26/02/2020

Construction Planning & Management

(Semester-2 MBA-CPM)

Sanjay Govind Patil PhD, MRICS

Associate Dean & Director, School of Construction

Outline

 Approximate Estimate of a whole building

• Case Study

 Estimating Methodology
Module I – Quantity Take off & Measurement  The new rules of Measurement (NRM)
 80/20 rule

Approximate Estimating of a Whole

Learning Outcomes & Competencies Building

On completion of this topics the students will be able to: Background

 Demonstrate the knowledge of measurement and quantification of Hindustan Construction Ltd. intends to develop 400 units of middle
different types of construction works (M006, T092, T078) class individual own apartments on a piece of 500 x 100m2 land at
 Formulate pre-tender estimates, post-tender estimates and budget Mumbai. The development includes a 350m2 club house, one half
for a construction project (T019, T034, T031, T104, T035) Olympic size swimming pool, 50 m2 substation, 4 sitting areas
(wooden benches), fencing all round the site and one open air
carpark lot for each residential unit. Access road and turfing area are
Code Competency
M001 Ethics, Rules of Conduct and professionalism
estimated to take up 5% and 40% of the land area respectively.
M006 Business planning
T092 Quantification and costing (of construction work) Question
T035 Design economics and cost planning
T104 Sustainability Prepare an Estimating Report as at today’s prices, for the above
development.

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Approximate Estimating of a Whole Approximate Estimating of a Whole

Building (Contd…) Building (Contd…)

Information available Calculations

No. Description Calculation Amount (Rs.)
Today’s index : 150 (Index in 2016:145)
Middle class condominium : Rs. 1,29,01,500 / unit @ 2016 prices. 1. Building Works
including M&E
Club house : Rs. 1,29,015 / 𝑚2 GFA @ 2016 prices.
1.1. Condominium Units 400 * 12,901,500 * (150/145) 53,38,551,724.14
Olympic size swimming pool : Rs. 2,15,02,400 / no. @ today’s prices.
Substation cum bin centre : Rs. 1,79,200 / m2 GFA @ today’s prices. 1.2. Club House 350 * 129,015 * (150/145) 46,712,327.60
Tennis court : Rs. 7,16,750 / no. @ today’s prices.
Sitting Areas (wooden benches) : Rs. 1,43,350 / no. @ today’s prices.
2. External works
Fencing : Rs. 8,600 / m @ today’s prices.
Carpark : Rs. 7,170 / no. @ today’s prices. 2.1. Half Olympic size pool 21,502,400 / 2 10,751,200.00
Tarmacadam road : Rs. 14,340 / 𝑚2 @ today’s prices.
2.2. Substation cum bin 50 * 179,200 8,960,000.00
Turfing : Rs. 1,580 / 𝑚2 @ today’s prices.
centre
2.3. Tennis Court 2 * 716,750 1,433,500.00

2.4. Sitting Area (Wooden 4 * 143,350 573,400.00

Benches)

Approximate Estimating of a Whole Approximate Estimating of a Whole

Building (Contd…) Building (Contd…)

…continued …continued

No. Description Calculation Amount (Rs.) No. Description Calculation Amount (Rs.)
2.5. Fencing 2 (500+100) * 8600 10,320,000.00 6 Contingency Assume 10% 575,688,335.4
2.6. Road 500 * 100 * 0.05 * 14340 35,850,000.00
2.7. Turfing 500 * 100 * 0.4 * 1580 31,600,000.00 7 Construction Cost 4+5+6 6,90,82,60,025.20
2.8. Carparks 400 * 7170 2,868,000.00
8 Professional Fees Assume 6% of construction 414,495,601.5
cost
3 Piling Cost Assume 5% of Building and M&E 269,263,202.59
costs
9 Total Construction 7,32,27,55,626.71
Cost
4 Subtotal 5,75,68,83,354.33

