Assignment One – Budgeting and Cost Planningstatic1.squarespace.com/static/5508c186e4b09e406a171000/t/553da1...Assignment One – Budgeting and Cost Planning ... the Tiara Tower

Hannah Butler – SRQ462: Building Cost Planning

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Assignment One – Budgeting and Cost Planning

CONTENTS 1. Introduction

2. Part One: Expansion of Information

(a) Briefing

(b) Outline Proposals

(c) Sketch Design

(d) Tender Documentation

(e) Construction

(f) Conclusion

3. Part Two: Early Design Stages Budgeting and Cost Planning

(a) Cost Panning Techniques

i. Briefing

ii. Outline Proposals

iii. Cost Planning Techniques

(b) Outline Proposal Cost (Preliminary Estimate)

i. Scheme A

ii. Scheme B

4. Conclusion & Recommendation

5. Appendices

6. References

Student Name: Hannah Butler

Student Number: 210664713

Unit: Building Cost Planning

Unit Code: SRQ462

Word Count:

Part One -1279

Part Two- 1799


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1. INTRODUCTION

This reports aim to investigate the practice of Cost Planning in the Construction

Industry. More specifically, stages of design development and the information

required for such stages will be broken down to explain how these stages inform

design decision-making in terms of cost planning and how decisions are made in

order to achieve best value for money in a given project.

The second section of the report will further investigate the relationship between

design decision-making and value for money during the briefing and outline

proposal stage of a project. This will be done by using an example of two design

schemes to develop a preliminary estimate, and discuss value to make a

recommendation.


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PART ONE : EXPANSION OF INFORMATION

This section of the report will look at the different stages of design development;

briefing, outline proposals, sketch design, tender documents and construction. We

will investigate how decisions are made within each stage to achieve best value for

money within a set budget.

In order to gain an understanding of the different stages of design development,

the Tiara Tower apartment building in South Bank will be used as an example. The

Tiara Tower is a medium to high standard high-rise residential building.

(a) Briefing

The briefing stage of design is essentially when the client outlines what they want

to get out of the project; this is known as the ‘inception’ of the brief. The client will

describe a basic idea of what they may want the building to look like, basic size

limitations (floor space, number of floors), purpose of the building, any special

features of the building (green stars, iconic, new technologies). Information on the

site will also be provided. In the case of Tiara, it can be assumed that the brief

stated something of the following manner:

Function: Tiara is be a an apartment building of a medium quality, capture views

of the city and the bay, contemporary design, modest budget.

Let-able floor area: approximately 25 + storeys, at approx. 1212 m2 =30,000

Requirements:, 200+ 1-2 bedroom fully services apartments, appropriate car

parking, swimming pool.

Budget: $50 Million (Final cost $63 Million)

Site: 1212m2. Located in close proximity to the Yarra River, therefore footings

have to be taken into special consideration. Site is flat and vacant.

After the initial brief has been developed, it will be analysed in terms of its

feasibility. A quantity surveyor or cost planner will be employed (can be internal or

contracted in) to determine whether the theoretical project is feasible. The primary


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purpose of feasibility is to look into the rate of return of the cost of the project

(which will depend on whether a loan has to be taken out), and furthermore to start

making a profit from it. Feasibility considers elements such as net let-able floor

space and studies of similar buildings in the area in order to determine an

indicative cost/m2 and furthermore develop a brief that in theory offer best rate of

return in the current market.

For most development projects, is up the designer to suggest, within reason,

changes to the brief. As an example, the designer may suggest having smaller

apartments, which could allow for more apartments on each level, ultimately

increasing income from rent, the rate of return and reducing time for the owner to

pay off the cost of producing the building.

(b) Outline Proposal

During the outline proposal stage, the designer will have developed a schematic

plan for which they believe fit the brief’s criteria. The design will be developed up

to a stage where schematic plans and elevations, number of floors, function of

floor, basic dimensions, the designer will make an informed decision as to what

structural systems will be used.

