07. RICS - Construction Handbook

Update 15 published December 2003Update 14 published September 2003Update 13 published May 2003Update 12 published January 2003Update 11 published October 2002Update 10 published August 2002Update 9 published December 2001Update 8 published October 2001Update 7 published July 2001Update 6 published December 2000Update 5 published October 2000Update 4 published May 2000Update 3 published December 1999Update 2 published October 1999Update 1 published April 1999

Please note: References to the masculine include, where appropriate, the feminine.

Extracts from Parrys Valuation and Conversion Tables, A W Davidson (1989),(Estates Gazette) reproduced by permission of the College of Estate Managementwhich owns the copyright.

Appendix A, Section 2.3 is reproduced from the Building Cost Information Service publication,Standard Form of Cost Analysis: Principles, Instructions and Definitions (1969).

Published by RICS Business Services Limiteda wholly owned subsidiary ofThe Royal Institution of Chartered Surveyorsunder the RICS Books imprintSurveyor CourtWestwood Business ParkCoventry CV4 8JEUK

No responsibility for loss occasioned to any person acting or refraining fromaction as a result of the material included in this publication can be accepted by theauthor or publisher.

ISBN 0 85406 865 1

RICS Business Services Limited (RBS) December 2003. Copyright in all or partof this publication rests with RBS, and save by prior consent of RBS, no part or partsshall be reproduced by any means electronic, mechanical, photocopying, recording orotherwise, now known or to be devised.

Typeset and printed by Q3 Print Project Management Ltd, Loughborough.

1998 FOREWORD

Knowledge is of two kinds: we know a subject ourselves, or we knowwhere we can find information upon it.

Samuel Johnson (17091784)

The fact that our profession serves a changing world increases the need forit to rely on well thought-out and reliable practices and procedures. Eventsmove at an ever-increasing pace, imposing a requirement for quickerresponse times. Modern communication methods such as facsimile and nowe-mail result in the need for information to be available almost instantly.This is made more difficult by an industry growing in complexity and whichis subject to increasing customer expectations in terms of service andquality.

The RICS has published this Surveyors Construction Handbook to helpsurveyors meet these needs. It is intended to become an important source ofreliable information and guidance to all Chartered Surveyors who practise inconstruction. Much of the excellent information produced by the divisionsin the past has now been updated for inclusion. Other material not yetrevised will be added. The whole will be regularly reviewed and updated asnecessary. RICS practice panels are continuing to produce information forinclusion to make it a useful construction reference document.

We hope that this Handbook will become an invaluable aid to yourday-to-day activities.

Christopher Powell, FRICS

PRESIDENT, QUANTITY SURVEYORS DIVISION, 199798

Trevor Mole, FRICS

PRESIDENT, BUILDING SURVEYORS DIVISION, 199798

ACKNOWLEDGEMENTS

Professor Roy Morledge, Professor of Construction Procurement at TheNottingham Trent University, for contributing the text of Part 3, Section 1.

Major D.R. Bassett, Royal Engineers, for his contribution to the researchunderpinning the construction time charts in Part 3, Section 1; Central Unit forProcurement, HM Treasury (now Office for Government Commerce), forpermission to use CUP guides extensively in the drafting of Part 1, Section 1and Part 3, Section 1.

Alan Turner, JP FRICS ACIArb, author of Building Procurement, forpermission to use a number of the diagrams from his text in Part 3, Section 1.

The Surveyors Construction Handbook Contents (12/03) Page 1

CONTENTS

Foreword

Acknowledgements

List of Abbreviations

Introduction 1A Aim and Scope of this Handbook 1B Arrangement of Content 1C Status of Content 2D Currency of References 3E Invitation 3F Subscription Service 3

Part 1: The ClientSection 1.1: The Clients Requirements and Roles 11.1.1 Establishing the Clients Objectives 11.1.2 The Role for Independent Advice 31.1.3 Project Brief 31.1.4 The Clients Role 41.1.5 The Clients Responsibilities 61.1.6 Appointment of Project Manager (where appropriate) 81.1.7 Appointment of Consultants 81.1.8 Appointment of Constructors 9Appendix A: Further Reading 1

Section 1.2: Value Engineering 1Introduction 1

1.2.1 Why Value Engineering? 21.2.2 Applicability 21.2.3 At What Stage Should Value Engineering be Carried Out? 31.2.4 Who Should Carry Out Value Engineering? 41.2.5 How Long Should It Last? 51.2.6 Preparing for a Value Engineering Workshop 51.2.7 Functional Analysis of Design Relative to the Clients

Requirements 51.2.8 Pricing the FAST Diagram 81.2.9 Presenting a Design Solution to a Value Engineering Workshop 81.2.10 The Workshop 81.2.11 Assessing the Value of the Workshop 91.2.12 Implementing the Results 101.2.13 Feedback from Post-Occupancy Evaluation 10Appendix A: Health Centre Value Tree 1Appendix B: Typical Example of a Value Engineering Process 1Appendix C: Further Reading 1

Contents (12/03) The Surveyors Construction Handbook

Part 2: Construction Design and Economics

Section 2.1: Pre-contract Cost Planning and Cost Management 1Introduction 1

2.1.1 Pre-contract Cost Planning and Cost Management 22.1.2 Preliminary Cost Studies and Feasibility Studies 42.1.3 Budget 42.1.4 The Cost Plan at Outline Proposals Stage 82.1.5 The Cost Plan at Scheme Design Stage 112.1.6 Cost Checking 132.1.7 Action after Receipt of Tenders 14Appendix A: Sources of Cost Information 1Appendix B: Format of Budget and Cost Plans 1Appendix C: Element Unit Quantities Generation for Hypothetical

Buildings 1Appendix D: Further Reading 1

Section 2.2: Life Cycle Costing 1Introduction 1

2.2.1 The Client Context 12.2.2 The Life Cycle Costing Calculation 52.2.3 Tax Allowances, Incentives and Business Rates 102.2.4 Data Sources 142.2.5 Worked Examples 15Appendix A: Residual Values 1Appendix B: Obsolescence 1Appendix C: Costs And Values 1Appendix D: Glossary of Terms for Taxation 1Appendix E: Examples of Items of Expenditure Likely to Attract

Taxation Allowances 1Appendix F: Further Reading 1

Section 2.3: Elements for Buildings 1Introduction 1

2.3.1 Elements 12.3.2 Elemental Cost Analysis 12.3.3 Other Uses 2Appendix A: BCIS Standard Elements 1

Section 2.4: Design and Build - Guidance for Employers Agents 1Introduction 1

2.4.1 Background 22.4.2 Contract Documentation 32.4.3 Additional Services 32.4.4 Employers Requirements and Contractors Proposals

(including contract sum analysis) 52.4.5 Design and Build Variants 62.4.6 Novation 8Appendix A: Potential Services Associated with the Role

of Employers Agent 1Appendix B: Employers Requirements/Contractors Proposal Checklist 1


Section 2.5: The Chartered Surveyor as Lead Consultant 1Introduction 1

2.5.1 Definitions: The Difference Between a Project Manager andLead Consultant 1

2.5.2 Benefits of Appointing a Chartered Surveyor as Lead Consultant 22.5.3 Issues to Consider before Undertaking the Role 32.5.4 Schedule of Lead Consultant Duties 3

Section 2.6 Defining Sustainable Construction 1Introduction 1

2.6.1 Technology Swaps 22.6.2 How Can the Environment and Sustainability be Valued? 32.6.3 How Does This Effect the Construction Industry? 42.6.4 Green Building Materials 72.6.5 Whole Building Sustainability 82.6.6 The Government Line 92.6.7 What Might the Future Hold 11Appendix A: Embodied Energy Content of Building Material 1Appendix B: Useful Addresses 1

Part 3: Construction Planning and ProcurementSection 3.1: Developing an Appropriate Building Procurement Strategy 1

Introduction 13.1.1 The Clients Role 23.1.2 Procurement Strategy 123.1.3 Selection of Most Appropriate Procurement Strategy 253.1.4 Implementation 29Appendix A: Procurement Options 1

Section 3.2: Building Services Procurement 1Introduction 1

3.2.1 Appointing the Building Services Designer 33.2.2 Design Coordination 113.2.3 Appointing a Building Services Contractor 193.2.4 Tender Documents 34Appendix A: Typical Example 1

Part 4: Construction Administration and ManagementSection 4.1: The Problems of Practical Completion 1

Introduction 14.1.1 What Happens in Practice 14.1.2 Standard Form Approaches 34.1.3 Effects of Practical Completion 134.1.4 Methods for Dealing with Practical Completion 144.1.5 Definitions 164.1.6 Subsidiary Issues 20Appendix A: General Objectives to be Achieved at Practical

