SBEC 2312 –COST STUDIFara Diva MustapaDepartment of Quantity SurveyingFaculty of Built Environment, UTMy

–ES

LECTURE 3: VALUE▪ The concept of cost, price, prof

▪ Value for money in constructioclient’s requirements

E FOR MONEYfit, value, feasibility and profitability

on projects and cost implications of 

SUPPLY CHAIN IN COINDUSTRY

ONSTRUCTION 

CONSTRUCTION PPROCESS

THE CONCEPT OF VALUE, FEASIBILIT

What is cost?

In a group of two, discusdefine as cost and its constitutions

COST, PRICE, PROFIT, , , ,TY AND PROFITABILITY

s what 

ANSWER1 An amount paid or required in paym1. An amount paid or required in paymprice.2. The expenditure of something, such necessary for the attainment of a goal:necessary for the attainment of a goal: advocate unpopular causes does not readvocacy be without cost" (Milton Frie3. costs Law The charges fixed for litigathe losing party.

However, different parties in constructdifferent types of cost. What do you thare?

ent for a purchase; aent for a purchase; a 

as time or labor, "Freedom toFreedom to 

equire that such dman).tion, often payable by 

ion project have hink the differences 

COST1) C li i f ll1) Cost to a client consists of all cons

inclusive of profit from the contra2) Cost to a contractor consists of bu

the profit charged from the materthe profit charged from the materlabour and profit charged from thmachineries suppliers.

i l dstruction related costs ctors.uilding materials inclusive of rial suppliers constructionrial suppliers, construction e profit from the plant and 

PRICEPRICEWhat is price?

nounnoun: price; plural noun: prices1.1. the amount of money expected, required, orthe amount of money expected, required, orsomething."land could be sold for a high price"

•the odds in betting.•archaicarchaic

value; worth."a pearl of great price"2.2. an unwelcome experience, event, or action ian unwelcome experience, event, or action iof achieving a desired end."the price of their success was an entire day

r given in payment forr given in payment for

involved as a conditioninvolved as a condition

y spent in discussion"

PROFITWhat is profit?

nounnoun: profit; plural noun: profits1.1. a financial gain esp the difference betwa financial gain, esp. the difference betwearned and the amount spent in buying, producing something."pretax profits"

ween the amountween the amount operating, or

WHAT IS VALUE?

How do you define value?

HOW DO YOU VALUE?

VALUEVALUEWhat is profit?

nounnoun: value; plural noun: values1.1. the regard that something is held to deserve;usefulness of something.g"your support is of great value"

•the material or monetary worth of some"prints seldom rise in value"

•the worth of something compared to thg p"at $12.50 the book is a good value"2.2. a person's principles or standards of behavioimportant in life.p"they internalize their parents' rules and valu3.3. the numerical amount denoted by an algebranumber."the mean value of x"

; the importance, worth, or

ething.

e price paid or asked for it.p p

or; one's judgment of what is

es"

aic term; a magnitude, quantity, or

FEASIBILITYnounnoun: feasibility1. the state or degree of being easily or convthe state or degree of being easily or convdone."the feasibility of a manned flight to Mars"

enientlyeniently 

"

PROFITABILITYProfitableness: the quality of affording gainn or benefit or profit

VALUE FOR MONEPROJECTSA comparative term expressing the worth the context of other similar or comparable

EY IN CONSTRUCTION 

of an item or commodity, usually in e item.

DEFINITION OF VALUE M

VM is rigorous, systematic effort to improveoptimize the cost of projects, facilities and generates these cost improvements withouneeded performance levelsneeded performance levels.

Relationship between Value, Function (woQuality and Cost according to Carlos Fallon

Value  =  WorthCost

MANAGEMENT

e the value and systems. VM ut sacrificing the 

orth), n,

VALUE MANAGEMChanges in client’s requirements will also change the cost and value of the construcproject. For instance, changes in high endb ld l ll l h hbuilding quality will also change the overaconstruction costs. 

MENT IN CI

ction d llall 

THE ENDTHE ENDThank you for your attention.