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Preliminaries (General Site Costs)

A Guide to the Pricing and Use of Preliminaries in the Formulation of Budgets, Quotations and Tenders.

PRELIMINARIES (GENERAL SITE COSTS)


The CIOB Code of Estimating Practice defines Preliminaries as the cost of administering a project and providing general plant, site staff, facilities, and site based services and other items not included in the rates. To further define Preliminaries and assist builders in their pricing we have divided the pricing process into five sub-sections: A. The Importance of Understanding Preliminaries B. The Three Step Approach to Pricing Preliminaries C. Preliminaries Priced Examples D. Further Advice on Pricing Preliminaries E. The Preliminaries Tables F. Using the Preliminaries Tables

A. The Importance of Understanding Preliminaries


Pricing the Preliminaries probably requires more judgement than any other cost area. It requires that you have a clear understanding of what costs have been allowed within the rated work, what general costs will be required to run the site and what costs are allowed for within overheads. For many businesses these distinctions are not clear-cut. For example, a smaller contractor will rarely separate and charge each hour of a managers or a foremans time into: 1) completing trade work, 2) managing work on site, 3) pricing prospective projects Moreover, to accurately price Preliminaries suggests that you are able to predict and cost how a project will turn out (including a suitable allowance for all the problems that you will incur) Some builders with experience of a particular type of works may allow a percentage for the Preliminaries (excluding Provisional Sums, etc.) based on previous projects. The percentage approach can, however, be prone to risk for less experienced builders who lack an understanding of the costs involved. For example, over the last week, we have discussed projects with clients who have costed preliminaries varying from: a 4.5% allowance for a specialist company tendering for a large new project a 9.5% allowance for a new house a 24% allowance for a small company tendering for a particularly tricky refurbishment (lots of scaffolding and provisions for working in an occupied premises)

Pricing Preliminaries is also clearly a key stage at which clients begin make commercial judgements relating to their desire to secure the work. For these reasons builders should NOT rely on the average percentage allowance set out on the on the Estimate Analysis Form We do not, unless specifically instructed, have enough information about each individual companies working practices to properly cost this area of the work. Our allowance should be removed and replaced with a properly costed figure based on your own calculation.
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B. The Three Step Approach to Pricing Preliminaries


The accurate pricing of Preliminaries requires that builders anticipate all those general site costs associated with a project. However, this is an area that is not always given the attention of the rated work and few contractors will approach this area of pricing in the same way: Generally speaking the more difficult a project is to manage the higher the preliminaries costs will be. Most of these difficulties or costs will be evident in the projects particulars. A lack of design, poor access, onerous contractual conditions, dual use of the site by others, etc. We advocate a three step approach to the pricing of Preliminaries 1) the first step is to understand and price the known (or definite) costs 2) the second step is to consider and cost the commercial factors. 3) the third step is to consider how these costs and risks are to be allowed for within the tender presentation This three step process allows you to clearly identify the commercial (or variable) allowance within the Preliminaries element during the adjudication process. This is especially important if you are considering reducing the tendered sum

Step 1 - Pricing the Known Costs


Having established an accurate cost for the work, it is important for the estimator to under-stand all the key factors relating to the project so that the predicable or known costs of the Preliminaries can be calculated. These are the costs that you know that you will definitely incur Examples of the projects key factors Layout of the site together with access and the usable areas An outline project program setting out the order of works and the critical items Key areas of work and the amount of labour and plant that each require Works by the main sub-contractors An outline security and safety plan A list of the key contractual requirements Any risks (to be noted and priced in Step 2)

The estimator can start to cost the known Preliminaries (once the key factors have been established) using a check list such as the Preliminaries Tables. At this stage it is essential that the estimator is aware what has been allowed for in the non-preliminary site costs and the overheads so as to avoid the duplication of costs The estimator should also restrict the pricing to a best assessment of how the project will be undertaken noting any concerns to be costed at the second stage. A concern, for example, relating to overtime may require knowledge of how the projects program will impact upon and be affected by other contracts.

