MANAGING COST CONTRACTS COMMUNICATION AND CLAIMS A

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Results The expected results of the implementation of procedures related to cost. contracts communication and claims will be addressed and how these may positively. influence the property development and construction process. 2 THE MANAGEMENT OF COST, He that counts all costs will ne er put plough in the earth Scottish proverb in. Browning 1982 378,2 1 Aims and goals of cost management. The basic goals of cost management and the pricing of a project or product relate to. the link between price and intrinsic value affordability in relation to needs or. investment and managing the procurement process, Cost managers cost planners should therefore understand that they need to work with. clients investors from the very inception of a project even earlier and then. throughout the process to ensure the best results This does not mean that a cost. planner or cost manager is a cost cutter far from it a cost manager should take. responsibility with designers the client and other role players to ensure that the. interests of the client community and environment are served Ferry and Brandon. Grover Cleveland cited in Nel 1992 43 stated the following about property. investment No investment on earth is so safe so sure so certain to enrich its. However one also has to take best value into account as well as the principle to put. available funds to best use This includes gearing cost design or design to cost cost. planning cost control architecture location environment etc. Sound investment has proven its value been a safeguard against ill fortune produced. income provided security and shown itself to be a way of producing wealth Nel. 1992 43 Utilising funds to best effect will improve these benefits even further. The cost manager needs to understand that the type of construction required for a. building will also influence the performance of the building over time including the. functional performance of the users environment Mole cited in Venmore Rowland. Brandon and Mole 1991 307, Ashworth 2002 proposes that the emphasis should always be on securing. developments that best satisfy the criteria identified by the developer client at. inception including the type scale standards funding cost and timing of a project. Different tasks need to be performed by different people involved in respect of design. cost forecasting planning organizing motivating as well as controlling and co. ordinating the management functions Ashworth 2002 5. The cost managers should be continuously involved from the design to the co. ordination and auditing to ensure best cost results specifically in commercial. property where investment is required to yield the best financial returns. KONGRESSE ICEC2006 VERSTER Paper doc,Typed by Jill 120905 2.
Last Printed 2005 09 14, Other areas of cost management that need attention are cash flow the timing of. payments interest rates and the availability of funds at specific times These aspects. also influence the total financial outlay and eventual returns on a property investment. Kenley 2003 3 stresses the potential value of improved and strategic cash flow to. enhance the profitability of the construction industry with the further potential to offer. reduced costs to the client and improved contractor performance. Cash flow forecasts and management should therefore be part of the cost manager s. service to ensure that the developers receive th e full benefit of pro active attention. The cost manager s Quantity Surveyor s involvement must go beyond a re active. service It should also include a service that takes the following aspects of value into. Physical a quality building, Psychological a pleasant looking building which is good to live in places of. Real quality cost effective but with specifications that fit the purpose. Durability taking life cycle costs and whole life costs into account. Design design to cost cost design and appearance,Affordability budget and returns are important. Timelessness short term fashions as opposed to design that will withstand the. pressures of current whims, The cost manager while communicating alternatives and options to the designers and. the client should remember the role of relative quality affordability returns as well. as the latter s link to design and specification, 2 2 Quantity surveying and cost management methods and tools.
Although cost management may be seen as an obvious and simple process in reality it. is not All aspects associated with a project have a direct impact on costing and how it. is managed Knipe et al 2002 257, The quantity surveyor is ideally placed to manage this complex process I f the. methods ar e followed diligently and the tools used effectively cost management may. produce exceptional results,2 2 1 Design to cost cost design. This process is based on design aimed at satisfy ing the parameters dictated by. cost cost of acquisition operation and management, The process may also be described as cost design where such design is defined. as designing a project in economic terms taking into account the cost and cost. benefit of each element of the project in an effort to balance the. interrelationship of all cost elements and the reason fo r its existence Knipe. 2002 276 277 Verster and Berry 2005 20 40,KONGRESSE ICEC2006 VERSTER Paper doc. Typed by Jill 120905 3,Last Printed 2005 09 14,2 2 2 Value Management.
Value Management is a systematic approach and process earlier referred to as. value engineering to ensure delivery of a function or product at the lowest cost. without detriment to quality performance or reliability Ashworth 2004 409. 421 Green 1992, Value management is a continuous process that should occur throughout the. project but is most effective when implemented right from the inception of the. project Moreover it should also include the following aspects. Orientation Understanding the issues, Information Identification of functions needs budgets project. constraints and timing, Speculation The creative development of ideas and alternatives. Analysis and evaluation Elimination and filtering of ideas. Development Examination in detail,Selection The final proposal. Conclusion Presenting the findings to the client, The most common approach to a value engineering study is the 40 hour.
