good morning everyone today we are going to discuss on the another part of building economics for this week's topics we are going to cover on part e2 which is on cost management and the concept of cost price profit value feasibility viability and also profit profitability now these are the things which i'm going to cover with you today um the first thing in this first part i'm going to cover on cost management and the concept of course price and etc and in the second part of the lecture i'm going to cover on the development framework and also the application of course management at various stage which include planning design procurement and also construction now um in the past a few weeks we have already discussed uh quite a number of things uh involving building economics and some of the things that we discussed uh in the past weeks were some of the terminologies concerning building economics as we move to the lesson that we are going to cover this week so i hope that you have already have that understanding or knowledge on that about the concept and also the philosophy of building economics by now you also should be able to have some understanding on the importance of course management and also some knowledge about building economics and also as i mentioned to you earlier it's terminology now let's first discuss on cost management parameter so in planning designing and constructing a project cost is of prime importance so this is true today more than ever to rampant escalation of course and in any projects that you are going to be involved in later on cost consideration are continually present from concept budget through successful building occupation and also use now cost management it could be defined as a process of planning interpretation detailing directing agreement cost control and evaluation of the construction during its preparation and constructing phases now this process is going on from throughout the building planning projection and design construction phases of a project until the final account is paid and thereafter permission to use the building is granted so moving on what what does uh construction cost management really encompass so my first note here it shows that it embodies the detailed cost planning and cost control services to ensure construction projects are bid documented and completed within a pre-agreed course framework and it should be carried out in the most economical manner consistent with the program requirements and also some a little bit of aesthetic consideration now when we talk about the cost management as a timeline so there's three important stages that we should understand so the first step the first phase concern with pre-contract the second phase is concerned with the post contract and the third and the last space it concerned with the occupancy of the building itself now within all these three phases there is need to have we need to have that check and balance continue mechanism in order to make sure that the cost that is invested or the cost that is spent throughout the projects are being spent wisely and in accordance to the headings that has already been planned and designed early on now how can we apply this check and balance mechanism is definitely by planning and controlling the cost to the client so the concerns of building economics is the one that we are going to cover in this course is not it's not going to cover uh during the post-contract stage or the occupancy stage but what we are going to cover is during the pre-contract stage so that's one of the reason why i put here our concern is here during the design stage now between cos price and also value so what are these terminologies stand for now when we talk about cost and price when it comes to the contractors and also the client these terminologies it actually being defined in a very different way so if you look at the contractors cost for instance so it is defined as the expenditure for all the items such as labor material plans and management that are used in the specific projects or delivery on the other hand if let's say you are talking about the contractor's price it involves the amount charged for the work carried out which include a reasonable profit margin over the actual cost of the work incurred so you can see the differences between contractors cost and also contractors price costs involve the expenditure for all of the items whereby when we talk about price is involved the amount charged for the works that have been carried out now again between cost price and also value we are going to look at value later on so from the contractor's perspective cost can be defined as all those items included under the heading of his expenditure whereby on the other hand price it can be defined as the amounts charged for the work he carries out now when the contractors receive his price so it becomes what we call as his income and when we find the difference between price and cost this is where we find the profit so uh in other words cost plus profits it's equal to price from the contractor's perspective now from the client perspective clause cost plus profit is equals to the contractor's price or that's the selling price so to the client's perspective when cost is added in with the profit it becomes the building cost which is the price that the building contractor charge to the building owner so a further understanding of building costs normally this becomes the basis of tpi or the tender price index whereby because of the material return from the manufacturer it becomes the basis of bci or building cost index so between price and cost this concept is actually can be combined so the price received by the contractor is the cost paid by the client so as i note over here both parties will experience costs but our concern throughout this course is the cost to the building owners so we are going to look at how to maximize the value of design we are going to cover on few tutorial questions that's going to illustrate how the principles of economics is supply in building now moving on let's see what's the definitions of value so a value it can be defined or it can be take as a more subjective term than either price or also cost so in an economic theory of value and object it has to be scaled relative to demand to have a value so it means here an abundance of supply but a limited demand for it so it it some of the thing or the things that we whatever it is it will have a little or no value attributed to it now value therefore it constitutes a measure of a relationship between the supply and also the demand so we can always keep in mind that value can increase as demand increase or value can increase as supply decrease so how does this relate to construction so how value relates to construction it can be closely connected to what we call as the economic value so why is it economic value because it is seen as a more objective consideration since it is measurable in terms of money so we could say that a maximum value is attained when cost of providing that service or function is at the minimum and somehow an increase above the required function for a small extra cost it would often be perceived for the client as a better value now let's look at what is feasibility so feasibility it looks mainly at the profitability of the project where profits or benefits are compared with the cost so it looks at whether a project is capable of being accomplished or brought about so a study that aims at uncovering the strengths and weaknesses of a proposed project is also called as the feasibility study now moving on to the next term so let's look what is viability so viability looks at the likelihood of survival well especially in the long term so it is an investigation of the proposed project sustainability so another indication of ability is a business growth which is an important aspect of viability well the things that we've been discussed discussing about feasibility profitability and etc we are actually looking at the balancing we are looking at balancing the act between uh our cost consideration and you know the resources that is considered limited that we have in our hands so between what we want or what we call as the desirability or between the questions of should we do this which is the question of viability and the question of feasibility can we do this so there so there is something that we have to put in in order to mediate all this question so when it comes to design so this is what we call as the most valuable design the design that will give the clients the most value to the money invested and also the design that is going to satisfy every person or every parties that's working on to that particular project now the last bit let's look at what what is profitability so profitability is a state or condition of yielding a financial profits again so it is measured with income and also expenses and it is the ability of an investment to make a profit after considering all costs and also overhead now as a summary in the first part we have covered some of these terminologies so the first thing that we covered we have covered on cost management the importance of it and then throughout the the session we have also discussed or i've already explained on the concept of cost price profit value feasibility viability and also lastly profitability now when we talk about cost management it could be defined as the process of planning interpretation detailing directing agreement cost control and evaluation of the construction during its preparations and constructing phases if i would like to repeat on feasibility it can be defined or it looks mainly at the profitability of a project where profits or benefits are compared with costs whereby when we talk about viability it looks at the likelihood of survival in long terms whereby lastly profitability in a state or condition of yielding a financial profits or gains