The Building Economist - December 2017 - The Yearly Wrap Up

THE YEARLY WRAP UP

FEATURING LIFE FELLOW SPOTLIGHT WHAT WILL IT TAKE FOR THE INDUSTRY TO PROSPER?

OUR NEW PRESIDENT PROF. ANTHONY MILLS FAIQS

FUTURE DIRECTIONS BUILDING & CONSTRUCTION AUSTRALIA

DECEMBER 2017

AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS

AIQS Academy CertiďŹ cate Available Now Save $1,500!

The AIQS Academy The AIQS Academy is an on demand, online training portal available for all Quantity Surveying professionals. This platform provides further CPD options to AIQS Members or Non-Members and can be accessed from a location of your choice. Each topic takes approximately two hours, but completion can be at your own pace and work around your busy schedule. During the course of 2016, the AIQS Academy will roll out up to 100 topics.

The topics available have been individually reviewed and assessed at the highest standard expected by the AIQS for continuing professional development. The AIQS Education Committee will regularly review and update the offerings of the Academy, to ensure a wide ranging and relevant topics. The Academy can be used for your organisational training, enhancing the professional skills of your Quantity Surveyors.

Meet AIQS Membership Entry Requirements

Continuing Professional Development

The Academy can be used as a pathway to AIQS Membership by ensuring you have the necessary skills required to meet the Institute’s academic entry requirements.

The Academy can help you identify knowledge gaps, learn new or upgrade existing skills, as well as provide upskilling opportunities for your project team.

Applicants seeking Institute Membership with a partially qualifying degree (Pathway 2), will be able to meet the academic entry requirements by completing the 100 Academy topics available.

The Academy provides continuing professional development (CPD) opportunities for AIQS Members and Non-Members.

Participants who complete 100 topics will also receive the AIQS Academy Certificate.

Undertaking CPD ensures your skills remain current and relevant in addition to ensuring you fulfill your requirements for continued membership.

www.aiqsacademy.com.au

19

FUTURE DIRECTIONS

BUILDING & CONSTRUCTION

We’d all like to know what the future holds. Here, we take a look at the Australian Construction Industry Forum’s (ACIF) latest industry forecasts for building and construction.

Read on for predictions into future growth areas, declining sectors and projected employment trends.

15

ICMS

INTERNATIONAL STANDARDS

The ICMS Coalition is working towards a new international standard for benchmarking, measuring and reporting construction project costs. We chat to Mark Chappe AAIQS and David Picken FAIQS about the framework and what they hope it will achieve.

10

PROF. ANTHONY MILLS

It’s time to welcome in our new President! BE was delighted to talk with Prof. Anthony Mills FAIQS and delve into his 38 years’ experience in the profession, find out what issues are on his agenda, and what his plans are for the Institute.

Editor Stephanie Ifill Graphic Designer Guilherme Santos Copy Editor Jennifer Page CEO Grant Warner

WHAT WILL IT TAKE FOR THE INDUSTRY TO PROSPER

BE is proud to talk to four hugely influential AIQS Members, all honoured as Life Fellows. Following a lifetime as Quantity Surveyors, Gordon Kinlay LFAIQS, Andrew Scotford LFAIQS, John Silversmith LFAIQS and Gerry Postmus LFAIQS share their thoughts on the industry and the challenges facing it, plus offer up some sound advice.

02 34 04 46 REGULARS 08 49 DEC 2017 CONTENTS

OUR NEW PRESIDENT

23

LIFE FELLOW SPOTLIGHT

Editorial Contributions The Australian Institute of Quantity Surveying encourages readers to submit their articles relating to quantity surveying, the built environment and associated industries including; construction economics, cost estimating, cost planning, contract administration, project engineering and the macroenvironment.

T: +61 (02) 8234 4009 E: marketing@aiqs.com.au

FROM THE CEO

LEGAL CASE NOTES

SNAP SHOT

EVENTS & SOCIAL

SALARY SURVEY

BUILDING COST INDEX AVAILABLE IN PRINT ONLY

Subscriptions The Building Economist is available to AIQS Members online. If you would like to receive the print version, subscribe for 1 year (4 editions) for $110 (inc. GST) or purchase a single edition for $55 (inc. GST) at www.aiqs.com.au.

Disclaimer The Institute does not take any responsibility for the opinions express by any third parties involved in the development of the Building Economist Magazine.

Advertising To advertise in the Building Economist, contact AIQS Marketing & Communications for more information on available opportunities.

Marketing & Communications T: +61 (02) 8234 4009 E: marketing@aiqs.com.au W: www.aiqs.com.au

THE BUILDING ECONOMIST - DECEMBER 2017 - 1

FROM THE CEO

THE YEARLY WRAP UP Despite a challenging year for the industry, I am pleased to report that 2017 saw the realisation of many Institute initiatives, including implementation and steady take-up of the Certified Quantity Surveyor (CQS) designation, release of the full 102 Academy topics, continued implementation of the new CPD Framework, and promotion of careers in Quantity Surveying via participation at Career Expos and Career Advisor Forums.

However, the construction industry continues to confront the reality of the application of non-conforming and non-complying building products which resulted in significant tragedy at

2 - DECEMBER 2017 - THE BUILDING ECONOMIST

Grenfell Tower in London. While not as tragic, this raised stark similarities to the Lacrosse fire in Melbourne in 2014. A 2015 audit carried out by the Victorian Building Authority found that nearly half of Melbourne’s CBD buildings had noncompliant cladding. The major issue facing the construction industry now is how to ensure that installed building products comply with the Building Code of Australia, not just sampled products.

2017 also saw the introduction of Budget Measures designed to prevent property investors from claiming deductions for second-hand plant equipment, despite numerous submissions by both the Institute and those firms specialising

standards are maintained. Deficiencies around the use of contracts (standard form or otherwise) and clear and precise instructions is one area that needs particular attention.

On a more positive note, the Institute has been actively engaging with governments across Australia, having met with 12 Commonwealth, State and Territory agencies over the year and providing seven submissions in response to government enquiries. This has resulted in increased recognition of services provided by Quantity Surveyors, and an earlier engagement of quantity surveying in Defence projects.

Over the course of the year the Institute also established five new committees to facilitate the provision of more services to members, including Diversity & Inclusiveness, Banking & Finance, and Building Information Modelling.

Members should see outputs from these committees from 2018.

in Tax Depreciations. At the time of writing, the legislation giving effect to the Budget Measures is being presented to the Governor-General for assent. This will likely have an adverse impact on some Institute members as it reduces the scope of available work.

A further shadow across the profession has been the increased number of complaints relating to services provided

by Quantity Surveyors (not all AIQS members) across a wide range of areas. Consequently, the Institute has commenced developing standards covering client relationships, and delivering increased education and training to ensure high professional

The shortage of skilled Quantity Surveying and Cost Planning professionals in the market has also been a significant issue for member firms across Australia, with overseas professionals filling the gap. The Commonwealth Governments’ changes to Visa regulations has meant that many of these overseas professionals can only remain in Australia for 2 – 4 years.

To combat this, the Institute has been actively participating at Career Expos and Career Advisory Forums across the country, and will participate in all state and territory Career Expos and Advisors Forums going forward. In addition, the Institute is restructuring its scholarships program to better attract year 11 and 12 students into the profession. The Diversity and Inclusiveness Committee is establishing mechanisms to facilitate increased participation in Quantity Surveying across all demographic and cultural sectors, enabling a more inclusive approach to what historically

“... the Institute has been actively engaging with governments across Australia, having met with 12 Commonwealth, State and Territory agencies over the year and providing seven submissions in response to government enquiries”

has been a male bastion.

The Institute’s BIM Committee, with representatives from across the professional Quantity Surveying and Contractor sectors, is developing a Best Practice framework and guide for the effective implementation of BIM. To aid this, the Institute is fortunate to be one of only three professions to have a seat at the Australasian BIM Advisory Board, which has been established by the APCC and ACIF to coordinate BIM development across Australia and New Zealand, and support/promote a consistent approach by government to BIM. The Institute has also cemented a position at the BiLT conference to promote engagement by the Quantity Surveyors and cost estimators in the effective uptake of BIM. The Institute is developing a Practice Guide to be published 2018.

While 2017 had its challenges, overall it has been a very positive year, with the realisation of many initiatives and the groundwork laid down for further achievements in 2018.

Wishing everyone a Happy Christmas and Prosperous 2018!

Grant Warner

CEO The Australian Institute of Quantity Surveyors

THE BUILDING ECONOMIST - DECEMBER 2017 - 3

SNAPSHOT INDUSTRY NEWS

WHAT WILL THE WORLD ECONOMY LOOK LIKE IN 2050?

Pwc report: ‘The long view: how will the global economic order change by 2050?, projects that for GDP measured at Purchasing Power Parities (PPPs):

investment and talented people after Brexit •

Turkey could overtake Italy by 2030 if it can overcome current political instability and make progress on economic reforms

•

World economy could double in size by 2042

•

China has already overtaken the US to be largest economy based on GDP in PPP terms, and could be the largest valued at market exchange rates before 2030

•

Nigeria has potential to rise up the global GDP rankings, but only if it can diversify its economy and improve governance standards and infrastructure

•

India could overtake the US by 2050 to go into 2nd place and Indonesia could move into 4th place by 2050, overtaking advanced economies like Japan and Germany

•

Colombia and Poland have potential to be the fastest growing large economies in their respective regions – Latin America and the EU.

•

By 2050, six of the seven largest economies in the world could be emerging markets

•

Vietnam could be the world’s fastest growing large economy over the period to 2050, rising to 20th in the global GDP rankings by that date

•

The EU27’s share of world GDP could fall to below 10% by 2050

•

The UK could grow faster than the EU27 average in the long run if it can remain open to trade,

The report projection that the world economy could double in size by 2042 is based on an annual average real rate of growth of around 2.5% between 2016 and 2050. This growth will be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of around 3.5% over the next 34 years, compared to only around 1.6% for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US.

4 - DECEMBER 2017 - THE BUILDING ECONOMIST

SNAPSHOT INDUSTRY NEWS

DAMPENED DEMAND FOR NEW HOUSES AND LAND ACROSS THE MAJOR CENTRES Emerging market development will create many opportunities for business as the economies progress into new industries, engage with world markets, and their relatively youthful populations get richer. They will become more attractive places to do business and live, attracting investment and talent.

Emerging economies are rapidly evolving and often relatively volatile, however, so companies will need operating strategies that have the right mix of flexibility and patience to succeed in these markets. Case studies in the PwC report illustrate how businesses should be prepared to adjust their brand and market positions to suit differing and often more nuanced local preferences. An in-depth understanding of the local market and consumers will be crucial, which will often involve working with local partners.

Economist John Hawksworth concludes, “Businesses need to be patient enough to ride out the short-term economic and political storms that will inevitably occur from time to time in these emerging markets as they move towards maturity.

But the numbers in our report make clear that failure to engage with these emerging markets means missing out on the bulk of the economic growth we expect to see in the world economy between now and 2050.”

The upturn in demand for residential land in the major eastern state centres is expected to begin to peter out over 2017/18 as the new housing market faces emerging headwinds, according to leading industry analyst and economic forecaster, BIS Oxford Economics.

The company’s Outlook for Residential Land 2017 to 2022 report series states that residential lot production in Sydney, Melbourne and SouthEast Queensland is around its peak in this cycle and will begin to fall away. Conversely, demand for land in Adelaide and Perth has been weakening and will continue to soften.

Sydney is estimated to have recorded its highest level of residential land production over 2016/17. Lot production in Melbourne peaked in 2014/15 but has remained close to this peak in the subsequent two years.

Similarly, the Brisbane, Gold Coast and Sunshine Coast markets have been experiencing a moderate upturn since 2013/14 after an extended period of weakness.

