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Why do the design stage elemental cost plan and final tender sum differ in New Zealand?

Johnson Adafin (Department of Civil & Environmental Engineering, The University of Auckland, Auckland, New Zealand)
James O.B. Rotimi (School of Engineering, Auckland University of Technology, Auckland, New Zealand)
Suzanne Wilkinson (Department of Civil & Environmental Engineering, The University of Auckland, Auckland, New Zealand)

Journal of Financial Management of Property and Construction

ISSN: 1366-4387

Article publication date: 3 August 2015

1361

Abstract

Purpose

The aim of this study is to investigate the reasons for disparity between design stage elemental cost plan and final tender sum (contract sum) in building procurement. A number of risk factors responsible for such variation were identified through case study projects from which data were extracted.

Design/methodology/approach

Literature review determined the risk factors inherent in the preparation of design stage elemental cost plan. Interviews and thematic analysis identified the risk factors responsible for the disparity between design stage elemental cost plans and final tender sums. Analysis of documents obtained from the archives of study participants (consultant quantity surveyors) complemented responses from the interviews.

Findings

The review revealed a number of inherent risks in the design stage elemental cost plan development. The interviews further indicated that risks have an impact on and are responsible for the deviations experienced. The assessment of these risk elements could assist in determining the final tender sum from cost plans.

Research limitations/implications

Findings revealed disparity between elemental cost plans and final tender sums in the region of −14 and +16 per cent. The risk factors identified were responsible for the deviations observed. With this information, Quantity Surveyors are more able to accurately forecast final tender sums of building projects from cost plans through proper risk identification and analysis, thus increasing the accuracy of design stage elemental costing.

Originality/value

To the best of the knowledge of the researchers, there is no recent documentary evidence of an investigation into the reasons for disparity between design stage elemental cost plan and final tender sum in traditional building procurement in New Zealand construction.

Keywords

Citation

Adafin, J., Rotimi, J.O.B. and Wilkinson, S. (2015), "Why do the design stage elemental cost plan and final tender sum differ in New Zealand?", Journal of Financial Management of Property and Construction, Vol. 20 No. 2, pp. 116-131. https://doi.org/10.1108/JFMPC-08-2014-0016

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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