What role does cost data play throughout the project lifecycle?

While it’s often said that every construction project is unique, there’s one thing every successful built environment project has in common – reliable cost data.

From initial budget estimation to pre-tender estimates and progress monitoring, reliable cost data plays a fundamental role in decision making that is based on verifiable information, rather than guesswork or optimistic estimates. This has become even more important in a post-Covid environment, where the industry continues to weather the impact of materials and supply chain issues, as well as high inflation and economic volatility. Here, we identify the role independent, reliable cost data plays in helping teams to ensure their resources are deployed as efficiently and effectively as possible.

A solid start

Construction professionals are faced with one inescapable challenge from the outset of any project. The decisions they make in the early stages will usually have the most significant impact on final outcomes, yet these initial decisions often occur when information is most limited.

If robust cost data is used in the early stages of a project, it can reduce the risk of costly design adjustments further down the line. Data that’s based on, for example, verifiable elemental costs eliminate the chance of overly-optimistic guesswork, helping to build trust and confidence from the start between the relevant stakeholders.

With this data at their fingertips, teams have the information they need to:

• carry out realistic feasibility studies (that analyse the financial, technical, and legal viability of a project) and set credible verifiable budgets
• allocate more reliable estimates for contingency funds and risk profiles
• compare design options with confidence, identifying cost implications to ensure projects are aligned with client priorities throughout
• identify potential issues early, when adjustments are typically less expensive
• have greater transparency around appropriate funding, without uncomfortable surprises for stakeholders.

Benchmarking as the design develops

With access to reliable, robust cost data, the process of benchmarking – integral to the success of any project – becomes far easier. A core principle is ‘designing to a cost’ rather than ‘costing a design. This involves setting a clear budget at the outset and designing the project within that constraint. Quantity surveyors will develop cost plans using BCIS elemental cost breakdowns to establish target costs for major building elements and BCIS project analyses to help evaluate cost implications of alternative materials and systems.

This is especially useful for the refinement of schematic design with more detailed systems and materials and value engineering – cost optimisation, while maintaining project objectives. This helps to ensure that target costs and design choices are aligned with the budget. This approach continues through the project’s lifecycle, as the cost plan is adjusted to reflect design changes, helping to prevent scope creep and avoid uncontrolled cost increases.

Pre-construction phase

Benchmarking also empowers clients to challenge costs presented to them, and make better-informed decisions, based on cost verification. Often, they rely heavily on external consultants for cost estimates and lack their own body of knowledge. But access to their own reliable cost information means they can spot anomalies immediately in pre-tender estimates. For example, if a contractor’s estimate for concrete foundations or steel reinforcement is 30% below benchmark expectations, it’s possible to investigate whether they’ve found genuine efficiencies or have potentially misunderstood the scope. This prevents both expensive change orders and potential quality compromises later, meaning stakeholders have the knowledge they need to make more confident decisions, backed by solid, comparable data.

Benchmarking and effective cost estimating can also help with planning the allocation of resources throughout a project, which is indispensable for financing. For example, verifying costs reduces the risk of taking out an unnecessarily high loan that incurs interest – particularly important for an industry that’s increasingly reliant on effective cash flow management.

Make it specific

However, it’s imperative the data is drawn from construction-specific indices that relate to specific building types, location factors, and current market conditions; this will help to ensure the budget is realistic and can be verified. This is particularly important given the series of unforeseen events have seen inflation rocket to extremely high levels across the globe, especially within the last five years. It’s rises in the Consumer Price Index (CPI) that tend to hit the headlines. But national statistics and construction-specific BCIS indices demonstrate that inflation has had an even more adverse impact on many aspects of the construction industry.

Compared with January 2020, in the BCIS Price Adjustment Formulae Indices (Building) Series 3, there was an increase of 86% in the Concrete: Reinforcement index by June 2022, and of 42% in Softwood Carcassing and Structural Members by October 2021.