In contrast to the strength of the eastern state capitals, the Adelaide land market has softened considerably, in line with weak population growth and a subdued local economy. Lot production in 2016/17 was well below its peak and

there are few key economic drivers on the horizon. Meanwhile, the Perth market continues to struggle both in absorbing the declines in mining investment and in broadening its economic base. Migration and population growth have fallen to well below their pre-mining boom levels. Despite easing lot production, dwelling supply has remained well above underlying demand adding to a significant dwelling oversupply, which will weigh on any cyclical upturn in the coming years.

Lot production in the main east coast capital cities and the Gold and Sunshine Coasts has been underpinned by solid population growth and a housing deficiency, and has been facilitated by record-low interest rates that drove new housing demand.

“Most markets saw house price growth outpace land price growth through the early stages of the upturn, which improved the value proposition for a new house” said Zigomanis, head of BIS Oxford Economics' Residential Research Unit. “That said, land prices have now largely caught up and this gap will have narrowed, making new housing less attractive.”

As a result, many cities are expected to see demand for land and lot production decline over 2017/18 and 2018/19.

THE BUILDING ECONOMIST - DECEMBER 2017 - 5

SNAPSHOT AIQS STORIES

ICEC-PAQS 2018 CONFERENCE, LESS THAN 1 YEAR TO GO! FEATURING THE 3RD INTERNATIONAL QS BIM CONFERENCE THE COUNTDOWN IS ON AS AIQS HOSTS THE JOINT CONFERENCES OF THE INTERNATIONAL COST ENGINEERING COUNCIL (ICEC) AND PACIFIC ASSOCIATION OF QUANTITY SURVEYORS (PAQS) IN NOVEMBER 2018! as they showcase new technology and services relevant to the industry.

EARN ALL YOUR CPD POINTS IN ONE PLACE!

To be held from 18-20 November at the recently rebuilt International Convention Centre at Darling Harbour Sydney, the location is perfect to showcase Australia to international visitors as well offering learning opportunities whilst the precinct continues to be developed and upgraded.

Here are some of the reasons you should ‘save the date’:

Attending the full conference in November 2018 will satisfy your AIQS CPD requirements for the 2018-2019 year.

SHARE YOUR IDEAS, PROJECTS AND RESEARCH AT THE CONFERENCE The ICEC-PAQS 2018 Conference is currently calling for submissions for both industry and academic presentations.

Submissions addressing the following themes are welcome; •

Building Information Modeling (BIM)

•

Project Controls/Cost Management

•

Law & Contracts

•

Project Management

•

Sustainability

•

Risk Management

LEARN FROM INDUSTRY LEADERS

•

Smart Cities/Smart Infrastructure

Stay tuned over the next 12 months as we announce the keynote speakers and program. You won’t want to miss this opportunity to be inspired by these experts.

•

Building Resilience/Post Disaster Reconstruction

•

Human Resource Management

•

Innovation in Construction

EXTEND YOUR PROFESSIONAL NETWORK Connect with Quantity Surveyors, cost engineers and project management professionals from around the world to discuss the latest techniques, standards and issues facing the industry today and in the future.

FIND OUT WHAT’S NEW IN THE MARKETPLACE Connect with vendors and suppliers

Visit www.icecpaqs2018.com for more details. We look forward to seeing you in Sydney.

6 - DECEMBER 2017 - THE BUILDING ECONOMIST

NEW! AIQS CORPORATE TIES & SCARVES The AIQS Corporate Tie is made from smooth silk with a sharp finish.

It’s a sleek, charcoal grey tie which features woven diagonal black, white, grey and blue stripes, along with embroidery of the AIQS logo. Perfect for the office and a smart-casual look.

Alternatively, the AIQS Corporate Silk Scarf in the AIQS distinctive charcoal with soft black, white and blue crossover print is easy to style. Wear this luxurious silk scarf effortlessly around your neck in multiple ways for a fresh and delicate take on any outfit.

Visit www.aiqs.com.au to purchase yours today!

SNAPSHOT

AIQS MEMBER ADVANTAGE

NEW YEAR’S RESOLUTION: SAVE MORE WITH MY MEMBER BENEFITS! New Year’s resolutions are one of those things which are extremely easy to make and even easier to break. As we look towards 2018, try a different approach.

Instead of focusing on the things you cannot do, focus on the things you can do.

One of the strategies for succeeding is to associate your goals with positive emotions and reinforcement. This is where your Member Advantage benefit program* will help you with deals and savings on a range of useful areas. Take a look below at how you can save money and help keep your 2018 resolutions:

JOIN A GYM Getting fit is one of the most popular resolutions, and it’s important to take achievable steps towards your goals. One way to encourage yourself is to join a set program like the 12-Week Challenge offered by Goodlife. Through Member Advantage it’s now even easier with 15% off the Active Plus Goodlife membership and 20% off the 12-week challenge.

TRAVEL MORE Plan a trip in advance to take advantage of the discounts offered to you. When booking tours or hotels, the prices will often fluctuate depending on when you are travelling. For hotels, the earlier you book the more discounts and locations are available through your member benefits. Tours can become cheaper closer to the time, giving you a bigger benefit with Member Advantage.

Researching your destination and monitoring the price cycle will ensure you are able to meet your travel dream without paying more than needed.

REDUCE STRESS Frequent flyers will understand the stress, chaos and bustle of the airport is something to be avoided wherever possible. One of the best ways to do this is by joining an airline lounge. New members save up to $384 on Qantas Club memberships and $332 on Virgin Australia Lounges through Member Advantage. So de-stress, relax and arrive at your destination rejuvenated with a lounge membership.

GET BETTER COVER Insurance policies should change to reflect your lifestyle, so check out where your benefits program can offer you discounted policies. There is a wide range of insurances to consider, with HCF health insurance, Chubb travel insurance, even new house and contents or motor vehicle insurance.

SPEND LESS ON EVERYDAY EXPENSES If your goal is to save up for something like a new car or a luxury holiday, try using your benefits program to save on everyday purchases, like petrol, groceries and even clothing. With pre-purchased gift and e-gift cards you can easily reduce your weekly or monthly budget.

Leaving more to splurge on movie tickets, entertainment, dining and new gadgets also discounted through your AIQS benefit program.

So, this year take some time to look through your AIQS Member Advantage website and turn your resolutions from a wish-list into positive actions. Visit www.memberadvantage.com.au/aiqs to discover your full range of benefits or call 1300 853 352 for more information. *Terms and conditions apply.

THE BUILDING ECONOMIST - DECEMBER 2017 - 7

SALARY REPORT

AIQS SALARY REPORT

THE AIQS SALARY SURVEY WAS THIS YEAR ANSWERED BY 36 FIRMS ACROSS AUSTRALIA; COVERING WESTERN AUSTRALIA, SOUTH AUSTRALIA, VICTORIA, QUEENSLAND, NEW SOUTH WALES AND AUSTRALIAN CAPITAL TERRITORY.

1ST YEAR CADET QUANTITY SURVEYOR (CURRENTLY STUDYING) *NOTE: SALARY MAY BE PRO-RATED BASED ON CONTRACTED HOURS

40k 50k 40k 50k 35k 55k 50k 60k 30k 40k 40k 55k 40k 55k ACT

SA

NSW

NT

QLD

WA

TAS/VIC

GRADUATE QUANTITY SURVEYOR (LESS THAN 2 YEARS EXPERIENCE)

SA

NSW

NT

QLD

WA

TAS/VIC

QUANTITY SURVEYOR (2-5 YEARS’ EXPERIENCE)

SA

NSW

NT

QLD

WA

TAS/VIC

SENIOR QUANTITY SURVEYOR (5-10 YEARS’ EXPERIENCE)

SA

NSW

NT

QLD

WA

TAS/VIC

ASSOCIATE LEVEL QUANTITY SURVEYOR

SA

NSW

NT

QLD

WA

TAS/VIC

DIRECTOR LEVEL QUANTITY SURVEYOR

190k ACT

180k SA

- PARKING/CAR ALLOWANCE - PHONE, LAPTOP & TRAVEL - TRAINING BUDGET - PROFESSIONAL SUBSCRIPTION/ MEMBERSHIP - INDUSTRY/TEAM EVENTS - POTENTIAL BONUS OTHER BENEFITS CAN INCLUDE:

150k 170k 140k 160k 140k 170k 130k 150k 140k 160k 140k 170k 140k 170k ACT

- PARKING/CAR ALLOWANCE - PHONE, LAPTOP & TRAVEL - TRAINING BUDGET - STUDY LEAVE - PROFESSIONAL SUBSCRIPTION/ MEMBERSHIP - INDUSTRY/TEAM EVENTS - POTENTIAL BONUS OTHER BENEFITS CAN INCLUDE:

100k 120k 90k 120k 100k 130k 100k 120k 90k 120k 100k 130k 100k 130k ACT

- PARKING/CAR ALLOWANCE - PHONE, LAPTOP & TRAVEL - TRAINING BUDGET - STUDY LEAVE - PROFESSIONAL SUBSCRIPTION/ MEMBERSHIP - INDUSTRY/TEAM EVENTS - POTENTIAL BONUS OTHER BENEFITS CAN INCLUDE:

75k 90k 75k 90k 75k 95k 80k 95k 75k 90k 75k 95k 75k 95k ACT

- STUDY LEAVE - TRAINING BUDGET/COURSES - HEALTH INITIATIVES - UNIVERSITY FEES SUBSIDY - INDUSTRY/TEAM EVENTS - POTENTIAL BONUS OTHER BENEFITS CAN INCLUDE:

55k 65k 55k 65k 55k 75k 55k 75k 50k 65k 60k 75k 55k 75k ACT

OTHER BENEFITS CAN INCLUDE:

- PARKING/CAR ALLOWANCE - PHONE, LAPTOP & TRAVEL - TRAINING BUDGET - PROFESSIONAL SUBSCRIPTION/ MEMBERSHIP - INDUSTRY/TEAM EVENTS - POTENTIAL BONUS OTHER BENEFITS CAN INCLUDE:

195k

190k

NSW

8 - DECEMBER 2017 - THE BUILDING ECONOMIST

NT

180k QLD

190k WA

195k TAS/VIC

- PARKING/CAR ALLOWANCE - PHONE, LAPTOP & TRAVEL - PROFESSIONAL SUBSCRIPTION/ MEMBERSHIP - POTENTIAL BONUS / PROFIT SHARE ARRANGEMENT

QS JOB MARKET

OVER THE NEXT 12 MONTHS, DO YOU ANTICIPATE THE NUMBER OF QUANTITY SURVEYORS IN YOUR ORGANISATION TO:

DO YOU BELIEVE THE JOB MARKET FOR QUANTITY SURVEYORS IS

OVERSATURATED 8% STEADY 50% NON SATURATED 39% DID NOT ANSWER 3%

INCREASE REMAIN STEADY DECREASE DID NOT ANSWER

PLEASE INDICATE THE NUMBER OF CADETSHIP OPPORTUNITIES YOUR ORGANISATION ANTICIPATES OFFERING IN 2018

NONE ONE TWO TO FOUR FIVE + DID NOT ANSWER

28% 42% 19% 8% 3%

OVER THE NEXT 12 MONTHS, DO YOU ANTICIPATE SALARIES FOR QUANTITY SURVEYORS TO

INCREASE REMAIN STEADY DECREASE DID NOT ANSWER

39% 53% 6% 2%

NUMBER OF FULL TIME QS EMPLOYEES 44% 28% 5.5% 17% 5.5%

AVERAGE SALARY PACKAGE

22% 39% 33% 3% 3%

LOCATION OF FIRMS SURVEYED WESTERN AUSTRALIA (WA) 5 SOUTH AUSTRALIA (SA) 1 TASMANIA / VICTORIA (TAS/VIC) 9 QUEENSLAND (QLD) 7 NEW SOUTH WALES (NSW) 10 NORTHERN TERRITORY 2 TASMANIA 1 AUSTRALIAN CAPITAL TERRITORY (ACT) 2

THE NUMBER OF QUANTITY SURVEYING STAFF EMPLOYED (FULL TIME) BY FIRMS SURVEYED

1 TO 10 11 TO 30 31 TO 50 50+ DID NOT ANSWER

PLEASE INDICATE THE NUMBER OF GRADUATE POSITIONS YOUR ORGANISATION ANTICIPATES OFFERING IN 2018

NONE ONE TWO TO FOUR FIVE + DID NOT ANSWER

ANTICIPATED SALARIES

61% 33% 3% 3%

MALE : FEMALE QS STAFF RATIO 51 - 75% FEMALE 76% FEMALE OR MORE 100% FEMALE DID NOT ANSWER

0% 6% 3% 3%

- Information is based on the recent AIQS Salary Survey.

