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Question 1
The SCFA (Standard Form of Cost Analysis) and the NRM1 (New Rules of Measurement 1) were
developed to facilitate the move from costing a design to designing a cost. Critically evaluate if this
can be achieved.
Answer
The Cost Plan
Every project has a budget and every client needs to understand what the budget should be before
proceeding to design and construction stage. The QS will be asked to prepare a cost plan. The cost
plan’s purpose is;
1.
Assist the design team in controlling the cost of the design
2.
Assist in economically spreading the cost between the elements of the building
3.
A tool for analysing and comparing tenders
4.
Assist the client in setting and understanding their budget
The cost plan would normally be in the form of a elemental cost plan developed through a process
of studying and examining the elemental cost analysis of completed projects from the BCIS data
base. The Standard Form of Cost Analysis provided a standardised and systematic approach to
setting up a elemental cost analysis for all projects.
In addition and in complement to the SFCA, the New Rules of Measurement (Part 1) – Order of
Cost Estimating assist the QS to understand the process and the rules of deriving estimates for cost
planning and incorporation into the elemental cost plan.
Standard Form of Cost Analysis (SFCA)
The purpose of cost analysis is to provide data that allows comparisons to be made between the
costs of achieving various building functions in a project with those of achieving equivalent
functions in other projects. It is the analysis of the cost of a building in terms of its elements.
An element for cost analysis purposes is defined as a major physical part of a building that fulfils a
specific function or functions irrespective of its design, specification or construction. The list of
elements, however, is a compromise between this definition and what is considered practical.
The cost analysis allows for varying degrees of detail related to the design process; broad costs
for building types are needed during the initial period and progressively more detail is required
as the design is developed. The elemental costs are related to square metre of gross internal floor
area and also to a parameter more closely identifiable with the elements function – the element
unit quantity.
Supporting information on contract, design/shape and market factors is defined so that the costs
analysed can be fully understood.
The aim has been to produce standardisation of cost analyses and a single format for presentation.
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Cost analyses are normally prepared from contract documents at ‘tender’ stage (commit to
construct) and therefore only reflect the cost of the construction work. NRM1 covers all the client’s
project costs and the SFCA has been expanded to facilitate the collection of this wider information
where available:
1. Project/design fees
2. Other development/project costs
3. Client’s risk
BCIS will continue to collect, analyse and publish costs derived from building contracts; the
expansion of the standard form will allow clients to record their additional direct costs, although
BCIS will be happy to record and publish these as well.
Cost analysis
1.
Element Costs
Total costs should be provided for each element and sub-elements as appropriate. Costs
should be shown separately where required in the elemental definitions and for different
forms of construction.
The costs of sub-elements should total to the element costs. The cost of the elements should
total to the contract sum less main contractor’s profit, where identified; preliminaries;
contingencies and, where appropriate, contractor’s design fees.
The cost of each element and the items comprising it should correspond with the
specification. If no cost is attributed to an element a note should be made to that effect.
Where the costs of more than one element are grouped together, a note should be inserted
against each of the affected elements explaining where the costs have been included. For
example, if windows in curtain walling are included in ‘External Walls’ it should be so
stated in the element ‘Windows’, and details of the cost and specification included with
the element ‘External Walls’.
Where various forms of construction or finish exist within one element, the net areas and
costs of the various types of construction should be included separately in the specification
notes.
2.
Preliminaries
The cost of preliminaries for the building being analysed should be stated and expressed as a
percentage of the contract sum excluding preliminaries, contingencies and, where
appropriate, contractor’s design fees.
3.
Main Contractor’s Overheads and Profit
The cost of overheads and profit, where identified separately, should be stated and
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expressed as a percentage of the contract sum excluding main contractor’s overheads and
profit, contingencies and where appropriate, contractors’ design fees.
4.
Contractor’s Commercial Risk
Where contractor’s commercial or other risk is included in a target cost, or the like, it shall
be allocated across the elements and preliminaries or as shown in the contract.
5.
Client’s Risk (Contingencies)
The cost of contingencies for the building being analysed should be stated but does not
form part of the building analysis.
6.
Contractor’s Design Fees
The cost of contractor’s design fees for the building being analysed should be stated but
does not form part of the building analysis.
7.
Project Design Team Fees and Other Development/Project Costs
Where they are available, Project Design Team Fees and Other Development/Project Costs
should be stated but they do not form part of the building cost analysis.
Cost of Building per m² or Functional Unit
Where the total building cost is expressed as £/m² floor area or £/functional unit, the cost of the
building should be the sum of elements 1-7, with preliminaries and main contractor’s overheads and
profit percentages apportioned. Unless shown otherwise in the contract, the preliminaries and main
contractor’s overheads and profit shall be apportioned as shown above.