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Step 2 Pricing Commercial Considerations


The second and more difficult factor in pricing preliminaries is the balancing the risk and reward against the likelihood of securing the work. This will depend upon: the desire to secure work the suitability of the work (including experiences of similar projects, skills, weather, etc.) the contractual risks miscellaneous other factors (prestige of the works, etc.)

The desire to win the work will be further effected by the businesses workload and any other opportunities in the market, for example: secure projects outstanding tenders (and the likelihood of success) other opportunities.

In an ideal world, it is assumed that a builder would already have rejected projects with high levels of risk. However, in practice, contracting usually involves some risk and this can be dealt with in a number of ways, for example costed by the builder on an item by item basis, (based on the level of risk) offset or sub-contracted to others offset within the tender through the use of exclusion clauses (usually agreed prior to tender) instituting procedures and training insurance

Further details of factors effecting such commercial decisions are set out in the Formulating Tenders section and the Sub-contract Pricing Considerations section of the booklet Building Costs and Sources of Supply In most cases the analysis proposed can be simply achieved by pricing the items in two columns.

Step 3 Presenting Preliminaries in the Tender Documentation


Care should be taken to ensure that any areas of uncertainty have been clarified and, where appropriate, excluded in the tender presentation The presentation of Preliminaries costs, like rated work, can have a significant effect on both cash flow and profitability and these areas are further considered in the Presenting Tenders section.

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C. Preliminaries - Priced Examples


For the purposes of these examples we have used a simple bungalow for the first calculation C1. We have then considered the extra over cost of the Preliminaries if we were to undertake a similar amount of work on similar bases but in: C2 the form of a large extension to an existing building C3 an inner city location

C1. A New Bungalow (60m2)


Based on a 14 week project, (rated cost 40,000) with architectural supervision (including CDM regulations) The site is reasonably secure site, with good access located on the outskirts of town. The site owner (and client) is coving all the development costs including insuring the property and supplying the electricity, water, etc., from an adjacent property.
Category Cost Description Unit Wks Nr Charged 2 hrs / day + bonus Valuations and final account With drying facilities Each Each 14 2 5.00 20.00 Wks 1 14 Rate 40.00 186.00 Total 40.00 Charged to overheads 2,604.00 Cost 12.50 with 1.50 bonus Charged to overheads 70.00 Cleaning only 40.00 Owned - no hire Included in rates Nr Contract Works Mobiles Calls Compound Nr Wks Nr 1 1 14 1 120.00 150.00 10.00 60.00 120.00 150.00 1% of labour 140.00 As foreman in P02 60.00 Own units As foreman in P02 To/From Site To/From Site Nr Nr Sum Nr 9.3% 2 1 1 1 18.00 20.00 450.00 36.00 In rates In rates 20.00 450.00 As quotation 3,730.00 Site Works 40,000 Notes

P02 Management & Staff


Project Plan Contracts Manager Site Foreman Quantity Surveyor

P03 Site Accommodation


Site Office / Toilets On / Off site Attendance On DSC Cleaning On Completion

P04 Attendant Labour Costs

P05 Miscellaneous Labour Costs


Insurance's

P06 Facilities & Services


Telephone Health Safety & Welfare Security

P07 Temporary Works


Setting Out

P08 Mechanical Plant


Excavating Equipment Mixers / Compactors

P09 Non-Mechanical Plant


Small Plant & Hand Tools Erect, Dismantle, Hire Scaffolding (External)
Percentage of Contract

P14 Notes
Sections P01, P10-13 = Nil cost
Cost Base June 2002

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C2. A New Extension (Additional Costs)


In this second example we consider some of the additional costs over and above C1, that could be incurred in connecting a new extension to an existing building
Category Cost Description Charged extra 3hrs week Unit Wks Wks Wks No noise before 8.15am Nr Nr Nr Some of site storage Percentage of Contract Nr 4.0% 14 14 1 1 1 1 Rate 36.15 30.00 100.00 250.00 200.00 100.00 Total Notes