- Salary levels are not an exact science and have been expressed as a range.

- Salaries are dependent on the individual’s capability, years’ experience, specific expertise and role within the organisation

THE BUILDING ECONOMIST - DECEMBER 2017 - 9

INTERVIEW

10 - DECEMBER 2017 - THE BUILDING ECONOMIST

"My career started in much the same way as many other Quantity Surveyors - by accident" Prof Anthony Mills FAIQS

WE’D LIKE TO EXTEND A VERY WARM WELCOME TO OUR NEW PRESIDENT, ANTHONY MILLS FAIQS, WHO WAS ELECTED IN OCTOBER. WITH 32 YEARS’ AIQS MEMBERSHIP UNDER HIS BELT, AND A CAREER SPANNING AN ARRAY OF SECTORS, INCLUDING GOVERNMENT AND ACADEMIA, TONY BRINGS A WEALTH OF EXPERIENCE TO THE ROLE. BE CHATTED WITH TONY TO FIND OUT MORE ABOUT HIS BACKGROUND, AND WHAT HIS VISION IS FOR THE INSTITUTE.

M

y career started in much the same way as many other Quantity Surveyors - by accident. A neighbour was a QS, and he very generously offered me a cadetship in 1979 at the firm of Davson and Ward in Perth. The late Geoff Ward was, himself, president of the AIQS. He gave me a start in this profession, for which I am very grateful.

I studied Bachelor of Applied Science (QS) at Curtin University and, upon graduation, joined the AIQS in 1985. I have worked for many employers including QS firms (Rider Levett Bucknall, Davis Langdon), state government (WA Main Roads Department), a UK-based building contractor (Henry Boots), and universities (RMIT and Melbourne University); most recently, Deakin University, where I’m the Head of School of Architecture and Built Environment. I’m a long-standing AIQS

member of 32 years, so it’s a great honour to become the President.

I think QS skills are just as important today as they have always been. Our valued clients understand the need for cost management on their projects, and as a result our members are always in demand.

I believe the initiatives being pursued by the AIQS will provide even more opportunities to improve our standing as an essential player in all successful construction projects.

WHAT ISSUE DO YOU SEE GAINING IMPORTANCE IN 2018?

The need for good cost management of infrastructure and other non-building projects. I worked for a state government

road construction authority at one point in my career. I found the experience very useful because it was an environment where QS skills were not commonly used. It showed me that, once the QS role was understood, they became valued by the project teams, and were highly sought after. I believe, as a project cost professional, we need to broaden our horizons and look to enhance our reputation in new disciplines, outside the traditional building industry.

WHAT DO YOU HOPE TO ACHIEVE AS PRESIDENT? I would like to continue the work that has already begun, in particular the promotion of the Certified Quantity Surveyor (CQS) designation and the

THE BUILDING ECONOMIST - DECEMBER 2017 - 11

INTERVIEW

AIQS Academy.

It’s really important that members embrace the CQS concept. The Institute is working hard with clients, governments and other stakeholders to show them the advantages of using members that are Certified QS’s. I’ll be speaking to many client groups over the next two years to promote the CQS concept. So, for this to be successful, eligible members need to sign on to become a CQS as soon as possible.

The other important initiative is the AIQS Academy, which has been driven by the outgoing president, Peter Clack.

I would like to take this opportunity to congratulate Peter on his tremendous efforts to create the academy, while also being a very successful president.

The Academy was established to allow members to join the AIQS from a variety of different and non-traditional backgrounds. As an academic, I know the importance of good quality education; the courses provided are based on our Competency Standards. People who complete the AIQS Academy courses can become a corporate member via this new pathway.

This pathway makes membership available to many people who have not previously been in a position to do an accredited QS degree. I’m really hopeful that this will improve access to, and diversity of, our membership. I think the QS profession has reached a point where we will benefit substantially from the knowledge, education, viewpoint, and professional experience of members who are approaching the QS profession from different backgrounds.

The Institute has appointed a diversity committee to provide the Board with advice about membership processes, amongst other things. If you have an interest in the work of the committee, please contact the AIQS, who will put you

in contact with the committee chair. The new committee will also consider how best the Institute should improve and streamline its policies and procedures.

WHAT ARE SOME OF YOUR PROUDEST MOMENTS IN YOUR CAREER SO FAR? The AIQS hosted the International Cost Engineering Council (ICEC) World Congress in 2002. At that time, it was the biggest conference undertaken by the Institute, and I was the technical editor of the program. It was a demanding job with many highs and lows along the two-year journey, but it did open the AIQS up to being part of a much broader international community of Quantity Surveyors and cost engineers.

In November 2018, the Institute will again host the same conference, but this time combined with the Pacific Association of Quantity Surveyors (PAQS) conference. Whilst the AIQS has hosted these conferences before, this event will be bigger and better than anything we have done in the past.

The conference will be held from 1820/11/18 and is expected to attract over 400 international and local delegates.

I’m hoping for strong support by AIQS members through sponsorship, presentations, and as attendees.

So, although I joined the profession by accident, the Institute has a clear strategy for the future. I’m looking for more members to work with their institute over the next two years, during which all AIQS members will become better informed though CPD, better qualified via certification, more international and diverse.

12 - DECEMBER 2017 - THE BUILDING ECONOMIST

“Our valued clients understand the need for cost management on their projects, and as a result our members are always in demand”

THE BUILDING ECONOMIST - DECEMBER 2017 - 13

Integration with estimating tools

CI MS

THE INTERNATIONAL CONSTRUCTION MEASUREMENT STANDARDS

Construction projects around the world are subject to local standards and guidelines which can vary widely from one region or country to another. The ICMS is a growing group of professional organisations, of which AIQS is a member, working towards a global framework that will provide consistency across construction project costs. Coalition Board and Committee members, Mark Chappe FAIQS, CQS and David Picken FAIQS, explain the ethos behind the ICMS and the benefits of having a common standard.

HOW WOULD YOU EXPLAIN THE ICMS? WHAT IS AN INTERNATIONAL STANDARD? Mark Chappe FAIQS, CQS (M): ICMSC stands for International Construction Measurement Standards Coalition. It is a new, high level international standard which aims to provide greater global consistency in classifying, defining, measuring, analysing and presenting construction costs at a project, regional, state, national or international level.

The ICMS is not a detailed method of measuring construction works, nor is it expected to replace currently adopted methods such as the Australian Cost Management Manual. Instead, it is a high-level benchmarking and reporting framework for international cost classification, reporting and comparison.

David Picken FAIQS (D): The fundamental idea of an international standard is that there is consistency

across countries. So, when it comes to comparison, an effective international standard provides a vehicle for ‘apples with apples’ comparison.

The basic notion of the Coalition is to obtain the commitment of national associations. Part of their commitment is to promote and require the use of a standard in their own jurisdiction.

M: The Intellectual Property (IP) for ICMS is owned and protected by the Board of Trustees of the ICMS Coalition, and not by any single organisation. ICMS Coalition members such as the AIQS will be responsible for ensuring their membership is using ICMS appropriately.

Although there are other recognised international standard setting bodies, notably the International Standards Organisation (ISO), ICMS has been delivered efficiently to the market by professional bodies to address a specific market problem.

WHAT HAS BEEN YOUR ROLE? M: As a current National Board member of the AIQS I was tasked by the Board to be the Australian Trustee representing the AIQS on the Board of Trustees for the ICMS Coalition. The Board of Trustees is made up from over 40 international professional and not-for-profit institutes, associations and the like who each have a Trustee to represent their organisation on the Board. The Board is responsible for making decisions under the provisions set out in the ICMSC Charter and Bye-Laws.

Among normal administrative functions, the Board has the responsibility to manage the Standard Setting Committee (SSC) and setting up this Committee’s Terms of Reference. The SSC, of which David is a member, is responsible for drafting the Standards and is totally independent from the Board of Trustees.

D: On the SSC there is myself from

THE BUILDING ECONOMIST - DECEMBER 2017 - 15

INSIGHT'

Australia plus members from Belgium, Canada, China, Ghana, Greece, Hong Kong, India, Ireland, Japan, Malaysia, Nigeria, Philippines, UAE, UK and USA – 27 people from 16 countries in all!

M: As a Trustee I am also responsible for promoting the Standard and disseminating information about the ICMSC to members of the AIQS as well as other interested and related bodies within Australia. Generally, we meet virtually over an internet communications platform on a monthly basis but there have also been three faceto-face meetings, which due to high costs of international travel I have not be able to attend.

D: My role on the SSC was to contribute to the completion of the Standards draft in less than a year, which by means of teleconference is an impressive feat! When the Construction Unit of the European Union (EU) Commission became more aware of our work, we were invited to hold a face-to-face meeting at the EU headquarters in Brussels in February 2016.

The head of the Construction Unit and his staff sat in on our meetings. A further meeting was held at the Institution of Civil Engineers HQ in London in July 2016. The consultation draft was launched in London at the Royal Institution of Chartered Surveyors HQ with many Coalition Trustees and industry leaders in attendance. Many of the latter made keynote presentations giving strong support to the consultation draft.

Further teleconferences were held to consider the feedback from the extensive consultation. The final Standards was launched formally at the PAQS (Pacific Association of Quantity Surveyors) conference in Vancouver in July this year.

WHY IS THERE A NEED FOR THE ICMS?

in the successful completion of construction projects.

M: Despite rapid globalisation with investment funds flowing across borders and money pouring into constructed assets, the construction profession currently lacks a common language and framework for classifying and reporting construction costs. This is particularly apparent when working with global clients who expect consistency across the world.

M: For the first time at a global collaborative level, ICMS will introduce a standard structure and format that will lead to greater consistency in classifying, benchmarking and reporting of capital costs for construction projects.

When estimating construction project costs, this causes huge problems for cost consultants, Quantity Surveyors, construction economists and cost engineers around the world. The ICMS Coalition is tackling this problem head on.

D: An international framework allows comparison with other projects both within and outside the market. ICMS, as with any cost reporting system, allows for assessing value for money and for benchmarking construction costs.

In particular it provides for reporting national and international statistics in a cohesive, unified manner.

There are differing systems around the world (as well as no system at all in some cases). Differing approaches to presenting construction costs can result in variations of 25% to 30% due to inconsistencies in the methodology and the standard adopted. Unfortunate implications can flow from this inconsistency. Ill-informed comparison of project costs and risk, and a lack of transparency. These can lead to overruns in budgets and construction time. A very unfortunate aspect can be under investment when risk is not properly assessed. Consistency will bring benefits for all parties interested

16 - DECEMBER 2017 - THE BUILDING ECONOMIST

Broadly, ICMS will allow: •

construction costs to be consistently and transparently benchmarked;

•

the causes of differences in costs between projects to be identified;

•

more informed decision-making about the design and location of construction projects;

•

data to be used with confidence for construction financing and investment, decision-making, and related purposes.

