DECEMBER 2020- FEBRUARY 2021
The text pages of this publication have been printed on paper manufactured in Australia and produced from responsibly managed forests.
14 IN SEARCH OF THE HOLY GRAIL - A SUSTAINABLE CONSTRUCTION INDUSTRY IN AUSTRALIA
23 TE OMANGA HOSPICE, LOWER HUTT - NEW ZEALAND CASE STUDY
38 RAILWAY CONSTRUCTION CHALLENGES AND OPPORTUNITIES FOR THE QUANTITY SURVEYOR
46 VALUING VARIATIONS
CONTENTS 2 CEO Letter
33 Construction Forecasts - Looking Beyond 2020
5 Health has Never Been More Important: Valuing
34 Accelerating Towards a Stronger Future: The Year
Healthcare Premises After 2020
Quantity Surveying Went Digital
9 Quantity Surveying Profession Q&A
38 Railway Construction Challenges and Opportunities for
14 In Search of the Holy Grail – A Sustainable
the Quantity Surveyor 42 How to Create Better Quantity Takeoffs
Construction Industry in Australia 19 The Design and Building Practitioners Act 2020 (NSW):
45 University of Melbourne’s STEMM 6 Green Star
Establishing a New Statutory Duty of Care for the Built
Building Case Study 46 Valuing Variations
Environment 23 Te Omanga Hospice, Lower Hutt – New Zealand Case
49 Commonly Complicated Provisions in Sub-Contractor
Study
Contracts
27 De-Risking Your Construction Estimates: Leveraging
52 Prevalence and Impact of Prime Suspects for
Cloud Estimating Technology
Inequitable Terms in Australian Construction Contracts
30 COVID-19: Boon or Bane, a Construction Perspective!
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56 Building Construction Index (available in print edition only)
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BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 01
CEO LETTER
In my CEO Letter in the September 2020 edition, I posed questions relating to future construction procurement and the role of the Quantity Surveyor. In this edition, I will provide a summary of the results from a subsequent survey. While it is not possible to include details of all responses in this letter, I have attempted to encapsulate the more prevalent views. Further work incorporating all responses will be developed later. I hope this summary will further stimulate thought and discussion around potential changes to the current status quo in relation to future construction procurement and the role of the Quantity Surveyor. SHOULD WE BE MANDATING THAT A CONSTRUCTION CERTIFICATE CAN ONLY BE ISSUED ONCE DESIGN DOCUMENTATION HAS BEEN FINALISED OR AT LEAST AT LOD 300?
Yes = 66% No = 34%
This proposition was supported as it would significantly improve the level of design documentation, with the Construction Certificate only being issued
when the design is sufficiently advanced (e.g. LOD 300), thereby improving cost certainty and risk mitigation. The qualification is that this should exclude small projects (not defined) in the first instance, until such time as all parties have the capability to develop and operate BIM project models. Some commentary highlighted the current issues relating to poor design documentation, risk allocation, certainty of cost, and the time required to establish design documentation to at least LOD 300. SHOULD A PRICED BILL OF QUANTITIES BE REQUIRED AS A MECHANISM FOR RECTIFYING POOR AND INADEQUATE DOCUMENTATION FOR TENDERERS?
Yes = 60% No = 40%
There was an overwhelming view that design and tender documentation leads the development of Bills of Quantities (BoQ). While a priced BoQ may highlight deficiencies, errors and un-coordinated items in documents, ultimately improving the standard of documentation, and enhancing the construction process
02: DECEMBER 2020 - FEBRUARY 2021: BUILT ENVIRONMENT ECONOMIST
commercially, it will not rectify poor and inadequate documentation. A detailed BoQ will enable clearer selection of preferred/winning tender and reduce scope for variations or inflated valuations of variations through construction. Having a Quantity Surveyor directly involved in pre-contract cost planning is far more valuable. While this will require the client to extend the pre-tender time frame and pay reasonable fees for the Quantity Surveyor’s services in defining/ resolving scope, documenting solutions and mitigating risks, it will reduce projects costs in the long-term. This will require a shift in client thinking to make it happen. A contrary view was, that as BoQ’s overall are not guaranteed, they are not treated with the same respect by contractors. There is a preference by some for the Quantity Surveyor to provide a Builders Bill or Schedule. SHOULD THE QUANTITY SURVEYORS ROLE BE EXPANDED TO THAT OF AN INDEPENDENT AUDITOR ON ALL CONSTRUCTION PROJECTS?
Yes = 79% No = 21%
CEO LETTER
As indicated, there is significant support for the Quantity Surveyor’s role to be expanded to include that of an Independent Auditor on construction projects and that some Quantity Surveyors already perform the role as the Independent Reviewer on public-private partnership (PPP) projects. It would be up to each Quantity Surveyor and/or the quantity surveying firm to assess the risks and rewards involved should they wish to provide this service. It was felt that Quantity Surveyors, with the requisite qualifications and experience in managing projects end to end, will typically have a far greater and far more reaching skill sets in terms of contractual compliance, building methodology, and design economics than many other consultants. Consequently, there may be a need for significant upskilling of Quantity Surveyors in all aspects of the construction process beyond scoping and pricing. Quantity Surveyors will need to be more involved and raise their status and effectiveness to be able to justify more fees for service. SHOULD WE BE MANDATING FOR MORE FREQUENT SITE INSPECTIONS AND PROJECT CONTROL GROUP MEETINGS?
Yes = 83% No = 17%
Definite agreement that more frequent site inspections are necessary to assess and verify that construction is being conducted in line with specifications, and to ensure issues are picked up early and rectified, opposed to trying to rectify defective work after it has already been completed. This is required to manage the project risk in a timely manner, the client's budget and to avoid disputes. At the outset, it provides timely solutions to achieve the key project goals of time, cost and quality.
IS THERE A NEED TO GO BACK TO THE PREMISE, ESTABLISHED IN THE AUSTRALIAN STANDARD, WITH MINIMAL AMENDMENTS/ EXCLUSIONS FROM THE CONTRACT?
Yes = 70% No = 30%
It was generally felt that utilising standard contracts means that all parties are clear as to their roles and responsibilities and that there is not the need to review each contract to see what is different to the last one. This, in turn, will lead to more consistent pricing and a better understanding and sharing of risk. The principal issue raised was the constant and numerous exclusions/ deviations from a standard form with little understanding by the principles and advisors of the ramifications of each. Amendments are often written by lawyers without regard to cost or even a proper understanding of the construction process. Contrary views proposed that as each project is different, every party is different and therefore every agreement is different - and the contract should be reflective of this. However, each party should take the time to ensure they understand their roles, responsibilities, and the associated risks. Contractors and sub-contractors should ensure they are receiving, or possess, resources to properly review any contract which they are signing. If they are not comfortable, they shouldn’t progress to execution. SHOULD FINANCIERS BE ENCOURAGED TO ESTABLISH A PRE-FINANCE ASSESSMENT OF THE DEVELOPER-BUILDER AND CONSULTANTS WITH THE QUANTITY SURVEYOR’S ROLE BEING EXPANDED TO UNDERTAKE THIS ROLE?