5 Preliminaries Assume 10% 575,688,335.4

Approximate Estimating of a Whole

Building (Contd…) What is Cost Estimation? (Contd…)
Preparation of the Estimating Report
No. Description Amount (Rs.) %
1 Building Works including M&E 538,52,64,051.74 73.54
1.1 Condominium Units 5,33,85,51,724.14
1.2 Club House 4,67,12,327.60
2 External works 10,23,56,100.00 1.40
2.1 Half Olympic size pool 1,07,51,200.00
2.2 Substation cum bin centre 89,60,000.00
2.3 Tennis Court 14,33,500.00
2.4 BBQ pits 5,73,400.00
2.5 Fencing 1,03,20,000.00
2.6 Road 3,58,50,000.00
2.7 Turfing 3,16,00,000.00
2.8 Carparks 28,68,000.00
3 Piling Cost 26,92,63,202.59 3.68 Cost Estimate Stages (Information Vs Accuracy)
Source: Dr. Emad Elbeltagi chapter -1 introduction
4 Subtotal 575,68,83,354.33
5 Preliminaries 57,56,88,335.40 7.86  At the beginning of a project, the estimate cannot be expected to carry a
6 Contingency 57,56,88,335.40 7.86 high degree of accuracy since little information is known.
7 Construction Cost 6,90,82,60,025.20
8 Professional Fees 41,44,95,601.50 5.66  As the design progresses more information is known and accuracy should
9 Total Construction Cost 732,27,55,626.71 100 improve

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What is Cost Estimation? (Contd…) What is Cost Estimation? (Contd…)

 Cost Estimate Stages & its Accuracy  Types of Estimate

 Estimate for Conceptual Planning

 general parameters of facility size
 anticipated quality of construction
 use of the facility
These estimates are prepared for early budgeting to determine project
feasibility and to develop project financing
The expected accuracy - 15% to 20%

 Estimate for Feasibility

 Scope of the project is completely defined
 Major items and equipment's are priced
 Local labor market is checked
The expected accuracy - 10% to 15%
Source: Construction Project Management Fundamentals by Kraig Knutson et al.

What is Cost Estimation? (Contd…) What is Cost Estimation? (Contd…)

 Types of Estimate (Contd…) But Still…Cost Overrun

 Estimate During Engineering & Design  Research Statistics on Cost Overrun

 Based on schematic level of design documents  Price escalation of raw materials reported by - Frimpong et al, Moura et al,
 Update an estimate (15%, 30%, 60% design) or scope change Kaliba et al, Rahman et al, Kaming et al.
 Design progresses estimate accuracy improves
 High cost of labour reported by - Kaming et al, Azhar et al.
The designer and project owner may use the early estimate to review  High cost of transportation reported by - Eshofonie and Patience
expected total project cost and perform value engineering
 Dispute on bill settlement reported by - Ameh et al , Sharma and Goyal
The expected accuracy - 5% to 10%  Delay in planned activity reported by - Harisweni, Kaliba et al, Rahman et al,

 Estimate for Construction  Long period between design activity and tendering time reported by -
Eshofonie and Patience
 Based on contract documents
 90-100% Plans and Specifications  Frequent design changes reported by - Kaming et al., Frimpong et al,
Omoregie and Radford, Harisweni, Le-Hoai et al, Azhar et al, Cheng
The expected accuracy - 2% to 5%
 Scope changes reported by - Kaming et al, Frimpong et al, Moura et al,
Rahman et al, Kaliba et al.

