Managing the Development of Building Projects for Better Results

First published in 1981, updated for web presentation, Dec. 2000

Introduction | Principal Parties | Project Plan | Improving Performance
Project Life Cycle | Bar Chart Schedule | Manpower Loading Data
Information Explosion | Final Cost | Design Stages | Cost Effectiveness
Choices | Construction Costing | Value Management | Design Review
Cost of Building Ownership | Practice and Value Management | Summary

Construction Costing and the 1/10th of 1% Rule

So, the "micro" level for cost monitoring, reporting, and controlling purposes during construction may be set at 1/10 of 1% of the total project construction cost as a good rule of thumb. That is, this is the minimum value that would be set to show up as a separately coded item in the routine cost reports. Conversely, items that exceed, say, 2 1/2% would be required to be broken down once more. This approach leads to more balanced items in the cost report, with a total of around eighty items being reported, which is manageable - especially when segregated by trade.

For example, for a building project with a construction budget of $10 million, the cost reporting structure would be set up to code items of not less than $10,000 and not more than $250,000. Such guidelines help considerably in developing initial budget strategies and maintaining balanced judgment during the life of the project.

So, in evaluating design alternatives in the earlier planning phases, a lower limit of significance might be set at say 2 1/2%. Hence, in the example given above, in comparing the merits of design alternatives of elements in the $250,000 range, differences of $6,000 or more would be considered significant and worth pursuing. This assumes, of course, that the design team has been diligent in maintaining a reasonable and consistent level of cost consciousness.

Making the Right Choices  Making the Right Choices

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