If construction-specific data is used early in the project, costly overruns can be avoided as it’s easier to adjust building designs in the design phase – for example, data can help with assessing and choosing the most appropriate components, elements or materials for a specific function to ensure they’re in line with the project’s design requirements. It can also help to rein in the more extravagant demands a client might have. For example, a glass facade may add instant sophistication to a building, but it could also exceed budget, prompting important questions such as: ‘will the aesthetic value be worth the investment, or should we explore alternatives?’

This process can also be carried out in tandem with lifecycle costing to identify the level of repair and maintenance needed as well as analysing long-term savings from upfront costs – for example, a £200,000 upgrade to a heating, ventilation and air conditioning system could significantly reduce long-term operational costs, potentially saving substantial costs and reducing client risk.

During construction – making the most of resource management

Once the construction phase is underway, independent cost data is integral to cost management. It is especially important for establishing and verifying costs associated with change orders that frequently occur with most types of projects. For example, when designs are altered or clarified as well as revisions to the scope of work. It’s also important for resource management, as it helps to ensure there’s enough labour in specific locations and that the budget is adequate for the specific skills required. While the cost of materials has been impacted by the rise in energy prices and supply chain challenges, the availability of skilled labour remains a systemic challenge for the construction industry, adding considerable pressure to wage growth for all trades.

Reliable cost data can also help to optimise construction programming, ensuring timely arrival and handling of materials and that equipment and plant are scheduled for minimal downtime and maximum use. Efficiencies that minimise waste in every sense all translate directly to the bottom line.

Lasting value

After the construction of a building or a project has finished, historic project cost data proves invaluable for creating reliable benchmarks for future projects and analysing performance to identify opportunities for improvement. Additional insight can also be gathered from data concerning the impact of initial design choices against lifetime operational costs; specifically, whether the upfront costs were worth the investment. This will become increasingly important as demand grows within the industry for whole life carbon assessments (WLCAs). In 2024, a survey by the construction consultancy firm RLB⁽¹⁾ found 33% of contractors reported that tenders included the obligation to provide a whole life carbon assessment; a substantial increase from the 14% reported in 2023. It’s likely this number will continue to grow as calls to mandate Part Z into existing building regulations – in part to ensure the government reaches its 2050 net zero targets – grow stronger.

Increasing the pool of data can help all of the construction industry to garner insight and knowledge. But it can also bring individual benefits to organisations too, as they can compare their performance with the wider industry.

And finally, looking beyond to the operational phase of a project, BCIS data can help with informed facility management decisions, ensuring professionals can plan for maintenance and refurbishment with confidence.

Conclusion

From the earliest planning stages to post-construction facility management, reliable cost data is a critical asset throughout a project’s lifecycle. It empowers stakeholders to make data-driven decisions that enhance efficiency, optimise resources, and minimise costly overruns. Access to data makes the process of measuring and reporting easier and feeds naturally into the appropriate allocation of resources, helping to ensure they’re used responsibly and economically.

In a volatile construction landscape marked by inflation, supply chain disruptions, and skilled labour shortages, cost data serves as a safeguard against uncertainty. It enables project teams to benchmark estimates, refine designs in real time and validate tenders – ensuring projects stay on budget and remain aligned with stakeholder goals. Furthermore, by integrating lifecycle costing, cost data allows decision-makers to weigh upfront investments against long-term operational savings, striking a balance between initial capital expenditure and ongoing maintenance costs.

Beyond financial considerations, it’s now possible to combine cost and carbon data. As WLCAs gain traction and regulatory frameworks evolve, the ability to assess both cost and carbon will become increasingly important in the built environment. Reliable, independent data not only supports sustainable decision-making choices but in doing so, potentially helps organisations future-proof their projects against tightening environmental regulations.

In today’s complex economic environment, professionals who have reliable cost data in their arsenal are more able to design and construct within budget, maximising value for all stakeholders. In an industry operating within tight margins, this isn’t just a nice to have, it’s essential.

To keep up to date with the latest industry news and insights from BCIS, register for our newsletter here.

^{(1) RLB – Procurement Trends Report 2024 – here}