Macmillan Building and Surveying Series Series Editor: lvor H. Seeley

Emeritus Professor, The Nottingham Trent University

Advanced Building Measurement, second edition lvor H. Seeley Advanced Valuation Diane Butler and David Richmond Applied Valuation Diane Butler Asset Valuation Michael Rayner Building Economics, fourth edition lvor H. Seeley Building Maintenance, second edition lvor H. Seeley Building Maintenance Technology Lee How Son and George C. S. Yuen Building Procurement Alan E. Turner Building Project Appraisal Keith Hutchinson Building Quantities Explained, fourth edition lvor H. Seeley Building Surveys, Reports and Dilapidations lvor H. Seeley Building Technology, fifth edition lvor H. Seeley Civil Engineering Contract Administration and Control, second edition

lvor H. Seeley Civil Engineering Quantities, fifth edition lvor H. Seeley Commercial Lease Renewals Philip Freedman and Eric F. Shapiro Computers and Quantity Surveyors Adrian Smith Conflicts in Construction- Avoiding, Managing, Resolving Jeff Whitfield Constructability in Building and Engineering Projects Alan Griffith and

Tony Sidwell Construction Contract Claims Reg Thomas Construction Law Michael F. James Contract Planning and Contractual Procedures, third edition B. Cooke Contract Planning Case Studies B. Cooke Cost Estimation of Structures in Commercial Buildings Surinder Singh Design-Build Explained David E. L. Janssens Development Site Evaluation N. P. Taylor Environmental Management in Construction Alan Griffith Environmental Science in Building, third edition R. McMullan European Construction- Procedures and Techniques B. Cooke and

G. Walker Facilities Management-An Explanation J. Alan Park Greener Buildings- Environmental Impact of Property Stuart Johnson Housing Associations Helen Cope Housing Management: Changing Practice Christine Davies (Editor) Information and Technology Applications in Commercial Property

Rosemary Feenan and Tim Dixon (Editors) Introduction to Building Services, second edition Christopher A. Howard

and Eric C. Curd Introduction to Valuation, third edition David Richmond Marketing and Property People Owen Bevan Principles of Property Investment and Pricing, second edition

W. D. Fraser Project Management and Control D. W. J. Day Property Finance David Isaac Property Valuation Techniques David Isaac and Terry Steley Public Works Engineering lvor H. Seeley Quality Assurance in Building Alan Griffith Quantity Surveying Practice lvor H. Seeley Recreation Planning and Development Neil Ravenscroft Resource Management for Construction M. R. Canter Small Building Works Management Alan Griffith

(continued overlean

Structural Detailing, second edition P. Newton Sub-Contracting under the JCT Standard Forms of Building Contract

Jennie Price Urban Land Economics and Public Policy, fifth edition P. N. Balchin,

J. L. Kieve and G. H. Bull Urban Renewal- Theory and Practice Chris Couch 1980 JCT Standard Form of Building Contract, second edition

R. F. Fellows

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BUILDING ECONOMICS Appraisal and control of building design cost and efficiency

IVOR H. SEELEY BSc (Est Man), MA, PhD, FRICS,

CEng, FICE, FCIOB, FCIH Chartered Quantity Surveyor

Emeritus Professor of The Nottingham Trent University

Fourth Edition

MACMILlAN

©I. H. Seeley 1972, 1976, 1983, 1996

All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended), or under the terms of any licence , permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE.

Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

First edition 1972 Reprinted three times Second edition 1976 Reprinted four times Third edition 1983 Reprinted seven times Fourth edition 1996

Published by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG216XS and London Companies and representatives throughout the world

A catalogue record for this book is available from the British Library

10 9 8 7 6 5 4 3 2 1 05 04 03 02 01 00 99 98 97 96

ISBN 978-0-333-63835-4 ISBN 978-l-349-13757-2 (eBook) DOI 10.1007/978-1-349-13757-2