For the outline proposal stage, the following information will become available:

basic plans, sections, elevations, basic structure and function. Structure and floor

plans will not be resolved, however the design team should have a good idea of

what methods should be used. It is the client’s role/responsibility to review the

design, considering function, program and quality. Any alternatives/ additions from

the original brief recommended by the designer will be assessed by the client, and

either accepted or declined. It is important to use a Quantity Surveyor in this stage

as they will be able to ascertain an accurate preliminary estimate of cost of the

project, and furthermore assist in budgeting and determining any necessary


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changes that can be made to the design to improve value for money. Allowances

for project contingencies, and wages can be developed at this stage.

For Tiara, an elemental preliminary estimate was carried out – this consists of

estimates of cost of substructure, superstructure, finishes, fittings, and services.

From the preliminary estimate, the design team is able to make an informed

decision as to what divisions of space will supply the client with the best value for

money. The following table shows the best break down of levels as concluded by

the team after conducting a preliminary estimate:

Function Floors X Floor area

Foyer/lobby 0.5 levels 1212m2 606m2

Car parking 4.5 levels 1212m2 5,454m2

Residential apartments 26 levels 1212m2 31,512m2

Total Floor Area 37,572m2

During the outline proposal stage, the design team will supply the client with a

schematic design in order to convey their idea of what they believe the project

should look like. The following diagram is an example of what the outline proposal

sketch for tiara would have looked like.

Balcony area

Apartment

Vertical transport


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By the conclusion of the outline proposal stage, the optimum design solution

should be developed in terms of basic floor areas and shape, services required and

method of construction.

(b) Sketch Design

The aim of the sketch design stage is to finalise all design decisions before

producing tender documentation. The sketch design phase is generally seen as a

‘method of checking’- to assess whether the cost targets developed in the briefing

stage are being met - cost targets are adjusted to suit realistic objectives The

design is narrowed down to what the design team believes is the best feasible

option before presenting it to the client for appraisal.

During the sketch design stage, the following information will be available; site and

soil information, developed floor plans, development service plans, interior

elevations.

The following table shows some examples of key value-engineering based

decisions that were made in the sketch design stage of the process.

Key Design Decisions

Advantage Disadvantage Conclusion

Above Ground Car park

Savings on cost to build compared to building a basement for an underground Car park.

Building needs to be taller to accommodate rentable floors and car parks.

Car park above ground is more feasible.

Cantilevered balcony

Adds to net let=able floor area without increasing floor plate. Tenants will appreciate the functionality of a larger balcony area.

Additional Cost Cantilevered balcony comes at an additional cost however adds to net let-able floor area.

Non-linear floor plan

Non linear floor plan adds to the architectural interest of the design and faced

Dead space where lines differentiate from

Using ‘dead- spaces’ for service shafts cancels out the loss in let-able floor area.

Post Tensioned Slab

Post tensioned slab is a quicker technique that standard steel reinforcement. Slab is also thinner than which mean building height is reduced.

Not a well-known method of construction – contractors may hesitate to use it.

Post tensioning is a better option in terms of value.


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Often a render is produced to give the client an

idea of what the building would look like. Left is a

rendered image (3D model) from the sketch

design stage used for marketing purposes.

By the end of the sketch design stage, the client

will have agreed on what they want the building

to look like, and the kind on value adding

elements they want to include in the building.

(d) Tender Documentation

Tender documentation needs to take

place in order for contractors to tender for

the project. In this stage there will be an

accurate estimate of cost and will be able

to check cost targets for the project; it is a

time when any cost-savings will be made

through final decision-making.

Tender Documentation is required in order

to select a Head Contactor to build the

project. Before tendering for a contractor,

the documentation will be resolved to a

point that is build-able. All plans, sections

and elevations will be detailed and all

specifications and schedules will be

provided. It is then up to the tendering

contractors to input any change in

construction methodology that they wish

During the After the contract has been

awarded, the design and construction

team will work together to resolve


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documentation to a point where it is build-able.

Above is an example of an elevation produced for tender documentation.

The documentation goes into detail of all materials used and all construction

methodology.

