The functional unit method is a rough budget setting technique. A suitable standard unit of use for the project is selected, such as a bed space or pupil place, and the projected number of units is multiplied by an appropriate cost per functional unit.
The method is used for an order of cost estimate at the very start of a project, typically RIBA Stage 0 or 1, when the client knows how many units it needs but no design exists. It is quick and easy for clients to understand, but its accuracy is limited because it does not reflect the size, shape or specification of the eventual design. To improve reliability, the QS should:
- use cost data from closely comparable projects, adjusted for location and time;
- state clearly what the rate includes and excludes, such as external works, fees or risk;
- move to the floor area or elemental method as soon as design information is available.
Related terms: Functional Unit, Floor Area Method, Elemental Method, Order of Cost Estimate.