Note: The expression of cost of External Works and Facilitating Works related to Gross Internal
Floor Area of the building is not particularly meaningful. It is used in the ‘Summary of element
costs’ so that the totals agree arithmetically.
Cost of Element per m² or Functional Unit
Where the cost of an element is expressed as £/m² floor area or £/element unit quantity, it should be
stated whether or not the costs include preliminaries and/or main contractor’s overheads and profit.
Works Outside the Site
The costs and details of any works included in the contract that are outside the site should be shown
separately.
Element unit quantities
The cost of the element should be expressed in units that relate solely to the quantity of the element
itself – Element Unit Quantities (EUQ). Element unit quantities are specified in the element
definitions.
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Area for Element Unit Quantities
Floor areas for element unit quantities should be measured as for Gross Internal Floor Area (GIFA),
i.e. to the internal face of the enclosing wall to the area treated or serviced.
Cubes for Element Unit Quantities, etc.
Cubes for air conditioning, etc. (treated volume), shall be the floor area, measured to the internal face
of the enclosing walls of the treated space, multiplied by the height from the floor finish to the
underside of the ceiling finish (abbreviated to Tm³).
Specification and design criteria
Specification and design criteria relating to requirements, purpose and function of the element,
should be given for each element.
The specification notes are considered to reflect designers’ solutions to the conditions expressed
by the design criteria and should indicate the quality of building achieved.
Specification notes should adequately describe the form of construction and quality of material
sufficiently to explain the costs in the analysis.
The element definitions (Section 5) provide a checklist of the items that should be included with
each element. Include costs of any significant items.
Any work included that is not covered by the elemental definition should be noted.
New Rules Of Measurement (Part 1) Order of Cost Estimating and Cost Planning for Capital
Building Works
First and foremost, changes have been made so that both the RICS NRM and RICS BCIS (Building
Cost Information Service) elemental breakdown structures are fully aligned. Notwithstanding these
changes, the basic organisation of the second edition of the RICS new rules of measurement: Order
of cost estimating and cost planning for capital building works remains the same as the first edition.
Change has been made simply to make clear the purpose and use of the elemental method of
estimating to establish an initial cost model before embarking on the preparation of formal cost plan
1, and how these rules can be used as a basis for the preparation of cost analyses and benchmark
data.
This volume provides indispensable guidance on the quantification of building works for the
purpose of preparing cost estimates and cost plans. Direction on how to quantify other items
forming part of the cost of a construction project, but which are not reflected in the measurable
building work items, is also provided – i.e. preliminaries, overheads and profit, project team and
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design team fees, risk allowances, inflation, and other development and project costs.
NRM 1 is the ‘cornerstone’ of good cost management of construction projects – enabling more
effective and accurate cost advice to be given to clients and other project team members, as well as
facilitating better cost control.
Although written primarily for the preparation of order of cost estimates and cost plans, the rules
will be invaluable when preparing approximate estimates.
In addition, the rules can be used as a basis for capturing historical cost data in the form required
for order of cost estimates and elemental cost plans, thereby completing the ‘cost management
cycle’.
Measurement in context with the RIBA Plan of Work and OGC Gateway Process
Throughout this document, references are made to both the RIBA Plan of Work and the OGC
Gateway Process and the RIBA Work Stages/OGC Gateways within.
The RIBA Plan of Work is a construction industry recognised framework that organises the process
of managing and designing building projects and administering building contracts into a number of
key Work Stages. The RIBA Plan of Work has 11 sequential steps. Despite its apparent linear
nature, it should be recognised that the sequence or content of RIBA Work Stages may need to be
varied or overlapped to suit the proposed procurement method. Consequently, when two or more
Work Stages are combined, it is not always transparent when a building project is moving from one
stage to another.As such, it is an ideal tool, provided that it is conceptualised as providing the basic
outline of the building project process.
As an alternative to the RIBA Plan of Work, central civil government, the health sector, local
government and the defence sector have adopted the OGC Gateway Process as best practice for
managing and designing building projects. The process examines programmes and projects at key
decision points in their life cycle. It looks ahead to provide assurance that the employer can
progress to the next stage. Project reviews are carried out under OGC Gateway Reviews 1 to 5.
Typically a project will undergo three reviews before commitment to invest, and two looking at
service implementation and confirmation of the operational benefits.
Both models are recognised frameworks for managing and designing building project.
Cost estimates and cost plans will need to be prepared by the quantity surveyor/cost manager at
various stages of the RIBA Plan of Work or at various gateways in the OGC Gateway Process,
whichever management process is applicable. To address this requirement RICS has determined a
series of formal cost estimating and elemental cost planning stages.These formal stages are shown
in Figure 1.1 in the context of the RIBA Work Stages and OGC Gateways. Notwithstanding this,
some employers may require the preparation of cost plans at different RIBA Work Stages. For
example, some employers may ask for Formal Cost Plan 1 to be prepared at Work Stage C+ (Work
Stage C+ being an employer-defined work stage, which occurs at a point between the completion of
Work Stage C: Concept and Work Stage D: Design Development).Work Stage C+ would usually
comprise the deliverables that the employer requires prior to submitting a building project for
planning approval. It is essential, therefore, that the quantity surveyor/cost manager ascertains from
the employer if there is to be any deviation from the recommended formal cost planning stages
before commencing the cost planning process.