Electrical, Mechanical, Hydraulic and Fire services are also documented in detail, as

determined by the relevant engineers. Below is a page of documentation for

HVAC at tiara, as documented by the consulting mechanical engineers. There is a

well-calculated amount of detail that goes into producing such documentation,

and the cost for such an element can be very accurately estimated. Despite the

amount of detail, the price quoted by the tendering subcontractor will not be

accurate until the building is complete and the final amount of materials has been

confirmed.

By the conclusion of the tendering stage, a head contractor will have been

selected. The price for construction will be very accurate as the building will be

essentially completely resolved, however not confirmed because it is impossible to

determine what deviations from the tender documentation will occur on site.


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(e) Construction

The Construction stage is when the design is physically executed. All design

decisions should be completely resolved, unless the client or contractor makes

variations to the contract.

During construction, it is very common for changes to the schedule to occur due

to unforeseen risks. It is up to the contractor to perform a risk analysis prior to

commencing construction in order to mitigate these risks where possible.

Any deviation from the contracted works must be documented. When variations

occur, they can be from the client’s side, or for the benefit of the contractor. The

responsible party must pay for the change accordingly.

After construction, it is up to the contractor to produce ‘ as-built’ drawings that

illustrate all deviations from the final construction plans.

(f) Conclusion

In conclusion, Cost Planning and Control assists in ensuring the client gets value

for money. It helps both the client side and the design-side weigh up the

consequences of their design-specific decisions to assist in making decisions.


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3. PART TWO: EARLY DESIGN STAGES BUDGETING AND COST PLANNING

3/09/2014 RE: Outline Proposal Cost Assessment Dear Sir, The following report is a study into the design feasibility of two design options provided to GDS to be used for construction of a 7-storey office building in the center of the Geelong CBD.

With the Outline Proposal documentation provided, we have to our best abilities using our up to-date resources performed a Preliminary Estimate of the two proposed schemes to provide you with a recommendation as to which scheme should be chosen for best design value.

I have also attached our current cost planning techniques report, for your own reference.

We hope the information provided to you helps you in this decision making phase of this exciting new project, and we hope to continue working with you to manage cost for the next stages. Please do not hesitate to get in contact with us to discuss our recommendation.

Kinds regards,

The team at GDS

Geelong Design Surveying 369 Moorabool St Geelong VIC 3220


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(a) GDS BREIFING AND OUTLINES PROPOSALS COST PLANNING TECHNIQUES Briefing and Outline Proposals are key stages in cost planning for a building project. The following is a client guideline to explain the Cost Planning Practices for Briefing and Outline Proposals at GDS. Please use this as a guideline to help you understand the accuracy of our preliminary estimate of your design schemes. Briefing The aim of the briefing stage to produce an estimate that will give the client an idea of cost for the proposed project, i.e. an indicative cost. After the client has outlined their requirements for the project, we will be able to provide a range of options along with cost estimates to assist the client in making a decision as to what direction they want the project to head in. The outcome of the briefing stage is to have a general idea of what the final project is going to look like, while establishing a ballpark budget. The client will be able to decide if the project is going to be feasible with the amount of information given and decide if they wish to proceed. Outline Proposals The key aim of the outline proposal stage of a project, in terms of cost planning, is to establish a basic idea of cost based on proposed design decisions, in order to further develop the project in terms of structure, quality and elements that can directly influence price. The outcome of the briefing stage should be to produce an accurate enough estimate to more onto the sketch design stage. In doing this, an outline proposal estimate will be produced to use as a reference for decision making to value-add to the project. The client will be able to review aspects of the proposed project and their relative costs to inform their design-based decisions. COST PLANNING TECHNIQUES FOR BRIEFING AND OUTLINE PROPOSALS

• Functional Unit: (eg. Number of bed in a hospital) This method is rough and suitable in very early stages of planning.

• Areas/Volumes: § Floor Area, the ‘superficial method’ cost per m2. This method works

well as it is simple to prepare and understand, however does not lend itself to detailed analysis of cost. This is the method that has been used in to prepare a preliminary estimate for this project.


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§ The basis principle of the floor area estimate is that a cost per element can be allocated to substructure, superstructure, finishes, fittings, and services, in relation to each m2 of let-able floor area. This is calculated based on reliable reference materials available, as well as figures based on experience in similar projects.