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

The three volumes of the NRM suite are:

NRM 1 offering guidance on the
 NRM1 - Rules for order of cost estimating and elemental cost
preparation of:
planning
 NRM2 - Rules for works procurement (Bill of Quantities)  Capturing historical cost data for order of
 NRM3 - Rules for maintenance and operation cost planning and cost estimates and elemental cost plans
procurement
 How to describe and quantify items not
included in measurable building work
 NRM1 comprises four parts: items, such as preliminaries, overheads
and profits, consultant fees, risk
 Part 1 sets out the context and definitions allowances, inflation and so on
 Part 2 explains how to prepare an order of cost estimate  Cost analyses
 Part 3 explains how to prepare an elemental cost plan
 Benchmark analyses
 Part 4 provides tabulated rules of measurement for the
preparation of cost plans

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New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Constituent of an order
Constituent of of cost estimate
an order of
cost estimate

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Elemental Method Elemental Method (Contd…)

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

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New Rules of Measurement (NRM) New Rules of Measurement (NRM)

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

When using unit rates from cost analyses and benchmark analyses, it is
recommended that such rates are adjusted to reflect prices current at the time the
order of cost estimate is prepared (i.e. adjusted to remove allowances included
for construction inflation).
Consider the following scenario:

A cost analysis is to be prepared on a building project, where:

Tender return date: 7 December 2012

Original contract sum (i.e. the agreed tender price): 30,600,900
Possession of the site (and commencement date of
the contract period): 11 February 2013
Contract period (i.e. construction period): 30 months
Date for completion: 6 August 2015
Tender price index (TPI) to be stated in cost analysis: December 2012 (or 4th
quarter 2012)

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Provide a cost for the industrial
shed of approximately 20,000m2 Rules to calculate unit rate at current base estimate
Methodology
based on inflation

Project 1. Need adjusting -

The unit rate is increased by the amount of inflation occurring during the period
security element
from the base date of cost data to the current estimate base date.
Project 2. Excluded - too small
The equation for calculating the updated unit rate is therefore:
Project5. Built almost 10 years
back Ra2 = Ra1 + (Ra1 x p)

Project6. Excluded –too large where:

Project7. Data Cannot be Ra1 = unit rate at base date of cost data
adjusted Ra2 = unit rate at current estimate base date
p = percentage addition for inflation
Project8. Consider the dock
levelers

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New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Rules to calculate inflation Measurement rules for main contractor’s preliminaries

The percentage addition for inflation (p) can be computed using published The equation for calculating the total estimated cost of main contractor’s
indices (i.e. tender price indices (TPI), building cost indices or retail price preliminaries is therefore:
indices (RPI)). Alternatively, the percentage addition can be derived from in-
house sources of indices. Using published indices, the equation for calculating
the percentage addition for inflation is therefore: c=axp
where:
p = ((index 2 – index 1) ÷ index 1) x 100 a = building works estimate (i.e. total estimated cost of building works)
p = percentage for main contractor’s preliminaries
where: c = main contractor’s preliminaries estimate (i.e. total estimated cost of main
index 1 = index at base date of cost data contractor’s
index 2 = index at current estimate base date preliminaries)
p = percentage addition for inflation

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Measurement rules for main contractor’s overheads and Work Cost Estimate
profit
The equation for calculating the works cost estimate is therefore:
The equation for calculating the total estimated cost of main contractor’s
overheads and profit is therefore: d=a+b+c
c = (a + b) × p where:
a = building works estimate
where: b = main contractor’s preliminaries estimate
a = building works estimate (i.e. total estimated cost of building works) c =main contractor’s overheads and profit estimate
b = main contractor’s preliminaries estimate (i.e. total estimated cost of main d = works cost estimate
contractor’s
preliminaries)
p = percentage for main contractor’s overheads and profits
c = main contractor’s overheads and profit estimate (i.e. total estimated cost of
main contractor’s overheads and profit).

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Measurement rules for project/design team fees Measurement rules for other development/project
costs

The equation for calculating project/design team fees is therefore:

This cost not necessarily directly associated with the works costs or
project/design team fees, but form part of the total cost of the building
c=axp project to the employer;

where: for example, insurances, planning fees, decanting and relocation costs,
a = works cost estimate marketing costs and contributions associated with planning permissions
p = percentage for project/design team fees
c = project/design team fees estimate (i.e. total estimated cost of
project/design team fees)
The combined total of the works cost estimate, the project/design team fees
estimate and the other development/project costs estimate is the base
cost estimate (i.e. the risk-free estimate).

