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Update 15 published December 2003
Update 14 published September 2003
Update 13 published May 2003
Update 12 published January 2003
Update 11 published October 2002
Update 10 published August 2002
Update 9 published December 2001
Update 8 published October 2001
Update 7 published July 2001
Update 6 published December 2000
Update 5 published October 2000Update 4 published May 2000
Update 3 published December 1999
Update 2 published October 1999
Update 1 published April 1999
Please note:References to the masculine include, where appropriate, the feminine.
Extracts fromParrys Valuation and Conversion Tables, A W Davidson (1989),(Estates Gazette) reproduced by permission of the College of Estate Management
which owns the copyright.
Appendix A, Section 2.3 is reproduced from the Building Cost Information Service publication,
Standard Form of Cost Analysis: Principles, Instructions and Definitions(1969).
Published by RICS Business Services Limited
a wholly owned subsidiary of
The Royal Institution of Chartered Surveyors
under the RICS Books imprint
Surveyor Court
Westwood Business Park
Coventry CV4 8JE
UK
No responsibility for loss occasioned to any person acting or refraining from
action as a result of the material included in this publication can be accepted by the
author or publisher.
ISBN 0 85406 865 1
RICS Business Services Limited (RBS) December 2003. Copyright in all or part
of this publication rests with RBS, and save by prior consent of RBS, no part or parts
shall be reproduced by any means electronic, mechanical, photocopying, recording or
otherwise, now known or to be devised.
Typeset and printed by Q3 Print Project Management Ltd, Loughborough.
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1998 FOREWORD
Knowledge is of two kinds: we know a subject ourselves, or we know
where we can find information upon it.Samuel Johnson (17091784)
The fact that our profession serves a changing world increases the need for
it to rely on well thought-out and reliable practices and procedures. Events
move at an ever-increasing pace, imposing a requirement for quicker
response times. Modern communication methods such as facsimile and now
e-mail result in the need for information to be available almost instantly.
This is made more difficult by an industry growing in complexity and which
is subject to increasing customer expectations in terms of service and
quality.
The RICS has published this Surveyors Construction Handbook to help
surveyors meet these needs. It is intended to become an important source of
reliable information and guidance to all Chartered Surveyors who practise in
construction. Much of the excellent information produced by the divisions
in the past has now been updated for inclusion. Other material not yet
revised will be added. The whole will be regularly reviewed and updated as
necessary. RICS practice panels are continuing to produce information for
inclusion to make it a useful construction reference document.
We hope that this Handbook will become an invaluable aid to yourday-to-day activities.
Christopher Powell,FRICS
P RES IDENT, QUANTITY S URVEYORS DIVIS ION, 1 9 9 7 98
Trevor Mole, FRICS
P RES IDENT, BUILDING S URVEYORS DIVIS ION, 1 9 9 7 98
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ACKNOWLEDGEMENTS
Professor Roy Morledge, Professor of Construction Procurement at The
Nottingham Trent University, for contributing the text of Part 3, Section 1.
Major D.R. Bassett, Royal Engineers, for his contribution to the research
underpinning the construction time charts in Part 3, Section 1; Central Unit for
Procurement, HM Treasury (now Office for Government Commerce), for
permission to use CUP guides extensively in the drafting of Part 1, Section 1
and Part 3, Section 1.
Alan Turner, JP FRICS ACIArb, author of Building Procurement, for
permission to use a number of the diagrams from his text in Part 3, Section 1.
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Page 2 Contents (12/03) The Surveyors Construction Handbook
1Introduction 1
2.1.1 Pre-contract Cost Planning and Cost Management 2
2.1.2 Preliminary Cost Studies and Feasibility Studies 4
2.1.3 Budget 4
2.1.4 The Cost Plan at Outline Proposals Stage 8
2.1.5 The Cost Plan at Scheme Design Stage 11
2.1.6 Cost Checking 13
2.1.7 Action after Receipt of Tenders 14
Appendix A: Sources of Cost Information 1
Appendix B: Format of Budget and Cost Plans 1
Appendix C: Element Unit Quantities Generation for Hypothetical
Buildings 1
Appendix D: Further Reading 1
1Introduction 1
2.2.1 The Client Context 1
2.2.2 The Life Cycle Costing Calculation 5
2.2.3 Tax Allowances, Incentives and Business Rates 10
2.2.4 Data Sources 14
2.2.5 Worked Examples 15
Appendix A: Residual Values 1
Appendix B: Obsolescence 1
Appendix C: Costs And Values 1
Appendix D: Glossary of Terms for Taxation 1
Appendix E: Examples of Items of Expenditure Likely to Attract
Taxation Allowances 1
Appendix F: Further Reading 1
1Introduction 1
2.3.1 Elements 1
2.3.2 Elemental Cost Analysis 1
2.3.3 Other Uses 2
Appendix A: BCIS Standard Elements 1
1Introduction 1
2.4.1 Background 2
2.4.2 Contract Documentation 3
2.4.3 Additional Services 3
2.4.4 Employers Requirements and Contractors Proposals
(including contract sum analysis) 5
2.4.5 Design and Build Variants 6
2.4.6 Novation 8
Appendix A: Potential Services Associated with the Role
of Employers Agent 1
Appendix B: Employers Requirements/Contractors Proposal Checklist 1
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1Introduction 1
2.5.1 Definitions: The Difference Between a Project Manager and
Lead Consultant 1
2.5.2 Benefits of Appointing a Chartered Surveyor as Lead Consultant 22.5.3 Issues to Consider before Undertaking the Role 3
2.5.4 Schedule of Lead Consultant Duties 3
1Introduction 1
2.6.1 Technology Swaps 2
2.6.2 How Can the Environment and Sustainability be Valued? 3
2.6.3 How Does This Effect the Construction Industry? 4
2.6.4 Green Building Materials 7
2.6.5 Whole Building Sustainability 8
2.6.6 The Government Line 9
2.6.7 What Might the Future Hold 11Appendix A: Embodied Energy Content of Building Material 1
Appendix B: Useful Addresses 1
1Introduction 1
3.1.1 The Clients Role 2
3.1.2 Procurement Strategy 12
3.1.3 Selection of Most Appropriate Procurement Strategy 25
3.1.4 Implementation 29
Appendix A: Procurement Options 1
1Introduction 1
3.2.1 Appointing the Building Services Designer 3
3.2.2 Design Coordination 11
3.2.3 Appointing a Building Services Contractor 19
3.2.4 Tender Documents 34
Appendix A: Typical Example 1
1Introduction 1
4.1.1 What Happens in Practice 1
4.1.2 Standard Form Approaches 3
4.1.3 Effects of Practical Completion 13
4.1.4 Methods for Dealing with Practical Completion 14
4.1.5 Definitions 16
4.1.6 Subsidiary Issues 20
Appendix A: General Objectives to be Achieved at Practical
Completion for Small to Medium-sized Building Projects 1
Appendix B: Table of Cases 1
Appendix C: Further Reading 1
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1Introduction 1
4.2.1 General Principles 1
4.2.2 Definitions 44.2.3 Entitlement 4
4.2.4 Ascertainment 7
4.2.5 Admissible Items 9
4.2.6 Inadmissible Items 13
Appendix A: Ascertaining the Cost of Running a Site 1
Appendix B: Disruption 1
Appendix C: Ascertaining the Cost of Head Office Overheads 1
Appendix D: Checklist of Items for which Loss and/or Expense are
Allowed 1
Appendix E: Checklist of Steps Required when Considering
Submissions by Contractor 1
Appendix F: Further Reading 1
1Introduction 1
4.3.1 Definitions 2
4.3.2 The Rationale for Risk Management in the Construction Process 2
4.3.3 The Risk Management Process 5
4.3.4 Summary 14
Appendix A: Further Reading 1
1Introduction 1
4.4.1 Valuations 1
4.4.2 Assumptions 2
4.4.3 Valuation Under a JCT Contract: Background 3
