It must be remembered that these figures include preliminary charges. Our means have now changed considerably. There was a sample of 29 building in the University – specialised teaching blocks, in the fifteen year period, this has now reduced to 9. Within this price bracket we can see that the highest is 4167, this seems excessive when we look at the mean for the sample. Taking out this particular figure reduces the mean to £1750 pm2. To balance it if we take the lowest figure, £1347, the figure rises to £1808. If we incorporate the results from Universities and Universities and mixed-facilities and average then this figure becomes £1849.
This figure is considerably higher the aforementioned mean of £1734. This demonstrates some of the weaknesses in BCIS and how care has to be taken when using these figures. Further assumptions based on an assessment of the available information are required.
In terms of quality we know that externally the envelope is going to reflect the regard LJMU places on this building. In the brief they proudly note that the School of Sports Science is the number one sports science institution in the country. They want to make a statement. They want quality cladding, glass bricks and windows. The building is going to contain a large service element and this will impact on the cost. We also know there are issues in terms of the time to complete, that the works are on a live site. However, we know that we are going to use a cheaper frame option. We also know that lot of the works will not be out of the ordinary in terms of cost. We know that the internal finishes are not going to be expensive; the building is going to be functional. On balance the job should be on the higher end of average.
Therefore I am going to propose that the job is going to cost in the region the higher level of £1849 per square metre. From this we can determine a cost bracket. I believe that this cost bracket should be no greater than ±10%. Therefore the cost range should be between: £1664-£2033.9 per metre squared. In terms of overall construction costs including preliminaries this translates to between £11,648,000-£14,237,300
Outline Cost Plan
The cost bracket has given an understanding of a reasonable ball park figure for the building in terms cost per metre square. This was vague and a reasonably large margin of error needs to be applied. We need to analyse further and to do this we need to break the building down into elements and try and compare our element requirements.
Substructure: The area being used for development has not been previously used for buildings, the ground therefore contains no foundations. Potentially there may be services within the area, these would need to be diverted. From knowledge of the area I know that geologically Liverpool is underpinned by sandstone and that foundations are usually piled. RC beams and pilecaps would be needed to support a structure such as ours. The sloping road will also require enabling works i.e. shoring. I anticipate substructure costs will be high.
Superstructure: I know that the external envelope will be of high quality with cladding, high quality glazing and glass brick. I know that the frame will be a concrete one, I also know that there will be retaining walls around the rear and side of the buildings and that this will incur extra expense. I anticipate superstructure and frame costs will be above average. To get a good figure I need to find a superstructure on a building that is similar, is clad, has the same number of storeys and floor space.
Internal Finishes: I know that these will be limited. There will be no ceiling, floor and wall finishes. These will be considerably lower than average.
Fittings: I know that there are limited FFE required. These will therefore be low to average, compared to similar buidings.
Services: I anticipate that services will be high. I will need to look at science buildings and compare costs to get a figure.
External Works I don’t think these will be very expensive, I anticipate that because the building is on an existing site that there will be drainage works, limited tarmacadam and hard landscaping. I anticipate these will be below average on the £m2.
A number of factors must also be considered when comparing like for like on BCIS. To establish elemental cost figures requires an analysis of element costs using BCIS of similar buildings. Ideally comparisons would be made against jobs of a similar size, reasonably local from a similar time period. I know that the sample is small and that the jobs are spread over a wide geographical area and at various times. I need to apply indices that relate these variables appropriately. I will be using the rebase function on BCIS to do this. Other factors can affect elemental figures and need to be taken into account. If a building was of similar size in floor space but had fewer storeys then costs such as the increased external envelope would be incurred. Also services would be more expensive an example being that lifts would have to travel further.
Preliminaries These are going to be high, there are a lot of factors that indicate this. Security costs based on the location and due to LJMU being an active site, also near a residential location. Within the cost analyses used the range is between 6 and 16 %. I think we should be assuming a figure of 10%, this is however a very vague.
Elemental Group Cost Plan
These figures are based on six jobs that contained some similar characteristics, the percentages were extrapolated on the characteristics that were similar and the prices compared as a check. The data is in appendix, there were no direct comparisons and had there have been then the forecasts would have been stronger, a lot of subjective judgement was applied.
