Purpose of preparing a cost plan

Cost planning determines the fiscal feasibility of a construction project. After the owner has set a maximum cost, cost planning will determine whether that cost cap can be met. If not, the project is not feasible in its current state and should be reworked to reduce costs. Cost planning informs the owner exactly when finance installments will be needed, so the owner can keep current with billings.

Cost planning typically involves two features. The first is an overall budget for the project. This is the total amount that the project is expected to cost. This amount is based on the current project scope and design and can be determined through various types of estimates. The second feature of cost planning is the allocation of costs over time. This involves predicting when along the project schedule costs will actually be incurred and paid.

The general advantages of cost planning include the following

· The tender sum is more likely equate with the approximate estimates.

· There is less possibility of addendum bills of quantities being required

· Cost effectiveness and a value for money design are more likely to be achieved.

· A balanced distribution of expenditure is likely to produce a more rational design

· Cost considerations are more likely to be taken into account because of the greater involvement of the quantity surveyor during design process. This will result in the BOQ preparation becoming easier, since the quantity surveyor will be more familiar with the project and have a greater understanding of what the designer is attempting to achieve.

· The amount of pre tender analysis by the architect and quantity surveyor should enable more decisions to be taken earlier, resulting in a smoother running of the project on site.

· Cost planning provides a basis for comparing different projects.

The aims of cost planning are as follows

· Ensure that the client’s cost limit is not exceeded- The client should be aware of any financial differences due to design change. Addition to that the QS should control and have to do proper cost check to ensure that the client’s limits are not exceeded.

· To establish a realistic cost limit which is determined by client’s availability of money , market demand, consultant’s estimate

· Ensure that the client obtain good value for money

ü Design is economical: Standard amenity, finish and equipment specified by client at the least cost consistent with good design.

ü Rational realistic distribution of money spent on the design.

ü No need to spend whole money offered by client, if suitable standard can be achieved for less cost.