RICS draft professional statement - Cost prediction

Glossary

 

The following terms relate to this professional statement. They do not include legal orother matters as defined in relation to local legislative or regulatory requirements.This glossary should be read in conjunction with the current edition of ICMS.

Baselining

The recording of early project estimates so that they can be compared to actual results later.

Bills of quantities

A list of items giving detailed identifying descriptions and firm quantities of the work comprised in a contract.

Client

The legal entity who pays for the works and services provided. The term 'client' has been used throughout the professional statement to represent the project sponsor/employer/owner/agency/operator, but could also include senior management in a funding, contractor, or other organisation.

Complexity

The number of elements, their interactions and the strength of impacts of a defined system with regard to decision making.

Contract sum

The consideration that the employer or owner pays the contractor for the works, and any design as defined in the contract.

Cost

The expense incurred in acquiring a facility, product, or service from a provider. Generally, the terms cost and price are used interchangeably throughout the construction sector. The cost is the direct and indirect costs of production, while the price is the price paid by the client for the facility, which includes the profit element.

Cost-benefit analysis

Analysis that quantifies in monetary terms as many of the costs and benefits of a proposal as feasible, including items for which the market does not provide a satisfactory measure of economic value.

Cost prediction

The prediction of a construction price or cost, where 'prediction' is defined as 'an assertion on the basis of data, theory or experience, but in advance of proof'. A prediction is a specific statement about when and where something will happen. In terms of this professional statement it is used as an umbrella term and it can commonly be taken to mean benchmarking, estimating and cost planning, for both a consultancy and/or a contractor, or other organisation, across building and civil engineering.

Final account

See out-turn cost.

ICMS

Collaborative, high level, international standards for cost reporting and data collection developed by the ICMS coalition (www.icms-coalition.org). The second and current edition, incorporating life cycle costs, was published in September 2019.

Indirect costs

Indirect costs are often fixed (e.g. the cost of bringing accommodation to the site) or time-related (e.g. the cost of insurance or security personnel). Fixed costs should be itemised, and their cost prediction based either on contemporary quotations or historical actual costs.

National cost measurement standards

Detailed cost measurement standards developed at a national level, e.g. New Rules of Measurement (NRM) for the UK.

Out-turn cost (also known as 'final account')

The known cost at the end of a project. Generally, it refers to the actual, total construction cost calculated at the end of the project, which includes the effects of any changes made to the design and the impact of any disruption. It may also refer to the costs incurred over a defined period.

Price

The amount a customer pays for a product or service or the 'asking' price of the seller, which may include profit.

Parametric estimate

A parametric estimate is an estimate of cost, time or risk that is based on a calculation or algorithm and uses historical data.

Principal contractor

The contractor appointed by the client to coordinate the construction/site production phase of a project, which may involve more than one contractor.

Project management

Planning, organising, monitoring, controlling and reporting of all aspects of a project, and the motivation of all those involved in it to achieve the project objectives.

Quality

A set of inherent characteristics of an object fulfils requirements (EN ISO 9000-9001-9002).

Range estimate

An estimate of the likely highest and lowest costs of a project. Single point predictions do not always reflect the variability in the cost prediction.

Re-basing

This includes using cost indexes to update to a common time base, or location indexes to cater for the impact of location on the cost.

Regulatory requirement

Obligatory requirement specified by an authority mandated by a legislative body.

Risk

A probability or threat of liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, errors or oversights and that may be avoided through pre-emptive action

SMART approach

A guide in the setting of objectives which can be used in cost prediction: Specific/standardised; Measurable or manageable; Assignable or achievable/acceptable/accurate/affordable; Realistic or relevant/reliable/reasonable/responsible/risk-aware; Time-related or timely/transparent /traceable/testable.

Statutory requirement

Obligatory requirement specified by a legislative body.

Tender

A commercial offer including contract conditions under which construction work will be carried out. The contract will state how payment for the work is to be calculated.

Acronyms

AACEi

Association for the Advancement of Cost Engineering International

AIQS

Australian Institute of Quantity Surveyors

BCIS

Building Cost Information Service

CESMM

Civil Engineering Standard Method of Measurement

CITE

Construction Industry Trading Electronically

BIM

Building information modelling

ICMS

International Construction Measurement Standards

IFC

Industry Foundation Classes

IPMS

International Property Measurement Standards

ISO

International Standards Organization

NRM

RICS New Rules of Measurement

NZIQS

New Zealand Institute of Quantity Surveyors

OECD

Organisation for Economic Co-operation and Development

PESTLE

Political, economic, social, technological, legal and environmental

SMART

Specific, manageable, assignable, realistic and time-related

UN/CEFACT

United Nations Centre for Trade Facilitation and Electronic Business

 

Mandatory requirements

RICS members and RICS-regulated firms producing a cost prediction report for a client must adhere to the following principles.

Produce a reliable prediction appropriate for the needs and best interests of the client, the complexity of the project and the project stage.

As well as any specific contractual or company requirements, provide a table of costs and key values and attributes in accordance with the requirements of ICMS.

Provide the sources of the data on which the cost prediction is based and a commentary on the reliability of the data.

Identify the key assumptions, including timing and methodology constraints, made in deriving the predicted cost and the grounds for making them.

State the change in predicted cost since the last report, and the reason(s) for the change.

Provide an estimate of the accuracy of the cost prediction and how this can be improved.