Adelaide University: Cost Planning & Management Review Report

This report presents a comprehensive review of cost planning and management for a residential development project in Adelaide, undertaken due to global economic uncertainties affecting the Australian residential market. The review includes a total measurement of the Gross Floor Area (GFA) using Fully Enclosed Covered Area (FECA) and Unenclosed Covered Area (UCA) calculations, providing indicative advice on the expected order of cost for the development, assessing functional areas, and reviewing the design to assess value to the client. The report also explores value management options, recommends a suitable contract type, and suggests tender documentation based on the contract advice. The analysis incorporates various cost planning tools and techniques, such as cost planning maps, bottom-up estimates, and parametric estimates, to provide a thorough assessment of the project's financial viability, with the aim of informing the developer's decision on whether to proceed with the investment.

University Of Adelaide
Masters in Construction
COST PLANNING & MANAGEMENT
ASSIGNMENT 3: TEAM PROJECT
Student Name:
Register Number:
Submission Date:

Executive Summary
The spot light of this research is on cost planning and management. The researcher is considered
as a part of a niche multi-disciplinary practice, for developing the residential properties where,
designing, engineering and cost planning is carried out as the basic functions. A part of a niche
multi-disciplinary practice has been working with the developer for the last six months on the
designs, for a new residential development. But, prior to moving on with the project’s Tender
Planning stage, the client conducts an urgent meeting, where the unsure global economy is
addressed and is resulting to increase the tensions overseas. Moreover, the Australian residential
market is mentioned to heavily rely on the Chinese investor market that is affected directly by
the frictions of the overseas. Thus, the developer has decided to hold the project and conduct a
wholesale review of this. With the completion of this review, there will be re-assessment by the
developer on the project, to decide whether to invest or not. The developer has agreed to pay
reasonable fee for their extra work apart from design and cost planning. The developer intends to
provide a presentation which summarizes the findings. Hence, this report ensures to conduct a
wholesale review of the design, engineering and cost planning, for the development of residential
properties.

Table of Contents
1. Introduction............................................................................................................................................................ 1
1.1 Project Aim......................................................................................................................................................... 1
1.2 Background........................................................................................................................................................ 1
1.3 Problem Statement.............................................................................................................................................. 2
1.4 Objective............................................................................................................................................................. 2
2. Total Measurement of GFA using FECA and UCA Areas.........................................................................................2
3. Indicative Advice of the Expected Order of Cost (budget +/- 10%) of the Development............................................5
4. Assessing the Functional Areas of the Development..................................................................................................8
5. Review of the Design Assessing the Value to the Client of Certain Criteria.............................................................10
6. Review of any Value Management Options that could be Available with a Report to be provided...........................12
7. Recommendation for the Type of Contract that would Suit the Development.........................................................13
8. Recommend Tender Documentation for the Project based on the Contract Advice.................................................14
9. Conclusion............................................................................................................................................................. 15
References...................................................................................................................................................................... 16

1. Introduction
The construction industry uses cost planning as a method to control the estimated costs,
when the project’s phases like, design and construction are carried out. This means that similar to
project management plans, the cost plans are the living artefacts, which throughout the lifecycle
of the initiative should be managed (Medak, 2018). Whereas, the cost management refers to a
process which of estimates, allocates and controls the project costs. Moreover, cost management
helps the business with the future predictions of expenses for reducing the chances of it crossing
the limits of the budget. The projected costs will be calculated in the project’s planning phase and
it has to be approved prior to its commencement. With the execution of project plan, the
expenses will be documented and helps to track whether the cost management plan is within the
set limits or not (Study.com, 2018). With the completion of project, the predicted costs and the
actual costs will be compared, to get the benchmarks for the future cost management plans and to
design the project budgets (Project Management Guide, 2018).
This research ensures to understand the cost planning and management. Here, the
researcher is considered as a part of a niche multi-disciplinary practice, for developing the
residential properties where, designing, engineering and cost planning is carried out as the basic
functions.
1.1 Project Aim
To understand the cost planning and management.
