NRM 1 and Cost Planning

The RICS framework for order of cost estimating and elemental cost planning

Introduction

NRM 1 — the RICS New Rules of Measurement: Order of Cost Estimating and Cost Planning for Capital Building Works — is the framework that underpins how quantity surveyors prepare cost estimates and cost plans during the design stages of a building project. Published by the RICS Quantity Surveying and Construction Professional Group, NRM 1 standardises the measurement rules, elemental classification, and cost planning methodology that allow like-for-like comparison, transparent budgeting, and defensible cost advice. If you have read our article on Elemental Cost Planning, NRM 1 is the rulebook behind it — it defines the structure, the measurement conventions, and the staged process that make elemental cost planning consistent and reliable.

Where NRM 1 Fits

NRM 1 is part of a three-volume suite. NRM 1 covers order of cost estimating and cost planning at RIBA Stages 0–4 — the design stages before procurement. NRM 2 covers detailed measurement for bills of quantities at procurement stage. NRM 3 covers cost estimating and planning for building maintenance works across the building’s lifecycle. The key distinction between NRM 1 and NRM 2 is the basis of classification: NRM 1 organises cost by building function (what parts of the building do), while NRM 2 organises cost by work section (how the building is constructed, trade by trade). This functional approach is what makes NRM 1 effective at design stage, when the focus is on performance and value rather than construction detail.

The current version is the second edition (originally published 2012) with practice information updates in 2021 and 2022.

The NRM 1 Structure

NRM 1 organises project costs into 15 group elements (numbered 0–14), each representing a functional category of building cost. Group 0 covers facilitating works (demolition, site preparation). Groups 1–8 cover the building itself: substructure, superstructure, internal finishes, fittings and equipment, services (MEP), complete building units, works to existing buildings, and external works. Group 9 covers main contractor’s preliminaries, Group 10 the contractor’s overheads and profit, Group 11 project and design team fees, Group 12 other development costs, Group 13 risk allowances, and Group 14 inflation.

Within each group element, costs are broken down hierarchically: group element → element → sub-element → component. For example, Group 2 (Superstructure) contains elements such as 2.1 Frame, 2.2 Upper Floors, and 2.3 Roof. Element 2.1 can be further split into sub-elements like 2.1.1 Steel frame and 2.1.2 Concrete frame. This hierarchy enables progressive detail — early estimates work at group level, while later cost plans drill down to sub-element and component level as the design develops.

Order of Cost Estimates

An order of cost estimate is a preliminary cost prediction prepared before detailed design, typically at RIBA Stages 0–1. Its purpose is to establish affordability and set budget parameters for the design team. NRM 1 defines three estimation techniques of increasing accuracy.

The functional unit method uses cost per unit of accommodation — £/bed for a hospital, £/pupil place for a school, £/car parking space. It is the quickest approach but the least precise, with typical accuracy of ±25–40%. The floor area method uses cost per square metre of gross internal floor area (GIFA), benchmarked against similar completed projects. This is the most commonly used early-stage technique, with accuracy around ±20–30%. The elemental method allocates cost to building elements using elemental unit rates derived from historical data, achieving ±15–25% accuracy. For example, substructure might be estimated at £350/m², superstructure at £600/m², and services at £400/m², giving a total building rate that can be applied to the project’s GIFA.

NRM 1 standardises all three approaches by defining what to include and exclude at each element, specifying elemental unit quantities (EUQ) for consistent benchmarking, and providing guidance on deriving elemental unit rates (EUR) from historical cost data. This eliminates opaque estimating — all assumptions are visible and defensible.

Cost Plans 1, 2, and 3

Cost Plan 1 is produced at RIBA Stage 2 (Concept Design). It allocates cost to group elements and main elements based on outline drawings, preliminary specifications, and historical elemental cost data. The QS establishes the elemental breakdown, builds a cost model using elemental unit rates from comparable projects, and identifies the key cost drivers — ground conditions, frame type, services complexity. Typical accuracy is ±15–25%.

Cost Plan 2 follows at RIBA Stage 3 (Developed Design). Elements are now broken down to sub-element level, reflecting detailed specifications and confirmed room layouts. The QS updates costs against refined drawings, benchmarks against BCIS data, conducts value engineering if costs exceed the budget, and issues a cost check against Cost Plan 1 explaining any variance. Accuracy improves to ±10–15%.

Cost Plan 3 is the pre-tender cost plan at RIBA Stage 4 (Technical Design). It provides full sub-element and component-level cost allocation based on near-final specifications and detailed MEP design. Risk allowances are finalised, tender and construction inflation are applied, and the cost plan becomes the benchmark against which tender returns are assessed. Accuracy is typically ±5–10%.

The progression from CP1 to CP3 mirrors the design development — each iteration adds detail, reduces uncertainty, and narrows the accuracy range. The QS’s role is to manage this progression, ensuring cost remains within the client’s budget as the design evolves.

Measurement Rules

NRM 1’s measurement rules define how each element is quantified at cost planning stage. These are deliberately simpler than NRM 2’s detailed measurement rules — the purpose is to enable consistent elemental benchmarking, not to produce a bill of quantities. For example, NRM 1 measures external walls by area (m²) without distinguishing between cavity wall, curtain wall, or rainscreen cladding at early stage. The specification assumption is recorded alongside the rate, so the QS and design team can track how the cost will change as the specification is refined.