1

CONTENTS

Preface to Fourth Edition

Acknowledgements

List of Figures

List of Tables

The Concept of Cost Control Introduction; historical development of cost control processes; European context; need for cost control; main aims of cost control; cost, price and value; the importance of building; building output and costs; tendering arrangements; building procurement; public procurement in the European Community; comparison of cost planning and approximate estimating; cost control terminology; BCIS; BMI; CEEC; other sources of European information; cost implications of dimensional co-ordination; introduction to value management/engineering; computer aids to cost planning; expert systems; examiners' reports.

ix

xi

xiii

XV

1

2 Cost Implications of Design Variables and Quality Assurance 31 Plan shape; size of building; perimeter/floor area ratios; circulation space; storey heights; total height of buildings; grouping of buildings; relative costs of flats and houses; implications of variations in the number of storeys of buildings; column spacings; floor spans; floor loadings; cost estimation of structures of commercial buildings; design cost criteria; constructability; quality assurance.

3 Functional Requirements and Cost Implications of Constructional Methods Low and high rise buildings; substructures; structural components; walling; roofing; flooring; doors and windows; finishings; service installations; automation; fire protection; external works.

4 Influence of Site and Market Conditions and Economics of Prefabrication, Industrialised and System Building Effect of site conditions on building costs; use of plant; site productivity; market considerations; cost implications of prefabrication and standardisation; industrialised/system building methods; industrialised and system built housing; problems with industrialised/system building; economics of industrialised/system building; the future in industrialised/system building and their main defects; refurbishment of tower blocks; CLASP.

56

90

5 Economics of Residential Development 113 Background to public housing provision; later housing developments in the UK; use of land for housing purposes; assessment of housing need; some financial aspects of housing provision; dwelling types; housing requirements of occupants; patterns of development to meet varying density requirements; economics of housing layouts; some overseas developments; car parking provision; rehabilitation and modernisation of older dwellings; latest trends in housing.

v

vi Contents

6 Approximate Estimating 154 Purpose and form of approximate estimating techniques; unit method; cube method; superficial or floor area method; storey-enclosure method; approximate quantities; elemental cost analyses; comparative estimates; interpolation method.

7 Cost Planning Theories and Techniques 174 Plan of work; cost control procedure; information required by architect and building client; role of the quantity surveyor during the design stage; cost planning techniques; building industry code; Cl/SfB classification system; cost planning of mechanical and electrical services; cost control during execution of contract; cost control by the contractor.

8 Cost Modelling 202 Introduction; accuracy; historical development of cost modelling; BCIS on-line approximate estimating package; Bucknall Austin building cost model; Davis Langdon and Everest cost model; purposes of cost modelling; approaches to cost modelling; types of model; risk analysis/Monte Carlo simulation; statistical models and regression analysis; other cost modelling applications; simulated modelling; network cost modelling systems; expert systems; conclusions.

9 Cost Analyses, Indices and Data 211 Cost analyses; standard form of cost analysis; cost limits; building cost/price indices; application and use of cost analyses; cost data; cost research.

10 Practical Application of Cost Control Techniques 248 Worked examples 1, 2 and 3 covering the preparation of a preliminary estimate, first cost plan, and cost checks and cost reconciliation during the design process; conclusions; cost control of engineering services.

11 Value Management General principles; value management definitions; reasons for the client comm1ss10ning VM studies; alternative approaches: the charette; 40 hour management workshop/study; one-two day workshop/study; other alternatives; VM strategy; comparison of VM and cost management; VM techniques- functional analysis; FAST diagrams; criteria scoring/alternative analysis matrix; VM case studies: Computer Centre, Northern England; Bank Processing Centre, Northern England; conclusions.

12 Valuation Processes The concept of value and investment; methods of valuation; valuation tables; rental value; premiums; service charges.

13 Life Cycle Costing Concept of life cycle costing; volume and impact of building maintenance work; value for money; practical problems which affect life cycle costing; life cycle costing terminology; the technology of maintenance; types of maintenance; current and future payments; maintenance and running costs; occupancy costs; the lives of buildings and components; life cycle cost plans; practical life cycle costing examples; energy conservation; prediction errors; effect of taxation and insurance; main­tenance cost records and data; greener buildings; facilities management; intelligent buildings.