workshop usually initiated when 35 of the design has been completed. Ashworth 2004 412 413, Value management is one of the effective tools available to quantity surveyors. who are in a position to play an important role in ensuring that the client and. designers actually consider all value and cost related aspects of construction. design specification and development options,2 2 3 Cost planning. Cost planning is used to ensure that the developer knows in the early stages of. a project what the anticipated final cost of the total development may be. including the cost of land legal issues demolitions buildings professionals. furniture connections tax financing and management Building cost is only. one of these items but the quantity surveyor or cost manager should include all. costs in the cost plan or estimate of final cost The cost planner should have a. clear understanding of cost and budget targets to enable him to advise the. developer about possible future over runs and pro actively to provide. alternative solutions Ferry and Brandon 1991 9, A complete system of cost planning must comprise cost planning and control. during the design process as well as the construction procurement stage. During the design stage the system includes finalizing the brief investigating. solutions and developing the design Ferry and Brandon 1991 183. One of the most effective tools that the quantity surveyor uses to assist with the. planning and design process is the elemental cost plan The theory behind the. analysis of building costs per element is that the total cost is a sum of the cost. of individual so called elements such as walls roofs foundations etc. Morton and Jaggar 1995 41 43,KONGRESSE ICEC2006 VERSTER Paper doc. Typed by Jill 120905 4,Last Printed 2005 09 14, The model for cost plans endorsed by the Association of South African.
Quantity Surveyors ASAQS includes 10 sections and 68 elements. The ten sections are,Primary elements,Special installations. Alterations,External works and services,Preliminaries. Contractor s fee,Contingency allowances,Escalation. Value added tax, The primary elements of the structure of a building are the following. foundations ground floor construction structural frame independent structural. components external envelope roofs internal divisions partitions floor. finishes internal wall finishes ceilings and soffits fittings electrical. installation internal plumbing fire services balustrading and m iscellaneous. items Association of South African Quantity Surveyors ASAQS 1998 1 6. Effective cost advice will place the client in a position where strategic. budgeting can be performed based on sound knowledge of all influences. Knipe et al 2002 276 277 The estimating process according to Knipe et al. 2002 257 276 277 should add to a more comprehensive understanding of all. benefits and associated costs,2 2 4 Cost control, Linked to auditing cost control is an activity that is aimed not only at reactive.
reporting of decision results but also at accounting for the decisions and. visions of the client and advising the client how best to achiev e desired. outcomes Knipe et al 2002 257, Cost control happens throughout the deployment process from the briefing. stage to completion Benefits are derived during all stages including the. briefing sketch plan approved sketch plan production drawing receipt of. tenders and construction stages Ferry and Brandon 1991 181 185. 2 2 5 Cost Checking, This process is necessary to ensure that the client is always informed about the. actual performance of the building in cost terms in relation to the budget or. The actual cost of each element or section of the building as the detailed. designs are developed is checked against the cost target or cost plan or. specific elements in the cost plan Seeley 1983 14, Cost checking is a continuous process and should be an important element of. pro active cost management,KONGRESSE ICEC2006 VERSTER Paper doc. Typed by Jill 120905 5,Last Printed 2005 09 14, One needs to understand that cost management methods and tools are.
integrated and do not stand on their own Every method used is part of the. bigger p icture to ensure the most effective support to the developer. 2 2 6 Cost analysis, Cost analysis supports the quantity surveyor s service to the client and can. provide the quantity surveyor with useful cost information and data Three. forms of cost analysis are identified by Ashworth 2002 69 namely. Identification of major cost items, Analysis of the annual user cost of building ownership. Identification of those groups of items elements of cost importance. The identification analysis and comparison of costs and items as well as. element related costs enable the quantity surveyor to assist the developer and. designer in investigating more cost effective alternatives enabling them to. deliver a project that yields the best results,2 2 7 Cost benefit analysis. The aim of cost benefit analysis is to establish the real benefit of expenditure. not only in financial terms but also in terms of time and energy expended by. human resources and the social benefits Ferry and Brandon 1991 12 13 or. in the words of Ashworth 2002 4 to evaluate the economics of costs. incurred with the benefits achieved, Although this technique is largely discredited it still provides support to. evaluate aspects which have a monetary value while intangibles such as social. benefits are merely assessed and shown separately to be decided upon in. objective terms Ferry and Brandon 1991 13,2 2 8 Whole life appraisal life cycle costing.
Whole life appraisal or life cycle costing also known as cost in use. describes the modelling tech nique aimed at coping with the mixture of capital. and running costs of buildings and the effect on ownership of a building This. technique does not only analyse the effect of using different materials finishes. and equipment over time but also investigates running cost in terms of water. energy maintenance electricity heating etc It also takes the future value of. money into account Ferry and Brandon 1991 43 44, The quantity surveyor must be very sensitive to the influence of all cost factors. so that the client receives advice that is practical applicable timeous and. In respect of whole life appraisal it is important to remember that the end. result should be value for money that will flow from giving full consideration. to maintena nce aspects and possible future costs at the design stage Seeley. KONGRESSE ICEC2006 VERSTER Paper doc,Typed by Jill 120905 6. Last Printed 2005 09 14,2 2 9 Cost reporting, The quantity surveyor should ensure that continuous accurate cost. information analysis cost results and cost influences are reported to the client. and design team The report must be based on sound information and data. ensuring continuous pro active action and effective management of the whole. 2 3 Results, The effective implementation of the above tools techniques or methods should result. kongresse icec2006 verster paper doc typed by jill 120905 last printed 2005 09 14 1 managing cost contracts communication and claims a quantity surveying

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