THE HONG KONG INSTITUTE OF SURVEYORS

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• THE HONG KONG INSTITUTE OF SURVEYORS
• JUNIOR ORGANISATION PQSL SERIES
• (23 NOVEMBER 2002)

PRE-CONTRACT CONSTRUCTION COST ESTIMATING
By Sunny Chan, AHKIS, MRICS Stephen Wong, AHKIS,
MRICS
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CONTENTS

• PART 1 - TERMS AND DEFINITIONS
• (A) Area Classification
• (B) Terms used in Cost Estimate and Cost Analysis
• PART 2 - TYPE OF COST ESTIMATE
• (A) The Pre-Contract Cost Estimating Process
• (B) Rough Indication of Costs/ Indicative Order
  of Costs
• (C) Preliminary Cost Estimate
• (D) Detailed Cost Estimate
• (E) Pre-Tender Estimate
• (F) Reconciliation of Estimate
• (G) Cost Studies of Alternatives
• PART 3 - IMPORTANT POINTS FOR COST ESTIMATING
• (A) Pricing of Cost Estimate
• (B) Verification of Quantities
• (C) Accuracy of Cost Estimate
• PART 4 - QUESTION AND ANSWER

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PART 1 TERMS AND DEFINITIONS
(A) Area Classification (B) Terms used in Cost
Estimate and Cost Analysis
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PART 1 TERMS AND DEFINITIONS
(A) AREA CLASSIFICATION
GROSS FLOOR AREA (GFA) of a building is the area
contained within the external walls of the
building measured at each floor level, together
with the area of balcony and the thickness of
external walls, but excluding carpark and plant
room areas. (for submission to Planning
Authorities) CONSTRUCTION FLOOR AREA (CFA) is
the covered areas fulfilling the functional
requirements of the building measured to the
outside face of the external walls or external
parameter, and measured over lift shaft voids and
stair well, inclusive of bay window, carpark and
mechanical room and open covered areas. LETTABLE
AREA is the area which could be leased to a
tenant for his exclusive use. Measurement should
include half of the thickness of walls enclosing
the lettable area. (for feasibility studies to
assess the profitability) USABLE FLOOR AREA is
the floor area other than staircases, staircase
halls, lift landings, area for sanitary wares and
area occupied by lift and machinery . (for
submission to Planning Authority)
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PART 1 TERMS AND DEFINITIONS
(B) TERMS USED IN COST ESTIMATE AND COST ANALYSIS
ELEMENT QUANTITY is the quantities of element
based on element unit, e.g. room, door, wall
finishes, etc. ELEMNET RATIO is the element
quantity per unit CFA (i.e Element Quantity /
CFA) ELEMENT UNIT RATE is the average cost per
unit element quantity. (Thus, Total Cost of
Element / Element Quantity) INDICES are the
indication of price level for particular subject,
such as tender price index, building services
tender price index, labour index, material index
and consolidated labour material index.
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PART 2 TYPE OF COST ESTIMATE
(A) The Pre-Contract Cost Estimating
Process (B) Rough Indication of Costs/ Indicative
Order of Costs (C) Preliminary Cost
Estimate (D) Detailed Cost Estimate (E) Pre-Tender
Estimate (F) Reconciliation of Estimate (G) Cost
Studies of Alternatives
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PART 2 TYPE OF COST ESTIMATE
(A) THE PRE-CONTRACT COST ESTIMATING PROCESS
(General Concept)
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PART 2 TYPE OF COST ESTIMATE
(B) ROUGH INDICATION OF COSTS/ INDICATIVE ORDER
OF COSTS

• Total Costs Construction Floor Area (CFA) x
  Unit Area Cost (HK/CFA)
• Where,
• CFA can be estimated based on the following
  information-
• Land development conditions (e.g. site area,
  plot ratio, site coverage, height limitation and
  gross floor area)Maximum buildable area site
  area x approved plot ratioApprox. CFA site
  coverage area x no. of floor (for building with
  full site coverage)Approx. CFA GFA x
  conversion factor (1.05-1.10 for residential,
  1.10-1.20 for office)
• Functional parameters e.g. hospital (60m2 to
  120m2 per bed), hotel (55m2 to 100m2 per room),
  auditorium (1.5m2 to 2m2 per seat) and carpark
  (30m2 to 40m2 per carpark)
• Unit Cost can be built up by -
• Reference to the Cost Analysis of the previous
  similar projects and
• Adjustment of price level, location factor,
  quality of standard, physical conditions,
  construction methods and other particulars.