Design Cost Management
The chosen procurement method for this contract will be management contracting. The main benefits are:
- Fast track the project. Main contractor brings in expertise to assist with design.
- Design and construction not separated, some overlap.
- The main contractor is paid by fee basis meaning they are partners, expertise in construction helpful to LJMU.
- Design changes permitted, usually without severe cost implications.
Potential pitfalls.
- Cost overrun risk.
- Work packages paid as lump sum could incur high variation costs if design needs to be modified later on.
We need to put measures in to try and limit costs. To do this we need to incentivise the main contractor. We also need to find ways of allowing design amendment cost implications to be minimised.
- A negotiable pain/ gain share. Deviations from the cost are shared between the contractor and LJMU. Any gain can be shared as well.
- Amendments to work packages to allow variation at a reasonable cost, not over inflated rates.
The management contactor is bought in early to contribute management and construction expertise to the design and prepare construction schedules. The construction schedules will link the work packages with the design schedule. The works packages will be put out for competitive tender for specific work packages.
Design is conducted independently by specialist consultants. The designers need to be of a high standard and designs need to have the potential to facilitate change. They need to ensure designs are in place at key times to meet tender deadlines for individual works packages.
Risks:
It is important to establish what the risks are on the contract and to whom they need to be allocated to. Completion of the contract to the deadline is of paramount importance on this project. The implications of not meeting the deadline are severe, there would be considerable disruption, logistical problems, cost implications etc.
Procurement is fundamentally the process of allocating risk and in Management Contracts the main contractor will not be liable other than when detriment to the client is attributable to the management contractor’s negligence (Chapman and Ward, 1999).The construction works will be allocated to successful tenderers in the bidding process. Each works package will have the risks attributable to that part of the work allocated to them. This way construction risks are allocated to specialists. The works contractors will assess the risk themselves and simply add it to the cost, the benefit being that they are best placed to mitigate these risks.
Risks attributable to design and any subsequent costs incurred will be attributable to LJMU. Where design and construction overlap there is obviously increased risk in things going wrong because of the added complexity. Good management is very important, getting the right main contractor in to co-ordinate design and construction is of fundamental importance. The risks of overrun and of not meeting the target budget are considerable. An allowance for each risk needs to be estimated and allocated. After the risk is neutralised the allowance needs to be reintegrated into the project budget.
Gateway Reviews. The OGC gateway review is a process of scrutiny that has been adopted as best practice for managing and designing buildings for most public works. At key decision points in the life cycle of the project an appraisal of the project is undertaken by the project management team and other relevant key stakeholders to review key issues. Issues include; whether risks are being managed; whether the project is still affordable, a review of the current phase, readiness for the next phase. When satisfied the employer can progress to the next stage. Cost estimates and plans may need to be provided at these key stages. On our project it will involve the management contractor reporting to LJMU.
The OGC Gateways applicable to building projects are:
The RIBA work stages does not illustrate accurately that the management contract we are using incorporates design and construction within a broadly similar timeframe so the gateways are going to be different. OGC gateways 1, 2 and 3a will apply as will stages 4 and 5. 3B, the detailed design approval stage will be different as design completion will occur during the construction phase. Maybe this should be replaced in our job with an outline approval stage. We could add stages between stages 3A and 4, at key stages during construction stages such as completion of the groundworks and at frame completion we could impose gateways. The problem with this is that different works packages may not be operating in sequential fashion but concurrently.
Residual Valuation
Rental values are to be derived from GVA Grimleys 2008 Office Market Commentary. The yield has been predetermined to remain at 8%
Rents and Rental Growth Prime headline rents in Q1 2008 within central Liverpool range between £20-£21pf, remaining at the same level as those that were achieved at the end of 2007 (GVA Grimleys, 2008). Looking at the Key Prime Transactions table it can be seen that property rental values fluctuate depending on area and available floorspace. This does not take account of quality of property either so estimating an accurate potential figure is very difficult. Because of the location being city centre a figure of £19 psf will be assumed.
Based on this data and on the building costs calculated the following can be deduced:
Looking at these figures we can see that any combination of rental value and construction costs results in a negative valuation. The rental value would have to increase to a whopping £26.83 at a yield rate of 8% at construction costs of £1849 pm2 to get the residual valuation to £0.
