This comprises indirect overheads and direct cost.
Indirect project-specific overheads cost
This represents the NOPs' management overheads that can be directly linked to the project (e.g. supervision, site sheds, and insurances).
Direct project cost
This is an estimate of the most likely cost of delivering the agreed Scope of Work and is developed in detail from first-principles estimating.
There should be clear articulation of the inputs into the TOC (including design solution, construction methodology, productivities, etc.), which should reflect current industry best practice.
There should be considered allowance for likely project risks and opportunities.
The TOC is only meaningful when analysed alongside the Commercial Framework. The Framework will impact the TOC during both project delivery and post completion. For example:
the Risk or Reward Model (including any caps); and
other costs, such as requirements for project insurances (including deductibles and cover provided), Owner's costs in obtaining approvals, land purchases, etc.
Adjustments will only be made to the TOC as defined by the PAA.
| A 'soft' TOC is not conducive to the public interest and, regardless of any gainshare or underruns, represents a serious erosion of VfM for the Owner. The Owner must make every effort to have a robust TOC. This is discussed in more detail in Guidance Note No 5. |