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THE HONG KONG INSTITUTE OF SURVEYORS JUNIOR ORGANISATION – PQSL SERIES (23 NOVEMBER 2002)

THE HONG KONG INSTITUTE OF SURVEYORS JUNIOR ORGANISATION – PQSL SERIES (23 NOVEMBER 2002) PRE-CONTRACT CONSTRUCTION COST ESTIMATING By Sunny Chan, AHKIS, MRICS Stephen Wong, AHKIS, MRICS CONTENTS PART 1 - TERMS AND DEFINITIONS (A) Area Classification

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THE HONG KONG INSTITUTE OF SURVEYORS JUNIOR ORGANISATION – PQSL SERIES (23 NOVEMBER 2002)

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  1. THE HONG KONG INSTITUTE OF SURVEYORS JUNIOR ORGANISATION – PQSL SERIES (23 NOVEMBER 2002) PRE-CONTRACT CONSTRUCTION COST ESTIMATING By Sunny Chan, AHKIS, MRICS Stephen Wong, AHKIS, MRICS By Sunny Chan and Stephen Wong

  2. CONTENTS PART 1 - TERMS AND DEFINITIONS (A) Area Classification (B) Terms used in Cost Estimate and Cost Analysis PART 2 - TYPE OF COST ESTIMATE (A) The Pre-Contract Cost Estimating Process (B) Rough Indication of Costs/ Indicative Order of Costs (C) Preliminary Cost Estimate (D) Detailed Cost Estimate (E) Pre-Tender Estimate (F) Reconciliation of Estimate (G) Cost Studies of Alternatives PART 3 - IMPORTANT POINTS FOR COST ESTIMATING (A) Pricing of Cost Estimate (B) Verification of Quantities (C) Accuracy of Cost Estimate PART 4 - QUESTION AND ANSWER By Sunny Chan and Stephen Wong

  3. PART 1 – TERMS AND DEFINITIONS • (A) Area Classification • (B) Terms used in Cost Estimate and Cost Analysis By Sunny Chan and Stephen Wong

  4. PART 1 – TERMS AND DEFINITIONS (A) AREA CLASSIFICATION GROSS FLOOR AREA (GFA) of a building is the area contained within the external walls of the building measured at each floor level, together with the area of balcony and the thickness of external walls, but excluding carpark and plant room areas. (for submission to Planning Authorities) CONSTRUCTION FLOOR AREA (CFA) is the covered areas fulfilling the functional requirements of the building measured to the outside face of the external walls or external parameter, and measured over lift shaft voids and stair well, inclusive of bay window, carpark and mechanical room and open covered areas. LETTABLE AREA is the area which could be leased to a tenant for his exclusive use. Measurement should include half of the thickness of walls enclosing the lettable area. (for feasibility studies to assess the profitability) USABLE FLOOR AREA is the floor area other than staircases, staircase halls, lift landings, area for sanitary wares and area occupied by lift and machinery . (for submission to Planning Authority) By Sunny Chan and Stephen Wong

  5. PART 1 – TERMS AND DEFINITIONS (B) TERMS USED IN COST ESTIMATE AND COST ANALYSIS ELEMENT QUANTITY is the quantities of element based on element unit, e.g. room, door, wall finishes, etc. ELEMNET RATIO is the element quantity per unit CFA (i.e Element Quantity / CFA) ELEMENT UNIT RATE is the average cost per unit element quantity. (Thus, Total Cost of Element / Element Quantity) INDICES are the indication of price level for particular subject, such as tender price index, building services tender price index, labour index, material index and consolidated labour & material index. By Sunny Chan and Stephen Wong

  6. PART 2 – TYPE OF COST ESTIMATE • (A) The Pre-Contract Cost Estimating Process • (B) Rough Indication of Costs/ Indicative Order of Costs • (C) Preliminary Cost Estimate • (D) Detailed Cost Estimate • (E) Pre-Tender Estimate • (F) Reconciliation of Estimate • (G) Cost Studies of Alternatives By Sunny Chan and Stephen Wong

  7. PART 2 – TYPE OF COST ESTIMATE (A) THE PRE-CONTRACT COST ESTIMATING PROCESS (General Concept) By Sunny Chan and Stephen Wong

  8. PART 2 – TYPE OF COST ESTIMATE (B) ROUGH INDICATION OF COSTS/ INDICATIVE ORDER OF COSTS • Total Costs = Construction Floor Area (CFA) x Unit Area Cost (HK$/CFA) • Where, • CFA can be estimated based on the following information:- • Land & development conditions (e.g. site area, plot ratio, site coverage, height limitation and gross floor area)Maximum buildable area = site area x approved plot ratioApprox. CFA = site coverage area x no. of floor (for building with full site coverage)Approx. CFA = GFA x conversion factor (1.05-1.10 for residential, 1.10-1.20 for office) • Functional parameters [e.g. hospital (60m2 to 120m2 per bed), hotel (55m2 to 100m2 per room), auditorium (1.5m2 to 2m2 per seat) and carpark (30m2 to 40m2 per carpark)] • Unit Cost can be built up by :- • Reference to the Cost Analysis of the previous similar projects; and • Adjustment of price level, location factor, quality of standard, physical conditions, construction methods and other particulars. By Sunny Chan and Stephen Wong