14 Land Use and Value Determinants Changing land use requirements; land use planning; land values; factors influencing development; encumbrances and easements; matters determining land use and value; land and building values.

277

296

308

380

Contents vii

15 Economics of Building Development 403 Nature of property; the essence of development; development properties; budgeting for public and private development; land acquisition procedures and problems; financial considerations; sources of development finance; project finance; developer's budget; feasibility study; choice between building lease or purchase.

16 Environmental Economics and the Construction Industry Environmental management; concept of environmental economics; public and private investment; structure of the construction industry; variations in workload on the construction industry; relationship of output of construction industry to available resources; effect of government action on the construction industry; European Union proposals for growth and competitiveness; urban renewal and town centre redevelopment; new and expanding towns; building conservation and urban regeneration; cost benefit analysis; private finance projects.

Appendix 1: Amount of £1 table Appendix 2: Present value of £1 table Appendix 3: Amount of £1 per annum table Appendix 4: Annual sinking fund table Appendix 5: Present value of £1 per annum or years' purchase table Appendix 6: Metric conversion table Appendix 7: Life cycle cost plan

References

Index

434

476 478 480 482 484 486 488

493

499

PREFACE TO FOURTH EDITION

The fourth edition has been comprehensively rewritten, updated and extended to cover the latest developments and techniques in this rapidly expanding, changing and vital area of activity. Cost management has become the most im­portant single facet of the work undertaken by the quantity surveyor, with the primary objective of controlling construction costs and obtaining value for money, set against perceived performance expectations. It is imperative to secure projects that satisfy the client's requirements with regard to cost, time, function and quality. There has developed a pressing need to refine the tools of cost prediction and control, and for the quantity surveyor to possess a wide knowledge of the factors influencing construction costs and other related development aspects; this book seeks to address this need.

Hence the scope of the book has been enlarged substantially to take account of the widening and more sophisticated cost management and control service required by the discerning client. It is believed that the new edition will meet the needs of the practising surveyor and student more effec­tively, by providing the breadth of knowledge needed to make informed judgements on the many diverse matters coming within the remit of this subject. The book should be of value to students on quantity surveying degree, higher diploma, BTEC and NVQ courses, be of con­siderable use to practising quantity surveyors as a handy means of reference, while architects, building surveyors, property managers and con­tractors may find much of interest within its pages.

The RICS Report Quantity Surveying 2000 ( QS 2000) - The Future Role of the Chartered

Quantity Surveyor, published in 1991, em­phasised the need to provide more accurate and robust forecasts of construction costs and prices and particularly the development of the tech­niques of early cost advice, construction cost and market forecasting and cost control, including the use of cost modelling and the application of latest computer technology. Seen in this context, cost forecasting is a truly professional service, re­quiring the exercise of a high level of expert discretion and judgement in conditions of con­siderable uncertainty over client requirements, design and future cost and price movements in the industry and in the economy generally. It is hoped that the revised text will assist the reader in undertaking these activities and having regard to the desirability of incorporating future costs in comparative analyses.

Two new chapters have been added: one on 'Value Management' and an introductory chapter on cost modelling, as these areas have assumed much greater importance and the quantity sur­veyor needs to be familiar with their main charac­teristics, uses and applications.

In addition, the text has been widened sig­nificantly to incorporate many new aspects in­cluding the European context, expert systems, quality assurance, buildability, cost implications of automation and fire protection, latest housing developments in the UK and overseas with their cost consequences, cost control by the contractor, extension of cost planning of M&E services, en­largement of life cycle costing, occupancy costs, facilities management, energy conservation, greener buildings, intelligent buildings, land and building values, property characteristics, sources of development finance, project finance, en-

ix

X Preface to Fourth Edition

vironmental management, environmental impact assessment, urban regeneration, building con­servation and private finance projects.

The number of case studies and supporting tables and diagrams has also been increased considerably to assist in bringing the subject to life and to make the text more easily readable.

Unfortunately, fluctuating building and land prices and interest rates will continue to affect the

rates and prices contained in the text, which are mainly those operative in 1992 to 1994. Hence these should be taken as indicative and are used primarily to illustrate the principles and tech­niques involved. In practice current local rates and prices should be used wherever possible.