4.4.4 Recommended Action at the Start of a Contract 4
4.4.5 Communications 5
4.4.6 Approach 6
4.4.7 Content of a Valuation 8
4.4.8 Administration 15
4.4.9 Special Situations 16
4.4.10 Other Contract Terms (relative to valuations) 17
4.4.11 Valuations Under Other Forms of Contract 18
Appendix A: Further Reading 1
Appendix B: JCT Definition of Reasonable Proof 1Appendix C: Example of Priced Activity Schedule 1
1Introduction 1
4.5.1 Extension of Time Clauses 2
4.5.2 Assumptions 2
4.5.3 Extension of Time Under a JCT Contract 3
4.5.4 Notice by the Contractor of Delay to Progress 4
4.5.5 The Award of an Extension of Time during the Contract
Period and Before the Completion Date 5
4.5.6 The Award of an Extension of Time after the Completion Date 6
4.5.7 Relevant Events 7
4.5.8 Concurrent Delays 12
4.5.9 Consequential Entitlement 13
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4.5.10 Administration 13
4.5.11 Extension of Time under an ICE Contract 14
4.5.12 Extension of Time under a GC Works Contract 14
Appendix A: Further Reading 1
1
15.2.1 Schedule of Sources of Useful CDM Information 2
1
15.4.3 BCIS Online 1
5.4.4 Other BCIS Publications and Services 2
5.4.5 Further details 4
15.5.2 BMI Quarterly Cost Briefing 1
5.5.3 Building Maintenance Price Book 1
5.5.4 Special Reports for Benchmarking 2
5.5.5 News, Digests and Reports 2
1Introduction 1
5.6.1 Code of Practice DISC PD 0008: 1999 2
5.6.2 Weight of evidence and document destruction 3
5.6.3 Authenticity 3
5.6.4 Photocopies, microfilm and image processing 4
5.6.5 Document storage 45.6.6 Storage and access procedures 5
5.6.7 Format of the Code of Practice 6
5.6.8 Conclusion 20
Appendix A: Specimen form for recording scanning information 1
Appendix B: Specimen form for recording retrieval 1
Appendix C: References 1
1
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The Surveyors Construction Handbook Abbreviations (10/02) Page 1
LIST OF ABBREVIATIONS
ABE Association of Building Engineers
ABI Association of British InsurersACA Association of Consultant Architects
ACE Association of Consulting Engineers
AQL Acceptable quality level
BCIS Building Cost Information Service
BEC Building Employers Confederation
BMI Building Maintenance Information
BRE Building Research Establishment
BRECSU Building Research Energy Conservation Support Unit
BREEAM Building Research Establishment Environmental
Assessment Method
BSI Building Standards InstitutionBSRIA Building Services Research and Information Association
BWIC Builders Work in Connection
CA Contract Administrator
CAWS Common Arrangement of Works Section for Building
Works
CDM Construction (Design and Management)
CD-R Compact disc recordable
CECA Civil Engineering Contractors Association
CIB Construction Industry Board
CIBSE Chartered Institution of Building Services Engineers
CIC Construction Industry CouncilCIRIA Construction Industry Research and Information
Association
CITES Control in Trade of Endangered Species
CCT Compulsory Competitive Tendering
CSM Chartered Surveyors Monthly
DBFO Design Build Fund and Operate
DoE Department of the Environment (now known as the
DETR)
DETR Department of the Environment, Transport and the
Regions (formerly the DoE)
DMS Document Management SystemDOM Domestic Sub-Contract
EC European Commission
EU European Union
FAST Functional Analysis Systems Technique
FCEC Federation of Civil Engineering Contractors
GNP Gross National Product
HBF House Builders Federation
HMSO Her Majestys Stationery Office (now known as
The Stationery Office)
HSE Health and Safety Executive
IChemE Institution of Chemical Engineers
ICE Institution of Civil Engineers
IDMA Information and Document Management Association
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Page 2 Abbreviations (10/02) The Surveyors Construction Handbook
IFC Intermediage Form of Contract
JCT Joint Contracts Tribunal
LCC Life Cycle Costing
LQ Limiting quality
M& E Mechanical and Electrical
MERA Multiple Estimate Risk Anaylsis
MW Minor Works
NEC New Engineering Contract
NEDO National Economics Development Office
NJCC National Joint Consultative Committee for Building
NSC Nominated Sub-Contract
OMR Optical Mark Reading
PFI Private Finance Initiative
PSA Property Services Agency
RIBA Royal Institute of British Architects
RICS Royal Institution of Chartered SurveyorsVAT Value Added Tax
WCD With Contractors Design
WORM Write-Once-Read-Many
WRC Water Research Centre
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INTRODUCTION
The Surveyors Construction Handbook Introduction (4/98) Effective from 1/6/98 Page 1
INTRODUCTION
A Aim and Scope of this Handbook
A1 The aim of this Handbook is to help both building and quantity surveyors to
provide construction-related professional services effectively and efficiently.
It seeks to achieve this by providing guidance which reflects what is often
good custom and practice, and relevant information (including references to
other useful material). It should be appreciated that this Handbook does not
attempt comprehensive coverage of necessary or good practice. The
Handbook is addressed to surveyors providing services to clients (as defined),
not surveyors undertaking the role of the clients representative who gives
instructions to surveyors on behalf of the Client.
A2 Construction in this Handbook means new construction, conversion,
refurbishment works and alterations to the form of buildings, and also civil
engineering works. The contents of this Handbook apply across the complete
range of this definition unless otherwise stated. So construction does not
embrace building surveys or building maintenance.
A3 Client in this Handbook is used to include companies and their Directors or
Officers, Trusts and their Trustees, partners, managers and employees who
may instruct a surveyor.
A4 Throughout the Handbook, it is assumed that possession and necessary access
to the site are available and, in principle, the rights to construct the
development and use the buildings when constructed. The Handbook does not
cover project management services, obtaining planning permission and
building regulation approvals, or dispute resolution.
A5 The document is drafted on the basis of UK law and practice, although much
of it is relevant to practice elsewhere.
B Arrangement of Content
B1 After sets of Definitions and Abbreviations which apply throughout, the
Handbook is arranged in five Parts. The first four Parts represent sequential
phases of the construction process. The last Part, Part 5, provides Additional
Guidance and Information. Each part is followed by Further Reading, to
which the numbered cross references in the Parts apply.
B2 The first four Parts are as follows:
Part 1: The Client seeks to help surveyors to work with clients. It discusses the
establishment of their construction objectives and constraints, leading to the
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INTRODUCTION
Page 2 Introduction (4/98) Effective from 1/6/98 The Surveyors Construction Handbook
development of construction briefs. It defines the clients roles during the
construction process, and comments on the engagement of professionals
involved in the construction process.
Part 2: Construction Design and Economics covers development of the design
concept, feasibility studies, design and economics (including life-cycle
costing, risk assessment, and cost-value relationships), and confirmation of
the final design proposal.
Part 3 relates to Construction Planning and Procurement, i.e. to the time the
construction contract is placed.
Part 4 covers Construction Administration and Management, i.e. all
post-contract matters.
Any Appendices are situated at the end of each Part.
B3 An Index follows Part 5.
C Status of Content
C1 For convenience, Guidance and Information is integrated. Each paragraph is
prefixed with a or an to indicate its status.
