Cost Planning & Management for Nest Apartments in Adelaide

This report presents a summary of various elements that will enable successful completion of the proposed Nest Apartments to be built in Adelaide, Australia. The total GFA of this three-level residential development is 895.49 m2. The estimated cost of the project will vary from $1,844,758.70 to $2,254,705.05 (average of $2,049,731.85 – $2,288.95/m2). The suitable contract type for this development is fixed price or lump sum contract.

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COST PLANNING & MANAGEMENT
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Cost Planning & Management 2
Cost Planning & Management
Executive Summary
This report presents a summary of various elements that will enable successful
completion of the proposed Nest Apartments to be built in Adelaide, Australia. The total GFA of
this three-level residential development is 895.49 m2. Based on historical data, the estimated
cost of the project will vary from $1,844,758.70 to $2,254,705.05 (average of $2,049,731.85 –
$2,288.95/m2). All the functional areas of the building are similar to those of similar
developments. The design elements of the development are also adequate to perform the
intended function and achieve the objectives of the project. The management options that the
client can use to enhance successful delivery of the project are: function analysis, FAST,
cost/worth, SMART, value drivers, creative techniques, target costing, lean construction,
building information modelling, prefabrication, automation, nanotechnology. Considering the
project objectives, constraints and delivery method, the suitable contract type for this
development is fixed price or lump sum contract. To get better pricing, the client should provide
the following documentation to the tenderers: general conditions, special conditions, bill of
quantities, drawings and specifications.

Cost Planning & Management 3
Table of Contents
Executive Summary...................................................................................................................................2
1. Introduction.......................................................................................................................................4
2. Total Measurement of GFA..............................................................................................................4
3. Expected Order of the Cost of the Development.............................................................................6
4. Functional Areas of the Development..............................................................................................8
5. Design Review....................................................................................................................................9
6. Value Management Options...........................................................................................................11
7. Type of Contract..............................................................................................................................14
7.1. Advantages...............................................................................................................................15
7.2. Disadvantages...........................................................................................................................15
8. Tender Documentation....................................................................................................................15
References................................................................................................................................................17

Cost Planning & Management 4
1. Introduction
This report presents a wholesome review of the proposed residential property
development project. The project is a three-storey residential building, called Nest Apartments,
that is to be built along Tucker Street in Adelaide, SA. The project has to be completed within a
specified timeframe so that the University students can start using the building immediately. The
client is concerned about several issues including uncertainty of the immediate global economy
growth and the heavy reliance of the Australian residential market on the Chinese investor
market. As a result, the client has requested a review of several elements of the project including:
total measurement of the ground floor area (GFA), expected order cost of the development,
functional areas of the development, design value of the project, value management option,
suitable type of contract, and required tender documentation. Findings from this report will help
the client make a decision on whether to invest in the project or not.
2. Total Measurement of GFA
Ground floor area (GFA) is a building’s total amount of floor space (square footage). It is
determined by measuring the length and width of internal walls of the building and multiplying
the two measurements. In this scenario, GFA is determined as the sum of fully enclosed covered
area (FECA) and unenclosed covered area (UCA) (Australian Property Institute, (n.d.)). FECA
refers to the sum of the building’s fully enclosed covered areas including basements, penthouses,
garages, floored attics and roof spaces, enclosed porches, staircases, lift shafts, equipment rooms,
vertical ducts, and the building’s usable areas (Branson, 2014); (International Code Council,
2015). UCA refers to the sum of all unenclosed building floor covered areas including open
verandahs, roofed balconies, open covered ways, porticos and porches, unenclosed access

Cost Planning & Management 5
galleries, usable space that is under the building, and other trafficable covered areas (James Cook
University, 2014).
The car park is on the ground level of the main building hence included in the GFA
The balconies in this project are roofed hence included in the GFA
Ground level:
= [(2400 + 2300 + 2300 + 2400)] x [(2180 + 3170 + 3040 + 2320 + 2350 + 4100 + 4100)] –
[(2300 + 2400) x 1637]
= [9400 x 21260] – [4700 x 1637]
= [9.4m x 21.26m] – [4.7m x 1.637m]
= 199.844m2 – 7.6939m2 = 192.1501m2 = 192.15m2
Level 1:
= [4260 + 5050] x [(3640 + 2180 + 3170 + 3040 + 2320 + 2350 + 4100 + 4100)]
= [9310] x [24900]
= 9.31m x 24.9m = 231.819m2 = 231.82m2
Level 2:
= [8992] x [(3640 + 2180 + 3170 + 3040 + 2320 + 2350 + 4100 + 4100)] + [½ x 4823 x (1456 +
1820)]
= [8992] x [24900] + [½ x 4823 x 3276]
The last part is the area of trapezoidal balcony on level 2

