Should Cost modelling: The impending end of design pricing approach in corporate real estate delivery

Abstract

In many industries it is widely recognised that the cost of the product is an important strategic factor that should be decided by management rather than by designers. However, the prevailing, traditional approach to cost estimating and modelling in the construction industry consists of a bottom-up cost estimate based on the proposed design, followed by a value engineering exercise to bring this cost estimate closer to a pre-set development budget. The direct result of this reactive ‘design pricing’ approach is a costly redesign process and design programme overrun on the project. This traditional approach to delivering projects is progressively being replaced by a proactive, top-down form of cost analysis that influences the entire development process from the start: Should Cost modelling. This cost modelling methodology revolves around establishing key commercial success criteria and efficiency ratios for all asset components, allowing the resources to be allocated where they generate the greatest value before the design commences.