Chirayuthchai TraisaengsatheanStrategic Finance for Property Development

Construction cost benchmarks and setting contingency

Reference cost ranges by work package, how to set contingency, and how to avoid adding OH&P twice when building the total budget

Key takeaways

  • Hard cost is the base of the estimate, not the project total. Contingency, soft cost, FF&E, land and sales items must be added separately.
  • A lump-sum BOQ from the main contractor usually already includes OH&P, so do not add it again. In the example, adding it twice raises the total budget by THB 50 million, or 6.5%.
  • Structure, architecture and MEP together make up 68–85% of hard cost, so these are the areas to focus negotiation and variation control on.
  • A 5% contingency is a starting point. It should have a budget owner and an approval process, and site teams should not be able to draw on it themselves.

What benchmarks are used for

The figures on this page are general reference ranges for mid- to high-end condominiums and resort residences in Thailand. They are suitable for sense-checking a BOQ and an early-stage feasibility, and do not replace a quantity surveyor's (QS) take-off. Actual prices depend on the design, soil conditions, location, number of floors and material specifications.

Proportions by work package

Work package% of Hard CostIssues to control
Preliminaries / General Conditions5–8%Site office, tower crane, insurance, security, temporary utilities
Piles, foundations, underground works8–12%With a basement or rock on hillside sites, this can rise by up to 15%
Above-ground reinforced concrete superstructure25–30%A large block that makes the S-curve steep
Architecture and finishes25–30%Walls, floors, ceilings, doors and windows, waterproofing, built-ins, sanitary ware
MEP systems18–25%Electrical, plumbing and sanitary, air conditioning, fire protection
Lifts3–5%Often a separate contract, paid on milestones rather than % of work completed
External works, landscape, pool5–8%For resort residences, this can reach 10–12%

Every range is wide, so the rows do not need to add up to 100%. When preparing the actual budget, adjust them to total 100% according to the project's characteristics. FF&E or the furniture package, at around 5–10%, should be shown separately from hard cost, especially if units are sold fully furnished or there are brand standards.

Cost layers outside hard cost

Cost layerReference rangeWhat to do
Contingency5% of hard costHeld at project owner or finance level
Contractor OH&P8–12% of work cost before OH&PIf compared with a group company, market comparison documents are needed
Soft Cost8–15% of hard costDesign, consultants, permits, EIA, and interest during construction if counted in this category

Total budget formula: placing OH&P correctly

A formula found in many working papers is Hard Cost × (1 + Contingency + OH&P). This is correct only when hard cost means the cost of the work before the contractor's profit. A BOQ obtained from a tender or a lump-sum contract usually already includes OH&P.

Where the BOQ already includes OH&P: Total Project Cost = Hard Cost × (1 + Contingency) + Soft Cost + FF&E + Land

Where the estimate is built from direct costs: Hard Cost = Work Cost × (1 + OH&P), then apply the formula above.

If IDC is separated from soft cost, add it as its own item once only. If you need the total cost before actual sales, add marketing costs, commission and transfer costs according to categories D and G.

Example: a project with hard cost of THB 500 million

ItemAssumptionsTHB million
Hard cost per BOQ, including OH&PLump-sum price500.0
Contingency5% of hard cost25.0
Soft Cost12% of hard cost60.0
FF&E7% of hard cost35.0
LandIllustrative figure150.0
Total before sales items770.0

If a further 10% OH&P is added, this increases the total by THB 50 million to THB 820 million, which is 6.5% higher than before. Conversely, if the THB 500 million BOQ already includes OH&P of 10% of direct cost, the work cost is THB 454.5 million and OH&P is THB 45.5 million. Together, the two items equal the original THB 500 million.

Converting proportions into a BOQ check budget

If you want illustrative ranges that add up to 100%, you can use the following as a starting point for comparison with a BOQ

Work packageIllustrative %THB million, from 500
Preliminaries630
Piles, foundations, underground works1050
Superstructure27135
Architecture and finishes27135
MEP20100
Lifts420
External works630
Total100500

Contingency: how much, and who holds it

5% is a commonly used starting point when setting a construction budget, but it is not a safe figure in every case. It should be reviewed upwards when the following risks are present

  • The design is incomplete when the budget is set, or soil boring is insufficient
  • The site is on a hillside, near the sea, or has limited access
  • A high proportion of imported materials, exposing the project to exchange rate and price risk
  • The contract is on a re-measurement basis or has a large number of provisional sums

Some projects separate construction contingency, for construction risk, from project contingency, for project-level risk. This is acceptable, but the calculation base and scope must be clearly specified so the same risk is not counted twice, and neither reserve layer should be added again on top of a forecast that already includes additional works.

Hold it at owner or finance level

Every use needs a variation or a clear reason. Track the remaining balance as a separate item so you know how much buffer the project has left.

Let the site hold it

The reserve tends to be used in place of the routine work budget, so cost problems go unreported until the budget is almost exhausted.

Points to check when comparing against a BOQ

  • Is each category priced on the same scope of work?
  • Is OH&P included in each item or shown separately?
  • Are FF&E, off-site utilities and piling works in the same price?
  • How large are the provisional sums and prime cost items?
  • Is VAT included, and can the project claim it as a credit?
  • Does soft cost already include IDC, or is it shown separately?