Completion for Small to Medium-sized Building Projects 1Appendix B: Table of Cases 1Appendix C: Further Reading 1

Contents (12/03) The Surveyors Construction Handbook

Section 4.2: Ascertaining the Amount of Loss andExpense Incurred in Building Projects 1

Introduction 14.2.1 General Principles 14.2.2 Definitions 44.2.3 Entitlement 44.2.4 Ascertainment 74.2.5 Admissible Items 94.2.6 Inadmissible Items 13Appendix A: Ascertaining the Cost of Running a Site 1Appendix B: Disruption 1Appendix C: Ascertaining the Cost of Head Office Overheads 1Appendix D: Checklist of Items for which Loss and/or Expense are

Allowed 1Appendix E: Checklist of Steps Required when Considering

Submissions by Contractor 1Appendix F: Further Reading 1

Section 4.3: The Management of Risk 1Introduction 1

4.3.1 Definitions 24.3.2 The Rationale for Risk Management in the Construction Process 24.3.3 The Risk Management Process 54.3.4 Summary 14Appendix A: Further Reading 1

Section 4.4: Valuations for Interim Certificates 1Introduction 1

4.4.1 Valuations 14.4.2 Assumptions 24.4.3 Valuation Under a JCT Contract: Background 34.4.4 Recommended Action at the Start of a Contract 44.4.5 Communications 54.4.6 Approach 64.4.7 Content of a Valuation 84.4.8 Administration 154.4.9 Special Situations 164.4.10 Other Contract Terms (relative to valuations) 174.4.11 Valuations Under Other Forms of Contract 18Appendix A: Further Reading 1Appendix B: JCT Definition of Reasonable Proof 1Appendix C: Example of Priced Activity Schedule 1

Section 4.5: Extension of Time 1Introduction 1

4.5.1 Extension of Time Clauses 24.5.2 Assumptions 24.5.3 Extension of Time Under a JCT Contract 34.5.4 Notice by the Contractor of Delay to Progress 44.5.5 The Award of an Extension of Time during the Contract

Period and Before the Completion Date 54.5.6 The Award of an Extension of Time after the Completion Date 64.5.7 Relevant Events 74.5.8 Concurrent Delays 124.5.9 Consequential Entitlement 13


4.5.10 Administration 134.5.11 Extension of Time under an ICE Contract 144.5.12 Extension of Time under a GC Works Contract 14Appendix A: Further Reading 1

Part 5: Additional Guidance and InformationSection 5.1: Surveying Safely 1Section 5.2: Construction (Design and Management) Information 15.2.1 Schedule of Sources of Useful CDM Information 2

Section 5.3: Built environment group roles and information 1Section 5.4: Building Cost Information Service 15.4.3 BCIS Online 15.4.4 Other BCIS Publications and Services 25.4.5 Further details 4

Section 5.5: Building Occupancy Cost Information (BMI) 15.5.2 BMI Quarterly Cost Briefing 15.5.3 Building Maintenance Price Book 15.5.4 Special Reports for Benchmarking 25.5.5 News, Digests and Reports 2

Section 5.6: Electronic document storage legal admissibility 1Introduction 1

5.6.1 Code of Practice DISC PD 0008: 1999 25.6.2 Weight of evidence and document destruction 35.6.3 Authenticity 35.6.4 Photocopies, microfilm and image processing 45.6.5 Document storage 45.6.6 Storage and access procedures 55.6.7 Format of the Code of Practice 65.6.8 Conclusion 20Appendix A: Specimen form for recording scanning information 1Appendix B: Specimen form for recording retrieval 1Appendix C: References 1

Index 1

The Surveyors Construction Handbook Abbreviations (10/02) Page 1

LIST OF ABBREVIATIONS

ABE Association of Building EngineersABI Association of British InsurersACA Association of Consultant ArchitectsACE Association of Consulting EngineersAQL Acceptable quality levelBCIS Building Cost Information ServiceBEC Building Employers ConfederationBMI Building Maintenance InformationBRE Building Research EstablishmentBRECSU Building Research Energy Conservation Support UnitBREEAM Building Research Establishment Environmental

Assessment MethodBSI Building Standards InstitutionBSRIA Building Services Research and Information AssociationBWIC Builders Work in ConnectionCA Contract AdministratorCAWS Common Arrangement of Works Section for Building

WorksCDM Construction (Design and Management)CD-R Compact disc recordableCECA Civil Engineering Contractors AssociationCIB Construction Industry BoardCIBSE Chartered Institution of Building Services EngineersCIC Construction Industry CouncilCIRIA Construction Industry Research and Information

AssociationCITES Control in Trade of Endangered SpeciesCCT Compulsory Competitive TenderingCSM Chartered Surveyors MonthlyDBFO Design Build Fund and OperateDoE Department of the Environment (now known as the

DETR)DETR Department of the Environment, Transport and the

Regions (formerly the DoE)DMS Document Management SystemDOM Domestic Sub-ContractEC European CommissionEU European UnionFAST Functional Analysis Systems TechniqueFCEC Federation of Civil Engineering ContractorsGNP Gross National ProductHBF House Builders FederationHMSO Her Majestys Stationery Office (now known as

The Stationery Office)HSE Health and Safety ExecutiveIChemE Institution of Chemical EngineersICE Institution of Civil EngineersIDMA Information and Document Management Association

Abbreviations (10/02) The Surveyors Construction Handbook

IFC Intermediage Form of ContractJCT Joint Contracts TribunalLCC Life Cycle CostingLQ Limiting qualityM & E Mechanical and ElectricalMERA Multiple Estimate Risk AnaylsisMW Minor WorksNEC New Engineering ContractNEDO National Economics Development OfficeNJCC National Joint Consultative Committee for BuildingNSC Nominated Sub-ContractOMR Optical Mark ReadingPFI Private Finance InitiativePSA Property Services AgencyRIBA Royal Institute of British ArchitectsRICS Royal Institution of Chartered SurveyorsVAT Value Added TaxWCD With Contractors DesignWORM Write-Once-Read-ManyWRC Water Research Centre

INTRODUCTION

The Surveyors Construction Handbook Introduction (4/98) Effective from 1/6/98 Page 1

INTRODUCTION

A Aim and Scope of this Handbook

A1 The aim of this Handbook is to help both building and quantity surveyors toprovide construction-related professional services effectively and efficiently.It seeks to achieve this by providing guidance which reflects what is oftengood custom and practice, and relevant information (including references toother useful material). It should be appreciated that this Handbook does notattempt comprehensive coverage of necessary or good practice. TheHandbook is addressed to surveyors providing services to clients (as defined),not surveyors undertaking the role of the clients representative who givesinstructions to surveyors on behalf of the Client.

A2 Construction in this Handbook means new construction, conversion,refurbishment works and alterations to the form of buildings, and also civilengineering works. The contents of this Handbook apply across the completerange of this definition unless otherwise stated. So construction does notembrace building surveys or building maintenance.

A3 Client in this Handbook is used to include companies and their Directors orOfficers, Trusts and their Trustees, partners, managers and employees whomay instruct a surveyor.

A4 Throughout the Handbook, it is assumed that possession and necessary accessto the site are available and, in principle, the rights to construct thedevelopment and use the buildings when constructed. The Handbook does notcover project management services, obtaining planning permission andbuilding regulation approvals, or dispute resolution.

A5 The document is drafted on the basis of UK law and practice, although muchof it is relevant to practice elsewhere.

B Arrangement of Content

B1 After sets of Definitions and Abbreviations which apply throughout, theHandbook is arranged in five Parts. The first four Parts represent sequentialphases of the construction process. The last Part, Part 5, provides AdditionalGuidance and Information. Each part is followed by Further Reading, towhich the numbered cross references in the Parts apply.

B2 The first four Parts are as follows:

Part 1: The Client seeks to help surveyors to work with clients. It discusses theestablishment of their construction objectives and constraints, leading to the

INTRODUCTION

Page 2 Introduction (4/98) Effective from 1/6/98 The Surveyors Construction Handbook

development of construction briefs. It defines the clients roles during theconstruction process, and comments on the engagement of professionalsinvolved in the construction process.

Part 2: Construction Design and Economics covers development of the designconcept, feasibility studies, design and economics (including life-cyclecosting, risk assessment, and cost-value relationships), and confirmation ofthe final design proposal.

Part 3 relates to Construction Planning and Procurement, i.e. to the time theconstruction contract is placed.

Part 4 covers Construction Administration and Management, i.e. allpost-contract matters.

