RICS professional guidance, UK Cost reporting

1 RICS professional guidance, UKCost reporting1st guidance noteCost reportingRICS guidance note, UK1st editionAcknowledgmentsRICS would like to thank the following for theircontribution to this guidance note:Lead author:Christopher Green FRICS, Capita Property andInfrastructureWorking group:Chair:Andrew Smith FRICS, Laing O RourkeJohn G Campbell FRICS, BAM construction LtdDavid Cohen FRICS, Amicus Development SolutionsStuart Earl FRICS, Gleeds Cost ManagementRoland Finch FRICS, NBSRoy Morledge FRICS, Nottingham Trent UniversityMichelle Murray MRICS, Turner & Townsend plcAlan Muse FRICS, RICSM ichael T O Connor FRICS, Carillion construction LtdMartin Stubbington MRICS, RICSK evin Whitehead FRICS, McBains Cooper ConsultingLtdPublished by the Royal Institution of Chartered Surveyors (RICS)

2 Parliament SquareLondonSW1P responsibility for loss or damage caused to any person acting orrefraining from action as a result of the material included in thispublication can be accepted by the authors or by the Quantity Surveying and construction professional Groupof the Royal Institution of Chartered 978 1 78321 093 0 Royal Institution of Chartered Surveyors (RICS) March 2015. Copyrightin all or part of this publication rests with RICS. No part of this work maybe reproduced or used in any form or by any means including graphic,electronic, or mechanical, including photocopying, recording, taping orweb distribution, without the written permission of RICS or in line with therules of an existing in Great Britain by Columns Design XML Ltd, Reading, professional guidance.

3 11 Introduction .. 32 General principles (Level 1: Knowing) .. The purpose of cost Cost reporting Factors affecting outturn construction Report reporting frequency .. Distribution and 63 Practical application (Level 2: Doing) .. Establishing the Treatment of variable costs .. Treatment of variations .. Fluctuations .. Loss and expense .. Example report .. Other 94 Practical considerations (Level 3: Doing/advising) .. Strategic importance .. Budget holder reporting .. Contractor Client and budget holder presentation .. Risk allowance reporting of loss and expense .. reporting of liquidated and ascertaineddamages .. Treatment and reporting of tenderadjustments.

4 13 Glossary .. 14 Cost reportingiiRICS guidance note, UKRICS professional guidanceInternational standardsRICS is at the forefront of developing internationalstandards, working in coalitions with organisationsaround the world, acting in the public interest to raisestandards and increase transparency within Property Measurement Standards (IPMS ), International construction MeasurementStandards (ICMS), International Ethics Standards (IES)and others will be published and will be mandatory forRICS members. This guidance note links directly tothese standards and underpins them. RICS membersare advised to make themselves aware of theinternational standards (see ) and theoverarching principles with which this guidance notecomplies. Members of RICS are uniquely placed in themarket by being trained, qualified and regulated byworking to international standards and complying withthis guidance guidance notesThis is a guidance note.

5 Where recommendations aremade for specific professional tasks, these areintended to represent best practice , that in the opinion of RICS meet ahigh standard of professional members are not required to follow therecommendations contained in the guidance note, theyshould take into account the following an allegation of professional negligence is madeagainst a surveyor, a court or tribunal may takeaccount of the contents of any relevant guidance notespublished by RICS in deciding whether or not themember acted with reasonable the opinion of RICS, a member conforming to thepractices recommended in this guidance note shouldhave at least a partial defence to an allegation ofnegligence if they have followed those , members have the responsibility of decidingwhen it is inappropriate to follow the is for each member to decide on the appropriateprocedure to follow in any professional task.

6 However,where members do not comply with the practicerecommended in this guidance note, they should do soonly for good reason. In the event of a legal dispute, acourt or tribunal may require them to explain why theydecided not to adopt the recommended , if members have not followed this guidance, andtheir actions are questioned in an RICS disciplinarycase, they will be asked to explain the actions they didtake and this may be taken into account by the some cases there may be existing national standardswhich may take precedence over this guidance standards can be defined as professionalstandards that are either prescribed in law or federal/local legislation, or developed in collaboration withother relevant addition, guidance notes are relevant to professionalcompetence in that each member should be up to dateand should have knowledge of guidance notes within areasonable time of their coming into guidance note is believed to reflect case law andlegislation applicable at its date of publication.

7 It is themember s responsibility to establish if any changes incase law or legislation after the publication date havean impact on the guidance or information in guidance note, status definedRICS produces a range of professional guidance and standards products. These have been defined in the tablebelow. This document is a guidance of documentDefinitionStatusStandardInternat ional standardAn international high-level principle-based standarddeveloped in collaboration with other relevant statementRICS practice statementA document that provides members with mandatoryrequirements or a rule that a member or firm isexpected to adhere term encompasses practice statements, Red Bookprofessional standards, global valuation practicestatements, regulatory rules, RICS Rules of Conduct andgovernment codes of practiceMandatoryGuidanceRICS code of practiceDocument approved by RICS, and endorsed by anotherprofessional body/stakeholder.

8 That provides users withrecommendations for accepted good practice asfollowed by conscientious or recommendedgood practice (will beconfirmed in the documentitself).RICS guidance note (GN)Document that provides users with recommendations orapproach for accepted good practice as followed bycompetent and conscientious best principles apply in casesof negligence if best practice isnot information paper (IP) Practice-based document that provides users with thelatest technical information, knowledge or commonfindings from regulatory and/orrecommended good principles apply in casesof negligence if technicalinformation is known in guidance note, UKCost reporting1 IntroductionThis guidance note sets out the principles of costreporting from the perspective of the quantity surveyorto the client during construction .

9 This guidance noteexplains the purpose of cost reporting , the factorsaffecting outturn cost and explores the differentformats and types of cost cost reporting is covered under practical reporting of each type of variable cost isexplored in anticipation that each type of variable costwill require to be considered regardless of procurementstrategy or contract is given under the following headings whichmap to the Assessment of professional Competence(APC): General principles: (Level 1: Knowing) Practical application: (Level 2: Doing) Practical considerations: (Level 3: Doing/advising).Minimum level of serviceThe quantity surveyor is expected to fulfil the followingduties, notwithstanding the detailed terms of anyappointment or contractual obligation: report all known construction costs report all anticipated construction costs report on required risk allowances for constructioncosts; and provide reports on a regular and frequent guidance note, General principles (Level 1 Knowing) The purpose of cost reportingThe purpose of cost reporting is to inform the client ina construction project of the likely outturn cost of theconstruction project.

10 The forecast of outturn costs maybe expressed as a variance against a budget amount,or expressed in absolute cost report will record: all costs incurred at the date of the report, wherethey areknownand can beaccurately valuedinaccordance with the particular contract conditions all costs incurred at the date of the report, wherethey areknownand can beestimatedinaccordance with the particular contract conditions the forecast of costs to be incurred as canreasonably beforeseenat the date of the reportandestimatedin accordance with the particularcontract conditions ; and the risk allowances necessary as can reasonablybeforeseenat the date of the cost report prepared on a regular and frequent basiswill afford the client and the project team the ability tocontrol the outturn construction cost.