Last edited 07 Aug 2018

Initial cost appraisal for design and construction

Initial cost appraisals are carried out without the benefit of a design for the project. They include client costs that may not feature in later cost plans and as a result will almost certainly need input from the client's finance director or financial advisers.

Once the initial cost appraisal is completed, the client will decide the scope of costs that will in future be monitored by the cost consultant and those that will be monitored and controlled by the client organisation.

Initial cost appraisals break down the overall project budget based on information provided by the client, an analysis of comparable projects and the experience of the cost consultant.

Initial cost appraisals might include:

Assumptions about the nature of the project, identifying variables. This will include a guestimate of gross internal floor area and a rate psm to be applied from a range of historical data. Repetition with standard solutions carries with it cost efficient options. For more information, see Cost of building.
Inclusions and exclusions.
Look at location and site constraints. Central London will attract a premium. Ground conditions and proximity of neighbouring buildings affect costs.
Adjust for market conditions.
The building's function and facilities influence design loadings, floor to floor heights and and structural spans which may affect costs. Special spaces with acoustic or vibration control will attract a premium.
State the procurement route as an assumption.
Land costs and purchase prices.
Book value.
Legal fees (including vendor).
Agent fees (including vendor).
Stamp duty.
Site investigations and surveys.
Demolition.
Consultant team fees including expenses and unusual items such as models.
Running costs.
Building and infrastructure costs. At this stage building and infrastructure costs should be set on an overall unit basis, based on comparable projects, with assumptions relating to different types of areas and abnormal items. Units costs could include the number of; dwelling units, parking spaces, rentable area, hotel bedrooms, hospital beds, prison cells, and so on.
Fixtures, fittings and equipment.
Relocation / migration costs.
Promotion and marketing.
Capital gains tax.
Corporation tax.
Irrevocable VAT.
Planning fees.
Building control fees.
Void costs.
Insurance.
Establishment costs.
Funding costs.
Capital allowances.
Grants.
Inflation escalation.
Operational and whole-life cycle costs.
Allocation of contingencies sum.