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1.

Overview of module
Welcome to this introduction to module QSP7BEC: Building Economics.

This module will provide you with a comprehensive understanding of commercial aspects of a
construction project during the pre-contract phase including costs, financing, value management
and cost control and, where applicable, the profitability of development opportunities.

This will be considered from the point of inception of a construction project and through the pre-
contract phase. In addition, building maintenance management will be considered, as this has
an impact on advice provided during the pre-contract phase of a project.

Case studies will be used to show how the various topics relate to construction projects, initially
looking at construction economics using case studies relating to the pre-contract phase and the
cost advice offered by a cost consultant. We will then focus on development appraisal when the
financial viability of a proposed development is considered. Activities relating to case studies will
provide you with the opportunity to practically apply the theory you have learned.
Module content
The topics we will cover are detailed below and are split over 14 teaching weeks. Each week
you will be provided with a weekly overview, which will provide guidance about all study
resources and activities for that week. During this module you will study:

Week Contents
1 The pre-contract roles of the project team
The briefing process
Introduction to BIM
Value for money
Value management and value engineering
Case study activity: prepare for a meeting
2 What are group elements and elements?
Design factor(s) that affect the cost of major building elements
An introduction to pre-contract cost control
3 Sources of cost information
Order of cost estimating
Cost planning
4 Case study activity: Pre-contract cost control task 1
Case study activity: Pre-contract cost control task 2
Case study activity: Pre-contract cost control task 3
5 Pre-contract cost control – the positives and negatives
Case study activity: Pre-contract cost control task 3 cont.
6 Consolidation week
7 Assignment Preparation Week
8 Activity: What are the difficulties of pre-contract cost control?
Activity: What are the three key benefits of precontract cost control?
Activity: BIM, cost consultants and pre-contract cost control
Life cycle costing
Impact of design and use of buildings on life cycle costs
9 Case study activity: Life cycle costing
Activity: Sustainability
10 Finance for development – principles
The Private Finance Initiative (PFI)
Activity: The impact of sustainability on property development
11 Introduction to valuation and real estate development
The relevance of valuation
Assessing the demand for development
Who are the parties involved in a development?
What are the stages of the development process?
Development of a residential estate – what needs to be considered?
12 Study break
13 Study break
14 The five methods of valuation
Activity: RICS Valuation Information Paper 12: Valuation of development land
The five methods
The residual method of valuation
Which method and why?

15 The Residual – A worked example


Activity: Sources of cost information: Income
Activity: Producing a residual on excel

16 The Residual - Critique


Exercise - The pros and cons

17 The Residual – Sensitivity analysis


Why bother with sensitivity?
Exercise – What are the risks?
Exercise – Which is the most sensitive?
Viability by residual
Assessing the risk
18 Consolidation week

19 and 20 Revision
It is not possible to allocate a full week to each topic, and in many cases you will work on more
than one topic during a week, or complete a topic over two weeks. It is important, therefore, to
seek guidance from the weekly overviews as to what to study in each week.

Case study information will be provided in the appropriate weeks, providing specific details
about emerging situations.

3. Module aims
The aims of this module are to:

 comprehensively examine the provision of cost advice provided during the pre-contract
phase of a construction project;
 evaluate the cost impact of sustainability on projects;
 critically appraise development opportunities
4. Learning outcomes
Knowledge and understanding
At the end of the module, you will be expected to demonstrate:

 knowledge and critical understanding of the production of a development appraisal;

 knowledge and comprehensive understanding of the techniques used in the provision of


cost advice provided during the pre-contract phase of a construction project;

 knowledge and critical understanding of how design solutions impact on initial and life cycle
costs and the methods used to establish such costs;

 knowledge and comprehensive understanding of the impact that sustainability has on


construction projects through the use of value engineering and life cycle cost exercises.

Cognitive skills
At the end of the module, you will be expected to:

 define, investigate and analyse commercial aspects of a construction project encountered


during the pre-contract phase;
 appraise possible solutions relating to commercial aspects of a construction project
encountered during the pre-contract phase.

Practical and professional skills


At the end of the module, you will be expected to:

 integrate theory and practice to allow appropriate recommendations to be provided on


matters relating to the commercial aspects of a construction project during the pre-contract
phase.
Key/transferable skills
At the end of the module, you will be expected to:

 communicate effectively with stakeholders in the context of commercial aspects relating to


the pre-contract phase of a construction project.
5. Learning approach
This module takes a broadly problem-based approach to learning and it is assumed that you will
have the ability to progress rapidly with your study, having previously completed a degree. At
postgraduate level, you are expected to be able to be critical, make sound judgements, and be
self-directed and original in solving problems. Additionally, you should be able to act
autonomously, exercise personal responsibility and be an informed decision-maker. Remember
that a problem exists only where there is a gap between what should be and what is.

