1. The term ‘front-loaded’ refers to costs that are applied disproportionately to elements of the work that take place early on during a project or part of a project.
2. There are a wide variety of different construction costs that must be built into a project’s budget. Many of these can be divided into two categories; hard costs and soft costs.
FRONT-LOADED COSTS
1. The term ‘front-loaded’ refers to costs that are applied disproportionately to elements of the work that take place early on during a project or part of a project.
2. Suppliers may front-load costs (or prices in bids) in order to maximise their revenue early in a project by assigning overstated values to the preliminary elements of the work. For example, a contractor might front-load costs for preliminary construction work such as services diversions, demolition, setting out, groundworks, piling, and so on.
3. Front-loading costs can help reduce a supplier's risk on a project, by improving their cash flow and ensuring that maximum payments are received on projects that might not proceed to completion. However, making payments in excess of the value of work completed puts the client under greater financial pressure early in the project and also at greater risk if the project does not proceed, or if a supplier becomes insolvent or has to be replaced. It can also act as a disincentive for suppliers to keep to time schedules, as they may have already completed the most profitable parts of the works.
4. Front loading can be avoided by detailed cost planning and cash flow projection during the design development and tender stages of a project, giving the client a clear idea of how much they should be expected to pay at different stages. Tender assessment should then allow comparisons to be made between competing bids to determine whether individual tenderers have submitted excessive prices for certain aspects or stages of the works. During the construction phase, there should be careful assessment of applications for payment to ensure that the amounts paid do not exceed the value of the works completed.
HARD COSTS V SOFT COSTS
1. Often referred to as 'brick-and-mortar costs', hard costs refer to the cost of physical construction, such as; foundations, superstructure, interior finishes, labourers, equipment, drainage and so on. Hard costs, being 'tangible', tend to be relatively easy to estimate but vary significantly according to the project type. For example, a complex facility such as a hospital will tend to have higher hard costs per square metre than an office building.
2. Soft costs are those costs that, unlike hard costs, are not instantly visible or tangible, and are not directly related to labour or building materials. This might include:
- Fees.
- Land costs.
- Off-site costs.
- Loans, accounting fees and interests.
- Insurances, permits and taxes.
- Public relations and advertising costs.
3. Unlike fixed equipment that is classified as a hard cost, moveable furniture and equipment are classified as soft costs. This includes items such as computer equipment, telephone systems, and so on. Costs that can continue post-completion such as maintenance, security and other up-keep-related fees are also deemed to be soft.
FACILITATION FUND (PROGRAM ENDED IN 2020)
1. Funds provided by the Government (UKAS) as an incentive for investments made by the private sector through the implementation of development projects.
2. Scope of the Fund
- Support from the Government will be provided in the form of grant or conditional adjustable grant as a tipping point to bridge project viability gap.
- Funds shall be utilised towards financing basic infrastructure (access roads, bridges etc.) and land acquisition for highways.
- Distribution of the Fund will be made on reimbursable basis or progressive payment.
3. Eligibility of Project, Key characteristics of project to be considered for Facilitation Fund:
- Projects with high impact and high multiplier effects towards the economic development.
- Potential to create sustainable job opportunities especially at management and professional level.
- Potential to contribute towards the country’s economic competitiveness.
- Project shall be technically feasible and commercially viable on a standalone basis.
- Value of the project is more than RM100.0 million.
- Projects that are in line with the nation’s Five Year Development Plan.
4. Ineligible Projects
- Projects in the financial/banking sector;
- Projects in incubator or R&D stage;
- Mergers and acquisitions; and/or
- Projects that have received Government funding.
- Government procurement projects;
- Investment in foreign countries;
- Projects that are highly dependent on Government support; and/or
- Projects whereby the Government needs to bear a significant portion of the risk.
5. Funding Limits, Shall not exceed 10% of the total project cost. Higher assistance can be offered based on public interest or its impact towards the economy.
Source:
https://www.bpmb.com.my/facilitation-fund
https://www.designingbuildings.co.uk/wiki/Front-loaded_costs
https://www.designingbuildings.co.uk/wiki/Hard_costs_v_soft_costs