§ Functional Floor Area; same as floor area, but adjusted according to function of area (eg. Admin, storage, board room). This method is more comprehensive than floor area alone however still lacks a lot of detail for accuracy of cost.

§ Building Surface Area: can be used in both the briefing and outline

proposal stages however is not entirely reliable because the data for such measurements are not widely available or reliable.

§ Building Volume: is calculated by multiplying the floor area by building height. This method can be appropriate in projects with abnormal ceiling heights that will significantly affect cost. This method is not appropriate for the selected project, and like the building surface area method, is not reliable enough to use.

• Factoring Methods are used in projects where the cost of single component is the most significant, for example a factory where the number of a piece of manufacturing equipment is the most significant cost item. This cost can be multiplied using a set factor. This method is not appropriate for the selected project.


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(b) OUTLINE PROPOSAL COST The following section of this report consists of a preliminary estimate for both the proposed schemes. By building up a rate for the entire building in accordance with the net let-able floor space, it has been possible to attain a preliminary estimate that is reliable enough to make an informed decision as to what design is the best to develop further. The final cost provided has been based on an informed estimate as to how much (and furthermore the cost) of each element is required per m2 of let-able floor space. This is known as the floor area method, and is one of the best-practiced methods for making design decisions at the outline proposal stage of a project. We have provided you with a discussion of the merits of the two options, and a recommendation as to what we at GDS propose as the most feasible and valuable option has been made for your use. The two schemes being compared are as illustrated below. The two schemes are consistent with each other in the following ways:

• Same materials and level of finish. • Same net let-able floor area. • Same methodology • Same facilities and tenancy

The points of difference for the two schemes are:

• Scheme A has no air-conditioning • Scheme B has air-conditioning • Scheme A is a rectilinear floor plate • Scheme B has an abnormal ‘projected façade’ floor plate.


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Naturally Ventilation vs. Air-Conditioned Discussion Air-conditioning is an expensive inclusion in a building, both as a construction and a lifecycle cost. However, air-conditioning is a very necessary part of achieving thermal comfort in the Geelong region. In an area of high temperature, high humidity, a naturally ventilated building may be a good option. For example in Queensland during the winter months little heating will be required, while in Summer the humidity and cross ventilation may be enough to keep the occupants at a comfortable temperature. The cost of using fans on particularly hot days and electric heaters on particularly cold days may be much cheaper than installing and running an air-conditioning system. (Refer to Appendix 2.1: Selection of Air-Conditioning System, for discussion of value engineering when selecting air-conditioning system.) Projected façade vs. flat facade Inclusion of a projected face increases function and quality of the property for the following reasons;

• More natural light • Increased natural ventilation • Increased circulation

Conversely, the projected façade will increase cost due to the expense of; • Wasted space • More complex scaffolding during construction • Increase façade material to floor-space ratio.

External Wall Length Adjustment The difference in wall length between the two schemes must be considered because more material and labour will be required as a result, ultimately increasing cost. The workings for difference in wall size are shown in Appendix 2.2.


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Comparing the two; 176m for Scheme A and 144.8m for Scheme B works out that that ‘A’ uses 122% of the materials of ‘B’. This percentage has been applied to the preliminary estimates. OUTLINE PROPOSAL PRELIMINARY ESTIMATES. SCHEME A:

Element Scheme A

m2 $/m2 Elemental Cost % Note

PRELIMINARIES 5208 $287.30 $1,496,258.40 15.23

SUBSTRUCTURE 5208 $41.99 $218,683.92 2.22

SUPERSTRUCTURE 5208 $830.91 $4,327,379.28 44.06

Columns $41.41 2.19

Upper Floors $221.00 11.71

Staircases $15.47 0.82

Roof $59.67 3.16

External Walls & Windows

$382.86

20.30

rate adjusted accordingly with wall length ratios

(app.2.1)