Yes = 79% No = 21%
As indicated, there is strong support for the Quantity Surveyor to undertake a pre-finance assessment of the developerbuilder and consultants. This is already a standard practice by many Quantity Surveyors and that superior outcomes were achieved following this approach. While the majority of respondents saw the Quantity Surveyor as being the consultant best suited to advising financiers during both pre and postcontract management, it was felt that, as this was a cost to the developer, they had a tendency to shop around amongst financiers to get the best deal and question the cost structure of the Quantity Surveyor advisor services. Consequently, the financier looks for the 'cheapest' entity to satisfy their own internal guidelines of risk on the project. This then changes the focus away from assessing developer risk to identifying financier risk. Contrary opinion reflected that this could pose significant risk and liability to the Quantity Surveyor. IS IT APPROPRIATE FOR A QUANTITY SURVEYOR TO HAVE AN ADJUNCT CERTIFYING ROLE IN VERIFYING THAT ALL RELEVANT CERTIFICATIONS ARE IN PLACE, THEREBY ASSISTING WITH REDUCING RISK TO FINANCIAL INSTITUTIONS, PARTICULARLY THOSE THAT HAVE FINANCED THE DEVELOPMENT AND ARE SUBSEQUENTLY FINANCING THE PURCHASE OF INDIVIDUAL APARTMENTS?
Yes = 62% No = 38%
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 03
CEO LETTER
While there was strong support for the Quantity Surveyor to have an adjunct certifying role with many respondents noting that they already undertook similar independent verifier roles, it was felt by some that this was not a traditional Quantity Surveyor role or skill set and questioned the increased risk and professional indemnity (P.I.) insurance costs. Should this be left to the building surveyor? SHOULD THERE BE A MANDATORY MINIMUM LEVEL OF P.I. INSURANCE FOR QUANTITY SURVEYORS ENGAGED ON CONSTRUCTION PROJECTS?
Yes - 51% No – 49%
The commentary reflected the closeness of the survey results with the difference principally being between the views of larger firms and smaller firms/sole practitioners. It was noted that as Quantity Surveyors were providing an advisory professional service, which should be insured to an adequate level, a mandatory minimum level would help define this and should be adjusted depending on the projects value, complexity, and risk. Conversely, while a $10 million cover is held by most firms (usually $20 million) it's not appropriate to mandate this for small firms or one-man practices who only work on small projects. Some projects may only be for $1 million or $2 million and the (P.I) insurance premiums for a $10 million cover would be too high to allow smaller companies firms and sole practitioners to operate. DO YOU ACCEPT THAT THE QUANTITY SURVEYOR IS BEST POSITIONED TO DETERMINE RISK LEVELS IN PROJECT DOCUMENTATION AND DELIVERY?
Yes = 66% No = 34%
The general view was that a senior Quantity Surveyor, who ideally has worked for a builder/developer, has the requisite skills, knowledge, and experience to value risk and identify instances where works are not fully detailed to a level where the works could be accurately costed or constructed. While the Quantity Surveyor should be the leader in this role, it should be in collaboration with the project management and design team. The Quantity Surveyor is not a designer and, whilst they can point out common and obvious issues, they cannot show where a design calculation is wrong - that must remain with the appropriate consultant. Commentary noted that while Quantity Surveyors can add information to the Risk Manager/team, risk is a bigger picture than just project documentation and delivery. In many cases, Quantity Surveyors don't understand the documentation process from a consultant contract aspect. They would need access to information including the individual contracts for each consultant and this may be a step too far. They would also require a full understanding of each service provider’s business.
contract out? That doesn't make sense. Furthermore, the importance of the net contribution clause should be enforced. Any liability of one party is always a project team effort. It would be unfair for one party to absorb all losses especially if the fault is caused by the project team. Conversely, any contracting out of proportionate liability should be considered depending on the typical construction risks and nature of the market. SHOULD REPLACEMENT COST ASSESSMENTS ONLY BE UNDERTAKEN BY A CERTIFIED QUANTITY SURVEYOR?
Yes = 75% No = 25%
Commentary reflected that a Quantity Surveyor is the only qualified professional to undertake these works. There is significant risk in the undervaluing of reinstatement costs where a Quantity Surveyor has not been engaged. Whether this is a Certified Quantity Surveyor or a qualified Quantity Surveyor who is a registered Building Practitioner with appropriate P.I. insurance should undertake the assessment, and certainly not a Valuer.
SHOULD THERE BE A REQUIREMENT FOR ALL GOVERNMENTS TO REMOVE THE ABILITY TO CONTRACT OUT OF PROPORTIONATE LIABILITY?
Yes = 66% No = 34%
Not surprisingly, commentary reflected why enact proportionate liability legislation only to allow provisions to
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GRANT WARNER CEO Australian Institute of Quantity Surveyors
HEALTHCARE
HEALTH HAS NEVER BEEN MORE IMPORTANT: VALUING HEALTHCARE PREMISES AFTER 2020 BY DR. RHONDA KERR
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 05
HEALTHCARE
HEALTHCARE IS BIG In 2018-19, around 10% ($196 billion) of Australia’s national economy (measured in Gross Domestic Product or GDP) was spent on health, with $62 billion (31%) spent on operating public hospitals. Hospital operating costs increased by 4% on the previous year. However, there are no figures for national capital costs or capital expenditure for public hospitals[1]. After 2020, healthcare can be expected to represent a higher percentage of GDP as the economy contracts, changes, and responds to the challenges of 2020. Rather than a percentage estimate for technology in hospitals, specific costs linked to national clinical standards can be expected to deliver greater surety for cost estimation.
Rather than a percentage estimate for technology in hospitals, specific costs linked to national clinical standards can be expected to deliver greater surety for cost estimation. 2020 IS ABOUT HEALTH Prudent border and public health actions saved Australia from the worst effects of the COVID-19 pandemic. However, pandemics are increasing in frequency and severity. COVID-19 has forced changes throughout the economy, for buildings and in healthcare. For most
buildings, including hospitals, two systemic transformations will be in infection control and data collection, and management systems. Infection control in hospitals: Medical and nursing staff found ‘’ the constraints of the built environment, including the ageing infrastructure of most hospitals [2]’’ increased their reliance on personal protective equipment (PPE). In other words, the deficiencies of the building exposed staff to risks which could only be addressed by PPE. In Australia, it is estimated that 3,500 clinical staff contracted COVID-19 in their workplace¹ [2]. A number of orthopaedic and cancer patients contracted COVID-19 in hospital[3]. This pandemic has changed expectations of hospitals from clinicians (who expect to have their personal safety embedded in hospital planning), politicians (who cannot risk infectious outbreaks in hospitals), and the community (who expect access to appropriate care when it is needed). To deliver these expectations when infectious diseases pose a high risk, it may require significant changes to existing hospitals, including: • changing to single-bed patient rooms with ensuites to replace shared wards and bathing facilities • rebuilding emergency department bays with solid barriers between patients, larger waiting areas, and specific ventilation solutions throughout[4] • creating additional PPE stores, cleaning and waste management spaces • enabling larger staff lunch and training rooms with access to fresh air, as early evidence suggests staff areas have been the sites of significant transfer of infection amongst clinicians
¹ Workplaces include nursing homes, hospitals, community and private practice.
