Estimation of Building Costs - University of Johannesburg PDF

COST S D IN G N OF BUIL TIO ESTIMA ESTIMATION OF BUILDING COSTS OUTCOME The objective of this lecture is to provide you with a basic knowledge of the methods and tools used to ensure that building projects are completed within an approved budget. INTROD...

COST S D IN G N OF BUIL TIO ESTIMA ESTIMATION OF BUILDING COSTS OUTCOME The objective of this lecture is to provide you with a basic knowledge of the methods and tools used to ensure that building projects are completed within an approved budget. INTRODUCTION AND OVERVIEW In the production process, the inputs needed, which are relatively scarce and come at a certain cost are planned for. The processes include: Resource planning - People (labour), equipment, materials and what quantities should be used to perform project activities. Cost estimating - Estimating the costs of the resources to complete the project activities. Cost budgeting - Allocating cost estimates to individual items and project expenditure over time. Cost control - Ensure adherence to and controlling changes to the project budget. NB: Difference between cost estimating and pricing in a building contract - Cost estimating is an assessment of the likely quantitative result / how much it will cost the performing organisation to provide the product or service involved; whereas, Pricing is a business decision – how much will the performing organisation charge for the product or service. 05/12/2025 2  ESTIMATION OF BUILDING COSTS - METHODS The cost of a building estimated as at the present time and under prevailing building-market conditions, for the client/employer. Project owners use cost estimates to determine a project's scope and feasibility and to allocate budgets. Different methods of drawing up an estimate, requiring different kinds of information, to serve a particular purpose, exist. These methods include: Cost-per-unit method of estimating - Extremely rough indication of total cost and rather unreliable method of estimating - Consists of multiplying the use-factor of a building, number of flats in a block of flats, number of seats in a church, etc.) by a monetary rate, to obtain an estimate of the total building cost. - Can be used for setting a target or cost limit (cost norm). For example in a hospital: Ward block - number of beds; Out-patients section - number of out- patients that could be treated in that section per day; Kitchen block number of meals to be served per day. Square-metre method of estimating - Method that has been employed for many years and still in general use. - Multiply the total construction area by a monetary rate (based on recent or concurrent rates for comparable buildings), to obtain an estimate of building costs - Costs of external paving, yard or boundary walls and other external works 05/12/2025 3 and any items of exceptional value are separately calculated.  ESTIMATION OF BUILDING COSTS CONSTRUCTION AREA OF A BUILDING - “the total of all the areas of a building measured on plan at each covered floor level over the external walls, and outermost vertical enclosing planes or, where applicable, the centre line of party walls between buildings.” CALCULATION OF THE CONSTRUCTION AREA Items specifically INCLUDED - Internal stairwell and staircase areas; Lift shaft areas; Duct space areas; Mezzanine floor areas; Finished floor areas in attic spaces; Penthouses, staff quarters, lift motor rooms, etc.; All open but covered porches, balconies and balcony corridors within the enclosing planes of the main building; Floor areas to attached sheds, carports, etc. and all partially completed rooms, porches, balconies, etc., provided that relevant areas are covered and have at least two of their walls not less than two-thirds of the storey height on which they occur. Items specifically excluded include: External steps and paved areas; Areas of projecting roof overhangs, hoods, and canopies and the like; Enclosed open areas (light or ventilation, wells and courtyards); Areas of outside covered ways and carports, etc.; Areas of unenclosed fire escapes; Areas of small projections such as pilasters, attached piers, fins, chimney breasts, etc. 05/12/2025 4 Setting out  ESTIMATION OF BUILDING COSTS Exercise: The following is a diagrammatic plan of a block of flats (45 X 11) together with an example of a square-metre estimate of building costs: Ground floor: Under block parking except entrance hall of 3,0 m x 4,0 m plus 2,0 m x 3,0 m and staff quarters of 3,0 m x 10,0 m. Typical floors: 6 Lift motor room: 2,0 m x 4,0 m Determine the rate per square metre (See solution on the next slide with additional notes) 05/12/2025 7 05/12/2025 8 ESTIMATION OF BUILDING COSTS FACTORS WHICH COULD AFFECT/VARY THE RATE USED IN A SQUARE-METRE ESTIMATE. Fullness on plan and Shape of building – Consider the following examples: Irregular shapes will cost more than simple shapes. For Building B with irregular shape, the floor area is larger and thus requires more external walling, higher setting out and excavation costs, higher drainage costs due to extra manholes and extra length of piping needed, and additional costs form other elements such as walling and roofing given the complicated shape. 