External Doors $6.63 0.35

Internal Walls $72.93 3.80

Internal Screens $6.63 0.35

Internal Doors $24.31 1.24

FINISHES 5208 $201.11 $1,047,380.88 10.66

Wall $48.62 2.60

Floor $81.77 4.34

Ceiling $70.72 3.75

FITTINGS 5208 $17.68 $92,077.44 0.94

Fitments $17.68 0.94

SERVICES 5208 $484.61 $5,692.61 25.70

Plumbing $103.87 5.50

Mechanical

$9.46 0.50

rate adjusted accordingly for no air-conditioning

Fire $17.68 0.94

Electrical $167.96 8.86

Vertical Transport

$163.54 8.67

EXTERNAL SERVICES 5208 $22.10 $5,230.10 1.17

SUBTOTAL ELEMTENTAL COST

$1,885.70 $7,192,702.63

100

Professional Fees $575,416.21 additional 8%

Design Contigency $359,635.13 additional 5%

Contract Contingencies $359,635.13 additional 5%


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SUBTOTAL INC. CONTINGENCY 339.426 $1,294,686.47 118%

FINAL TOTAL after index adjustment $2,225.13 $7,300,593.17

rate adjusted to current index (Sep 2014; 101.5%)

Adjustment for escalation ( at 2.7% a year, see appendix 2.3) Date of Outline Proposal Preliminary Estimate: 4/09/2014.

Date of Tender: 4/12/2015 (+1 year, 1 quarter: +3.375% of preliminary estimate): $12,159,260.09

Date of Project Completion:4/12/2016 (+2years, 1 quarter: +6.075% of preliminary estimate): $12,476,253.62

OUTLINE PROPOSAL ESTIMATE SCHEME B.

Element m2 $/m2 Elemental Cost % Note

PRELIMINARIES 5208 $287.30 $1,496,258.40 13.11 SUBSTRUCTURE 5208 $41.99 $218,683.92 1.92

SUPERSTRUCTURE 5208 $761.87 $3,967,818.96 34.76

Columns $41.41 1.89

Upper Floors $221.00 10.08

Staircases $15.47 0.70

Roof $59.67 2.72

External Walls & Windows

313.82

14.32

base rate for walls of office building

External Doors $6.63 0.30

Internal Walls $72.93 3.33

Internal Screens $6.63 0.30

Internal Doors $24.31 1.11

FINISHES 5208 $201.11 $1,047,380.88 9.18

Wall $48.62 2.22

Floor $81.77 3.73

Ceiling $70.72 3.23

FITTINGS 5208 $17.68 $92,077.44 0.81

Fitments $17.68 0.81

SERVICES 5208 $859.69 $6,067.69 39.22

Plumbing $103.87 4.74

Mechanical

384.54

17.54

base rate for air conditioned office

building


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Fire $17.68 0.81

Electrical $167.96 7.66

Vertical Transport

$163.54 7.46

EXTERNAL SERVICES 5208 $22.10 $5,230.10 1.00

SUBTOTAL ELEMTENTAL COST

$2,191.74 $6,833,517.39

100.00

Professional Fees $546,681.39 additional 8%

Design Contigency $341,675.87 additional 5%

Contract Contingencies $341,675.87 additional 5%

SUBTOTAL INC. CONTINGENCY 394.5132 $13,339,563.96 118%

FINAL TOTAL after index adjustment

$2,224.62 $13,539,657.42

rate adjusted to current index (Sep

2014; 101.5%)

Adjustment for escalation ( at 2.7% a year, see appendix 2.3) Date of Outline Proposal Preliminary Estimate: 4/09/2014.

Date of Tender: 4/12/2015 (+1 year, 1 quarter: +3.375% of preliminary estimate): $14,026,954.88

Date of Project Completion: 4/12/2016 (+2years, 1 quarter: +6.075% of preliminary estimate): $14,362,191.61

