Pre-contract Cost Control

Pre-contract Cost control

Pre-contract cost control is the total process which   ensures that the contract sum is within the clients   approved budget or cost limit.  As the design is developed and decisions taken the cost plan must be checked to ensure that such decisions will not adversely affect the intended expenditure.  If the value of any element in the cost plan is seriously altered by a decision taken at this stage it will be necessary to review the value of other elements in the cost plan.

A construction cost control system should enable a manager to observe current cost levels, compare them with a standard plan or norm, and institute corrective action to keep cost within acceptable bounds.

Pre-contract cost controlling process in the RIBA plan of work 

Feasibility Studies

If at any time during the design process it becomes apparent that the agreed budget is likely to be exceeded, without a change to the brief, the client should be informed and instructions requested. Likewise, if it becomes apparent that the whole of the agreed budget will not be required, the client should also be informed.

Outline Proposal Stage and Scheme Design Stage

When a change is proposed to the outline cost plan the following procedures should be followed;

All the relevant members of the design team should be informed.

The architect should confirm his agreement, in principle, to the proposal. No proposal should be incorporated in the cost plan without the agreement of the quantity surveyor, and he should indicate his confirmation that the proposal can be met within the agreed elemental target.

Where the proposal incurs additional cost over the elemental target, or would cause the total budget to be exceeded, the quantity surveyor should positively indicate to the design team alternative savings that are available to maintain the overall budget. Upon the conclusion of a proposed change, the quantity surveyor should communicate to the client, and all members of the design team, the consequential effects of the change and provide an updated cost plan.

Detail Design to Production Information stage

Objectives - To  allow  flexibility  in  the  design  process  for change of  mind, whilst  maintaining overall cost control of the project within the framework of the cost plan to reduce the amount of abortive design work and lost time caused through proceeding too far in the design process before realizing that the budget will be exceeded.

Principles - The method will vary according to the stage reached in the design process. Normally, however, this takes the form of measurement of approximate quantities from the consultant's drawings, to provide a check on the quantity and the quality of parameters set down in the appropriate cost plan. The gross floor area is the first check at any stage.

The two dominant considerations in deciding the priorities for cost checking elements are as follows.

The known variability of cost of an element i.e. where a wide range of cost is possible in an element, it will be necessary to cost check this before checking elements of low variability but of the same overall cost significance. Judgment must be applied before notifying the architect of possible excess expenditure in a particular element. If an excess revealed during cost checking is of such significance that is highly improbable that compensating savings will occur elsewhere, then this must be notified immediately and the design team must be asked to consider modification to the cost plan.

It is important for the quantity surveyor to maintain proper records of the cost checking process, setting down on a summary the value of the elements cost checked compared with the cost plan targets, and to be especially clear as to the drawings or information upon which the cost check has been based. (Pre-contract Cost Control & Cost Planning, The QS Division of RICS, 1982)