HOW DOES THE ICMSC PROCESS WORK? M: ICMS is developed and agreed at a global level (by the ICMS Coalition).

The Standards Setting Committee analysed many of the world’s estimating models and processes to determine the commonality and to ensure universal principles were being adopted. Oceania was extremely well represented on this Committee by David Picken FAIQS, who ensured that the AIQS’s Australian Cost Management Manual principles were considered and incorporated to a high degree.

D: The process at the project level is that cost reports are prepared using the ICMS structure for classifying and presenting construction costs. It covers

David Picken FAIQS

buildings and civil engineering works.

In the civil engineering section there are 12 project types, which can be seen in figure 1, ICMS hierarchical levels and framework. More project types will be added in the future.

M: ICMS sets out universal rules which provide consistency in classifying, defining, measuring, analysing and presenting construction costs at a project, regional, state, national or international level. An overriding

Fig 1: ICMS Hierarchical framework Level 1: Projects or SubLevel 2: Cost Categories Projects

Level 3: Cost Groups

Level 4: Cost Sub-Groups (Discretionary)

Buildings Roads and motorways

Railways

Cost Sub-Group Capital Construction Costs

Cost Group Cost Sub-Group Cost Group Cost Sub-Group

Bridges

Associated Capital Costs

Tunnels

Cost Sub-Group Site Acquisition and Client's Other Costs

Pipelines Wells and boreholes Power generating plants Chemical plants

Refineries

Provision for further types of Project to be added at a later date

Cost Sub-Group Cost Group

Waste water treatment works Water treatment works

Cost Group

Total Capital Cost

Provision for costs-in-use to be added at a later date

Cost Group Cost Sub-Group Cost Group

principal in setting up the universal rules for ICMS was simplicity. It was agreed that the moregreater the simplicity, the easier the international adoption and usage. Consequently, for those members thatwho use the Australian Cost Management Manual elemental breakdown, they will find that the ICMS breakdown is a simplification of many of the elements that they use, in effect a collection of some of the elements into a higher reportable category.

Professional institutions will incorporate these high-level standards and rules within their guidance or local standard methods or rules of measurement.

Again, not to replace those already in place which are highly developed, but rather to run alongside those existing rules and provide a consistent framework into which data generated locally can be allocated for comparison.

HOW WILL THE ICMS PROCESS WORK IN AUSTRALIA? •

How will it work in markets with existing local standards?

•

How is it being implemented

M: ICMS has been developed with the view that, in time, it can be implemented

“Despite rapid globalisation with investment funds flowing across borders and money pouring into constructed assets, the construction profession currently lacks a common language and framework for classifying and reporting construction costs.”

THE BUILDING ECONOMIST - DECEMBER 2017 - 17

INSIGHT'

Mark Chappe FAIQS

in all jurisdictions across the globe.

Markets that do not have established standards for measuring and classifying construction costs are encouraged to adopt ICMS. Markets that do have established local standards should adopt ICMS to compare cost data prepared using different standards from different markets on a consistent, like-for-like basis.

ICMS will be implemented around the world through proactive engagement by the ICMS Coalition members with the memberships, key accounts, and relevant national stakeholders (governments, banks, associations etc.) including ICMS Partners.

Over the long term, it is hoped and expected that ICMS will become the primary basis for both global and local construction cost reporting.

Currently, the AIQS is preparing a mapping document between the AIQS Australian Cost Management Manual and the ICMS document to enable members to easily see the differences and where there needs to be cognisance of a possible impact and effect on benchmarked rates supplied by consultants using ICMS on the ‘normal’ AIQS elemental rates the member is used to. Apples may not necessarily be apples!

Ideally members should do business as usual, but implement a parallel coding process that filters and reallocates the AIQS elements into the consolidated ICMS cost group so that the overall cost is simultaneously allocated to both benchmarking methods. With computer technology this should be a relatively simply process.

As with any major global initiative on this scale, it is anticipated that ICMS will initially be used alongside existing standards, but overtime ICMS will become established in construction markets and be used as the primary standard for reporting on construction cost both locally and globally. As the ICMS method is adopted the benefit of the aforementioned parallel coding will become more apparent, especially with global clients and projects.

However, ICMS will always be secondary to any legally mandated requirements which may differ from ICMS.

ANY FURTHER COMMENTS OR THOUGHTS? M: Apart from encouraging all our AIQS members to become actively engaged with and adopt the ICMS, I would encourage members to get their firms or organisations involved as well. One way of doing this is for them to become an ICMS Partner.

An ICMS Partner is a government, commercial or academic organisation which supports the collaborative approach to developing international standards and commits, in principle, to the adoption of ICMS. ICMS Partners can include, but are not limited to, the following types of organisation: a) construction and infrastructure consultancy firms b) construction industry service providers (e.g. measurement practices) c) construction companies (e.g. multinational firms with international

18 - DECEMBER 2017 - THE BUILDING ECONOMIST

“when it comes to comparison, an effective international standard provides a vehicle for ‘apples with apples’ comparison.”

construction portfolios) d) property investment firms e) developers, banks and lending institutions f) construction related software vendors g) construction cost data service providers, etc.

Prospective ICMS Partner organisations are asked to express their interest through myself as a Trustee, or by emailing info@icms-coalition.org for further information. To qualify as an ICMS Partner, organisations must provide a public statement of support and offer an in-principle commitment to adopt ICMS. ICMS Partners will be listed on the ICMS website.

D: To obtain your (free) copy of the ICMS document please visit www.icmscoalition.org

FUTURE DIRECTIONS FOR AUSTRALIA’S

BUILDING AND CONSTRUCTION INDUSTRY THE BUILDING ECONOMIST - DECEMBER 2017 - 19

FORECAST'

ACIF FORECASTS Since 2002, the Australian Construction Industry Forum (ACIF) has published the ACIF Forecasts to provide the industry with a relevant and credible ‘compass’ for the next ten years on upcoming demand for work across all sectors, including major projects, as well as what is happening with construction costs and labour requirements. The November 2017 ACIF Forecasts have collected information from 20 building activity types across all areas of Australia and processed it through a detail model to provide credible predictions of the future growth and slow areas.

AIQS members are entitled to free access to this data by subscription via the AIQS website.

FORECAST HIGHLIGHTS After some years of decline, construction industry leaders in ACIF are now forecasting a recovery in Non-Residential Building activity. This includes an uplift in commercial building (including offices, retail and industrial building) reflecting increased business investment, as well

as in building required to support the underlying transition in the economy and employment towards the provision of services (including in tourism, accommodation, education, health and aged care).

The upturn in infrastructure construction in roads, rail and water, that has been in the ACIF forecasts for some time, is now definitely gathering pace.

These increases will offset the falls in mining and commodity export infrastructure following the completion of a number of mega projects and the decline in Residential Building activity that has already begun.

WORK DONE IN BUILDING AND CONSTRUCTION The value of all of the work done in the building and construction industries fell by 4% last year to $218 billion. The November 2017 ACIF Forecasts project that total building and construction work will continue to fall over the next three years, but the decrease will become smaller each year. The fall in total building and construction activity is projected to dip to just 0.3% by 2019-20, leaving total work done at $203 billion.n.

RESIDENTIAL BUILDING Approvals peaked two years ago and we are now on the downside of the residential building cycle. The number of new houses built fell last year. The rate of growth in the building of New Other Residential dwellings (such as apartments and townhouses) fell

20 - DECEMBER 2017 - THE BUILDING ECONOMIST

last year from the extraordinary highs seen for some years in some states, particularly in Queensland, New South Wales and Victoria. All categories of Residential Building are expected to fall over the next two to three years. This will push the value of work done in this category of building down from $96 billion in 2016-17 to $84 billion by 2019-20.

NON-RESIDENTIAL BUILDING Economic accounts show that business investment in areas outside of mining is recovering. Non-Residential Building activity is already growing in the states that were less exposed to a hangover from the end of the mining boom.

While there are some challenges to overcome, including the need to address competition from new technologies and lingering scars from previous periods of overbuilding and over supply, NonResidential Building activity is projected to see growth over the next three years, rising from $36 billion in 2016-17 to $39 billion in 2019-20.

ENGINEERING CONSTRUCTION Engineering Construction fell by 10% last year to reach $85 billion. A rebound in infrastructure investment in Roads and Bridges, Railways and Harbours, in Water and Sewerage and in Electricity and Pipelines is underway and expenditure is expected to increase significantly in the next three years. This will slow down and eventually halt the down turn in Engineering Construction work done.

Engineering Construction is forecast to fall and then level out at around $80 billion over the next three years.

VALUE OF BUILDING AND CONSTRUCTION WORK DONE 2016-17

2017-18 (f)

Actual ($ billion)

2018-19 (f)

2019-20 (f)

Forecast ($ billion)

Residential Building

96

92

86

84

Non Residential Building

36

38

38

39

Engineering Construction Total Construction

85

80

80

81

218

210

204

203

% change (YoY) Residential Building

1.6

% change (YoY) -4.4

-7.0

-2.5

Non Residential Building

-1.5

4.0

1.3

1.9

Engineering Construction

-10.3

-6.1

0.1

1.0

Total Construction

-3.9

-3.6

-2.8

-0.3

BUILDING AND CONSTRUCTION IN THE AUSTRALIAN STATES Differences in the performance and outlook of the building and construction industries in the Australian states and territories give some credence to concerns about the ‘two speed economy’.

The ‘mining states’ – Western Australia, Queensland and the Northern Territory – account for $7 billion of the $8 billion fall in building and construction activity forecast for this year. Meanwhile the

south eastern states are projected to hold on to present levels of building and construction activity over 2017-18.

Increases in infrastructure investment and increases in Non-Residential Building in some of the south eastern states will fully offset the coming downturn in Residential Building activity, maintaining construction activity current levels for the next 3 years.

“After some years of decline, construction industry leaders in ACIF are now forecasting a recovery in Non-Residential Building activity.”

VALUE OF WORK DONE IN THE STATES AND TERRITORIES 2016-17

2017-18 (f)

Actual ($ billion) NSW

61

2018-19 (f)

2019-20 (f)

Forecast ($ billion) 61

59

58

VIC

49

49

47

46

QLD

45

43

41

41

SA

11

11

11

11

WA

38

34

34

35

TAS

3

3

3

3

NT

7

6

5

5

ACT

4

3

3

3

218

210

204

203

Australia

THE BUILDING ECONOMIST - DECEMBER 2017 - 21

TRENDS IN CONSTRUCTION EMPLOYMENT

THE CONTEXT TO THE FORECASTS

expectation that continued moderate economic growth and employment growth is leaving spare capacity in the labour market, capping wages growth and inflation. Interest rates will increase when the labour market tightens, but that does not seem imminent. Low interest rates have added fuel to house price inflation and a concerning increase in household debt. Business investment is now responding to accommodative monetary policy settings and (nonmining) business investment is on an upturn. Government has been expanding investment in infrastructure and the provision of services such as health, aged care and education.

The ACIF Forecasts draw heavily on a detailed macro-economic model of the Australian economy. Key factors shaping the economic outlook are the

Changes in Australia’s demography also underpin the ACIF Forecasts. Australia’s population grew at a rate of 1.7% over the last ten years. These forecasts factor in growth of 1.5% per annum over the

Employment in the building and construction industries increased to 1,111,000 jobs last year, making a helpful contribution to employment growth in the economy at large.

Given the projected falls in overall building and construction activity in the next three years, and the falls in labour intensive Residential Building activity in particular, employment in building and construction activity is projected to fall to 1,041,000 jobs by 2020-21.

forecast period, which implies the need to house and provide for around 380,000 additional residents in each year of the next decade.

Most population growth is occurring in Australia’s more populous capital cities.