Any Appendices are situated at the end of each Part.

B3 An Index follows Part 5.

C Status of Content

C1 For convenience, Guidance and Information is integrated. Each paragraph isprefixed with a or an to indicate its status.

C2 Guidance, as the word implies advice to Members of the RICS on aspects oftheir profession. Where recommended for specific professional tasks,procedures are intended to embody best practice, i.e. procedures which inthe opinion of the RICS meet a high standard of professional competence.

Members are not required to follow the advice and recommendationscontained in such paragraphs. They should, however, note the followingpoints.

Should an allegation of professional negligence be made against a surveyor,the Court is likely to take account of the contents of any relevant guidancenotes published by the RICS in deciding whether or not the surveyor had actedwith reasonable competence.

In the opinion of the RICS, a Member conforming to the practicesrecommended in this Note should have at least a partial defence to anallegation of negligence by virtue of having followed those practices.However, Members have the responsibility of deciding when it is appropriateto follow the guidance. If the guidance has been followed in an appropriatecase, the Member will not necessarily be exonerated merely because therecommendations were found in RICS Guidance.

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INTRODUCTION

The Surveyors Construction Handbook Introduction (revised 10/01) Effective from 1/12/01 Page 3

On the other hand, it does not follow that a Member will be adjudgednegligent if he has not followed the practices recommended in this Handbook.It is the responsibility of each individual surveyor to decide on the appropriateprocedure to follow in any professional task. However, where Membersdepart from any practices recommended in this Handbook, they should do soonly for good reason. In the event of litigation, the Court may require them toexplain why they decided not to adopt a recommended practice.

In addition, Guidance Notes are relevant to professional competence in thateach surveyor should be up to date and should have informed himself ofGuidance Notes within a reasonable time of their promulgation.

C3 Material classified as information is intended to provide information andexplanations to Members of the RICS on specific topics of relevance to theprofession. The function is not to recommend or advise on professionalprocedures to be followed by surveyors. It is again, however, relevant toprofessional competence to the extent that a surveyor should be up to date andshould have informed himself of such information within a reasonable time ofits promulgation.

Members should note that if an allegation of professional negligence is madeagainst a surveyor, the Court is likely to take account of the contents of anyrelevant information published by the RICS in deciding whether or not thesurveyor has acted with reasonable competence.

D Currency of References

The cases cited and the editions quoted were up-to-date at the time of writing.However, readers should check current rulings and additions.

E Invitation

RICS Books would welcome comments upon and suggestions for additionsand amendments to this Handbook. They should be provided in writing toRICS Books Publishing, Surveyor Court, Westwood Business Park,Coventry, CV4 8JE.

F Subscription Service

Any change of address should be notified to the address appearing below:

The Surveyors Construction Handbook Subscription ServiceRICS BooksSurveyor CourtWestwood Business ParkCoventry CV4 8JETel: 020 7222 7000 ext 647

PART 1, SECTION 1

The Surveyors Construction Handbook Part 1, Section 1 (01/03) Effective from 1/3/03 Page 1

PART ONE: THE CLIENT

SECTION 1: THE CLIENTS REQUIREMENTS ANDROLES

1.1.1 Establishing the Clients Objectives

1.1.1.1 Client satisfaction will be maximised if the clients objectives as establishedin the business case for the project are met. The surveyor should be able toassist with the development of the business case and the prioritisation ofproject objectives (see 3.1.1.6 and 3.1.1.9).

1.1.1.2 The type of client will affect the criteria which must be met if the client is tobe satisfied with the project.

1.1.1.3 Owner occupiers are usually primarily concerned with buildingperformance in terms of functionality and costs in use. They may also beconcerned with image and building style. In this sense, value for money is akey criterion. Developers, on the other hand, may be driven by marketconditions which enable the project to be let or sold at maximumcommercial advantage. They may be predominantly concerned with speedrather than performance.

1.1.1.4 This is not to say that owner occupiers are unconcerned about time. Indeed,certainty of completion date may be a key issue. Nor is it fair to suggest thatdevelopers are unconcerned about building performance or cost. There aremarket conditions where both of these issues may become important.

1.1.1.5 However, the clients purpose in initiating a building project is usuallydriven by the need for the project as a functional unit or as an investment.There will usually be particular criteria for achievement which are critical orimportant to each particular client. Possible objectives are as follows:

(a) Cost-related minimise capital cost maximise capital cost/value ratio maximise capital cost/worth to client ratio achieve necessary income cash flow profile minimise management costs minimise maintenance and insurance costs minimise tax liability respect capital cost constraint be energy efficient.

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(b) Marketability maximise prompt or future disposal (freehold or otherwise).

(c) Use-related optimise operational requirements of intended occupier(s) provide greatest flexibility in potential uses reflect intended occupiers requirements/preferences/ability to afford meet social/management/occupiers special needs (e.g. disabled).

(d) Environmental minimise health and safety risks choose materials which reflect sustainability aesthetically please (e.g. impression on occupiers customers) minimise any alterations to specific features reflect planning authoritys brief/policies minimise potential opposition reflect corporate style or personal preferences of proposed

occupier/employees maximise comfort of occupants minimise inconvenience to others during construction.

(e) Timing construct within a defined period minimise risks of delay during construction.

1.1.1.6 The importance of each of these criteria will be relative to the objectives of theclient, the business case for the project and to the extent to which he/she isable to cope with risk (see 3.1.2.9). It is important that the client seekinvestment appraisal advice in respect of the project and that the appraisalconsiders what if questions to ensure that the impact of changes of keycomponents in the appraisal is clearly understood. A chartered surveyor willbe able to assist the client in these matters. However, the giving of advice onsome of the requirements listed above is, of course, outside the competence ofthe surveyor. Where such a particular requirement is important to the clientand outside the clients expertise, the client should be advised to seek otherprofessional advice.

1.1.1.7 Many construction projects suffer from poor definition due to inadequate timeand thought being given at an early stage1. This is often because there is asense of urgency fuelled by the desire for an immediate solution. Investingtime at the beginning of a project in developing a complete definition takingaccount of all the requirements will reduce the likelihood of changes later. Thelater that changes are made in a project, the more they are likely to cost in bothdirect and knock-on effects (see 3.1.4.14 and 3.1.2.14(f) & (g)).

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1 Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.

PART 1, SECTION 1


1.1.2 The Role for Independent Advice

1.1.2.1 With the potential for the involvement of many consultants and/orconstructors in a project and the range of contracts associated with theiremployment, all but the most experienced client may need advice. The adviceoffered should be informed and unbiased and it should be based upon a logicalanalysis of the needs of the client, the type and character of the project and therange of appropriate strategies available.

1.1.2.2 This advice can be offered by a member of the clients design team or can bea separate function. It may be more difficult for a design team member toremain impartial in carrying out this process and it is recommended that anyexpert retained should be solely for this purpose. This function can beidentified as the role of the principal adviser and may encompass:

Assistance in preparing the business case (the business case)underpinning the project

Identifying the needs and requirements (briefing)of the client

Defining the project (project definition) Matching needs and project characteristics (procurement strategy)

with appropriate procurement strategy Facilitating the associated selection and (implementation)

contractual processes and policies

1.1.2.3 Possible sources for the appointment of independent advisers include suitablyqualified and experienced construction professionals such as charteredsurveyors.

1.1.3 Project Brief

1.1.3.1 The importance of a clear project brief to the successful completion of theproject and in ensuring appropriate performance of the project cannot be overemphasised. The inexperienced client will need professional help in thepreparation of the brief. The project brief is a comprehensive statement of theclients requirements for the project based on close consultation between theclient and users and based upon the parameters established (see 3.1.1.10 and3.1.1.12).

The project brief may include:

(a) project description;

(b) how it fits into the clients corporate plan (e.g. it may be part of a largerplanned development);

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(c) number of people that are to occupy the building, together with their spacerequirements;

(d) schedule of accommodation and quality of internal environment;

(e) standards;

(f) equipment and special services/requirements;

(g) when the building needs to be available for use;

(h) quality and cost limitations;

(i) life span;

(j) site; and

(k) statutory controls.

1.1.3.2 This is the initial control document for the early planning of the project;without it, little constructive work can be done. If all the information requiredfor the project brief is not readily available, it is better to issue it in anincomplete form and to update it progressively1.

1.1.4 The Clients Role

1.1.4.1 This section briefly explains the clients responsibilities through the life of aconstruction project. In carrying out their role, clients, depending on theirknowledge and expertise, will need help from their professional advisers,project managers and other consultants, whose roles are also explained in thishandbook. This section aims to outline the clients task in setting policy andformulating strategy, and explains how it should be carried out.