Each element has a defined elemental unit quantity (EUQ) — the standard unit of measurement (m², m, nr, tonne) — and a corresponding elemental unit rate (EUR) derived by dividing the element cost by the EUQ. These standardised metrics are what enable BCIS benchmarking and like-for-like comparison between projects.

Benchmarking and Cost Data

NRM 1’s elemental structure directly supports the BCIS (Building Cost Information Service) database, the RICS’s primary source of construction cost data. BCIS collects elemental cost analyses from completed projects, classified using NRM 1 group elements. This means the QS can extract elemental unit rates for comparable building types and locations, adjust for inflation and regional factors, and apply them to a new project’s cost plan.

The benchmarking process is central to cost planning credibility. A cost plan built on rates that cannot be traced to comparable projects is difficult to defend. NRM 1’s standardised classification ensures that when a QS quotes a superstructure rate of £600/m², it is measured and classified on the same basis as the BCIS data it was derived from.

Risk and Inflation

Groups 13 and 14 of NRM 1 address two areas that are often underestimated in cost plans. Group 13 (Risk Allowances) requires the QS to identify and quantify three categories of risk: design development risk (the cost of design changes as the scheme develops), construction risk (unforeseen site conditions, weather, supply chain issues), and employer change risk (the client changing their requirements). NRM 1 requires these to be stated explicitly, not hidden within element rates — this transparency allows the client to understand what contingency they are carrying and how it reduces as the design matures.

Group 14 (Inflation) covers tender inflation (the movement in costs between the cost plan base date and the anticipated tender date) and construction inflation (the movement during the construction period). Both must be stated separately and calculated using published indices such as BCIS Tender Price Index or PUBSEC indices. In volatile markets, inflation can represent 5–10% of the total project cost — omitting or underestimating it is one of the most common cost planning errors.

The QS Role

Under NRM 1, the QS is the custodian of the cost plan throughout the design stages. This involves preparing order of cost estimates to establish the project budget, developing and refining cost plans at each RIBA stage, advising the client on cost implications of design decisions, conducting value engineering when costs exceed the budget, benchmarking against BCIS data to validate rates, managing risk allowances and inflation forecasts, and issuing cost checks between stages to explain variances. The QS also works closely with the design team — architect, structural engineer, MEP engineer — to ensure that design development is cost-aware and that the cost plan reflects the latest design intent.

For a deeper look at how the elemental cost plan is built and used, see our article on Elemental Cost Planning.

Common Issues

Insufficient cost data. Cost plans are only as reliable as the data behind them. If the QS does not have access to recent, comparable elemental cost analyses — or if the project type is unusual — the cost plan’s accuracy is compromised. Building a library of cost data from completed projects is essential.

Underestimating preliminaries. Group 9 (preliminaries) typically represents 10–18% of the base build cost, but it is often estimated as a blanket percentage rather than priced against the project’s specific site and programme requirements. NRM 1 requires preliminaries to be assessed as a separate element, not buried in rates.

Ignoring inflation in volatile markets. Tender and construction inflation can shift significantly between the cost plan base date and contract award. The QS must update inflation forecasts at each cost plan stage and communicate the risk to the client.

Design changes without cost checks. Design development between RIBA stages can introduce significant cost changes that are not captured until the next formal cost plan. Regular cost checks — even informal ones — prevent surprises at Cost Plan 2 or 3.

Practical Tips

Use BCIS as your starting point, not your answer. BCIS data provides benchmarks, but every project has unique characteristics. Adjust elemental unit rates for location, specification, ground conditions, and market conditions.

State your assumptions explicitly. Every rate in the cost plan should have a recorded specification assumption. When the design changes, the cost impact is traceable.

Reduce risk allowances as design matures. Risk contingencies should decrease from CP1 to CP3 as design uncertainty reduces. If they do not, either the design is not progressing or the risks have not been properly managed.

APC Relevance

NRM 1 maps directly to the RICS APC competencies of Design Economics and Cost Planning (preparing order of cost estimates, developing cost plans, benchmarking, value engineering) and Quantification and Costing (applying measurement rules, deriving elemental unit rates, using BCIS data). APC candidates should be able to explain the NRM 1 group element structure, describe the progression from order of cost estimate to Cost Plan 3, and discuss how NRM 1 supports cost control during the design stages.

Further Reading on ProQS

Elemental Cost Planning — how the elemental cost plan is built and used in practice, complementing the NRM 1 framework covered here.

NRM 2: Practical Measurement Guide — how NRM 2’s work-section measurement builds on NRM 1’s elemental classification at procurement stage.

Value Engineering in Construction — how value engineering exercises use the elemental cost plan to identify savings without compromising performance.

Risk Management: Tools and Techniques — how NRM 1’s risk allowances fit within the broader project risk management framework.

Key References

RICS NRM Suite — the official RICS page for NRM 1, NRM 2, and NRM 3, including the latest editions and practice notes.

BCIS (Building Cost Information Service) — the RICS cost data service providing elemental cost analyses, tender price indices, and regional cost factors.

Designing Buildings Wiki: NRM 1 — a comprehensive reference covering the NRM 1 structure, cost planning stages, and measurement rules.

RICS Black Book — professional guidance for cost management and quantity surveying practice.

RIBA Plan of Work — the stage framework (Stages 0–7) that NRM 1 cost plans align to.