Purpose of NRM 1
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The RICS new rules of measurement have been written to provide a standard set of measurement
rules that are understandable by all those involved in a construction project, including the employer;
thereby aiding communication between the project/design team and the employer. In addition, the
RICS new rules of measurement should assist the quantity surveyor/cost manager in providing
effective and accurate cost advice to the employer and the project/design team.
1. The document provides rules of measurement for the preparation of order of cost estimates
and elemental cost plans. Direction on how to describe and deal with costs and allowances
forming part of the cost of a building, but which are not reflected in the measurable building
work items, is also provided.
2. The RICS new rules of measurement do not explain estimating methods, cost planning
techniques, procurement methods or contract strategies; advice on these is obtainable in
other RICS publications and from other external publications.
3. The RICS new rules of measurement are based on UK practice but the requirements for a
coordinated set of rules and underlying philosophy behind each section have worldwide
application.
Use of NRM 1
1. The RICS new rules of measurement: Order of cost estimating and cost planning for capital
building works provides a structured basis for measuring building work and presents a
consistent approach for dealing with other key cost components associated with a building
project when preparing order of cost estimates and elemental cost plans. The rules represent
the essentials of good practice.
2. The rules deal with measurement for the preparation of:
order of cost estimates, including ‘rough’ order of cost estimates;
elemental cost models;
cost plans;
cost analyses; and
benchmark analyses.
3. Users of the rules are advised to adopt metric units as the standard system of measurement.
Where the employer requires reference to imperial units these may be provided as
supplementary information (e.g. in parenthesis).
4. Although the British Standard BS 8888:2006 Technical Product Specification (for defining,
specifying and graphically representing products) recommends the inclusion of a comma
rather than a point as a decimal marker, and a space instead of a comma as a thousands
separator, the traditional UK convention has been adopted in these rules (i.e. a point as a
decimal marker and a comma as a thousands separator). Users should take care to ensure
that this does not conflict with employer requirements.
Structure of NRM 1
1. The RICS new rules of measurement: Order of cost estimating and cost planning for capital
building works is divided into four parts with supporting appendices:
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•
Part 1 places cost estimating and elemental cost planning in context with the RIBA
Plan of Work and the OGC Gateway Process and explains the symbols, abbreviations
and definitions used in the rules.
•
Part 2 describes the purpose and content of an order of cost estimate; defines its key
constituents; explains how to prepare an order of cost estimate; and sets out the rules
of measurement for the preparation of order of cost estimates using the floor area
method, functional unit method and elemental method.
•
Part 3 describes the purpose of elemental cost plans; explains their key constituents;
and explains how to prepare an elemental cost plan.
•
Part 4 comprises the tabulated rules of measurement for the preparation of formal cost
plans.
•
Appendices:
Appendix A: Core definition of gross internal area (GIA)
Appendix B: Commonly used functional units and functional units of measurement
Appendix C: Core definition of net internal area (NIA)
Appendix D: Special use definitions for shops
Appendix E: Logic and arrangement of levels 1 to 3 for elemental cost planning
Appendix F: Information requirements for formal cost plans
Appendix G: Template for elemental cost plan (based on level 1 codes) Appendix H:
Template for elemental cost plan (based on level 2 codes)
The SFCA and the New Rules of Measurement: Order of cost estimating and cost planning for
capital building works (NRM1)
The SFCA shares elemental definitions and data structure with the second edition of New Rules of
Measurement for order of cost estimating and elemental cost planning for capital building works
(NRM1), but they have different objectives:
◊ The SFCA provides rules for allocating cost to their functional elements.
◊ The detailed tabulated rules of measurement for costs planning in NRM1 provide rules for
measuring designed elements and components.
The NRM tables are therefore expanded to cover various design solutions to the same functional
element; this does not affect the definition and numbering of the elements and sub-elements,
which are common to both documents.
There is one instance, Work to Existing Buildings, where the measurement rules in NRM1 have, for
ease of pricing, been grouped to reflect their specification and procurement rather than their
function. For cost analysis purposes, these costs should be allocated to the appropriate elements.
When analysing refurbishment or conversion work, the cost of work to existing structure, fittings,
finishes and services should be allocated to the appropriate functional element. General stripping
out costs that cannot be allocated should be shown in Work to Existing Buildings– minor
demolition and alteration works.
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