h the selected contractor.
- Final account, agreed once the construction works are completed.
Other than initial cost appraisals, these all relate to the construction cost of the project (rather than wider project costs that the client might incur, which could include; fees, equipment costs, furniture, the cost of moving staff, contracts outside of the main works, and so on).
Contingencies will tend to be highest in the early stages of the project when there are the greatest number of possible risks, but can generally be reduced as better particulars about the project become available and some risks have passed or been overcome.
The approximate quantities cost plan is a first attempt to measure defined quantities from drawings (or to take them off from a building information model). It presents a more accurate picture of where costs are distributed, in particular it draws the attention of designers to those elements of the design that are standard and those that are not and as a consequence may be more expensive.
The pre-tender estimate (PTE) is the final estimate of the likely cost of the works that are described in completed tender documents. It provides a final comparison with the budget, and along with a cash flow estimate enables the client to confirm that sufficient funds area available before committing to seeking tenders. It also gives a basis for assessing and comparing tenders when they are returned.
The contract sum provides the first actual confirmed price. Up to this point, all cost planning has been based on estimates. A bill of quantities is issued to tendering contractors for them to prepare a price for carrying out the works. The bill of quantities assists tenderers in the calculation of construction costs for their tender, and, as it means all tendering contractors will be pricing the same quantities (rather than taking-off quantities from the drawings and specifications themselves), it also provides a fair and accurate system for tendering.
Best practice for the preparation of bills of quantities is set out in the New Rules of Measurement (NRM). The price agreed with the successful tenderer is entered ino the contract as the contract sum. Unfortunately it is fairly common for there to be a significant difference between the prices offered by contractors and the cost consultants pre-tender estimate.
The complexity of construction projects, the differences in circumstances, duration and level of specification between one project and another, and the continually changing state of the market due to fluctuations in supply and demand, inflation and so on mean that it is impossible to give rule of thumb figures (such as a cost per sq. m) for the likely cost of construction works.
Until 2015, The Department for Business, Innovation and Skills published quarterly construction price and cost indices for estimating, cost checking and fee negotiations on public sector construction projects. The responsibility has since been transferred to the Official for National Statistics (Construction Output Price Indices).
Private sector organisations such as the Building Cost Information Service (BCIS) provide cost and price information to the construction industry to help estimate the likely cost of construction works.
Construction is only a small part of the cost associated with a built asset. There may be land acquisition costs, fees, taxes and so on incurred before construction begins, and management, maintenance and other costs once the project is completed. These may be categorised as capital costs and operational costs
- Land or property acquisition.
- Statutory fees.
- Consultant fees directly associated with the development.
- Materials, plant and equipment.
- Fixtures and fittings.
- Project insurance, inflation, taxation and financing.
- Internal costs directly associated with the development.
This is considered a better way of assessing value for money than construction costs, which can result in lower short-term costs but higher ongoing costs through the life of the building. This can also apply to things such a