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= [8.992m x12.9m] + [½ x 4.823m x 3.276m]
= [223.9008m2] + [7.9m2]
= 231.8m2 = 231.80m2
Level 3:
= [(4260 + 5050)] x [(3640 + 2180 + 3170 + 3040 + 2320 + 2350 + 4100 + 4100] + [½ x 4823 x
(1456 + 1820)]
The last part is the area of trapezoidal balcony on level 3
= [9310] x [24900] + [½ x 4823 x 3276]
= [9.31m x 24.9m] + [½ x 4.823m x 3.276m]
= [231.819m2] + [7.9m2]
= 239.719m2 = 239.72m2
Total GFA = GFA of ground level + GFA of level 1 + GFA of level 2 + GFA of level 3
= 192.15m2 + 231.82m2 + 231.80m2 + 239.72m2 = 895.49m2
Therefore the GFA of the proposed residential development in this project is 895.49m2.
3. Expected Order of the Cost of the Development
There are different methods of estimating the cost of a residential building. Accurate
estimation of construction cost of a building requires data including the building’s plans and
sections, specifications of different elements of the building, and rates of each elements
(Misronet.com, (n.d.)). The cost of the development in this project is determined by multiplying
the total GFA with the estimated construction cost of a residential development in Adelaide,

Cost Planning & Management 7
Australia. This method is referred to as square foot estimation method. In this, dimensions in
design drawings of the building are used to estimate GFA that is then multiplied by the unit cost
(cost per square foot) obtained from historical data (Cullen, 2016). This is a quick method of
estimating cost of a building project. The historical data is mainly obtained from previous
experiences of similar projects (Bettini, et al., 2016). The level of finish of the building also
affects the cost per square meter (Mortgage House, 2018). The finish levels are classified as: low
or basic, medium or standard and high or luxury (Kempthorne, 2018). Each region is also unique
and therefore has different construction cost per square meter. Hence it is important to consider
regional variations when estimating the cost of construction. In this scenario, the regional
variation of Adelaide is applied. The level of finish for this project is medium/standard. The
estimate cost per square meter of a three-level unit with a ground floor parking and concrete
structure with medium/standard finish in Sydney is $2,255. The regional variation of Adelaide is
95% - 108% (MBT Quantity Surveyors, 2018). This means that the construction cost per square
meter of the same unit in Adelaide costs between $2,142.25 and $2,435.40. The average of these
two is $2,288.95, which is used as the cost per square meter of the proposed residential
development in this project.
Thus the construction cost of the proposed project is: 895.49m2 x $2,288.95/m2 = $2,049,731.85
Considering the ± 10 %, the cost can vary from $1,844,758.70 and $2,254,705.05. It is important
to note that the price is exclusive of GST.
The costs have been determined by considering the GFA of the proposed residential
development, number of levels of the building, the structure and type of materials of the
building, type of finish of the building, estimated construction cost per square meter of a similar
project based on historical data, and regional variation (Adelaide region).

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4. Functional Areas of the Development
Sample calculations of areas of the various elements of the building on level 3 are as follows:
Living areas:
Living/dining = 4.26m x 4.823m = 20.55m2
Amenity (bathroom) areas:
Bath = 1.82m x 1.82m = 3.31m2
Bath2 = 0.728m x 2.73m = 1.99m2
Kitchens:
Kitchen1 = 3.64m x 2.548m = 9.27m2
Kitchen2 = 4.26m x 0.819m = 3.49m2
Bedrooms:
Master bedroom = (3.276m x 4.55m) + (1.82m x 2.73m) = 14.91m2 + 4.97m2 = 19.88m2
Bedroom1 = (3.185 x 2.73m) + (1.729m x 0.728m) = 8.70m2 + 1.26m2 = 9.96m2
Bedroom2 = (3.276m x 3.276m) + (0.728m x 1.638m) = 10.73m2 + 1.19m2 = 11.92m2
Outdoor space
Balcony = 9.31m x 0.819m = 7.62m2
From the calculations above, the areas of different elements of the building are similar with other
new developments. This is because the sizes of different elements of the building are within
reasonable range to the typical sizes of similar developments.