Note: all values, unless otherwise stipulated, are from Rawlinson’s 2014. (let-able low rise, fully serviced, office building 4-7 Storeys), adjusted to Melbourne total price (between $2140 & $2310 : $2191.40). No adjustment for Geelong (100%). 4. CONCLUSION AND RECOMMENDATION On concluding our preliminary estimate, it can be seen that the best scheme in terms of cost saving is Scheme A, which has been estimated to cost $12,476,253.62, which worked out to be close to $2 Million cheaper than the $14,362,191.61 calculated for Scheme B. While Scheme B may bee the obvious choice on face value, it is essential to consider the value of function and quality that the scheme can add to your project. In the case of Scheme B, the point of difference is the inclusion of air-conditioning. While air-conditioning is an expensive element of the building, it is important to consider the functional and qualitative value of having air-conditioning in the climate of Geelong. As discussed, air-conditioning is essential to climate control for comfort of users with in the building. It is for this reason we recommend Scheme B for you selection, as it will offer you the best quality final product and is worth the extra cost.


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5. APPENDICES Appendix 2.1: Selection of Air-conditioning system When selecting an air-conditioning system, it is important to consider the cost of installing the equipment vs. the cost over the lifecycle. An expensive air-con system to install may run much more efficiently over the lifecycle of the building, reducing running costs. It may also cost more in maintenance costs if the quality of the product is not great. In the case of an owner-builder, it is wise to select an air-conditioning system that will cost less throughout the lifecycle, as these savings on cost will always outweigh the extra cost of installing such a system in the first place. Vise-verse, a cheaper air-conditioning system may run inefficiently and cost more to maintain. In the case of a developer selling the building onto another owner, a cheaper system might be selected, as it will save the developer costs up front while they won’t have to worry about the extra costs of running the system over the lifecycle. This is not necessarily an ethical option and may contribute to a bad reputation for the company – this is not ideal, as it will affect business in the future. Decisions like this have to be weighed up carefully by the builder, based on the type of reputation they want to have; for example they may wish to have a good reputation for being ethical, or may want to have a reputation for delivering projects on a tight budget for clients. The type of contractor they wish to be will inform decisions like this. Appendix 2.2 Workings for difference in Wall Size. Scheme A. Floor Area (1 floor): (60m x 10m) + 2(9m x 8m) = 744m2 Wall Length: 60 + 10 + 7 + 9 + 8 + 9 + 30+ 9 + 8+ 9+ 7+ 10 = 176m 176/744=0.236m wall to every 1m2 floor. Scheme B. Floor Area (1 floor): 12.4m x 60m = 744m2 Wall Length: 60m + 60m + 12.4m + 12.4m = 144.8m 144.8/744=0.195m wall to every 1m2 floor. Comparing the wall to floor area ratio for the two schemes, the following calculation has been made:

0.2360.195×100 = 121%

Therefore, the meters of materials used for a walls per m2 floor in Scheme A will be 121% that of Scheme B.


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Appendix 2.3 Consumer Price Index to Calculate Escalation in Price Based on the Consumer Price Index rate of previous years, CPI increase; 102.8 to 105.9 in 2013 to 2014 105.9-102.8 102.8

X 100= 3.01%

100.4 to102.8 in 2012 to 20131 102.8 –100.4 100.4

X 100= 2.39%

Average of 3.01% and 2.39% is 2.7%. Which has been assumed that the average escalation in cost each year will be 2.7% Therefore the adjustment for escalation of cost has been calculated at 2.7% per year. Appendix 2.4 Assumptions

• It has been assumed that the % elemental cost provided for external walls and windows are accurate for that of scheme B, as it is close to a standard floor plate for an office building

• Removal of air conditioning means that the ‘Mechanical’ cost will be

significantly reduced, however not eliminated as

1 Trading Economics, Australia | Economic Forecasts | 2014-‐2030 Outlook ,[http://www.tradingeconomics.com/australia/forecast]


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6. REFERENCES

Deakin University, Building Cost Planning; Cost Planning in Action (1), 2014




Deakin University, Principles and Purpose of Cost Planning, 2014

Rawlinson’s, 2014, Construction guide.

Trading Economics, Australia | Economic Forecasts | 2014-2030 Outlook, online

available at: [http://www.tradingeconomics.com/australia/forecast]

Documents

Assignment One – Budgeting and Cost Planningstatic1.squarespace.com/static/5508c186e4b09e406a171000/t/553da1...Assignment One – Budgeting and Cost Planning ... the Tiara Tower