Cost Management | Davis Langdon

By: Dlpks  05/12/2011
Keywords: supply chain, Quantity Surveying, Construction Supply

Our starting point is an appreciation of the business case for the project. We establish our clients' needs from the outset, and we then focus on understanding what they require from the design process and the construction supply chain. Our confidence in advising on the cost implications of our clients' requirements, from the earliest stages, rests on our extensive experience, data and specialist knowledge across all market sectors and building types.

We remain constantly alert to what drives value for our clients. Our service is therefore about co-ordinating mutual interests and thinking as part of the design team, helping to capture the client’s objectives within the team’s proposed solutions.

Our Cost Management service is in essence about delivering a building to cost. In practice, however, projects are multi-faceted and demand an appreciation of all stakeholder agendas. Successful Cost Management therefore requires the adoption of an optimum procurement strategy, designed to balance the sometimes conflicting requirements of risk, certainty, speed, design, quality, budgets and benefits. Effective engagement of the supply chain - at the right time – and application of rigorous change management and delivery processes can make a major contribution towards achieving the value and outcomes our clients are seeking. Our world-leading Cost Management service is the foundation of the partnership’s growth and service expansion. It has evolved by repeatedly expanding the boundaries of quantity surveying and will continue to do so.

Davis Langdon is a market leader in the development and use of benchmarks. Datasets for some of our sectors are drawn from up to 50 million sq.ft. of our completed work. This breadth of captured experience enables us to provide some of the most accurate benchmarking available. Our historic data is collated by our dedicated research teams, who then study global markets and construction trends to provide a wider context for our client advice.

Clients especially value the comparisons we can make between proposed and similar existing buildings within a market sector: these can look at both whole and elemental costs. Our research can also be used to compare the performance of buildings in relation to a variety of factors: speed of construction, net/gross floor area efficiencies, specific studies on, for example, steel versus concrete frame costs, and the costs of different procurement methods.  Moving forwards, this will also include the building's key sustainability indicators.

At Davis Langdon the use of benchmarking is a pro-active process, often deployed in value engineering discussions and reviews.

The minimum requirements for control of costs once projects are underway are that expenditure and forecast cash flow match available funding. There must be a systematic and rigorous process for agreeing and approving changes to the scope of the project. This process must ensure that changes are identified sufficiently early, so that clients can understand the impact of change before they commit to it. Necessary direction can then be given to avoid delays to the project.

Cost control typically takes place during the latter construction stages of a project, when a client is committed to substantial expenditure through a building contract.  But it is equally important during the detailed design stages, to ensure no surprises at the tender stage. During construction, requirements for change can arise for a wide variety of reasons. The role of cost control is to monitor the impact of changes, enabling corrective action to be implemented if there is any risk of the client’s requirements not being met.

This includes management of the commercial relationship with the contractor, measurement of work, approval of payments and negotiation of changes.

Cost Planning aims not only to predict how much something will cost to build or provide, but, once design quality is set, how little it need cost. Increasingly, it is also likely to include the prediction of future costs and carbon use.

A cost plan develops through stages of refinement, from the preliminary indication of the costs of a client’s brief, to a market-tested cost plan.  The market-tested cost plan is tied to designs and specifications, providing the level of certainty on which to confidently base investment decisions. A cost plan links the design to a detailed statement of the quantum, quality and cost of the work involved in its realisation.  Our process encourages dialogue with stakeholders to help them articulate their needs. This helps them understand the implications of what they are trying to achieve, and arrive at the optimum balance between different and sometimes competing objectives.

Through an emphasis on value-based thinking, and drawing on our additional value and risk management service, we are able to help clients and their teams make rational and informed decisions. These link proposed design solutions to the business objectives – which may be much wider than the functional requirements of the building.

Davis Langdon’s cost plans draw on our wealth of specialisms - including  our engineering, curtain walling and sustainability teams.  Data from numerous sector groups is continually captured, promoting consistency, thoroughness and accuracy in our Cost Planning.

Materials, components and services for major buildings are sourced from different parts of the world, and the weight of global demand is testing energy and resource capacities across all construction markets. Davis Langdon’s global reach can assist clients in taking advantage of their position in this procurement market. “What are we buying and what is the best way to buy it?” are the key procurement questions. Davis Langdon has the necessary experience to provide our clients with a wide range of early options about how they might wish to engage with the procurement process.

These options represent a set of choices that are not always straightforward and encompass a wide range of interrelated issues. For example, the need for early cost certainty against the need to keep opportunities for change open. Or the need to demonstrate competition versus a preference for partnering.  In providing clear, knowledgeable and pro-active advice, we are able to assist our clients throughout this process in making informed decisions.

We have an in-depth understanding of the market place, and its inherent risks and opportunities. Together with our own market standing, this often affords us the ability to secure favourable terms.  In addition, the effective management of the contractual process reduces risk and enhances our clients’ position should later negotiations arise.

It is also important to address key issues about project finance at the planning stage, to maximise potential savings. We have extensive experience across a full range of private and public sector procurement strategies. We are therefore able to provide expert advice, appropriate to our clients’ financial and organisational requirements as well as the specifics of the project.

As the science of climate change hardens, clients are increasingly asking Davis Langdon to help them focus on reducing energy use and the costs of occupying buildings. Consideration of the return on investment in buildings is shifting to include fuller consideration of Whole Life Costs. Whole Life Costs is “the systematic consideration of all relevant costs and revenues associated with the acquisition and ownership of an asset.” (CRISP)

In broad terms, Whole Life Costs analysis yields the most cost-effective balance of capital and revenue costs over the life of a building. It can be undertaken at any stage in a project; as part of an investment appraisal to define what is built and when, or during design and construction to consider specification options and predict future maintenance and running costs – or to update these for existing buildings.

Davis Langdon has the techniques, data and expertise to assist clients in these studies. We find that Whole Life Costs provides a particularly useful framework for generating pertinent questions during the assessment of design options.

Keywords: Construction Supply, Quantity Surveying, supply chain,

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