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• installing transparent solid barriers between patients in intensive care units (ICU) • office areas may replace hot-desking in confined spaces • small staff change rooms may switch to larger uniform distribution systems • segregated staff and public amenities for management of community to staff infections • more diagnostic equipment, larger equipment stores and cleaning areas in clinical areas • robots for food, pharmacy, linen, and other delivery systems • access to outdoor areas from the wards, imaging, ICU, and emergency department areas for staff mental health stress release • embedded information systems and centralised real-time monitoring of patients • an emphasis on monitored clinical waste management systems. New facilities will be expected to deliver a safe working environment and minimise the risk of cross-infection. Data management: Accurate, real-time clinical data has been vital in managing population, patient, and clinical risk over 2020. Initially, there was little data on: (i) the capacity of the hospital system to test and treat COVID-19 patients in appropriate facilities including ICU beds and appropriately ventilated spaces, and (ii) the data systems of each hospital. Early in 2020, over $2.4 billion in new COVID-19 funding aimed to upgrade public hospitals for telehealth, improved pathology testing and contact tracing, and fast-tracking increases in capacity
HEALTHCARE
of hospitals including equipment and diagnostics. However, real-time data collection for patients and operating systems is not universally available in Australian hospitals. The absence of a national system of funding for electronic medical records and contemporary information systems in hospitals has been acknowledged as causing patients harm [5, 6].
HEALTHCARE IS CHANGING Comparable platforms in hospitals will be required nationally for information and clinical communications systems to supporting electronic medical records, artificial intelligence as a clinical aid[7, 8], automatic dispensing, big data management [5, 9], real-time patient monitoring equipment and apps [9-11], and patient monitoring systems. These systems will need to be appropriate, accurately costed and nationally funded.
Australia needs effective, specific and appropriate methods to accurately cost in detail the capital elements required to meet our emerging health challenges. Costing methods: The way hospitals are funded for operational costs has improved. Unlike capital expenditure, all hospitals are funded equally for the work they do. Operational costs for hospitals are commonly funded by activity-based funding or specific funding per patient based on the specific costs for each
type of patient. So, the diagnosis and the treatment determine the cost. The total cost per patient is derived from cost buckets measured for each hospital across Australia. The cost buckets cover operational costs in each area-wards, operating theatres, critical care, hotel services, imaging, pathology, allied health, and corporate. Capital funding for hospitals, medical equipment and information and communications (ICT) systems, however, is not national. Capital funding remains restricted based on the budgetary position of the state or territory and priorities of the government[12]. Cost-effectiveness: A high level of specificity for hospital operational costing has been refined over 20 years resulting in a well-accepted system that has improved cost-effectiveness[13]. The same cannot be identified for hospital capital expenditure on buildings, medical equipment, information and communications systems.
AFTER 2020 Health has been identified as an essential foundation for our economy and our community. 2020 has been the year health has been the most important consideration, nationally and internationally. A continuation of sound public health delivery will need to be sustained and supported by community-based and hospital services. In Australia, patients are guaranteed access to good quality clinical services in hospitals by the Medicare system[14]. Three themes have emerged from 2020 as critical to successful future healthcare: (i) Infection control - new standards are being developed to ensure hospitals are built to maximise the safety of staff and patients.
(ii) Data - investment in a nationally consistent system of data sets and management systems for each Australian public hospital is required. Public health and hospital systems should link with the community-based system of medical records in “My Health Record�. Electronic medical records supporting real-time data from medical equipment, point-of-care testing, and pathology are expected to replace paper record systems in all Australian hospitals (iii) Technology - a national system to invest in the specific technologies required for effective patient care. Technological and clinical changes are enabling more effective treatments during the pandemic and have accelerated the rate of change.
COSTING CHANGE These changes are likely to require a change in costing methods for hospitals. As with operational costing, capital costs are expected to become more specific to the patient diagnosis groups. The specifics of areas, equipment, mechanical engineering including ventilation systems and ITC systems can be expected to be identifiable at the diagnosis level. Capital costs for specific areas like ICU, operating theatres, emergency departments, outpatient clinics, dialysis, chemotherapy and colonoscopy suites will be counted towards the cost of capital for each patient's diagnosis. A consistent set of national standards for infection control, data and the technologies required for appropriate access to effective clinical services can be aligned with the patient and the treatment. The key issue is to ensure nationally consistent access to appropriate care for patients in effective hospitals.
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 07
HEALTHCARE
WHAT CAN WE SEE IN THE FUTURE? The COVID-19 pandemic, clinical, and technological change have signalled that the costing and funding of healthcare is likely to change. More targeted funding
to achieve specific health objectives can be expected. Rather than a percentage estimate for technology in hospitals, specific costs linked to national clinical standards can be expected to deliver greater surety for cost estimation.
For healthcare, the pace of change has increased. Australia needs effective, specific and appropriate methods to accurately cost in detail the capital elements required to meet our emerging health challenges.
REFERENCES 1. AIHW, Health expenditure Australia 2018–19. Health and welfare expenditure series no.66. Cat. no. HWE 80. 2020, Australian Institute of Health and Welfare Canberra https://www.aihw.gov.au/getmedia/a5cfb53c-a22f-407b-8c6f-3820544cb900/aihw-hwe-80.pdf.aspx?inline=true. 2. Ananda-Rajah, M., Veness, B. Miller, A. Heslop, D., Health care worker safety has fallen short of best practice. Insight plus MJA, 2020. 28 September, 2020(https://insightplus.mja.com.au/2020/38/health-care-worker-safety-has-fallen-short-of-best-practice/?utm_ source=InSight%2B&utm_campaign=c9973be6e1-EMAIL_CAMPAIGN_2020_09_25_04_52&utm_medium=email&utm_term=0_7346f35e23c9973be6e1-42113637). 3. Longbottom, J., Patients who caught COVID-19 in health settings demand official figures, as experts claim cases were preventable, in ABC News,. 2020: https://www.abc.net.au/news/2020-11-06/how-many-victorians-caught-covid-19-while-in-hospital/12848186. 4. Bourke, E., It's time to rethink indoor airflow to reduce the spread of COVID-19, say experts, in ABC News. 2020: https://www.abc.net.au/ news/2020-11-16/ventilation-indoor-airflow-could-be-important-against-covid-19/12881444. 5. Productivity Commission, Data availability and use, Inquiry Report. 2017: Canberra https://www.pc.gov.au/inquiries/completed/data-access/ report/data-access.pdf. 6. Tan, Z.M.-G., R. Margelis, G., Clinicians can drive innovation in digital health age. MJA Insight,, 2018(29 30 July 2018). 7. Sampler, I., "It's going to create a revolution": how AI is transforming the NHS, in The Guardian. 2018: https://www.theguardian.com/ technology/2018/jul/04/its-going-create-revolution-how-ai-transforming-nhs?utm_source=esp&utm_medium=Email&utm_ campaign=GU+Today+AUS+v1+-+AUS+morning+mail+callout&utm_term=280152&subid=13574337&CMP=ema_632. 8. Dewey, M., The future of radiology: adding value to clinical care. The Lancet, 2018. 392(10146 August 11): p. 472-3. 9. CSIRO, Future of Health: Shifting Australia's focus from illness treatment to health and wellbeing., C. Futures, Editor. 2018: Canberra https://www. csiro.au/en/Showcase/futureofhealth?featured=F29EDEB1728C4A92B579C7A5DC28BAD5. 10. Productivity Commission, Shifting the Dial: 5 Year Productivity Review, Inquiry Report . 2017: http://www.pc.gov.au/inquiries/completed/ productivity-review#report. p. 17. 11. Phillips, B., New series: making the digital health revolution. MJA Insight, 2018(42 29 October 2018). 12. Kerr, R. and D.V. Hendrie, Is capital investment in Australian hospitals effectively funding patient access to efficient public hospital care? Australian Health Review, 2018. 42(5): p. 501-513. 13. Biggs , A., Recent developments in federal government funding for public hospitals: a quick guide, P.o. Australia, Editor. 2018: Canberra https:// www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1819/Quick_Guides/FundingPH. 14. SCRGSP, S.C.f.t.R.o.G.S.P., Report on Government Services 2020, P. Commission, Editor. 2020: https://www.pc.gov.au/research/ongoing/reporton-government-services/2020/health/public-hospitals. p. Table 12A.57,.
