Construction Economics – Development Appraisal.
MLO1: Critically analyse the key strategic technical, legal, and financial frameworks and theories underpinning construction development and procurement.
MLO2: Critically appraise and evaluate the tools and professional procedures used in the cost management of construction projects.
Intellectual / Professional skills & abilities:
MLO3: Critically analyse information, identify solutions, demonstrate judgement, and communicate findings.
MLO4: Apply appropriate professional practices to complex contemporary development scenarios at different stages of the procurement process.
Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):
MLO5: Demonstrate the capacity for independent, evidence–based thinking and
decision–making.
The client has provided the necessary data and appointed you as the consultant to appraise the development option.
The data provided by your client are as follows:
Land Price = £550,000
Construction Area (GIA) = 4000m2
Expected tender date = February 2021
Construction Period = 2 years
Pre–build Period = 1 year
Letting Void = 1 year
All Risk Yield Based on the Market Value = 5%
Task 1 – Order of Cost Estimate
Prepare an Order of Cost estimate for the proposed new build using the information
provided. No drawings are available at this early stage. The building is expected to be two storeys, on a brownfield site which will require new road access, car parking, pavements,sports fields, drainage, fencing and landscaping.
Instructions
Collect 3 samples, each of minimum of 30 suitable cost analyses, from BCIS online
database. Each sample should be based on a different set of BCIS search criteria, for
example, ranges of floor areas and number of storeys etc.
Compute average building cost (£)/m2, Standard Deviation and Confidence Intervals of each selected sample.
Select the sample with the narrowest Confidence Interval and use this to produce the Order of Cost Estimate.
State your BCIS search criteria (you can use relevant downloads from BCIS as
evidence) and state any assumptions you make in preparing the estimate.
Task 2 – Whole Life Costing
The client is interested in exploring an alternate design option (Design B) that will allow a better energy efficiency rating to be obtained by the building. In line with its commitment to sustainability, the client is especially concerned with reducing its whole life carbon emissions.
The client, however, is wary of the risks associated with each design option and would like to know which option offers the best value for money in terms of life cycle cost.
Conduct a Whole Life Cost study using the data below to appraise the options below and prepare your advice to the client. The expected life of the building is 60 years.
Where major renovations or demolition is scheduled, it should be assumed that general repairs will not take place that year.
Design A
Description Traditional lighting and HVAC fittings
Gross Floor Area 4000 m2
Construction cost Cost per m2 from Task 1
General repairs 1% of initial capital cost (every 5 years)
Major renovations £200,000 (every 15 years)
Running cost £50,000 per annum
Design B
Description Low energy internal light wells and programmable
controls and thermostats
Gross Floor Area 4000 m2
Construction cost Additional 10% of cost per m2 of Design A
General repairs 0.5% of initial capital cost (every 7 years)
Major renovations £400,000 (every 25 years)
Running cost £30,000 per annum
Task 3 – Development Appraisal
You are required to appraise the proposed development and produce a development
appraisal with necessary recommendations in light of assisting client to decide whether to proceed with the development.
In addition to the above data, you are required to make sensible assumptions for the following
variables.
Rental rate
Purchaser’s costs
Professional fees
Developer contingency
Promotion/marketing of the finished development
Letting Fees
Finance (interest) rate (for both land purchase and construction costs)
Associated other cost items
Indicate all sensible assumptions and provide evidence that you have used to make these assumptions.
Task 4 – Evaluation and Recommendation
Provide a logical and thoughtful evaluation of the project based on the calculations and evidence presented. Consider potential issues around building design, early estimation, environmental impact, potential risks, and finance including taxation affecting this development. Synthesise these important points and provide recommendations that are aligned with the findings of the study.