Nottingham Autumn 1994

IVOR H SEELEY

ACKNOWLEDGEMENTS

The author acknowledges with gratitude the willing co-operation and assistance received from many organisations and individuals, so many that it is not possible to mention them all individually.

Valuable information has been obtained from a variety of sources including RICS Journals, the Architect's Journal, Building, Building Economist, Housing Associations Weekly, Housing, Inside Housing, New Builder, Estates Times, Building Technology and Management and Specification, and from the work of the Department of the Environment, the Treasury, Building Research Establishment, British Stan­dards Institution, Energy Efficiency Office (DoE), Royal Institution of Chartered Surveyors, Char­tered Institute of Housing, National Federation of Housing Associations, CIRIA and the National Association of Lift Manufacturers, for which the author is most grateful.

The author is also indebted to the following:

The RICS Building Cost Information Service and Building Maintenance Information, and particularly the wealth of help and information which was so readily provided by Douglas Robertson and Joe Martin on cost analyses, cost indices and other cost and construction data, which was of great value in illustrating and amplifying the text.

Macmillan Press Ltd for permission to quote from Building Maintenance, and to reproduce figure 13.4 and tables 13.4 and 13.5, to quote from Public Works Engineering, and repro­duce figures 5.6 to 5.9 inclusive, and to quote from Civil Engineering Contract Administra­tion and Control.

Tim Carter MSc FRICS F APM of Davis Langdon Management, Chester, for supplying a large amount of practical information on value management, including valuable case studies, with consent to reproduce from them. This forms the backbone of chapter 11 and includes figures 11.2 and 11.4 to 11.9 inclusive.

Dr Paul Townsend BSc PhD FRICS for con­tributing to the cost modelling chapter.

Bruce Watson FRICS FACostE of Engin­eering Cost Management Ltd, Croydon, for cost information on engineering services (tables 10.6 to 10.10 inclusive).

DoE for data on construction output and em­ployment, housebuilding completions and PUB SEC.

RICS Publications for figure 13.1, reproduced by permission of the RICS which owns the copyright.

The Valuation Office for kind permission to quote from the tables in Property Market Re­port (tables 14.1 and 14.3 to 14.7 inclusive).

Richard Ellis, Jones Lang Wootton and Hillier Parker for helpful advice and informa­tion on property values.

David Hoar FRICS, Quantity Surveying Practice Manager, Nottinghamshire County Council, for information on energy conserva­tion in schools and on CLASP.

xi

xii Acknowledgements

Willmott Dixon Ltd for the supply of com­parative social housing costs contained in table 2.1.

Brian Drake FRICS of Drake & Kannemeyer, Godalming, for information on CEEC.

Brian Norton BSc ARICS of Currie & Brown Inc for permission to reproduce figures 11.4 and 11.5.

BRE, Garston, Watford WD2 7JR for per­mission to refer to various digests and in­formation papers.

The Controller of Her Majesty's Stationery Office for permission to reproduce figs 5. 9 and 5.10 from Flats and Houses 1958.

The Architect's Journal for permission to reproduce figure 5.5.

The Building Group for the housing cost index (table 9.8).

The Energy Efficiency Office (DoE) for abun­dant help on many aspects of energy con­servation and the use of tables 13.22, 13.23, 13.27 and 13.28.

J Alan Park FRICS MCIOB ACIArb of Stride Treglown Management, Bristol (figure 13.7).

WT Partnership (tables 13.13, 13.14 and 13.15).

National Federation of Housing Associations (tables 13.24 and 13.25).

HM Treasury (figure 16.1).

The Housing Corporation (table 15.2).

Society of Chief Quantity Surveyors in Local Government (SCQS) (appendix 7: format).

Nationwide Building Society (table 15.1).

Last but by no means least, my most grateful thanks are due to the publisher for abundant help and the utmost consideration throughout the production of the book, with special thanks to Malcolm Stewart. My wife and family dis­played their customary patience and under­standing as the pressure of the book rewrite intensified.

