Importance of cost planning and cost control

Press, 30 May 1985, Page 17

Importance of cost planning and cost control

(By

P. T. WATERHOUSE,

convenor of the N.Z.I.Q.S. planning group) While most New Zealanders would be aware that design input is a fundamental and significant part of the construction process in any building project, few may have ever had occasion to appreciate the importance of cost planning and cost control, or the impact that cost considerations have on the function and appearance of buildings. Fewer still may have even heard of quantity surveyors, who are the practitioners of this cost-manage-ment process, and yet these highly skilled professionals presently play a vital and expanding role in the development of major construction projects. Most prospective building owners now place equal or even greater emphasis on the importance of cost than on the niceties of design, and increasingly see the cost manager — the quantity surveyor — as the key to any successful project. In fact, in numerous instances, the quantity surveyor is appointed as principal consultant in a role at the hub of the management process. Although the origins of quantity surveying are difficult to trace, it is apparent that the need for specialists to measure and value materials and construction emerged in the seventeenth century following the Great Fire of London. Ever since the building boom that followed, these specialists have progressively expanded and developed their expertise throughout the world, into roles of cost planning and control, fast track procedures, resource planning, life cycle costing, computer services, insurance valuations, and project management. The cost-related processes of major building construction can be seen as analogous with the erection of a family house. It is important to know with reliability during the design phase what the building will cost, establish a contract within that criteria, effectively manage any changes that may be desirable during construction and to arrive at an end cost that falls within predictions.

It is clear that any multistorey office block, large hospital or major industrial building is likely to involve numerous complexities on a scale far greater than the house builder may encounter, but these basic principles of effective cost management are equally applicable.

Cost management or cost planning is in essence designing within paramenters of cost rather than costing a design. The objective of cost planning is to provide reliable, effective budgets and cost assessment of various design options. A budget is established by setting realistic cost targets for each section of a building, each principal component or element and the services required. As the design is developed, it is constantly subjected to a cost checking process to ensure that targets are not being exceeded.

Where excesses are detected, an offsetting cost saving needs to be identified elsewhere before the overrun is committed. This costchecking system continues throughout the whole construction process. Where contract documents include schedules of quantities, which are detailed analyses of buildings, these provide an effective means for reliable competitive tendering and an effective basis of cost management for all parties throughout the construction phase. The Master Builders Federation recommendation is that for all buildings of value exceeding $lOO,OOO a schedule of quantities should be provided. Quantity surveyors, not unlike members of the accounting profession, are engaged and employed in many sectors, as independent consultant practices, within building and development companies, by a whole range of subcontracting industries, and by central and local governments and authorities.

The profession faces numerous new challenges, not the least of which is to gain appropriate recognition by effective marketing and have its cost management expertise more widely utilized to the best advantage of all prospective building owners.