenders at due time and date - evaluate the tenders - Appoint contractor and sign contract agreement 8

Tendering n Selective Tendering Advantages - Suitable for specialist jobs - The procurement process may be faster - Only tried and tested contractors selected 9

Types of estimating cost control � Approximate Estimate � Cost Planning � Life Cycle Costing (Cost-in-use) 10

� Approximate Estimate ◦ A preliminary estimate based on little/limited information provided by the client. ◦ Based on single price rates �£/m 3 �£/m 2 �£/no of beds �£/no of pupils or students ◦ Usually refined as the design details unfold into �Element unit quantities estimate �Approximate quantities estimate 11

Cost Planning ◦ Purpose/Function �Assists the design team in controlling the cost of the design �Spreading the cost between the elements of the building �A tool for analysing and comparing tenders ◦ Main Elements (Group Elements) �Substructure �Superstructure �Internal/External Finishes �Fittings and furnishings �Services �External works �Preliminaries �Contingencies Building sub-total 12

Life Cycle Costing (Cost-in-use) ◦ Technique for identifying the most efficient way of achieving value for money in terms of expenditure and revenue ◦ Takes into account �Running cost �Maintenance cost �Remodelling cost �Capital expenditure �Approximate life of the building ◦ Technique used �Discounted cash flow techniques �Annual equivalent �Present value 13

Definition of Cost, Price and Value � Cost Procurement Cost �Cost of land �Consultants’ fees �Legal fees �Cost of finance �Cost of permits Life cycle costs Running Costs Maintenance costs etc Construction Cost Contractor’s tender price (contract sum) §Labour cost §Materials cost §Plant cost §Management cost §Builder’s finance cost §Profit and overheads Price 14

Cost, Price and Value � Value ◦ What the building is worth �Tangible commercial value � as a tradable commodity � adaptable for alternative uses �Non-tangible value � Meeting social needs, prestige ◦ Critical in determining whether a scheme/project is scaled down or abandoned altogether. ◦ Value > Cost (for a project to be viable) 15