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PART 2 TYPE OF COST ESTIMATE
(C) PRELIMINARY COST ESTIMATE
Total Construction Costs Sum of (Elemental
Quantity x Elemental Unit Rate) In Elemental
Form. It include the elements of demolition
alteration, site investigation, site formation,
foundation, substructure basement, structural
frame, roof covering, external facade, internal
partition door, internal finishes, fitting
fixture, interior decoration, building services,
landscaping, external works, preliminaries and
contingencies. Elemental Quantity can be
obtained either from the design information of
the proposed project or the cost analysis of
previous similar projects. Elemental Unit Rate
can be estimated from the Cost Analysis of the
previous similar projects and with adjustment of
price level, location factor, quality of
standard, physical conditions, construction
methods and other particulars. Allowance of
Preliminaries and Contingencies The report of
preliminary cost estimate consists of cover,
contents, summary of estimated costs, scope of
cost estimate (inclusion exclusion), general
particulars (project details, definition of area,
schedule of area basis of cost estimate),
outline specification and assumptions and
supplementary information.
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PART 2 TYPE OF COST ESTIMATE
(D) DETAILED COST ESTIMATE
Total Construction Costs Sum of (Approximate
Quantity x Unit Rate) In Elemental Form. It
include the elements of demolition alteration,
site investigation, site formation, foundation,
substructure basement, structural frame, roof
covering, external facade, internal partition
door, internal finishes, fitting fixture,
interior decoration, building services,
landscaping, external works, preliminaries and
contingencies. Approximate Quantity for each
element can be measured based on the design
information (including drawings and
specifications). Unit Rate can be estimated from
the Cost Analysis of the previous similar
projects with appropriate adjustment, (ii) recent
returned tenders, (iii) recent prepared cost
estimate, and (iv) suppliers/sub-contractors
quotations. Allowance of Preliminaries and
Contingencies. The report of detailed cost
estimate consists of cover, contents, summary of
estimated costs, scope of cost estimate
(inclusion exclusion of works), general
particulars (project details, definition of area,
schedule of area and basis of cost estimate),
outline specification and assumptions and
supplementary information.
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PART 2 TYPE OF COST ESTIMATE
(E) PRE-TENDER ESTIMATE

• Prepared based on the bills of quantities
  measured from the tender/working drawings.
• Priced at the current rate which can be obtained
  from
• the Cost Analysis of the previous similar
  projects with appropriate adjustment,
• recent returned tenders,
• recent prepared cost estimate,
• suppliers/sub-contractors quotations.

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PART 2 TYPE OF COST ESTIMATE
(F) RECONCILIATION OF ESTIMATE
Reconciliation of Cost Estimate is used to
systematically report the cost change/ difference
between the old cost estimate and the new cost
estimate. Therefore, the reasons of the
change/difference can be identified and
assessed. The cost difference is usually due to
(i) change in price level, (ii) change in the
Employers requirement, (iii) change in
design/development, (iv) more advanced
information obtained, (v) change in site
conditions, and (vi) adjustment upon awarded
contract. It is particularly useful for
proceeding cost saving exercise and reporting
changes of the project. Upon necessary, it may
be required to carry out at each pre-contract
stage.
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PART 2 TYPE OF COST ESTIMATE
(G) COST STUDIES OF ALTERNATIVES
Cost studies is to compare two alternatives of
design scheme/requirements in terms of cost
consideration. It provides a clear cost
direction for the client/architect to make their
final decisions on the selection of design
schemes. Particular in Value Engineering studies
and can be applicable to each pre-contract stages.
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PART 3 IMPORTANT POINTS FOR COST ESTIMATING
(A) Pricing of Cost Estimate (B) Verification of
Quantities (C) Accuracy of Cost Estimate
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PART 3 IMPORTANT POINTS FOR COST ESTIMATING
(A) PRICING OF ESTIMATE

• Use of Composite Rates and Lump Sum Allowances
• Source of Prices can be obtained from/
  cross-checked by (i) suppliers/sub-contractors
  quotations, (ii) recently returned tenders, (iii)
  recently prepared estimates, (iv) historical cost
  data/ cost analysis.
• Particular attention to be drawn on price level,
  market conditions, location of site, site
  conditions, programme of work, procurement
  method, contract conditions, size of the project
  and other special characteristics.

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PART 3 IMPORTANT POINTS FOR COST ESTIMATING
(B) VERIFICATION OF QUANTITY

• The quantity of each element should be checked
  and verified whether it is reasonable. The
  following are some of the common ratio/proportion
  for verification of the element quantity.
• CFA / no. of H-pile and CFA/ sectional area of
  bored pile
• Reinforced concrete / CFA
• Formwork / CFA
• Reinforcement / CFA and Reinforcement /
  reinforced concrete
• (External wall finishes windows curtain
  wall) / CFA
• Roof waterproof largest footprint
• Floor finishes Approx. 90 CFA
• Internal wall finishes / CFA and Internal
  ceiling finishes / Total floor finishes

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PART 3 IMPORTANT POINTS FOR COST ESTIMATING
(C) ACCURACY OF ESTIMATE

• Clients brief
• Availability of Information
• Market condition/inflation
• Method of estimating
• Site conditions
• Tendering procedure and contractual arrangement
• Uniqueness of project
• Experience of estimator

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PART 4 QUESTION AND ANSWER
Q A
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- END OF PRESENTATION -