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COURSE CODE

SUSS PI NO.

NAME

SUBMISSION DATE
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Question 1

Tender submission write-up

Commonly quoted statistics show that about 80% to 90% of the cost a project is usually
determined by the design. Hence, the time at which major cost savings can be achieved is during
the design and planning for the project, alternatively if there are any changes which are to be
implemented during the construction stage, these are likely going to lead to delays which are
usually followed by inflated project costs. Through an effective cost management, the
estimation, control and budget of costs involved through out the project cycle will go a long way
in ensuring that the tentative budget is not exceeded and the quality of delivered works is not
compromised. A successful project usually encompasses the following;

1) High quality work is executed.

2) Work is completed within schedule.
3) The work is completed within budget.
4) All the requirements and scope of work is executed.

Through cost management, the planning and controlling of the project’s expected costs
can be undertaken. This is further compounded by the fact that the first estimate of a project’s
cost which is undertaken during the design stage is usually the most important. During the design
stage, the expected costs can be calculated and also approved beforehand. The various benefits of
cost management during the design stage include; preventing cost overruns through rational
distribution of costs on all the project areas, avoidance of risks in the event that unforeseen costs
arise and also aiding future project planning. During the periods whereby the execution of the
project will be going on, the various procedures for project control and cost management will
become indispensable tools which will have to be incorporated, this is because during the actual
execution, there is likely to be deviations from the original design.

The cost management strategy which will be employed in the project will involve the
following key steps;

The first step will involve resource planning whereby the resources required for the
execution of the work will be determined. Resource planning will also entail undertaking an
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evaluation and a plan of the physical, human and financial resources required to execute the
works. Resource planning will begin with the scope and execution plan development process.
During this stage, the work breakdown structure and execution structure will be developed.
Through resource estimation, the activity resources which are needed will be determined (eg.
like hours, tools and materials). The estimated resource quantities, resource availability together
with the limitations considering the project circumstances will also be evaluated in the resource
planning stage. These will then be optimized with how the available activities will be used in the
activities over time.

The second step will involve cost estimating whereby the quantification of the costs and
prices to be used in the project will be done. This step will also involve the estimation of the time
duration of the activities to be undertaken during the project execution since these are likely to
lead to changes in scope or plan.

The third step will involve cost budgeting which will form the baseline for cost control
during the design and the execution of the project. The project execution plan together with the
associated cash flow estimates will consequently form the baseline references for the subsequent
monitoring of the project together with the project control. For the evaluation of whether the
budget is in tandem with the progress, the initially developed cost estimates will be converted
into a cost budget. The fourth cost management strategy will involve measuring any variances
from the cost budget baselines. This will encompass cost evaluation of the variances and then
undertaking corrective actions to achieve the minimum costs.

Question 1(b)

Methodology approaches for the cost estimation throughout the design development stage and up
to tender can involve several approaches. These approaches include the use of;

1) Expert judgement is one of the ways through which cost estimation can be undertaken
throughout the design development stage up to the tender stage. Expert judgement
involves the use of professionals with formidable experience in the field like quantity
surveyors. Expert judgement can therefore provide valuable insights on the costs
involved from the project design up to the tendering process.
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2) Another methodology which can be utilized involves the use of the analogous estimation
method. Through this, this technique is based on undertaking comparisons between the
project to be executed and other previously undertaken projects. During the analogous
estimation, the projects scope, size and complexity can be used as a basis for the
estimation of the costs of the project. This technique involves the actual use of previous
similar projects in undertaking the cost estimation of a particular project before its
commencement. However, this methodology can only be useful in the event that previous
projects are similar in structure and fact to the project being designed for.
3) Parametric cost estimation method will involve the use of algorithms and statistical
relationships between variables in order to estimate the costs needed to undertake a
particular project throughout the design up to the project development stage. For instance,
in construction, the square footage of the project is usually used to estimate the cost of
the project depending of factors like the technology to be employed in the construction,
the types of finishes to be used etc. This methodology has been deemed as being accurate
depending on the data and the assumptions made. In this method, the cost of the project
will be estimated based on the number and price of the project sub-components which are
usually referred to as work units. This will involve the following; identification of the
relevant project units, estimation of the costs of each project unit then determination of
the project cost.
4) The bottom -up estimation is another method which can be used to estimate the projects
cost. This will entail calculation of the cost of the project by first identifying and
evaluating the separate projects which make up the project. After the identification of
these components of the project, the individual expenditures for each project components
are then summed up in order to arrive at the total project cost. This will involve
accurately developing a complete work breakdown structure during the design and
project development stage. However, this method may usually be time consuming and
may require a considerable number of resources in order to execute it.

