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Describe various methods that could be used to prepare a preliminary budget for a project before any drawn information is available.

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Introduction

QUESTION 1 - Describe various methods that could be used to prepare a preliminary budget for a project before any drawn information is available. Discuss the type and source of the cost information that you would use and any problems that you might encounter with your calculations. Budgets are used for planning and controlling income and expenditure, it is through the budget that a company's plans and objectives can be converted into quantities and monetary terms. Budgeting decides whether the project should proceed as envisaged or not as the case may be. Throughout a project's planning, design and construction phases, cost estimating is employed as a means of validating decisions affecting the scope and quality of work. Once an initial budget has been established, it is important to test its assumptions by employing a series of increasingly precise cost estimating techniques that coincide with further development of design and construction details. A sound understanding of the most common types of estimates, tools for estimating, historical database sources, and methods of estimating forms the basis of the more sophisticated methods of estimating, such as cost models. Early in the planning stages, both building clients and designers must agree on an anticipated cost of the project at completion. Preliminary estimates are employed in the early planning phases of a proposed project to match an owners needs, expressed as written programmatic requirements, with budget constraints in order to establish its overall scope and quality expectations. Estimate comparisons at this stage are especially valuable in evaluating the feasibility of strategic alternatives being considered to satisfy current and projected space requirements (often known as Conference estimating). Financial methods fix a cost limit to the building design, where elemental cost planning is used; this will be the target cost that should be decided during the brief stage. Where comparative cost planning is used, some idea of the figure may be suggested in the earliest stage but the actual decision is not made until the design stage when the cost plan has been drawn up. ...read more.

Middle

In order for estimating to be effective, feedback from the job site must occur. Actual costs should be compared with estimated costs to inform the estimator of his or her performance during the estimating phase. Unfortunately, the feedback process is not carried out effectively within the industry. To quote the Business Round Table Report on modern management systems: "Even within companies, a feedback of actual costs is not consistently used to review and adjust the basis for estimating future projects."(3) When using historical data to compare bills of quantity great care must be taken as considerable variation in price will be found, this is due to a number of factors. Location of the site, whether it is a rural or an urban build will cause a variation between the bills. The estimator may have deliberately distorted the rate in anticipation of variations or to gain extra financing. Human error, it is more than likely that this can occur. The lack of accurate data, time constraints may mean that the estimator is unable to price all items; companies may have their own work force while others will use sub-contractors. All these variations will have to be considered when using historical data to compare rates. It is becoming increasingly apparent that to predict cost accurately is a problem which is common to all industries. Throughout the construction industry there are extra difficulties due to the complexity and uncertainty of the type of work involved. The difficulty with all the methods used is in the selection of the appropriate rate to be applied. Considerable expertise on the project concerned is therefore desirable to obtain consistently reliable results and meet the requirements of the client's budget 2a Explain the functions of the real estate market Real-estate markets involve participants from virtually every walk in life. They range from single persons living in one-room studio apartments to large-scale manufacturers seeking low-cost public utilities near major transportation facilities. ...read more.

Conclusion

Prof Muellbauer's solution is a tax on land through reform of the business rates system. The tax could be levied on the value of land held by all companies, including house-builders, above a certain threshold, perhaps �10,000 a hectare, to exclude most farmland. "If the holding cost of land is somewhat higher, builders have an incentive not to hold on to land so long, and that is going to change the supply response," he says. (6) The real estate market has some specific characteristics, which make it a unique market: lack of sufficient information; a reaction lag as compared to the other sectors of the economy; non-standardised product; lack of mobility of real estate, as well as, buyers and sellers; limited number of transactions in one's lifetime; the whole industry is fragmented by regional variations and professional organisation. E-commerce could play a part in elevating some of the inefficiencies; the internet has enabled purchasers to increase their knowledge of the market, giving them the ability to 'cut-out' the middle-man (agents). E-conveyancing will alleviate the lags involved within the market, and perhaps even speed the process up. No real market has ever achieved perfect competition; the conditions are only a bench mark which helps identify sources of inefficiency. In a perfect market there should be no, or limited Government intervention, however if the Government had to intervene it can do so in a number of ways. Taxation (direct or indirect) can reduce the inequity of income distribution. The enactment of legislation can regulate prices such as rent controls, which are employed in and attempt to make housing more affordable to those of lower incomes; farmers, in the past, have received subsides which allowed them to leave fields fallow. The Government could introduce price ceilings which would change the equilibrium price, therefore altering demand and supply. There are incentives offered to developers who are prepared to build on brown-field sites, by-passing the planning system, which has become a delaying practice. ...read more.

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