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Update 15 published December 2003 Update 14 published September 2003 Update 13 published May 2003 Update 12 published January 2003 Update 11 published October 2002 Update 10 published August 2002 Update 9 published December 2001 Update 8 published October 2001 Update 7 published July 2001 Update 6 published December 2000 Update 5 published October 2000 Update 4 published May 2000 Update 3 published December 1999 Update 2 published October 1999 Update 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 Management which 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 Limited a wholly owned subsidiary of The Royal Institution of Chartered Surveyors under the RICS Books imprint Surveyor Court Westwood Business Park Coventry CV4 8JE UK No responsibility for loss occasioned to any person acting or refraining from action as a result of the material included in this publication can be accepted by the author or publisher. ISBN 0 85406 865 1 RICS Business Services Limited (RBS) December 2003. Copyright in all or part of this publication rests with RBS, and save by prior consent of RBS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying, recording or otherwise, now known or to be devised. Typeset and printed by Q3 Print Project Management Ltd, Loughborough.

1998 FOREWORDKnowledge is of two kinds: we know a subject ourselves, or we know where we can find information upon it.Samuel Johnson (17091784)

The fact that our profession serves a changing world increases the need for it to rely on well thought-out and reliable practices and procedures. Events move at an ever-increasing pace, imposing a requirement for quicker response times. Modern communication methods such as facsimile and now e-mail result in the need for information to be available almost instantly. This is made more difficult by an industry growing in complexity and which is subject to increasing customer expectations in terms of service and quality. The RICS has published this Surveyors Construction Handbook to help surveyors meet these needs. It is intended to become an important source of reliable information and guidance to all Chartered Surveyors who practise in construction. Much of the excellent information produced by the divisions in the past has now been updated for inclusion. Other material not yet revised will be added. The whole will be regularly reviewed and updated as necessary. RICS practice panels are continuing to produce information for inclusion to make it a useful construction reference document. We hope that this Handbook will become an invaluable aid to your day-to-day activities.

Christopher Powell, FRICSPRESID ENT, QUANTITY SURVEYORS DIVISION, 199798

Trevor Mole, FRICSPRESID ENT, BUILDING SURVEYORS DIVISIO N, 199798

ACKNOWLEDGEMENTSProfessor Roy Morledge, Professor of Construction Procurement at The Nottingham Trent University, for contributing the text of Part 3, Section 1. Major D.R. Bassett, Royal Engineers, for his contribution to the research underpinning the construction time charts in Part 3, Section 1; Central Unit for Procurement, HM Treasury (now Office for Government Commerce), for permission to use CUP guides extensively in the drafting of Part 1, Section 1 and Part 3, Section 1. Alan Turner, JP FRICS ACIArb, author of Building Procurement, for permission to use a number of the diagrams from his text in Part 3, Section 1.

CONTENTSForeword Acknowledgements List of Abbreviations IntroductionA B C D E F Aim and Scope of this Handbook Arrangement of Content Status of Content Currency of References Invitation Subscription Service 1 1 1 2 3 3 3

Part 1: The ClientSection 1.1: The Clients Requirements and Roles1.1.1 Establishing the Clients Objectives 1.1.2 The Role for Independent Advice 1.1.3 Project Brief 1.1.4 The Clients Role 1.1.5 The Clients Responsibilities 1.1.6 Appointment of Project Manager (where appropriate) 1.1.7 Appointment of Consultants 1.1.8 Appointment of Constructors Appendix A: Further Reading 1 1 3 3 4 6 8 8 9 1

Section 1.2: Value Engineering

1 Introduction 1 1.2.1 Why Value Engineering? 2 1.2.2 Applicability 2 1.2.3 At What Stage Should Value Engineering be Carried Out? 3 1.2.4 Who Should Carry Out Value Engineering? 4 1.2.5 How Long Should It Last? 5 1.2.6 Preparing for a Value Engineering Workshop 5 1.2.7 Functional Analysis of Design Relative to the Clients Requirements 5 1.2.8 Pricing the FAST Diagram 8 1.2.9 Presenting a Design Solution to a Value Engineering Workshop 8 1.2.10 The Workshop 8 1.2.11 Assessing the Value of the Workshop 9 1.2.12 Implementing the Results 10 1.2.13 Feedback from Post-Occupancy Evaluation 10 Appendix A: Health Centre Value Tree 1 Appendix B: Typical Example of a Value Engineering Process 1 Appendix C: Further Reading 1

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Part 2: Construction Design and EconomicsSection 2.1: Pre-contract Cost Planning and Cost ManagementIntroduction 2.1.1 Pre-contract Cost Planning and Cost Management 2.1.2 Preliminary Cost Studies and Feasibility Studies 2.1.3 Budget 2.1.4 The Cost Plan at Outline Proposals Stage 2.1.5 The Cost Plan at Scheme Design Stage 2.1.6 Cost Checking 2.1.7 Action after Receipt of Tenders Appendix A: Sources of Cost Information Appendix B: Format of Budget and Cost Plans Appendix C: Element Unit Quantities Generation for Hypothetical Buildings Appendix D: Further Reading 1 1 2 4 4 8 11 13 14 1 1 1 1 1 1 1 5 10 14 15 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 3 3 5 6 8 1 1

Section 2.2: Life Cycle CostingIntroduction 2.2.1 The Client Context 2.2.2 The Life Cycle Costing Calculation 2.2.3 Tax Allowances, Incentives and Business Rates 2.2.4 Data Sources 2.2.5 Worked Examples Appendix A: Residual Values Appendix B: Obsolescence Appendix C: Costs And Values Appendix D: Glossary of Terms for Taxation Appendix E: Examples of Items of Expenditure Likely to Attract Taxation Allowances Appendix F: Further Reading

Section 2.3: Elements for BuildingsIntroduction 2.3.1 Elements 2.3.2 Elemental Cost Analysis 2.3.3 Other Uses Appendix A: BCIS Standard Elements

Section 2.4: Design and Build - Guidance for Employers AgentsIntroduction 2.4.1 Background 2.4.2 Contract Documentation 2.4.3 Additional Services 2.4.4 Employers Requirements and Contractors Proposals (including contract sum analysis) 2.4.5 Design and Build Variants 2.4.6 Novation Appendix A: Potential Services Associated with the Role of Employers Agent Appendix B: Employers Requirements/Contractors Proposal Checklist

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Section 2.5: The Chartered Surveyor as Lead Consultant2.5.1 2.5.2 2.5.3 2.5.4 Introduction Definitions: The Difference Between a Project Manager and Lead Consultant Benefits of Appointing a Chartered Surveyor as Lead Consultant Issues to Consider before Undertaking the Role Schedule of Lead Consultant Duties