C2 Guidance, as the word implies advice to Members of the RICS on aspects of
their profession. Where recommended for specific professional tasks,
procedures are intended to embody best practice, i.e. procedures which in
the opinion of the RICS meet a high standard of professional competence.
Members are not required to follow the advice and recommendations
contained in such paragraphs. They should, however, note the following
points.
Should an allegation of professional negligence be made against a surveyor,
the Court is likely to take account of the contents of any relevant guidancenotes published by the RICS in deciding whether or not the surveyor had acted
with reasonable competence.
In the opinion of the RICS, a Member conforming to the practices
recommended in this Note should have at least a partial defence to an
allegation of negligence by virtue of having followed those practices.
However, Members have the responsibility of deciding when it is appropriate
to follow the guidance. If the guidance has been followed in an appropriate
case, the Member will not necessarily be exonerated merely because the
recommendations were found in RICS Guidance.
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INTRODUCTION
The Surveyors Construction Handbook Introduction (revised 10/01) Effective from 1/12/01 Page 3
On the other hand, it does not follow that a Member will be adjudged
negligent if he has not followed the practices recommended in this Handbook.
It is the responsibility of each individual surveyor to decide on the appropriate
procedure to follow in any professional task. However, where Members
depart from any practices recommended in this Handbook, they should do so
only for good reason. In the event of litigation, the Court may require them to
explain why they decided not to adopt a recommended practice.
In addition, Guidance Notes are relevant to professional competence in that
each surveyor should be up to date and should have informed himself of
Guidance Notes within a reasonable time of their promulgation.
C3 Material classified as information is intended to provide information and
explanations to Members of the RICS on specific topics of relevance to the
profession. The function is not to recommend or advise on professional
procedures to be followed by surveyors. It is again, however, relevant toprofessional competence to the extent that a surveyor should be up to date and
should have informed himself of such information within a reasonable time of
its promulgation.
Members should note that if an allegation of professional negligence is made
against a surveyor, the Court is likely to take account of the contents of any
relevant information published by the RICS in deciding whether or not the
surveyor has acted with reasonable competence.
D Currency of ReferencesThe cases cited and the editions quoted were up-to-date at the time of writing.
However, readers should check current rulings and additions.
E Invitation
RICS Books would welcome comments upon and suggestions for additions
and amendments to this Handbook. They should be provided in writing to
RICS Books Publishing, Surveyor Court, Westwood Business Park,
Coventry, CV4 8JE.
F Subscription Service
Any change of address should be notified to the address appearing below:
The Surveyors Construction Handbook Subscription Service
RICS Books
Surveyor Court
Westwood Business Park
Coventry CV4 8JE
Tel: 020 7222 7000 ext 647
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PART1, SECTION1
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(b) Marketability
maximise prompt or future disposal (freehold or otherwise).
(c) Use-related
optimise operational requirements of intended occupier(s)
provide greatest flexibility in potential uses
reflect intended occupiers requirements/preferences/ability to afford
meet social/management/occupiers special needs (e.g. disabled).
(d) Environmental
minimise health and safety risks
choose materials which reflect sustainability
aesthetically please (e.g. impression on occupiers customers)
minimise any alterations to specific features
reflect planning authoritys brief/policies minimise potential opposition
reflect corporate style or personal preferences of proposed
occupier/employees
maximise comfort of occupants
minimise inconvenience to others during construction.
(e) Timing
construct within a defined period
minimise risks of delay during construction.
1.1.1.6 The importance of each of these criteria will be relative to the objectives of theclient, the business case for the project and to the extent to which he/she is
able to cope with risk (see 3.1.2.9). It is important that the client seek
investment appraisal advice in respect of the project and that the appraisal
considers what if questions to ensure that the impact of changes of key
components in the appraisal is clearly understood. A chartered surveyor will
be able to assist the client in these matters. However, the giving of advice on
some of the requirements listed above is, of course, outside the competence of
the surveyor. Where such a particular requirement is important to the client
and outside the clients expertise, the client should be advised to seek other
professional advice.
1.1.1.7 Many construction projects suffer from poor definition due to inadequate time
and thought being given at an early stage1. This is often because there is a
sense of urgency fuelled by the desire for an immediate solution. Investing
time at the beginning of a project in developing a complete definition taking
account of all the requirements will reduce the likelihood of changes later. The
later that changes are made in a project, the more they are likely to cost in both
direct and knock-on effects (see 3.1.4.14 and 3.1.2.14(f) & (g)).
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1 Construction Industry Board,Briefing the Team, Thomas Telford Publishing, London, 1997.
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1.1.2 The Role for Independent Advice
1.1.2.1 With the potential for the involvement of many consultants and/or
constructors in a project and the range of contracts associated with theiremployment, all but the most experienced client may need advice. The advice
offered should be informed and unbiased and it should be based upon a logical
analysis of the needs of the client, the type and character of the project and the
range of appropriate strategies available.
1.1.2.2 This advice can be offered by a member of the clients design team or can be
a separate function. It may be more difficult for a design team member to
remain impartial in carrying out this process and it is recommended that any
expert retained should be solely for this purpose. This function can be
identified as the role of the principal adviser and may encompass:
Assistance in preparing the business case (the business case)
underpinning the project
Identifying the needs and requirements (briefing)
of the client
Defining the project (project definition)
Matching needs and project characteristics (procurement strategy)
with appropriate procurement strategy
Facilitating the associated selection and (implementation)
contractual processes and policies
1.1.2.3 Possible sources for the appointment of independent advisers include suitably
qualified and experienced construction professionals such as chartered
surveyors.
1.1.3 Project Brief
1.1.3.1 The importance of a clear project brief to the successful completion of the
project and in ensuring appropriate performance of the project cannot be over
emphasised. The inexperienced client will need professional help in the
preparation of the brief. The project brief is a comprehensive statement of the
clients requirements for the project based on close consultation between the
client and users and based upon the parameters established (see 3.1.1.10 and
3.1.1.12).
The project brief may include:
(a) project description;
(b) how it fits into the clients corporate plan (e.g. it may be part of a larger
planned development);
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(c) number of people that are to occupy the building, together with their space
requirements;
(d) schedule of accommodation and quality of internal environment;
(e) standards;
(f) equipment and special services/requirements;
(g) when the building needs to be available for use;
(h) quality and cost limitations;
(i) life span;
(j) site; and
(k) statutory controls.
1.1.3.2 This is the initial control document for the early planning of the project;
without it, little constructive work can be done. If all the information required
for the project brief is not readily available, it is better to issue it in an
incomplete form and to update it progressively1.
1.1.4 The Clients Role
1.1.4.1 This section briefly explains the clients responsibilities through the life of a
construction project. In carrying out their role, clients, depending on their
knowledge and expertise, will need help from their professional advisers,
project managers and other consultants, whose roles are also explained in this
handbook. This section aims to outline the clients task in setting policy and
formulating strategy, and explains how it should be carried out.
1.1.4.2 The success of any project will depend upon the motivation given by the
client. Experienced clients may take a leading role in the procurement process;
less experienced clients will need to seek advice or to appoint advisers to
assist them. Where projects are of a large or complex nature it may be
advisable to consider the appointment of a project manager.
1.1.4.3 Effective management is vital in any construction project. The clients prime
role is to establish a structure for the management of the project and to make
sure that it works. A crucial part of any effective management structure is
efficient communication. To perform effectively, all parties must have timely
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1 Construction Industry Board,Briefing the Team, Thomas Telford Publishing, London, 1997.
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access to all information relevant to their tasks and the projects objectives and
status (see 3.1.4.11).
