Target costing and designing to targets in construction

Abstract

Purpose

Target costing determines the cost of a building before design. The cost of the product is based on the customer's requirements for the product's performance and the customer's willingness to pay for such performance. However, if the designers cannot achieve the target cost, the benefits of target costing are wasted. The purpose of this paper is to describe design steering, a methodology for managing design process to achieve target cost and purposed value for the customer.

Design/methodology/approach

The design steering concept steers the complex design process by knowledge management and rapid cost feedback loops, especially in the very early stages of design. Traditional estimating together with CAD systems cannot produce feedback because of the cumulative nature of design. This paper introduces advanced building information modelling (BIM) that supports project management in cost and quality management. As CAD systems start from zero, this BIM starts from the full content. The BIM constructs all the quantities and costs of the building components before the design starts, basing on the client's needs. The model acts as a “defending champion” in relation to the designer's proposals during the design.

Findings

Design steering concept is already in commercial use with encouraging results. A case study explains how design steering affects to designers' decision making. Design steering has helped mutual understanding between the designers and management enabling to achieve the target cost.

Research limitations/implications

At the moment more transparency on goals, processes and information models of clients, project managers and designers are needed in order to support the commitment process of the participants.

Originality/value

Design process has not been earlier dealt with from top to bottom, but from bottom to top. New BIM technologies enable both perspectives.

Citation

Pennanen, A., Ballard, G. and Haahtela, Y. (2011), "Target costing and designing to targets in construction", Journal of Financial Management of Property and Construction, Vol. 16 No. 1, pp. 52-63. https://doi.org/10.1108/13664381111116089