1 1 1 2 3 3 1 1 2 3 4 7 8 9 11 1 1

Section 2.6 Defining Sustainable ConstructionIntroduction 2.6.1 Technology Swaps 2.6.2 How Can the Environment and Sustainability be Valued? 2.6.3 How Does This Effect the Construction Industry? 2.6.4 Green Building Materials 2.6.5 Whole Building Sustainability 2.6.6 The Government Line 2.6.7 What Might the Future Hold Appendix A: Embodied Energy Content of Building Material Appendix B: Useful Addresses

Part 3: Construction Planning and ProcurementSection 3.1: Developing an Appropriate Building Procurement StrategyIntroduction 3.1.1 The Clients Role 3.1.2 Procurement Strategy 3.1.3 Selection of Most Appropriate Procurement Strategy 3.1.4 Implementation Appendix A: Procurement Options 1 1 2 12 25 29 1 1 1 3 11 19 34 1

Section 3.2: Building Services ProcurementIntroduction 3.2.1 Appointing the Building Services Designer 3.2.2 Design Coordination 3.2.3 Appointing a Building Services Contractor 3.2.4 Tender Documents Appendix A: Typical Example

Part 4: Construction Administration and ManagementSection 4.1: The Problems of Practical CompletionIntroduction 4.1.1 What Happens in Practice 4.1.2 Standard Form Approaches 4.1.3 Effects of Practical Completion 4.1.4 Methods for Dealing with Practical Completion 4.1.5 Definitions 4.1.6 Subsidiary Issues Appendix A: General Objectives to be Achieved at Practical Completion for Small to Medium-sized Building Projects Appendix B: Table of Cases Appendix C: Further Reading 1 1 1 3 13 14 16 20 1 1 1


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Section 4.2: Ascertaining the Amount of Loss and Expense Incurred in Building ProjectsIntroduction 4.2.1 General Principles 4.2.2 Definitions 4.2.3 Entitlement 4.2.4 Ascertainment 4.2.5 Admissible Items 4.2.6 Inadmissible Items Appendix A: Ascertaining the Cost of Running a Site Appendix B: Disruption Appendix C: Ascertaining the Cost of Head Office Overheads Appendix D: Checklist of Items for which Loss and/or Expense are Allowed Appendix E: Checklist of Steps Required when Considering Submissions by Contractor Appendix F: Further Reading

1 1 1 4 4 7 9 13 1 1 1 1 1 1

Section 4.3: The Management of Risk

1 Introduction 1 4.3.1 Definitions 2 4.3.2 The Rationale for Risk Management in the Construction Process 2 4.3.3 The Risk Management Process 5 4.3.4 Summary 14 Appendix A: Further Reading 1 Introduction 4.4.1 Valuations 4.4.2 Assumptions 4.4.3 Valuation Under a JCT Contract: Background 4.4.4 Recommended Action at the Start of a Contract 4.4.5 Communications 4.4.6 Approach 4.4.7 Content of a Valuation 4.4.8 Administration 4.4.9 Special Situations 4.4.10 Other Contract Terms (relative to valuations) 4.4.11 Valuations Under Other Forms of Contract Appendix A: Further Reading Appendix B: JCT Definition of Reasonable Proof Appendix C: Example of Priced Activity Schedule 1 1 1 2 3 4 5 6 8 15 16 17 18 1 1 1 1 1 2 2 3 4 5 6 7 12 13

Section 4.4: Valuations for Interim Certificates

Section 4.5: Extension of Time4.5.1 4.5.2 4.5.3 4.5.4 4.5.5 4.5.6 4.5.7 4.5.8 4.5.9Page 4

Introduction Extension of Time Clauses Assumptions Extension of Time Under a JCT Contract Notice by the Contractor of Delay to Progress The Award of an Extension of Time during the Contract Period and Before the Completion Date The Award of an Extension of Time after the Completion Date Relevant Events Concurrent Delays Consequential EntitlementContents (12/03)


4.5.10 Administration 4.5.11 Extension of Time under an ICE Contract 4.5.12 Extension of Time under a GC Works Contract Appendix A: Further Reading

13 14 14 1

Part 5: Additional Guidance and InformationSection 5.1: Surveying Safely Section 5.2: Construction (Design and Management) Information5.2.1 Schedule of Sources of Useful CDM Information 1 1 2 1 1 1 2 4 1 1 1 2 2 1 1 2 3 3 4 4 5 6 20 1 1 1 1

Section 5.3: Built environment group roles and information Section 5.4: Building Cost Information Service5.4.3 BCIS Online 5.4.4 Other BCIS Publications and Services 5.4.5 Further details

Section 5.5: Building Occupancy Cost Information (BMI)5.5.2 5.5.3 5.5.4 5.5.5 BMI Quarterly Cost Briefing Building Maintenance Price Book Special Reports for Benchmarking News, Digests and Reports

Section 5.6: Electronic document storage legal admissibilityIntroduction 5.6.1 Code of Practice DISC PD 0008: 1999 5.6.2 Weight of evidence and document destruction 5.6.3 Authenticity 5.6.4 Photocopies, microfilm and image processing 5.6.5 Document storage 5.6.6 Storage and access procedures 5.6.7 Format of the Code of Practice 5.6.8 Conclusion Appendix A: Specimen form for recording scanning information Appendix B: Specimen form for recording retrieval Appendix C: References

Index


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LIST OF ABBREVIATIONSABE ABI ACA ACE AQL BCIS BEC BMI BRE BRECSU BREEAM BSI BSRIA BWIC CA CAWS CDM CD-R CECA CIB CIBSE CIC CIRIA CITES CCT CSM DBFO DoE DETR DMS DOM EC EU FAST FCEC GNP HBF HMSO HSE IChemE ICE IDMAThe Surveyors Construction Handbook

Association of Building Engineers Association of British Insurers Association of Consultant Architects Association of Consulting Engineers Acceptable quality level Building Cost Information Service Building Employers Confederation Building Maintenance Information Building Research Establishment Building Research Energy Conservation Support Unit Building Research Establishment Environmental Assessment Method Building Standards Institution Building Services Research and Information Association Builders Work in Connection Contract Administrator Common Arrangement of Works Section for Building Works Construction (Design and Management) Compact disc recordable Civil Engineering Contractors Association Construction Industry Board Chartered Institution of Building Services Engineers Construction Industry Council Construction Industry Research and Information Association Control in Trade of Endangered Species Compulsory Competitive Tendering Chartered Surveyors Monthly Design Build Fund and Operate Department of the Environment (now known as the DETR) Department of the Environment, Transport and the Regions (formerly the DoE) Document Management System Domestic Sub-Contract European Commission European Union Functional Analysis Systems Technique Federation of Civil Engineering Contractors Gross National Product House Builders Federation Her Majestys Stationery Office (now known as The Stationery Office) Health and Safety Executive Institution of Chemical Engineers Institution of Civil Engineers Information and Document Management AssociationAbbreviations (10/02) Page 1

