Section 1
Purpose
Formal Cost Plan 3 is the Stage 4 elemental cost plan, prepared from the completed technical design. It is the most detailed and accurate cost plan in the pre-contract sequence: all elements should be measured from fully coordinated drawings, specifications and engineers' calculations. Design contingency reduces to 2.5–5%, reflecting the near-complete state of the design. Cost Plan 3 is the last cost plan produced before tenders are issued, and the cost movement schedule reconciling it to Cost Plan 2 is a mandatory deliverable under RICS Cost Prediction (Professional Statement, 2021).
The Pre-Tender Estimate (PTE) is a separate but closely related document. Where Cost Plan 3 follows the NRM 1 elemental structure, the PTE is a bottom-up cost build from the completed technical drawings and specification — effectively a priced summary of the Bill of Quantities or pricing schedule. The PTE must be completed, reviewed and sealed before tenders are issued. Its purpose is to provide an independent, unbiased benchmark against which tender returns are compared. A credible PTE should be within 5–10% of the lowest compliant tender.
Both documents are mandatory Stage 4 deliverables. Failure to produce a sealed PTE before tender issue, or to reconcile CP3 to CP2 with documented reasons for change, are deficiencies in the minimum level of QS service under RICS Tendering Strategies (2015) and RICS Cost Prediction (2021).
Section 2
Key Principles
- NRM 1: RICS New Rules of Measurement (2nd edition, 2012), Parts 3 and 4: Formal Cost Plan 3 uses the NRM 1 Group Element structure with full measured quantities; design contingency 2.5–5% at Stage 4.
- RICS Cost Prediction (Professional Statement, 1st edition, effective 1 July 2021): mandatory requirement to state change from Cost Plan 2 with reasons; state accuracy range; identify assumptions and exclusions.
- RICS Tendering Strategies (1st edition, 2015), Section 3.1 — Producing the Pre-Tender Estimate: confirms the PTE must be completed before tenders are issued; a PTE prepared after tender returns are known has no integrity as an independent check.
- BCIS Tender Price Index (TPI): both CP3 and PTE must state the base date; tender inflation from base date to tender return date must be applied and separately identified.
- RICS Cost Analysis and Benchmarking (2nd edition, 2024): even at Stage 4, elemental unit rates in CP3 should be benchmarked against BCIS; any element still significantly above benchmark should be subject to final VE check or explanation.
- ICMS (International Construction Measurement Standards, 2nd edition, 2019): RICS Cost Prediction PS recommends ICMS reporting format for CP3 where in the client's best interests.
Section 3
Practical Application
Step 1
Confirm the technical design information cut-off date with the design team. CP3 and the PTE can only be prepared from complete, coordinated information. Any outstanding information must be identified as a risk/assumption in both documents.
Step 2
Prepare the CP3 cost movement schedule: tabulate CP2 elemental totals alongside CP3, categorise each movement (design development, scope change, market movement, error correction), and calculate the total movement and percentage change. Issue the schedule for client review before CP3 is finalised.
Step 3
Measure CP3 elemental quantities from the completed technical drawings using NRM 1 Part 4 tabulated rules. At Stage 4, all elements should be measured — not estimated from benchmarks. Apply BCIS TPI and location factors to any benchmark-derived rates.
Step 4
Set Stage 4 design contingency: typically 2.5–5% of construction cost, reflecting the near-complete design. Document the basis — a lower rate (2.5%) is appropriate for a fully detailed design; a higher rate (5%) for a design with outstanding specialist or CDP information.
Step 5
Update the risk allowance from the Stage 3 Risk Register. At Stage 4, many design development risks should be resolved; the residual risk allowance should reflect only genuine remaining uncertainties (ground conditions not yet encountered, interfaces with live operations, unforeseen statutory requirements).
Step 6
Prepare the Pre-Tender Estimate as a bottom-up build from the completed drawings and specification. Price each BQ section independently from the elemental CP3 approach — the PTE should produce a comparable total through a different route, providing a robust cross-check.
Step 7
Apply inflation to both CP3 and PTE: tender inflation (base date to tender return) and construction inflation (tender return to construction mid-point). Use BCIS TPI values; document the TPI indices and base/current dates used.