Dr. Rhonda Kerr B.A.(Econs)ANU, Ph.D. (Public Health) Curtin is a Health Economist, Clinical Service & Health Facilities Planner, Director, Economics, Health Services and Planning, Guidelines and Economists Network International (GENI), and Hon. Research Fellow, University of Western Australia.
08: DECEMBER 2020 - FEBRUARY 2021: BUILT ENVIRONMENT ECONOMIST
Q&A
WHAT EXCITES YOU ABOUT THE QUANTITY SURVEYING PROFESSION? AIQS GRADUATE MEMBERS AND NZIQS STUDENT MEMBERS SHARE THEIR INSIGHTS INTO WHAT EXCITES THEM ABOUT THE QUANTITY SURVEYING PROFESSION.
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 09
Q&A
YEE CHING LIEW
AIQS Graduate Member For me, the quantity surveying profession is an interesting profession where it involves various skills such as understanding drawings, specifications, utilise cost data from Rawlinsons or other similar projects, applying construction knowledge to make reasonable assumptions, interpreting BoQ descriptions, contracts, and more. I am so lucky because I was given opportunities to be involved in different stages of construction. Early-stage cost planning required a certain degree of
construction knowledge, experience on past projects, and common sense to make reasonable assumptions. It is important to state clearly our assumptions, inclusions and exclusion items. Besides that, being fair and reasonable in assessing progress claims and variations are another challenge. Based on the site progress and photos taken, we need to make sure that the contractor is not over claiming for the works that are incomplete, as sometimes they
MARCEL HAHN
Generally, the construction industry fascinates me purely for witnessing a green site turn into a fully functional home, factory or something else. Being part of the transformation of sites, suburbs or even cities is quite unique, and I am unsure if I will ever get used to that feeling.
Overall, I think I am still learning to become a professional quantity surveyor, and every new project is exciting for me because I will learn something different and these will become part of my valuable experience.
YUBIN LIN
NZIQS Student Member
I am a quantity surveying Diploma student at Ara Institute of Canterbury (Christchurch, New Zealand) due to finish in December 2021. I also recently started a quantity surveying role for a firm specialising in rainwater goods.
would claim the works to the end of the month, while the contract stated the claims are for the works done up to 25th of the month. We would then need to communicate with them and recommend a fair payment.
AIQS Graduate Member
Furthermore, I am excited for my work to potentially take me overseas, learning about different construction techniques, as well as other cultures and work environments. As a quantity surveyor, one can work in basically all kinds of sub-areas of the construction industry, providing lots of options to specialise in. Most importantly, and, this what I hear from experienced quantity surveyors that I speak to, is that no one day will ever be the same. For these reasons, I am excited for where my career will take me in the future.
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Compassion. I learned this in my first interview for the role of assistant quantity surveyor. I now know the meaning of compassion is to be a reliable connection between each party. A quantity surveyor must stand in the shoes of the client and contractor without prejudice. Being compassionate assists us to solve difficulties and deliver a project in a winwin manner. This is a challenge which excites me about the quantity surveyor profession.
Q&A
CHENG (MILES) LANG
CINDY ZHANG
AIQS Graduate Member
I was lucky to receive a job offer from Geocon right after I completed my master’s degree of Construction Practice. Working for the largest residential builder/developer in Canberra provided me with opportunities to work on multistorey residential complexes. Watch them build up up day by day, rather than just working on project drawings hundreds of miles away. I am excited every morning when I start my work. As a quantity surveyor, I am excited to
AIQS Graduate Member
see innovative solutions that are utilised for better outcomes. For instance, we found a prefabricated building system that streamlines the bathroom construction process, normally involving the expertise of 12 different trades. For our City 7 project, the site team installed 48 bathroom pods in 5 hours – a record! It’s obvious that the reduction in construction time, defects, material usage, and onsite waste is an ideal outcome from a construction cost perspective.
KAINLARM HOUGHTON
AIQS Graduate Member Prior to gaining my degree, I was lucky to join Costplan as they provided me an insight into the exciting aspects of the quantity surveying profession. The flexibility of a quantity surveyor is exciting because of how much the role can vary between projects, states, and countries. There is a diversity within the role of a quantity surveyor that ensures an ever-changing exposure to different aspects of the construction industry, ensuring that I am always being challenged.
The exciting opportunities that present themselves as a quantity surveyor has allowed me to be heavily involved in a wide range of projects types across Australia, throughout the South Pacific, as well as Europe. Professional bodies, such as AIQS, ensure the continual development of our profession, internally and in the wider construction industry. It is rewarding to be involved with such bodies that have a sense of belonging within the industry and ensure we all share the common core values.
There are lots of aspects of the quantity surveying profession that excite me, apart from a steady pay-check! One reason why being a quantity surveyor is so exciting is that I have the chance to work on a wide variety of projects from apartment and office buildings, roads and railways, travelling to different locations, and maybe even work in the Antarctic region. At the same time, the diversity in day-to-day tasks varying from the high-level feasibility estimates to the heavily detailed pre-tender estimates and bills of quantity, to post-contract and tax depreciation, means that there is always challenge ahead. I will not get bored with repetitive work! Gaining a wide array of skills and knowledge and encountering professionals across multiple disciplines is another reason why quantity surveying is a stimulating career. I am gaining a deeper knowledge of construction processes, methods of measurement, and cost planning as well as interpersonal skills that improve communication efficiency and enhance teamwork. Additionally, as social interactions and connections built, it can be helpful in winning more opportunities and future projects. In a nutshell, quantity surveying is such a fascinating career with plenty of challenges and excitement for me. Successful delivery of every single project gives me massive satisfaction.
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 11
Q&A
RICKY PRIETO
NZIQS Student Member and Quantity Surveying Emerging Professionals Committee Member Before becoming a quantity surveyor, I worked for many years as a chef and kitchen manager, so costing and working in a fast-paced and demanding environment with strict deadlines became my second nature. Many things excite me about being a quantity surveyor the madness when a tender deadline is approaching, the paperwork, interim payments, and schedules of quantities. As a committee member of Quantity
Surveying Emerging Professionals Tauranga, I am involved in organising functions to broaden recently graduated quantity surveyors’ perspective of the many facets of the construction industry. I learned from senior quantity surveyors how daunting and demanding this profession can be. That just made me want to learn more. To be part of one of the biggest industries in New Zealand, helping to grow and
build the country, especially in the COVID-19 times, make me proud to be a quantity surveyor. In the most fragile economic times in decades, relying on professionals, like us, to guide clients to the correct expenditure path is paramount for businesses to thrive. We as quantity surveyors have a challenging and rewarding essential role in the construction industry, and I am happy and proud to be part of it.
