International Construction Measurement Standards, 2nd edition

Part 2 ICMS Framework

2.1 Overview

Figure 1 sets out the broader context and scope for ICMS, 2nd edition, including what is covered beyond the scope of the 1st edition.

Figure 1: ICMS Framework

 

Figure 2 presents the overall taxonomy used for ICMS, 2nd edition. The taxonomy consists of four levels with Level 1 through Level 3 being mandatory while Level 4 is discretionary.

Figure 2: ICMS Framework including Level 1 Projects and Sub-Projects

2.2 Hierarchical Levels

Figure 3 shows the hierarchical links between the four levels of the ICMS taxonomy, from the highest to the lowest level of detail.

Figure 3: ICMS Hierarchy

The description of each level in Figure 3 is as follows.

Project and Sub-Project (Level 1)

ICMS classify Projects according to their essence and principal purpose. The Projects shown in the framework are not exhaustive and will be further developed in future editions of the Standards. Projects have been assigned the following codes:

When a Project is too large or complex to be described by a single set of Project Attributes and Project Values, it is to be subdivided for cost reporting into Sub-Projects, each described by a single set of Project Attributes and Project Values. A Project can have multiple Sub-Projects. It is also possible to use a combination of Sub-Projects within a Project to report a collection of Projects under the names of 'programme' or 'portfolio'.

Cost Categories and Cost Groups (Levels 2 and 3)

The Cost Categories at Level 2 and Cost Groups at Level 3, as defined in Table 1, are mandatory and standardised for all Projects to enable high-level comparison between different Projects and Sub-Projects.

Table 1: Definitions of Cost Categories (Level 2) and Cost Groups (Level 3)

- Accepted alternative terms are separated with a vertical slash ( | ).

- All individual costs reported should be those paid or payable by the Client and include the payees' overheads and profits where applicable.

- Different levels of Cost codes are to be linked together with a '.' in between.

 

Cost Sub-Groups (Level 4)

The costs of components of a Project or Sub-Project under each Cost Group serving a specific function or common purpose are grouped into one Cost Sub-Group, such that the costs of alternatives serving the same function can be compared, evaluated and selected. Cost Sub-Groups are chosen irrespective of their design, specification, materials or construction.

These Standards do not mandate the classification of the Cost Sub-Groups (Level 4), but the following appendices provide examples of what might be included:

  • Appendix A - Acquisition Cost Sub-Groups
  • Appendix B - Construction | Renewal | Maintenance Cost Sub-Groups: Buildings
  • Appendix C - Construction | Renewal | Maintenance Cost Sub-Groups: Civil Engineering Works
  • Appendix D - Operation Cost Sub-Groups
  • Appendix E - End of Life Cost Sub-Groups.

Users of these Standards may adopt a Cost Sub-Group classification based on trades, work breakdown structure or work results according to their local practice.

Cost codes

Cost codes are a unique identifier for digital purposes. They have been assigned to the ICMS hierarchy down to Level 4. However, since the classification of the Cost Sub-Groups at Level 4 is not mandatory, the cost codes there may be suitably adjusted.

2.3 Project Attributes and Project Values

To enable consistent and concise evaluation and comparison between different Projects or different design schemes, these Standards provide a set of Project Attributes and Project Values in Part 3 describing the principal characteristics of each Project or Sub-Project.

Costs should, as far as practicable, be stated in their payment currencies. When it is necessary to carry out a currency conversion, the exchange rates or conversion factors used and the applicable dates should be stated.

2.4 Life Cycle Cost Considerations

Setting the scope of the life cycle costs

Life cycle costing (LCC) is an economic evaluation method that takes account of all relevant costs over a time horizon (Period of Analysis). Presentation of life cycle costs should make clear the scope of those costs included or excluded (as defined in the Cost Categories and Cost Group tables) and the relevant level of costs for the LCC purpose, as well as dealing with the time value of money.

Life cycle costs may be reported at a lesser level of detail than the underlying analysis. For example, the detailed cost analysis may be at Level 4 Cost Sub-Groups, whereas reporting may be at Constructed Asset Level 1 Project or Sub-Project Costs or Level 2 Cost Categories or Level 3 Cost Groups.

Life cycle costing may be part of a wider economic project evaluation that considers the whole life costs (including non-construction costs such as finance, business income from sales and disposals, and externalities).

Expected asset life

The design life of the Constructed Asset is a key performance requirement and should be defined in the project brief. The estimated expected service life of the Constructed Asset should be at least as long as the design life.

Renewals of Constructed Assets during the expected service life should be included in the life cycle cost's Period of Analysis, as well as any associated end of life or handback obligations.

Time value of money

The initial construction costs reported should be the forecast or actual final costs to complete the construction of the Project. Forecast costs should include an adjustment for price level fluctuations until the completion of the Project using published market indices and an agreed Base Date.

The rest of the life cycle costs should be the forecast costs after the completion of construction until the end of life or a shorter Period of Analysis (e.g. one to ten years). This should be defined in the project scope, discounted to a Common Date not earlier than the completion of construction and made using Discount Rates mandated by government authorities for public projects or published Discount Rates for the market where the Project is located for private projects or other rates such as those designated by the Client. These interrelated terms of LCC are illustrated in Figure 4.

Figure 4: LCC Calculations and Period of Analysis

ICMS can be used to record, collect and analyse actual costs. Actual costs should be recorded in the amounts paid. When historic actual costs are used for forecasting future costs, Price Level Adjustments should be made to bring the historic costs to the desired date of payment. Life cycle costing has certain cost variables. It is therefore important to record the purpose, scope, form and method of the economic appraisal as well as the Common Date and the underlying assumptions, risks and uncertainty, information and data sources.

Net Present Value Calculations

For option appraisal based on life cycle costs the net present values (NPV) of different options should be compared. The NPV of an option should be a single figure that sums up the present values of all relevant future life cycle costs occurring during the Periodof Analysis. NPV is the normal measure for discounted life cycle costs.

To convert a future cost to the present value (cost) at the Common Date, the following formulae, using $ as an example currency, can be used:

  • Present value = future cost × discounting factor
  • R% = Discount Rate per annum
  • Discounting factor for the same cost spent at the end of year N after the Common Date

= PV of $1 after N years

= 1 / (1 + R%) N

  • Discounting factor for a cost spent annually for N years after the Common Date

= PV of $1 per annum after N years

= [1 - 1 / (1 + R%) N] / R%