1.1.4.2 The success of any project will depend upon the motivation given by theclient. Experienced clients may take a leading role in the procurement process;less experienced clients will need to seek advice or to appoint advisers toassist them. Where projects are of a large or complex nature it may beadvisable to consider the appointment of a project manager.

1.1.4.3 Effective management is vital in any construction project. The clients primerole is to establish a structure for the management of the project and to makesure that it works. A crucial part of any effective management structure isefficient communication. To perform effectively, all parties must have timely

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1 Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.

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access to all information relevant to their tasks and the projects objectives andstatus (see 3.1.4.11).

1.1.4.4 The client has substantial influence on the design of the project in respect bothof functional efficiency and of overall appearance, and, therefore, has to takeparticular care to:

(a) understand fully the purpose of the building; ensure that the requirementsof the users are accommodated; and communicate those requirements to thedesigners (see 3.1.1.10); and

(b) appoint designers with proven ability in designing buildings which satisfyusers requirements and harmonise with and contribute to the quality of thebuilt environment. The selection of the right people is emphasised as a key tosuccess (see 3.1.4.8).

1.1.4.5 The accompanying figure indicates the activities in the procurement processand when activities are usually performed. As can be seen, the clients role issignificant, with a wide range of activities to perform and implement beforeboth the design and the construction processes. In the performance of theseactivities, the client can expect to be supported and advised by his/her adviseror (if appointed) the project manager. More detail for each of these activitiescan be found in the section of this handbook indicated in brackets in thefigure.

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1.1.5 The Clients Responsibilities

1.1.5.1 The client should set policy and outline strategy including:

(a) setting and prioritising the project objectives within the business plan;

(b) planing to meet the objectives (the pre-design phase);

(c) implementing the plans (the pre-construction phase);

(d) controlling their implementation (the construction phase);

FIGURE TO INDICATE THE ACTIVITIES IN THE PROCUREMENT PROCESS

Pre-Design Phase Pre-Construction Phase Construction Post-Construction

Clients Role Develop business case for project (3.1.1.9)

Appoint adviser(3.1.1.6)

Define clients responsibilities (3.1.1.7)

Project Brief(3.1.1.12)

Appointment of PM (if appropriate) (3.1.4.7)

Appointment of design andcost consultants (3.1.4.8)

Procurement strategy* (3.1.1.13)

Value management (3.1.4.16)

Procurement strategy (3.1.1.13)

Design overview* (3.1.4.12)

Cost Control overview* (3.1.4.13)

Whole-life Costs(3.1.4.15)

Value Engineering(3.1.4.17)

Time control overview* (3.1.4.14)

Quality control overview* (3.1.4.18)

Appointment of constructors (3.1.4.9)

Confirming the business case (3.1.1.9)

Design overview (3.1.4.12)

Cost control overview (3.1.4.13)

Time control overview (3.1.4.14)

Quality control overview (3.1.4.18)

Change control overview(3.1.4.19)

Commissioning (3.1.1.17)

Occupation and takeover (3.1.1.18)

Procurement Strategy

Procurement strategy development (3.1.2)

Implementation Resources (Client) (3.1.4.35)

Organisational structure (3.1.4.6)

Contractual arrangements* (3.1.4.10)

Systems and controls* (3.1.4.11)

Implementation policy (3.1.4.2)

Contractual arrangements (3.1.4.10)

Systems and controls (3.1.4.11)

Systems and controls (3.1.4.11)

* Indicates the activity will continue into the next phase( ) Indicates the section of this document referring to the activity in more detail

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(e) arbitrating between conflicting demands; and

(f) evaluating the complete project against the objectives (thepost-construction phase).

1.1.5.2 The client also has a dual management function:

(a) to manage the client input; to co-ordinate functional and administrativeneeds; to resolve conflicts; to act as the formal point of contact for the project(see 3.1.4.11); and

(b) to supply the technical expertise, to assess, procure, monitor and controlthe external resources needed to implement the project (see 3.1.4.35).

1.1.5.3 In particular, the client should be satisfied that:

(a) the project brief is comprehensive and clear and has the full support of theusers1&2 (see 3.1.1.12);

(b) any constraints demanded by the project funder(s) are known and theirimpact understood;

(c) the critical assumptions made in preparing the initial estimates andprogrammes are valid, realistic and achievable (see 3.1.1.9);

(d) cost estimates are comprehensive and include all capital and resourcecosts;

(e) allowances made in the feasibility and viability assessments to coverpossible risks are sufficient (contingency allowance);

(f) substantial sensitivity analysis and what if studies have been carried outto assess the effect of possible changed criteria on the viability of the project;and

(g) plans are in place for adequate project management including systems forcost, time, quality and change control.

1.1.5.4 The client should also co-ordinate and resolve conflicts between all interestedsections of the client organisation including (see 3.1.4.6):

(a) user groups who will work in the building;

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1 Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RICS, Department ofBuilding Engineering and Surveying, Heriot Watt University. This document is out of print.2 Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.

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(b) specialist groups responsible for technical systems within the building,e.g. communications, computers;

(c) facilities management who will manage the completed buildingincluding maintenance and security;

(d) finance and accounts who will plan and control expenditure and pay billsas they arise; and

(e) legal advisers who will advise on and monitor the clients formalrelationships with outside parties.

1.1.5.5 The client is responsible for ensuring that all necessary decisions are made ontime. Timely decisions are necessary to avoid delays and increased costs: thedecision-making process requires as much planning and management as anyother activity. This will include (see 3.1.4.11):

(a) scheduling the key decisions to be made;

(b) identifying the decision makers and their required procedures;

(c) ascertaining the time required for making decisions;

(d) establishing a formal programme for decisions;

(e) warning decision makers regarding forthcoming submissions makingsure items are on the agenda;

(f) preparing on time fully detailed submissions and/or presentations in fullcompliance with procedural requirements;

(g) following up submissions throughout the decision making process; and

(h) promptly communicating decisions made to the parties affected bythem.

1.1.6 Appointment of Project Manager (where appropriate)(see 3.1.4.7)

1.1.6.1 Due to the complexity of modern buildings and the potentially large numberof parties involved in the process the client may wish to appoint a singleperson to draw the process together and manage it to ensure that the overallperformance, time, cost and quality requirements are achieved. The projectmanager may be a member of the client organisation who is given sole, orpredominant, responsibility for the project. Project management practices alsoexist to enable appointment to be made on a consultancy basis. In this case,

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selection should be based upon resources, reputation, and price; and servicesshould be clearly identified.

1.1.6.2 It should be emphasised that the role of the project manager should be to actas part of the client organisation.

1.1.7 Appointment of Consultants (see 3.1.4.8)

The process of selecting and appointing the design team and the costconsultant is carried out by the client who may seek the advice of his/heradvisers. The terms and conditions of these appointments are governed by theprocurement strategy adopted for the project.

1.1.8 Appointment of Constructors (see 3.1.4.9)

The selection of those who will actually construct the project is often key to asuccessful outcome. Selection should always be on quality as well as price andideally the procurement strategy governing when they are appointed shouldfacilitate the early involvement of constructors in the design process.

The selection of procurement strategy is a complex one and is referred to inPart 3 section 1 of this handbook.

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The Surveyors Construction Handbook Part 1, Section 1 Effective from 1/3/03 Page 1Appendix A (01/03)

Appendix A: Further Reading

Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London,1997

Construction Industry Board, Partnering in the Team, Thomas Telford Publishing,London, 1997

Construction Industry Board, Selecting Consultants for the Team: Balancing Qualityand Price, Thomas Telford Publishing, London, 1997

Construction Industry Council, The Procurement of Professional Services: Guidelinesfor the Value Assessment of Competitive Tenders, CIC, London, 1997

European Construction Institute, Partnering in the Public Sector: a Toolkit for theImplementation of Post-Award, Project Specific Partnering on Construction Projects,ECI, Loughborough, 1997

Kelly, J., MacPherson, S., and Male, S., The Briefing Process: A Review and Critique,RICS, Department of Building Engineering and Surveying, Heriot Watt University,1992. This document is out of print.

PART 1, SECTION 2


PART ONE: THE CLIENT

SECTION 2: VALUE ENGINEERING

Introduction

Value management (and within it, value engineering) is a structured methodof eliminating waste from a clients brief and from the design on aconstruction project before binding commitments are made. Used to delivermore effective and better quality buildings, for example, through takingunnecessary costs out of designs, value management ensures a clearerunderstanding of the brief by all project participants and improves teamworking. According to the Construction Task Force report, RethinkingConstruction (published by the DETR in July 1998) it is practiced by up to aquarter of the construction industry in the UK. The report also estimates thatwhile the objective of value management is to increase value, it can alsoreduce costs by up to 10 per cent.

