Abnormal costs in a viability appraisal: what survives review

An abnormal cost in a viability appraisal is a site-specific cost that a standard build rate does not already cover: remediation of contaminated ground, demolition of existing structures, piled foundations on poor ground, diversion of a sewer or a high voltage cable, archaeological excavation, abnormal retaining structures. The reason an abnormal costs viability appraisal gets challenged so hard is that the same money can be counted twice, once as a cost in the residual and again as a discount to the land value. Planning Practice Guidance expects abnormals to be reflected in the benchmark land value, and that single sentence is behind most of the argument you will have with a council's reviewer.

So the question is never only whether the cost is real. It is whether the cost has already been paid for in the price of the land.

What actually counts as an abnormal

A base build rate, whether taken from published cost data or from a quantity surveyor's own analysis, covers the normal construction of the buildings on a reasonable site. Abnormals are what the site adds to that.

The defensible list is shorter than most schedules submitted. Ground remediation and gas protection measures. Demolition, asbestos removal and below-ground obstruction removal. Piling or ground improvement where shallow foundations would otherwise be used. Diversion or protection of statutory undertakers' apparatus. Off-site highway works. Significant level changes requiring retaining structures. Archaeological investigation. Flood resilience measures above the standard specification. Abnormal drainage, such as a pumping station where gravity discharge is impossible.

What does not belong there: anything that is a design choice rather than a site constraint. A basement is a choice. A concrete frame instead of timber is a choice. A specification uplift to meet a local energy policy is a policy cost, which belongs in the appraisal under policy requirements rather than hidden among abnormals.

The grey area is the cost that is normal for the site type. Piling is normal on most urban brownfield land. Calling it abnormal invites the reviewer to say that the market already prices it into brownfield land values, and the reviewer will usually be right.

The land value problem

Benchmark land value under the Planning Practice Guidance viability chapter is based on existing use value plus a premium to the landowner, and the guidance is explicit that site-specific circumstances, including abnormal costs, should be reflected in that figure. A rational purchaser of a contaminated former works does not pay greenfield prices and then recover the remediation from the planning obligations.

This is where appraisals fall apart. A Viability Assessment that takes the price actually paid as the benchmark, then deducts a long abnormals schedule, is asking the council to fund the developer's overpayment. The guidance says the price paid is not in itself a justification for failing to comply with policy.

Two ways to handle it honestly. Either set the benchmark land value by reference to existing use value plus premium, with the abnormals reflected as a deduction in arriving at that value and therefore not also claimed in the residual. Or claim the abnormals in the residual and demonstrate, with transactional evidence, that the benchmark has been set on a basis that excludes them. Say which approach you have taken, in one paragraph, near the front. Reviewers who cannot find that paragraph assume the worst.

Evidencing a cost rather than asserting it

A number in a schedule is not evidence. Three things turn it into evidence.

1. A quantity. Cubic metres of material to be removed, metres of retaining wall, number of piles, length of diversion. The quantity should be traceable to a drawing or a survey.
2. A rate from a named source, dated. A specialist contractor quotation, a tendered sum, a water company or distribution network operator estimate, or a quantity surveyor's build-up from first principles.
3. A document in an appendix. The quotation itself, with its date, its scope and its exclusions.

Old quotations are a common weakness. A remediation price from three years ago, uplifted by an assumed inflation rate, is worth much less than a current one. So is a budget estimate marked "for information only" by the contractor who issued it.

Remediation, demolition and services diversions

Remediation is the largest abnormal on most brownfield sites and the one most tightly tied to survey evidence. The cost should follow from an intrusive investigation and a remediation strategy, not from a rate per hectare. Land Contamination Phase 1 and Phase 2 work has to be carried out by suitably qualified and experienced persons in accordance with BS 10175, and an AI-assisted draft of a contaminated land assessment is a starting point for that professional rather than a substitute. Where the strategy is still indicative, say so and present the cost as a range with the basis of each end stated.

Demolition costs should come from a demolition contractor who has seen a refurbishment and demolition asbestos survey. Without that survey the figure is a guess, and asbestos is the single item most likely to move the number materially.

Services diversions need the utility's own estimate. Both water companies and electricity network operators issue costed quotations on application, and a reviewer will ask for the reference number. Where the diversion has not yet been priced, the honest presentation is a provisional sum with the scope described.

Contingency and the double counting trap

Contingency is where double counting hides. If the abnormals schedule contains a 10 per cent allowance on each item for risk, and the appraisal then applies a scheme-wide contingency on total construction cost including abnormals, the same risk is priced twice.

Pick one. A single stated contingency on total cost, with abnormals priced at best estimate, is easier to defend than a layered approach. Where one item plainly carries more risk than the rest, say so and explain the allowance, rather than inflating every line.

Inflation is the other overlap. A cost base at a stated date plus a separate build cost inflation assumption works. A cost base already uplifted plus an inflation allowance does not.

How a reviewer tests the schedule

A council's reviewer, usually an independent surveyor instructed under the RICS professional statement on financial viability in planning, works through a predictable sequence.

They check whether each item is site-specific or scheme-specific. They test whether the quantity matches the drawings. They ask whether the rate is tendered, quoted or estimated. They look for the item in the base build rate, since published rates for some building types already include foundations beyond strip footings. They check the date of every quotation. They look for contingency layering. And they check whether the abnormals have also been deducted in arriving at the benchmark land value.

They will also look at whether the abnormals serve the application scheme or a wider masterplan. Infrastructure built once but serving three phases cannot be charged entirely against phase one, and the apportionment needs to be shown.

If the appraisal reaches appeal, the schedule gets tested again, and an inspector will often take a different view of the benchmark rather than of individual costs, which is covered in when an inspector reopens viability at appeal.

Presenting abnormals so they survive

Set them out as a table with a reference, a description, a quantity, a unit rate, a total, a source and a date for each line. Cross-reference each one to a drawing or survey. State exclusions. State the treatment of contingency and inflation once, clearly. And explain in a short paragraph how the abnormals interact with the benchmark land value.

Then accept that the council may not agree, and offer a mechanism rather than a fight. A late stage review in the section 106 agreement allows the parties to settle on the evidence available now and revisit the outcome if costs come in lower, which is how most contested appraisals are resolved in practice. The mechanics are covered in affordable housing review mechanisms in section 106, and the affordable housing position itself should be set out in an Affordable Housing Statement rather than left to the appraisal to imply.

A viability appraisal is expected to be published, in full, as part of the application. Write the abnormals schedule on the assumption that a neighbour with a surveyor friend will read it line by line.

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