1.1.4.4 The client has substantial influence on the design of the project in respect both
of functional efficiency and of overall appearance, and, therefore, has to take
particular care to:
(a) understand fully the purpose of the building; ensure that the requirements
of the users are accommodated; and communicate those requirements to the
designers (see 3.1.1.10); and
(b) appoint designers with proven ability in designing buildings which satisfy
users requirements and harmonise with and contribute to the quality of the
built environment. The selection of the right people is emphasised as a key to
success (see 3.1.4.8).
1.1.4.5 The accompanying figure indicates the activities in the procurement process
and when activities are usually performed. As can be seen, the clients role is
significant, with a wide range of activities to perform and implement before
both the design and the construction processes. In the performance of these
activities, the client can expect to be supported and advised by his/her adviser
or (if appointed) the project manager. More detail for each of these activities
can be found in the section of this handbook indicated in brackets in the
figure.
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1.1.5 The Clients Responsibilities
1.1.5.1 The client should set policy and outline strategy including:
(a) setting and prioritising the project objectives within the business plan;
(b) planing to meet the objectives (the pre-design phase);
(c) implementing the plans (the pre-construction phase);
(d) controlling their implementation (the construction phase);
FIGURE TO INDICATE THE ACTIVITIES IN THE PROCUREMENT PROCESS
Pre-Design Phase Pre-Construction Phase Construction Post-Construction
Clients Role Develop business case for
project (3.1.1.9)
Appoint adviser
(3.1.1.6)
Define clients
responsibilities (3.1.1.7)
Project Brief
(3.1.1.12)
Appointment of PM (if
appropriate) (3.1.4.7)
Appointment of design and
cost consultants (3.1.4.8)
Procurement strategy*
(3.1.1.13)
Value management
(3.1.4.16)
Procurement strategy
(3.1.1.13)
Design overview*
(3.1.4.12)
Cost Control overview*
(3.1.4.13)
Whole-life Costs
(3.1.4.15)
Value Engineering
(3.1.4.17)
Time control overview*
(3.1.4.14)
Quality control overview*
(3.1.4.18)
Appointment of constructors
(3.1.4.9)
Confirming the business
case (3.1.1.9)
Design overview
(3.1.4.12)
Cost control overview
(3.1.4.13)
Time control overview
(3.1.4.14)
Quality control overview
(3.1.4.18)
Change control
overview
(3.1.4.19)
Commissioning
(3.1.1.17)
Occupation and takeover
(3.1.1.18)
Procurement
Strategy
Procurement strategy
development (3.1.2)
Implementation Resources (Client)
(3.1.4.35)
Organisational structure
(3.1.4.6)
Contractual arrangements*
(3.1.4.10)
Systems and controls*
(3.1.4.11)
Implementation policy
(3.1.4.2)
Contractual arrangements
(3.1.4.10)
Systems and controls
(3.1.4.11)
Systems and controls
(3.1.4.11)
* Indicates the activity will continue into the next phase
( ) Indicates the section of this document referring to the activity in more detail
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(e) arbitrating between conflicting demands; and
(f) evaluating the complete project against the objectives (the
post-construction phase).
1.1.5.2 The client also has a dual management function:
(a) to manage the client input; to co-ordinate functional and administrative
needs; to resolve conflicts; to act as the formal point of contact for the project
(see 3.1.4.11); and
(b) to supply the technical expertise, to assess, procure, monitor and control
the external resources needed to implement the project (see 3.1.4.35).
1.1.5.3 In particular, the client should be satisfied that:
(a) the project brief is comprehensive and clear and has the full support of the
users1&2 (see 3.1.1.12);
(b) any constraints demanded by the project funder(s) are known and their
impact understood;
(c) the critical assumptions made in preparing the initial estimates and
programmes are valid, realistic and achievable (see 3.1.1.9);
(d) cost estimates are comprehensive and include all capital and resource
costs;
(e) allowances made in the feasibility and viability assessments to cover
possible risks are sufficient (contingency allowance);
(f) substantial sensitivity analysis and what if studies have been carried out
to assess the effect of possible changed criteria on the viability of the project;
and
(g) plans are in place for adequate project management including systems forcost, time, quality and change control.
1.1.5.4 The client should also co-ordinate and resolve conflicts between all interested
sections of the client organisation including (see 3.1.4.6):
(a) user groups who will work in the building;
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1 Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RICS, Department ofBuilding Engineering and Surveying, Heriot Watt University. This document is out of print.2 Construction Industry Board,Briefing the Team, Thomas Telford Publishing, London, 1997.
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(b) specialist groups responsible for technical systems within the building,
e.g. communications, computers;
(c) facilities management who will manage the completed buildingincluding maintenance and security;
(d) finance and accounts who will plan and control expenditure and pay bills
as they arise; and
(e) legal advisers who will advise on and monitor the clients formal
relationships with outside parties.
1.1.5.5 The client is responsible for ensuring that all necessary decisions are made on
time. Timely decisions are necessary to avoid delays and increased costs: the
decision-making process requires as much planning and management as anyother activity. This will include (see 3.1.4.11):
(a) scheduling the key decisions to be made;
(b) identifying the decision makers and their required procedures;
(c) ascertaining the time required for making decisions;
(d) establishing a formal programme for decisions;
(e) warning decision makers regarding forthcoming submissions making
sure items are on the agenda;
(f) preparing on time fully detailed submissions and/or presentations in full
compliance with procedural requirements;
(g) following up submissions throughout the decision making process; and
(h) promptly communicating decisions made to the parties affected by
them.
1.1.6 Appointment of Project Manager (where appropriate)
(see 3.1.4.7)
1.1.6.1 Due to the complexity of modern buildings and the potentially large number
of parties involved in the process the client may wish to appoint a single
person to draw the process together and manage it to ensure that the overall
performance, time, cost and quality requirements are achieved. The project
manager may be a member of the client organisation who is given sole, or
predominant, responsibility for the project. Project management practices also
exist to enable appointment to be made on a consultancy basis. In this case,
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selection should be based upon resources, reputation, and price; and services
should be clearly identified.
1.1.6.2 It should be emphasised that the role of the project manager should be to act
as part of the client organisation.
1.1.7 Appointment of Consultants (see 3.1.4.8)
The process of selecting and appointing the design team and the cost
consultant is carried out by the client who may seek the advice of his/her
advisers. The terms and conditions of these appointments are governed by the
procurement strategy adopted for the project.
1.1.8 Appointment of Constructors (see 3.1.4.9)
The selection of those who will actually construct the project is often key to a
successful outcome. Selection should always be on quality as well as price and
ideally the procurement strategy governing when they are appointed should
facilitate the early involvement of constructors in the design process.
The selection of procurement strategy is a complex one and is referred to in
Part 3 section 1 of this handbook.
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A endix A (01/03)
Appendix A: Further Reading
Construction Industry Board,Briefing the Team, Thomas Telford Publishing, London,
1997
Construction Industry Board, Partnering in the Team, Thomas Telford Publishing,
London, 1997
Construction Industry Board, Selecting Consultants for the Team: Balancing Quality
and Price, Thomas Telford Publishing, London, 1997
Construction Industry Council,The Procurement of Professional Services: Guidelines
for the Value Assessment of Competitive Tenders, CIC, London, 1997
European Construction Institute, Partnering in the Public Sector: a Toolkit for theImplementation of Post-Award, Project Specific Partnering on Construction Projects,
ECI, Loughborough, 1997
Kelly, J., MacPherson, S., and Male, S.,The Briefing Process: A Review and Critique,
RICS, Department of Building Engineering and Surveying, Heriot Watt University,
1992. This document is out of print.
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PART ONE: THE CLIENT
SECTION 2: VALUE ENGINEERING
Introduction
Value management (and within it, value engineering) is a structured method
of eliminating waste from a clients brief and from the design on a
construction project before binding commitments are made. Used to deliver
more effective and better quality buildings, for example, through taking
unnecessary costs out of designs, value management ensures a clearer
understanding of the brief by all project participants and improves team
working. According to the Construction Task Force report, RethinkingConstruction (published by the DETR in July 1998) it is practiced by up to a
quarter of the construction industry in the UK. The report also estimates that
while the objective of value management is to increase value, it can also
reduce costs by up to 10 per cent.
