Executive Summary
Cost planning is often viewed as a process of validating whether a design fits within budget.
In reality, the most effective cost planning happens much earlier and plays a far more strategic role within a project.
When developed properly, an early-stage cost model can become a framework for decision-making – helping clients understand where money is being spent, what drives value for the business and where commercial pressure is likely to emerge.
This article looks at a major banking relocation project where a bottom-up estimate was used not simply to validate cost, but to actively guide the design and procurement strategy from the earliest stages of development.
The challenge
A few years ago, I worked on a major banking relocation project involving approximately 250,000 sq. ft. of Cat A and Cat B fit out within a new City tower development.
We became involved relatively early in the lifecycle of the project, although the initial budget had already been established by another consultant team.
Our first task was to validate whether the existing budget aligned with the client’s ambitions.
On the surface, the numbers looked broadly reasonable, even if slightly light.
The issue was that the budget had largely been developed using high-level benchmark allowances, while the project itself contained a number of elements that sat well outside a typical office fit out.
These included:
- a full catering kitchen
- extensive cellular accommodation
- auditorium and conferencing facilities
- a high-specification client suite
- enhanced landlord Cat A requirements within a premium tower development
Our concern was that the budget did not properly reflect the reality of what the client was trying to achieve.
But we needed more than instinct to demonstrate that.
Moving beyond benchmark allowances
Rather than relying on blended £/sq. ft. rates, we developed a detailed bottom-up estimate using the early-stage test fit information available at approximately RIBA Stage 1.
This allowed us to build a structured cost model around the actual components of the scheme.
Importantly, the exercise was not simply about proving the budget was insufficient.
It was about understanding where the money was going and identifying the key cost drivers influencing the project.
That distinction matters.
Because once you understand what is driving cost, the conversation becomes much more strategic.
Turning cost planning into a design tool
One of the biggest advantages of a detailed early-stage cost model is that it allows the project team to guide the design process proactively rather than react to cost issues later.
Once the model was established, we were able to set clear cost targets for the designers to work within.
We benchmarked and interrogated key business-critical spaces including:
- the auditorium
- conferencing facilities
- the client suite
- workplace areas
This created visibility around the relationship between specification, functionality and cost.
Rather than applying blanket cost reduction across the scheme, the client could make informed decisions about where investment genuinely mattered to the business.
That allowed spending to be focused on areas that directly supported operational objectives and client experience, while ensuring the remainder of the scheme was delivered as efficiently as possible.
Ultimately, this approach helped secure additional funding for the elements that were considered business-critical.
Why this matters
One of the common misconceptions around cost planning is that its primary purpose is to reduce cost.
In reality, good cost planning is about alignment.
It helps ensure that:
- the budget reflects the client’s ambitions
- investment is directed towards the right areas
- risk is understood early
- design decisions are made with commercial visibility
Without that structure, projects can easily drift into reactive value engineering, where cost reduction happens late and often without clear alignment to operational priorities.
Protecting the commercial strategy
Once the cost strategy had been established, the next challenge was protecting it throughout design development and procurement.
To achieve this, we implemented robust governance processes early in the lifecycle of the project, including:
- structured change control
- ongoing cost validation
- risk management procedures
- regular commercial reviews during design development
This ensured that the commercial objectives established early in the project remained visible as the design evolved.
Procurement strategy and flexibility
The procurement strategy also played a critical role.
We engaged with the market early and ultimately adopted a two-stage procurement route.
At Stage 1, the project secured:
- Cat A works
- preliminaries
- overheads and profit
- key risk elements
However, rather than forcing premature certainty across the entire Cat B package, contractors were given flexibility around how much residual risk they were prepared to fix at that stage.
Approximately 80% of the project value was secured during Stage 1, with the remaining 20% carried as provisional sums into the second stage.
This created a balanced position between cost certainty and design flexibility.
The wider lesson
The most effective cost plans do more than test affordability.
They create a commercial framework that helps guide decision-making throughout the project lifecycle.
At its best, cost planning is not a reporting exercise.
It is a tool that helps clients align investment, design and procurement with the outcomes they are trying to achieve.
Conclusion
The success of the project did not come from simply validating the budget.
It came from developing an early-stage cost model that allowed the team to understand the commercial implications of the design and make informed decisions before the project became constrained by procurement and delivery.
That process created clarity around where money mattered most, allowed investment to be prioritised appropriately and provided a structured framework for managing the project commercially as it evolved.
How we can help
At EthosEQ, we help clients by developing structured early-stage cost models that support better design, procurement and commercial decision-making throughout the lifecycle of a project.
Links
Why Office Fit-Out Costs Vary Between Buildings
Disclaimer
This article is provided for general information purposes only and does not constitute professional, legal or financial advice. Project circumstances and market conditions vary, and advice should always be tailored to specific requirements.
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