IFC JCT LCC LQ M&E MERA MW NEC NEDO NJCC NSC OMR PFI PSA RIBA RICS VAT WCD WORM WRC

Intermediage Form of Contract Joint Contracts Tribunal Life Cycle Costing Limiting quality Mechanical and Electrical Multiple Estimate Risk Anaylsis Minor Works New Engineering Contract National Economics Development Office National Joint Consultative Committee for Building Nominated Sub-Contract Optical Mark Reading Private Finance Initiative Property Services Agency Royal Institute of British Architects Royal Institution of Chartered Surveyors Value Added Tax With Contractors Design Write-Once-Read-Many Water Research Centre

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Abbreviations (10/02)


I NTRODUCTION

INTRODUCTIONA Aim and Scope of this HandbookA1 The aim of this Handbook is to help both building and quantity surveyors to provide construction-related professional services effectively and efficiently. It seeks to achieve this by providing guidance which reflects what is often good custom and practice, and relevant information (including references to other useful material). It should be appreciated that this Handbook does not attempt comprehensive coverage of necessary or good practice. The Handbook is addressed to surveyors providing services to clients (as defined), not surveyors undertaking the role of the clients representative who gives instructions to surveyors on behalf of the Client. Construction in this Handbook means new construction, conversion, refurbishment works and alterations to the form of buildings, and also civil engineering works. The contents of this Handbook apply across the complete range of this definition unless otherwise stated. So construction does not embrace building surveys or building maintenance. Client in this Handbook is used to include companies and their Directors or Officers, Trusts and their Trustees, partners, managers and employees who may instruct a surveyor. Throughout the Handbook, it is assumed that possession and necessary access to the site are available and, in principle, the rights to construct the development and use the buildings when constructed. The Handbook does not cover project management services, obtaining planning permission and building regulation approvals, or dispute resolution. The document is drafted on the basis of UK law and practice, although much of it is relevant to practice elsewhere.

A2

A3

A4

A5

B Arrangement of ContentB1 After sets of Definitions and Abbreviations which apply throughout, the Handbook is arranged in five Parts. The first four Parts represent sequential phases of the construction process. The last Part, Part 5, provides Additional Guidance and Information. Each part is followed by Further Reading, to which the numbered cross references in the Parts apply. The first four Parts are as follows: Part 1: The Client seeks to help surveyors to work with clients. It discusses the establishment of their construction objectives and constraints, leading to theThe Surveyors Construction Handbook Introduction (4/98) Effective from 1/6/98 Page 1

B2

I NTRODUCTION

development of construction briefs. It defines the clients roles during the construction process, and comments on the engagement of professionals involved in the construction process. Part 2: Construction Design and Economics covers development of the design concept, feasibility studies, design and economics (including life-cycle costing, risk assessment, and cost-value relationships), and confirmation of the final design proposal. Part 3 relates to Construction Planning and Procurement, i.e. to the time the construction contract is placed. Part 4 covers Construction Administration and Management, i.e. all post-contract matters. Any Appendices are situated at the end of each Part. B3 An Index follows Part 5.

C Status of ContentC1 For convenience, Guidance and Information is integrated. Each paragraph is prefixed with a G or an I to indicate its status. Guidance, as the word implies advice to Members of the RICS on aspects of their profession. Where recommended for specific professional tasks, procedures are intended to embody best practice, i.e. procedures which in the opinion of the RICS meet a high standard of professional competence. Members are not required to follow the advice and recommendations contained in such paragraphs. They should, however, note the following points. Should an allegation of professional negligence be made against a surveyor, the Court is likely to take account of the contents of any relevant guidance notes published by the RICS in deciding whether or not the surveyor had acted with reasonable competence. In the opinion of the RICS, a Member conforming to the practices recommended in this Note should have at least a partial defence to an allegation of negligence by virtue of having followed those practices. However, Members have the responsibility of deciding when it is appropriate to follow the guidance. If the guidance has been followed in an appropriate case, the Member will not necessarily be exonerated merely because the recommendations were found in RICS Guidance.

C2

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Effective from 1/6/98


INTRODUCTION

On the other hand, it does not follow that a Member will be adjudged negligent if he has not followed the practices recommended in this Handbook. It is the responsibility of each individual surveyor to decide on the appropriate procedure to follow in any professional task. However, where Members depart from any practices recommended in this Handbook, they should do so only for good reason. In the event of litigation, the Court may require them to explain why they decided not to adopt a recommended practice. In addition, Guidance Notes are relevant to professional competence in that each surveyor should be up to date and should have informed himself of Guidance Notes within a reasonable time of their promulgation. C3 Material classified as information is intended to provide information and explanations to Members of the RICS on specific topics of relevance to the profession. The function is not to recommend or advise on professional procedures to be followed by surveyors. It is again, however, relevant to professional competence to the extent that a surveyor should be up to date and should have informed himself of such information within a reasonable time of its promulgation. Members should note that if an allegation of professional negligence is made against a surveyor, the Court is likely to take account of the contents of any relevant information published by the RICS in deciding whether or not the surveyor has acted with reasonable competence.

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

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

F Subscription ServiceAny change of address should be notified to the address appearing below: The Surveyors Construction Handbook Subscription Service RICS Books Surveyor Court Westwood Business Park Coventry CV4 8JE Tel: 020 7222 7000 ext 647


Introduction (revised 10/01)


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PART ONE: THE CLIENTSECTION 1: THE CLIENTS REQUIREMENTS AND ROLES1.1.1 Establishing the Clients ObjectivesG 1.1.1.1 Client satisfaction will be maximised if the clients objectives as established in the business case for the project are met. The surveyor should be able to assist with the development of the business case and the prioritisation of project objectives (see 3.1.1.6 and 3.1.1.9). The type of client will affect the criteria which must be met if the client is to be satisfied with the project. Owner occupiers are usually primarily concerned with building performance in terms of functionality and costs in use. They may also be concerned with image and building style. In this sense, value for money is a key criterion. Developers, on the other hand, may be driven by market conditions which enable the project to be let or sold at maximum commercial advantage. They may be predominantly concerned with speed rather than performance. 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 that developers are unconcerned about building performance or cost. There are market conditions where both of these issues may become important. However, the clients purpose in initiating a building project is usually driven 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 or important 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.