JIAHAO CHEN
AIQS Graduate Member
Three things make me excited about my quantity surveying profession.
on projects. I enjoy solving all the challenges!
Firstly, the challenges on each project. As a graduate quantity surveyor working with a head contractor, I am facing many challenges on different projects every day, insufficient documentation when doing a cost plan, short time frames when tendering on a project, and hard negotiations with sub-contractors
Secondly, interaction with different stakeholders on projects. I am responsible for achieving the best value for money for my client. For subcontractors, I am ensuring that they deliver the best quality. Once the project has completed, I am proud to say that I was a part of the team that built it.
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Thirdly, great working environment and mentorship. As a junior/graduate quantity surveyor, I am still on my journey towards becoming a professional quantity surveyor. Great working environment and mentorship helps to drive me to achieve my goals, which makes me excited about my work every day and my professional journey ahead.
Q&A
BAIXIANG (HOBBS) HUANG
AIQS Graduate Member
The key factors which excite me about quantity surveying are the range of services provided and different sectors in construction. Every project, regardless of the scale, is a fresh experience regarding sector, layout, and appearance. As a project is explored further, more and more unique features and details will be identified. For example, there is a school project consisting of two
general learning buildings, which have very similar architectural appearances, but because of different ground conditions, foundation designs vary drastically from each other with one building requiring extensive piling solutions. The excitement is not only about the project aspect, but also about the various disciplines in construction. It feels like reading a story when reviewing building
designs, and quantity surveying is a profession that can discover the logic of all disciplines such as hydraulics, electrical and mechanical services. Working in different disciplines to figure out how the building functions are achieved is challenging. Every time our team completes a project, I feel a sense of excitement and achievement. The sky is the limit – or is it?
ETHAN RUMP
AIQS Graduate Member The quantity surveying profession excites me in many ways, from bringing knowledge and guidance to a client and project team in the design phase, through to the final building inspections and ongoing operations. During the initial design stages of a project, being able to quantify an idea and work through these with a team
to get the most ‘bang for buck’ end product is excellent. Producing the final estimates and seeing the final tender figures is a little thrill. One of my biggest enjoyments is being onsite and watching the build come to life, walking through the plans you had seen just months earlier and seeing the end user’s enjoying the new space.
Estimating and tendering is competitive, and as someone who has always been highly competitive, it sparks my drive to be the best cost planner/quantity surveyor! Every project has its intricacies and challenges which helps me learn and develop my knowledge, bringing it forward onto the next project.
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SUSTAINABLE CONSTRUCTION
IN SEARCH OF THE HOLY GRAIL A Sustainable Construction Industry in Australia
BY ADJUNCT ASSOCIATE PROFESSOR BOB WILDERMUTH OAM FAIQS CQS FAIB NBPR LEVEL 1
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SUSTAINABLE CONSTRUCTION
INTRODUCTION I am a quantity surveyor, who has spent a great deal of time, particularly early in my career, dealing with and treating the symptoms, rather than the root causes of construction problems. Call it wisdom, call it whatever you want but these days I find myself regularly sifting through the various issues affecting a distressed project and usually identifying a couple of root causes that have caused significant non-productive costs. One of those is regularly the use of a heavily amended standard form of contract. The first step in understanding the challenge is to consider what a sustainable Australian construction industry might require. The construction industry in Australia is multifaceted and sustainability would need to be achieved in all facets of industry to attain the theoretical “Holy Grail” of sustainability. In simple terms, sustainability needs to be achieved in the following facets of the construction industry:
on addressing whole of planet environmental issues both current and developing, in the following areas:
institutes and associations, must be the leaders with all whole of industry sustainability changes.
a. onsite construction b. offsite construction c. material manufacture d. head office In this article, I focus primarily on the sustainability aspects of my area of expertise – Item 1. commercial outcomes or financial sustainability. Economic/commercial sustainability in the construction industry exists at two distinct levels: 1. the whole of industry level (affecting everyone in the industry, including industry culture) 2. the individual company level (affecting individual companies in the industry).
WHOLE OF INDUSTRY ISSUES The largest clients in the industry, such as governments along with industry
The much-maligned construction cost estimators hold one of the biggest keys to the sustainability of the Australian construction industry.
The Australian Contractors Association has recently published its comprehensive roadmap to a sustainable Australian Construction industry which is available on their website. This journey will be long and arduous, however I believe it addresses most of the whole of industry issues. The ACA framework is shown below:
1. economic/commercial outcomes: for all construction industry participants including clients, consultant’s, financiers, insurers, contractors, sub-contractors, suppliers, and manufacturers. 2. the optimum cost of construction: through elimination of unproductive work and disruption, and attainment of optimal productivities. 3. the workforce: in terms of enough skilled workers, appropriate skillsets, and effective education and training for both blue-collar and white-collar workers. 4. workplace health and safety (WHS): through the provision of zero harm work environments. 5. environmental impacts: through compliance with legislation as the minimum standard with a focus
Reproduced with permission of Australian Contractors Association
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SUSTAINABLE CONSTRUCTION
INDIVIDUAL COMPANY ISSUES In simple terms, economic/commercial sustainability for companies relies upon a basic business model of maintaining a positive cashflow (topped up with borrowing as necessary) and making a profit at the end of each year (tech companies excluded). Achieving a profit for contractors is an exceptionally fine line at times which involves many business components functioning well, however this can be distilled down to a remarkably simple philosophy based upon the flow of money through a contractor’s business. Money can only flow in or out of a contractor’s business. The philosophy is therefore to MAXIMIZE income or revenues and to MINIMIZE expenditure.
“Any success in either MAXIMIZING INCOME or MINIMIZING EXPENDITURE will better the profit position of the contractor” In recent times there has been an increased corporate focus on WHS and environmental issues. Undoubtedly because of the increased legislation respectively and the potential for serious fines and even jail time for company directors for serious breaches of such legislation. Consequently, many corporates seem to have dropped the ball with respect to commercial outcomes or results on many projects over the past decade (2011 to 2020) following the “Alliance Cost Reimbursable” dominated decade (2000 to 2010).