1.2 Background
A part of a niche multi-disciplinary practice has been working with the developer for the
last six months on the designs, for a new residential development. But, prior to moving on with
the project’s Tender Planning stage, the client conducts an urgent meeting, where the unsure
global economy is addressed and is resulting to increase the tensions overseas. Moreover, the
Australian residential market is mentioned to heavily rely on the Chinese investor market that is
affected directly by the frictions of the overseas. Thus, the developer has decided to hold the
project and conduct a wholesale review of this. With the completion of this review, there will be
re-assessment by the developer on the project, to decide whether to invest or not. The developer
has agreed to pay reasonable fee for their extra work apart from design and cost planning. The
developer intends to provide a presentation which summarizes the findings. Hence, this report
ensures to conduct a wholesale review of the design, engineering and cost planning, for the
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development of residential properties.
1.3 Problem Statement
The main problem is the unsure global economy which is increasing the tensions
overseas. The Australian residential market is mentioned to heavily rely on the Chinese investor
market that is affected directly by the frictions of the overseas. Due to this, the developer took
the decision of keeping the project on hold until a wholesale review is conducted, for re-
assessment to decide whether to invest on this project or not.
1.4 Objective
The objective of this research is to conduct a wholesale review, where the total
measurement of the GFA will be measured; indicative advice of the expected order of cost of the
development will be provided; the functional areas of the development will be assessed;
calculation and reviewing for other new developments, for the purpose of assessment will be
checked; design reviews will be assessed; value management options will be reviewed;
Recommendation for the type of contract which will suit the development will be suggested; and
finally depending on the contract advice, the tender documentation for the project will be
recommended.
2. Total Measurement of GFA using FECA and UCA Areas
GFA
The aggregate of the Unenclosed Covered Area and 'Fully Enclosed Covered Area as
characterized.
Fully Enclosed Covered Area (F.E.C.A.)
The fully enclosed covered area is a total of every single zone at all the floor levels buildings
like penthouses, carports, lofts, stunned rooftop spaces and appended fully enclosed covered area
by staircases, vertical conduits, hardware rooms, lift shafts, structures and other fully enclosed
covered area of the building proceed by estimating from the typical inside and outside of the
dividers yet overlooking the any point like docks, sections, plinths and which area from the
ordinary inside face of outside dividers. Fully enclosed covered area will exclude the association.
Light wells, open courts, net open tettitories of upper bits of interstitial spaces, lobbies,
entryways and disconnected secured ways which are reach out through the story being figured.
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Unenclosed Covered Area (U.C.A.)
The whole of each and every such region at all building floor levels, including roofed shades,
open verandas, porches and corridors, added open anchored courses near to structures, under
crofts and usable space under structures, unenclosed access shows and some other trafficable
anchored areas of the building which are not Fully encased by full stature dividers, figured by
evaluating the regions between the encasing dividers or balustrade. There are some surprising
evaluating methods uses being developed industry for Cost masterminding process. Those
methods give starter measure, in this way Quantity Surveyor needs to change fate data
considering the followings, for instance, monetary circumstances, Size, number of stories, detail
level, fuses and shirking’s, advantage, site and foundation conditions and distinctive components.
Fundamental Cost assessing is used for set up the harsh cost of an improvement adventure. It
looks to, the detriment of the assignment on a fundamental introduce using from other
tantamount endeavors. In like manner gives cost urging in the midst of the arrangement stages.
The Details of Buildings are,
The Details of Buildings are,
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Hence, this section confirms that the areas of the developments are appropriate for the
locality. Gross floor area diagram is illustrated as below.
4

Fully enclosed covered area is illustrated as below.
5

3. Indicative Advice of the Expected Order of Cost (budget +/- 10%) of the
Development
Here, the team is expected to utilize the researched $/m2 rates, by taking account of any
locality loadings and an expectation of escalation costs of the development starting in
approximately twelve months duration.
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Figure: Cost Management Plan (A guide to the project management body of
knowledge (PMBOK® guide), 2013)
The above figure illustrates the plan to of cost management, which contains certain inputs
like, project management plan, project charter, enterprise environmental factors and the assets of
the organizational process. Then, it contains the tools and techniques like, expert judgment,
meetings and analytical techniques. The result is the output which refers to the cost management
plan.
