Estimation , Costing and
Specification
Module 4
Introduction to Cost Modelling
• In the majority of cases in which an industrialist is about to
manufacture a new product he first of all builds a prototype.
• He does this for a number of reasons; such as:
– (i) To identify and solve three-dimensional problems that were not
apparent in the drawings.
– (ii) To identify the tools required for production.
– (iii) To help estimate the cost of production.
– (iv) To evaluate its functional performance
– (v) To test the product's marketability.
– (vi) To provide a sample for a customer as evidence of the quality
standard to be achieved.
Introduction to Cost Modelling
• These models can be, for example, physical (as in a three-
dimensional architect's model); mathematical (as in a heat loss
equation); or Statistical (where some collected information indicates
a certain trend).
• Cost modelling may be defined as the symbolic representation of a
system, expressing the content of that system in terms of the factors
which influence its cost.
• In terms of quantity surveying practice this usually means estimating
the cost of a building design at an early stage to establish its
feasibility.
• Cost models are mathematical algorithms or parametric equations
used to estimate the costs of a product or project
• All methods , techniques or procedures used by quantity surveyors
for estimation or cost forecast may be termed as cost models
Introduction to Cost Modelling
Purpose:
• To forecast construction costs for clients
• To estimate resource costs for contractors
Choice of estimation models will be influenced by various
factors:
• Availability of information
• Experience/knowledge of the estimator or quantity surveyor
• Purpose of estimates
Classification of Cost Models
1. Traditional cost models
2. Empirical or causal models
3. Regression cost models
4. Life cycle cost analysis
1. Traditional cost models
• Quantity surveyors have been using a form of modelling
technique for a number of years.
• In their measurement for Bills of Quantities they have been
representing the building in a form suitable for the contractor's
estimator; and when prices are applied to the measured
quantities the Bill becomes a representation (or model) of the
cost of the building.
[Link] cost models
• 1. Conference:-
– Calculating rate by discussion
• 2. Functional unit:-
– Similar to the superficial model, although different cost rates are
applied to different functional areas within a building on the
assumption that those different areas will cost different amounts
to construct.
• 3. Superficial:-
– A single rate applied to the floor area of a building, then
calculating total rate of building
[Link] cost models
• 4. Superficial-perimeter:-
– A variation on the superficial method
– As well as taking the floor area of a building into account, the
length of building perimeter is also included in an endeavour to
increase accuracy
• 5. Cube:-
– A single cost rate applied to the internal volume of a building
• 6. Storey enclosure:-
– The measurement and costing of the area of the external walls,
the floor and ceiling which enclose each storey within a building
[Link] cost models
• 7. Approximate quantity:-
– The measurement and pricing of a small number of grouped
items.
• 8. Bill of quantities:-
– The measurement and pricing of many items, such as a Bill of
Quantities
Elemental Cost Model:
• In this method the design of cost planning has been best
achieved by dividing the building into ‘functional elements’
mainly into three levels.
• Elements are defined as the major parts of the building which
always perform the same function irrespective of their location
or specification. for eg.
• Level 01 MAJOR GROUP :
– Substructure
• Level 02 GROUP ELEMENTS :
– Foundations
– Basement construction
Elemental Cost Model:
• Level 03 INDIVIDUAL COMPONENTS :
– Standard foundation
– Special foundation
– Slab on grade
– Basement excavation
– Basement walls
• These elements have some relationship with the design
process ,and can be readily measured form the sketch
drawings and are easily understood and communicated to all
the parties involved in the project including the client.
2. Causal or empirical cost models
Methodical cost estimation based on the
available data and skills, experience, and knowledge of the
estimator.
• Requires step by step compilation of the estimate based on
skills, knowledge, level of experience of the estimator.
• Time consuming method.
• Degree of accuracy is low.
• Left to a single person for judgement.
2. Causal or empirical cost models
• These are symbolic models which are based on relationship between
the design variables and cost, and which have been derived from
observation and experiment
• It is a small step to translate the process into a general algebraic form
relating to the morphology of the building and its components, to
which cost factors can be applied
• If instead of measuring up a building and applying a unit rate to the
derived quantities of each component we express the building in
algebraic terms, then we can give values to those algebraic terms,
apply cost coefficients and arrive at a cost estimate.
2. Causal or empirical cost models(Eg.)
2. Causal or empirical cost models(Eg.)
1) The ground floor slab.
• The cost of this component can be
considered to be a function of the ground
floor plan area.
• The algebraic equation is therefore:
Area of slab = l x w.
• To this equation must be applied a cost
factor (CF1) related to the cost per sq. m
ground floor slab including additional
items such as reduced level excavation
and hardcore, which relate to this
particular horizontal measurement.
• Cost of slab = l x w x CF1
2. Causal or empirical cost models(Eg.)
2) The perimeter strip foundation.
• The cost of this component is a
function of its total length.
• The cost factor (CF2) for this item
would include for excavation,
concrete, brickwork, etc.
• Length of strip foundations
= 2 x (I + w)
• Cost of strip foundations
= (2 x (1 + w)) x CF2
3. Regression models.
• In the empirical model it is usually assumed that there is a fixed
relationship between the design variable and cost, and that
the cost factor applied to the algebraic formula is constant.
• In regression model, the major components of construction
are identified and a mathematical relationship between them,
in the form of an algebraic equation is determined using the
data
3. Regression models.
• Regression models involve the following variables:
• The unknown parameters, denoted as β, which may represent
a scalar or a vector.
• The independent variables X.
• The dependent variable, Y.
• In various fields of application, different terminologies are used
in place of dependent and independent variables.
• A regression model relates Y to a function of X and β.
• Y ≈f(X, β)
4. Life Cycle Cost Analysis:
• Life cycle costing, LCC, is the process of analysis to asses the
total cost of ownership of a product, including its cost of
installation, operation, maintenance, conversion, and/or
decommission. It takes into account all costs of acquiring,
owning, and disposing of a building or building system.
• LCCA is especially useful when project alternatives that fulfill
the same performance requirements, but differ with respect to
initial costs and operating costs, have to be compared in
order to select the one that maximizes net savings.
4. Life Cycle Cost Analysis:
• Example: LCCA will help determine whether the incorporation
of a high-performance HVAC or glazing system, which may
increase initial cost but result in dramatically reduced
operating and maintenance costs, is cost-effective or not.
• The purpose here is to estimate the overall costs of project
alternatives and to select the design that ensures the facility
will provide the lowest overall cost of ownership consistent
with its quality and function.
Costs
• There are numerous costs associated with acquiring, operating,
maintaining, and disposing of a building or building system, but all of
that can be broadly classified under the following:
• Initial Costs—
– Design & development cost
– Investment on asset
– Installation cost or erection & commission(bring into working
condition) cost.
• Operation, Maintenance –
– Labour cost
– Energy cost
– Spare & maintenance cost