Step 8
Seal the PTE in a dated envelope (physical or electronic audit record) before tenders are issued. Issue CP3 to the client for sign-off. After tender returns are received, open the PTE and compare against the lowest compliant tender. If the variance exceeds 10%, prepare a reconciliation for the tender report.
Section 4
Common Mistakes to Avoid
- Preparing the PTE after tender returns are received — this destroys its independence as a benchmark and provides no basis for assessing whether the market has priced the work correctly.
- Using the same methodology for CP3 and the PTE — CP3 follows NRM 1 elemental structure; the PTE should follow NRM 2 trade/work section structure. Using identical calculations for both means a systematic error in one will appear in the other.
- Failing to adjust the PTE for inflation to the tender return date — an uninflated PTE compared to an inflated tender return will show an apparent variance that does not reflect a genuine pricing difference.
- Maintaining 5–10% design contingency at Stage 4 without justification — if the technical design is complete, this level of contingency is excessive and may mislead the client about the budget position.
- Not producing the CP2-to-CP3 cost movement schedule — the RICS Cost Prediction PS makes this a mandatory requirement; omitting it constitutes a deficiency in the minimum level of QS service.
Section 5
APC Competency & Quick Reference
APC Competencies: Cost Management (L2) | Design Economics & Cost Planning (L2) | Procurement & Tendering (L1) | Programming & Planning (L1)
What is the difference between Formal Cost Plan 3 and the Pre-Tender Estimate?
CP3 follows the NRM 1 elemental structure (Group Elements 0–8) and is an updated benchmark of the project cost against the approved budget. The PTE is a bottom-up priced build from the completed technical drawings, following the NRM 2 trade/work section structure. Both should produce a similar total through different methodologies — the comparison between them provides a quality check on both.
What design contingency rate is appropriate at Stage 4?
Typically 2.5–5% of construction cost — reduced from Stage 3 (5–10%) as technical design is substantially complete. 2.5% is appropriate where all technical design is fully detailed; up to 5% where specialist or contractor-designed portions (CDP) remain outstanding. The basis must be documented in CP3.
What action is required if the PTE and lowest tender vary by more than 10%?
Per RICS Tendering Strategies (2015): a variance of more than 5–10% between PTE and tender requires explanation in the tender report. The QS should analyse the variance by trade/element, identify whether it reflects a systematic pricing difference (market conditions, abnormals, scope misunderstanding) or isolated items, and advise the client on whether the variance is acceptable or whether tender clarification is needed.
Section 6
Cost Plan 3 & PTE Checklist
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Technical design information cut-off date agreed with design team
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CP2-to-CP3 cost movement schedule prepared and categorised
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CP3 elemental quantities measured from completed technical drawings (NRM 1 Part 4)
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Stage 4 design contingency set (2.5–5%) with basis documented
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Risk allowance updated from Stage 3/4 Risk Register
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Tender and construction inflation applied (BCIS TPI; base dates and indices documented)
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PTE prepared as bottom-up build (NRM 2 trade/work section structure)
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PTE sealed (dated) before tenders are issued
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CP3 issued to client with sign-off obtained
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PTE opened after tender returns and variance to lowest tender reconciled (target: within 10%)
Section 7
CPD Learning Outcomes
- Prepare Formal Cost Plan 3 from completed technical design information using NRM 1 Part 4, with a mandatory CP2-to-CP3 cost movement schedule in compliance with RICS Cost Prediction (2021).
- Prepare a Pre-Tender Estimate as a bottom-up NRM 2-structured cost build, explain its purpose as an independent benchmark, and describe the process for sealing it before tender issue and reconciling it to tender returns.
- Apply BCIS TPI tender and construction inflation adjustments to CP3 and PTE, and set an appropriate Stage 4 design contingency rate with a documented basis.
Section 8
Further Reading
- RICS NRM 1: Order of Cost Estimating and Cost Planning (2nd edition, 2012, RICS Books) — Parts 3 and 4
- RICS NRM 2: Detailed Measurement for Building Works (2nd edition, 2021, RICS Books)
- RICS Cost Prediction (Professional Statement, 1st edition, effective 1 July 2021, RICS)
- RICS Tendering Strategies (1st edition, 2015, RICS Books) — Section 3.1
- BCIS Online — Tender Price Index and Cost Forecasting Service (BCIS)
- RICS Cost Analysis and Benchmarking (2nd edition, 2024, RICS)
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