P02 Management & Staff


Site Foreman Cleaning As Work Proceeds
506.10 Additional clients needs 420.00 After breakthrough in rates 100.00 Partial charge for some delays 250.00 200.00 125.00 Some double handling 1,601.10

P04 Attendant Labour Costs P05 Miscellaneous Labour Costs


Unproductive Time

P06 Facilities & Services


Security
Making building secure

P07 Temporary Works


Maintain Live Services

P11 Contractual Conditions


Limited Working Space Additional Costs

Cost Base June 2002

C3. An Inner City Project (Additional Costs)


The cost implications of working on inner city projects can be significant, for example: limited access, providing support for neighbouring properties, increased security, limited working hours, special licences or permits (i.e. for scaffolding, skips, etc.) In this example we consider the some of the additional costs over and above C1 associated with travelling, over and above those of the preliminary and overheads costs not shown on the C1 site. No allowance has been made for any congestion charges or car parking fees.
Category Cost Description Unit Wks 1 vehicles petrol allowance Use of own vehicles Average 45min per day Percentage of Contract
Cost Base June 2002

Wks 14 14 14 14

Rate 42.00 15.00 35.00 50.22

Total

Notes

P04 Attendant Labour Costs


Parking
588.00 Off site parking allowance 210.00 Own staff only 490.00 Additional to overhead allowance 703.13 Total as paid to operatives 1,991.13 ADDITIONAL COST

P05 Miscellaneous Labour Costs


Travel Allowance Travel Allowance Unproductive Time
Wks Wks Wks 5.0%

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D. General Advice on Pricing Preliminaries


This section sets out a number of methods that builders use to further consider Preliminary costs. Understanding the specific data calculated from part B, Step 2 together with methods 1 3 below provides the user with significant information about how variations to the duration and value of the project can affect the tendered sum, as well as the risk, profitability, cash flow of the project. In most cases the analysis proposed in methods 1 to 3 can be simply achieved by setting pricing out in added columns on your check list.

Method 1 Using Set Up, Fixed and Variable Cost Analysis


Builders most commonly separate their costs into three cost areas. 1) Set up Costs i.e. the initial costs involved in starting or setting up the site 2) Fixed Costs i.e. the on / off costs of moving plant 3) Variable Costs i.e. any cost that is relative to time or value such as management, site huts etc The advantages of this breakdown are set out in the Formulating Tenders section

Method 2 Using Ownership Cost and Hire Cost Analysis


Builders also vary in the way in which they charge for items. Contractors who own plant such as site huts, scaffolding, etc., may wish to gain a competitive edge by charging these items at cost (i.e. for delivery, set up, maintenance, removal, collection etc., together an allowance towards the capital cost (or depreciation). Another contractor may elect to, or have to, allow the full hire cost

Method 3 Using Labour / Materials / Plant / Sub-Contract / Other Analysis


If an element of off-site overheads are to be charged on some parts of the Preliminaries a breakdown of resources can be used to provide a breakdown of the relevant cost areas

Method 4 - Using Percentages


As previously stated, some experienced builders like to consider Preliminaries on smaller projects (like off site overheads) as a percentage of turnover. This approach requires a significant amount of judgement. One way to improve this approach, is to calculate the actual preliminaries costs of similar completed projects for the first 12 sections of the Preliminaries Tables and then consider these individual costs as percentages of the total cost

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The Preliminaries Tables


Date:

Preliminaries Summary
Category Notes Total Comment

P01 Employers Requirements P02 Management & Staff P03 Site Accommodation P04 Attendant Labour Costs P05 Miscellaneous Labour Costs P06 Facilities & Services P07 Temporary Works P08 Mechanical Plant P09 Non-Mechanical Plant P10 Miscellaneous and Unlisted P11 Contractual Conditions P12 Adjustments P13 Specifier Costs Site Costs Preliminaries %

(As a % of Site Costs)