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New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Measurement rules for Risk Measurement rules for Risk (Contd…)

It is recommended that separate allowances be made for each of the
following:
(c) Employer change risks – an allowance for use during both the
design process and the construction process to provide for the risks of
(a) Design development risks – an allowance for use during the design
employer driven changes
process to provide for the risks associated with design development,
changes in estimating data, third party risks
(e.g. changes in scope of works or brief, changes in quality and changes
in time).
(e.g. planning requirements, legal agreements, covenants, environmental
issues and pressure groups, statutory requirements, procurement
(d) Employer other risks – an allowance for other employer risks
methodology and delays in tendering.
(e.g. early handover, postponement, acceleration, availability of funds,
(b) Construction risks – an allowance for use during the construction
liquidated damages or premiums on other contracts due to late provision
process to provide for the risks associated with site conditions
of accommodation, unconventional tender action and special
contract arrangements).
(e.g. access restrictions/limitations, existing buildings, boundaries, and
existing occupants and users), ground conditions, existing services and
delays by statutory undertakers.

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

Measurement rules for Risk (Contd…)  NRM2 comprises three parts:

Part 1: General information.

for design development risks: R1 = a x p1
for construction risks: R2 = a x p2 Part 2: Rules for detailed measurement of
for employer change risks: R3 = a x p3 building works
for employer other risks: R4 = a x p4
where: Part 3: Tabulated rules of measurement for
building works - comprises the majority
a = base cost estimate of NRM2 being the tabulated rules for
p1 = percentage risk allowance for design development risks the measurement and description of building
p2 = percentage risk allowance for construction risks works for the purpose of works procurement.
p3 = percentage risk allowance for employer change risks
p4 = percentage risk allowance for employer other risks

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

NRM 2 - Appendices: NRM 2 - Appendices:

Appendix A: Guidance on the preparation of bill of quantities
Appendix B: Template for preliminaries (main contract) pricing schedule
(condensed)

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New Rules of Measurement (NRM) New Rules of Measurement (NRM)

NRM 2 - Appendices: NRM 2 - Appendices:

Appendix D: Template for pricing summary for elemental bill of
Appendix C: Template for preliminaries (main contract)
quantities (condensed)
pricing schedule (expanded)

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

NRM 2 - Appendices: NRM 2 - Appendices:

Appendix E: Template for pricing summary for elemental bill of Appendix F: Templates for provisional sums, risks and credits
quantities (expanded)

New Rules of Measurement (NRM) New Rules of Measurement (NRM)

NRM 2 - Appendices:  NRM3 is intended to provide a

Appendix G: Example of a work package breakdown structure consistent method for the quantification
and description of maintenance works.
NRM3 can be used for:
 Initial order of cost estimates during
preparation stages.
 Cost plans during the design development
and pre-construction stages.
 Asset-specific cost plans during the pre-
construction phases.
It also offers guidance about:
 The procurement and cost control of
maintenance works.
 The measurement of other items associated
with maintenance works that are not included
in work items.

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Estimating Methodology
80/20 Rule
 When analysing construction task in an estimate, the estimator should identify those
tasks that account for the major portion of the project cost.
 These task can be identified by applying 80/20 rule which states that approximately
80% of the project cost is contained in 20% of the task
Source: One Company’s cost experience for high-tech facilities
Task Type Cost range (%) Cost % average
Site work 1-3 2.0
Concrete 5-10 6.5 THANK YOU
Structural 5-8 6.0
Architectural finishes 6-9 6.0
Tech-Specific rooms 6-13 8.0
Mechanical 36-48 42.0
Electrical 11-14 12.0
Indirect Cost 14-22 17.5
Total 100.0