#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.

Re-work

One of the most common reasons for project costs overruns we repeatedly encounter on projects during the design phases, are due to REWORK.
Rework may happen inevitably on small portions, however, we believe that major redesign can be avoided by having a good planning, in order to mitigate most of the following reasons:

  • Late changes to scope from the client, when input and requirements are not clearly defined during the early stages of the project.
  • Design inconsistencies, when disciplines (or members of the very same discipline) work individually on their design part, without performing consistent clash detection or a periodic interdisciplinary quality assurance review.
  • Design errors not detected till late stages of the project, due to lack of investigation on elements crucial for the design critical path (focus on what will affect other disciplines design, and ensure those parts won’t require changes after they are complete).
  • Project costs over budget, due to light, poor or nonexistent periodic control of the project cost estimates as the design develops.
  • Output produced without taking into account the receiver´s needs, including over design project parts unnecessarily for the project outcome.

They all not only affect the project time schedule by causing delays, but they also have an impact on the overall project economy and the quality output.

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.

Main considerations that will prevent your project from costs overruns

1) Realistic initial budget:

  • Calculated using relevant bench marking but also specific project conditions, for example time/location/quality/logistic factor expected.
  • In accordance with the actual project procurement strategy.
  • A total project economy covering for all possible necessary expenses (Direct; Indirect; Client expenses; VAT; Contingencies; Risks; Inflation…).

2) Minimise scope changes:

  • From the client: defining clear requisites in the program and foreseen circumstances that may appear, covering for them with sufficient, but realistic, contingency allowances. If there are end users involved, they should be consulted prior to the design competition tender and budget calculation, what are their absolute needs, and what would be “nice to have”.
  • From the design team: allowing themselves provisional allowances to cover for design development when presenting the competition proposal, or errors in the design that will lead to major project changes. This allowances should be controlled and reduced as the project develops and uncertainties are been removed. -From the contractor: with a strong and consistent contract and a good quality project design, reducing issues discovered during the execution phase.

3) Quality commercial control during the design process:

  • Consider the impact of the overall project economy when making decisions.
  • Analyse the commercial viability of the design choices against the target budget before presenting to the client.
  • Quality estimates at each design gateway, preventing the design from developing too far from the client’s budget.
  • While developing the design also focus on specific cost drivers to reduce the risk of the project.

4) Quality of the design when tendering:

  • Reduce the contractor’s uncertainties and risk by clear and decisive design material.
  • Securing there is no missing scope on the tender offer.
  • Strong project specific contract between parties.
  • Good quality tender lists/Bills of Quantities to assess the offers and control the costs in execution

5) Preventing time delays:

  • During the design phase, have good quality time schedules with clear milestone deliveries but also with penalties for delaying the project.
  • Avoid extra expenses by considering all directly related impacts due to the new time plan (winter, interfaces with ongoing projects around, temporary relocation when not handing on time,…).
  • Assuring time allocated to certain tasks is not cut down, causing a poor quality delivery.

6) Foreseen economical market changes:

  • Proposing an attractive procurement strategy to increase interest and competitive bids.
  • Acknowledging busy production lines delivering certain materials, and preparing alternative design options. All these points may look frequent and inevitable, however, the reality is that with a structured and planned Commercial Strategy, it is possible to detect and mitigate all these risks that affect the project economy, turning them into opportunities. A commercial manager would, with this mindset, manage these issues, while coordinating with the team to highlight any issues that might impact the economy or project delivery.
Main considerations that will prevent your project from costs overruns