Cost planning in construction is necessary since building a house is a very expensive thing to do and any mistakes can be very costly to the client. It is very important to know how to plan and to ensure that the building is suitable as far as the resources are concerned. All factors should be considered to ensure maximum value for your money. It is also important to note that a building should not cost more than what the client has budgeted for.
There are different methods of cost planning during construction which the client should be able to use for purposes of ensuring the budget is not overrun. These methods involve approximate estimation of the client’s budget. One method involves looking at similar structures erected within the resent time frame since costs do not differ very much within the same location. A developer should always consult on the prevalent costs before commencing building works.
The method of cost planning during construction we call comparative method involves taking similar structures done in recent past in the neighbour hood and making several adjustments. The adjustments involve size of the new building the client is undertaking. Other items to be considered include services like water, sewers or septic tanks, roads and also variations in prices of materials.
In recent years various methods of cost planning have been evolved but to date there is no universal system which can be satisfactorily applied to every type of project. There are two main methods used for effective cost planning, they are Elemental cost planning system and the Comparative system.
1. Elemental Cost Planning
In an elemental cost plan the estimate is broken down into a series of elements that can then be compared with later estimates, or with actual costs as the project progresses. Typically, each element is treated as a cost centre, but money may be transferred between elements, provided a reasonable balance between elements is maintained and the overall target budget is not exceeded. The initial cost plan is likely to be based on approximate figures, which provide a fair basis for determining the validity of future estimates. Control by the project manager is achieved by an ongoing review of estimates for each cost centre against its target budget. As design develops and costs have been made, any variance in cost from the cost plan is identified. Decisions are then taken on whether that element can be permitted to increase in cost, which would require a corresponding reduction elsewhere, or whether the element must be re-designed in order to keep within the budget.
Advantages of Elemental Cost Planning
An adaptable system which can be used with suitable adjustment at all stages of the design process, this can be a real advantage as it is flexible enough for most construction projects, and this is the main reason why it is the first choice that many people have in mind.
Their basic forms of analysis (the element) mean it is a system capable of being understood by parties. Due to the simplicity of this method it can be widely understood by all participating members. In addition to this the simplicity makes it an easier process to complete.
Comparisons between projects and between elements can be made rapidly, and each element can be adjusted individually. This is yet another great advantage, for if any reason there may be budget increase for improved services in the building, then it can be easily adjusted to handle the budget increase.
Elemental costs plans allow the design team members to gain elemental costs and to ascertain the costs implication during the early stages of the project; this allows greater control for other member of the design team.
Disadvantages of Elemental Cost Planning
Elemental cost plan require more time and effort in their preparation, but this investment should give better returns in aiding decisions-making. This process can be time consuming as each element must consider individually.
Extensive cost databases are required to ensure accuracy of costs; this can lead to high costs for software and training.
High levels of ability and expertise are required if elements are to be properly evaluated and adjusted. It can be expensive to find and hire suitable candidates with sufficient experience to manage cost control.
2. Comparative System
Comparative cost planning assumes that initial feasibility studies and cost advice have determined the general layout and arrangement of the building in the light of its total estimated or prescribed cost limit, and sets out to examine what could be described as a market of alternatives open to the designer in respect of each part of the building, and which are both feasible and acceptable to him. The study of alternative design solutions takes account of all the consequential effects of decisions on various parts of the building, relating to one particular part.
The information concerning alternatives is set out in a manner which enables the architect to make rational decisions in the light of their individual order of cost and their cumulative effect on total cost, before he starts developing his design. Having settled his design decisions he then develops them, and only if he changes from them should the cost plan need adjustment.
The comparative method does not seek to enforce rigid cost limits for the design of particular elements, but rather to maintain flexibility of choice of a combination of possible design solutions, that will serve the purpose to be achieved. It is more concerned with the comparison of alternative possibilities within a total sum, rather than attempting to control the design piecemeal in relation to targets for limited sections of the work. Its object is not necessarily to show how cheaply a building can be produced but to show the spread of costs over varies parts of the building and what economies are feasible. This enables the architect, within his cost terms of reference, to use the money to the best advantage in interpreting his design. This should lead to economy in design and will assist in comparison of elemental cost apportionment as between one building and another.
Advantages of Comparative System
The comparative system endeavours to show the architect the cost consequences of what they are doing and what they can do. This gives greater control to the architect, and due to the fact that they can foresee a problem and avoid it, thus saving time
Costs are also expressed a cost per square meter of gross floor area for ease of comparison. This makes it easy for everyone to understand as a ‘regular’ person would be able to understand it with a simple glance.
Cost of an element can be adjusted with out effecting the unit expression of others. This makes it a lot simpler to make those small changes with out worrying about the units.
Disadvantages of Comparative System
Drawing cannot be guaranteed to include each and every item that occurs in practise. This can be a major problem as each element is not taken into consideration.
It is always customary to add a sum at the end of a cost plan. This can be a lengthy and time consuming process.
When producing the cost plan the overall layout can often become complex making it complex for other to fully understand.