Cost planning is the discipline by which the quantity surveyor controls the cost of a building project from inception to completion. Its purpose is to ensure that the design that is ultimately constructed delivers the employer's brief within the available budget, and that decisions made early in the design process — when the cost consequences are most significant — are taken with a clear understanding of those consequences. A project that is properly cost planned is far less likely to give rise to the disputes that follow uncontrolled budget overrun.
The cost plan evolves through the stages of design development. At the inception stage, the cost plan may be little more than a benchmark figure derived from comparable projects, expressed as a cost per square metre of gross internal floor area or per functional unit. As the design develops through concept and detailed design, the cost plan becomes more granular: an elemental cost plan first, then a more detailed cost plan based on quantified elements, and ultimately a fully measured pricing document at the point of tender.
Each stage of the cost plan serves a different purpose. The early-stage benchmark cost plan tests the feasibility of the brief against the budget and informs the employer's decision to proceed. The elemental cost plan provides a framework against which design decisions are evaluated and trade-offs considered. The detailed cost plan supports the procurement process and provides the baseline against which tenders are evaluated. Discipline at each stage is essential to the integrity of the next.
Effective cost planning requires more than the mechanical application of unit rates to quantities. The cost planner must understand the design intent, the procurement strategy, the programme, the market conditions, and the specific characteristics of the project — its location, its complexity, its scale, the quality of the specification, and the risks inherent in delivery. A cost plan that ignores these factors will be unreliable.
Risk allowance is a particular feature of cost planning that is frequently misunderstood. A cost plan that contains no risk allowance is not a complete cost plan: it is an estimate of the likely outturn cost of the works as currently designed, ignoring the possibility that the design will change, that the procurement will be more competitive or less competitive than expected, or that unforeseen conditions will be encountered. A properly constructed cost plan identifies the risks, quantifies their cost impact, and either allocates a risk allowance to the project budget or discloses the risks transparently to the employer.
The relationship between the cost plan and the contingency is sometimes confused. The contingency is an allowance for the residual risk that remains after specific risks have been quantified and allocated. It is not a slush fund to absorb design changes that should have been priced separately, nor an allowance for items that have been omitted from the cost plan in error. A disciplined approach to the management of the contingency is essential to the credibility of the cost plan as the project develops.
Our quantity surveyors and cost consultants at Construction Expert Witness provide cost planning services on major construction and infrastructure projects across the UAE and GCC. Where a project has gone into dispute, we frequently assist tribunals in evaluating whether the cost planning was conducted to a competent standard and whether the budget overruns relied on by the parties are properly attributable to the matters in issue.