In 2016, Sydney, Melbourne, and Brisbane absorbed an additional 92,000, 126,000 and 41,000 additional residents. These three cities alone accounted for 72% of the increase in Australia’s resident population. While overall population growth is moderating, there is reason to expect that the largest capital cities will continue to accommodate additional residents at rapid rates in the next few years and perhaps longer. This growth will require further investment in housing, and in many and varied commercial and public services, and in infrastructure, to maintain the liveability and productivity of our largest cities.

“In 2016, Sydney, Melbourne, and Brisbane absorbed an additional 92,000, 126,000 and 41,000 additional residents. These three cities alone accounted for 72% of the increase in Australia’s resident population”

22 - DECEMBER 2017 - THE BUILDING ECONOMIST

SPOTLIGHT

"The "Theprofession profession cannot cannotstand stand still, still,and andasasever, ever, itsitsfuture futureisisinin the thehands handsofofitsits members" members" GORDON KINLAY LFAIQS GORDON KINLAY LFAIQS

THE BUILDING ECONOMIST - DECEMBER 2017 - 23

SPOTLIGHT

have changed), but for the perceived opportunity to be out and about in what appeared to be an exciting industry.

The fact that my grandfather had been a master joiner until retirement but still pottered around in a backyard shed, and my father had been a skilled cabinetmaker and fitout foreman and was at that time managing a joinery shop, probably indicated that I carried, as Napoleon remarked about private soldiers, a measuring rule (if not a field marshal's baton) in my knapsack.

Prior to her marriage, my mother had been a bookkeeper in an electrical engineering company which pointed to another facet of an occupation riddled with figures.

GORDON KINLAY LFAIQS FORMER NATIONAL PRESIDENT OF AIQS (1978-1980) PARTNER OF KEITH RICHMOND & PARTNERS (1970-1991) DIRECTOR OF KINLAY GRINHAM (1991-2002)

Born into a family of joiners and bookkeepers in Scotland, and with a passion for drawing, Quantity Surveying was a natural career choice for Gordon Kinlay. With 50 years’ experience in the profession, and now a Life Fellow of AIQS, Gordon gives BE a glimpse into a remarkable career that lead him to New Zealand and Australia, witnessing an inordinate number of changes to the industry along the way. He also offers up some worthy advice for today’s professionals.

WHAT FIRST DREW YOU TO QUANTITY SURVEYING? In the days when high school careers advice was the remit of a master who had put his hand up, perhaps inadvertently, I heard our careers master once remark that a Quantity Surveyor is the chartered accountant of the construction industry.

This stimulated some interest in me, not so much for the accountancy side which in those days appeared to be a musty indoor occupation (how times

24 - DECEMBER 2017 - THE BUILDING ECONOMIST

As a small boy I recall a fascination with the National Library of Scotland project in George IV Bridge Edinburgh which had commenced construction some time before 1939 but whose steel frame rusted its way through the war years due to the pressing need of 'the war effort'.

Miraculously it did not succumb to the attention of the Luftwaffe or Edinburgh's climate but was completed in the 1950s.

All of this plus an incessant interest in drawing, and pursuits such as aircraft recognition based on little cards with silhouettes, alongside a lifetime interest in geography and mapping, probably indicated in a confused way a likely career path.

WHAT ARE YOU MOST PROUD OF IN YOUR PROFESSIONAL LIFE? I am probably most proud of being involved in an industry which seeks at its best to provide something of worth for the people of this and other countries, which is constantly evolving to bring innovative solutions to satisfy its clients’ requirements, and which regardless of their role is peopled by a range of

SPOTLIGHT

exuberant, brilliant, humorous, sometimes pedantic but always interesting members at all levels and in all occupations.

I say 'I am..' rather than 'I was...' as I have visited several impressive projects both here and overseas and still pause at construction sites to mentally applaud or critique a detail here and there and exchange nods with the flagman.

Luxury Townhouses Bellevue Hill, Sydney/ construction management package BQ, contract administration

I am, in short, proud to be a QS in this maelstrom of human endeavour!

HOW HAS THE PROFESSION CHANGED OVER TIME? Although the profession was well recognised within the construction industry in both Scotland and New Zealand, and provided services commensurate with the sophistication of the industry in the 1950s and 60s, it occupied a lesser status in Australia at that time.

Century Tower Apartments/ cost planning, construction management package BQ, contract administration

QS commissions usually consisted of estimating and the production of bills of quantities were frequently transferred to the architect's letter headed paper much to the chagrin of immigrant QS. Contract administration was normally carried out by the architect with assistance from the engineering consultants and only the ‘curliest’ claims were reluctantly referred to the QS. The increasing sophistication of buildings and their services, an enhanced public

“I heard our careers master remark in answer to a pupils question that the Quantity Surveyor is the chartered accountant of the construction industry. This stimulated some interest in me not so much for the accountancy side which in those days appeared to be a musty indoor occupation (how times have changed) but for the perceived opportunity to be out and about in what appeared to be an exciting industry.”

THE BUILDING ECONOMIST - DECEMBER 2017 - 25

SPOTLIGHT

works involvement and the rise of investment by financial and commercial organisations, many with links to the UK, created a demand for a more accountable industry and the influx of QS from the UK and South Africa all contributed to an increase in opportunities for QS practices to promote their ability to assume a wider role.

Gradually this change was accepted and the advent of first the public authorities' and later the commercial clients' requirements for detailed cost planning of projects hastened the improvement in QS involvement and consequently the type of information available to the client.

It should also be noted that the AIQS, in conjunction with the universities, strove earnestly to raise the standard of education for the QS of that time and future years.

Increased involvement in contract administration services further widened the scope of the QS relationship with the consultant team, and the construction companies and practices were increasingly able to conduct cost research activities. By virtue of their increased involvement and knowledge of construction techniques and contract law, QS could also provide expert witness services to the courts.

The advent of the personal computer and increasingly suitable software radically changed the entire profession providing a platform to speedily integrate and disseminate information and documentation related to the construction industry. Since the late 1980s this change has rapidly evolved to the benefit of the entire industry.

The entry of professional project management services into the industry mix provided further stimulus for QS involvement.

Today the QS plays a valuable role in many sectors of commercial client organisations in addition to the traditional private practice role.

In summation it has now become apparent that the long held mantra of being a QS professional, truly independent and unencumbered by any perceived agency ties to one side or the other, had dawned on the industry's clients and that both they and the QS benefited by this situation.

WHAT WOULD YOU SAY IS THE GREATEST CHALLENGE FACING QS TODAY? The greatest challenge facing the profession today is absorbing the plethora of new information streaming into the construction industry and indeed its potential clients, proactively integrating existing ideas and services into the evolving conditions and quickly and accurately adopting new procedures in order to keep the profession relevant in this rapidly changing world.

The key to this conundrum is superior education in all facets of modern Quantity Surveying, including: - increased liaison between the profession and the universities; - stringent continuing professional development requirements; - re-education to maintain familiarity with evolving techniques; - continuing and improving exposure to real-time on-site conditions and practices and; - cross-fertilisation between QS and other construction professionals, contracting, sub-contracting and supplier organisations.

The profession cannot stand still and as ever its future is in the hands of its members.

WHAT ASPECTS OF AIQS MEMBERSHIP HAVE YOU FOUND MOST HELPFUL IN YOUR CAREER?

26 - DECEMBER 2017 - THE BUILDING ECONOMIST

AIQS membership assures the QS of a pipeline of formal and informal contacts with fellow professionals which is often useful in enhancing knowledge.

The Institute's organisation of seminars and specific meetings addressing issues bearing on CPD requirements enables members to maintain and improve their skill levels commensurate with the changing patterns, techniques, innovations and systems introduced into the construction industry whether at the educational, financial, development, design, construction or legal level.

In my opinion the garnering of this information is almost beyond the capabilities of the average individual member given the pressures of professional and commercial life in private practices, government agencies, development groups or construction organisations. Therefore membership of the AIQS and the ability to access its services are invaluable to QS. The AIQS committee system also enables members to gain information on specific topics by contacting these committees and studying their reports.

Social events, whether free-standing or attached to seminars and the like, are a further way of enabling the different 'layers' of members to interact in discussion.

When I joined I found them to be valuable in extending my knowledge of other members.

WHAT ADVICE DO YOU HAVE FOR TODAY'S JUNIOR QS? At the risk of sounding like Hamlet's Polonius [and you know what happened to him!] I consider the following advice worthwhile: - Learn well in the office, on site and at university and strive for accuracy and clarity;

SPOTLIGHT

- Read wide ranging literature, including fiction books, technical papers and architectural magazines, in addition to text books. This will implant in you the rhythms and cadences of language enabling you to write fluent reports and correspondence [which apart from anything else will be more readily translated into other languages];

Metropolitan Remand Centre, Glebe, Sydney/ cost planning, tender documentation

- Keep your eyes and ears open and your nose alert especially on site and at meetings. It’s amazing what information can be derived by casual observation, but maintain silence unless you have something relevant to add or you are asked a question; - If prompted, speak slowly. There may be others [like myself some might say!] for whom English is not a first language and the slow speaker usually succeeds in transmitting his/her message; - Be inquisitive - train your memory to gather information. Ask questions of your colleagues and when appropriate of other design team or construction members.

Most members are proud of their place in the industry and are happy to advise a junior member; - Nurture a sense of humour and maintain a cheerful and polite demeanour whether you are addressing the managing director or the Alimak operator - they all have a contribution to make and by adopting a polite approach you enhance the reputation of the profession - and yourself!

Werrington TAFE College, Sydney Metro Area/ cost planning, tender documentation

Work-life balance is not just a tag-line it's an essential ingredient of your health and wellbeing.

“I carried as Napoleon remarked about private soldiers a measuring rule (if not a field marshal's baton) in my knapsack.”

THE BUILDING ECONOMIST - DECEMBER 2017 - 27

SPOTLIGHT

"The "Thegreatest greatestchallenge challenge facing facingQSQStoday todayisistoto attract attractboth bothskilled skilledand and qualified qualifiedpersonnel personnelinin adequate adequatenumbers numberstoto ensure ensurethe theprofession profession continues continuestotoprosper, prosper,and and IIwholeheartedly wholeheartedlyendorse endorse that thatsentiment" sentiment" ANDREW H. SCOTFORD LFAIQS ANDREW H. SCOTFORD LFAIQS

28 - DECEMBER 2017 - THE BUILDING ECONOMIST

SPOTLIGHT

WHAT ARE YOU MOST PROUD OF IN YOUR PROFESSIONAL LIFE? The shortage of supply of skilled Quantity Surveyors across the country presents issues not only to firms who are unable to recruit the desired number and calibre of professionals, but also to clients who may not receive the high standard of service expected from the profession, as highlighted by an increase in complaints in 2017. With a successful career built upon the collaboration of talented and multi-skilled professionals across the industry, Andrew H.Scotford, Life Fellow of the AIQS, is only too aware of the impact this shortage will have on the profession. Here he shares his thoughts on these challenges, and what it will take for the industry to prosper.

ANDREW H. SCOTFORD LFAIQS FORMER NATIONAL PRESIDENT OF AIQS (1990-1991) MANAGING DIRECTOR OF SCOTFORD CAMERON & MIDDLETON (1969-1989) JOINT MANAGING DIRECTOR OF RIDER HUNT, PERTH (1989-1993)

The building up of a local practice in Perth from scratch was satisfying.

Together with three very capable directors, Darryl Walker, Godfrey Lawson, and Nigel Hollis, the firm grew to around 25 professionals. We provided traditional cost planning, documentation and post contract services on a wide variety of city, regional, and state building projects.

Commonwealth Government contracts gave us an opportunity to open an additional office in Darwin (Ian Smith), and although that venture was frustrated

by Cyclone Tracy in 1974, more work eventuated including Tindal Air Base (Bruce Moore) in NT. Variety came from consulting on new mining townships and engineering projects throughout WA, which during boom times kept us on our toes. The office had a good atmosphere, and it was not all work and no play, as we also fielded an indoor cricket team (The Super Q’s)!

