The cost per functional unit, or functional unit cost, is the unit rate that, when multiplied by the number of functional units, gives the total building works estimate (that is, the works cost estimate less main contractor’s preliminaries and main contractor’s overheads and profit). The total recommended cost limit (the cost limit including inflation) can also be expressed as a cost per functional unit when reporting costs.
A functional unit is a measure of the use of a building, such as a hospital bed, a school pupil place, a hotel bedroom or a car parking space. Functional unit costs are particularly useful at the very earliest stages, when the client knows how many units are needed but no design exists, because a rate from comparable projects can be applied to give an initial order of cost estimate. They are also a helpful way to benchmark and explain costs to clients.
Related terms: order of cost estimate, cost per m² of GIFA, benchmarking, building works estimate.