In 2009, I returned to Australia from working overseas and could see the demise of the Alliance Reimbursable style contracts was well and truly underway. At the time, I foresaw there would be significant commercial issues for many contractors as the pendulum swung back to hard dollar lump sum contracting. My reasoning was based upon a generation of young contract administrators and young project managers who had only known Alliance Cost Reimbursable style contracting. I was amazed at how many young administrators did not properly administer their sub-contracts as hard dollar sub-contracts sitting under an Alliance Head Contract. They were overly generous rather than firm but fair in their administration of these hard dollar sub-contracts. I believe this misplaced attitude or approach was largely to blame for clients turning off Alliance Contracting towards 2010 as they correctly perceived they were not getting value for their money. If contract administrators properly administer hard dollar sub-contracts under an Alliance Head Contract (and by that I mean treat spending the client’s money prudently just as they would spend their own money under a Hard Dollar Head Contract) then Alliance Head Contracts can certainly provide clients with value for money. Therefore, a clear message to clients is: As an integral part of the procurement process, educated client’s need to stringently vet the contractor’s staff and their past records to ensure alignment of goals particularly with the client’s expectations with respect to value for money and an essential need for the contractor to spend the client’s money prudently. As an observation, the compliance costs of the increased WHS and environmental legislation have been steadily increasing
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over the past two decades and ultimately these increasing costs or expenses are having a greater impact upon the commercial outcomes of projects. This is because they cost or burn money rather than generate money or revenue. However, I do acknowledge good and consistent WHS and environmental performances are valued by some clients which may contribute to a contractor winning future work. I prefer to call the process of ensuring consistent and profitable financial outcomes on projects “Financial Safety” as it is paramount to the long-term survival or sustainability of contractors. Most contractors, as a standard procedure on every project, have the following plans: • Project Management Plan (some PMP’s may include a subsection on change Management) • Project Design Management Plan • Project Quality Plan • Project Workplace Health and Safety Plan • Project Environmental Plan • Project Completion Plan Unfortunately, very few have a Commercial Plan/Financial Safety Plan. Most contractors have standard commercial procedures, but they do not all produce a Commercial Plan tailored to suit the project, taking account of the specific commercial aspects with respect to the project such as the type of contract, the quality of contract documentation, etc. I find it unbelievable the management of various size contractors would take such a random approach and effectively rely upon the abilities of the commercial team to navigate the contractors interests to a positive commercial outcome without the comfort and guidance of a detailed commercial plan for the project.
SUSTAINABLE CONSTRUCTION
A comprehensive commercial plan tailored to the specific project circumstance is an essential tool in successfully navigating a path to a positive commercial outcome for all contractors irrespective of their size.
PROJECT COSTS AND NON-STANDARD PROJECT RISKS Non-standard project risks should never be priced into the rates. Non-standard risks should be separately identified and priced on a stand-alone basis. If this approach is not adopted, the monetary allowance for non-standard project risks is quickly lost into a plethora of what is effectively composite rates (standard rates + risk allowances for non-standard project risks). Thus, the management review process of reviewing the nonstandard risk allowances and the standard rates becomes problematic. Standard types of work (excluding nonstandard project risks) should be priced separately using known standard rates (based upon historical performance) for the respective items of work. The much-maligned construction cost estimators hold as one of the biggest keys to the sustainability of the Australian construction industry. The perennial race to the bottom with prices must be short circuited through estimators constantly seeking feedback on cost outcomes from current projects and adjusting tender pricing accordingly. The focus for estimators collectively must be to rewire their DNA and effectively change their thinking from "the price required to win a tender" to "the cost to actually perform the tendered construction works". A change in thinking is required away from "the price required to win a tender" to "the estimated cost to actually perform the tendered construction works”.
CEO's and management collectively also have a responsibility to eliminate the insane practice of applying negative margins or discounts to tender pricing, rather than applying percentages that reflect their actual overheads and a reasonable profit. People deploying those practices really have no place in a sustainable Australian construction industry.
PRODUCTIVITY IMPROVEMENTS When it comes to productivity reviews in the construction sector, the white-collar component of the construction workforce has unfortunately been neglected in preference for the larger blue-collar component. The Australian construction industry has now earned the somewhat unenviable reputation for some of the highest construction costs by comparison with other developed countries. White-collar productivity is certainly a sadly neglected sector that can deliver potentially significant productivity improvements, simply through some fundamental changes. Whilst the blue-collar workforce physically perform the construction works and are commonly referred to as productive workers, the white-collar workforce do not physically perform the construction works but instead perform managerial, supervisory and contract administrative work and are referred to as non-productive workers. Despite the commonly used references to productive (blue-collar) and nonproductive (white-collar) workers, both groups perform productive and non-productive work in relation to the different types of work they perform. Notwithstanding this, it is evident from a productivity perspective that any whitecollar work that can be reduced or avoided will lead to project cost savings and a white-collar productivity improvement. As a commercial practitioner (whitecollar) for most of my career, I have
worked with many different forms of contract. It is this fundamental aspect of construction - the form of contract, that I believe has enormous potential to eliminate significant non-productive white-collar workforce costs. The concept of a standard form of contract is not new and Standards Australia has produced several standard forms of contract (such as AS2124) for some period. If only these standard contracts were used as originally intended which was to facilitate: • a balanced and reasonable allocation of risk, without the need for amending the standard (time and cost savings for the client) • contractor's estimators being able to use the same prices for similar work in similar locations (based upon standard contracts) without the need to read an amended contract from cover to cover during the tender period and make provision for changes in standard risk allocations • no need for qualifying and negotiating unacceptable standard risk changes as proposed by the client, thus saving time and cost for the contractor and the client • a reduction in disputes arising from interpretation and administration of the amended standard contract clauses • an opportunity for use of standardised contract administration notices and templates and the avoidance of a learning curve associated with getting "up to speed" with the terms of heavily amended standard contracts. In my experience, the loudest opponents to such a logical change to using unamended standard forms of contract have been the profession with the most to lose - the legal profession. The legal profession gets paid to amend contracts for the client, advise contractors on unacceptable terms, provide advice to clients and contractors and litigate/defend
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SUSTAINABLE CONSTRUCTION
amended standard terms because there is a lack of clarity and certainty because of the bespoke nature of the changes. Sure there is and has been litigation on standard contract terms, but over a relatively short period of time, such litigation has provided a great deal of clarity as to what most of the standard terms mean or don't mean and hence a substantial reduction in disputes. I am not saying there will be no disputes or litigation with the unamended standard forms of contract, just a substantial reduction. Some of the arguments put forward by the legal profession revolve around the need for parties operating in the business world to have the flexibility to formulate a commercial deal. I am sorry, but a construction contract does not need to be complicated. Provided the client knows what it wants constructed and provides detailed documentation of its requirements, then a standard form of contract is very suitable. And that equally applies to design and construct contracts where the client provides a suitably detailed design brief. The corollary of this is if a client does not know what it wants to construct then perhaps the client should not be proceeding with its project. Standard forms of contract work for the real estate industry, the car sales industry, and the residential construction industry. But apparently, they are totally unacceptable for the commercial construction industry. Please, give me a break! As a practitioner in the commercial construction industry for over 40 years it makes no sense whatsoever from a cost perspective. My opinions are based upon the vast amounts of non-productive (including legal) time spent as a direct consequence of amending standard forms of contract. Comprehensive drawings and specifications have the potential to reduce the number of variations and contractual claims on a project as well as reduce the amount of disruption and nonproductive work for the contractor.
Common sense says, there should be more time and money spent in the pre-tender phase on providing comprehensive drawings and specifications (fully documenting what the client wants constructed) than amending standard forms of contract. It is going to require government and industry association leadership and legislation to get some fundamental change on this issue. It would be a fundamental step towards the construction industry doing what is best for itself and the consumers that purchase or use the facilities constructed by the industry. The use of standard (unamended) forms of contract for commercial construction will ultimately lead to more of every dollar spent on construction being paid to the blue-collar workers that lay the bricks and pour the concrete. Thus, more physical construction can be built for the available budget. Our infrastructure Prime Minister is already on the record as committing to a substantial national COVID recovery budget for infrastructure. So, this issue must surely be of national interest.
CONCLUSION Let us all start agitating our politicians and our institutes and associations for whole of industry change, because increases in both blue-collar and white-collar productivity can and should be made whatever they are, because as a nation, as we recover from the COVID pandemic, we shall certainly need a sustainable construction industry as well as a sustainable economy to help stretch every dollar spend on construction as far as possible. Finally, let us all start agitating our CEO’s and senior managers in the companies we work for and with for the necessary sustainability changes at the company level, for all the same reasons we need a strong and sustainable Australian Construction.