After the firm merged with Rider Hunt Perth, one of our more interesting projects was having joint responsibility (with Bill Wright in Perth, and Jim McFarlane in London) for pre and post contract aspects of the Goodwyn A production facility as part of The North West Shelf Gas Project. The platform was located 138km offshore of the Pilbara town of Dampier. Rider Hunt International produced Bills of Approximate Quantity for international tender and evaluation, and contractors’ pricing material was processed by a computer package containing an extensive schedule of rates for offshore works. Experienced personnel were seconded to topside fabrication sites at Jervoise Bay, south of Perth, and at Ulsan in Korea.

capacity. Time was spent in planning and constructing a new suburban Church Centre, together with assisting in the establishment of a new Community School, both in Perth’s growing northern suburbs at Mindarie. Similar skills were needed in the development of a new Conference and Education Centre at Mt Claremont. This was followed by a time giving pre-contract co-ordination advice for the structural restoration of St George’s Cathedral, one of Perth’s most historic buildings, a vital centre for outreach and ministry to the city, and a venue for many great occasions of Church and State. Whilst these pro bono projects certainly consumed a lot of time, they also gave much satisfaction, being able to utilise former QS skills for the benefit of the local community.

HOW HAS THE PROFESSION CHANGED OVER TIME? Traditionally, Quantity Surveyors measured Bills of Quantities, and undertook post contract cost administration. Then came an increasing demand from most clients for initial cost advice enabling preparation of budgets before commencing new projects. This naturally led to total cost management by QS being the norm for most development projects, both Government and non Government. In turn this has led to the current insatiable demand for QS skills in most sectors of work across Australia, and overseas.

Following an early retirement, opportunities arose to put my project management skills to work in an honorary

THE BUILDING ECONOMIST - DECEMBER 2017 - 29

SPOTLIGHT

WHAT WOULD YOU SAY IS THE GREATEST CHALLENGE FACING QS TODAY? Budgets, and equally importantly, completion costs of so many projects appear to have soared inexplicably during the past decade, through a time of nominal inflation. I suspect that in a number of instances the reason could be due to either rushed, or muddled methods of contract letting…but I can only surmise!

Infrastructure spending (especially transport) throughout Australia, and overseas, will be huge during this next decade, and it is essential that this spending is cost effective. Being funded mainly through taxes, surely here is an area where QS should be concentrating their efforts and engaging appropriate skilled professionals, to ensure that the public obtains value for money.

A colleague stated a few years ago that the greatest challenge facing QS today is to attract both skilled and qualified personnel in adequate numbers to ensure the profession continues to prosper, and I wholeheartedly endorse that sentiment.

WHAT IS ONE OF YOUR PROFESSIONAL OR PERSONAL QUALITIES THAT HAS CONTRIBUTED TO YOUR SUCCESS? The ability to attract such good professional staff, and to encourage them to take on new challenges, particularly during the lean times that inevitably followed the regular booms in the WA economy. Directors, associates, as well as most senior staff, were multi-skilled,

and therefore suited a number of different building and engineering disciplines, and we were able to use basic QS skills in many fields of work. We formed associations and joint ventures initially, and later mergers, with firms within Australia (viz with Cameron & Middleton, and later with Rider Hunt). If we did not have specific skills in areas of work that demanded it, we linked with overseas firms that did (viz Currie & Brown from UK for their expertise in gas pipeline procurement, which brought Doug Leedham & Wilf van Dam to WA, and later Rider Hunt International for their skills in procurement of offshore oil and gas facilities).

WHAT ASPECTS OF AIQS MEMBERSHIP HAVE YOU FOUND MOST HELPFUL IN YOUR CAREER? AIQS has a treasure trove of current and historical information at its fingertips, through the knowledge and experience of its members. The ability to share data (including the Construction Cost Index Forecasting), as well as to talk to like-minded professionals has been, and remains its strength. Often what we think is a new potential problem, or threat, has usually been experienced by another member somewhere else before, so networking with other members has always been helpful for me.

In addition, international membership reciprocity agreements allow flexibility of careers, through recognition of good practice. During my time as President of AIQS in 1990 I had the pleasure of signing a fixed-term, reciprocity agreement between AIQS and RICS at their headquarters in Westminster, London. This enabled members of each organisation to move freely between Australia and UK, and vice versa. The final draft agreement was negotiated by AIQS ED Anthony Hordern in London, just prior to him being held hostage by Iraq forces in Kuwait on his BOAC flight.

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“Be thorough, aim high in your chosen area of interest”

Anthony was thankfully released by Iraq almost 6 months later to the great relief of us all.

WHAT ADVICE DO YOU HAVE FOR JUNIOR QS? Be thorough, aim high in your chosen area of interest, support and network with as wide a circle of AIQS members as possible. There are always countless opportunities out there. Despite this, there are still many people, both inside and outside of our industry, who have little idea of the benefits of engaging a QS, so my advice is to promote the profession at every opportunity, and the rewards will follow to all our members.

SPOTLIGHT

"If"Ifyou youreally reallywant want totobebeinvolved involved ininthe thebuilding building industry, industry,become become aaQuantity Quantity Surveyor" Surveyor" JOHN SILVERSMITH LFAIQS JOHN SILVERSMITH LFAIQS

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SPOTLIGHT

BE chats with John Silversmith and Gerry Postmus, both honourable Life Fellows, about the difficulties they have faced throughout their QS careers, and how many of today’s problems can be overcome with a little help from others

JOHN SILVERSMITH GERRY POSTMUS LFAIQS LFAIQS John Silversmith LFAIQS, former partner at McCredie Richmond & Johns (1964-1994) and former pharmaceutical Quantity Surveyor consultant (1994-2005); played a major role in the amalgamation of two separate Institutes - acting for the “Institute of Quantity Surveyors” and working closely with Lindsay Lynch from “Australian Institute of Quantity Surveyors” to set up the one governing body - “Australian Institute Of Quantity Surveyors”

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Gerry Postmus LFAIQS, former Senior Quantity Surveryor for the Commonwealth Department of works, WA Branch (1960-1985); developed the AIQS Cost Management Manuals (ACMM) volumes 1, 2, and 3, and the ACMM volume 5 based on the National Public Works (NPWC) manuals. Gerry is a recently retired sessional Lecturer in Building Measurement at Curtin University of Technology, Curtin College and Online Universities Australia

SPOTLIGHT

WHAT FIRST DREW YOU TO QUANTITY SURVEYING? Gerry [G]. Aptitude; at the end of my final year in high school (1959), the guidance officer did a series of tests; IQ, aptitude, etc. From the test results the guidance officer concluded that I was best suited for a career in Quantity Surveying. The Commonwealth Department of Works had a vacancy for a cadet Quantity Surveyor for the first time in their Perth office. I applied for the position, was interviewed by the senior QS in Perth (Ted Foss) and started my cadetship in February 1960.

John [J]. For me, it was my father; he was a builder who activated my interest in building, although he was totally opposed to my becoming involved in the building industry which he considered far too difficult a vocation to follow. He eventually relented and said “if you really want to be involved in the building industry, become a Quantity Surveyor”.

So I did and I thoroughly enjoyed every day of the 60 years I was actively involved in the profession

WHAT ARE YOU MOST PROUD OF IN YOUR PROFESSIONAL LIFE? J. At a work level it was the participation in the conversion of the Old Mark Foys Building in Liverpool Street, Sydney to the Downing Centre Courts. This was a 3-year project commencing in the late 1980s and I, together with four others from my office, worked there every day, often in very difficult circumstances as the building work proceeded around us.

G. I would have to say, my participation in the development and publication of the Australian Cost Management Manual Volumes 1, 2 and 3 in 2000 to 2001, and Volume 5 in 2006. This was, in essence, preserving the work that I had been involved in during my time with the Commonwealth and its role on the NPWC (National Public Works Council).

GERRY HOW WOULD YOU SAY THE PROFESSION CHANGED OVER TIME? G. Since starting my QS training in 1960 I experienced many changes, the most significant of these changes include: •

The currency changed from Pounds, Shillings and Pence to Dollars and Cents. This change, whilst making the math easier, meant that all our rates and prices had to be converted (on paper as well as in one’s mind)

•

The introduction of the metric system of measurement in the construction industry. The imperial system of weights and measures, (feet, inches and yards, pounds and hundred weights) required special math skills - the math was almost impossible to do on a calculator that used decimal numbers.

•

The introduction of calculators and more recently computers. In the 1960s the office had no calculators.

There was an old “comptometer” that was inherited from the account section. It could add and subtract numbers in pounds, shillings and pence. The machine needed a trained operator (a comptometrist), was noisy, and limited in its

application to measurement. I had a slide rule and a modern ‘abacus’, both had very limited useful applications.

JOHN WHAT ASPECTS OF AIQS MEMBERSHIP HAVE YOU FOUND MOST HELPFUL IN YOUR CAREER? J. The sharing of common problems, ideas and difficulties that fellow members of the profession were encountering at different points in their professional lives. Often others had been through experiences I was currently facing and they could help me, and sometimes the situation was reversed.

WHAT ADVICE DO YOU HAVE FOR TODAY'S JUNIOR QS? J. I would suggest that an endeavour to be diligent and organised is a great advantage. Also a preparedness to learn from others as to how they are handling their situations can be of great benefit, always keeping in mind that in life there is very rarely, if ever, something which has never occurred before. Perhaps more so in this day and age, there are more distractions and side issues to take away from concentrating on one’s work within the profession and this should be acknowledged by both employer and employee alike.

“an endeavour to be diligent and organised is a great advantage”

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THE FUTURE OF DISPUTE RESOLUTION

IN THE AUSTRALIAN CONSTRUCTION INDUSTRY “…IT IS INEVITABLE THAT THE COMMERCIAL ACTIVITIES OF THOSE ENGAGED IN THE CONSTRUCTION INDUSTRY WILL ALWAYS PRODUCE DISPUTES WHICH REQUIRE A RESOLUTION” THE HON JUSTICE D BYRNE

It is no secret that the construction industry fosters adversarial relationships between the parties involved. This combative climate is the result of a multitude of competing interests, such as a principal interested in minimising costs and maximising quality, and contractors and subcontractors seeking to maximise profit.

The pressures placed on each of the involved parties from their respective interests leads to conflict, disagreement and often opportunistic behaviour. Further, the general nature of a construction dispute is inevitably complex, technical and often legally difficult to manage and comprehend. This requires the involvement of technical experts who are then critiqued by the other side’s experts in reply. As such, construction disputes are fertile for

litigants to develop and corroborate legal arguments which arguably have merit, yet are inevitably contested due to their factual, legal and technical interpretation.

For these reasons and many alike, the construction industry has fallen victim to a system that inadvertently stimulates disputes, which is further reflected by the vast number of dispute resolution processes available in the industry.

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THE AUSTRALIAN CLIMATE “…the present cost of conducting this litigation [construction] in any but the largest cases will rarely be justified on a commercial basis” The Hon Justice D Byrne

The Cooperative Research Centre for Construction Innovation found that in 2012, dispute resolution in the Australian construction industry was estimated to cost between $560-840 million dollars.

However, the most significant aspect of this figure is that a large proportion of the costs

LEGAL CASE NOTES

are associated with ongoing litigation that is often unnecessary and avoidable.

The Australian response has been to accept disputes as absolute and embrace Alternative or Appropriate Dispute Resolution (ADR). ADR is commonly defined as the methods of dispute resolution that are alternative to litigation, such as negotiation and mediation. The general consensus behind this approach is to avoid the inefficiencies of litigation.