G

1.1.1.2

I

1.1.1.3

I

1.1.1.4

I

1.1.1.5


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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. G 1.1.1.6 The importance of each of these criteria will be relative to the objectives of the client, the business case for the project and to the extent to which he/she is able to cope with risk (see 3.1.2.9). It is important that the client seek investment appraisal advice in respect of the project and that the appraisal considers what if questions to ensure that the impact of changes of key components in the appraisal is clearly understood. A chartered surveyor will be able to assist the client in these matters. However, the giving of advice on some of the requirements listed above is, of course, outside the competence of the surveyor. Where such a particular requirement is important to the client and outside the clients expertise, the client should be advised to seek other professional advice. Many construction projects suffer from poor definition due to inadequate time and thought being given at an early stage1. This is often because there is a sense of urgency fuelled by the desire for an immediate solution. Investing time at the beginning of a project in developing a complete definition taking account of all the requirements will reduce the likelihood of changes later. The later that changes are made in a project, the more they are likely to cost in both direct and knock-on effects (see 3.1.4.14 and 3.1.2.14(f) & (g)).

G

1.1.1.7

1

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

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PART 1, SECTION 1

1.1.2 The Role for Independent AdviceG 1.1.2.1 With the potential for the involvement of many consultants and/or constructors in a project and the range of contracts associated with their employment, all but the most experienced client may need advice. The advice offered should be informed and unbiased and it should be based upon a logical analysis of the needs of the client, the type and character of the project and the range of appropriate strategies available. This advice can be offered by a member of the clients design team or can be a separate function. It may be more difficult for a design team member to remain impartial in carrying out this process and it is recommended that any expert retained should be solely for this purpose. This function can be identified as the role of the principal adviser and may encompass:

G

1.1.2.2

Assistance in preparing the business case underpinning the project Identifying the needs and requirements of the client Defining the project Matching needs and project characteristics with appropriate procurement strategy Facilitating the associated selection and contractual processes and policies

(the business case) (briefing) (project definition) (procurement strategy) (implementation)

I

1.1.2.3

Possible sources for the appointment of independent advisers include suitably qualified and experienced construction professionals such as chartered surveyors.

1.1.3 Project BriefG 1.1.3.1 The importance of a clear project brief to the successful completion of the project and in ensuring appropriate performance of the project cannot be over emphasised. The inexperienced client will need professional help in the preparation of the brief. The project brief is a comprehensive statement of the clients requirements for the project based on close consultation between the client and users and based upon the parameters established (see 3.1.1.10 and 3.1.1.12). 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 larger planned development);




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(c) number of people that are to occupy the building, together with their space requirements; (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. G 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 required for the project brief is not readily available, it is better to issue it in an incomplete form and to update it progressively1.

1.1.4 The Clients RoleG 1.1.4.1 This section briefly explains the clients responsibilities through the life of a construction project. In carrying out their role, clients, depending on their knowledge and expertise, will need help from their professional advisers, project managers and other consultants, whose roles are also explained in this handbook. This section aims to outline the clients task in setting policy and formulating strategy, and explains how it should be carried out. The success of any project will depend upon the motivation given by the client. Experienced clients may take a leading role in the procurement process; less experienced clients will need to seek advice or to appoint advisers to assist them. Where projects are of a large or complex nature it may be advisable to consider the appointment of a project manager. Effective management is vital in any construction project. The clients prime role is to establish a structure for the management of the project and to make sure that it works. A crucial part of any effective management structure is efficient communication. To perform effectively, all parties must have timely

G

1.1.4.2

G

1.1.4.3

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 and status (see 3.1.4.11). G 1.1.4.4 The client has substantial influence on the design of the project in respect both of functional efficiency and of overall appearance, and, therefore, has to take particular care to: (a) understand fully the purpose of the building; ensure that the requirements of the users are accommodated; and communicate those requirements to the designers (see 3.1.1.10); and (b) appoint designers with proven ability in designing buildings which satisfy users requirements and harmonise with and contribute to the quality of the built environment. The selection of the right people is emphasised as a key to success (see 3.1.4.8). G 1.1.4.5 The accompanying figure indicates the activities in the procurement process and when activities are usually performed. As can be seen, the clients role is significant, with a wide range of activities to perform and implement before both the design and the construction processes. In the performance of these activities, the client can expect to be supported and advised by his/her adviser or (if appointed) the project manager. More detail for each of these activities can be found in the section of this handbook indicated in brackets in the figure.




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FIGURE TO INDICATE THE ACTIVITIES IN THE P ROCUREMENT PROCESSPre-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 and cost 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

1.1.5 The Clients ResponsibilitiesG 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);Page 6 Part 1, Section 1 (01/03) Effective from 1/3/03 The Surveyors Construction Handbook

PART 1, SECTION 1

(e) arbitrating between conflicting demands; and (f) evaluating the complete post-construction phase). G 1.1.5.2 project against the objectives (the

The client also has a dual management function: (a) to manage the client input; to co-ordinate functional and administrative needs; 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 control the external resources needed to implement the project (see 3.1.4.35).

G

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 the users1&2 (see 3.1.1.12); (b) any constraints demanded by the project funder(s) are known and their impact understood; (c) the critical assumptions made in preparing the initial estimates and programmes are valid, realistic and achievable (see 3.1.1.9); (d) cost estimates are comprehensive and include all capital and resource costs; (e) allowances made in the feasibility and viability assessments to cover possible risks are sufficient (contingency allowance); (f) substantial sensitivity analysis and what if studies have been carried out to 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 for cost, time, quality and change control.

G

1.1.5.4

The client should also co-ordinate and resolve conflicts between all interested sections of the client organisation including (see 3.1.4.6): (a) user groups who will work in the building;

1

Kelly, J., MacPherson, S., and Male, S. (1992), The Briefing Process: A Review and Critique, RICS, Department of Building 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 building including maintenance and security; (d) finance and accounts who will plan and control expenditure and pay bills as they arise; and (e) legal advisers who will advise on and monitor the clients formal relationships with outside parties. G 1.1.5.5 The client is responsible for ensuring that all necessary decisions are made on time. Timely decisions are necessary to avoid delays and increased costs: the decision-making process requires as much planning and management as any other 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 making sure items are on the agenda; (f) preparing on time fully detailed submissions and/or presentations in full compliance with procedural requirements; (g) following up submissions throughout the decision making process; and (h) promptly communicating decisions made to the parties affected by them.