Value management is the wider term used in the UK to describe the overall
structured team-based approach to a construction project. It involves clearly
defining the clients strategic objectives, considering optimum design
solutions within the context of the clients business objectives and deciding
which of these provides the optimum lifetime value to the client, as well as a
review of the whole process after occupancy. Value management includesvalue engineering as part of this process.
Value engineering is a systematic approach to delivering the required
functions to the required quality at the least cost, i.e. a method of ensuring
that the client gets the best possible value for money in terms of safety,
performance and delivery targets. It is a structured form of consensus
decision making that compares and assesses the design solutions against the
value systems declared by the client.
This section of the handbook looks at the carrying out of a value engineering
exercise during the early design phase of a project, i.e. an evaluation of design
solutions against the clients brief. Value engineering, as described here, can
be a stand-alone exercise (a value engineering workshop) or may be part of an
overall value management process.
In describing the value engineering process this section aims to assist
surveyors both in advising clients on the use of value engineering and taking
part in a value engineering exercise as part of the design team. It is not
intended for surveyors acting as value engineering facilitators and makes no
attempt to address the very particular skills required for this role.
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1.2.1 Why Value Engineering?
1.2.1.1 Value engineering has grown in popularity for the simple reason that it
actually works. Construction projects can often take on a life of their own
when members of the design team become focused on their own particular
problems and time constraints. Consequently, the true objectives of the client
get lost along the way. Value engineering relates design proposals directly
back to a clients business, thus ensuring that a management system is in place
which forces designers to justify their decisions when tested against the
clients required function.
1.2.1.2 A value engineering exercise can only relate design proposals to a clients
business requirements if early value management studies have encapsulated
these requirements within the brief. If a value engineering exercise is carried
out in isolation from any strategic review of the project requirements, it canonly act as a functional assessment of the technical design solutions and their
relative cost. However, even in this limited function it can still be very useful.
1.2.2 Applicability
1.2.2.1 The technique of value engineering can be employed on any project. However,
more complicated and higher value buildings are likely to benefit the most
(seefigure 1). This is because it is more difficult to develop the design brief
in such instances and consequently a design solution may be adopted without
being questioned, usually because of time constraints placed upon thedesigners.
1.2.2.2 Many client organisations will only undertake value engineering on schemes
over a certain value. For example, Railtrack will carry out the technique on
projects valued at 250,000 or more and Northumbrian Water will only
consider it for projects worth over 1m. Despite this, there is no reason why
the process should not be applied to smaller schemes. Furthermore, value
engineering will be invaluable where repetitive schemes are being considered
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EssentialHigh
Complexity
Low
Value
Low High
Figure 1: Projects Benefiting from Value Engineering
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as improvements and savings can be incorporated into future schemes. They
can also be tested in practice, leading to the sort of continuous improvement
recommended by the Rethinking Construction report.
1.2.2.3 Value engineering works irrespective of the procurement route taken. It is a
discipline upon the design team members and the clients who appoint them.
Where the contractor is mainly responsible for the design, for example, design
and build, develop and construct or PFI projects, the technique is just as
appropriate in ensuring that a well-defined statement of requirements is first
established and that subsequent design solutions address the function of the
building most economically.
1.2.3 At What Stage Should Value Engineering be Carried Out?
1.2.3.1 The greatest benefits can be obtained by commencing the VE process at the
earliest possible stage. Once it has been established that the clients needs will
best be met through a construction project the purpose of the first VE exercise
should be to inform the brief. When an experienced client has prepared the
brief, or a value management exercise has already examined the clients
requirements, the value engineering exercise (which will address the proposed
design solutions) is best done towards the end of the scheme design. Several
workshops may be necessary at each of the crucial decision-making stages of
a project:
(a) A first exercise (a functional analysis of requirements), to define the
project needs and inform the brief, could be carried out as early as option
appraisal, and since this could generate the greatest benefit to the client the
timing is crucial. Carry it out too early and not enough will be known about
the problems associated with the building function, whereas too late and
minds become set on the solutions formulated by the design team.
(b) A review of the project at outline design could be conducted to ensure
that the decisions taken earlier have been implemented or, if changed, that
they still meet the functional requirements.
(c) Another review (a functional analysis of the solutions) would then be
carried out at scheme design to test individual building elements involvingtraditional cost planning/life cycle costing techniques.
1.2.3.2 This section of the handbook considers the evaluation of a design at the end of
the scheme design phase, but the process will be the same whenever it is
carried out. The objectives of the project should remain the same throughout
the process and they should be validated at the beginning of each workshop.
The objectives of each workshop may be different. If the project objectives do
change the whole direction of the project will need to reassessed.
1.2.3.3 It is important that time for the value engineering process and any resultant
redesign is included in the scheme design programme at the outset.
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1.2.4 Who Should Carry Out Value Engineering?
1.2.4.1 It is strongly recommended that a value engineering exercise is organized by
an experienced value management facilitator to ensure that the valueengineering participants retain their objectivity and that an unbiased approach
is maintained.
1.2.4.2 The value engineering participants should represent the principal stakeholders
in the project namely, the client, the building users and the design team
(designer, engineers and quantity surveyor) and also the contractor, where
applicable. It is important that each of the participants have the authority to
make decisions at the workshop. It may also be appropriate to include clients
advisers, for example, letting agents or rating valuers.
The participants should be those who can make decisions and provideinformation related to the specific aims and objectives of the workshop. These
may include:
those people with responsibility for the needs of the business;
those with specific responsibility for development, design and
implementation of the operation/project;
those with responsibility for the management and/or maintenance of the
operation; and
those who will be affected by the outcome.
Different stakeholders will be required to participate at different stages of the
project.
1.2.4.3 The optimum size of a value engineering panel would depend upon the
complexity of the project as well as the skills of the facilitator. However, it is
considered that panels of more than twelve members are difficult to manage.
Panels with fewer than four members could be considered ineffective.
However, it is important that all stakeholders are represented even if this
results in a larger group.
1.2.4.4 It is common practice in North America to appoint an outside team of
consultants to question the design teams solutions. However, this practice has
been known to cause resentment between the project team and the external
advisers and might therefore compromise the final design solutions. It is
considered that an experienced facilitator independent of the design team,
with an appropriately briefed panel, will ensure that the design teams
solutions are adequately tested at the workshop.
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1.2.5 How Long Should It Last?
1.2.5.1 The length of time taken over the value engineering workshop will depend on
the complexity of the project and the level of design detail that has beencompleted.
1.2.5.2 The 40-hour workshop is the classic industrial value engineering standard.
However, two-day workshops at key points during the design process are
more common in the UK construction industry.
1.2.6 Preparing for a Value Engineering Workshop
1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by the
panel and distributed by the facilitator.
1.2.6.2 In addition to an agenda, a functional analysis of the clients requirements
should be drawn up.
The clients value criteria will have been developed in the first value
management workshop. With each successive workshop these criteria will be
developed further into a function diagram. This should be included in the
workshop handbook. If it is to be developed further this will take place as part
of the information stage of the workshop.