05/12/2025 9 ESTIMATION OF BUILDING COSTS Similarly, the rate per square metre for regular shapes which are longer and narrower will be higher. For the buildings below, assume that the superstructure walling for both is 3m high; and the external wall length is 80m and 208 m for A and B, respectively. For A: Area of plan = 400m2, length of walling = 80m, height of walling 3m @ R200 per metre. Then cost/m2 = (80 X 3 X 200) / 400 = R120 per m2 For B: Area of plan = 400m2, length of walling = 208m, height of walling 3m @ R200 per metre. Then cost/m2 = (208 X 3 X 200) / 400 = R312 per m2 Likewise, a block of flats with bachelor flats will differ from a block of three-bedroom flats. Consider the same buildings below. If the smaller building (A) was a block of bachelor flats, with more division walls and bathrooms, and building B (a block of three-bedroom flats, the cost of providing more division walls and more bathrooms will result in higher costs for building A even though it is a smaller building. 05/12/2025 1 0  ESTIMATION OF BUILDING COSTS Floor-to-ceiling height - The rate per m2 for a building of 3 m floor-to-ceiling height will be lower than the rate for a building with 4 m floor-to-ceiling height. Height of building - The rate per square metre for a single or double-storey building and for example, a forty-storey building respectively could be substantial. Horizontal wind loads become a marked factor in structure costs when buildings exceed twenty storeys. Construction differences - Reinforced concrete walling instead of brick walling, hollow-tile slab construction instead of solid slab construction, industrialised building methods instead of conventional methods, etc. Difference in finish and/or architectural detail - The rate per square metre will be substantially affected if, for instance, marble floor slabs are used instead of granolithic floor finish, or precast terrazzo cladding instead of bagging and lime wash to walls. Sanitary fittings, joinery fittings, etc. - A concentration of toilets or sanitary fittings will make a substantial difference in the rate per m2 of the building. 05/12/2025 1 1  ESTIMATION OF BUILDING COSTS Site - Nature of foundations, sloping or level site, the position of municipal sewer connection, resulting in excessive length of drains, and access difficulties could affect the square-metre rate Locality or area - Building costs vary considerably from place to place. A difference of approximately 10% in building costs between Pretoria and Johannesburg. Tender conditions - Tender amount can be influenced by the use of competitive or negotiated tendering methods and availability of tenderers, etc. Negotiated contracts invariably more expensive than open-tender contracts in a competitive market. Building-contract period - The shortening of the period for the completion of a building will result in increased building costs. GAUTRAIN needed an additional R10 Billon to complete the section between Sandton and OR Tambo before the soccer. Square-metre method of estimating should not be employed, except for preliminary estimates of building costs if only block plans or rough diagrams are available. 05/12/2025 1 2  ESTIMATION OF BUILDING COSTS Important to note that there are four basic rates per m 2 which are generally quoted namely: Basic building rate - excluding special items and site works and general. Example: R1 500000.00 1 000 m2 = R1 500,00 per m2 Building rate, i.e. basic rate plus special items such as specialist work, mechanical work, etc. but excluding site works and general. Example: R1 800 000.00 1 000 m2 = R1 800,00 per m2 Project rate - overall rate, including site works and general. Example: R2 200 000.00 1 000 m2 = R2 200,00 per m2 Use factor rate - rate per usable or lettable area Example: R2 200 000.00 850 m2 = R2 588,24 per m2 of lettable area 05/12/2025 1 3 ESTIMATION OF BUILDING COSTS OTHER METHODS OF ESTIMATING INITIAL COSTS Storey-enclosure method of estimating - - Measuring certain areas, the roof area, the floor area, the vertical external wall area, etc. multiplying each area by a factor predetermined for each component - Result multiplied by a single common rate, to obtain an estimate of building costs for the structure, roof, floors and finishes of the building. - Plumbing and sanitary fittings, joinery fittings, etc. are separately measured and estimated. Rough or approximate-quantities method of estimating - The important cost items are measured in much the same way as the items in a bill of quantities. - Identical or near identical items grouped together (e.g. although varying in exact area, the areas of the floor finishes, screeds, surface beds, hard-core and earth filling are sufficiently similar to permit them to be grouped together. Elemental method of estimating - considered the most reliable, accurate and consistent - Buildings are divided into elements, e.g. structural frame, external