1. Target price method and building element cost estimation
Robert Ven, Joona Hannonen, Mimmi Sjöblom, Alexander Åkerlund, Joachim Björnström, Tomi Blom

2. Origins - Development started after World War 2 in Britain
- In Finland in the 80’s (Nora software 1982)
- Haahtela-index and Haahtela-nomenclature Index updated every year, latest version according to price level of January Current nomenclature according to Talo 2000

3. Target price method
Way to calculate the price of a construction project or an existing building
For the calculation spaces need to be assigned a specific purpose
bathroom, bedroom, living room etc.
The spaces are given an area to meet the demand of that purpose
In value calculation / repair calculation, the condition of each space must also be measured
no repair needed, some repair needed or even total renewal
Used to define
the cost of a new construction
the cost of a repairing construction
the value of a current building
For the calculation spaces need to be assigned a specific purpose and the areas of the spaces must be measured. This is called making a space program.

4. Target price method
Target costing has been used for decades in manufacturing
Adapted the benefit the construction industry
The target price is set by the characteristics of the end product
The target price is calculated in the beginning of a project and can be used as a base for more detailed planning
Target price method can be used to e.g.
set a budget for a construction project
assess the value of an existing building
Idea is not a new one, actually in manufacturing target costing has been used for decades to achieve cost predictability during new product development)
Now it has been adapted to suit the needs of the construction industry.
...when traditionally a product’s price is set by the development and production costs

5. Target price method Process: Define customer needs
Calculate maximum project cost
Calculate maximum project cost with current methods
Step 3 - Step 2 = cost-reduction required
Design the product
Monitor process
Cost improvements
Define the customer’s needs; what does the customer want built, and how much is he ready to pay for it?
Calculate how much the project is allowed to cost, by taking into account current market prices and desired profit margins.
Calculate how much the project would cost if the methods currently used by the company were to be used.
Calculate the difference between the results of steps 2 and 3, only by reducing the costs by this amount can the company meet its strategic goals.
Design the product with regards to the customer’s needs and the target price restrictions that have been set. This part takes into account both the cost of construction, and the cost of maintenance during the building’s whole lifecycle.
Monitor how customer satisfaction, cost development and organizational goals are affected by (and during) the process.
Strive to always make cost improvements throughout the whole process.
ALEXANDER

6. Target price method Several different systems available
In Finland the most widely used software is Taku - Haahtela
Customer language instead of developer language
Initial data required
Inputs regarding soil and urban environments important
CUSTOMER LANGUAGE - which means that the client can feed the program initial data about his requirements. Such initial data can consist of, for instance, square metres needed for different spaces, number of rooms required, desired internal temperature in the spaces, desired ceiling height, lux lightning requirements, etc.
ALEXANDER

7. Target price method
The following is a target pricing example done with the Taku software
Location: Lappeenranta
Wholesale-central
Net floor space of 4460 m2
Plot area of m2
Quite detailed target pricing done in 2012
The target pricing is based upon the architect’s draft of the different spaces and their needs
ALEXANDER

8. Target price method: example 4460 m2 inside 21000 m2 plot
wholesale terminal
B! = cost calculations for planning and administrational work
B2 = cost calculation of structural work, earthworks, machinery required
B3 cost calculation of hvac work and machinery.
Electrical work is also included in this section, but not in the picture. ALEXANDER

9. Target price method: example 4460 m2 inside 21000 m2 plot
wholesale terminal
Cost-calculations for the different spaces planned inside the building.
Quite detailed - each individual space has it’s own cost-per-square metres established.
This is advantageous, not only for the accuracy of the target price, but also when researching how total costs are impacted when changes are made to the blueprints.
Basic principles of target pricing: you estimate the cost of a space, or a work that is to be done, by the square feet - and you multiply this cost with the actual square feet of said area.
ALEXANDER

10. Building element cost estimation
Trade name of Haahtela-kehitys Oy
Estimating the price of the building according to nomenclature or with modeling software

11. Building element cost estimation
Main objectives:
To reveal the distribution of costs in construction projects
To compare the cost of the same element in different projects
To obtain and use cost data for future projects

12. Building element cost estimation
Can be used for new construction projects or repair projects as:
Budgeting the construction project
Estimating the cost changes according to specific design
Controlling the economy of construction projects
Base for construction procurement
Estimating the total price of the building

13. Building element cost estimation
Includes calculation of:
Dimensions of structures
Price of structures
Price of construction services
Price of property expenditure
Operational costs
Financing costs
Construction procurement reservation

14. Building element cost estimation
Haahtela / Talo 2000 nomenclature includes three different pricing categories: Low price, normal price, high price.
All the prices are presented without tax, so the value-added tax 24% should be added to price calculations
Reference level is a trade name of Haahtela and it is used as an example to compare costs or for early design to help estimate costs

15. Building element cost estimation
Plans
Measurement
Pricing
Comparing
Joona
Rakennusosa-arvioon tarvittavia asioita ja mitä missäkin vaiheessa tapahtuu

16. Building element cost estimation
Building Information Modeling
Joona
Mallintamisen edut verrattuna vanhanaikaiseen, perinteiseen suunnitteluun ja kustannuslaskentaan/määrämittaukseen

17. Taku, Haahtela Corporation, Finland
Jehkonen, Ville. Talonrakennuksen kustannustieto Ohjelman hyödyntäminen kustannuslaskennassa Karelia-ammattikorkeakoulu
“Building Cost Information System”, Istanbul Technical University, Turkey
Joona
Selitetään kustannuslaskentaohjelmien toimintaa suurpiirteisesti
Taku, Haahtela Corporation, Finland

18. UNIFORMAT II Classification for Building Elements, USA
Joona
Avataan vähän nimikkeistön sisältöä, vasemmalla jenkkien mallia ja oikealla suomen
UNIFORMAT II Classification for Building Elements, USA
Talo-2000 nomenclature, Finland