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5. Design Review
Since the client is keen in providing superior quality to the street frontage and improved
interiors, the elements that should remain because of their value to the client include the
following:
Balustrades: all the types of balustrades provided (aluminium, stainless steel and
galvanized steel balustrades) should remain because they have the capacity to perform the
intended function of enhancing safety of the occupants and also provide adequate aesthetic value
to the client.
Screens and finishes: the provided screens and finishes on the elevations of the building
(both internal and external) should remain because they are of high quality and provide high
aesthetic value to the client.
Balconies: the balconies provide great aesthetic value and are also designed to provide
occupants with an outdoor space to relax or store their items. Therefore the balconies should
remain.
Exposed block walls: these walls should remain because they provide high aesthetic
value to the client besides performing their intended function adequately.
Compressed fibrous cement (CFC) sheeting: all the CFC sheeting types provided for the
stairs element should remain because besides increasing the sustainability of the building, it
provides value to the client.
Stairs: the stairs should remain as they are because they will facilitate movement of
occupants from one floor to another. Their sizes are adequate and are made of suitable materials.
They are also have high aesthetic value.

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Columns and beams: the columns and beams of the building should remain because of
their role in structural integrity of the building.
Fire rated ceiling: the ceiling should remain because its properties are adequate to protect
the indoor of the building against fire and also provide the required aesthetic value.
Ceiling plasterboard: this should remain because it is able to provide the required
aesthetic value by the client and also help regulate indoor air temperature and sound.
Roof sheeting: the roof sheeting should remain because it has a strong metal cover and
insulation blanket that provides the required cover for the building and also helps in improving
indoor environment by reducing entry of excess heat and light into the building.
Eaves and box gutters, and downpipes: they should remain because they are effective in
collecting rainwater hence will enable the client harvest adequate rainwater and manage it easily.
Joints: the various joint types or systems used should also remain because they provide
the required supports and connections for various components of the building to make it a
continuous integrated system.
Internal shelving, doors and other interior elements: these elements should remain
(together with their finishes) because they have the capacity to perform their intended functions
and also provide high aesthetic value to the client.
Hot water unit: t should remain because it will provide the required heated water for
consumption by the students occupying the building.
Air conditioning unit: it should remain because it has the capacity to regulate the indoor
air temperature and thermal comfort.

Cost Planning & Management 11
Parapet wall: this wall has to remain because besides acting as a security barrier and
providing privacy to the occupants, it also increases the aesthetic value of the development.
6. Value Management Options
Value management plays a very key role in maximizing value for money in all types of
construction projects (Oke & Ogunsemi, 2009). Some of the main benefits of value management
are: encourages creativity and innovation; improves common knowledge and communication
among stakeholders involved in the project; improves the quality of final products or services
provided; results to better decision making; saves time; enhances competitiveness in the
construction industry; and increases value for money; among others (Oke, 2017); (Zhao & Moh,
2016). In general, the concept of value management is to select designs and materials that
provides high quality at the lowest cost possible (Oke & Aigbavboa, 2017). Some of the value
management solutions that can help the client increase the value or reduce the cost of the project
include the following:
Function analysis: the client should involve professionals to analyze the functions of the
development and clearly state the target objectives. This involves comprehensive analysis and
definition of the main objectives to be achieved, the things that must be done right so as to
achieve the target objectives, the things that should be considered when designing the project,
and the impact of the chosen designs in achieving these targets. The cost of each function has to
be determined so as to establish appropriate ways of reducing it as much as possible.
Function analysis system technique (FAST): this is the technique where all stakeholders
(from different professions) involved in the project communicate effectively so as to give their

Cost Planning & Management 12
views on how the cost of the project can be minimized. This mainly involves answering the
how/why questions.
Cost/worth: this is where the client analyzes the lowest cost possible that can be incurred
to achieve a particular function of various elements of the building. This helps in determining
alternative designs, materials or construction processes for each element of the building.
Simple multi-attribute rating technique (SMART): this is the process of identifying
various objectives of the project and their respective attributes on how to achieve then objectives
followed by ranking them based on their importance to the project.
Value drivers: some of the applicable value drivers in this project are: achieve or enhance
the desired financial performance; comply with necessary constraints of the third party; project
the right image of the project; minimize operational costs and maximize operational efficiency;
ensure effective management of procurement process; attract and retain occupants; improve the
environment; reduce maintenance costs; and ensure safety and health during project lifecycle.
Value engineering entails establishing the functions of a service or product, identifying the
functions’ worth, and identifying suitable functions that will meet the desired performance of the
structure being built at the lowest cost possible (Mahadik, 2015).
Creative techniques: this is where innovation is applied to reduce the cost of the project
or increase its value. There are numerous creative techniques that can be used such as use of
nanomaterials, modern construction methods, etc.
Target costing: this is where the cost of the project is determined based on what the client
is ready to pay. This means that the designs of the building have to be developed by considering