facades, plumbing, etc. - Each element subdivided into components, e.g. concrete walls & other walls, external finishes, windows & window sundries 05/12/2025 1 4 05/12/2025 1 5  ESTIMATION OF BUILDING COSTS ESTIMATING TOTAL CAPITAL OUTLAY (TCO) ON A PROJECT - Common practice to capitalise all costs attributable to a project from the day of inception up to the date of occupation by the user (starts of income- producing life). ESTIMATING TOTAL COST OF A BUILDING OR FACILITY IN USE OVER ITS LIFETIME – LIFE CYCLE COSTING (LCC) - Property development or building projects are usually completed over a certain length of time and most costs are expended on a periodic basis. - Buildings are constructed to different standards and subject to varying standards of maintenance. - It is difficult to predict or assess the probable physical life of a building/facility or any of its components. - Different aspects of “life” of buildings exist:  “structural life” (the period which expires when it ceases to be an economic proposition to maintain the building)  “economic life” (concerned with earning power and is that period of effective life before replacement; replacement taking place when it will increase income absolutely.)  “actual physical life” of a building is frequently much greater than its economical life. Buildings often demolished before its physical life has expired in order to permit a more profitable use of the site. It is cheaper to clear and rebuild than to adapt the building to the changed requirements. 05/12/2025 1 6  ESTIMATION OF BUILDING COSTS Life-cycle costing - Life-cycle costing is an analytical technique for the comparative evaluation of time-phased costs and revenues attributable to a project or an asset or component over a specific planning period; 30-40 years including initial costs (from project initiation stage through to decommissioning). The total life-cycle cost of an asset - The total cost of that asset over its operating life, including initial acquisition costs and subsequent running costs. It is important to building owners that a building is designed in such a way that it secures a reasonable balance between initial and future costs. 05/12/2025 1 7  ESTIMATION OF BUILDING COSTS DIFFICULTIES IN ASSESSING TOTAL COSTS In an attempt to assess total costs or costs in use at the design stage, a number of problems can be experienced, including: - Difficulty to assess the probable maintenance costs of different materials, processes and systems - Different types of payments involved: initial, annual and periodic. - Selection of a suitable long-term interest rate; rates can increase dramatically. Inflationary trends may not affect all costs in a uniform manner. If the initial funds available to a building owner are severely restricted, it is of little consequence telling him that he can save large sums in the future by spending more on the initial construction. COST BUDGETING Allocating the overall cost estimates to individual work items to establish a cost baseline for measuring project performance. Cost budgeting includes cash-flow projections to enable the planning and monitoring of expenditures over time. 05/12/2025 1 8 ESTIMATION OF BUILDING COSTS Cost budgeting for maintenance - Maintenance budgets are normally based on: the previous year’s maintenance expenditure with an allowance for inflation and some renovations; current condition of assets; the frequency of failures; the success of previous maintenance programmes; and the age of assets, etc. Types of maintenance budgets – (See notes below) - Conceptual budgeting - Detail budgeting COST CONTROL - Concerned with: (a) influencing the factors which create changes to the cost baseline to ensure that changes are beneficial, (b) determining if the cost baseline has changes, and (c) managing the actual changes when and as they occur (corrective actions, where necessary) 05/12/2025 1 9 ESTIMATION OF BUILDING COSTS COST CONTROL STRATEGIES (AVOIDANCE / CONTAINMENT) Paying hourly rates, in addition to tracking the time it takes a technician to finish a maintenance job and their work orders, overall. Understanding and following safe work practices, to reduce cost of injuries and rework, etc. Review maintenance steps to identify most important steps and specify them Better management of unplanned maintenance Creating and sharing scheduled maintenance dates with other departments so that maintenance doesn’t clash with other plans Training of non-maintenance personnel to identify signs of breakdown Having the right tools, esp with IT, to reduce time spent on data collating Life cycle costing Benchmarking Prioritising – See notes below Contract price adjustments - See notes below 05/12/2025 2 0 CONCLUSION The objective of this lecture was to provide you with a basic knowledge of the methods and tools used to ensure that building projects are completed within an approved budget. MINI-ASSIGNMENT 1. Discuss three cost control strategies in budgeting. 2. Discuss three factors that may affect the rate per square meter used in estimating building costs. TOTAL – 12 MARKS