How to control the cost reasonably?

On how to control the cost of real estate development

Di Guo Yong

In recent years, great changes have taken place in the operating environment of the real estate industry, and the competition is becoming increasingly fierce. Simply relying on simple tactical measures, it is difficult for developers to maintain long-term competitiveness in the fierce competition. The importance of business strategy has been paid more and more attention by developers, and the role of cost management has become increasingly prominent, occupying an extremely important core position in business strategy. Because, in the short term, the prices of products targeted by developers are subject to market constraints, and market demand is also an external factor for enterprise development, which developers cannot control. How to effectively reduce costs has become an important way to maximize profits.

I. Investment decision-making stage

Investment decision-making stage is the most critical stage in project development, and the project plan and investment estimation made at this stage are the important basis for investment decision-making, which directly affects the success or failure of the whole project. At this stage, we should focus on strengthening cost management from the following aspects.

1. Organize excellent project teams.

Project feasibility study and product development planning is a systematic and professional work. In the investment decision-making stage, the company needs to organize a project team composed of experienced professional and technical personnel from group companies and real estate companies, and the cost control personnel should participate in the specific work in the investment decision-making stage. The project team should be composed of the following personnel: architects, cost engineers, marketers (or entrusted professional planning companies), engineers and technicians, investment analysts, managers (or project managers).

In the investment decision-making stage, the project team should complete the whole process from market research, product planning, product positioning, risk analysis to investment estimation and analysis. Among them, the cost control personnel mainly fully understand, analyze and judge the market situation and economic situation of the city, the construction and installation project cost, government fees and taxes, loan interest rates and so on.

2. Make a detailed cost analysis.

(1) Land development cost

The land cost accounts for about 20-30% of the total project expenditure, so the development risk and appreciation space should be fully considered when determining the land, and the determination of its cost should include:

① Land transfer fee

The land transfer fee can be revised and estimated with reference to similar plots recently transferred by the government, combined with its location and surrounding conditions, building volume ratio, etc.

(2) land acquisition fee, urban supporting fee and demolition compensation fee.

There are specific provisions on land acquisition fees and urban supporting fees. Development enterprises should negotiate with the government, make full use of policy advantages, conduct actual research on various municipal facilities involved in the project, and fully estimate the expansion of pipelines, road widening and public facilities. Monetary compensation is generally used for demolition compensation and resettlement, and its cost can refer to similar projects in the near future.

(2) Estimate the upfront cost of the project

Pre-development expenses generally account for about 3% of the total expenditure of the project, but there are also great differences in actual charges in different places. "Three links and one leveling" and temporary facilities fees should be estimated according to the actual situation, and the relative permanence of temporary facilities to the project construction should be given full play in combination with the actual situation, so as to relatively reduce the development cost.

There are many other expenses in the early stage of the project, and the stipulated rates are different from the actual charges. Developers should pay attention to coordination with relevant departments. At the same time, with the transformation of government functions, many charges have changed from hard targets to market regulation, and developers should ensure that they meet the requirements of government policies and the interests of project development.

(3) Construction and installation costs

Construction and installation costs generally account for 45-55% of the total project expenditure, and the proportion varies from region to region. Its cost analysis should first analyze the current regional economic situation and grasp the overall situation of construction enterprises in the construction market. Investigate the cost index of similar projects in the near future, understand the changes of labor and materials in the market, analyze and correct the main factors affecting the cost, and determine the construction and installation cost index of the project reasonably and scientifically. The development cost of the preliminary design scheme is analyzed and optimized to determine the product positioning.

(4) community pipe network, supporting facilities, and intelligent community charges.

The cost of residential pipe network is generally about 6% of the total expenditure of some mid-range residential projects. In the decision-making stage, the focus of cost control should be to understand, analyze and estimate the supply capacity of the first-level websites supporting municipal universities and the setting of websites in the district.

On the premise of not affecting the positioning and differentiation of product quality, try to streamline the supporting facilities in the region and consider the manageability of supporting projects to lay a good foundation for the later property operation of the project; Supporting facilities also include supporting facilities for community planning, and their adaptability should be considered.

The orientation of intelligent residential quarters should adhere to the principle of "Ning Jing not much, meeting basic needs". The maintenance and operation costs of complex intelligent systems will increase the difficulty of property management, and the technology will depreciate quickly.

(5) Garden environmental engineering fee

The general garden environment accounts for 3-5% of the total project expenditure, and its cost is related to the positioning of the project and the regional environment where the project is located.

(6) Analysis of taxes and fees in investment decision-making stage.

Management fee: 2-3% of the sales revenue is generally determined according to the regional characteristics of the city.

Sales expenses: generally determined as 2-3% of sales revenue. The control of sales expenses should pay attention to the selection of appropriate advertising media, and handle the setting mode and positioning of sales offices and model houses.