Question 2

Impacts of covid-19 on the construction costs.

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With the on-set of Covid-19 pandemic, there were unprecedented challenges which arose.
The construction industry was not left behind as it was adversely affected by the pandemic. The
construction industry has therefore been forced to adapt to the various challenges posed and also
formulate various solutions based on the various projects in order to mitigate against the delays
and other challenges occasioned by the pandemic. The costs on construction particularly
increased due to various lockdowns and social distancing rules which were occasioned by the
pandemic leading to direct and indirect cost impacts on the construction industry. In order to
ensure that safety of workers was maintained, construction projects had to be suspended leading
to increased project duration and timelines and consequently leading to rise in the project costs.
This is in addition to supply chain disruptions which were being experienced on associate sectors
such factors necessitate extension of time for construction projects which comes with inflated
costs. The various ways through which Covid-19 is likely to impact construction costs is
discussed below;

1) Construction pricing is highly sensitive to forces of supply and demand just like most
goods and services. This is particularly manifested through supply chain disruptions
whereby as a result of the imposed lockdowns, it has become difficult to transport various
required materials to the respective sites. This has consequently led to higher
transportation costs which are more likely than not to drive the costs in the construction
industry up. In some instances, there have compete shutdowns in the transportation sector
which have led to temporary stoppages of the construction work. As a client, necessary
measures should be implemented in order to overcome the transportation challenges
likely to be experienced in the course of the project. The ripple effects on material delays
and shortages are likely to felt for a considerable amount of time since manufacturing and
processing industries are also likely to undergo massive losses as a result of closure of
business.
2) The second cost impact on construction projects is related to the backlog in construction
projects which is likely to arise. This backlog is usually related to a huge number of
construction projects which have to be closed or postponed indefinitely. Commodity
prices are likely to reduce on the backdrop of a reduction in demand for construction
products occasioned by the pandemic.
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3) There are labour issues which are likely to arise as a result of the pandemic with labour
shortages likely to be experienced. Construction work is labour intensive, a large
proportion of construction costs are determined by labour expenses. However, massive
layoffs have occurred since the pandemic begun. Cessation of movement as a result of
the pandemic will lead to delays in turn around time and additional costs when it comes
to obtaining transport permits. The introduction of curfews has forced contractors to
adjust the working hours which has consequently affected scheduled works. Social
distancing rules mean that less construction workers have to be accommodated. This
consequently leads to less productivity meaning higher costs of execution of a project.
Compliance with various health guidelines like screening of workers imply additional
general contractor costs incurred which had not been factored for or anticipated. In the
event that a labourer is found to be infected, the works have to be closed leading to delays
in project execution.
4) Some construction works are funded on loans. Due the outbreak of the pandemic, there
were various stoppages of works which were experienced. These stoppages meant that
there was no productivity going on which could be used to service various loans. As a
result, and especially in the case whereby the terms of payment were not flexible, the
costs of execution of the projects rose significantly which was further complicated by
high interest rates in the event of default in the repayment of loans.

There are various cost management strategies which can be adopted during Covid-19 pandemic
in order to mitigate against the various adverse cost implications which are likely to arise. As a
result of the pandemic, there will be delays, loss of efficiencies in addition to the afore-
mentioned cost impacts. The management of the costs from the brief up to the tender stage can
involve several undertakings which can help to cushion against the anticipated losses and
increase in costs. Such strategies can involve the following;

