Article from Northcroft Australia office
Cost management is one of the core activities performed by Quantity Surveyors (QS) and is an integral part of any project development process. The activity involves cost planning and cost controlling from the briefing stage to tendering. The purpose of this article is to demystify the role of QS, so that clients could fully appreciate the many advantages of having QS on their team.
The Development Process
The development process, in many cases, involves a great deal of time, effort and money. Different decisions made during the process could impact varied costing outcomes. These decisions, as well as the planning and building code requirements for a new development are key factors affecting the cost movements in any development and have a direct influence on the final product.
Key factors that affect cost movements in a development include:
- Purpose of the development – the type of building being constructed such as offices, apartments, shopping/retail
- Scope of work, which will define the building’s final design – such as size of a functional area, number of levels, building height, etc
- Quality goal – including the expected level of finishes at completion
- Costing and value, taking into consideration life cycle costing and maintenance
- Timing of the project, and thus the overall development time and program
The Costing Process
The process of costing a project, after factoring in the complexities involving council’s decisions, community’s involvement and economics’ perspectives, is complicated – especially when it requires specialist skills to define these influencing factors in a meaningful way. This exercise should only be completed by experienced QS.
We also study other Costs that are influenced by a project’s constraints and parameters, such as site contour. Environmental concerns and regulations are also worthwhile learning, studying and analysing during the development process. This combined cost study activity is applicable to any project, regardless of its scale or size. Subsequently these cost studies could be used as a reference or for benchmarking in the next project.
The Cost Planning Process
Cost management is a process that takes place in 4 different stages:
- Briefing/concept
- Schematic Design
- Design Development
- Pre-tender
Cost planning starts in a limited, but important form in the briefing/concept stage with the process beginning in earnest as information about the project expands through the subsequent stages. It is unlikely there will be sufficient information for accurate cost planning to be rigorously applied at the commencement of a project. Therefore, during the initial briefing/concept Stage, the project cost is more likely to be developed using functional or elemental rates per m2.
It may not sound particular technical to work the costs out at this stage. However, QS also make reasonable adjustments on preliminaries and contingencies based on the design constraints presented at the time, while taking into consideration any potential risks in the project type.
Once initial costing is established, decision could be made before town planning submission. This feasibility/concept phase is an essential stage because it offers greater flexibility for design consideration at the beginning of the project. As a result, different design schemes can be evaluated as well as providing an opportunity to conduct cost benefit analysis, including and consideration of wider economic consequences of a development.
This flexibility and opportunity is lost once the project advances and moves into the construction stage.
The Cost Control Process
Cost controlling is more likely to be applied in subsequent stages (such as the schematic design stage and beyond) when more information is provided and documentation is produced. Nevertheless, involving QS from the earliest stages provides opportunities to build insights and understanding of the goals and objectives of the project that will shape the financial commitment throughout the process.
Our engagement in the later project development stages could potentially limit the economic control of the overall life cycle of development. Cost management is a process, so QS should never be considered as a one-off service if clients wish to achieve a maximum return and savings on a project.
A Summary of Benefits
In summary, there are many benefits of hiring a QS from the beginning of a project. These benefits include:
- Reducing the chance of cost overruns
- The opportunity to overcome any hiccups during the design process
- Improving the quality of the consultant’s documentation and thereby reducing risk of claims during construction
- Safeguarding the client’s position on any cost-relating discussions
- Establishing benchmarking and understanding cost issues which could be referenced and brought forward to benefit the next project
- Progressing projects with more confidence by obtaining costing confirmation
- Hiring a QS should be essential given the benefits mentioned above. We encourage you to reach out to Northcroft for more information. Northcroft are proficient QS practitioners in delivering cost management service for all types of projects and have been in operation since 1841.
Author: Mei Lew CQS MRICS is Senior Associate/ Office Manager at Northcroft Victoria.
Contact Mei: [email protected]