Advantages are that the construction management firm is working at the risk of the guaranteed maximum price so it is the construction management firm that is responsible for continuously managing construction costs as well as complying with the client’s interests. The Construction Management firm is in control of the entire process, phases can overlap to some extent which allows the schedule on the construction process work faster. This methods best advantage is on handling changes within the design and scope process.
Disadvantages are the GMP has to be agreed on before the design process begins. So because of this factor the client will never know whether they received the best bid, this can also lower competition in terms of pricing contractor overhead, fees, and subcontract costs.
Competitive Bid (Design/Bid/Build)
Competitive Bid (Design/Bid/Build) is the most common method. This is when each stage follows the next process in a linear process (without overlapping). The architect would report to the client plans/specifications etc then the contractors place a bid on the project. Usually the lowest bidder is accepted for the project, which develops exactly as designed. This is a good choice for basic projects that have a budget and that is not likely to change.
Advantages These types of projects are easier to sell and manage in a step by step process. This is because the scopes/stages are defined. The design team and contractor both communicate regularly with the client and the client gets more control over the whole process.
Disadvantages are that the cost of design is not known until all bids are received. This could cause issues if the bids excess the budget, time can also affect cost estimates which can also change within the design process. The contractor has no say in budget, design or the project planning phases. The other main disadvantage would be that the step by step 'stage process' is slower than other methods.
Design/Build is a new method but is developing in popularity. This type of method the client acts as both the architect and contractor. This is based on a design invented by the client. GMP is organized earlier in the project. Design/Build has to also prepare drawings for the client’s approval, then subcontractors are chosen and the construction phase starts. This type of method is for specialized or more technical complex scopes/design and is more for time sensitive projects.
Advantages are that the design can be easily accessed and tailored to the budget and changed if needed. This method is faster than competitive bid and CMAR. The other advantage is that the project will be successful because the GMP is organized earlier in the project.
Disadvantages are that it can be difficult to assess the best bid. Also checks and balances that are common between the contractor and architect are missing and this can cause disagreements between the client and Design/Build.
Cost planning is vital when working out the cost of the development of a construction project. If cost planning is not properly assessed you will find when the project is complete it will be over-budget. This can be due to changes in materials or implications that have appeared during the development of a construction project. A lot of thought has to be put into the design brief and the budget of how much it will all cost. A budget has to be properly evaluated by either the client or someone working for the owner; instead of quickly going through the cost planning method must be analysis with sufficient consideration.
The reason why the client frequently goes over the budget is because the intended cost was not covered for any implications that could arise due to the budget not being realistically planned to meet the actual cost of the project as a whole. Getting the budget right from the first stages is the key step in 'cost planning'. The cost of a building project can change as it progresses into construction stages this is why projects must be realistically planned, contained and monitored. Cost planning is vital when embarking on a construction project it tells the client how much a proposed construction project will cost.
Cost planning is also set out in stages for example; when construction work is done, money will be handed out and this is why cost planning is needed to evaluate and pin point the cash flow and the amount of money coming in from a project and this should be more than the amount going out else the project is not gaining profit. This is just the same as profit gained by the production of a construction project. Cost planning is critical for obtaining project financing and for predicting whether any profit is going to be gained. Without cost planning the client would enter blindly into the construction project and could cause major problems like the job being over the original budget or possibly into insolvency.
Cost planning is significant when it comes to evaluation of the fiscal feasibility of a project. When the client has a maximum cost budget of the whole project, the cost planning will show whether the cost capital can be met. If this does not meet then the project is not feasible with the current budget worked out so then has to be re-evaluated to reduce the costs for a reasonable budget with a gain in profit more than money being handed out on the project. Cost planning is mainly used to structure financing for a construction project.
Cost planning monitors when the client has to hand out financial installments which need to be paided off and this helps the client be aware of bills. Cost planning should be properly evaluated at least three times before even starting a construction project.
Once after the final design is permitted if any changes are made the cost plan must be re-evaluated, updated and tracked during the stages and throughout construction to ensure accuracy. The best way to meet obligations is to limit the amount of design change that occurs within a construction project.
Elemental cost planning
Elemental cost planning is a system which is designed to plan, analysis, monitor and control the cost of building projects within the U.K. construction industry. This helps monitor the management of the financial state and cost of the project throughout the design process. The BCIS which is known as The building cost information service of the royal institute of chartered surveyors developed this cost planning system over 50yrs ago. The BCIS set up the company in 1961 and the website for cost planning advice was launched in 1997. Since then this system has been popular with managing construction projects.
Elemental cost planning is a technique which is used by architects and surveyors. The estimate is broken down into a number of parts that can be compared to previous costs as the construction project progresses. Each part is an estimated budget to how much each of the project will cost, money maybe transferred from one part to another as long as it don't go over the target budget for the project on a whole. To work out an overall cost plan is to base the elements of the project on approximate figures. This is how future estimates are predicted.
As the construction project progresses, variance of the target budget cost from the cost plan is evaluated, compared and then identified. The elements are then evaluated to see if there will be an increase in cost. If this is the case a reduction in another part of the projected will have to be assessed or some part of the project redesigned so it is kept within budget. The advantages of elemental cost planning is that is most commonly used because it is a flexible system in which is easily adaptable to all the stages throughout the design and construction process. Any problems with the project e.g. an increase in the budget, this can be analysed and adjusted individually to be able to manage the increase.
Disadvantages in elemental cost planning is that this technique will take a lot of time and effort to get off the ground. This is due to a lot of analysis, organisation, planning and preparation of each element of each detailed stage which is individually decided upon. The cost of software equipment and training may be expensive because cost databases are needed to provide accurate estimates.
Comparative cost planning
Comparative cost planning is when the general layout of the building project. This is estimated with a total budget cost by the evaluation of feasibility studies. The evaluation of the alternative types of designs which would be in budget or would suit the clients needs will be taken into account and discussed in regards to various parts of the building project. This type of technique is useful for the architect in deciding on cheaper solutions for the client to do with the design and gives the architect more control over the project. Costs for each element within the construction project is calculated by 'per square metre'.
The disadvantages of using comparative cost planning technique is drawings are not to detail because every element is not considered, this can cause implications with the cost of the building project and can cause confusion because of the lack of detail.
The difference between elemental and comparative cost planning
Elemental is the most common system that is used for construction projects. This is because it is a more effective system out the two and is better detailed in regards to the design, specification and managing the cost of the whole construction project, “compared to comparative cost planning”. Comparative is less complex compared to elemental cost planning because there's not as must planning and not as much cost for the software to manage the accurate estimates which “elemental cost planning requires to get a precise and accurate estimate”. Also another disadvantage is with comparative cost planning the architect makes all the decisions and feeds advice to the client and no QS is involved to estimate cheaper solutions.