Some of the cost planning tools include the following (A guide to the project
management body of knowledge (PMBOK® guide), 2013):
a) Cost Planning Map
b) Bottom-up Estimate
c) Parametric Estimate
d) Cost Baseline
e) Analogous Estimate
The above calculation are done based on the following steps (des Bouvrie, 2018)
(Markgraf, 2018):
Step 1: Planning the Resources: It is the project’s very first phase, for completing
the activities of the defined project. The resources type includes, physical resources, time,
labor, equipment, material and so on, associated with cost should be determined.
Step 2: Estimating the Cost: Various cost estimating methods are available, which
could be utilized for predicting the cost for performing the activities of the project.
The other option is to take the previous cost of the similar project to estimate and
compare the current project’s cost. The other set of option includes to utilize the parametric
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models which represents the project mathematically, for refining the estimates of the project.
Step 3: Cost budgeting: It helps to get the project’s periodic and total costs’
overview.
Step 4: Control the Cost: It concerns about measuring the variances from the cost
baseline and takes corrective actions that are effective, for achieving minimum costs.
Moreover, the cost management can be achieved with the following components (Daniel, 2012):
a) Estimating the costs: Here, it refers to accurately determining the costs prior to
the commencement of the project.
b) Tracking the costs: Here, it refers to keep a track of all the project related costs,
for reviewing the cost information on a time. The costs includes labor, resources,
support costs, employees’ entry time and vendor costs.
c) Controlling the costs: It is not easy to control cost and it can be a serious task,
which controls the spendings of the project which is in progress. Thus, it is
essential to discuss with the project team prior to the commencement of any task,
and then also the requirements must be reviewed along with the level of effort and
time duration for getting their commitment to the work, within the time limit and
guidelines. The time and budget must be managed simultaneously with the level
of efforts required to complete the task.
d) Cost data Maintenance: This refers to archiving the cost data in the closing
processes. Because, the cost data could be utilized while estimation and planning
for the future projects. If the projects are managed in this approach, the
organization can get better, at the overall cost control.
The most important parts of the project’s planning phase is, project’s cost plan
configuration, as it serves as the safety net which guarantees to keep the cost of the project
within the budget limits. In general, the cost management plan will analyze how to plan, fund
and control the project costs. The following are a set of procedure followed in cost management
plan for a project, to be within the limits of the approved budget and quality standards (Clarizen,
2018):
a) Precision Levels
b) Measurement Units
c) Control thresholds
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d) Performance measurement rules
e) Formats of Reporting
4. Assessing the Functional Areas of the Development
As a residential project, the functional areas must be fairly simple by considering the
living areas, amenity (bathroom) areas, kitchens, bedrooms and outdoor space. This section will
provide the calculation of the areas and review areas for other new developments to assess if they
are similar or not.
Project Budget for a Development
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5. Review of the Design Assessing the Value to the Client of Certain Criteria
Here, the client furnishes the perception of superior quality and high cost to the street
frontage of the projects. The elevations will demonstrate the perceived value, but without the
high cost. Internally, the client prefers to ensure spaces are functional with some features to
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provide enhanced living. Whole of life costs are an important consideration because of
increasing utility costs. Projects provide a safe environment with safety in design.
The designs are reviewed in this section to advise which elements you believe to remain,
because they are of value to the client.
The designed are very good and covers all the major aspects like quality and cost. From
the assessment, it is observed that, the specification are met and the customer needs are met.
Further, the designs are verified and assessed. The planned functionality and capabilities of the
project are also cross-checked.
Thus, the overall requirements are verified followed by the considered design is assessed
with the help of the Requirements Traceability Matrix (RTM), which shows the association with
the functional requirements, requirements of the project and the capabilities of project design
components. The RTM effectively points at the components of the design which are mainly
designed for meeting the project requirements, for a well-designed project. On the other hand,
the association could be included in the RTM for representing the mechanisms for testing the
design’s functionality, for meeting the project requirements. The below diagram also represents
the relationship of the Requirements Traceability Matrix.
Figure: Relationship of the Requirements Traceability Matrix
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Traceability and verification helps with the following:
a) Development of project scope.
b) Written requirement’s Quality.
c) Excessive reliance on the derived requirements.
d) Unique challenges.
e) Requirements baseline
f) Project risk and impacts.
g) Verification of test plans.
The design assessment needs the following (The MITRE Corporation, 2018):
1) Review the strategy of the development team.
2) Conduct interview with the design team leads and the key personnel.
3) Review the documentation.