Value management is the wider term used in the UK to describe the overallstructured team-based approach to a construction project. It involves clearlydefining the clients strategic objectives, considering optimum designsolutions within the context of the clients business objectives and decidingwhich of these provides the optimum lifetime value to the client, as well as areview of the whole process after occupancy. Value management includesvalue engineering as part of this process.

Value engineering is a systematic approach to delivering the requiredfunctions to the required quality at the least cost, i.e. a method of ensuringthat the client gets the best possible value for money in terms of safety,performance and delivery targets. It is a structured form of consensusdecision making that compares and assesses the design solutions against thevalue systems declared by the client.

This section of the handbook looks at the carrying out of a value engineeringexercise during the early design phase of a project, i.e. an evaluation of designsolutions against the clients brief. Value engineering, as described here, canbe a stand-alone exercise (a value engineering workshop) or may be part of anoverall value management process.

In describing the value engineering process this section aims to assistsurveyors both in advising clients on the use of value engineering and takingpart in a value engineering exercise as part of the design team. It is notintended for surveyors acting as value engineering facilitators and makes noattempt to address the very particular skills required for this role.

PART 1, SECTION 2

1.2.1 Why Value Engineering?

1.2.1.1 Value engineering has grown in popularity for the simple reason that itactually works. Construction projects can often take on a life of their ownwhen members of the design team become focused on their own particularproblems and time constraints. Consequently, the true objectives of the clientget lost along the way. Value engineering relates design proposals directlyback to a clients business, thus ensuring that a management system is in placewhich forces designers to justify their decisions when tested against theclients required function.

1.2.1.2 A value engineering exercise can only relate design proposals to a clientsbusiness requirements if early value management studies have encapsulatedthese requirements within the brief. If a value engineering exercise is carriedout in isolation from any strategic review of the project requirements, it canonly act as a functional assessment of the technical design solutions and theirrelative cost. However, even in this limited function it can still be very useful.

1.2.2 Applicability

1.2.2.1 The technique of value engineering can be employed on any project. However,more complicated and higher value buildings are likely to benefit the most(see figure 1). This is because it is more difficult to develop the design briefin such instances and consequently a design solution may be adopted withoutbeing questioned, usually because of time constraints placed upon thedesigners.

1.2.2.2 Many client organisations will only undertake value engineering on schemesover a certain value. For example, Railtrack will carry out the technique onprojects valued at 250,000 or more and Northumbrian Water will onlyconsider it for projects worth over 1m. Despite this, there is no reason whythe process should not be applied to smaller schemes. Furthermore, valueengineering will be invaluable where repetitive schemes are being considered


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Optional

EssentialHigh

Complexity

Low

Value

Low High

Figure 1: Projects Benefiting from Value Engineering

PART 1, SECTION 2

The Surveyors Construction Handbook Part 1, Section 2 (revised 10/01) Effective from 1/12/01 Page 3

as improvements and savings can be incorporated into future schemes. Theycan also be tested in practice, leading to the sort of continuous improvementrecommended by the Rethinking Construction report.

1.2.2.3 Value engineering works irrespective of the procurement route taken. It is adiscipline upon the design team members and the clients who appoint them.Where the contractor is mainly responsible for the design, for example, designand build, develop and construct or PFI projects, the technique is just asappropriate in ensuring that a well-defined statement of requirements is firstestablished and that subsequent design solutions address the function of thebuilding most economically.

1.2.3 At What Stage Should Value Engineering be Carried Out?

1.2.3.1 The greatest benefits can be obtained by commencing the VE process at theearliest possible stage. Once it has been established that the clients needs willbest be met through a construction project the purpose of the first VE exerciseshould be to inform the brief. When an experienced client has prepared thebrief, or a value management exercise has already examined the clientsrequirements, the value engineering exercise (which will address the proposeddesign solutions) is best done towards the end of the scheme design. Severalworkshops may be necessary at each of the crucial decision-making stages ofa project:

(a) A first exercise (a functional analysis of requirements), to define theproject needs and inform the brief, could be carried out as early as optionappraisal, and since this could generate the greatest benefit to the client thetiming is crucial. Carry it out too early and not enough will be known aboutthe problems associated with the building function, whereas too late andminds become set on the solutions formulated by the design team.

(b) A review of the project at outline design could be conducted to ensurethat the decisions taken earlier have been implemented or, if changed, thatthey still meet the functional requirements.

(c) Another review (a functional analysis of the solutions) would then becarried out at scheme design to test individual building elements involvingtraditional cost planning/life cycle costing techniques.

1.2.3.2 This section of the handbook considers the evaluation of a design at the end ofthe scheme design phase, but the process will be the same whenever it iscarried out. The objectives of the project should remain the same throughoutthe process and they should be validated at the beginning of each workshop.The objectives of each workshop may be different. If the project objectives dochange the whole direction of the project will need to reassessed.

1.2.3.3 It is important that time for the value engineering process and any resultantredesign is included in the scheme design programme at the outset.

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1.2.4 Who Should Carry Out Value Engineering?

1.2.4.1 It is strongly recommended that a value engineering exercise is organized byan experienced value management facilitator to ensure that the valueengineering participants retain their objectivity and that an unbiased approachis maintained.

1.2.4.2 The value engineering participants should represent the principal stakeholdersin the project namely, the client, the building users and the design team(designer, engineers and quantity surveyor) and also the contractor, whereapplicable. It is important that each of the participants have the authority tomake decisions at the workshop. It may also be appropriate to include clientsadvisers, for example, letting agents or rating valuers.

The participants should be those who can make decisions and provideinformation related to the specific aims and objectives of the workshop. Thesemay include:

those people with responsibility for the needs of the business;

those with specific responsibility for development, design andimplementation of the operation/project;

those with responsibility for the management and/or maintenance of theoperation; and

those who will be affected by the outcome.

Different stakeholders will be required to participate at different stages of theproject.

1.2.4.3 The optimum size of a value engineering panel would depend upon thecomplexity of the project as well as the skills of the facilitator. However, it isconsidered that panels of more than twelve members are difficult to manage.Panels with fewer than four members could be considered ineffective.However, it is important that all stakeholders are represented even if thisresults in a larger group.

1.2.4.4 It is common practice in North America to appoint an outside team ofconsultants to question the design teams solutions. However, this practice hasbeen known to cause resentment between the project team and the externaladvisers and might therefore compromise the final design solutions. It isconsidered that an experienced facilitator independent of the design team,with an appropriately briefed panel, will ensure that the design teamssolutions are adequately tested at the workshop.

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1.2.5 How Long Should It Last?

1.2.5.1 The length of time taken over the value engineering workshop will depend onthe complexity of the project and the level of design detail that has beencompleted.

1.2.5.2 The 40-hour workshop is the classic industrial value engineering standard.However, two-day workshops at key points during the design process aremore common in the UK construction industry.

1.2.6 Preparing for a Value Engineering Workshop

1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by thepanel and distributed by the facilitator.

1.2.6.2 In addition to an agenda, a functional analysis of the clients requirementsshould be drawn up.

The clients value criteria will have been developed in the first valuemanagement workshop. With each successive workshop these criteria will bedeveloped further into a function diagram. This should be included in theworkshop handbook. If it is to be developed further this will take place as partof the information stage of the workshop.

The functional analysis should always be generated by the clientrepresentatives with the help of the other members of the workshop. It is therole of the facilitator to facilitate this process, not to take part in it.

All participants must be prepared to propose and challenge design solutions.The input of all participants (not just those who are experts in a particulardiscipline) is one of the strengths of the VE process and should be encouragedby the facilitator.

1.2.7 Functional Analysis of Design Relative to the Clients Requirements

1.2.7.1 It should be understood that it is not possible to find meaningful alternativesto a technical solution without first identifying the function required of it.

1.2.7.2 Functional analysis is any technique designed to appraise value by carefulanalysis of function. This can be simple creative session of the functions andpossible alternatives, but the most common method is using a functionalanalysis systems technique (FAST) diagram.

1.2.7.3 The FAST system uses a function diagram which identifies the basicfunction what is required on the left-hand side and more detailed secondaryfunctions working from left to right until all the means of achieving these

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functions how are they to be fulfilled are identified on the right. See figure 2for an example of a FAST diagram. It should be understood that this is abroad-brush technique.

The objective of functional analysis is to produce a complete description ofthe end purpose of the design in terms of what it must do.

Reference is sometimes made to different types of FAST diagram: ClassicalFAST, Technical FAST or Customer/Task FAST.

