Costs and business planning in construction: Knowledge hub

[edit] Key takeaways

Cost and business planning are vital practices in construction that involve forecasting, controlling, and aligning costs with budgets and business objectives. Different types of cost plans evolve through project stages—from high-level appraisals to detailed final accounts. These plans ensure affordability, cash flow management, and accountability, helping clients and teams make informed decisions and avoid cost overruns.

Designing Buildings hosts a rich number of articles (400+ in the cost/business planning category) covering everything from elemental cost plans to cost–benefit analysis.

[edit] What is cost / business planning ?

Cost planning involves systematically estimating, allocating, and controlling the costs of a construction project over its lifecyclearxiv.org+14designingbuildings.co.uk+14designingbuildings.co.uk+14designingbuildings.co.ukdesigningbuildings.co.uk. Business planning expands on this by integrating project costs with broader organisational strategy, funding, and commercial objectives. It is important because: It aligns design with budget: Helps teams design to cost to ensure outcomes match financial constraints. It helps manage cash flow, monitoring project spending patterns and accurately forecast cash requirements as they come. It helps support decision-making enabling proper evaluation of options through cost–benefit analyses, risk assessments, and investment appraisals. Finally it helps control costs by establishing benchmarks and reporting systems to monitor cost variances and trigger corrective action if and when needed.

[edit] What are the different types of of cost plans ?

Types of cost plans

• Initial cost appraisal (early feasibility & affordability)
• Elemental cost plan (breakdown by building element once brief/design is formed)
• Approximate quantities cost plan (pre-tender, measured quantities from drawings/BIM)
• Pretender estimate (estimated during tender docs preparation)
• Tender pricing documentation (provided to bidders)
• Contract sum & analysis (agreed cost with contractor, then detailed breakdown in D&B contracts)
• Final account (agreed final cost post-completion)
• Whole life cost plan (assesses total lifecycle and operational costs)—though often treated separately

[edit] Why is cost / business planning needed in construction

• Complexity and scale: Construction projects involve multiple phases, numerous stakeholders, and unpredictable variables (material prices, labour availability, inflation, planning delays).
• Avoiding overruns: Studies show infrastructure projects often exceed budgets; structured cost planning helps mitigate this risk arxiv.org.
• Value engineering: Early cost visibility enables targeted value analysis and optimization before construction begins.
• Risk management: Regular cost monitoring identifies emerging cost risks, enabling adjustments to contingency and design .
• Cash flow & financial planning: Detailed cost profiles inform financing strategies, loan drawdown schedules, and funding arrangements.
• Accountability and transparency: A structured cost planning regime with clear reporting ensures clients and stakeholders can monitor spending against approved budgets throughout the project.

[edit] Key articles about Cost / business planning

Below are key articles in this category, that can be found on Designing Buildings, each summarised below:

• Cost plans for construction projects – Introduces the lifecycle of cost plans from feasibility to final account.
• Difference between cost plan and budget – Clarifies that budgets set expenditure limits, while cost plans detail spend allocation.
• Cost control in building design and construction – Describes how cost plans underpin monitoring, reporting, and variation control.
• Construction costs – Defines hard, soft, capital, operational, and wholelife costs relevant to cost planning .
• Order of cost estimate – Covers early affordability assessments using New Rules of Measurement (NRM) standards.
• Cost plan strategy – Explains when and how to develop elemental cost plans within the RIBA stages
• Elemental cost plan for design and construction – Discusses breakdown by element, updating as design evolves
• Approximate quantities cost plan – Covers early quantity tak eoff and pricing for value engineering
• Cost benefit analysis in construction – Details comparing monetary benefits and costs to assess project viability
• Cost consultant – Outlines the role and responsibilities of the specialist preparing cost plans.
• Cost control – Explains techniques and tools for managing costs in real-time.
• Cost monitoring – Covers ongoing tracking of cost performance.
• Budget – Defines budgets and how they differ from cost plans.
• Bills of quantities – Discusses detailed quantity-based cost documentation.
• Pre-tender estimate – Describes cost estimation during tender documentation.
• Tender pricing document – Covers documents provided to contractors for tendering.
• Contract sum – Explains agreed cost between client and contractor.
• Contract sum analysis – Breaks down contract sum in design and build projects.
• Final account – Covers the closing off of project costs post defects.
• New Rules of Measurement – Introduces standard measurement rules (NRM1, NRM3).
• Cost of building – Explains key determinants of building costs.
• Out turn cost – Covers the actual cost incurred at project close.
• Whole-life costs – Discusses long term cost implications beyond initial build
• Life cycle costs – Explores total cost across the asset’s operating life .
• Hard costs v soft costs – Defines direct construction costs versus indirect expenses
• Cost variance – Covers tracking deviations between estimated and actual costs.
• Cost performance index (CPI) – Explains performance metrics in earned value management.
• Cost reporting – Details standards and timing of cost reports.
• Cost-plus contract – Outlines contract type where costs plus fee are reimbursed.
• Contingency – Discusses allowances for uncertainties and risks in cost plans.