1.1.6 Appointment of Project Manager (where appropriate) (see 3.1.4.7)G 1.1.6.1 Due to the complexity of modern buildings and the potentially large number of parties involved in the process the client may wish to appoint a single person to draw the process together and manage it to ensure that the overall performance, time, cost and quality requirements are achieved. The project manager may be a member of the client organisation who is given sole, or predominant, responsibility for the project. Project management practices also exist to enable appointment to be made on a consultancy basis. In this case,Effective from 1/3/03 The Surveyors Construction Handbook

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selection should be based upon resources, reputation, and price; and services should be clearly identified. G 1.1.6.2 It should be emphasised that the role of the project manager should be to act as part of the client organisation.

1.1.7 Appointment of Consultants (see 3.1.4.8)G The process of selecting and appointing the design team and the cost consultant is carried out by the client who may seek the advice of his/her advisers. The terms and conditions of these appointments are governed by the procurement strategy adopted for the project.

1.1.8 Appointment of Constructors (see 3.1.4.9)G The selection of those who will actually construct the project is often key to a successful outcome. Selection should always be on quality as well as price and ideally the procurement strategy governing when they are appointed should facilitate the early involvement of constructors in the design process. The selection of procurement strategy is a complex one and is referred to in Part 3 section 1 of this handbook.




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PART 1, SECTION 1, APPENDIX A

Appendix A: Further ReadingConstruction 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 Quality and Price, Thomas Telford Publishing, London, 1997 Construction Industry Council, The Procurement of Professional Services: Guidelines for the Value Assessment of Competitive Tenders, CIC, London, 1997 European Construction Institute, Partnering in the Public Sector: a Toolkit for the Implementation 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.


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PART ONE: THE CLIENTSECTION 2: VALUE ENGINEERINGIntroductionValue management (and within it, value engineering) is a structured method of eliminating waste from a clients brief and from the design on a construction project before binding commitments are made. Used to deliver more effective and better quality buildings, for example, through taking unnecessary costs out of designs, value management ensures a clearer understanding of the brief by all project participants and improves team working. According to the Construction Task Force report, Rethinking Construction (published by the DETR in July 1998) it is practiced by up to a quarter of the construction industry in the UK. The report also estimates that while the objective of value management is to increase value, it can also reduce costs by up to 10 per cent. Value management is the wider term used in the UK to describe the overall structured team-based approach to a construction project. It involves clearly defining the clients strategic objectives, considering optimum design solutions within the context of the clients business objectives and deciding which of these provides the optimum lifetime value to the client, as well as a review of the whole process after occupancy. Value management includes value engineering as part of this process. Value engineering is a systematic approach to delivering the required functions to the required quality at the least cost, i.e. a method of ensuring that the client gets the best possible value for money in terms of safety, performance and delivery targets. It is a structured form of consensus decision making that compares and assesses the design solutions against the value systems declared by the client. This section of the handbook looks at the carrying out of a value engineering exercise during the early design phase of a project, i.e. an evaluation of design solutions against the clients brief. Value engineering, as described here, can be a stand-alone exercise (a value engineering workshop) or may be part of an overall value management process. In describing the value engineering process this section aims to assist surveyors both in advising clients on the use of value engineering and taking part in a value engineering exercise as part of the design team. It is not intended for surveyors acting as value engineering facilitators and makes no attempt to address the very particular skills required for this role.




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1.2.1 Why Value Engineering?1.2.1.1 Value engineering has grown in popularity for the simple reason that it actually works. Construction projects can often take on a life of their own when members of the design team become focused on their own particular problems and time constraints. Consequently, the true objectives of the client get lost along the way. Value engineering relates design proposals directly back to a clients business, thus ensuring that a management system is in place which forces designers to justify their decisions when tested against the clients required function. A value engineering exercise can only relate design proposals to a clients business requirements if early value management studies have encapsulated these requirements within the brief. If a value engineering exercise is carried out in isolation from any strategic review of the project requirements, it can only act as a functional assessment of the technical design solutions and their relative cost. However, even in this limited function it can still be very useful.

1.2.1.2

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1.2.2 Applicability1.2.2.1 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 brief in such instances and consequently a design solution may be adopted without being questioned, usually because of time constraints placed upon the designers.Figure 1: Projects Benefiting from Value EngineeringHigh

Essential

Complexity

OptionalLow Low High

Value

1.2.2.2

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

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as improvements and savings can be incorporated into future schemes. They can also be tested in practice, leading to the sort of continuous improvement recommended by the Rethinking Construction report. 1.2.2.3 Value engineering works irrespective of the procurement route taken. It is a discipline upon the design team members and the clients who appoint them. Where the contractor is mainly responsible for the design, for example, design and build, develop and construct or PFI projects, the technique is just as appropriate in ensuring that a well-defined statement of requirements is first established and that subsequent design solutions address the function of the building most economically.

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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 the earliest possible stage. Once it has been established that the clients needs will best be met through a construction project the purpose of the first VE exercise should be to inform the brief. When an experienced client has prepared the brief, or a value management exercise has already examined the clients requirements, the value engineering exercise (which will address the proposed design solutions) is best done towards the end of the scheme design. Several workshops may be necessary at each of the crucial decision-making stages of a project: (a) A first exercise (a functional analysis of requirements), to define the project needs and inform the brief, could be carried out as early as option appraisal, and since this could generate the greatest benefit to the client the timing is crucial. Carry it out too early and not enough will be known about the problems associated with the building function, whereas too late and minds become set on the solutions formulated by the design team. (b) A review of the project at outline design could be conducted to ensure that the decisions taken earlier have been implemented or, if changed, that they still meet the functional requirements. (c) Another review (a functional analysis of the solutions) would then be carried out at scheme design to test individual building elements involving traditional cost planning/life cycle costing techniques. 1.2.3.2 This section of the handbook considers the evaluation of a design at the end of the scheme design phase, but the process will be the same whenever it is carried out. The objectives of the project should remain the same throughout the process and they should be validated at the beginning of each workshop. The objectives of each workshop may be different. If the project objectives do change the whole direction of the project will need to reassessed. It is important that time for the value engineering process and any resultant redesign 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 by an experienced value management facilitator to ensure that the value engineering participants retain their objectivity and that an unbiased approach is maintained. The value engineering participants should represent the principal stakeholders in the project namely, the client, the building users and the design team (designer, engineers and quantity surveyor) and also the contractor, where applicable. It is important that each of the participants have the authority to make decisions at the workshop. It may also be appropriate to include clients advisers, for example, letting agents or rating valuers. The participants should be those who can make decisions and provide information related to the specific aims and objectives of the workshop. These may include: those people with responsibility for the needs of the business; those with specific responsibility for development, design and implementation of the operation/project; those with responsibility for the management and/or maintenance of the operation; and those who will be affected by the outcome. Different stakeholders will be required to participate at different stages of the project. 1.2.4.3 The optimum size of a value engineering panel would depend upon the complexity of the project as well as the skills of the facilitator. However, it is considered 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 this results in a larger group. It is common practice in North America to appoint an outside team of consultants to question the design teams solutions. However, this practice has been known to cause resentment between the project team and the external advisers and might therefore compromise the final design solutions. It is considered that an experienced facilitator independent of the design team, with an appropriately briefed panel, will ensure that the design teams solutions are adequately tested at the workshop.

