Construction cost plans need evidence behind them

Landsec's decision to put its £1.5bn Lewisham Shopping Centre redevelopment on hold will be read mostly as a planning and politics story. For anyone who prices, procures or funds schemes, the more useful detail sits in the council's viability papers. A construction cost plan that started life as a two-page model rose by about £269m once someone asked to see what sat behind it. The lesson for developers and main contractors is simple: a cost plan is only as strong as the drawings, quantities and market prices you can trace it back to.

What happened at Lewisham

Landsec has "deprioritised" the scheme, a year after Lewisham's strategic development committee approved 1,744 homes, student rooms and a new mall across 17 acres. The developer pointed to higher interest rates, construction inflation, more complex regulation and the council's position on affordable housing and land assembly. The project was split into six phases over roughly ten years, with work due to start next year. (Construction Enquirer, MyLondon)

The politics will run on. The commercial detail is in the council's independent review of the applicant's financial viability assessment (Lewisham Council papers). The reviewer described the original cost model, dated 17 October 2024, as "a very high level assessment (with the actual cost information limited to two pages) more akin to a benchmarking exercise". It totalled £990,030,164. The reviewer could not see how the £337 per sq ft rate had been built up, because costs were shown by typology with no assumed quantities, and fit-out was measured on NIA while frame and substructure were on GIA.

After the council brought in a cost consultant and the two sides exchanged information, the supporting data evidenced £1,258,970,000 including a 5% contingency. That is £383 per sq ft rising to £487 per sq ft including abnormals, with abnormal costs alone moving from about £119m to about £210m. Even then the reviewer noted that some costs were still provisional and would need further clarification as the design developed.

I am not saying the cost plan sank the scheme. Interest rates and the affordable housing stand-off did plenty of that on their own. My point is that the number everyone was arguing over was not stable, and it moved by more than a quarter when it was tested.

Why this matters on every scheme, not just the big ones

Most of us have sat in a meeting where a cost plan figure has become "the budget" long before anyone could explain it line by line. On a £20m residential block the swing is smaller in pounds and just as damaging in proportion. It turns up as a funding gap at stage 4, a value engineering exercise that strips the specification the planning consent relied on, or a main contract sum that only works if the subcontract packages come in at numbers nobody has tested.

The pattern is usually the same. Benchmark rates get used past the point they are useful. Abnormals sit as round allowances. Quantities are not tied to a specific drawing revision, so when the architect issues a new set nobody can say what changed in cost terms. Package prices come from the last job, not from the current market.

Developers carry that risk directly. Main contractors carry it the moment they sign a two stage or design and build deal off the back of it.

What a cost plan you can defend looks like

The fix is not more pages for the sake of it. It is traceability. Every material figure should answer three things: which drawings it was measured from, what quantity it assumes, and where the rate came from.

Tie the cost plan to a drawing revision

If your cost plan says "measured from architectural set rev C04", you can tell the client exactly what a C05 issue does to the number. That only works if the drawing register is reliable. On too many jobs it lives in an email chain and a spreadsheet nobody owns. Whatever system you use, the design team's issues need to be filed, dated and tracked against an information release schedule, so the QS and the client are looking at the same revision.

Separate measured work from allowances

Abnormals, provisional sums and risk allowances should be shown as exactly that, with a note of what design information would firm them up and when it is due. The Lewisham review effectively did this exercise after the event. Doing it from the start lets the client see how much of the budget is real and how much is hope.

Test the big packages with the market early

On a resi or mixed use scheme, frame, façade, M&E and groundworks will drive most of the cost and most of the risk. Benchmarks are fine for feasibility. By the time a figure is going into a funding appraisal or a contract sum, the key packages should have been priced by real subcontractors against real drawings. That means issuing a proper tender pack, logging RFIs so every bidder gets the same answers, and comparing returns on a like-for-like basis, including qualifications and exclusions.

Give the client a live view, not a quarterly PDF

The other thing that strikes me about Lewisham is how long it took for the supporting information to surface. Clients and funders should not have to commission a forensic review to see what is behind a number. If design progress, outstanding information and procurement status are visible to the client side as they happen, cost movements stop being surprises.

A worked example: checking a frame allowance

Say your stage 3 cost plan carries a concrete frame for a 12-storey residential block at a benchmark rate per square metre of GIA. Before that figure goes anywhere near a funding paper:

1. Confirm the structural drawings and the GIA schedule it was measured from, and note the revisions in the cost plan.

2. Check the measurement basis is consistent. If the frame is on GIA and fit-out is on NIA, say so and reconcile them.

3. List what is not yet designed: transfer structures, podium, cores, temporary works. Price those as named allowances, not hidden in the rate.

4. Issue the structural package to at least three frame contractors with the current drawings, a clear scope and a programme window.

5. Log every RFI and send the answers to all bidders.

6. Compare returns line by line, normalise qualifications, and feed the tested rate back into the cost plan with the source noted.

7. Record which drawing revision the returns were priced on, so the next design issue triggers a re-check rather than a surprise.

None of this is new to a good QS. What goes wrong is the admin around it: drawings in the wrong place, tender returns in inboxes, and no single record of what was priced against what.

Where the tools fit

This is the part of the job SubTrada was built around for main contractors and developers. Drawings are bulk uploaded and auto-filed against an IRS tracker, tender packs are issued with drawings pulled straight from the platform, RFIs and pricing sit in one place, and returns can be compared side by side. The client profile can see design and procurement progress without waiting for a report. It does not replace commercial judgement. It does mean that when someone asks what a number is based on, you can show them.

FAQ

What is a construction cost plan?

A construction cost plan is a structured estimate of a project's build cost, broken into elements or packages, that is refined as the design develops. Under RICS NRM it moves from order of cost estimate at feasibility to detailed cost plans through the design stages.

Why do cost plans increase so much between stages?

Usually because early figures rely on benchmark rates and allowances rather than measured quantities and tested prices. As the design firms up and the market prices real packages, hidden assumptions surface. The Lewisham review shows how far that can move a number.

When should key packages be market tested?

Before a cost plan figure is used for a funding decision or a contract sum. For most schemes that means testing frame, façade, M&E and groundworks with real subcontractor prices against current drawings by the end of technical design at the latest.

How can a client check a contractor's or consultant's cost plan?

Ask for the drawing revisions it was measured from, the quantities assumed, the source of each major rate and a clear split between measured work and allowances. If those cannot be produced quickly, the figure is not ready to rely on.

If you are about to take a cost plan figure into a funding paper or a two stage agreement, pick your three biggest packages this week and ask one question of each: which drawings, which quantities, whose price. Any figure that cannot answer that is your Lewisham, just at a smaller scale.