Bataan Heroes College

Module No. 7

TOTAL PROJECT COST

CIVIL ENGINEERING LAW, ETHICS AND
CONTRACTS

ENGR. CHRISTIAN P. CARLOS

Department of Engineering and Architecture

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Total Project Cost

Engr. Christian Carlos

Bataan Heroes College

Module 7: Total Project Cost

Module Description:
This module discusses the major concern of the client throughout the planning design, and
construction phases of a project which is the total cost. This also tackles the different areas where
the budgets will be allocated.

Learning Objectives:
After studying this module, students should be able to:
a.)

Probable total cost is a major concern of the client throughout the planning design, and
construction phases of a project.

The probable total capital cost, often used to establish budgets for a typical project, is made up
of:

1. Professional Engineering Cost.

2. Construction Cost.
3. Legal and land Costs.
4. Owner’s Costs, including Project Administration, Staffing, Financing, and other
Overhead.
5. Contingency Allowance for unknowns.

I. PROFESSIONAL ENGINEERING COST

A Civil Engineer is often engaged to make a study and to render a planning report on the
contemplated project including alternative solutions, layouts, and locations along with initial
estimates of the probable project cost.
This may involve alternative or phase implementation schemes which add flexibility to the
project.

The six standard phases of a construction project and the engineering service:

1. Study and Report Phase

2. Preliminary Design Phase
3. Final Design Phase
4. Bidding or Negotiating Phase
5. Construction Phase
6. Operation Phase

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Engr. Christian Carlos

Bataan Heroes College

a. Study and Report Phase

Analysis of client needs, evaluation of alternatives and recommendations of a

preferred option, conceptual design, conceptual opinions of probable construction
cost.

b. Preliminary Design Phase

Preparation of final design criteria, preliminary drawings, outline specifications, and

preliminary estimate of construction cost.

c. Final Design Phase

Preparation of construction drawings, specifications, estimates of probable

construction cost, and other contract documents.

d. Bidding/Negotiating Phase

Assistance to the client with the bidding or negotiating process for construction of the
project.

e. Construction Phase

Representation of the client during construction and inspection of construction.

f. Operation Phase

Assistance to the client in startup and operation of the project, including periodic
inspections.

II. CONSTRUCTION COST

 Construction costs form part of the overall costs incurred during the development of a
built asset such as a building.
 However, the construction contract may include costs that might not in themselves be
considered literal construction costs (hard costs), such as fees, profits, overheads, and so
on.
 Contract sum can be adjusted.
 Cost plan is used to analyze the estimated cost during the pre and post construction
phases of the project.

Cost plan may include:

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Engr. Christian Carlos

Bataan Heroes College

o Initial Cost Appraisals, prepared during the feasibility study stage.

o Elemental Cost Plans, prepared during the project brief stage and carried through
to detailed design.
o Approximate Quantities Cost Plans, prepared from the end of detailed design
through to tender.
o Pre-tender Estimates, prepared alongside tender documentation.
o Contract Sum, agreed with the selected contractor.
o Final Account, agreed once the construction works are completed.

COST ESTIMATE

The method used to estimate actual cost will very with the increase in the amount of
detail available:

 Initial Cost Appraisal might simply breakdown of the overall project budget based on
client input, comparable project analysis and cost consultant experience.

 Elemental Cost plans might simply be the total construction cost for the project divided
into major components of the work in percent

 Approximate Quantities is a first attempt to measure quantities based on drawings. It

provides a clearer picture of the distribution costs.

 Pre-Tender Estimates (PTE) is a final estimate of the likely cost of the work described in
the tender documents and provides a basis for evaluating and comparing offers upon
return.

 Contract Sum provides a confirmed first real price. Until now, all cost planning was
based on estimates. Contractors are given an estimate to prepare a price for performing
their work. The bill of quantities helps tenders to calculate the construction cost of their
bid and, as this means that all tenders will set the same prices. It offers a fair and precise
tendering system.

 Final Account includes any adjustments to the contract sum to allow the final payment
amount to be determined.

CONSTRUCTION PRICE & COST INDICES

The complexity of construction projects, the differences in circumstances, duration and

level of specification between one project and another, and the continually changing state of the
market due to fluctuations in supply and demand, inflation and so on mean that it is impossible to
give rule of thumb figures (such as a cost per sqm) for the likely cost of construction works.

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Engr. Christian Carlos

Bataan Heroes College

However, a wide range of construction price and cost indices are continuously updated and
published to help estimate the likely cost of construction works.

CAPITAL COST VS. OPERATIONAL COST

Capital costs are associated with one-off expenditure on the acquisition, construction or
enhancement of built assets and might include:

- Land or property acquisition

- Commissions

- Statutory Fees

- Consultant fees directly associated with the development

- Labor

- Fixtures and fittings

- Project insurance, inflation, taxation and financing

- Internal cost directly associated with the development

Operational cost incurred in day-to-day operations might include:

 Wages

 Utilities

 Maintenance and Repairs

 Rent

 Sales

 General and Administrative Expenses

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Engr. Christian Carlos

Bataan Heroes College

WHOLE LIFE COST

Whole-life costs consider all costs associated with the life of a building, from inception to
construction, occupation and operation and even ultimate disposal.

This is considered a better way of assessing value for money than construction costs, which
can result in lower short-term costs but higher ongoing costs through the life of the building. This
can also apply to things such as design fees, where saving money on fees at the beginning of a
project can be outweighed by very much higher ongoing costs through construction and
occupation.

LIFE CYCLING COST

Life cycle costing (LCC) provides a methodology for the evaluation of combined capital,
operating and end-of-life costs of a range of construction project alternatives, to ensure long-term
value is delivered.

HARD COST VS. SOFT COST

Often referred to as ‘brick-and-mortar’ costs, hard costs refer to the cost of physical
construction. Soft costs refer to those costs that, unlike hard costs, are not instantly visible or
tangible, and are not directly related to labor or building materials.

Hard costs might include:

- Labor, equipment and materials required to complete the built structure.

- Site costs, such as utilities, drainage and so on.

- Landscape costs

Soft costs might include:

- Fees

- Land costs

- Off-site costs

- Loans accounting fees and interests

- Insurances and taxes

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Bataan Heroes College

- Public relations and advertising costs.

III. LEGAL, LAND, ADMINISTRATION, STAFFING & FINANCIAL COST

These costs which include audits, the cost of issuing bonds, land costs, and interest for
borrowed money during construction, are part of the probable total project cost and can be
estimated in cooperation with the client because they are usually outside the knowledge and control
of the Civil Engineer.

IV. CONTINGENCY ALLOWANCE

As the project moves forward from the study and report phase throughout the final design
phase and finally to construction award, more becomes known about the project details and costs,
until at the completion of the project, the final project becomes a known quality.

To provide for intangible costs, contingencies should routinely be added to the basic cost
estimate. It is common practice to add 20% or more to the estimated probable total project cost at
the completion of the study end report phase, reducing this to perhaps 10% at the completion of
the final design and perhaps to 5% when the construction bids become known. Larger or more
complex may require higher contingencies.

SUMMARY

Estimate of probable total project cost should be periodically revised by the engineers as the design
moves forward and more information becomes known.

The client is normally responsible for providing estimates of those costs which may lie outside the
Civil Engineers knowledge or expertise, such as those in the legal, land, administrative, and
financial areas.

References:

Total Project Cost | CE Laws, Ethics & Contracts - YouTube

[Link]

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Engr. Christian Carlos