1.2.4.2

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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 on the complexity of the project and the level of design detail that has been completed. The 40-hour workshop is the classic industrial value engineering standard. However, two-day workshops at key points during the design process are more common in the UK construction industry.

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1.2.6 Preparing for a Value Engineering Workshop1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by the panel and distributed by the facilitator. In addition to an agenda, a functional analysis of the clients requirements should be drawn up. The clients value criteria will have been developed in the first value management workshop. With each successive workshop these criteria will be developed further into a function diagram. This should be included in the workshop handbook. If it is to be developed further this will take place as part of the information stage of the workshop. The functional analysis should always be generated by the client representatives with the help of the other members of the workshop. It is the role 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 particular discipline) is one of the strengths of the VE process and should be encouraged by the facilitator.

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1.2.7 Functional Analysis of Design Relative to the Clients Requirements1.2.7.1 It should be understood that it is not possible to find meaningful alternatives to a technical solution without first identifying the function required of it. Functional analysis is any technique designed to appraise value by careful analysis of function. This can be simple creative session of the functions and possible alternatives, but the most common method is using a functional analysis systems technique (FAST) diagram. The FAST system uses a function diagram which identifies the basic function what is required on the left-hand side and more detailed secondary functions working from left to right until all the means of achieving thesePart 1, Section 2 (revised 10/01) Effective from 1/12/01 Page 5

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functions how are they to be fulfilled are identified on the right. See figure 2 for an example of a FAST diagram. It should be understood that this is a broad-brush technique. The objective of functional analysis is to produce a complete description of the end purpose of the design in terms of what it must do. Reference is sometimes made to different types of FAST diagram: Classical FAST, Technical FAST or Customer/Task FAST. The original FAST diagram was a presentation of the user-related and product-related functions of a design solution. It was a technique used to assemble the functions of a product in a hierarchy and to assess why and how they are delivered. This is known as a Classical FAST. Subsequently it was recognized that all functions did not fit into the flow logic so it was decided to separate out the functions that are always active, whether the product is operational or not. It was also decided to separate out those functions that only occur one time regardless of repetitiveness of the process. This diagram describes what a product, element or component must do and is known as a Technical FAST. It was then recognized that, ideally, it is the customer who should determine the value of the product and that the FAST diagram should include the customer/user in the development of value study projects. The resulting FASTFigure 2: FAST Diagram

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diagram has become known as a Customer or Task FAST. It is this concept from which the Value Tree has developed. All FAST diagrams should include a scope line on the left-hand side of the diagram. The scope line limits the area of the project on which attention is being focused. The scope is the portion of the project that is selected for the value study. The FAST model displays functions in a logical sequence and tests their dependency. 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 active verb/measurable noun (or phrase) combinations, for example, minimize energy consumption. This improves clarity, helps all panel members develop a shared understanding and promotes the examination process. These should be interrogated by asking why the client requires this in order to examine how it should be achieved. The process of setting up a FAST diagram is of matching the functional elements of the building (object functions) to the clients required functions (user functions). The functional requirements need to be broken down until they are reflected in elements which can be priced (and built). This process is called functional decomposition. For example, the requirement for increased energy efficiency might be provided by increased levels of insulation which might be achieved by changes to all or any of roof, walls, floor, windows and doors or finishes. The number of levels of decomposition required cannot be predetermined. VALUE TREE A Value Tree is a diagram that describes the business driver (mission) for a project 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 the brief. 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 establish whether a project is the solution to their needs. The criteria are then developed further into the functions required in order to achieve them. The scope line for a 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 for a health centre. Function elements (object functions) are defined in the BCIS publication, Standard Form of Cost Analysis: Principles, Instructions and Definitions and in Section 2.3 of this handbook. A typical example of a value engineering process is included in Appendix B.

1.2.7.5

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1.2.8 Pricing the FAST Diagram1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomes possible to establish alternative costs for achieving a given function. However, it is important that all functions are clearly defined if costs of alternative proposals are to be meaningful. Also, it should be remembered that it is the design solutions to the functional requirements that are being priced and 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 energy consumption or may rank this as important for other reasons. The value engineering teams task is to put a price on the various design solutions suggested that will achieve this end. It is creativity in finding the most economical solution that is the essence of the value engineering exercise. Fees and value added tax (VAT) and other financial and fiscal matters may also need to be considered.

1.2.8.2

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1.2.9 Presenting a Design Solution to a Value Engineering Workshop1.2.9.1 Design solutions should be presented as designers normally would to any panel of users. However, they should expect to be questioned quite extensively. They should keep an open mind and maintain objectivity in justifying their proposals because the objective is to find the most cost-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 it is correct for the function being considered.

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1.2.10 The Workshop1.2.10.1 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 in terms of the functions they fulfill. It asks the questions about what is the prime function of an element?; what are its subsidiary functions?; what does it cost?; what is its value? It is at this stage that the FAST diagram is developed and it is against the background of this information that the value engineering evaluation will be made. (b) Speculation is the brainstorming stage which will generate the ideas from which solutions will be developed. It is important that each member of the panel thinks positively. The facilitator will ensure that no one is allowed to become overly critical of another members contribution in order that ideas flow. All ideas should be logged at this stage. However, in order to encourage idea building, they should not be analysed or rejected. It is important that the underlying functions of suggestions for improvement are listed for evaluation later. 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 should only be considered at the evaluation stage. (c) Evaluation is the analysis of the ideas generated by the earlier speculation. Again, a positive feeling will be encouraged by the facilitator with advantages/disadvantages being discussed in an even-handed manner. At this stage some ideas will be rejected and the best taken forward. It is essential to ensure that all the ramifications of any suggested changes should be considered. For example, if the exercise has suggested a change to a piece of M&E equipment, the effects on the control management systems and structural requirements must also be considered. Life cycle costing can be an important factor in the process when considering optional solutions but the criticality of this aspect will hinge on the clients philosophy. (d) Development of the ideas to be taken forward will be initiated at the meeting and a programme established for completion of this stage. Often the detailed development including life cycle costing, if appropriate, will be continued beyond the initial meeting and the outcome presented to a subsequent meeting for the panel to determine which design options to adopt. (e) Presentation takes the form of a report prepared by the facilitator which records in some detail all elements of the study and concludes with those options to be incorporated in the developed design. This report is normally presented to the client by the value engineering panel at a meeting held within one 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 have been allocated little money or have cost a lot of money but do not contribute to the function.