The original FAST diagram was a presentation of the user-related andproduct-related functions of a design solution. It was a technique used toassemble the functions of a product in a hierarchy and to assess why andhow they are delivered. This is known as a Classical FAST.

Subsequently it was recognized that all functions did not fit into the flow logicso it was decided to separate out the functions that are always active, whetherthe product is operational or not. It was also decided to separate out thosefunctions that only occur one time regardless of repetitiveness of the process.This diagram describes what a product, element or component must do and isknown as a Technical FAST.

It was then recognized that, ideally, it is the customer who should determinethe value of the product and that the FAST diagram should include thecustomer/user in the development of value study projects. The resulting FAST

Figure 2: FAST Diagram

PART 1, SECTION 2


diagram has become known as a Customer or Task FAST. It is this conceptfrom which the Value Tree has developed.

All FAST diagrams should include a scope line on the left-hand side of thediagram. The scope line limits the area of the project on which attention isbeing focused. The scope is the portion of the project that is selected for thevalue study.

The FAST model displays functions in a logical sequence and tests theirdependency. It does not indicate how a function should be performed.

There is no such thing as a correct FAST model, only a valid FAST model.

1.2.7.4 Most practitioners insist that functions are defined in terms of activeverb/measurable noun (or phrase) combinations, for example, minimizeenergy consumption. This improves clarity, helps all panel members developa shared understanding and promotes the examination process. These shouldbe interrogated by asking why the client requires this in order to examinehow it should be achieved.

1.2.7.5 The process of setting up a FAST diagram is of matching the functionalelements of the building (object functions) to the clients required functions(user functions). The functional requirements need to be broken down untilthey are reflected in elements which can be priced (and built). This process iscalled functional decomposition. For example, the requirement for increasedenergy efficiency might be provided by increased levels of insulation whichmight be achieved by changes to all or any of roof, walls, floor, windows anddoors or finishes. The number of levels of decomposition required cannot bepredetermined.

1.2.7.6 VALUE TREE

A Value Tree is a diagram that describes the business driver (mission) for aproject or need and the criteria that need to be satisfied in order to achieve it.A Value Tree should be developed at an early stage in order to inform thebrief. However, it can be developed at any stage in order to confirm the brief.It will generally be carried out by the client organization in order to establishwhether a project is the solution to their needs. The criteria are then developedfurther into the functions required in order to achieve them. The scope line fora project will begin to the right of the Value Tree.

1.2.7.7 Appendix A gives an example of part of a Value Tree and a FAST diagram fora health centre.

Function elements (object functions) are defined in the BCIS publication,Standard Form of Cost Analysis: Principles, Instructions and Definitions andin Section 2.3 of this handbook.

A typical example of a value engineering process is included in Appendix B.

PART 1, SECTION 2


1.2.8 Pricing the FAST Diagram

1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomespossible to establish alternative costs for achieving a given function.However, it is important that all functions are clearly defined if costs ofalternative proposals are to be meaningful. Also, it should be remembered thatit is the design solutions to the functional requirements that are being pricedand compared to the value and importance that the client puts on that function.For example, the client can identify the value of savings from reduced energyconsumption or may rank this as important for other reasons. The valueengineering teams task is to put a price on the various design solutionssuggested that will achieve this end. It is creativity in finding the mosteconomical solution that is the essence of the value engineering exercise.

1.2.8.2 Fees and value added tax (VAT) and other financial and fiscal matters mayalso need to be considered.

1.2.9 Presenting a Design Solution to a Value Engineering Workshop

1.2.9.1 Design solutions should be presented as designers normally would to anypanel of users. However, they should expect to be questioned quiteextensively. They should keep an open mind and maintain objectivity injustifying their proposals because the objective is to find the mostcost-effective solution, not to criticize for the sake of it. On the other hand,designers should be prepared to stand by their design solution if they think itis correct for the function being considered.

1.2.10 The Workshop

1.2.10.1 A value engineering workshop will work through phases of information,speculation, evaluation, development and presentation:

(a) The information phase identifies the spaces, elements and components interms of the functions they fulfill. It asks the questions about what is the primefunction of an element?; what are its subsidiary functions?; what does itcost?; what is its value? It is at this stage that the FAST diagram is developedand it is against the background of this information that the value engineeringevaluation will be made.

(b) Speculation is the brainstorming stage which will generate the ideas fromwhich solutions will be developed. It is important that each member of thepanel thinks positively. The facilitator will ensure that no one is allowed tobecome overly critical of another members contribution in order that ideasflow. All ideas should be logged at this stage. However, in order to encourageidea building, they should not be analysed or rejected. It is important that theunderlying functions of suggestions for improvement are listed for evaluationlater. Design solutions should not be developed at this stage to ensure that

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what is to be achieved is properly addressed. All optional solutions shouldonly be considered at the evaluation stage.

(c) Evaluation is the analysis of the ideas generated by the earlierspeculation. Again, a positive feeling will be encouraged by the facilitatorwith advantages/disadvantages being discussed in an even-handed manner. Atthis stage some ideas will be rejected and the best taken forward. It is essentialto ensure that all the ramifications of any suggested changes should beconsidered. For example, if the exercise has suggested a change to a piece ofM&E equipment, the effects on the control management systems andstructural requirements must also be considered.

Life cycle costing can be an important factor in the process when consideringoptional solutions but the criticality of this aspect will hinge on the clientsphilosophy.

(d) Development of the ideas to be taken forward will be initiated at themeeting and a programme established for completion of this stage. Often thedetailed development including life cycle costing, if appropriate, will becontinued beyond the initial meeting and the outcome presented to asubsequent meeting for the panel to determine which design options to adopt.

(e) Presentation takes the form of a report prepared by the facilitator whichrecords in some detail all elements of the study and concludes with thoseoptions to be incorporated in the developed design. This report is normallypresented to the client by the value engineering panel at a meeting held withinone or two weeks of the date of the workshop.

1.2.10.2 The workshop should focus on expensive items or mismatches, for example,parts of the FAST diagram which are important to the client but which havebeen allocated little money or have cost a lot of money but do not contributeto the function.

1.2.11 Assessing the Value of the Workshop

1.2.11.1 Areas for research/change identified at the workshop could be grouped intothree categories:

(i) those that are removed/changed and result in reduced cost;(ii) those that are added/changed and result in additional cost; and(iii) those that are identified for investigation but not implemented

1.2.11.2 The financial benefit should then be identified against all elements withincategories (i) or (ii).

1.2.11.3 A major benefit of the workshop which will be enjoyed by the panel membersis a better understanding of the project functions and common ownership ofthe team-based designs solutions which have evolved.

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1.2.12 Implementing the Results

1.2.12.1 The value engineering panels decisions are recommendations that need to beaccepted by all stakeholders. Those stakeholders that are not part of the panelare likely to have a right to comment before decisions are adopted.

1.2.12.2 Once the workshops proposals have been sanctioned by the client, decisionsshould be fed back to the design team, briefing those members whose work isaffected as to why the changes were made.

1.2.12.3 If necessary, amendments to the design brief, design programme and scope ofprofessional teams brief should be incorporated into these documents.

1.2.13 Feedback from Post-Occupancy Evaluation

1.2.13.1 It is important for any client to carry out a project review to demonstrate howproject objectives have been achieved and particular problems overcome. Aspart of the project evaluation process, it should be established whether theproject represents best value for money and whether or not key design changesmade as a result of value engineering have achieved the benefits expected.These should always be set against the cost of carrying out the exercise.

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PART 1, SECTION 2, APPENDIX A

The Surveyors Construction Handbook Part 1, Section 2 Effective from 1/12/01 Page 1Appendix A (revised 10/01)

Appendix A: Health Centre Value Tree

PART 1, SECTION 2, APPENDIX B

The Surveyors Construction Handbook Part 1, Section 2 Effective from 1/1/00 Page 1Appendix B (12/99)

Appendix B: Typical Example of a Value Engineering Process

B1 BACKGROUND

A retail client with a regular development programme for a series of newstores (typical size 8,000m2) entered into a partnering agreement with keymembers of the construction team for four new projects.

To encourage value engineering, the partnering contractors share in anysavings that relate to any accepted proposals.

For two of these projects the client opted for a design and build contract forthe services installations (mechanical, sprinklers and electrical).

In an effort to reduce costs and ultimately add value to the schemes, the clientset a target of reducing the costs on these projects by 10 per cent, with nomaterial effect on quality or health and safety.

