Understanding Build Cost Estimates (BCEs) and Reinstatement Cost Assessments (RCAs)
In the ever-evolving field of construction and property management, understanding the purpose of Build Cost Estimates (BCEs) and Reinstatement Cost Assessments (RCAs) is essential to avoid potentially costly errors regarding development acquisitions and insurance premiums. This blog aims to shed light on these important services, why they matter, and how they can benefit various stakeholders.
What are BCEs and RCAs?
- Build Cost Estimates (BCEs) refer to the detailed cost projections for constructing a new building or structure. These estimates are crucial for real estate developers and approved housing bodies (AHBs) to budget and plan effectively. BCEs are also necessary for an acquisition of partially completed developments, in order to correctly calculate the projected completion costs, from a technical due diligence perspective, but also for writing off costs for tax purposes.
- Reinstatement Cost Assessments (RCAs), are evaluations of the cost required to rebuild a property to its original state following damage or destruction, such as fires or floods. These assessments are vital for individual building owners and insurance companies to ensure adequate insurance coverage whilst simultaneously avoiding unnecessarily high insurance premiums.
Why are BCEs and RCAs important?
The ORS Building Surveying team has many clients availing of these services, but for anyone new to the subject matter, these services are important for the following reasons:
- BCEs; help in early-stage budgeting and financial planning for construction projects. Having an accurate estimate as early as possible can prevent cost overruns, ensuring projects stay within budget.
- RCAs; are critical for insurance purposes. Keeping them updated regularly ensures that property owners are not underinsured, which can be financially devastating in the event of a claim. Similarly, they can lead to your insurance broker negotiating a lower insurance premium, where a previous RCA may have overestimated costs.
ORS’s Expertise in BCEs and RCAs
ORS specialises in delivering both BCEs and RCAs, backed by our experience with market-leading professional services and property management companies. This experience has provided us with valuable insights and capabilities, enabling us to deliver high-quality assessments and estimates.
For those interested in BCEs and RCAs, we recommend:
- Engaging Early: Get in touch with the ORS team early in the project planning stage to initiate enquiries for BCEs, in order to maximise their benefit.
- Frequent RCAs: Conduct RCAs more frequently, every 3 years at a minimum, to keep up with rising costs in the construction sector, ensuring adequate insurance coverage.
Common Misconceptions
Clients have often confuses an RCA with a property valuation. It’s crucial to understand that an RCA is not a valuation but an estimate of the cost to rebuild a property to its original condition. The key distinction is that an RCA excludes the value of any freehold or leasehold associated with the property.
Additionally, it is important to accurately assess the costs related to any necessary demolition to ensure a comprehensive estimate of the required rebuild.
Looking to the future
In the current market, the demand for BCEs is strong as developers and AHBs acquire partially completed estates, making BCEs a crucial part of the Technical Due Diligence process.
Given the recent volatility in construction costs, it is vital to regularly update RCAs. We encourage you to review how current your RCA is on your insurance policy.
In conclusion, understanding and utilising BCEs and RCAs is essential for effective financial planning and risk management, while allowing you to be better prepared for future developments, ensuring the long-term success of your projects.
Contact our building surveying experts today to get started your BCE or RCA journey.