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1.2.11 Assessing the Value of the Workshop1.2.11.1 Areas for research/change identified at the workshop could be grouped into three 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 The financial benefit should then be identified against all elements within categories (i) or (ii). A major benefit of the workshop which will be enjoyed by the panel members is a better understanding of the project functions and common ownership of the team-based designs solutions which have evolved.

1.2.11.2

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1.2.12 Implementing the Results1.2.12.1 The value engineering panels decisions are recommendations that need to be accepted by all stakeholders. Those stakeholders that are not part of the panel are likely to have a right to comment before decisions are adopted. Once the workshops proposals have been sanctioned by the client, decisions should be fed back to the design team, briefing those members whose work is affected as to why the changes were made. If necessary, amendments to the design brief, design programme and scope of professional teams brief should be incorporated into these documents.

1.2.12.2

1.2.12.3

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1.2.13 Feedback from Post-Occupancy Evaluation1.2.13.1 It is important for any client to carry out a project review to demonstrate how project objectives have been achieved and particular problems overcome. As part of the project evaluation process, it should be established whether the project represents best value for money and whether or not key design changes made 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

Appendix A: Health Centre Value Tree


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Appendix B: Typical Example of a Value Engineering ProcessB1 BACKGROUND A retail client with a regular development programme for a series of new stores (typical size 8,000m2) entered into a partnering agreement with key members of the construction team for four new projects. To encourage value engineering, the partnering contractors share in any savings that relate to any accepted proposals. For two of these projects the client opted for a design and build contract for the services installations (mechanical, sprinklers and electrical). In an effort to reduce costs and ultimately add value to the schemes, the client set a target of reducing the costs on these projects by 10 per cent, with no material 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 scheme layouts. Allowances were included for any items that were classified as site specific (e.g. acoustic requirements stipulated by the district surveyor). Cost plan figures were based on the clients current specification. Due to the volume of developments undertaken by the client and the repetitive nature of the works, the savings generated by value engineering can be incorporated in any future schemes. B2 SPECIFIC EXAMPLE: VENTILATION TO SALES FLOOR The original design was based on previous solutions and included traditional ventilation. At the information phase, the functional requirement, including the need for ventilation, was examined against the clients desire to reduce capital costs. This identified that a high proportion of the cost of the mechanical installation related 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 closely with the mechanical partnering contractor to consider alternative methods of ventilating 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 which occupiers are breathing. Air is introduced at low level and at low velocity. Natural convection currents are utilised to remove excess heat and pollutants out of the occupied zone. There is a saving in the amount of ductwork required, 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.) The new specification requires diffusers of the displacement type, with the facility of automatically varying the air throw pattern whether in heating or cooling mode. Furthermore, the proposed system required ventilation to the occupied zone only rather than the full building space. This has resulted in capital cost savings 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 size Saving on chiller plant size Saving on sales floor ductwork Air handling plant Chiller plant Ductwork and diffusers 10% 5% 25%

Savings on capital cost:

At the development phase, the proposed method was discussed with other members of the design team to ensure that any impact on the other building elements, the project programme and the interface with other subcontractors were taken into account.

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PART 1, SECTION 2, APPENDIX C

Appendix C: Further ReadingBritish Standards Institute. Value Engineering, Value Analysis Vocabulary Part 1: Value Analysis and Functional Analysis, BS EN 13251 1997, British Standards Institute, 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 and Information Association. Value Management in Construction: A Clients Guide, CIRIA, London, 1996 Dellisola, Alphonse. Value Engineering in the Construction Industry, Van Nostrand Reinhold 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 for Unnecessary Cost, Chartered Institute of Building, Berkshire, 1990 Institution of Civil Engineers. Creating Value in Enginering, Thomas Telford Publishing, London, 1996 Kelly, John and Male, Stephen. A Study of Value Management and Quantity Surveying Practice, RICS Books, Coventry, 1988 Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity Surveying Practice, Heriott-Watt University, Edinburgh, 1989 Kelly, J.R. and Male, S.P., Heriot-Watt University, Department of Building Engineering and Surveying, Royal Institution of Chartered Surveyors. The Practice of Value Management: Enhancing Value or Cutting Cost? RICS, London, 1991 Law, Alastair, G. An Introduction to Value Engineering: A New Technique in Technology Assessment and Evalution, Alastair G. Law, Washington DC, 1981 May, Susan, C., College of Estate Management. Value Engineering and Value Management: 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: A Practical Guide, Macmillan, Basingstoke, 1995


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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 a conference 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 a Value Engineering Workshop? RICS, London, 1998 Zimmerman, Larry, W. and Hart, Glen, D. Value Engineering: A Practical Approach for Owners, Designers and Contractors, Van Nostrand Reinhold & Co, New York, 1982

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PART 2, SECTION 1

PART TWO: CONSTRUCTION DESIGN AND ECONOMICSSECTION 1: PRE-CONTRACT COST PLANNING AND COST MANAGEMENTIntroductionThis Section of the Handbook sets out procedures which enable pre-contract cost 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 design process by systematic application of cost criteria so as to maintain a sensible and economic relationship between cost, quality, utility and appearance which thus helps in achieving the clients requirements within the agreed budget. The information and guidance which follow are based on a traditionally procured new-build project, but varying client requirements and different procurement methods may prevent implementation of some aspects of the following procedures. In practice, the design of the elements may proceed at different speeds and the stages described here may overlap. However, the principles of budget, cost plan, cost checks and reconciliation should be adhered to whenever possible. (See the figure showing the outline of the cost planning procedure.) On projects where non-traditional procurement routes are used, the responsibility for developing the cost plan may change but the stages suggested here remain appropriate. For example, on Design and Build (D&B) schemes, the clients quantity surveyor will be responsible for the cost plan at feasibility and outline proposal stage and the D&B contractors quantity surveyor will be responsible for developing the cost plan with the contractors design team to produce the tender. The process described would apply to refurbishment or conversion schemes and the elemental approach would be suitable even if all elements were not required. The procedures are not designed for use with civil engineering projects, but should provide a framework appropriate to civil engineering needs.




