Finance and Control for Constuction Book

List of figures x

List of tables xi

Introduction 1

1 The development process: the main participators 4

1.1 Landowners 4

1.2 Private developers 7

1.3 Public-sector and government agencies 8

1.4 Planners 9

1.5 Financial institutions 10

1.6 Agents 10

1.7 Building contractors 11

1.8 Project design and development team 11

1.9 Objectors 18

1.10 Occupiers 19

2 Sources of finance 21

2.1 Insurance companies and pension funds 21

2.2 Banks 22

2.3 Private person 23

2.4 Building societies 23

2.5 Government and EC funding 23

3 Valuation and development appraisal 25

3.1 Introduction 25

3.2 Cost elements 26

3.3 Development valuation techniques 34

3.4 Risk analysis and sensitivity analysis 39

3.5 Mathematics of valuation 42

4 Introduction to design economics 47

4.1 RIBA Plan of Work 47

4.2 Factors affecting the cost of the building 49

5 Approximate estimating 55

5.1 Introduction 55

5.2 Methods 55

5.3 Functional unit method 56

5.4 Superficial area method 56

5.5 Elemental cost plan 57

5.6 Approximate quantities techniques 57

6 Whole-life costing and life-cycle assessment 61

6.1 Definitions 61

6.2 Introduction 61

6.3 Cost centres 63

6.4 Period of analysis 63

6.5 Factors affecting life expectancy 64

6.6 Data for whole-life costing 67

6.7 Issues to be considered at the design stage for whole-life costing 68

6.8 Is whole-life costing effective? 72

6.9 Life-cycle assessment 73

6.10 Whole building environmental assessment 74

6.11 The future and sustainable building development 76

7 Value management or engineering 78

7.1 Introduction 78

7.2 Functional performance 79

7.3 Methodology or sequence of events80

7.4 When valuation engineering should be applied 84

7.5 Functional analysis method 84

7.6 Function cluster groups 85

8 Procurement methods and types of contract 88

8.1 Traditional methods of procurement 89

8.2 Design and build 91

8.3 Construction management 92

8.4 Management contracting 94

8.5 Partnering 94

8.6 Alliancing 97

8.7 Private-Public Partnerships and Private Finance Initiatives 98

8.8 Prime costing 98

8.9 ProCure21 99

8.10 Apportioning risk 100

9 Standard Method of Measurement and bills of quantities 102

9.1 Introduction 102

9.2 The Standard Method of Measurement 102

9.3 Composition of SMM7 103

9.4 Preliminaries 105

9.5 Preliminaries classification expounded 106

9.6 The bills of quantities 122

10 Estimating and tendering procedures 125

10.1 Introduction 125

10.2 Selection and invitation to tender 127

10.3 Tender documentation 128

10.4 The decision to tender 129

10.5 Managing the estimating process 131

10.6 Completing the bills 134

10.7 Building up the costs of an item 134

10.8 Calculating labour costs 135

10.9 Building up material rates 144

10.10 Cost of plant 148

10.11 Calculating and pricing unit rates 151

10.12 Costing the preliminaries 151

10.13 Sub-contractors' and suppliers' quotations 164

10.14 Selection and invitation to tender - sub-contractors 169

10.15 Opening of tenders 170

10.16 Suppliers' quotations 172

10.17 Method statements 173

10.18 Tender programme 175

10.19 Cash flow 176

10.20 Overheads and profit 176

10.21 Bringing the tender information together for final review 180

10.22 Final review meeting 183

10.23 Final adjustments and submitting the tender documents 185

10.24 Vetting of tenders 187

10.25 Risk and uncertainty in estimating 188

10.26 Computerised estimating 190

11 Bidding strategy 194

11.1 Introduction 194

11.2 Comparisons with competitors 195

11.3 The accuracy of the estimate 196

11.4 The number of competitors 198

11.5 Summary 199

12 Purchasing 200

12.1 Introduction 200

12.2 Ethics 200

12.3 Fair price 203

12.4 Procedures for procuring suppliers and sub-contractors 204

12.5 Preferred suppliers and sub-contractors 204

12.6 Supply chain management 205

13 Post-contract cost control 206

13.1 Introduction 206

13.2 Pareto's Law 206

13.3 The basic needs of a cost-control system for the contractor and client 207

13.4 Cash flow 208

13.5 S-curve 209

13.6 Further refinements 209

13.7 Monitoring using the S-curve 211

13.8 Saw-tooth diagram 211

13.9 Bad practices 212

14 Interim valuation, claims and variations 214

14.1 Introduction to interim valuations 214

14.2 Sums subject to retention 214

14.3 Sums not subject to retention 215

14.4 Materials on site 216

14.5 Off-site materials 216

14.6 Introduction to claims 216

14.7 Extension of time 217

14.8 Cost centres for claims 217

14.9 Introduction to variations 221

14.10 Example calculations 222

15 Cost systems 227

15.1 Introduction 227

15.2 Budget cost 227

15.3 Actual cost 228

15.4 Direct labour costing systems 230

Index 239