The functional analysis should always be generated by the clientrepresentatives with the help of the other members of the workshop. It is the
role of the facilitator to facilitate this process, not to take part in it.
All participants must be prepared to propose and challenge design solutions.
The input of all participants (not just those who are experts in a particular
discipline) is one of the strengths of the VE process and should be encouraged
by the facilitator.
1.2.7 Functional Analysis of Design Relative to the Clients
Requirements
1.2.7.1 It should be understood that it is not possible to find meaningful alternatives
to a technical solution without first identifying the function required of it.
1.2.7.2 Functional analysis is any technique designed to appraise value by careful
analysis of function. This can be simple creative session of the functions and
possible alternatives, but the most common method is using a functional
analysis systems technique (FAST) diagram.
1.2.7.3 The FAST system uses a function diagram which identifies the basic
function what is required on the left-hand side and more detailed secondary
functions working from left to right until all the means of achieving these
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functions how are they to be fulfilled are identified on the right. See figure 2
for an example of a FAST diagram. It should be understood that this is a
broad-brush technique.
The objective of functional analysis is to produce a complete description of
the end purpose of the design in terms of what it must do.
Reference is sometimes made to different types of FAST diagram: Classical
FAST, Technical FAST or Customer/Task FAST.
The original FAST diagram was a presentation of the user-related and
product-related functions of a design solution. It was a technique used to
assemble the functions of a product in a hierarchy and to assess why and
how they are delivered. This is known as a Classical FAST.
Subsequently it was recognized that all functions did not fit into the flow logicso it was decided to separate out the functions that are always active, whether
the product is operational or not. It was also decided to separate out those
functions that only occur one time regardless of repetitiveness of the process.
This diagram describes what a product, element or component must do and is
known as a Technical FAST.
It was then recognized that, ideally, it is the customer who should determine
the value of the product and that the FAST diagram should include the
customer/user in the development of value study projects. The resulting FAST
Figure 2: FAST Diagram
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diagram has become known as a Customer or Task FAST. It is this concept
from which the Value Tree has developed.
All FAST diagrams should include a scope line on the left-hand side of the
diagram. The scope line limits the area of the project on which attention is
being focused. The scope is the portion of the project that is selected for the
value study.
The FAST model displays functions in a logical sequence and tests their
dependency. It does not indicate how a function should be performed.
There is no such thing as a correct FAST model, only a valid FAST model.
1.2.7.4 Most practitioners insist that functions are defined in terms of active
verb/measurable noun (or phrase) combinations, for example, minimizeenergy consumption. This improves clarity, helps all panel members develop
a shared understanding and promotes the examination process. These should
be interrogated by asking why the client requires this in order to examine
how it should be achieved.
1.2.7.5 The process of setting up a FAST diagram is of matching the functional
elements of the building (object functions) to the clients required functions
(user functions). The functional requirements need to be broken down until
they are reflected in elements which can be priced (and built). This process is
called functional decomposition. For example, the requirement for increased
energy efficiency might be provided by increased levels of insulation whichmight be achieved by changes to all or any of roof, walls, floor, windows and
doors or finishes. The number of levels of decomposition required cannot be
predetermined.
1.2.7.6 VALUETREE
A Value Tree is a diagram that describes the business driver (mission) for a
project or need and the criteria that need to be satisfied in order to achieve it.
A Value Tree should be developed at an early stage in order to inform the
brief. However, it can be developed at any stage in order to confirm the brief.
It will generally be carried out by the client organization in order to establish
whether a project is the solution to their needs. The criteria are then developed
further into the functions required in order to achieve them. The scope line for
a project will begin to the right of the Value Tree.
1.2.7.7 Appendix A gives an example of part of a Value Tree and a FAST diagram for
a health centre.
Function elements (object functions) are defined in the BCIS publication,
Standard Form of Cost Analysis: Principles, Instructions and Definitionsand
in Section 2.3 of this handbook.
A typical example of a value engineering process is included in Appendix B.
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1.2.8 Pricing the FAST Diagram
1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomes
possible to establish alternative costs for achieving a given function.However, it is important that all functions are clearly defined if costs of
alternative proposals are to be meaningful. Also, it should be remembered that
it is the design solutions to the functional requirements that are being priced
and compared to the value and importance that the client puts on that function.
For example, the client can identify the value of savings from reduced energy
consumption or may rank this as important for other reasons. The value
engineering teams task is to put a price on the various design solutions
suggested that will achieve this end. It is creativity in finding the most
economical solution that is the essence of the value engineering exercise.
1.2.8.2 Fees and value added tax (VAT) and other financial and fiscal matters mayalso need to be considered.
1.2.9 Presenting a Design Solution to a Value Engineering Workshop
1.2.9.1 Design solutions should be presented as designers normally would to any
panel of users. However, they should expect to be questioned quite
extensively. They should keep an open mind and maintain objectivity in
justifying their proposals because the objective is to find the most
cost-effective solution, not to criticize for the sake of it. On the other hand,
designers should be prepared to stand by their design solution if they think itis correct for the function being considered.
1.2.10 The Workshop
1.2.10.1 A value engineering workshop will work through phases of information,
speculation, evaluation, development and presentation:
(a) The information phase identifies the spaces, elements and components in
terms of the functions they fulfill. It asks the questions about what is the primefunction of an element?; what are its subsidiary functions?; what does it
cost?; what is its value? It is at this stage that the FAST diagram is developed
and it is against the background of this information that the value engineering
evaluation will be made.
(b) Speculation is the brainstorming stage which will generate the ideas from
which solutions will be developed. It is important that each member of the
panel thinks positively. The facilitator will ensure that no one is allowed to
become overly critical of another members contribution in order that ideas
flow. All ideas should be logged at this stage. However, in order to encourage
idea building, they should not be analysed or rejected. It is important that the
underlying functions of suggestions for improvement are listed for evaluation
later. Design solutions should not be developed at this stage to ensure that
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what is to be achieved is properly addressed. All optional solutions should
only be considered at the evaluation stage.
(c) Evaluation is the analysis of the ideas generated by the earlier
speculation. Again, a positive feeling will be encouraged by the facilitator
with advantages/disadvantages being discussed in an even-handed manner. At
this stage some ideas will be rejected and the best taken forward. It is essential
to ensure that all the ramifications of any suggested changes should be
considered. For example, if the exercise has suggested a change to a piece of
M&E equipment, the effects on the control management systems and
structural requirements must also be considered.
Life cycle costing can be an important factor in the process when considering
optional solutions but the criticality of this aspect will hinge on the clients
philosophy.
(d) Development of the ideas to be taken forward will be initiated at the
meeting and a programme established for completion of this stage. Often the
detailed development including life cycle costing, if appropriate, will be
continued beyond the initial meeting and the outcome presented to a
subsequent meeting for the panel to determine which design options to adopt.
(e) Presentation takes the form of a report prepared by the facilitator which
records in some detail all elements of the study and concludes with those
options to be incorporated in the developed design. This report is normally
presented to the client by the value engineering panel at a meeting held within
one or two weeks of the date of the workshop.
1.2.10.2 The workshop should focus on expensive items or mismatches, for example,
parts of the FAST diagram which are important to the client but which have
been allocated little money or have cost a lot of money but do not contribute
to the function.
1.2.11 Assessing the Value of the Workshop
1.2.11.1 Areas for research/change identified at the workshop could be grouped into
three categories:
(i) those that are removed/changed and result in reduced cost;
(ii) those that are added/changed and result in additional cost; and
(iii) those that are identified for investigation but not implemented
1.2.11.2 The financial benefit should then be identified against all elements within
categories (i) or (ii).