1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 6.1 6.2 6.3 7.1 8.1 8.2

10.1 10.2 10.3 11.1 11.2 11.3 11.4 11.5 11.6 11.7

11.8

LIST OF FIGURES

Cost adjustment opportunities Building cost trends Construction output by sector Higher cost of buildings of irregular shape Effect of change in size of buildings Perimeter/floor area ratios Means of access to flats Hotel circulation patterns and relationships Real house prices Three-storey flats infill development- Harlow New Town Radburn layout- Cwmbran Radburn layout- Andover Residential development- Odham's Walk, Covent Garden Developments from Tsuen Wan to Tsing Yi Island, Hong Kong Layout plan, Ang Mo Kio New Town, neighbourhood 3, Singapore Housing development at Ang Mo Kio New Town, Singapore Layout plan, Yishun New Town, neighbourhood 2 (part), Singapore Residential development at 250 habitable rooms per hectare Residential development at 350 habitable rooms per hectare Blocks of lock-up garages Approximate estimating- block of six unit factories Office block- estimating by storey-enclosure method Factory check office- approximate quantities Sequence of design team's work Development stages for a model Sample probability distributions for risk analysis Cost planning example 10.2- sketch design of four-storey block of flats Cost planning example 10.2- three-storey block of flats Cost planning example 10.3- social club Extract from a typical FAST diagram Compiling a FAST diagram A criteria scoring matrix Summary ofF AST diagram of Computer Centre project Detailed FAST diagram of site preparation work to Computer Centre project Summary ofF AST diagram of Bank Processing Centre Detailed FAST diagram of provision of acceptable working environment to Bank Processing Centre Detailed FAST diagram of secure operations to Bank Processing Centre

6 9

11 32 35 38 40 42

121 128 130 131 133 134 135 136 136 138 140 142 158 163 165 177 203 207 252 257 264 284 285 288 289 289 290

290 291

xiii

xiv List of Figures

11.9 Value management: optimum timing for study 13.1 Life cycle cost and the RIBA plan of work 13.2 Breakdown of total costs 13.3 Types of maintenance 13.4 Maintenance feedback 13.5 Occupancy expenditure patterns 13.6 Average and good practice energy costs for four different office types 13.7 Facilities management: operation flowchart 15.1 Comparison of rehab and new build costs 16.1 Examples of private finance projects

294 312 317 318 327 335 365 377 419 471

LIST OF TABLES

1.1 LabourcostsJune1993 10 2.1 Comparative costs of one-, two-, three- and four-bedroom new build social housing in the

Midlands, Eastern and Southern England (1993 prices) 36 2.2 Typical relative proportional costs of local authority houses and flats 44 2.3 Design cost criteria 53 3.1 Relative costs of houses and low flats (1993) 57 3.2 Social housing- relative substructure costs 65 3.3 Cost relationships of non-loadbearing partitions 74 3.4 Comparative costs of alternative coverings to pitched roofs 77 3.5 Cost relationships of floor finishings 78 3.6 Cost relationships of internal doors 78 3.7 Capital costs of domestic central heating systems (1993 prices) 81 3.8 Comparative costs of basic mechanical engineering services 83 3.9 Comparative air conditioning installation and running costs for a medium sized office

building 84 4.1 Typical CLASP project costs (1992) 112 5.1 Categorisation of housing tenures in England (percentages) 115 5.2 Housebuilding completions; by sector and number of bedrooms 119 5.3 Comparative costs of different dwelling forms 120 5.4 Costs of refurbishment work 148 5.5 Summary oftypical recommended energy saving measures for gas heated dwellings 151 5. 6 Summary of typical recommended energy saving measures for electrically heated

dwellings 151 6.1 Comparison of cube, floor area and storey-enclosure approximate estimating methods 161 6.2 Comparison of cube, floor area and storey-enclosure price rates 161 6.3 Schedule of comparative costs of different constructional methods 171 7.1 Plan of work for design team operation 175 7.2 Cost plan of office block 188 7.3 Detailed cost plan of substructural work to school 189 7.4 Part of cost study using comparative method 192 7.5 Comparison of elemental and comparative cost planning 193 8.1 Example of relationship between construction cost per square metre and number of ~~ ~