4) Focus on assessing the existence of RTM, critical design reviews and design team's
approach, procedures and methodologies.
6. Review of any Value Management Options that could be Available with a
Report to be provided
This section asses the designs and puts forward the options of value management, which
could decrease the costs, without any compromising in the design value. The proposed solutions
with specific reasons is presented here, which denotes why this would reduce the cost of the
project or increase the ‘value’.
The value management review’s advantages include that, they are regularly seen as far as
enhanced quality and decreased cost. Anyway the 'imperceptible' advantages can be just or
highly valuable. It needs accord and understanding among the partners, with goals that are clear,
with decreased risks of change with the enhanced communications could support in guaranteeing
the project to meet its objectives. The Function analysis system technique (FAST) can be an
option for reviewing the value management.
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Various techniques are available for value management, such as cost and worth analysis,
options selection, weighting techniques, creative techniques, SMART technology, function
analysis, value bench marking, function analysis system technique, scenarios techniques,
function performance specification, evaluation techniques, value drivers and target costing
(Designingbuildings.co.uk, 2018):
7. Recommendation for the Type of Contract that would Suit the
Development
Here, for the development, the preference of client is, a commercial contract. This section
will represent the details like why the specific recommendation for the type of contract is made,
for the client to understand its advantages and disadvantages for the project mentioned below.
Project B
Quick build time to ensure ready for University student intakes at the beginning of 2019
Project brief outlines specification & quality requirement but does not need to be specific
Cost certainty
Experienced developer
For Project B, the recommended type of contract is Fixed-Price Contract. Because, of the
following advantages like, the fixed-price contract acts as a legal agreement among the project
organization and the entity (for example, Person or a company) for providing the services to the
project, with the agreed price. Moreover, the contract provides details such as service or goods
quality, required timing for supporting the project, and the cost to deliver the goods or services.
Predictable cost is offered by the fixed price contract. To meet the project needs and manage the
work, the contractor is held responsible. The quality and schedule progress is tracked by the
project team for getting assurance whether the contractors would meet the needs of the project or
not. The costs related with the project change are considered as the risks related with the fixed
price contracts. In the event that a change takes in the project that needs a change order from the
contractor, the price of the change is normally high. Notwithstanding when the price for changes
is incorporated into the first contract, changes on a fixed-price contract will make higher total
project costs than the different types of contracts, as most of the risks of cost is put on the
contractor, and the contractors will include a possibility to the contract to overcome their risks
(Pm4id.org, 2018).
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Table: Characteristics of Fixed Price Contracts
On the other hand, this type of contracts need at least two or more suppliers always
available, who possess the historic background of qualifications and performance which
guarantees to meet the project needs, as and when needed. The additional requirement includes,
the scope of work which most probable will not be changing at al. The critical aspects of this
contract are, to develop clear scope of work depending on the right information, to create a list of
bidders who are highly qualified, and to develop a clear contract which reflects the scope.
To incorporate all the costs, if the service provider is held responsible along with profit,
into the agreed-on price, then it refers to fixed-total-cost contract.
This contract utilizes fixed fee with price adjustment, for the long projects which extends
for years.
The fixed-price with incentive fee can be used to provide performance based incentive.
When the service or the materials could be measured in a standard unit, but the accurate amount
is not known, in such case there can be fixed unit price.
8. Recommend Tender Documentation for the Project based on the Contract
Advice
It is observed that, cost management plan refers to a process which establishes specific
procedures, policies and documentation related to plans, management, spending and to control
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the cost of the project. The cost management plan’s advantage is that it acts as guideline to direct
in managing the cost of the overall project (A guide to the project management body of
knowledge (PMBOK® guide), 2013).
It is clear that cost estimating and cost planning contains certain guiding principles such
as follows:
i. Time is regarded as money.
ii. Always the risk and the reward work oppositely i.e., the higher the risk, the
reward has greater potential. Whereas, if the risk is unsustainable, no reward is
possible.
iii. Right controls for developing, implementing and managing the cost estimates and
the cost plans are the key for repeatable quality outcomes and to achieve success
commercially.
The recommended Tender Documentation for the Project based on the Contract Advice
(Designingbuildings.co.uk, 2018):
1) Letter of welcome to the delicate.
2) The delicate shape.