Preliminaries Costs
P01 Employers Requirements
Ref 01 02 03 04 05 06 Category Cost Description Unit Wks Rate Total Comment

Accommodation Telephone Connection/Installation Call Charges Equipment Others


-

P02 Management & Staff


Ref 01 02 03 04 05 06 07 08 09 10 11 12 Category Cost Description Unit Wks Rate Total Comment

Contracts Manager Programmer Project Plan Site Plan Quantity Surveyor Agent Engineer Support Staff Site Forman Trade Forman Watchman Others
-

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P03 Site Accommodation


Ref 01 02 03 04 05 06 07 Category Cost Description Unit Wks Rate Total Comment

Site Office Mess Room Drying Facilities Storage Containers / Stongbox Toilets Others
-

P04 Attendant Labour Costs


Ref 01 02 03 04 05 06 07 Category Cost Description Unit Wks Rate Total Comment

Transport & Haulage Unloading & Distribution Attendance On DSC Cleaning As Work Proceeds Cleaning On Completion Reinstatement Others
-

P05 Miscellaneous Labour Costs


Ref 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Category Cost Description Unit Wks Rate Total Comment

Travel Allowances Lodging Allowance Parking Charges / Costs Congestion Charges Insurances % Employers Liability Contract Works Others Unrecoverable Costs Exclusions Theft Inclement Weather (Exceptional) Overtime Unproductive Time Costs Excluded In 'All In Rates' Others
-

P06 Facilities & Services


Ref Category 01 Telephone 02 Connection/Installation 03 Call Charges 04 Administration 05 Health Safety & Welfare 06 General Provisions 07 C & D M Regs. 1994 08 Control Of Noise 09 Fire Protection 10 Others
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Cost Description

Unit

Wks

Rate

Total

Comment

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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Power & Lighting Connect & Disconnect Installation Units Used Fuels Water Connect & Disconnect Installation / Standpipes m3 Used Temporary Drainage Security General Measures Site Perimeter Compounds Other Clearing & Disposal Of Rubbish Drying & Humidity Contractors Testing & Samples Asphalt / Concrete Seasonal Building Others
-

P07 Temporary Works


Ref 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Category

Cost Description

Unit

Wks

Rate

Total

Comment

Setting Out Access Roads / Paths Provide Maintain Hardstandings Pumping & Dewatering Hoardings & Fencing Advertising & Notice Boards Support Existing Structures Protection Weather (Water, Temperature) Site Features Maintain Live Services Finished Work Materials Others
-

P08 Mechanical Plant


Ref Category 01 Cranes, 02 To / From Site 03 Erect / Dismantle 04 General Use / Standing 05 Piling 06 To/From Site 07 Erect / dismantle 08 General Use / Standing 09 Excavating Equipment

Cost Description

Unit

Wks

Rate

Total

Comment

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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

General Use / Standing Forklifts To/From Site General Use / Standing Dumpers To/From Site General Use / Standing Mixers / Batching Equipment Limited Vehicle Access Hoists Mixers / Batching Equipment Pumps Breaking Compressing, Consolidating Wackers, Vibrators Rollers To/From Site Finishing Others
-

P09 Non-Mechanical Plant


Ref 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Category

Cost Description

Unit

Wks

Rate

Total

Comment

Small Plant & Hand Tools Hand & Power CCTV (Drains) Ladders & Access Warning & Traffic Traffic Control Road Signs Props & Trenching Others Surveying Equipment Scaffolding (Internal) Scaffolding (External) Putlog Independent Alter & Adapt Hire After First Month Support Access Mobile & Towers Coverings Lifting Equipment Other

Erect, Dismantle, Hire Erect, Dismantle, Hire

P10 Miscellaneous and Unlisted


Ref 01 02 03 04 Category

Cost Description

Unit

Wks

Rate

Total

Comment

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P11 Contractual Conditions


Ref 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Category Cost Description Unit Wks Rate Total Comment