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2.1.1 Pre-contract Cost Planning and Cost ManagementI 2.1.1.1 DEFINITION Pre-contract cost planning is the technique by which the budget is allocated to the various elements of an intended building project to provide the design team with a balanced cost framework within which to produce a successful design. It allows for the redistribution of the budget between elements as the design develops. Cost management is the total process which ensures that the contract sum is within the clients approved budget or cost limit. It is the process of helping the design team design to a cost rather than the quantity surveyor costing a design.

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2.1.1.2

OBJECTIVES (a) To ensure that the client obtains an economical and efficient project in accordance with the agreed brief and budget; (b) to make the design process more efficient, thus reducing the time needed to produce a successful design; (c) to ensure that all requirements arising from the clients brief to the design team are included in the cost planning process (e.g. the engineering services should also be subject to the cost planning process); and (d) to advise the client and members of the design team of cost-in-use or life-cycle costing techniques.

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2.1.1.3

GENERALLY (a) A general principle applies throughout the cost planning process that any agreed budget or cost limit is seen as the maximum cost, and the quantity surveyor should, at all times, work with the other design team members to satisfy the client at a lower cost if possible, whilst still maintaining the desired objectives for quality and function. (b) If, at any time, sums have been included in the approved budget, for example, for abnormal site costs which subsequently are found to have been wholly or partially unnecessary, the consequential saving should always be notified to the client.

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2.1.1.4

DESIGN STAGES References to Design Stages are to the RIBA Plan of Work (taken from the RIBA Handbook of Architectural Practice and Management) and refer to the main stages through which a project design typically passes. The links to the cost planning procedures outlined in this section are summarised here: Design Stages Stage B: Feasibility Quantity Surveyor Prepare feasibility studies and determine the budget Consider with client and design team alternative strategies and prepare cost plan Carry out cost checks and update cost plan if necessary

Stage C: Outline Proposals

Stage D: Scheme Design

Stage E: Detail Design Stage F: Production Information Carry out cost checks Stage H: Tender ActionThe Surveyors Construction Handbook

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2.1.1.5

VALUE ENGINEERING A value engineering exercise may be carried out on all or part of the design during the design process. (For further details see part 1, section 2 of this handbook.) This might affect both the clients requirements and the chosen design solution and changes would, therefore, affect the budget and the cost plan.

2.1.2 Preliminary cost studies and feasibility studiesG 2.1.2.1 It is recommended, as a matter of importance, that before and during the formulation of the clients brief (Design Stage B: Feasibility), the quantity surveyor, in consultation with other members of the design team and the client, should undertake such feasibility studies as may be necessary to ensure that the clients requirements can be reasonably accommodated within the finance that is available for the project. The clients budget is established as a result of these studies. (See 2.1.3.)

2.1.3 BudgetI 2.1.3.1 DEFINITION Budget is the total expenditure authorised by the client which is the responsibility of the design team at the end of the feasibility stage (Design Stage B). 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) will also need to be established; (b) to provide the client with a statement of the likely area and quality of building, which is achievable within the limit of expenditure; (c) to provide a statement of the recommended methods of construction and of the contractual procedures to achieve the required occupation date; and (d) to provide the client with alternative budgets for different occupation dates and qualities of building, if appropriate. G 2.1.3.3 INFORMATION REQUIREMENTS (a) The ideal requirements from the client and members of the project team to the quantity surveyor are given below. On projects where this level of information is not available, the quantity surveyor should state clearly any assumptions made. It is possible to produce a typical elemental estimate forPage 4 Part 2, Section 1 (05/03) Effective from 1/7/03 The Surveyors Construction Handbook

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a particular type of building from very little information, but it is important to clarify as many information issues as possible before such an estimate is accepted 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, or other 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 the engineering 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 in Appendix 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. G 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 large element 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 budget using the parameters set out under G 2.1.3.5. This can be based on cost information from previous projects, from the RICS Building Cost Information Service (BCIS), other published sources, or on an appropriate cost model. (c) The main elemental quantities of hypothetical buildings can be generated using agreed parameters, to which rates applicable to agreed quality and performance standards can be applied. An example of a method of calculating hypothetical quantities is described in Appendix C to this Section. (d) Once the budget has been established, it provides the first cost plan for the project, and the framework for the actual design to be developed. G 2.1.3.5 STATEMENT OF QUANTITY AND QUALITY PARAMETERS The main parameters which should normally be incorporated in the calculation 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 at least the following: foundations, roof, external walls, floors and vertical 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. G 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 an assessment of inflation is required for more than a few months ahead, a range of probable inflation is best provided. This can be calculated using predictions published, for example by BCIS or the Department of Trade and Industry. The assumptions upon which the prediction is made should be stated. (b) Some clients, particularly in the public sector, have their own inflation controls. Where the client requests that a particular level of inflation be included in the budget, the quantity surveyor should inform the client if he or she believes it to be unrealistic. G 2.1.3.7 COST REPORTING If at any time during the design process it becomes apparent that the agreed budget is likely to be exceeded without the brief being changed, the client should be informed and instructions requested. Likewise, if it becomesPart 2, Section 1 (05/03) Effective from 1/7/03 Page 7


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

2.1.4 The cost plan at outline proposals stageI 2.1.4.1 DEFINITION The cost plan at outline proposals stage is a statement of the probable cost of the project at Design Stage C which sets out the cost targets for the main elements of a building, together with their approximate quantity and quality parameters. OBJECTIVES (a) To describe, together with the outline proposal drawings, the chosen distribution of the resources within the budget to provide a balanced design to meet the clients needs; (b) to set cost targets for the main elements so that, as the design develops, the targets can be checked and adjustments made so that the overall cost of the project 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. G 2.1.4.3 INFORMATION REQUIREMENTS The basic information requirements from the members of the project team to be 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.Page 8 Part 2, Section 1 (05/03) Effective from 1/7/03 The Surveyors Construction Handbook

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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 design team are as follows: (An example of a format for the quantity surveyors report is given in Appendix 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 other consultants: such quality and quantity parameters as relate to their design responsibilities and target costs. G 2.1.4.4 METHODS OF PREPARATION (a) The method of preparation should be appropriate to the level of detail available for each element and may be: the measurement of approximate quantities and the application of rates to the quantities generated; comparison of the requirements with analyses of previous projects of a similar character; use of appropriate cost models; and/or a mixture of the above methods. (b) Evaluation should be made of the alternative forms of construction, or systems, of the key elements, e.g. structural elements, and service installations. The key elements on each project will vary. However, they are likely to be those with major financial consequences, and to include the structural and service elements.The Surveyors Construction Handbook Part 2, Section 1 (4/98) Effective from 1/6/98 Page 9

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STATEMENT OF QUANTITY AND QUALITY PARAMETERS The quantity surveyors statement should include the following: (a) Quantity Confirmation of information provided at budget stage with the addition o