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Adjunct Associate Professor Bob Wildermuth OAM FAIQS CQS FAIB NBPR Level 1 is a Certified Quantity Surveyor, Chartered Building Professional and Principal at Wildermuth Consulting Pty Ltd based in Brisbane, Australia, providing dispute resolution board, dispute advisory board, and commercial advice and services to the construction industry.
LEGAL
THE DESIGN AND BUILDING PRACTITIONERS ACT 2020 (NSW): Establishing a New Statutory Duty of Care for the Built Environment
BACKGROUND The landmark report by Professor Peter Shergold and Ms Bronwyn Meir titled ‘Building Confidence: Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia’ (Shergold Weir Report) made 24 recommendations to improve the national best practice model for effectively implementing building
regulation and the National Construction Code (NCC) across Australia. Among the Report’s recommendations is the establishment of ‘a statutory duty on design practitioners to prepare documentation that demonstrates that proposed buildings will comply with the NCC’ which will facilitate ‘a more robust approach to third party review of designs and to the documentation and approval of performance solutions and variations’.
Recommendations 13 to 17 of the Report called for improvements to the quality of documentation and to increased control over design-and-construct approaches to building. Another recent research publication titled ‘An examination of building defects in residential multi-owned properties’ (Reid Johnston Report) by Associate Professor Sacha Reid and Dr Nicole Johnston examined 212 building defect reports
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LEGAL
that identified 3,227 building defects throughout various states, including New South Wales. The Reid and Johnson Report stated that in New South Wales, the average number of building defects per apartment building was 16 and that 97% of all New South Wales apartment buildings had at least one type of defect and that of all defects, cladding defects accounted for 40.19%, fire protection system defects accounted for 13.26%, and waterproofing defects accounted for 11.46%.
THE DESIGN AND BUILDING PRACTITIONERS ACT 2020 In its response to the Shergold Weir Report, the New South Wales government committed to strengthening the building sector through a suite of reforms (New South Wales Building Stronger Foundations: Discussion Paper, June 2019), one of which is the enactment of the Design and Building Practitioners Act 2020 (NSW) (the Act) on 11 June 2020. Introducing a range of statutory obligations on key participants across the New South Wales building industry, the Act is in line with the New South Wales government’s plan to not only regulate building professionals who provide designs, specifications or plans. But also to ensure that such building practitioners owe a common law duty of care to owners corporations and subsequent residential homeowners as well as unsophisticated development clients.
…a QS that strays into coordinating, project managing or controlling building works may well be caught by the new legislation.
A NEW DUTY OF CARE A prominent feature of the Act is the establishment of this new, non-delegable statutory duty of care that will be owed to building owners by builders, designers, product manufacturers and suppliers, and supervisors (Sec. 37, Act), and the prohibition against such duty being contracted out of by parties to a construction contract (Sec. 39 and 40, Act). Prior to the Act, the prevailing principle in respect of a builder’s duty of care to subsequent owners is the precedent set in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36, which concerned a claim by a body corporate to recover defects rectification costs and damages against the builder of a multi-dwelling apartment building. In Brookfield, the body corporate asserted that the builder’s negligent construction of the building constituted a breach of the builder’s duty of care to the developer and subsequent owners of the building not to cause economic loss arising from its negligent construction. The builder, however, argued that as the building contract was subject of lengthy negotiations, no duty of care arose in favour of the developer, thereby negating the existence of a similar duty of care to subsequent owners of the building. The High Court ruled against the body corporate, holding that the builder had no longer-term responsibility or duty of care to the subsequent owner-occupants of the high-rise apartment negligently constructed by the builder. Section 37 of the Act now states that a person who carries out construction work owes a duty to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work is done and arising from such construction work (Section 37(1), Act). Additionally, this duty of care is owed to each owner of the land in relation to which
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type of construction work is carried out as well as to each subsequent owner of the land (Section 37(2), Act). Any such person to whom the duty of care is owed is entitled to damages for the breach of that duty as if the duty were a duty established by the common law (Section 37(3), Act). Further, the duty is owed to an owner whether or not the construction work was carried out under a contract or any other arrangements entered into with that owner or another person, or otherwise than under a contract or arrangement (Section 37(4), Act). Owners corporations and associations are deemed to have suffered economic loss if they bear the costs of rectifying defects (including damages caused by those defects) in the construction of their buildings (Section 38(1), Act) and such economic loss includes the reasonable costs of providing alternative accommodation where necessary (Section 38(2), Act). Section 41 of the Act also makes it clear that the newly created duty of care is in addition to, and will not limit, the duties, statutory warranties or other obligations imposed under the Home Building Act 1989 (NSW), other acts or the common law. Neither does the Act limit the damages or other compensation recoverable under any other act or at common law arising from a breach of a duty by a person who carries out construction work (Section 41(2), Act).
WHO OWES THE DUTY OF CARE? Section 37 refers to ‘any person who carries out construction work’, where ‘construction work’ is defined under Section 36 as any of the following: (a) building work (i.e., the construction, alteration, addition, repair, renovation or protective treatment of a building (Sec. 4, Act), including residential building work under the Home Building Act 1989 (NSW) (Sec. 36(1), Act);
LEGAL
(b) preparation of regulated designs (i.e., designs prepared for a building element or performance solution for building work [Sec. 5, Act]), and other designs for building work; (c) the manufacture or supply of a building product (as defined under the Building Products (Safety) Act 2017 (NSW) used for building work; and (d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in (a), (b) or (c). The Act accordingly imposes the duty of care on the key parties involved in the construction of residential or mixed-use developments. From a quantity surveyor’s perspective, it appears that the duty of care will not apply to a quantity surveyor that is carefully restricting its activities to those traditionally associated with the core business of a quantity surveyor (i.e., valuation of project costs). However, as Section 36 includes a person exercising substantive control over construction work, a quantity surveyor that strays into coordinating, project managing or controlling building works may well be caught by the new legislation.
RETROSPECTIVE APPLICATION It is also important to note that the duty of care is imposed on building practitioners retrospectively (for loss that became evident within the 10 years immediately prior to 11 June 2020) (Schedule 1, Sec. 5, Act), i.e., that it’s the duty of care provisions apply to existing buildings and contracts and arrangements. Section 5 specifically extends the duty of care to construction work carried out before the commencement of the Act on 11 June 2020 ‘as if the duty of care was owed by the person who carried out the construction work to the owner of the land and to subsequent owners when the
work was carried out’, but only where the economic loss caused by a breach of the duty of care first became apparent within 10 years immediately before 11 June 2020. It is accordingly important to evaluate current and recent projects with a view to ensuring that the practitioner’s duty of care is being, or has been, observed in full compliance with the Act.
COMPLIANCE DECLARATIONS The Act also establishes a regime which, in addition to expanding the current licensing scheme for certain designers and building practitioners, requires design and building practitioners to provide design compliance declarations and building compliance declarations in respect of compliance with the requirements of the Building Code of Australia and other applicable requirements. In essence, registered design practitioners must provide design compliance declarations if they provide to a person a regulated design which is suitable for use in connection with building work, building element or performance solution, or if they vary a regulated design earlier provided by them or another practitioner to that person (Sec. 9, Act).