Financial expenses: In the investment decision-making stage, we should fully estimate the financial expenses, correctly use the leverage of funds, and meet the continuity of the project capital chain with the least financial expenses. The use cost of funds will have a great impact on the final profit of developers.

Taxes and fees: In the decision-making stage, developers should estimate according to relevant government regulations and strive for government support to reduce some taxes and fees. In second-tier cities, tax relief is very important for developers in different places.

(7) Unforeseen expenses and risk analysis

According to the complexity of the project, unforeseen costs and risks are generally 3-5% of the direct costs except land development costs. In the investment decision-making stage, the project team should do a good job in risk analysis of land cost change, construction cost change, house price change, development cycle, floor area ratio, loan interest rate and policy change, and basically ensure that the risk cost is less than 5-8% of the project net profit.

Second, the design stage.

The cost control in the design stage is an important stage of the project cost control, which has an impact on the project cost above 75%. At this stage, the cost controller can get twice the result with half the effort by properly cooperating with the architect of the developer and the designer of the design institute. The main methods and measures are:

1. Determine the reasonable plot ratio according to the project positioning.

The plot ratio of the project will directly affect the sales revenue and construction cost of the project. Determine a basic control interval as far as possible, make full use of land resources, build environmental landscape in combination with the topographic characteristics of the project, and improve the land utilization rate.

2. Do a good job in reviewing the design scheme and strengthen the optimization of the design scheme.

The cost controller should analyze the cost of the structural system, basic modeling and plane layout of the design scheme, and make suggestions to the architect in order to continuously optimize the design scheme. At the same time, the calculation process of design scheme is reviewed to prevent the conservative expansion of human factors, especially in the selection of design coefficients.

3. The quota construction drawing design, clear rewards and punishments.

The design index of the construction drawing quota of the design unit is:

(1) rebar content index per square meter;

(2) concrete content index per square meter;

(3) unit construction drawing budget indicators;

(4) Design change expense limit index.

4. Strengthen the inspection and supervision of design quality and reduce the cost of design change.

The management of design units is highly professional. If the developers themselves lack human resources, they can integrate social resources and strengthen control in advance. The contract signed with the design unit shall clearly stipulate the restrictive measures for changes caused by insufficient design quality. Giving the design stage the necessary time is also a necessary condition to reduce or eliminate the "trilateral project".

Third, the bidding and contract negotiation stage

Project bidding and contract negotiation and determination are important links in project cost control and management. Many related legal texts were completed at this stage, and many hidden dangers and difficulties were also left at this stage. The quality of work at this stage will directly affect the cost management and settlement in the process of project operation. Therefore, at this stage, the cost management personnel should make the project bidding clear and orderly according to the overall project schedule, and make the project contract meet the project requirements.

1. Several main measures to do a good job in bidding

According to the overall construction plan of the project, make a detailed bidding plan, establish and improve the regional information base of construction units, building materials, policies and regulations through market investigation and analysis, and reserve information resources for bidding. When formulating the bidding scheme, it is necessary to make clear the bidding principle, contract mode, scope, payment method, scope and method of materials supplied by Party A, subcontracting projects and other major contract negotiation terms.

The main methods of cost control in the bidding stage are:

(1) unit project: general contracting is the main project, and some projects are subcontracted. The unit project adopts the method of lump-sum cost per square meter or lump-sum price, and subcontracting is adopted for sub-projects with economies of scale, such as doors, windows and stair railings, and unilateral lump-sum cost is also implemented.

(2) Materials provided by Party A: materials related to engineering quality (such as exterior wall coatings and decorative materials). ), it is advisable to use the materials uniformly supplied by Party A, and some major mechanical and electrical equipment should also be purchased by Party A. If funds permit, some materials (such as cement and steel, etc.). Its price changes greatly due to seasonal factors, and it can also give full play to the scale benefits of the developer's supply to Party A.. The price of materials supplied by Party A shall also be determined through competitive bidding. The company must ensure that it has a price advantage for the contractor and avoid damaging the enthusiasm of the contractor.

(3) In terms of supporting facilities and landscape engineering in the area, it is advisable to bid in the form of list quotation, and at the same time, the specifications and quality of main materials should be made clear when bidding.

(4) Intelligent engineering: It is advisable to adopt the list quotation method for bidding, and the contract price should adopt the adjustable price method. The difference of price adjustment range of main materials should be agreed upon during bidding. At the time of settlement, the price will be adjusted if the difference exceeds (because electronic products are updated quickly, the price drops greatly, and the time span from construction to normal use of intelligent systems is long).

(5) Earthwork: Earthwork balance project in the area is also the focus of cost control. Professional companies should be selected for construction when bidding, and professional companies can adopt the competitive mode of unilateral quotation to bid and bid.