To set a benchmark for this reduction model cost plan costs for a typical store(derived from historical records) were modified to suit the new schemelayouts. Allowances were included for any items that were classified as sitespecific (e.g. acoustic requirements stipulated by the district surveyor). Costplan figures were based on the clients current specification.

Due to the volume of developments undertaken by the client and the repetitivenature of the works, the savings generated by value engineering can beincorporated in any future schemes.

B2 SPECIFIC EXAMPLE: VENTILATION TO SALES FLOOR

The original design was based on previous solutions and included traditionalventilation.

At the information phase, the functional requirement, including the need forventilation, was examined against the clients desire to reduce capital costs.This identified that a high proportion of the cost of the mechanical installationrelated to the provision of ventilation to the sales floor of the store (plant,distribution ductwork, diffusers, etc.)

At the speculation phase, the clients engineering department worked closelywith the mechanical partnering contractor to consider alternative methods ofventilating the sales floor of the store.

The alternative method of ventilation proposed was of the displacement type.With displacement ventilation, air is only conditioned at the level at whichoccupiers are breathing. Air is introduced at low level and at low velocity.Natural convection currents are utilised to remove excess heat and pollutantsout of the occupied zone. There is a saving in the amount of ductworkrequired, as only two runs of ductwork are needed on the sales floor. (The

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traditional method is designed for four separate branches of ductwork.) Thenew specification requires diffusers of the displacement type, with the facilityof automatically varying the air throw pattern whether in heating or coolingmode.

Furthermore, the proposed system required ventilation to the occupied zoneonly rather than the full building space. This has resulted in capital costsavings on plant and in the likely running costs of the system.

The evaluation identified significant savings.

Summary of Value Engineering Exercise

Original installation: Traditional ventilation

Value engineering proposal: Displacement ventilation

Benefits: Saving on air handling plant sizeSaving on chiller plant sizeSaving on sales floor ductwork

Savings on capital cost: Air handling plant 10%Chiller plant 5%Ductwork and diffusers 25%

At the development phase, the proposed method was discussed with othermembers of the design team to ensure that any impact on the other buildingelements, the project programme and the interface with other subcontractorswere taken into account.

PART 1, SECTION 2, APPENDIX C

The Surveyors Construction Handbook Part 1, Section 2 Effective from 1/12/01 Page 1Appendix C (revised 10/01)

Appendix C: Further Reading

British Standards Institute. Value Engineering, Value Analysis Vocabulary Part 1:Value Analysis and Functional Analysis, BS EN 13251 1997, British StandardsInstitute, London, 2000.

Building Cost Information Service. Elements for Design and Build, BCIS Ltd, 1996

Building Cost Information Service. Standard Form of Cost Analysis; Principles,Instructions and Definitions, BCIS Ltd, 1969 (Reprinted 1997)

Connaughton, John, N., Green, Stuart, D., Construction Industry Research andInformation Association. Value Management in Construction: A Clients Guide,CIRIA, London, 1996

Dellisola, Alphonse. Value Engineering in the Construction Industry, Van NostrandReinhold Co., New York, 1983

Dellisola, Alphonse. Value Engineering: Practical Software Applications for Design,Construction, Maintenance and Operations, R. S. Means & Co., Kingston, MA, 1997

Green, Stuart, D. and Popper, Peter, A. Value Engineering: The Search forUnnecessary Cost, Chartered Institute of Building, Berkshire, 1990

Institution of Civil Engineers. Creating Value in Enginering, Thomas TelfordPublishing, London, 1996

Kelly, John and Male, Stephen. A Study of Value Management and Quantity SurveyingPractice, RICS Books, Coventry, 1988

Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity SurveyingPractice, Heriott-Watt University, Edinburgh, 1989

Kelly, J.R. and Male, S.P., Heriot-Watt University, Department of BuildingEngineering and Surveying, Royal Institution of Chartered Surveyors. The Practice ofValue Management: Enhancing Value or Cutting Cost? RICS, London, 1991

Law, Alastair, G. An Introduction to Value Engineering: A New Technique inTechnology Assessment and Evalution, Alastair G. Law, Washington DC, 1981

May, Susan, C., College of Estate Management. Value Engineering and ValueManagement: A CPD Study Pack, College of Estate Management, Reading, 1994

Mole, Kelly, Fernie, Grongvist and Bowles. The Value Management Benchmark:Good Practice Framework for Clients and Practitioners. Thomas Telford Publishing,London 1998

Norton, Brian, R. and McElligott, William, C. Value Management in Construction: APractical Guide, Macmillan, Basingstoke, 1995

PART 1, SECTION 2, APPENDIX C

Page 2 Part 1, Section 2 Effective from 1/12/01 The Surveyors Construction HandbookAppendix C (10/01)

Palmer, Angela. A Critique of Value Management, Chartered Institute of Building,Berkshire, 1990

Royal Institution of Chartered Surveyors. Value and the Client (papers presented at aconference held at the RICS on 29 January 1992), RICS, London, 1992

Smith, J., Jackson, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run aValue Engineering Workshop? RICS, London, 1998

Zimmerman, Larry, W. and Hart, Glen, D. Value Engineering: A Practical Approachfor Owners, Designers and Contractors, Van Nostrand Reinhold & Co, New York,1982

PART 2, SECTION 1


PART TWO: CONSTRUCTION DESIGN AND ECONOMICS

SECTION 1: PRE-CONTRACT COST PLANNING AND COST MANAGEMENT

Introduction

This Section of the Handbook sets out procedures which enable pre-contractcost management of building projects to be carried out from the clients brief,through the various design stages to the acceptance of a contractors tender.

Control of costs can only be achieved by the actions of the whole project team,including the client. The quantity surveyors role is to facilitate the designprocess by systematic application of cost criteria so as to maintain a sensibleand economic relationship between cost, quality, utility and appearance whichthus helps in achieving the clients requirements within the agreed budget.

The information and guidance which follow are based on a traditionallyprocured new-build project, but varying client requirements and differentprocurement methods may prevent implementation of some aspects of thefollowing procedures. In practice, the design of the elements may proceed atdifferent speeds and the stages described here may overlap. However, theprinciples of budget, cost plan, cost checks and reconciliation should beadhered to whenever possible. (See the figure showing the outline of the costplanning procedure.)

On projects where non-traditional procurement routes are used, theresponsibility for developing the cost plan may change but the stagessuggested here remain appropriate. For example, on Design and Build (D&B)schemes, the clients quantity surveyor will be responsible for the cost plan atfeasibility and outline proposal stage and the D&B contractors quantitysurveyor will be responsible for developing the cost plan with the contractorsdesign team to produce the tender.

The process described would apply to refurbishment or conversion schemesand the elemental approach would be suitable even if all elements were notrequired.

The procedures are not designed for use with civil engineering projects, butshould provide a framework appropriate to civil engineering needs.

PART 2, SECTION 1


2.1.1 Pre-contract Cost Planning and Cost Management

2.1.1.1 DEFINITIONPre-contract cost planning is the technique by which the budget is allocated tothe various elements of an intended building project to provide the designteam with a balanced cost framework within which to produce a successfuldesign. It allows for the redistribution of the budget between elements as thedesign develops.

Cost management is the total process which ensures that the contract sum iswithin the clients approved budget or cost limit. It is the process of helpingthe design team design to a cost rather than the quantity surveyor costing adesign.

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2.1.1.2 OBJECTIVES

(a) To ensure that the client obtains an economical and efficient project inaccordance with the agreed brief and budget;

(b) to make the design process more efficient, thus reducing the time neededto produce a successful design;

(c) to ensure that all requirements arising from the clients brief to the designteam are included in the cost planning process (e.g. the engineering servicesshould also be subject to the cost planning process); and

(d) to advise the client and members of the design team of cost-in-use orlife-cycle costing techniques.

2.1.1.3 GENERALLY

(a) A general principle applies throughout the cost planning process that anyagreed budget or cost limit is seen as the maximum cost, and the quantitysurveyor should, at all times, work with the other design team members tosatisfy the client at a lower cost if possible, whilst still maintaining the desiredobjectives for quality and function.

(b) If, at any time, sums have been included in the approved budget, forexample, for abnormal site costs which subsequently are found to have beenwholly or partially unnecessary, the consequential saving should always benotified to the client.

2.1.1.4 DESIGN STAGESReferences to Design Stages are to the RIBA Plan of Work (taken from theRIBA Handbook of Architectural Practice and Management) and refer to themain stages through which a project design typically passes. The links to thecost planning procedures outlined in this section are summarised here:

Design Stages Quantity Surveyor

Stage B: Feasibility Prepare feasibility studies and determinethe budget

Stage C: Outline Proposals Consider with client and design teamalternative strategies and prepare cost plan

Stage D: Scheme Design Carry out cost checks and update cost planif necessary

Stage E: Detail Design

Stage F: Production Information Carry out cost checks

Stage H: Tender Action Prepare reconciliation statement

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2.1.1.5 VALUE ENGINEERINGA value engineering exercise may be carried out on all or part of the designduring the design process. (For further details see part 1, section 2 of thishandbook.)