3) Preliminaries: Inclusive of pre-development data and site squander
administration plan (whenever required).
4) The type of agreement, contract conditions and corrections. It can likewise
contain a model which empowers the correction for Building Information
Modeling (BIM).
5) Tender valuing report
6) Employer's data prerequisites for BIM.
7) Design illustrations, and the current building data show.
8) Specifications, which indicate the material quality and additionally the
gauges of required workmanship.
9) Tender return slip
9. Conclusion
Therefore, this report concludes that all the objective are met. It is understood that, it is
not easy to control cost and it can be a serious task. Then, the cost management plan denotes a
process which establishes specific procedures, policies and documentation related to plans,
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management, spending and to control the cost of the project. The advantage of cost management
plan is that, it helps to direct in managing the cost of the overall project. Here, the total
measurement of the GFA is measured and it is confirmed that the areas of the developments are
appropriate for the locality. The indicative advice of the expected order of cost of the
development is provided. The functional areas of the development are assessed. The calculation
and reviewing for other new developments, for the purpose of assessment is checked. The design
reviews are assessed. The value management options are reviewed. The recommendation for the
type of contract for three projects, which will suit the development is identified and their
characteristics are also specified. At last, depending on the contract advice, the tender
documentation for the project is recommended.
It is necessary to archive the cost data in the closing processes, because this data can be
utilized for future projects, while estimation and planning. If the projects are managed in this
approach, the organization can get better, at overall cost control.
Henceforth, to have clarity and certainty of cost, as the scheme evolves, the costs must be
monitored and adjusted. With a team of thorough cost planning and regular reporting, it is
possible to meet the tight budget control targets.
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References
A guide to the project management body of knowledge (PMBOK® guide). (2013). 5th ed. USA:
Project Management Institute, Inc.
Clarizen. (2018). What is a Cost Management Plan?. [online] Available at:
https://www.clarizen.com/cost-management-plan/ [Accessed 7 Nov. 2018].
Daniel (2012). Project Cost Planning and Management. [online] pmhut.com. Available at:
https://pmhut.com/project-cost-planning-and-management [Accessed 7 Nov. 2018].
des Bouvrie, C. (2018). Cost Management explained in 4 steps. [online] Costmanagement.eu.
Available at: http://www.costmanagement.eu/blog-article/198-cost-management-explained-in-4-
steps [Accessed 7 Nov. 2018].
Designingbuildings.co.uk. (2018). Tender documentation for construction projects. [online]
Available at:
https://www.designingbuildings.co.uk/wiki/Tender_documentation_for_construction_projects
[Accessed 7 Nov. 2018].
Designingbuildings.co.uk. (2018). Value management in building design and construction.
[online] Available at:
https://www.designingbuildings.co.uk/wiki/Value_management_in_building_design_and_constr
uction [Accessed 8 Nov. 2018].
Markgraf, B. (2018). Project Cost Control Techniques. [online] Smallbusiness.chron.com.
Available at: https://smallbusiness.chron.com/project-cost-control-techniques-72603.html
[Accessed 7 Nov. 2018].
Medak, K. (2018). A project manager’s guide to cost estimating and cost planning. [online]
Framegroup.com.au. Available at: https://www.framegroup.com.au/cost-estimating-and-
planning/ [Accessed 7 Nov. 2018].
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Pm4id.org. (2018). 9.5 Selecting the Type of Contract. [online] Available at:
https://pm4id.org/chapter/9-5-selecting-the-type-of-contract/ [Accessed 8 Nov. 2018].
Project Management Guide. (2018). What is Cost Management in Project Management?.
[online] Available at: https://www.wrike.com/project-management-guide/faq/what-is-cost-
management-in-project-management/ [Accessed 7 Nov. 2018].
Study.com. (2018). What is Project Cost Management?. [online] Available at:
https://study.com/academy/lesson/what-is-project-cost-management-definition-techniques-
importance.html [Accessed 7 Nov. 2018].
The MITRE Corporation. (2018). Assess the Design's Ability to Meet the System Requirements.
[online] Available at: https://www.mitre.org/publications/systems-engineering-guide/se-
lifecycle-building-blocks/system-design-and-development/assess-the-designs-ability-to-meet-
the-system-requirements [Accessed 8 Nov. 2018].
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