6 advantages of having cost management on projects for developers

  1. A clear commercial strategy is implemented ensuring clear guidelines for managing the cost through the entire project life cycle.
  2. A clear risk management strategy with calculated risk and contingency allocations.
  3. Continues follow up and management of the project economy.
  4. High quality economic documentation and guidelines for the Client Advisor and Total Advisor to follow.
  5. A different perspective and knowledge base focusing 100% on economic impact.
  6. Procurement specialist focusing of valuable commercial information.

Commercial benefits of ensuring a good quality of the design when tendering

A good quality of the design when tendering, from a Commercial perspective, will:

  • Reduce the contractor’s uncertainties and risk considered.
  • Keep to a minimum changes during the construction period.
  • Minimise the number of claims due to on-site decisions to deal with design deficiencies.
  • Secure there is no missing scope on the tender offer.
  • Strenth the project specific contract conditions between parties.

#5 Understanding the tools for Cost management/control

Price Lists / Regulerbare ydelser

The rates in the bill of quantities (BoQ), provide a basis for estimation of variations of work. Additional rates, received as part of the Price Lists, which should be part of the bill of quantities (BoQ), can also be used to calculate the prices of other components not specifically described in the BoQ.

These conditions should be specifically described as part of the tender special conditions, so that the process is clear for all parties when requesting extra work.

#3 Understanding the tools for Cost management/control

Post-tender estimate / Skøn efter udbuddet

The purpose of this estimate is to corroborate the funding level required to complete the building project by the developer, including rates adjustments, fees, as well as other development and project costs.

After all tender offers have been received and evaluated, it is possible to produce a Post-tender estimate, that will be based on the outcome of any negotiations with the final contractors, including rates and quantities adjustments, clarifications of scope and the like.

This estimate will take into account the actual known construction costs and any residual risks, and the uncertainties of market conditions became clear. This estimates are used as the control estimate during construction, as it defines the basis of all the works going forward and all updated agreed quantities.

All possible future variations will be checked against the post-tender estimate.

#4 Understanding the tools for Cost management/control

Cost planning / Omkostningsplanlægning

The aim of a Cost Plan is to redistribute the elements into works packages for the purpose of budget and cost control during the design phases, for procurement while defining the tender strategy and during the tender phase and for cost control during the construction phase of the building project.

Cost planning is a constant and reiterative process, that develops in steps of increasing detail as more design information becomes available. A cost plan provides both a work breakdown structure and a cost breakdown structure.

It provides cyclic information for future feasibility studies, and allows to focus value engineering efforts by understanding main cost impacts of the different packages to the over all project economy.

Having a standard Cost Plan breakdown for all projects, ensures the company will be able to take intelligence decisions for future development projects, based on actual and historical information.”

#2 Understanding the tools for Cost management/control

Pre-tender estimates / Skøn før udbuddet

Pre-tender estimates are prepared immediately before calling the first tenders for construction. This is the final cost-check undertaken by the cost manager before tender bids for the building project, or any part of the building project, are obtained.

Therefore, it is essential that the design has finalized, the project has been quality checked, and no more changes to the project material are done after the Quantity Surveyor begins the Tender estimate.

This way, the estimate is based on the very same conditions that the different contractors will base their own offers in the tender. This allows as well to prepare the basis for the tender analysis later on, and allows to compare side by side all offers received against the pre-estimate expected.

When a bill of quantities (BQ) is the basis of obtaining a tender price, the pre-tender estimates will be based on the BQ.

#1 Understanding the tools for Cost management/control

Bill of Quantities / Tilbudslister

Almost more important than a good process for commercial management, are the tools implemented in the project to carry on this task.

The most used tool for this purpose would be a standardized Bill of Quantities.

The main purpose of a bill of quantities (BoQ) is to present a coordinated list of components/items, together with their identifying descriptions and quantities that encompass the building works, so that the tendering contractors are able to prepare tenders efficiently and accurately.

Having a standardized BoQ will assure parity of tendering, as all bidders will base their offers on the same conditions and contents.

For a quantity surveyor/cost manager, the BoQ becames a vital tool, as it will be used to manage and control the costs of the building project. Cost management and control uses include:

  • Pre-tender estimates;
  • Post tender estimates;
  • Cost planning;
  • Pricing variations; and
  • Interim valuations and payment.

Commercial management in Denmark and the need of an specific local education

Last week, the founder of KOSMOS, Ross Griffin, was interviewed by Berlingske for their Ejendomme section, to talk about commercial management in Denmark and the need of an specific local education to bring more Danish professionals to the industry. Access to the full interview: https://lnkd.in/gZckYsr

BIM maturity: 5D Cost

BIM in relation the 3D aspect seems to be well established and strong processes are implemented in almost every single construction firm in the country. Now, we need to begin thinking on what is next, and in the case of BIM, the development will need to focus on 4D (time) and 5D (cost), but not just in the execution phase.

In order to build good standards and grow maturity around these areas, it is necessary to involve the planners and commercial specialists in the BIM strategy development process. Only in this way will the process take into account the output required by these 2 disciplines. This is necessary in order to take full advantage of the information produced and incorporate it in the project design.

IKT agreements must include minimum requirements and conditions on how to produce the project material, not only for the final delivery, but also along the design process to facilitate the control around these 2 specialist discipline deliveries.

Active Commercial Control helps to reduce rework during Design Phases.

Technology presents great opportunities to improve productivity and increase efficiency during the Design stages.

However, the design process still under-performs, and it is often that the projects end up over budget or with considerable delays (affecting the costs too).

While quantity take off is becoming easier for us, quantity surveyors, our work will be substantially affected when a project is delayed (because the time we have to deliver gets cut short), or its quality is poor (meaning there will be a large number of inconsistencies and our work will became harder).

A proactive project management plan, instead of reactive planning, would mitigate inefficient practices, like re-work, that lead to poor quality and delays. The less time the project has for actual design, the poorer the quality.

ACTIVE Commercial Control helps to reduce rework during Design Phases.