The Benefits of a Detailed Cost Plan

Six Ways to Gain Better Service and Added Value from your Supply Chain and Consultants

We at MPL took a long, hard look at our role within the supply chain and, by examining key projects over the past two years, we have identified some real, tangible ways of reducing costs to our customers, whilst increasing their service levels.

To illustrate our findings we’ll use a project valued at £1,000,000.

1. Feasibility and Project Definition

It is at inception stage, when budgets are set and project plans are defined, that the feasibility definition is most important. This is produced prior to any application for funding, but the production of outline designs and detailed cost plans are vital – many projects suffer from false economy at this stage. The MPL detailed cost plan production service provides significant benefits:

• More robust and reliable cost forecasting, which gives confidence to funders and results in less conditional authorisation by funding boards
• Accurate detailing of final users’ needs, which engages them in the sign-off process, offers less avenue for change and avoids the scope creep that is caused by generic, outline cost plans.
• Change Control is more defined and better managed when tied to a detailed cost plan.
• The implementation team is better informed through a comprehensive, detailed briefing document.

The MPL detailed cost plan production service:

• Does NOT require detailed drawings or significant front end design
• Can be produced for no additional cost to that of a generic cost plan.

On our £1M project, accurate costing saved the supply chain 0.15% as well as the subsidiary benefits of reduced project administration and financial substantiation.

2. Cost Certainty

Once fund authorisation has been granted, cost certainty is essential for accurate budget management and mitigation of risk.

MPL uses RIPAC, the live, interactive cost database, which interrogates an exhaustive list of current, comparable projects, to provide accurate benchmarking and forecasting for even the most complex projects. The cost plan resides within RIPAC throughout the life of the project and is constantly monitored so that it is always up to date. The level of detail enables structured value management to be undertaken at any time with the ability to comprehensively review options and defined products. Our experience in market pricing has been gained through completing measurement and pricing for medium and large contractors who rely upon our skills to tender more effectively.

3. Accelerated tender process

The detailed cost plans MPL produces at feasibility stage become the central tool of the project. As the design changes and adapts, so does the cost plan. RIPAC reacts to changes in the cost plans making it easy to produce a measured schedule of quantities for a contractor to price at tender stage. Typically we reduce the time required to go to tender from 2–3 weeks to 3-6 days.

Using MPL’s method, contractors obtain realistic prices and return tenders more quickly and confidently as they do not need to produce their own measured schedule of quantities and works for subcontractors to price, tenders therefore go straight to market, providing the client with more competitive and comprehensive prices. MPL can produce detailed recommendation reports within 48 hours ready for client approval.

On our £1M project we achieved feasibility through to tender recommendation within 5 weeks rather than the 8 weeks typically encountered using outline cost planning

4. Supply Chain Savings

MPL detailed cost plan service, when used from feasibility stage and for the production of a detailed schedule of quantities for the contractor, offers the client transparency on pricing, reduce the client’s workload, gives the contractor accurate quantity data (KPI of 95%) and speeds up the subcontracting process. Return tenders are similarly more consistent, greater pricing integrity and more competitive because the supply chain has been provided with the opportunity to provide their best price.

The tendering process for each contractor can cost between £1200 and £1500. Based upon six tenderers the MPL cost plan saves the supply chain £7500.

On our £1M project the additional supply chain savings equate to 0.75% as well as the subsidiary benefits of greater cost surety, better prices and reduced risk.

5. Cost Database

Project cost data from over 60 construction projects ranging up to £12M shared with the client enabling them to

• Produce accurate and realistic budgets
• Benchmark across projects and compare with other organizations
• Provide auditable tender to out-turn costs, which can be performance monitored
• Form the basis of standardization of design and details matched to a price
• Better control future budgetary spending by profiling a portfolio of projects through to completion within a single database

A database of costs with a value of £10M per annum would be expected to cost 0.1% of contract value. Minimum saving for maintaining a database would be £1000 which is already absorbed into the cost of delivery.

6. Whole life costing using modeling data from Client assets, reducing total Client expenditure.

MPL will produce a whole life cost model at the earliest stage of project appraisal so that the real and ongoing cost of the project can be identified and addressed from the earliest design stage. Using RIPAC, MPL will interrogate a range of databases, work with the client’s asset/maintenance/estates departments and produce a forward maintenance plan and budget. Future proofing the project’s financial control

7. Time is money – and MPL can save you both time and money

MPL can deliver direct monetary benefits to the supply chain, conservatively estimated as a 1% of contract value ultimately saving the client £10,000 for a £1M project. The subsidiary benefits are:-

• Better project definition and client sign off.
• Tighter budgetary control from feasibility to out-turn.
• Significant programme savings.
• Reduction in whole life cost.
• Reduced administration and management time.