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Outline Cost Proposals
1.1
Introduction
We have reviewed the current general arrangement and various reports. From this information
we have taken off approximate quantities generally in line with the elements of the projects
previously described. We have created a number of approximate bills of quantities based on the
structure of the Manual of Contract Documents for Highway Works (MCHW) – Volume 4 - Bills
of Quantities for Highway Works. Using generic rates we have priced the works, making
assumptions where necessary. This process has provided a point estimate for the core
construction works for each of the separate projects. The effective date for the pricing is
1st Quarter 2010.
The results of the above process are shown below both as separate projects and as a
combined single project. The point estimate is however only part of the total project cost.
Additional allowances have to be made for Client costs, project management, fees (legal,
Quantity Surveyor etc.), land costs if appropriate, design, (outline and detailed), assurance, and
uncertainty. Finally, costs already incurred and not included in any of the previously described
allowances have to be added.
However, prior to detailing the results we have outlined the overall concept upon which the total
anticipated final cost (AFC) for the project is calculated. We have called this a ‘Portrait of a
healthy project’ and it can be found at Error! Reference source not found. Error! Reference
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1.2
Portrait of a healthy project
Our portrait of a healthy project outlines the necessary best practice to ensure a healthy project
throughout it’s lifecycle.
A healthy project starts with a clear vision and develops to have clearly defined benefits and
requirements, and a robust business case. The healthy project ends having been safely
delivered to time and budget providing the benefits and requirements of the stakeholders, all in
line with the original vision.
A project is generally a form of intervention within the whole life of a collection of assets. This
could be new works, replacement, maintenance or decommissioning. In considering the type of
intervention required and the resultant project, due regard should be made to the interfaces with
the rest of the whole life of the particular collection of assets. A project will have it’s own
lifecycle within the lifecycle of the whole life. The project lifecycle progresses from inception,
through development to implementation and completion in set stages with gateways between
specific stages. The stages can be industry generally adopted, for example RIBA Plan of Work
Stages or Client / Project specific. Similar applies to gateways. A gateway is a decision point
where a project is tested against a number of criteria. A health check. Providing the project
passes the health check it is allowed to progress through the gateway to the next stage of the
project.
Constituent parts of a healthy project include, but are not limited to, with the amount of detail
commensurate with the project stage
1. An outturn Statement, including perceived benefits and requirements
2. A clearly defined scope and specification
3. A sufficiently detailed and thought out programme
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4. A risk register
5. A Procurement Strategy
6. A cost plan
7. Sustainability and environmental reports
8. Health, safety and CDM reports.
9. Value management workshop output reports
10. A robust Business Case.
Obviously not all of the above are instantly available at the inception of the project but are
developed as the project progresses and becomes more detailed.
A significant proportion of the health of a project is provided by having a cost plan which has
sufficient cost allowances to complete the whole of the project from the outset. This is also
compared with the business case at all stages of project development to ensure that the project
will provide the required internal rate of return. It should be noted that, unless precluded by
Client procedures, a business case can include soft issues as well as just financial return. An
important example of this is a project that is primarily required for safety reasons.
An initial cost plan by necessity will contain a significant amount of uncertainty. There will be
insufficient detail to fill in the gaps and provide a detailed and robust estimate of final costs of
the project. It is our desire that we meet our self imposed target that >95% of projects that we
cost at inception are finally delivered within that initial cost plan.
Please see adjacent image which indicates the intent in graphic format. It is generic and not to
scale. It equally applies to projects of £500k to £15b.
The ‘sunk cost’ bar indicates actual cost expended at that point in time.
The definition, in this instance, of the ‘known cost’ bar is cost data in the form of cost plan or
detailed estimates based on firm and detailed information.
The ‘uncertainty’ bar consists of
1. estimating tolerance,
2. risk value based on a risk register
3. contingency value to allow for unknowns, and
4. Optimism Bias based on the Government’s recommendations.
As the project progresses through the stages more information becomes known which in turn
reduces the level of uncertainty. Accordingly the level of ‘uncertainty allocation’ reduces until at
project completion it is zero. All the reserves have been released.
This represents a healthy project solely in the aspect of cost. The other elements, listed above,
also have to be in place to facilitate the result shown in the image.
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Portrait of a healthy Project
Uncertainty
Uncertainty
Uncertainty
Sunk Cost
Actual Cost
S
u
n
k
C
o
s
t
Sunk
Cost
Sunk Cost
Known Cost
Known Cost
Known Cost
Sunk Cost
Known Cost
Cost
Uncertainty
Anticipated Final Cost
Idea
Feasibility
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Gates
Design
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Detailed Design
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Close
Construction
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