Cost Planning & Management 13
the client’s requirements and budget. The suppliers should also be engaged so as to understand
the price that the client is ready to pay for the materials delivered for the project.
Lean construction: this is the technique of minimizing wastage at different stages of the
project. The option can be implemented through reuse of materials, use of recycled materials,
encourage recycling, provide waste collection systems, harvesting rainwater, use of renewable
energy, and accurate estimation of materials.
Building information modeling (BIM): this is a process of improving documentation
throughout the project lifecycle thus making it easier for all stakeholder to access the required
information quickly and timely. Effective communication is very essential in improving value
for money because it eliminates possible costs associated with delays, errors/reworks and
disputes/conflicts among stakeholders (Constructible, 2017).
Prefabrication: this is process where various components of the buildings (referred to as
modules) are manufactured in an offsite factory and transported to the site for assembly. The
option reduces construction time, improved quality, minimizes wastage and improves value for
money.
Automation: this options involves use of automated systems to monitor, regulate and
manage various elements and processes of the project. The option is very useful both during
construction and operation stages of the project (Ellis, 2018). During operation, the automated
systems can be used to monitor and regulate use of water and electricity in the building thus
increasing resource efficiency and improving value for money.
Nanotechnology: this is the process of manipulating properties of materials to meet the
desired specifications. In this option, available materials are improved or engineered to meet the

Cost Planning & Management 14
target properties depending on the intended use of these materials. The options ensures use of
available materials thus reducing the cost of importing materials over long distances, which helps
in improving value for money.
These value management options should be implemented throughout the project
lifecycle. The client should use modern technology as it has become a very important tool in
reducing cost of construction projects and increasing value for money (Rucker, 2015).
7. Type of Contract
The type of contract is usually selected by considering the project objectives, project
constraints and delivery method of the project. Since this project has to be delivered within a
tight deadline, requires an experienced developer and cost certainty is important to the client, the
most suitable type of contract for the project is fixed price or lump sum contract. This is because
the client has already developed the required drawings that can be used to accurately estimate the
total cost of the project. Once the actual total cost of the project has been determined, the client
can choose a formula to calculate the developer’s overhead, profit and margin. These costs are
then used to come up with the fixed price or lump sum of the project. This contract type is most
appropriate in cases where the project has been properly defined and there is less likelihood of
the client making changes during construction stage as these changes or variations will be very
costly and delay the project significantly. The developer who tenders for this type of contract
must also be experienced enough to be able to accurately estimate the cost of the project and
establish innovative ways of completing the project earlier and below the fixed price so as to
maximize profits.

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7.1. Advantages
Some advantages of fixed price or lump sum contract include: the developer or contractor
bears the highest risk (Rodriguez, 2018); the total cost of the project is determined early and
fixed hence the client has enough time to plan on where to get the required money; the developer
or contractor gets incentives for completing the project below budget or early (Riddell, 2017);
and there are minimal change orders.
7.2. Disadvantages
Disadvantages of fixed price or lump sum contract include: there are penalties for the
developer/contractor if the project is completed late (Brown, 2016); the contractor bears the
highest risk; there is no room for variations or else the client will pay heavily for any changes
made during construction stage; the developer/contractor’s desire to complete the project under
the budget and early can detriment quality hence the client has to hire experts to monitor quality
as the project progresses; it is difficult to quantify variations to the drawings or specifications;
there is a high possibility of change orders being rejected by the client; and the project must be
designed completely before any construction work can start.
8. Tender Documentation
Considering that the recommended contract type is fixed price or lump sum contract, the
documentation that the client should provide with the tender to help tenderers provide the best
pricing include:
General conditions: these are standard or general details of the project. They include the
project definition, components of the contract, the client and contractor/developer’s rights and

Cost Planning & Management 16
responsibilities, the schedule of the project, payment method to be used, delay penalties and
warranty (Jain, 2017).
Special conditions – these are unique details or modifications of the project that are necessary
to make this project to stand out from others, make it more flexible and help achieve the project’s
objective easily.
Drawings – these are illustrations and pictures showing the details of various plans, sections
and elevations of the building to be constructed. The drawings indicate the dimensions (sizes and
shapes) and layout of various elements of the building that help the tenderer estimate the cost of
each of these elements.
Specifications – these are the details of properties and standard requirements of various
components and materials, finishes and appliances to be used in the project. The specifications
are very essential in estimating the cost of works packages of the project.
Bill of quantities (BOQ) – this is also a very important document in tendering process. The
document defines the types of materials, equipment/plant and labour that are likely to be used in
executing the project. Based on the project objectives, constraints and delivery method, the client
can provide a list of materials, plant/equipment and labour that must be used in the project and
make them compulsory for use by the successful bidder. The client must ensure that the BOQ is
prepared by a qualified and experienced cost consultant. The client issue the BOQ to tenderers so
that they can provide the price for each of the items included in the BOQ. The client then uses
the prices provided to select the best tenderer depending on his budget, project objectives and the
capability of the tenderer to complete the project successfully.

Cost Planning & Management 17
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