Project Feasibility Estimates

Project feasibility estimate as it applies to the area of reclamation can be defined as ‘An estimate used for determining the economic feasibility of a project, the probable sequence and cost for construction of a project, and as a guide in the choice between alternative locations or plans’.

Cost Estimates at Different Project Stages

The type of cost estimate to be done varies at different stages of a project, ranging from ballpark figures in the early stage to fairly reliable figures at the detailed design stage prior to the return of tenders. Despite different terminology being used for the type of cost estimates at different stages of a project, cost estimates can be generally classified into the following categories according to their function.

Feasibility Cost Estimates (also commonly known as Rough Indication of Costs)

At the feasibility stage of a project, information is rarely sufficient for preparation of a detailed cost estimate. The cost estimate prepared at this stage is expected to be fairly rough when compared with the cost estimates prepared at the later stages. Feasibility Cost Estimates provide an indication of the cost range to Clients, which is essential for the Clients to evaluate the viability of the investment. For some projects, the indication of costs is also used as a basis for funding applications.

Feasibility Cost Estimates are generally prepared based on planning parameters such as the site area, Plot Ratio, Gross Floor Area (GFA), Net Operational Floor Area (NOFA), Construction Floor Area (CFA), guestroom mix (for hotels), number of beds (for hospitals), number of seats (for auditorium/ theatres), number of workstations (for office fit out), etc. Project benchmarking, that is the target grade or quality of the project, should be identified at this stage. Reference could be made to historical unit costs ($/m2 CFA/GFA, $/room, $/bed, $/seat, $/ workstation, etc.) from past projects of a similar nature and/or scale to estimate the construction cost.

Design Stage Cost Plan

The emphasis at design stage is to define the likely eventual scope of a project, together with identifying and evaluating the risks to be encountered during the entire design and construction process. The cost estimate prepared at design stage is called a “Cost Plan”. As the name would suggest, a Cost Plan sets out the planned cost for each element, sub element and even individual work item depending on the level of design information available at different design stages. It is a useful tool for updating cost estimates as the design develops. In a new build project, the design is typically developed in three stages – Concept Design Stage, Scheme Design Stage and Detailed Design Stage.

Concept Design Stage

During the Concept Design Stage, preliminary design information such as site plans, floor plans, overall building elevations/sections, area schedules, are usually available. In some projects, the outline structural form, building services systems and 3-D images of the project are also available at this stage. The Cost Plan is normally structured in an elemental/sectional format. The elemental/sectional cost is primarily worked out on the basis of $/m2 CFA/GFA, cost per functional unit ($/room, $/car parking space, $/seat etc.), lump sum allowances or a combination of these.

Appropriate contingencies shall be included in the Cost Plan in consultation with the Client and the Design Team. While it is common practice to allow for contingencies on a % basis, the risk based approach* can also be adopted to estimate the amount of contingencies.

Below is a typical elemental cost summary of a new build project.

Project Feasibility Sydney

*Note: The risk-based approach is basically done by evaluating the likely cost implication of the project risks to determine the appropriate cost allowance for contingencies. This technique is intended to give more insight and confidence to the Client with regard to the level of contingencies to be allowed for.

Scheme Design Stage

The main objective of the Scheme Design is to develop the design to a sufficient level of detail that allows the Client to confirm the design and specification of the major elements of the project before the commencement of the Detailed Design. During this stage, more design details such as building plans/elevations/sections, typical details, major materials schedule, outline specification, construction methods, foundation system etc. are normally provided. The Cost Plan is further refined by breaking down the cost of the major elements similar to the snapshot given below. Planned costs of sub-elements are developed to provide greater clarity.

The planned costs could be estimated on the basis of unit costs, similar to the method adopted in the Concept Design Stage and supplemented with approximate quantities of major items measured from drawings. Budget allowances should be provided for any items not clearly given in the design but likely to be required in the eventual scope of the works. The Quantity Surveyor may also need to prepare cost studies for various design scheme options to facilitate the Client’s decision making as to which design scheme to select from the perspective of cost effectiveness. If required, the life cycle cost can be estimated for building elements such as lighting, electrical and mechanical plant, architectural finishes etc. which will have a long-term cost impact on the Client’s future operation and maintenance costs.

Detailed Design Stage

During this stage, design drawings and specifications should be developed in sufficient detail for tender purposes. The Quantity Surveyor should continuously monitor the costs as the detailed design develops, and advise the Client and Design Team on corrective actions, if any, as soon as the estimated cost of any item exceeds the budget. The format of the Detailed Design Cost Plan would be basically a list of approximate quantities priced at composite rates. Miscellaneous items of a minor nature are normally priced on a percentage or lump sum basis in the Cost Plan. Here is an example of the cost breakdown for internal floor finishes in a Detailed Design Cost Plan.

Pre-Tender Estimate

The pre-tender estimate is an independent valuation of the expected tender price. The Chartered Quantity Surveyor in Sydney should price all items in the bills of quantities or schedule of rates provided to the tenderers using prevailing market rates (normally based on recent tender prices from similar projects, or supplier’s/ sub-contractor’s quotations, etc.). Cost variances between the Cost Plan and the Pre-Tender Estimate should be reconciled to identify design changes incorporated in the tenders since the Detailed Design Stage was developed. Market conditions, Contractor’s tendering strategy, procurement method and latest project constraints can be some of the factors contributing to the cost variance. The Pre-Tender Estimate should be provided to the Client prior to the return of tenders, preferably as soon as possible after the tender documents are issued so that potential cost overruns can be identified.