9.1 Concise cost analysis: thirty sheltered flats 215 9.2 Concise cost analysis: warehouse 216 9.3 Detailed cost analysis: advance factories 217 9.4 Tender price and building cost indices 226 9.5 Building cost indices for different types of buildings 227

XV

xvi

9.6 9.7 9.8 9.9 9.10 9.11 9.12

10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 13.1 13.2 13.3 13.4 13.5 13.6

13.7 13.8 13.9 13.10 13.11 13.12 13.13 13.14 13.15

13.16 13.17 13.18 13.19 13.20 13.21 13.22 13.23 13.24 13.25 13.26

13.27 13.28

List of T abies

Davis Belfield and Everest indices Pubsec tender price index of public sector building non-housing Housing cost index Analysis of groups of elements in typical school Weighted analysis of house and siteworks Regional factors Average building prices Cost planning example 10.1 - concise cost analysis of factory Cost planning example 10.2- detailed cost analysis of block of flats (3-storey) Cost planning example 10.2- initial cost plan: four-storey block of flats, Greater London Cost planning example 10.3- initial cost plan and record of cost checks of social club Suggested procedure for cost control of engineering services in buildings Elemental cost summary: engineering services Cold water supply- comparative costs of outlet points Elemental rates for air conditioning for offices: variable air volume system Elemental rates for air conditioning for offices: induction system Elemental rates for air conditioning for offices: brief specification notes Breakdown of typical total costs for various types of buildings Construction output including repairs and maintenance Breakdown of cleaning costs of a higher education building Maintenance manual materials schedule Maintenance manual cleaning schedule Local authority traditional housing: capitalised maintenance costs as a percentage of initial costs Sources and causes of typical local authority housing maintenance costs Distribution of maintenance expenditure between different buildings University ranked average expenditure 1985/86 to 1989/90 Average occupancy costs Sample property occupancy cost analyses Percentage breakdown of cleaning expenditure Characteristics of heating boilers Relative costs of heat emitters Typical elemental breakdown of LTHW heating installation with gas fired boiler plant and continuous perimeter natural convectors for office building of 5000 m2

Typical lives of building components Comparative heating costs Comparison of costs of installing and maintaining heating systems Relative capital costs of air conditioning plant with different glazing combinations Conversion of billed units to kWh Total energy usage in typical non-domestic buildings Typical annual fuel costs for dwellings with different NHER ratings Typical costs of domestic heat losses, energy conservation work and annual savings Average additional capital cost versus fuel saving for each size of unit: gas heated Average additional capital cost versus fuel saving for each size of unit: electric systems Extra costs and savings (three bedroom house): heating by Economy 7 off-peak electricity Energy efficiency methods in schools Predicted disaggregated annual energy use for advance factory unit

228 229 231 233 233 234 243 249 254 263 267 271 272 273 273 274 275 310 311 324 325 325

329 330 331 331 333 336 337 338 338

339 341 346 346 347 357 358 358 359 360 360

361 364 366

13.29

13.30 13.31 13.32 14.1 14.2

14.3 14.4 14.5 14.6 14.7 15.1 15.2 16.1 16.2 16.3 16.4

List of Tables

Savings and payback periods for energy efficiency measures in refurbished industrial buildings Energy efficiency in refurbished public houses Effect of errors in predicting lives of buildings Typical BMI standard form of property occupancy cost analysis Residential building land prices (October 1993) Private sector housing land prices (at constant average density) and housing prices, 1978-91 Offices: rental values (October 1993) Shops: rental values (October 1993) Industrial buildings: capital and rental values (October 1993) Industrial and warehouse land values (October 1993) Agricultural land and property values (October 1993) House prices in the United Kingdom (second quarter 1993) Housing association development: forecast mid-range figures for approvals (1993/97) Construction output by type of work Private contractors: number of firms Private contractors: total employment Construction manpower: employees in employment

xvii

367 368 369 373 396

397 398 399 401 401 402 412 416 441 443 443 444

'It is unwise to pay too much; but it is worse to pay too little.' John Ruskin