  9. PART 2 – TYPE OF COST ESTIMATE (C) PRELIMINARY COST ESTIMATE Total Construction Costs = Sum of (Elemental Quantity x Elemental Unit Rate) In Elemental Form. It include the elements of demolition & alteration, site investigation, site formation, foundation, substructure & basement, structural frame, roof covering, external facade, internal partition & door, internal finishes, fitting & fixture, interior decoration, building services, landscaping, external works, preliminaries and contingencies. Elemental Quantity can be obtained either from the design information of the proposed project or the cost analysis of previous similar projects. Elemental Unit Rate can be estimated from the Cost Analysis of the previous similar projects; and with adjustment of price level, location factor, quality of standard, physical conditions, construction methods and other particulars. Allowance of Preliminaries and Contingencies The report of preliminary cost estimate consists of cover, contents, summary of estimated costs, scope of cost estimate (inclusion & exclusion), general particulars (project details, definition of area, schedule of area & basis of cost estimate), outline specification and assumptions and supplementary information. By Sunny Chan and Stephen Wong

  10. PART 2 – TYPE OF COST ESTIMATE (D) DETAILED COST ESTIMATE Total Construction Costs = Sum of (Approximate Quantity x Unit Rate) In Elemental Form. It include the elements of demolition & alteration, site investigation, site formation, foundation, substructure & basement, structural frame, roof covering, external facade, internal partition & door, internal finishes, fitting & fixture, interior decoration, building services, landscaping, external works, preliminaries and contingencies. Approximate Quantity for each element can be measured based on the design information (including drawings and specifications). Unit Rate can be estimated from the Cost Analysis of the previous similar projects with appropriate adjustment, (ii) recent returned tenders, (iii) recent prepared cost estimate, and (iv) supplier’s/sub-contractor’s quotations. Allowance of Preliminaries and Contingencies. The report of detailed cost estimate consists of cover, contents, summary of estimated costs, scope of cost estimate (inclusion & exclusion of works), general particulars (project details, definition of area, schedule of area and basis of cost estimate), outline specification and assumptions and supplementary information. By Sunny Chan and Stephen Wong

  11. PART 2 – TYPE OF COST ESTIMATE (E) PRE-TENDER ESTIMATE • Prepared based on the bills of quantities measured from the tender/working drawings. • Priced at the current rate which can be obtained from • the Cost Analysis of the previous similar projects with appropriate adjustment, • recent returned tenders, • recent prepared cost estimate, • supplier’s/sub-contractor’s quotations. By Sunny Chan and Stephen Wong

  12. PART 2 – TYPE OF COST ESTIMATE (F) RECONCILIATION OF ESTIMATE Reconciliation of Cost Estimate is used to systematically report the cost change/ difference between the old cost estimate and the new cost estimate. Therefore, the reasons of the change/difference can be identified and assessed. The cost difference is usually due to (i) change in price level, (ii) change in the Employer’s requirement, (iii) change in design/development, (iv) more advanced information obtained, (v) change in site conditions, and (vi) adjustment upon awarded contract. It is particularly useful for proceeding cost saving exercise and reporting changes of the project. Upon necessary, it may be required to carry out at each pre-contract stage. By Sunny Chan and Stephen Wong

  13. PART 2 – TYPE OF COST ESTIMATE (G) COST STUDIES OF ALTERNATIVES Cost studies is to compare two alternatives of design scheme/requirements in terms of cost consideration. It provides a clear cost direction for the client/architect to make their final decisions on the selection of design schemes. Particular in Value Engineering studies and can be applicable to each pre-contract stages. By Sunny Chan and Stephen Wong

  14. PART 3 – IMPORTANT POINTS FOR COST ESTIMATING • (A) Pricing of Cost Estimate • (B) Verification of Quantities • (C) Accuracy of Cost Estimate By Sunny Chan and Stephen Wong

  15. PART 3 – IMPORTANT POINTS FOR COST ESTIMATING (A) PRICING OF ESTIMATE • Use of Composite Rates and Lump Sum Allowances • Source of Prices can be obtained from/ cross-checked by (i) suppliers/sub-contractor’s quotations, (ii) recently returned tenders, (iii) recently prepared estimates, (iv) historical cost data/ cost analysis. • Particular attention to be drawn on price level, market conditions, location of site, site conditions, programme of work, procurement method, contract conditions, size of the project and other special characteristics. By Sunny Chan and Stephen Wong

  16. PART 3 – IMPORTANT POINTS FOR COST ESTIMATING (B) VERIFICATION OF QUANTITY The quantity of each element should be checked and verified whether it is reasonable. The following are some of the common ratio/proportion for verification of the element quantity. • CFA / no. of H-pile and CFA/ sectional area of bored pile • Reinforced concrete / CFA • Formwork / CFA • Reinforcement / CFA and Reinforcement / reinforced concrete • (External wall finishes + windows + curtain wall) / CFA • Roof waterproof = largest footprint • Floor finishes = Approx. 90% CFA • Internal wall finishes / CFA and Internal ceiling finishes / Total floor finishes By Sunny Chan and Stephen Wong

  17. PART 3 – IMPORTANT POINTS FOR COST ESTIMATING (C) ACCURACY OF ESTIMATE • Client’s brief • Availability of Information • Market condition/inflation • Method of estimating • Site conditions • Tendering procedure and contractual arrangement • Uniqueness of project • Experience of estimator By Sunny Chan and Stephen Wong

  18. PART 4 – QUESTION AND ANSWER Q & A By Sunny Chan and Stephen Wong

  19. - END OF PRESENTATION - By Sunny Chan and Stephen Wong

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