As such, the courts and the legislature have both increasingly demonstrated

their commitment to reducing the pressures placed on the inefficient processes of civil litigation through court directed ADR and amendments to statute making ADR mandatory for parties in dispute. As a result, the growth of ADR in Australia has surged over the past decade.

Recently, an amendment to the Domestic Building Contracts Act 1995 (VIC) now requires parties involved in a domestic building dispute to attend a mandatory conciliation session before the matter

can proceed to VCAT (Victorian Civil & Administrative Tribunal).

Section 56 of the Domestic Building Contracts Act 1995 (VIC): (1) ‘a party to a domestic building work dispute must not make an application to VCAT in relation to the dispute unless the chief dispute resolution officer has issued a certificate of conciliation to the party…’

However, whether this additional requirement will add additional time delays to an eventual VCAT hearing is yet

THE BUILDING ECONOMIST - DECEMBER 2017 - 35

LEGAL CASE NOTES

to be seen. Nevertheless, this is just one of the many legislative reforms requiring parties to first engage in ADR before litigation avenues can be instigated.

Whilst the Australian construction industry has undoubtedly experienced the significant benefits of ADR, a failure of these processes to assist the parties in reaching a resolution can ultimately add additional time and costs and therefore further exacerbate the primary issue it is designed to address.

Therefore, it is important that practitioners continue to develop skills in, and familiarity with this area of dispute resolution and ensure that their clients are fully aware of its benefits as it becomes embedded in the future of the industry.

ENHANCING ADR THE ROLE OF THE LAWYER

‘I have, on occasions in the past, sought to encourage lawyers to focus upon the central issues of the case rather than those at the periphery. Generally, my efforts have been fruitless’ – The Hon Justice D Byrne A fundamental issue of ADR is that it is responsive to a dispute. Therefore, ADR is instigated after two or more parties already have unresolved conflict. It is at this stage where parties may become positional, relationships have begun to break down and the prospects for a mutually agreeable resolution are substantially reduced. To the layperson engaged in these disputes, their lawyer is generally their first point of contact with regard to the legal system, their rights, obligations and available options. It is at this point where parties should focus primarily on the issues in dispute and look toward their commercial resolution, rather than on legal technicalities to support a

position that will ultimately prove to be inefficient and not in proportion with the quantum of the dispute.

It is the duty of practitioners in the construction industry to encourage ADR when it is appropriate, and resist taking legal processes unnecessarily.

Practitioners should explore the ADR options available with their clients before construction contracts are signed, so that the governing dispute resolution clause and ADR requirement clauses are more likely to be accepted and utilised by the parties.

PRE-CONTRACT Whilst ADR methods are common in Australian construction contracts, often little consideration is given to ADR and the ADR options when contracts are made.

As a result of this, often an unsuitable ADR clause is included that fails to adequately address the dispute. Given the significantly high costs associated with construction disputes, more time should be spent at the contracting stage negotiating dispute resolution clauses and a suitable ADR method. This ensures that the parties have considered the effect and utility of ADR rather than viewing it merely as a step preceding litigation.

This is important given that the courts are inclined to compel parties to follow contractual procedure. In Cable & Wireless Plc v IBM UK Ltd [2002] EWHC 2059 (Comm) as cited in Santos Limited v Fluor Australia Pty Ltd [2016] QSC 129, Justice Colman stated that: “…[P]arties who enter into an ADR agreement…must be taken to appreciate that mediation as a tool for dispute resolution is not designed to achieve solutions which reflect the precise legal rights and obligations of the parties, but rather solutions which are mutually commercially acceptable…”

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“development that meets the needs of the present without compromising the future of generations to meet their own needs”

Therefore, as the Courts give weight to the contractual provisions agreed to by the parties, it is important that these provisions have been well designed at the time that they are made.

Justice Hammerschlag recommends that contracts should adopt simple ADR provisions, which move away from the multi-step provisions that are commonly disregarded as a result of their inefficiency and complexity. This is important as it is highly likely that dispute resolution clauses will be triggered on some aspect during the contract.

ADR OPTIONS The growth of ADR in Australia has resulted in a diverse range of ADR options becoming available. As opposed to litigation, the flexibility of ADR enables parties to often be at liberty in having more control over the resolution process and are therefore not confined to strict judicial procedure.

For instance, Early Neutral Evaluation offers parties with an initial indication of the likely outcome of their dispute based on the merits of each party’s position, which is given by a suitably qualified practitioner. Similarly, Expert Determination is another method that has been adopted to allow an expert to operate in an inquisitorial fashion, and make a decision that is not solely reliant on the evidence presented by the involved parties. Rather, the expert utilises their experience and expertise to quickly provide a determination on the

issues at hand, which is often beneficial in construction disputes given that the issues in dispute are technical.

Whilst the decision may be non-binding on the parties, these decisions handed down are often complied with given the qualification of the impartial expert and the costs that will be incurred should they

proceed to litigation.

The increase in ADR has also resulted in contracting parties exploring ADR hybrids, where ADR methods are combined and varied so that the dispute resolution procedure is tailored to suit an individual project.

DISPUTE AVOIDANCE PROCEDURES A relatively contemporary methodology of countering the prevalence of disputes in the construction industry is the notion of Dispute Avoidance Procedures (DAPs). These procedures aim to operate proactively in resolving conflict before it manifests into a dispute, acting as a circuit breaker between ‘conflict’ and ‘dispute’.

DAPs

When conflict arises, this ‘real time’ presence assists in circumventing disputes, fostering working relationships and obtaining mutually agreeable resolutions rather than reactively focusing on the other party’s’ fault and liability.

ADR

Dispute

One particular DAP that has been utilised internationally and domestically is the Dispute Resolution Board (DRB). DRBs are generally comprised of mutually appointed experts, who oversee the construction project from its inception until completion. When conflict arises, informal hearings are conducted on site in ‘real time’, enabling conflict to be resolved swiftly and without the need for the legal system.

Given the international and domestic success of DRBs, and their increased use on smaller scale projects, the prevalence of DRBs and other DAPs in the construction industry may increase in the near future.

CONCLUSION

Litigation

Conflict

applicable on large scale projects, a 2009 study by the Cooperative Research Centre Construction Institute found that smaller scale projects are increasingly adopting this process worldwide.

Arbitration

In the United States, between 70-80% of construction projects utilising a DRB did not require the Board’s intervention and for those that did, 98% accepted their decision. Notably, a DRB was utilised and successful in the completion of the Sydney Desalination Project.

Whilst common discourse surrounding the inclusion of DRBs into the Australian construction industry has been hindered by the belief that DRBs are only

Litigants in the construction industry must adjust to the trends in the industry to expedite the resolution of construction disputes.

The increase in ADR has proven to be a suitable and effective mechanism to resolve many of these disputes and counteract many of the inefficiencies associated with litigation.

Whilst litigation will always play a significant and necessary role in the resolution of disputes, it is essential that a greater effort is made to continue to promote commercial resolutions through ADR. Practitioners of all disciplines must transform their approach from an adversarial to a cooperative culture when dealing with construction disputes and become proactive in dispute management. This will mean that they explore the variety of flexible options available and choose those that are most suitable to individual projects.

ADR provides a contemporary solution to resolving conflict before it manifests into a protracted dispute and should be used wherever practicable.

Legal case notes has been brought to you

by Doyles Construction Lawyers. For further information or if you have any questions in relation to this article please visit www.doylesconstructionlawyers.com or contact doyles@doylesconstructionlawyers.com

THE BUILDING ECONOMIST - DECEMBER 2017 - 37

WORKPLACE

TOMORROWS CHALLENGES In a technological world where life exists in front of screens of varying sizes, individuals and companies alike tend to let days slide by without looking much beyond today’s success or the latest software release. What does this mean for the future? In these articles, we find out from Prof. Knut Haanaes what it now takes for a business to prosper in our constantly evolving existence, and Prof.

Stéphane Garelli gives his view on the virtual economy, and how maybe we need to check in with reality once in a while

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THE CHALLENGE OF BALANCING SHORT TERM AND THE FUTURE FOR BUSINESSES KNUT HAANAES PROFESSOR AT IMD BUSINESS SCHOOL Here are two ways your company can fail.

Keep doing more of the same. Or, if you’d prefer, start doing only what’s new.

If you want it to thrive you need to take the trickier middle way; you need to find the right balance between exploring new ideas and exploiting existing ones. That is, between creating new services and products that push frontiers despite the inherent risks, and using the knowledge that you already have to make something that is good even better.

It’s easy to find examples of companies that go under because they were unable to imagine any future beyond business as usual. Take Facit, an office equipment manufacturer that was established in Sweden in the 1920s. It was known for making the best mechanical calculators in the world – ‘everybody’ used them.

Then the electronic calculator came along. And how did Facit respond? By continuing to do exactly what it had always done: manufacture mechanical calculators. Its engineers recognised the value of electronic calculators – they bought some in Japan and used them to double-check the accuracy of their own products – but that did not change the company’s strategy. It is so difficult to change when you are so competent!

Within six months the firm lost not just its place at the top of the pyramid, but everything. It collapsed completely.

It’s obvious in this example that Facit failed because it focused its efforts far too strongly on exploiting what it had to

the exclusion of developing new ideas, but out-of-control exploration can be just as dangerous to corporate existence. I saw this first hand a few years ago when I worked closely with a brilliant European biotech firm that had applications that promised to diagnose, or even cure, some forms of blood cancer. The company was extremely innovative; every day was about creating something new. And not just creating it but making sure that it was absolutely perfect.

But the sad thing was that before these ideas became perfect – before they even became good enough – they became obsolete. The company spent so much time coming up with ideas that it wasn’t able to exploit them.

So, we can see that exploitation and exploration both carry significant risks when they’re taken to extremes.

It’s obvious that a balance is needed.

Companies that find that balance see huge pay-offs. Think of Nestlé’s creation of Nespresso, Lego’s move into animated films and Toyota’s creation of hybrid vehicles.

But getting that balance right is much harder than simply saying we need to do it. In fact, our research suggests that only about 2% of companies successfully

“It is so difficult to change when you are so competent!”

THE BUILDING ECONOMIST - DECEMBER 2017 - 39

manage both exploration and exploitation in parallel. Why is it so difficult? Largely because there are numerous traps that keep us where we are. Two of the biggest are the ‘perpetual search trap’ and the ‘success trap’.

The first of these arises when a company discovers something but does not have the patience or persistence to stick at it and make it work. It doesn’t put in the time or the effort needed to turn an exciting idea into commercialising a new product or service. Instead, it moves on to the next discovery – which it will treat in just the same way. This is how the biotech firm I mentioned earlier ended up failing. Successful exploration requires patience and persistence.

The success trap, meanwhile, is what caught Facit out. The company was so good at making mechanical calculators

that they simply didn’t want to change.

It stuck with what it knew well despite the need for change. In the short term doing more of the same is not risky, in the medium term not changing is detrimental.

As Bill Gates said, “Success is a lousy teacher. It seduces us into thinking we cannot fail.”

There are at least four things we can do to avoid or escape from these traps. First, get ahead of the crisis. Ready yourself for the next battle. Any company that can innovate is buying an insurance policy on the future.

Next, think in multiple time scales. In any one year innovation typically accounts for only about 30% of a company’s value.

Across 10 years, however, innovation and the ability to renew accounts for 70%.

Executives need to fund the journey and lead the long term.

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Third, invite diversity of talent to challenge you. Balancing exploration and innovation is a team sport. It requires people who are willing to challenge the company and its strategy – and a corporate board that will accept and listen to that challenge.

Finally, be sceptical of success. Learn from history. Roman generals celebrating a triumphant victory were accompanied by a companion telling them, “Remember, you’re only human”.

Whether you are an explorer by nature or someone who prefers to exploit what you already know, don’t forget that beauty is in the balance.