1) Early development of mitigation plans for any potential slowdowns and shutdowns or
even project restarts. The mitigation plans can involve entering into pre-contract
agreements with the material suppliers regarding the supply of materials. This can be
aided by the development of a project start-up plan, this start-up plan can involve risk
analysis of the various costs involved in the event of disruption of activities by the
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pandemic. Risk analysis can factor in issues like disruption in the construction supply
chain, delays in obtaining permits, insolvency and even bankruptcy of the contractor.
Assessment of the services which can be continued off-site in order to limit delays as a
result of the pandemic.
2) Conducting a schedule assessment and time impact analysis will also help to identify
latent delays which are likely to be experienced before the project commences. This can
involve rescheduling and sourcing for materials of the crucial construction activities as a
way of anticipating for probable delays which are likely to happen in the event that the
pandemic leads to lockdowns. Acquiring necessary permits early enough may also lead to
avoidance of unnecessary delays.
3) Resource planning with the various major stakeholders like the project manager,
engineer, architect, contractor and subcontractor can help in the identification of the key
resources required throughout the duration of the project. This can go a long way in
identifying the key resources required for the execution of the project. Through effective
resource planning, changes to productivity can be estimated and determined.
4) The client should undertake the appropriate insurance cover in order to cushion
him/herself from any losses which are likely to occur. A review of the insurance policies
should be undertaken before the project commences in order to have an understanding of
how Covid-19 will impact the capital project and the project construction program. In the
event of delays, having an insurance policy in place will enable the client to cover any
losses which might push the project costs up like idle machinery, delay in materials and
construction interruptions
5) Preparation and having a cost plan early enough will go a long way in capturing all the
costs which are likely to arise from the project. The cost plan will also enable the client to
come up with approximate cost budgets before the project commences. Additionally, the
cost plan should also give best estimates of cashflows while setting costs for the future
running of the project in the event of the pandemic. Furthermore, the cost plan will cover
all the stages of the project and will form a great point of reference when it comes to how
the project costs will be managed. Through this, effective cost control will be established
which will enable the delivery of the project within the stipulated deadlines by assessing
the ongoing risks to costs which are likely to arise, strategies on how to achieve potential
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savings to costs and monitoring of the expenditure incurred in the periods of the
pandemic to ensure that it is within limits and that the expenditure is manageable.

Question 4

EXCLUSIONS

This estimate of the construction cost has been developed on the basis of ruling competitive
tender market conditions; the following items have been excluded in the elemental cost plan:

1) Any abnormal foundations

2) The pertinent Security system to be used in the facility
3) Fencing and gates
4) The pertinent Professional fees.

Other items which comprise of the total capital investment for the project as detailed below will
be reflected elsewhere. That is;

1) The costs of the property

2) Any local authority costs.
3) Any promotional costs.
4) Financing costs.
5) Professional fees.
6) Funding costs.
7) Tenanting costs.

Proposed Gross Floor Area = 18000m2.

TPI = 106.5

VAT is calculated at 14%.

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ESCALATION:

Pre-tender escalation will be based on latest published tender price index and Contract escalation
will be based on latest published building cost index.

Design brief:

• Structural system - Steel structural system with composite slab. This proposed structural system
is approximately 30% more expensive than precast Reinforced Concrete (RC) structural system.

• Mechanical & Electrical (M&E) systems - Prefabricated Mechanical, Electrical and Plumbing
(MEP) systems which is estimated to cost 20% more than the conventional M&E system cost c/o
Air Conditioning & Mechanical Ventilation (ACMV), Sanitary & Plumbing, Fire Protection and
Electrical system.

Total cost from the elemental cost plan = 66,818,969.39

Assuming 10% contractors preliminary = 66,818,969.39+6.681,896.9= 73,500, 866

Question 3(b)

Through elemental cost planning, design teams can plan adequately on how the tentative
budget is to be spent. The quantity surveyor is also able to carry out comparative cost estimates
for purposes of identification of alternative and more effective and economic solutions to the
project both at the detail and at the design level, this leads to optimization of the value for the
money invested in the project. In the process of cost control, which usually begins at the design
stage, cost forecasts are made about the tentative amounts which the project will consume. In the
event that a decision has been made in principle to proceed, an examination of the various
proposals presented is made in order to determine which proposal best meets the clients needs
and budget.

Therefore, the cost plan is a strategic financial plan which is structured towards
confirming and updating the cost estimates which had been initially developed during the cost
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outline proposal stage. It also ensures that the target costs are evenly and equally distributed over
the different parts of the building while also doing predictions about the contractor’s tender. By
utilizing cost plan, the amounts set out for each element in the building are ensured to be enough
while also conforming to the overall design of the project. Hence, the specific target costs of
each element of the building can be applied to each element of the building. Through the cost
plan, the building constraints can therefore be adhered to. The cost plan will cover all the stages
of the project and will form a great point of reference when it comes to how the project costs will
be managed. Through this, effective cost control will be established which will enable the
delivery of the project within the stipulated deadlines by assessing the ongoing risks to costs
which are likely to arise