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Target price method and building element cost estimation

Lauri Luoma-Halkola, Jukka Kujala, Jonna Haavisto & Pauli Autio

15.10.2015

+Structure of the presentation

Each concept is presented individually, starting with target price method Method’s basic idea Background Simplified process steps Applications Case examples

+Target price method - basics

A method for estimating The price of a construction to be built The present value of an existing building Repair costs

Values based on catalogue by Haahtela

A rough cost estimate

Main purpose is to clarify the goals of the project: shows the impact of desired outcome on the price

+Target price method - background

Has been used as a tool since the 1960’s, especially in Japanese car industry

In Finland has been applied in construction since 1980: Haahtela Group’s manual Target Costing Methodology in Construction

Applications differ country wise

+Target price method – process

Process steps in a nutshell:

Building is sectioned into different functional areas, which are added in a table    

Surface areas are estimated.

Price / sq. m is obtained from the directory created by Haahtela Group.

Target price is achieved by simply multiplying the areas by their prices.

+Target price method – process

Parameters and indexes to take into account location: six categories Quality of the design Room height High quality furnishing etc.

+Target price method – applications Price of a construction to be built

+Target price method - applications PV of an existing building

+Target price method - applications Costs of a repairing procedure

+Case Bandy hall Space specific properties: program had a preset for ice hockey hall, which needed some modifications

Project specific properties

Calculations were made for four different versions of the hall: wood / steel structure, insulated / not insulated

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+Building element cost estimation –basics Used

In the beginning of a building project for budgeting

Budgeting renovation projects Controlling costs of a project Setting the basis for procurement Estimating the price of a building

+Building element cost estimation – background

Haahtela Group brand

Goal is to estimate building’s price as a sum of its building elements

+Building element cost estimation – process

Process is divided into eight phases: Calculating the amount of construction elements Estimating the price for each type of element Estimating the prices for internal cladding, linings and

building equipment Estimating the price of building services Estimating the price of project management services Estimating the price of connection charges and other

costs relating to the plot Estimating the price of the operational equipment,

maintenance and financing Making the risk reserve

+Building element cost estimation - applications An example: need of new business premises;

no construction plans yet but know an approximate scope

Estimation made by own professionals or external consultants

The model enables calculating the cost of different options

+Case: grocery logistics company

Initial data: company needs 800 sq. m of freezer-cold storage

During the process the company decided that they also need 800 sq. m of refrigerated storage, which was added to the plans

Architect sketches and HVAC consultants building element cost estimation revealed the investment to be too expensive for the company

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