Defect Liability Period Firm Price Allowance Inflation Before Contract Inflation During Contract Cost Of Cash Flow Local Authority & Utility Fees Licenses & Fees Bonds & Warranties Performance Bonds General Conditions Special Conditions Restrictions Phased Work / Specific Order Partial Possession Limited Working Hours Limited Working Space Late Completion Rates & Taxes Professional Fees
-

P12 Adjustments
Ref 01 02 03 04 05 Category Cost Description Unit Wks Rate Total Comment

Deduct General Attendances (Double Entered) Deduct Items Charged To Rates Deduct Items Charged To Overheads General Adjustment
-

P13 Specifier Costs


Ref 01 02 03 04 05 Category Cost Description Unit Wks Rate Total Comment

Defined Provisional Sums Undefined Provisional Sums Contingency Dayworks


-

P14 Notes

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F. Using the Preliminaries Tables


In using the three step approach to pricing Preliminaries a check list, such as the Preliminaries Tables, can be invaluable. The list is not comprehensive and builders will need to carefully check the requirements of the tender documents and use their own experience in ensuring that they have included all the costs

Considering The Cost Implications of Using the Preliminaries Tables


Builders will, when using the Preliminaries Tables, also need to consider the cost implications of each heading or item for example: P06 Water - allowance for: connection, installation, distribution system, removal, making good, standpipes, tanks and pipe work. P08 Excavation Equipment - allowance for: delivery to site, (possible standing time), maintenance, collection from site. P08 Scaffolding External - allowance for: delivery to site, erecting, protecting, security, maintaining, checking and certificating, lighting, loss or damage, adapting, dismantling, collection from site.

Factors Affecting Costs In More Than One Section


Preliminaries are usually priced on an individual basis considering the actual cost implications of the project. If, for example, the work is in occupied premises, we would probably need to establish the cost over a number of sections: P02 - Management P04 - Cleaning as work proceeds P05 - Unproductive time P06 - Heath and safety, maintaining temporary services P07 - Protection of the works P11 - Special conditions, limited working space

P01 Employers Requirements


Employers requirements are usually as stated in the contract documents and should be charged as such

P02 Management and Staff


A view should be taken as to the duration of the contract and how the project is to be managed and administered. This usually requires that relevant staff are charged out on a cost per week or month over the contract period. Working foremen can be charged in the number of hours or days spent in administering the works. Time should also be allowed for planning, etc, as well preparing records for interim valuations and the final account. Where a site foremen carries out other duties, normally priced within other sections of the Preliminaries (such as setting out, safety work, etc.) care should be taken to ensure that costs are not duplicated.
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On smaller sites, Contracts Managers and Quantity Surveyors (with their attendant costs) usually form part of a builders overhead charge. However these costs may be moved to Preliminaries where such staff: are based exclusively on one site (i.e. larger projects) are contracted in for a specific project

P03 Site Accommodation


The level of contractors site accommodation required will usually be self-evident and should include: hard standings (P07), delivery, cost or hire, heating, cleaning, collection, making good, etc. Temporary services for accommodation may be taken for here or in section or P06

P04 Attendant Labour Costs


This section provides for general labour based tasks that may be required for the project, such as cleaning attendance on sub-contractors The unloading and distribution item is significant on sites with difficult access such as high buildings where, for example: materials have to be moved to remote areas by hand

P05 Miscellaneous Labour Costs


This section primarily allows for additional costs in providing labour such as transporting workers to site together hourly costs such as overtime and unproductive time. Examples of factors that would have a significant effect on the these costs would be Location for example an inner city site could require higher allowances for: Transport costs, time lost in transit, parking costs, higher plant on/off costs, skips licences, restrictions and waiting time Similarly very remote sites, where there are limited sources of supply can incur significant amounts of time lost in transit, higher plant on/off costs, etc. Regulations limiting hours, noise, etc., as set out in other sections could lead to unproductive hours

Working in or near occupied premises - for example works to a partially occupied shop or school could require higher allowances for: Unproductive time due to higher levels of regulation, control, implementing increased security, safety routines, limited working hours, etc., as set out in other sections Overtime rates or incentives to reduce complete certain areas of work during times when the premises are closed or to reduce overall contract period

A project program should be used to identify the potential for overtime and can assist in identifying potential period of unproductive time.

