Budgeting, Cost Control, and Life-Cycle Asset Management
Budgeting, cost control, and life-cycle asset management tests whether you can estimate, control, and sustain the facility over its life. The exam expects hard/soft cost separation, contingency, escalation, and O&M planning.
Core rules and concepts
- Cost categories: hard construction; soft costs (A/E, permits, FF&E, technology); contingency (design 5–10%, construction 3–5%); escalation.
- Estimating: parametric per square foot, unit costs, quantity takeoff; order-of-magnitude ±30%, budget ±15%, bid ±5%.
- Life-cycle cost: first cost plus O&M, energy, and replacement; present value; simple payback.
- Asset management: capital renewal, facility condition index (deferred maintenance divided by replacement value), maintenance plans.
- Cost control: change orders, schedule, value engineering.
Worked example
A 40,000 sq ft courthouse at $600/sq ft hard cost is $24M. Soft costs at 25% are $6M; contingency at 8% is $2.4M; total $32.4M. A two-year delay at 4% escalation adds about $2.6M. A $500,000 HVAC upgrade saving $60,000/year has an 8.3-year simple payback; if the system life is 20 years, accept it.
Traps that cost marks
- Comparing bids without life-cycle cost.
- Underfunding contingency.
- Ignoring escalation.
- Treating FF&E and technology as hard cost.
- Forgetting capital renewal.