1.2.11.3 A major benefit of the workshop which will be enjoyed by the panel members
is a better understanding of the project functions and common ownership of
the team-based designs solutions which have evolved.
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1.2.12 Implementing the Results
1.2.12.1 The value engineering panels decisions are recommendations that need to be
accepted by all stakeholders. Those stakeholders that are not part of the panelare likely to have a right to comment before decisions are adopted.
1.2.12.2 Once the workshops proposals have been sanctioned by the client, decisions
should be fed back to the design team, briefing those members whose work is
affected as to why the changes were made.
1.2.12.3 If necessary, amendments to the design brief, design programme and scope of
professional teams brief should be incorporated into these documents.
1.2.13 Feedback from Post-Occupancy Evaluation
1.2.13.1 It is important for any client to carry out a project review to demonstrate how
project objectives have been achieved and particular problems overcome. As
part of the project evaluation process, it should be established whether the
project represents best value for money and whether or not key design changes
made as a result of value engineering have achieved the benefits expected.
These should always be set against the cost of carrying out the exercise.
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A endix A (revised 10/01)
Appendix A: Health Centre Value Tree
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Appendix B (12/99)
Appendix B: Typical Example of a Value Engineering Process
B1 BACKGROUND
A retail client with a regular development programme for a series of new
stores (typical size 8,000m2) entered into a partnering agreement with key
members of the construction team for four new projects.
To encourage value engineering, the partnering contractors share in any
savings that relate to any accepted proposals.
For two of these projects the client opted for a design and build contract for
the services installations (mechanical, sprinklers and electrical).
In an effort to reduce costs and ultimately add value to the schemes, the client
set a target of reducing the costs on these projects by 10 per cent, with no
material effect on quality or health and safety.
To set a benchmark for this reduction model cost plan costs for a typical store
(derived from historical records) were modified to suit the new scheme
layouts. Allowances were included for any items that were classified as site
specific (e.g. acoustic requirements stipulated by the district surveyor). Cost
plan figures were based on the clients current specification.
Due to the volume of developments undertaken by the client and the repetitive
nature of the works, the savings generated by value engineering can beincorporated in any future schemes.
B2 SPECIFIC EXAMPLE: VENTILATION TO SALES FLOOR
The original design was based on previous solutions and included traditional
ventilation.
At the information phase, the functional requirement, including the need for
ventilation, was examined against the clients desire to reduce capital costs.
This identified that a high proportion of the cost of the mechanical installation
related to the provision of ventilation to the sales floor of the store (plant,distribution ductwork, diffusers, etc.)
At the speculation phase, the clients engineering department worked closely
with the mechanical partnering contractor to consider alternative methods of
ventilating the sales floor of the store.
The alternative method of ventilation proposed was of the displacement type.
With displacement ventilation, air is only conditioned at the level at which
occupiers are breathing. Air is introduced at low level and at low velocity.
Natural convection currents are utilised to remove excess heat and pollutants
out of the occupied zone. There is a saving in the amount of ductworkrequired, as only two runs of ductwork are needed on the sales floor. (The
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Appendix B (12/99)
traditional method is designed for four separate branches of ductwork.) The
new specification requires diffusers of the displacement type, with the facility
of automatically varying the air throw pattern whether in heating or cooling
mode.
Furthermore, the proposed system required ventilation to the occupied zone
only rather than the full building space. This has resulted in capital cost
savings on plant and in the likely running costs of the system.
The evaluation identified significant savings.
Summary of Value Engineering Exercise
Original installation: Traditional ventilation
Value engineering proposal: Displacement ventilation
Benefits: Saving on air handling plant size
Saving on chiller plant size
Saving on sales floor ductwork
Savings on capital cost: Air handling plant 10%
Chiller plant 5%
Ductwork and diffusers 25%
At the development phase, the proposed method was discussed with other
members of the design team to ensure that any impact on the other building
elements, the project programme and the interface with other subcontractors
were taken into account.
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A endix C (10/01)
Palmer, Angela. A Critique of Value Management, Chartered Institute of Building,
Berkshire, 1990
Royal Institution of Chartered Surveyors. Value and the Client (papers presented at a
conference held at the RICS on 29 January 1992) , RICS, London, 1992
Smith, J., Jackson, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,
Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run a
Value Engineering Workshop?RICS, London, 1998
Zimmerman, Larry, W. and Hart, Glen, D.Value Engineering: A Practical Approach
for Owners, Designers and Contractors, Van Nostrand Reinhold & Co, New York,
1982
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PART TWO: CONSTRUCTION DESIGN AND ECONOMICS
SECTION 1: PRE-CONTRACT COST PLANNING AND
COST MANAGEMENT
Introduction
This Section of the Handbook sets out procedures which enable pre-contract
cost management of building projects to be carried out from the clients brief,
through the various design stages to the acceptance of a contractors tender.
Control of costs can only be achieved by the actions of the whole project team,
including the client. The quantity surveyors role is to facilitate the design
process by systematic application of cost criteria so as to maintain a sensible
and economic relationship between cost, quality, utility and appearance which
thus helps in achieving the clients requirements within the agreed budget.
The information and guidance which follow are based on a traditionally
procured new-build project, but varying client requirements and different
procurement methods may prevent implementation of some aspects of the
following procedures. In practice, the design of the elements may proceed atdifferent speeds and the stages described here may overlap. However, the
principles of budget, cost plan, cost checks and reconciliation should be
adhered to whenever possible. (See the figure showing the outline of the cost
planning procedure.)
On projects where non-traditional procurement routes are used, the
responsibility for developing the cost plan may change but the stages
suggested here remain appropriate. For example, on Design and Build (D&B)
schemes, the clients quantity surveyor will be responsible for the cost plan at
feasibility and outline proposal stage and the D&B contractors quantity
surveyor will be responsible for developing the cost plan with the contractorsdesign team to produce the tender.
The process described would apply to refurbishment or conversion schemes
and the elemental approach would be suitable even if all elements were not
required.
The procedures are not designed for use with civil engineering projects, but
should provide a framework appropriate to civil engineering needs.
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2.1.1 Pre-contract Cost Planning and Cost Management
2.1.1.1 DEFINITION
Pre-contract cost planning is the technique by which the budget is allocated to
the various elements of an intended building project to provide the design
team with a balanced cost framework within which to produce a successful
design. It allows for the redistribution of the budget between elements as the
design develops.
Cost management is the total process which ensures that the contract sum is
within the clients approved budget or cost limit. It is the process of helping
the design team design to a cost rather than the quantity surveyor costing adesign.
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2.1.1.2 OBJECTIVES
(a) To ensure that the client obtains an economical and efficient project in
accordance with the agreed brief and budget;
(b) to make the design process more efficient, thus reducing the time needed
to produce a successful design;
(c) to ensure that all requirements arising from the clients brief to the design
team are included in the cost planning process (e.g. the engineering services
should also be subject to the cost planning process); and
(d) to advise the client and members of the design team of cost-in-use or
life-cycle costing techniques.
2.1.1.3 GENERALLY
(a) A general principle applies throughout the cost planning process that any
agreed budget or cost limit is seen as the maximum cost, and the quantity
surveyor should, at all times, work with the other design team members to
satisfy the client at a lower cost if possible, whilst still maintaining the desired
objectives for quality and function.
(b) If, at any time, sums have been included in the approved budget, for
example, for abnormal site costs which subsequently are found to have been
wholly or partially unnecessary, the consequential saving should always be
notified to the client.
