Budget vs. Design

1. Budget vs. Design LAPA Annual Conference 2013 Trevor HipkinsDavis Langdon John CameronGHD

2. I am pleased to announce that all our projects are completed within budget Budget vs. Design LAPA Annual Conference 2013

3. ScopeDefinition “Tell me what you want,or tell me what you can afford...But please don’t tell me both! - Sir Aston Webb Budget vs. Design LAPA Annual Conference 2013

4. Budget vs. Design – How to control budgets at project concept stage • Brief / Scope • Budget • Risk Management • Value Engineering • Questions Budget vs. Design LAPA Annual Conference 2013

5. Define the Brief • Client brief / scope • Stakeholders • Predefined budget • Stick to brief if you want to stick to budget • Identify what isn’t included Budget vs. Design LAPA Annual Conference 2013

6. A Clear Way Forward Budget vs. Design LAPA Annual Conference 2013

7. How to Manage a Changing Brief • Review updates to brief and report variances against agreed budget • Seek to get additional funding for “scope changes” to protect the original contingency • Review any changes to procurement strategy • Review all documentation at key milestones, ie: • Concept • Preliminary Design • Developed Design • Construction Documents Budget vs. Design LAPA Annual Conference 2013

8. How to Deal with Scope Creep • Advise Client/Sponsor of budget adjustment due to scope creep • Look for alternatives to save money • Price options and recommendations for consideration to save money • Interrogate the reasons behind any Scope Creep. • Ensure you provide budget reconciliation in order to demonstrate clearly why the budget has moved • Seek reconfirmation of budget and approval of adjusted budget • Identify area of highest project risk and focus design and cost on this area Budget vs. Design LAPA Annual Conference 2013

9. William Shakespeare “When we mean to build,We first survey the plot, then draw the model;And when we see the figure of the house,Then we must rate the cost of the erection;Which, if we find outweighs ability,What do we do then, but draw anew the model in fewer offices;or at least desist to build at all.” - Henry IV Budget vs. Design LAPA Annual Conference 2013

10. How the ARCHITECT designed it… How the ENGINEER modified it… How the QUANTITY SURVEYOR estimated it… How the LAWYERS documented it… How the CONTRACTOR priced it How it was BUILT…. How the VALUER valued it… Setting the Appropriate Budget • Consultants’ perceptions of clients’ needs: Budget vs. Design LAPA Annual Conference 2013

11. Lesson: identify the scope ACCURATELY Setting the Appropriate Budget What the CLIENT wanted: Budget vs. Design LAPA Annual Conference 2013

12. Setting the Appropriate Budget • After the scope has been identified: • Assess the current market • Ensure the brief is documented • Ensure the brief has input and buy-in from all relevant stakeholders • Identify any constraints • Assess project specific risks • Identify any programme requirements, i.e. fast track or staging • Ask plenty of questions if the brief is vague • Build in realistic contingency allowances; these can vary from 5% – 20% Budget vs. Design LAPA Annual Conference 2013

13. Setting the Appropriate Budget • Bench mark against similar projects • Include in the project budget all items that relate to the project, not just construction costs: • Identify all exclusions • Construction • Consent Fees / Contributions • Legal / Accounting / Finance, etc. • Risk • Other • Consultant Fees • Escalations • FF&E • Contingencies Budget vs. Design LAPA Annual Conference 2013

14. Explore Alternatives Budget vs. Design LAPA Annual Conference 2013

15. Robust Budget through the Design Stage • Get client/sponsors sign-offs to budget at key Milestones. • Scope and budget must align at all stages. • As design progresses through each design phase, carry out a budget check and take corrective action/Value Management to bring the project back within budget. • Manage design-related contingency spend. • Monitor Separate Development Costs included within the Budget. • Complete a “Health Check” against the Business case Budget vs. Design LAPA Annual Conference 2013

16. The Budget Tug Of War Budget vs. Design LAPA Annual Conference 2013

17. Budget Estimate Stages • Concept Design stage – m2 rates • Developed Design stage – elemental budget estimate • Detailed Design stage – detailed elemental cost plan • Construction Drawing stage – tender FEC Budget vs. Design LAPA Annual Conference 2013

18. Learn from Experience Budget vs. Design LAPA Annual Conference 2013

19. Budget / Cost / Risk Reconciliation • Less design equals less certainty equals greater risk equals more contingency required • Certainty / Risk model: Certainty Value $ Risk Time Budget vs. Design LAPA Annual Conference 2013

20. Typical Problems • Budget set as part of 10 year plan without escalation • Political / stakeholder interference • Project not scoped properly • Timeline unachievable • Sudden change in market pricing • Lack of due diligence • Lack of management • Inadequate documentation Budget vs. Design LAPA Annual Conference 2013

21. Honesty Budget vs. Design LAPA Annual Conference 2013

22. Risk Management Budget vs. Design LAPA Annual Conference 2013

23. Providing for the unknown: how big is your crystal ball? The Quantity Surveyor / Estimator needs to cost not what is shown but what is needed Budget vs. Design LAPA Annual Conference 2013

24. Contingency • Design Contingency – Utilised through the Design Process • Allocated Contingency – Foreseeable Potential Risk Items • Ground conditions • Contamination • Asbestos • Unallocated Contingency – The unknown • Level of contingency will depend on complexity of project and risks associated with areas that are unknown • A change of brief should not come out of contingency, the budget should be adjusted • Contingency needs to be managed through the development process Budget vs. Design LAPA Annual Conference 2013

25. Value Engineering Potential for change Resistance to change Cost of change Cost $ The value zone Concept Design Construction Use Time Budget vs. Design LAPA Annual Conference 2013

26. Questions Budget vs. Design LAPA Annual Conference 2013

27. Thank you