“Think of Nestlé’s creation of Nespresso, Lego’s move into animated films and Toyota’s creation of hybrid vehicles”

SOONER OR LATER THE REAL ECONOMY BITES THE VIRTUAL ECONOMY BACK STÉPHANE GARELLI IMD BUSINESS SCHOOL PROFESSOR EMERITUS; FOUNDER OF THE WORLD COMPETITIVENESS CENTRE If the post-truth era triumphs, if alternative facts supersede evidence, if polls are so wrong, it is perhaps because the relationship people have with the real world has changed.

Throughout time, individuals have tried to escape the reality of life, through religion, drugs or alcohol. Today, modern technologies allow a genuine democratisation of the unreal. Everyone can live in a parallel world consisting of video games, augmented reality, avatars or sitcoms. Each can lead an alternative life by proxy.

“In Japan, Konosuke Matsushita, the founder of Panasonic, had a 25-year plan for his company. One day, a journalist asked him what his long-term forecast for the company was. He answered: “for the next 500 or 1000 years?” He was hardly joking”

According to the Nielsen Institute, Americans spend 10 hours and 39 minutes per day in front of a screen.

The greater part is devoted to checking a smartphone, followed by TV, computer and finally a tablet. The proportion is roughly the same in Europe even though the total duration drops to around six hours per day.

Considering a sleeping period of 7 hours and 30 minutes, only 6 hours

remains to confront the reality of life, often with reluctance.

An economy dominated by the unreal is extremely difficult to quantify. The traditional means of analysis such as the GDP, which dates from the 1930s, or productivity, focus on the ‘real economy’ and measure a transaction which has a price. But how to measure the gain in productivity of a software update or, on the contrary, the cost of a computer virus? In addition, this virtual economy is atomised. A myriad of actors, often small, can have a global influence. The ‘tipping points’ are numerous: financial scandals, pollution, fictitious jobs or pirated emails.

Everything can alter the outcome.

Edward Lorenz and his famous Butterfly Effect would have enjoyed it.

The virtual economy is difficult to anticipate. Economic forecasts are increasingly failing. Who trusts perspectives for the next two to three years? According to BCA Research, 40,000 research papers are emailed each week by banks. 2% to 5% are read. And how many are taken into consideration? As highlighted by John Kenneth Galbraith, “The only function of economic forecasting is to make astrology look respectable”.

When the real economy ruled, it was different. In the 1980s, Chase Econometrics, a subsidiary of

“The problem is that sooner or later the real economy bites back. We do not eat video games, and we do not pay our bills with ‘likes’ posted on Facebook”

Chase Manhattan Bank, produced econometric forecasts for each country, by quarter, by sectors, and with a ten-year horizon. Those were the good old days. Students in economics learned how to elaborate a long-term plan. In Japan, Konosuke Matsushita, the founder of Panasonic, had a 25year plan for his company. One day, a journalist asked him what his longterm forecast for the company was. He answered, “for the next 500 or 1,000 years?” He was hardly joking.

Today, many companies rely on rolling annual plans, revised every six months.

In the virtual economy, a product life cycle could last only a few months. The problem is that sooner or later the real economy bites back. We do not eat video games, and we do not pay our bills with ‘likes’ posted on Facebook.

However, the world of the unreal is the subject of much lust and excess, be they political or economic. In his notebooks of 1886, Friedrich Nietzsche wrote, “There are no facts, only interpretations”. Donald Trump would welcome this – others less so.

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VIEWPOINT

TOP 10 ACADEMY TOPICS OF 2017 HOW MANY CAN YOU TICK OFF?

THE AIQS ACADEMY PROVIDES ONLINE TRAINING FOR 100 + TOPICS, ENABLING YOU AND YOUR TEAM TO LEARN NEW SKILLS, PLUS KEEP UP TO DATE WITH CURRENT PROCESSES AND REPORTING PROCEDURES. FROM COST ESTIMATION TO ACCOUNT MANAGEMENT, THE ACADEMY COVERS ALL YOUR TRAINING NEEDS. HERE ARE OUR 10 MOST POPULAR TOPICS FROM 2017.

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1 BANK REPORTS This topic takes a look at what banks and other lending authorities require a Quantity Surveyor (QS) to report on the construction aspects of a development, and to recommend interim payments to the developer or contractor. This is a specialised commission which only a QS is qualified to provide. QS bank reports should not be undertaken lightly – the bank will rely on the advice included in these reports.

The topic is divided into four sections that cover the following areas: 1.

Understand the role of the QS in providing bank reports

2. Understand the high level of reliance of the bank on the QS report 3. Understand the essential components of the first report to the bank 4. Understand the requirements for progress reports to the bank during construction

2 PREPARE COST PLAN This topic looks at demonstrating and understanding the cost planning process including measurement of areas (FECA, UCA, GFA, NLA) and area efficiency. It also takes a look at preparing a cost plan framework, developing a cost plan and preparing a cost plan report.

The topic is divided into four sections that cover the following areas: 1.

Understand the cost planning processes

2. Prepare a cost framework 3. Develop a cost plan elementally 4. Prepare a cost plan report

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VIEWPOINT

3 BASIC MEASUREMENT SKILLS This topic will give you an overview of the structure of the construction industry in Australia, and the role of the Quantity Surveyor at the different stages of a building project.

You will learn about the function and use of a Bill of Quantities (BoQ), which is commonly used in the industry, and the processes and procedures required for its preparation.

This topic is divided into seven sections that cover the following: 1.

An understanding of the role of a Quantity Surveyor

2. An understanding of the principles, use, type, format and preparation of a Bill of Quantities (BoQ) 3. An understanding of the principles, structure and use of the Australian Standard Method of Measurement of Building Works (ASMMBW)

working in a contracting or development environment, but commercial considerations and tendering strategies will form additional components which will need to be factored into the final estimate and/or tender.

This topic is divided into seven sections that cover the following areas: 1.

2. Understand the various types of estimates

4. Identify the data required to prepare an estimate 5. Be able to apply the appropriate estimating technique to suit the stage of project development 6. Carry out updates to the estimate for variations and scope changes 7.

6. An understanding of the different techniques of measurement

4 PREPARING ESTIMATES This topic deals with cost estimating from the viewpoint of a Quantity Surveyor (QS) working in a professional office and advising a client. The basic principles remain the same for those

Understand the need to supplement the estimate with a forecast cash flow

5 PREPARE PROGRESSIVE FINANCIAL REPORTS DURING CONSTRUCTION PHASE

5. An understanding of the setting out and usage of measurement papers

An understanding of the descriptions of BoQ items, set out dimensions and side calculations

6 DISPUTE RESOLUTION PROCESSES

3. Be aware of the cost components of an estimate

4. The ability to use the ASMMBW for the preparation of a BoQ

7.

Appreciate the difference between cost estimating and cost planning

This topic looks at preparing financial reports during construction, and will use simple separate schedules to demonstrate each point.

The topic is divided into four sections that cover the following areas: 1.

Introduction

2. Analyse required financial information 3. Report levels 4. Conclusion

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This topic considers the perspective of a Quantity Surveyor working as a consultant or employee of the Client to a construction contract (sometimes known as the “Principal”, “Owner” or the “Employer”).

However, it is equally likely that a Quantity Surveyor could be engaged by the contractor. The principles in this topic should enable a Quantity Surveyor to undertake either role.

The topic is divided into four sections that cover the following areas: 1.

Appreciate the importance of the contract provisions to the manner in which disputes are resolved

2. Describe the different processes of dispute resolution 3. Make recommendations as to appropriate dispute resolution procedures for a particular dispute 4. Provide appropriate support in dispute resolution

7 RECOMMEND PROGRESS PAYMENTS This topic deals with the recommendation

of progress payments during the construction phase and the Quantity Surveyor should familiarise themselves with contract management and in particular contract administration.

This topic is divided into five sections that cover the following: 1.

Introduction

2. Assessment of work executed 3. Assessment of work recommendation

3. Be able to write an expert report in a form acceptable in court 4. Understand the principles for satisfactory appearance in court for cross-examination 5. Be able to write a joint report and understand the process of expert conclaves

9 ADVISE ON ALTERNATIVE CONTRACT TYPES

5. Case studies

This reviews the basic requirements for an expert report and the procedures following the issue of that report.

However, further reading and experience is recommended before accepting a role as an expert in any dispute.

The topic is divided into six sections that cover the following areas: 1.

Understand the requirements for providing expert opinion

2. Understand the responsibilities to the parties and to the court or other tribunal

7.

9. Supply contracts 10. Construction management

10 PREPARING COST REPORTS This topic looks at cost and progress reporting plus aids to forecasting.

This topic is divided into five sections that cover the following areas: 1.

This topic will examine the types of risks that are likely to exist, and the different delivery mechanisms that can be used to allocate some of those risks in a general manner.

The topic is divided into ten sections that cover the following areas: 1.

Risk allocation in AS4300 – 1995 (Design and Construct)

8. Special contracts

6. Understand what should not be done as an expert

4. Other Cconsiderations

8 EXPERT WITNESS

6. Risk allocation in AS2124

Why cost and financial reports are required

2. The information to be included in the reports 3. How the data is captured 4. The dynamic nature of reporting 5. Report formats

Overview of delivery methods

2. Factors influencing the choice of delivery method 3. Contract fundamentals 4. Key contract documents 5. Standard form contracts

Visit www.aiqsacademy.com to purchase one of these top topics!

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SOCIAL

UAE BOWLING TOURNAMENT

Dubai, United Arab Emirates 3rd November 2017

The UAE Branch organised their 3rd annual bowling tournament with members in the UAE. The tournament was hosted in the Dubai International Bowling Centre, Al Mamzar, Dubai, United Arab Emirates.

This year’s event featured a friendly bowling tournament between invited teams from Sri Lankan Quantity Surveyors Group, Institute of Indian Quantity Surveyors, Philippine Institute of Certified Quantity Surveyors and the AIQS-UAE team.

The UAE Branch team were the winners of the friendly tournament while Institute of Indian Quantity Surveyors were the runner-up.

The player of the tournament was Manoj Herath of the AIQS-UAE.

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IMPORTANCE OF QSS & FINANCIAL INSTITUTION REPORTING

Melbourne, Victoria 18th October 2017

The hugely insightful presentations at this event were delivered by Julian Chai, Associate Director, Construction Risk Management, National Australia Bank, and Peter Clack, Director at Ralph & Beattie Bosworth (and past President of the AIQS).

With over 60 years’ experience between them, Julian and Peter discussed the merits and successful implementation of independent cost and due diligence reviews on projects undertaken by financial institutions.

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UAE APPRECIATION AND CERTIFICATE AWARDING CEREMONY Dubai, United Arab Emirates 12th September 2017

This year’s UAE ceremony took place at the Mövenpick Hotel, Dubai. Organised

by AIQS UAE branch, certificates for new corporate members, affiliate members and certified Quantity Surveyors were awarded by Dr. Abdulla Galadari and Prof.

Indrawansa Samaratunga.

Mr. Dhammika Gamage, the AIQS-UAE CPD committee coordinator, also delivered tokens of appreciation to CPD speakers.

If you have held or attended an AIQS event in your area and want to be featured in the Social Pages please send the event details and photographs to marketing@aiqs.com.au

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BCI

BUILDING COST INDEX THE BUILDING COST INDEX IS PUBLISHED IN THE PRINT VERSION OF THE BUILDING ECONOMIST. IT CONTAINS DATA THAT CAN BE USED AS A PREDICTOR FOR THE ESTIMATED TIMES FOR DESIGN AND CONSTRUCTION AND INCLUDES A SUMMARY OF THE PAST, PRESENT AND ESTIMATED FUTURE CONSTRUCTION COSTS.

BUILDING COST I N DEX DECEMBER 2017 THE BUILDING ECONOMIST - DECEMBER 2017- 49