There are many bidding links, and strong monitoring will avoid decision-making mistakes and cost out of control. On the one hand, strengthen the qualification examination of bidders. Investigate in detail the reputation, economic situation and management ability of the unit to which it belongs, so as to avoid disturbing the bidding environment, bringing difficulties to bidding and even making wrong judgments. On the other hand, strengthen the pre-tender estimate audit. The calculation process of pre-tender estimate is characterized by professionalism, complexity and many human factors. Enterprises should establish a review mechanism to avoid the cost increase caused by the deviation of pre-tender estimate or the difficulties brought to project management and settlement by blindly winning the bid at a low price.

2. Cost control in contract management system

(1) Tightness of the contract

In addition to the normal contract terms, the design change, the pricing method of on-site visa, the pricing method of special technology, the handling method of breach of contract and the handling method of possible risks should be clarified to avoid differences and contradictions in settlement.

(2) the operability of the contract

The operability of the contract is mainly reflected in the fact that developers and contractors can effectively implement it. Avoid the contractor's blind commitment to impossible terms in order to obtain the project, which will affect the project schedule and the implementation of the project plans.

Fourthly, the cost control in the construction stage.

There are often differences between construction units and developers in management concepts and methods. In order to build high-quality real estate, the company must establish strict and feasible management measures in some key management links, which are embodied in the following three aspects of cost management:

1. Strengthen the supervision and management of design changes and on-site visas.

Design changes and site visas in the construction stage are inevitable, but they should be in a strict control system. The design change and visa management control system should be clear: the operation process, the responsible person in the process, the management authority of the responsible person, the confirmation time limit of the process, the veto and the accountability system, etc. At the same time, let the construction unit clear the operating system, facilitate cooperation, improve work efficiency, and lay a good foundation for settlement.

2. Strengthen the quality and price management of equipment and materials.

A perfect equipment and material management system is a necessary condition for building high-quality projects. Generally, the operation method is as follows:

(1) Buy it yourself.

Self-purchase can not only control the cost, but also avoid differences in settlement between the two parties. Such as large electromechanical equipment (elevators, air conditioners, etc.). ), facade decoration materials (exterior wall coatings, tiles, etc.). ) has a direct impact on the quality of the project, at the same time, the price is higher and easy to play the advantages of large-scale procurement, should be centralized procurement. Some materials used in landscape engineering can also be purchased through bidding.

(2) General Contractor Procurement

On the premise of limiting the quality and performance of some common building materials, developers can let contractors purchase them, which can give play to the advantage that contractors are more familiar with the market than developers, thus mobilizing their enthusiasm.

(3) Party A shall restrict the procurement of the contractor.

For some projects that cannot be guaranteed at one time, the price of main materials can be confirmed through the price confirmation procedure agreed by the developer and the contractor. The price shall be fixed at the time of settlement, and the time limit and scope of the price shall be specified when the price is fixed.

The above three materials procurement methods should be put into use under the system of sample supervision, sample certification and entry acceptance confirmation.

3. Strengthen the monitoring of the implementation of the capital plan.

(1) The capital plan is based on the confirmation of all the contracts of the project and the rationality of the overall construction schedule, which requires the cost control personnel and the project management personnel to coordinate with each other in the early stage and do the basic work well.

(2) The project payment in the construction stage is based on the capital plan and should be coordinated with the construction progress plan. Monitoring the project under such a general framework can make the project management clearer. When the increase or decrease of the actual amount in the current month exceeds a certain proportion of the capital plan, cost control personnel and project management personnel should analyze and clarify the reasons in time, and put forward cost early warning and project progress early warning when it is serious.

(3) The combination of capital planning and dynamic cost control can make the company better control the operation of the project, and make the sales revenue and engineering expenditure of the enterprise in a virtuous circle.

Verb (abbreviation of verb) cost control in settlement stage

The outstanding characteristics of settlement work are: "massive, centralized and complex". In order to avoid subjective errors, loopholes and objective negligence in settlement, the following mechanisms should be established:

1. Meeting confirmation system

The settlement principle adopts the meeting confirmation system. Through the settlement meeting, determine the settlement method, candidates, settlement period, special issues other than normal settlement items, and items that are not agreed in the contract or have great differences between the two parties.

2. The second review and audit system

Establish a feasible secondary audit mechanism to keep the settlement under control. On the one hand, strengthen internal constraints; On the other hand, reduce work mistakes. Specific operators should apply for experienced cost personnel or entrust an intermediary agency.

3. Reward and punishment system

After the settlement, the cost target is analyzed and sorted out, and the design quality of the design unit (including the enterprise design management department) and the on-site visa management of the supervision unit (including the enterprise engineering department) are analyzed respectively, and the rewards and punishments are carried out according to the specific situation.

In a word, the cost control of real estate development should run through the whole process of project development, and its control focus is on early decision-making, pre-control in design stage, accurate control in bidding and contract negotiation stage, and strict control in construction settlement stage. Especially in the case that the profit of development projects in second-tier cities is not high, we should do every link well with a rigorous and pragmatic attitude so that the company can win the maximum profit.