This module aims to take you rapidly through some of the activities involved in preparing a
development appraisal and also in providing pre-contract cost advice. The learning activities
draw on real-life situations commonly found within surveying and cost consultancy. Your own
workplace may not provide you with personal experience in all aspects of the course, depending
on, for example, whether you work for a contracting organisation or in a consultancy practice.
However, by using the discussion forums, everyone will gain from learning from each other’s
experiences. A variety of learning activities has been created for this module; each seeks to
help you develop your understanding of the context of costs and contract administration relating
to construction projects:

 Case study and scenarios: The case studies included in this module may be based on a
real-life development site or be hypothetical. You will be expected to identify any problems
or difficulties with the information provided and develop solutions, as would be the case in
the real-life working environment.

 Quizzes: These are a series of electronically delivered questions which provide feedback in
response to your answers and are designed for self-assessment. They allow you to check
your understanding of the supporting concepts and theories that you should be
knowledgeable about on completion of blocks of study.

 Workplace experience: As this is primarily a subject that relates to practical aspects of


development appraisal and construction economics, you will be able to draw upon your own
experience in the workplace and the experiences of others, through online discussions.

 Personal skills: Activities require you to use or develop your own transferable skills. You
will, for example, be expected to surf the Internet to broaden your knowledge base.
 Reflection: This is an essential part of professional development. You should develop the
habit of critically examining practice in both a formal (academic) and informal (workplace)
sense.

Effective learning results from a process of visiting and revisiting theories, concepts and ideas.
Thus, knowledge and understanding developed through earlier activities should be applied to
later ones, where this is appropriate.

6. Learning activities
Details of the individual activities for this module are given in the weekly overviews – these
schedule the learning activities and indicate when each should be completed. You may
complete them ahead of time, but it is worth checking back on an activity as other students will
make valuable contributions to activities which you will benefit from reading.

You should make every effort not to fall behind schedule, otherwise your assignment may not
be completed by the due date and your later studies may be affected.

Before starting to study for this module, you should plan when and how you are going to set
aside time to complete the required tasks for each week. The weekly overviews indicate a
suggested time for each activity, to assist you in planning your studies. This includes both the
time to complete the activity and the time to study the supporting reference papers or other
resources. However, it must be remembered that everyone reads at different speeds and if you
are, for example, a slow reader, you may require more time than has been indicated.

If you finish an activity sooner than you expect, it is best to move on to the next as soon as
possible rather than take time off, as this gives you some contingency time to fall back on
should a later activity require more time than anticipated
. Module teaching and learning tools
A variety of teaching and learning tools will be used, including:

 weekly overviews;

 study papers and e-books;

 links to internet resources;

 e-learning resources;

 VLE discussion forums;

 videos;

 self-assessment quizzes;

 webinars – scheduled across various weeks and prior to the submission of your assignment
and the examination.

8. Further reading
A concentrated course of study, such as this, can only direct your attention to the key
issues, techniques and elements of practice that you should be knowledgeable about. In
general, the learning resources supplied with this module are sufficient to enable you to
appreciate the theory and application of construction economics.

You should not feel restricted from widening your enquiry beyond the study material supplied,
and additional reading is highly recommended. For example, when considering the various
activity topics, it is recommended that you look for additional information on the Internet. You
are encouraged to share relevant Internet addresses in discussion forums on the VLE and
discuss your views of the articles you have read.
For a deeper understanding of contemporary issues, it is recommended that you read
publications such as Building magazine, The Architects’ Journal and Construction News – all
have websites and some allow you to sign up to receive free newsletters via email.
The Construction Management and Economics journal (published by Routledge) is another
good source of additional information (see the e-Library section on the VLE).

The Internet is an important source of information, with many websites offering authoritative
information to professional practitioners. Websites set up by professional institutions, trade
bodies and government departments, as well as consultants and suppliers, provide useful
references and information. The e-Library on the VLE provides weblinks for many important
organisations and sources of data.

Research using such additional sources is not obligatory for completion of this module, but
tutors will note the inclusion of information taken from sources beyond the course materials
issued. Where relevant, your assignment answers may make reference to sentences, sections
or parts of the study materials, other textbooks or periodicals that you have used in researching
the assignment. However, your attention is drawn to the need to avoid plagiarism. Details of
how to reference correctly and acknowledge source materials, to avoid charges of plagiarism,
are provided in the ‘Study skills’ section on the VLE.

9. Summative assessment
Assessment Weighting
Assessment 1: A 2,000 – 2,500 word assignment to be submitted by a due date as 30%
timetabled
Assessment 2: Examination – 3 hours sat on completion of study 70%
Pass mark: 50%