The owner should take into consideration the preliminary capital cost and the consequent operation and maintenance costs for a building construction. The cost component is formed with these cost categories.
The capital cost relates to the expenditures required for initial formation of the construction. The capital cost consists of land acquirement expenses along with assembly, holding and improvement, Architectural and engineering design, Construction financing, Planning and feasibility studies, materials, equipment and labor, Insurance and taxes throughout construction, Owner's general office overhead, equipment and furnishings not taken in construction, Inspection and testing.
The operation and maintenance cost over the project life cycle for succeeding years should comprise of relevant land rent, Labor and material for maintenance and repairs, cyclic renovations, Insurance and taxes, Financing costs, Utilities, Operating staff, Owner's other expenses
The extent of these costs varies according to nature, size and location of the project in addition to the management organization.
In order to compute the life cycle costs the owner should also consider the equivalent operation and maintenance cost of each alternative for a suggested construction.
In a construction budget there should be arrangements for allowance of contingencies or unexpected costs all through the construction process. This contingency must be contained in each cost item or incorporated in a single category of construction contingency. The amount of contingency depends on historical experience and the predictable complexity of a particular construction project. The contingency expenses for a construction may be associated with design development alterations, schedule adjustments, general administration changes (such as wage rates), contradictory site conditions for those anticipated, Third party obligations required for the duration of construction, as for example new permits.
The owner can avail the contingent amounts not expend for construction near the end of construction to the owner. These amounts can also be considered as additional project elements.
Posted by Rajib Dey
Business Development
Global Associates
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