This might affect both the clients requirements and the chosen designsolution and changes would, therefore, affect the budget and the cost plan.

2.1.2 Preliminary cost studies and feasibility studies

2.1.2.1 It is recommended, as a matter of importance, that before and during theformulation of the clients brief (Design Stage B: Feasibility), the quantitysurveyor, in consultation with other members of the design team and theclient, should undertake such feasibility studies as may be necessary to ensurethat the clients requirements can be reasonably accommodated within thefinance that is available for the project. The clients budget is established as aresult of these studies. (See 2.1.3.)

2.1.3 Budget

2.1.3.1 DEFINITIONBudget is the total expenditure authorised by the client which is theresponsibility of the design team at the end of the feasibility stage (DesignStage B).

2.1.3.2 OBJECTIVES

(a) To establish the limit of expenditure necessary to meet the clients brief.The clients and projects status with regard to VAT (Value Added Tax) willalso need to be established;

(b) to provide the client with a statement of the likely area and quality ofbuilding, which is achievable within the limit of expenditure;

(c) to provide a statement of the recommended methods of construction and ofthe contractual procedures to achieve the required occupation date; and

(d) to provide the client with alternative budgets for different occupation datesand qualities of building, if appropriate.

2.1.3.3 INFORMATION REQUIREMENTS

(a) The ideal requirements from the client and members of the project teamto the quantity surveyor are given below. On projects where this level ofinformation is not available, the quantity surveyor should state clearly anyassumptions made. It is possible to produce a typical elemental estimate for

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a particular type of building from very little information, but it is important toclarify as many information issues as possible before such an estimate isaccepted as the budget for a particular project.

(b) Information required from the client: location of the site; availability of the site for commencement of

construction work; in conjunction with the designer, architect or building surveyor, a

schedule of accommodation; names of other similar buildings of broadly suitable quality if

appropriate; the required occupation date or phased occupation dates; any specific requirements relating to life-cycle costs; any specific requirements as to specification and/or procedures; requirements in respect of the treatment of inflation; instructions regarding Construction (Design and Management)

Regulations; and the clients VAT status and any other tax matters which may affect the

overall cost of the project.

(c) Information required from the designer, architect, building surveyor, orother source:

approximate location of the building on the site; advice on necessary storey heights for any specialist areas shown on

schedule of accommodation; advice on statutory regulations; advice on routes of public sewers and the like; designers concept of building; and names of similar projects previously designed by the practice.

(d) Information required from the structural engineer: advice on probable ground conditions; advice on probable floor loadings; and any information on structural solutions.

(e) Information required from the services engineer: advice on areas of building which will require specialist engineering

services; any information on the types of systems; and advice on availability of public utility services.

Note: If the quantity surveyor is not responsible for cost planning theengineering services, this should be clearly stated in the budget and cost plan.

The information from the quantity surveyor to the design team is as follows:

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(An example of a format for the quantity surveyors report is given inAppendix B to this Section.)

(f) Information to be provided to the client involves a report containing: the budget, with alternative proposals if appropriate; a statement of the basis of the budget calculation including any

important assumptions made; a statement setting out the programme for design and construction on

which the budget is based; an outline cash-flow forecast; a statement of any items not included; and assumptions in respect of inflation forecasts and current/future market

conditions.

(g) Information to be provided to the designer: a copy of the report sent to the client; and a more detailed statement of the quantity and quality parameters

included in the calculations.

(h) Information to be provided to other consultants: such quantity and quality parameters as relate to their area of design.

2.1.3.4 METHODS OF PREPARATION

(a) The method of preparation depends on the type of project involved.Unusual projects, projects of great complexity and projects containing a largeelement of alterations are more difficult to budget accurately at an early stage.

(b) For most types of project, it is possible to build up an elemental budgetusing the parameters set out under 2.1.3.5. This can be based on costinformation from previous projects, from the RICS Building Cost InformationService (BCIS), other published sources, or on an appropriate cost model.

(c) The main elemental quantities of hypothetical buildings can be generatedusing agreed parameters, to which rates applicable to agreed quality andperformance standards can be applied. An example of a method of calculatinghypothetical quantities is described in Appendix C to this Section.

(d) Once the budget has been established, it provides the first cost plan for theproject, and the framework for the actual design to be developed.

2.1.3.5 STATEMENT OF QUANTITY AND QUALITY PARAMETERS

The main parameters which should normally be incorporated in thecalculation are as follows (the list is not exhaustive):

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(a) Quantity in addition to the briefed areas, a statement of the allowances (e.g.

circulation) used to calculate a gross floor area; the number of storeys of a possible solution; the storey height(s); the square index or wall/floor ratio (see appendix C to this section); the density of vertical division or partition/floor ratio (see appendix C

to this section); proportion of window area; floor loadings; thermal resistance values of fabric; air change rates; heating and hot-water loads; lighting levels; total electrical load; areas of the brief with special functions of significant cost; road area and number of car parking spaces; paved pedestrian areas; and length of boundary walls or fencing.

(b) Quality A general statement of quality and specification which relates to the

rates used for the budget calculation. This should cover specifically atleast the following: foundations, roof, external walls, floors andvertical circulation, internal vertical division, internal finishes,lighting and other services. External works should include roads,paths, landscape, boundary walls and fences, and service mains,planting and the like.

2.1.3.6 INFLATION

(a) The prediction of future inflation may not be necessary for some clients,and a statement of cost at current prices may be adequate. Where anassessment of inflation is required for more than a few months ahead, a rangeof probable inflation is best provided. This can be calculated usingpredictions published, for example by BCIS or the Department of Trade andIndustry. The assumptions upon which the prediction is made should bestated.

(b) Some clients, particularly in the public sector, have their own inflationcontrols. Where the client requests that a particular level of inflation beincluded in the budget, the quantity surveyor should inform the client if he orshe believes it to be unrealistic.

2.1.3.7 COST REPORTINGIf at any time during the design process it becomes apparent that the agreedbudget is likely to be exceeded without the brief being changed, the clientshould be informed and instructions requested. Likewise, if it becomes

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apparent that the whole of the agreed budget will not be required, the clientshould be informed.

2.1.4 The cost plan at outline proposals stage

2.1.4.1 DEFINITIONThe cost plan at outline proposals stage is a statement of the probable cost ofthe project at Design Stage C which sets out the cost targets for the mainelements of a building, together with their approximate quantity and qualityparameters.

2.1.4.2 OBJECTIVES

(a) To describe, together with the outline proposal drawings, the chosendistribution of the resources within the budget to provide a balanced design tomeet the clients needs;

(b) to set cost targets for the main elements so that, as the design develops, thetargets can be checked and adjustments made so that the overall cost of theproject is managed within the budget;

(c) to provide the design team with controls which communicate the costs,quantity, quality and time parameters to be followed; and

(d) to provide the opportunity for consideration of life-cycle costs.

2.1.4.3 INFORMATION REQUIREMENTSThe basic information requirements from the members of the project team tobe provided to the quantity surveyor are as follows:

(a) Information required from the client: the budget. Where alternative budgets have been quoted in the budget

report, the client should state the preferred alternative; confirmation of the programme for design and construction times stated

in the budget report; confirmation of the brief; acceptance or variation of any other matters within the budget report;

and authority to proceed.

(b) Information required from the designer: outline drawings of the building and site works indicating alternative

solutions; and an indication of the preferred specification for the main elements.

(c) Information required from the structural engineer: outline proposals or alternative structural solutions.

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(d) Information required from the services engineer: outline proposals for installations, indicating any alternative systems;

and an indication of the preferred specification, after acceptance by the

designer of its visual implications.

(e) Information required from specialist consultants: outline proposals.

The basic information requirements from the quantity surveyor to the designteam are as follows:

(An example of a format for the quantity surveyors report is given inAppendix B to this Section.)

(f) Information to be provided to the client involves a report containing: a statement of cost; a broad indication of the specification; a statement of floor areas; a request for decisions on any alternative proposals and/or procurement

routes, with advice thereon; an updated cash-flow forecast; allowances for contingencies and design reserve; and an update of inflation projections.

(g) Information to be provided to the designer: a copy of the documents sent to the client; and the cost plan with target costs for each element.

(h) Information to be provided to othe