2.1.1.4 DESIGNSTAGES
References to Design Stages are to the RIBA Plan of Work (taken from the
RIBAHandbook of Architectural Practice and Management) and refer to the
main stages through which a project design typically passes. The links to the
cost planning procedures outlined in this section are summarised here:
Design Stages Quantity Surveyor
Stage B: Feasibility Prepare feasibility studies and determine
the budget
Stage C: Outline Proposals Consider with client and design team
alternative strategies and prepare cost plan
Stage D: Scheme Design Carry out cost checks and update cost plan
if necessary
Stage E: Detail Design
Stage F: Production Information Carry out cost checks
Stage H: Tender Action Prepare reconciliation statement
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2.1.1.5 VALUEENGINEERING
A value engineering exercise may be carried out on all or part of the design
during the design process. (For further details see part 1, section 2 of this
handbook.)
This might affect both the clients requirements and the chosen design
solution and changes would, therefore, affect the budget and the cost plan.
2.1.2 Preliminary cost studies and feasibility studies
2.1.2.1 It is recommended, as a matter of importance, that before and during the
formulation of the clients brief (Design Stage B: Feasibility), the quantity
surveyor, in consultation with other members of the design team and the
client, should undertake such feasibility studies as may be necessary to ensure
that the clients requirements can be reasonably accommodated within the
finance that is available for the project. The clients budget is established as a
result of these studies. (See 2.1.3.)
2.1.3 Budget
2.1.3.1 DEFINITION
Budget is the total expenditure authorised by the client which is the
responsibility of the design team at the end of the feasibility stage (DesignStage B).
2.1.3.2 OBJECTIVES
(a) To establish the limit of expenditure necessary to meet the clients brief.
The clients and projects status with regard to VAT (Value Added Tax) will
also need to be established;
(b) to provide the client with a statement of the likely area and quality of
building, which is achievable within the limit of expenditure;
(c) to provide a statement of the recommended methods of construction and of
the contractual procedures to achieve the required occupation date; and
(d) to provide the client with alternative budgets for different occupation dates
and qualities of building, if appropriate.
2.1.3.3 INFORMATIONREQUIREMENTS
(a) The ideal requirements from the client and members of the project team
to the quantity surveyor are given below. On projects where this level of
information is not available, the quantity surveyor should state clearly any
assumptions made. It is possible to produce a typical elemental estimate for
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a particular type of building from very little information, but it is important to
clarify as many information issues as possible before such an estimate is
accepted as the budget for a particular project.
(b) Information required from the client:
location of the site; availability of the site for commencement of
construction work;
in conjunction with the designer, architect or building surveyor, a
schedule of accommodation;
names of other similar buildings of broadly suitable quality if
appropriate;
the required occupation date or phased occupation dates;
any specific requirements relating to life-cycle costs;
any specific requirements as to specification and/or procedures;
requirements in respect of the treatment of inflation; instructions regarding Construction (Design and Management)
Regulations; and
the clients VAT status and any other tax matters which may affect the
overall cost of the project.
(c) Information required from the designer, architect, building surveyor, or
other source:
approximate location of the building on the site;
advice on necessary storey heights for any specialist areas shown on
schedule of accommodation;
advice on statutory regulations;
advice on routes of public sewers and the like;
designers concept of building; and
names of similar projects previously designed by the practice.
(d) Information required from the structural engineer:
advice on probable ground conditions;
advice on probable floor loadings; and
any information on structural solutions.
(e) Information required from the services engineer: advice on areas of building which will require specialist engineering
services;
any information on the types of systems; and
advice on availability of public utility services.
Note: If the quantity surveyor is not responsible for cost planning the
engineering services, this should be clearly stated in the budget and cost plan.
The information from the quantity surveyor to the design team is as follows:
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(An example of a format for the quantity surveyors report is given in
Appendix B to this Section.)
(f) Information to be provided to the client involves a report containing:
the budget, with alternative proposals if appropriate;
a statement of the basis of the budget calculation including any
important assumptions made;
a statement setting out the programme for design and construction on
which the budget is based;
an outline cash-flow forecast;
a statement of any items not included; and
assumptions in respect of inflation forecasts and current/future market
conditions.
(g) Information to be provided to the designer: a copy of the report sent to the client; and
a more detailed statement of the quantity and quality parameters
included in the calculations.
(h) Information to be provided to other consultants:
such quantity and quality parameters as relate to their area of design.
2.1.3.4 METHODS OFPREPARATION
(a) The method of preparation depends on the type of project involved.
Unusual projects, projects of great complexity and projects containing a large
element of alterations are more difficult to budget accurately at an early stage.
(b) For most types of project, it is possible to build up an elemental budget
using the parameters set out under 2.1.3.5. This can be based on cost
information from previous projects, from the RICS Building Cost Information
Service (BCIS), other published sources, or on an appropriate cost model.
(c) The main elemental quantities of hypothetical buildings can be generated
using agreed parameters, to which rates applicable to agreed quality and
performance standards can be applied. An example of a method of calculatinghypothetical quantities is described in Appendix C to this Section.
(d) Once the budget has been established, it provides the first cost plan for the
project, and the framework for the actual design to be developed.
2.1.3.5 STATEMENT OFQUANTITY ANDQUALITYPARAMETERS
The main parameters which should normally be incorporated in the
calculation are as follows (the list is not exhaustive):
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(a) Quantity
in addition to the briefed areas, a statement of the allowances (e.g.
circulation) used to calculate a gross floor area;
the number of storeys of a possible solution;
the storey height(s);
the square index or wall/floor ratio (see appendix C to this section);
the density of vertical division or partition/floor ratio (see appendix C
to this section);
proportion of window area;
floor loadings;
thermal resistance values of fabric;
air change rates;
heating and hot-water loads;
lighting levels;
total electrical load; areas of the brief with special functions of significant cost;
road area and number of car parking spaces;
paved pedestrian areas; and
length of boundary walls or fencing.
(b) Quality
A general statement of quality and specification which relates to the
rates used for the budget calculation. This should cover specifically at
least the following: foundations, roof, external walls, floors and
vertical circulation, internal vertical division, internal finishes,
lighting and other services. External works should include roads,
paths, landscape, boundary walls and fences, and service mains,
planting and the like.
2.1.3.6 INFLATION
(a) The prediction of future inflation may not be necessary for some clients,
and a statement of cost at current prices may be adequate. Where an
assessment of inflation is required for more than a few months ahead, a range
of probable inflation is best provided. This can be calculated using
predictions published, for example by BCIS or the Department of Trade andIndustry. The assumptions upon which the prediction is made should be
stated.
(b) Some clients, particularly in the public sector, have their own inflation
controls. Where the client requests that a particular level of inflation be
included in the budget, the quantity surveyor should inform the client if he or
she believes it to be unrealistic.
2.1.3.7 COSTREPORTING
If at any time during the design process it becomes apparent that the agreed
budget is likely to be exceeded without the brief being changed, the client
should be informed and instructions requested. Likewise, if it becomes
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(d) Information required from the services engineer:
outline proposals for installations, indicating any alternative systems;
and
an indication of the preferred specification, after acceptance by the
designer of its visual implications.
(e) Information required from specialist consultants:
outline proposals.
The basic information requirements from the quantity surveyor to the design
team are as follows:
(An example of a format for the quantity surveyors report is given in
Appendix B to this Section.)
(f) Information to be provided to the client involves a report containing:
a statement of cost;
a broad indication of the specification;
a statement of floor areas;
a request for decisions on any alternative proposals and/or procurement
routes, with advice thereon;
an updated cash-flow forecast;
allowances for contingencies and design reserve; and
an update of inflation projections.
(g) Information to be provided