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Inclement Weather - for example works to the exteriors of building, especially works involving re-roofing. Unproductive time where trades cannot work due to exceptional wind, rain, frost, etc.

Most rates make a limited provision for inclement weather. However the decision to allow an additional cost is usually a case of balancing in the risks of loss against other works you are likely to be available for those trades to undertake during the same period. Allowance should be made to protect or cover in certain works in P07 A substantive allowance would be required if you had to complete un-seasonal works (such as external decorating in winter) where you had sufficient internal work over the same time period.

P06 Facilities and Services


General costs, facilities and services required in running the site, administrative staff, utilities costs, etc.

P07 Temporary Works


This section allows for any temporary works that that will be required in providing the main or rated works. Costs vary from providing temporary access roads to specific tasks such as setting out. Particular attention is should be paid to the cost of securing and protecting both existing buildings and services together with works in progress. Care also need to be taken to establish ground conditions and water levels when constructing basements, tanks, drains and forming foundations

P08 Mechanical Plant


The cost of most smaller plant (and fuel) will be included in the rates. However provision should be made for bringing plant on to site and removing the same. Larger plant that is not allocated to a specific area of the work (i.e. a tower crane) would be allowed for within the Preliminaries. A smaller crane say brought in for the some steel erecting would be charged to that area of the work Care should also be taken to allow for the additional costs associated with phasing or standing time if projects cannot provide a continuity of work

P09 Non-Mechanical Plant


This section includes for a range of plant which may not be included in the rates A detailed project program is often essential in making proper allowance for the more costly items such as access equipment or scaffolding. Specialist quotations should be sought for high, supporting or bespoke scaffolding or lifting equipment where costs cannot always be predicted.
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P10 Sundries and Unlisted


This section can be used for any specialist or sundry Preliminary costs that do not naturally fall within the other classifications

P11 Contract Conditions


The contract conditions section sets out a number of areas which may need to be priced. The list can be expanded to include specific clauses within the contract and in some cases costs within the development costs section. How individual contractors approach pricing this area will vary significantly. A contractor with an empty order book may be unconcerned about clauses requiring an early start, a short contract period, whereas another contractor with a number of secured contracts may budget for overtime charges and liquidated damages for late completion. Builders are generally advised to make allowance for any unrecoverable costs, For example it is not uncommon for contractors to price concerns relating to: Contract Administrators, where the have experience of: administrative problems, poor design, indecision, late drawings, difficulty negotiating valuations, Clients, where they have experiences of delayed payment or dispute Lack of design information such as survey documents, Contractual risks longer defects liability period, incomplete documents (i.e. outstanding questions over rights of access),

Alternatively builders may, in some circumstances, be able to set out their own terms and as such reduce their risk and costs

P12 Adjustments
In costing preliminaries contractors will also need to take care to ensure that they have not duplicated any costs included in the rated work or in the off site overheads. Furthermore care must be taken to ensure that costs are not duplicated within the Preliminaries section. For example a foreman allowed for in P03 may undertake much of the safety works required in section P06. Ideally the duplicated costs would be removed fro the relative section and a note inserted explaining how allowance has been made Alternatively the duplicated charge could be noted and deducted in this section

P13 Specifier Costs


These are usually costs that have been defined by the Contract Administrator within the specification, (such as Provisional Sums, Prime Costs, etc.) that are to be included within a tender. Whilst they must be included in the tender they should be kept separate if you are comparing the cost of preliminaries with other works

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P14 Notes
Most Preliminaries calculations require a significant level of judgement and it is recommended that estimators record the significant factors affecting their views. These notes are often invaluable when analysing performance or considering the costs of future projects

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