SUMMARY Given the broad scope of the Act, quantity surveyors engaged in supervising or project managing construction work will likely fall within the coverage of the Act and should ensure that they keep their statutory duty of care to current and future owners of their projects in mind in the course of providing their services. Additionally, quantity surveyors may wish to carefully review the registration and compliance requirements laid down under the Act in view of the considerable penalties attached to non-compliance. Every builder, subcontractor, project manager or design professional should immediately re-evaluate its current asset protection measures and structures to ensure that it is not unduly exposed to the awkward provision of the new Act.
This article has been written by the team at Doyles Construction Lawyers. www.doylesconstructionlawyers.com
Registered building practitioners on the other hand must, before an application is made for an occupation certificate, provide building compliance declarations for building work, contractor documents and other required documents to persons for whom the practitioner does the building work (Sec. 17, Act). They are also prohibited from carrying out any part of the building work for which a regulated design is to be used unless they have obtained the design from a registered design practitioner and the latter has provided the design compliance declaration (Sec. 19, Act).
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CASE STUDY
TE OMANGA HOSPICE, LOWER HUTT – NEW ZEALAND “PROUD TO BE PART OF SUCH A WORTHWHILE AND IMPORTANT COMMUNITY BUILD.” TONY SUTHERLAND, MANAGING DIRECTOR OF RIDER LEVETT BUCKNALL AND NZIQS LIFE MEMBER
From the very beginning, everyone involved in the project knew that it was all about delivering a worthwhile and important facility for the benefit of the whole community. Te Omanga Hospice in the Lower Hutt suburb of Wellington, New Zealand, has always played a crucial role in the community and, with its new, purpose-
built facility, it is now even better placed to provide a comfortable and welcoming space for those in need.
work would probably mean compromised patient care, a situation that needed to be avoided at all costs.
When discussions first started about the future of the hospice, there was talk of keeping and upgrading the existing facility. However, this was quickly abandoned because of the original hospice’s existing layout and compliance issues. Upgrade
So, that left the option of a new build project that would provide a superior hospice and community care for years to come. But, with a modest budget funded primarily through the local community, the big question on everyone’s mind then
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CASE STUDY
became how to deliver such an important community facility without breaking the bank. The budget guidelines had to be adhered to. There were other issues. The client and the project team both understood the hospice’s extensive history meant a lot to family and relatives of loved ones who had been cared for in the facility. That history and family connection had to be respected. It was deemed necessary to reuse and save some of the important existing components, whatever was practicable and added value to the end result, such as the cottage, certain special trees, and plants. There were also the issues of the location and orientation of the building. These were significant considerations due to the existing stream and ground conditions, and the need to ensure each room had good sunlight and easy access to the outdoors. The original building was dated and tired,” says Tony Sutherland, Managing Director of Rider Levett Bucknall and NZIQS Life Member. Tony was the client’s Project Director Quantity Surveyor and was personally involved in the estimating, tender review, post contract services and final account negotiations. We knew there would be unknowns and significant, unique details that needed to be worked through. “There was certainly consideration given to existing aspects, like the plants in the garden, as we knew there were memories and deep family connections to the area. “Ultimately, it was important in the build that we ensured patients’ comfort and that we honoured the history of Te Omanga Hospice.”
CLIENT + CONSULTANTS + CONTRACTORS The client and consultants decided to bring the contractor on board as early as possible in the design process as part of enhancing the overall delivery process. Despite being already very busy, local contractors knew how important the hospice was to the local community and wanted to be involved in the project. “There was a lot of discussion about how best to deliver this project in the right way,” Tony says. He says that throughout the community there is a deep, familial and personal connection to the building and the land, and it was important to understand that and factor that into all the plans. A two-stage tender process established the preferred contractor to work with the client and consultants to complete the design and pricing processes.
TEAM COMMITMENT Tony says all those involved in the project were committed to delivering an outstanding facility for Te Omanga Hospice. “The entire design team, client representatives, contractors, and subcontractors were absolutely all on board. The whole team understood how incredibly important the facility was and they really did put their heart and soul into the project which was great to see and be a part of,” he says. Consultants helped out by keeping their fees as low as possible, often doing work ‘in kind’. The contractor and subcontractors also offered discounted rates and provided many other reduced costs along the way. “This was certainly one of those special projects you will always remember being involved with. It’s one to tell your family and friends that you helped not just deliver,
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but to deliver outstanding results for an essential community facility,” Tony says.
QUANTITY SURVEYING ISSUES After a significant amount of early investigation work, it was clear that there were all the usual issues associated with a new build. These included isolated and poor ground conditions, unknown underground services, and the need to avoid impacts on the existing stream. These were
CASE STUDY
identified, highlighted and ‘planned around’ very early in the budget process.
grow out of control if not watched very carefully.
“We certainly had issues with the foundations and ground conditions. Even with the ground testing, there were still issues around the stream boundary. There were definitely unknowns, but you get that on most jobs.”
So, decisions were made early on to ensure funds were directed to areas of the project that were essential for the build operations but that also generated the best bang for buck for patients and staff.
Because of the size of the site area and the planned location of the new building, it was obvious that costs for landscaping and site redevelopment could quickly
competitive pricing for the works, and to avoid as much as possible of any discounted tender pricing.
IMPORTANT CONSIDERATIONS
This ensured a reasonable ability to review tenders and meant donations could be easily tracked, recognised, and recorded for tax purposes. It also provided for much better transparency throughout the tender process.
One of the most important decisions made during the procurement process was that it was better to obtain clean,
And then there was the business of making sure all products and systems came with appropriate warranties and
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CASE STUDY
guarantees. The team felt it might not be so easy to track that kind of thing if the materials and components used were gifted as part of the delivery process.
REFLECTION & REMEMBERING Tony says that perhaps one of the most important take-aways from this project is the uncertainty of the future. “You just never know what the future holds, and when or if you may need the support and care provided by this type of hospice facility,” he says. Unfortunately, this was true in the case of one of the project’s leading lights, Peter Angus, who was lost too early. Peter worked long and hard with the hospice and project team to ensure a great result and, sadly, found that he needed the kind of care the hospice provides. “I’m sure that every time team members drive past the hospice or hear about it they will remember the incredible work Peter did to help turn this facility into a reality.”
A TRUE COMMUNITY ACHIEVEMENT These types of community-focused projects need totally dedicated fundraising teams with a true passion and drive for what they do, and Tony says the fundraising team for this project certainly had that in spades. When you see the list of corporates, families, and individuals listed amongst the community of donors, and you saw the huge numbers of people at the opening ceremony and on the open days, it really says it all. “I can say without a shadow of doubt that all of us were proud to play our part in rebuilding the Te Omanga Hospice for the benefit of hospice staff, patients, and community,” Tony says.
This article has been supplied by the New Zealand Institute of Quantity Surveyors.
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TECHNOLOGY
DE-RISKING YOUR CONSTRUCTION ESTIMATES: LEVERAGING CLOUD ESTIMATING TECHNOLOGY BY ERIC SILCOTT
There is an often-used phrase in building that sums up a craftsman’s ability: “Quality workmanship is not defined by the craftsman’s tools; instead, it’s defined by the knowledge and experience they possess.”. On many levels, estimators bring their own craftmanship to the role of construction estimating. Good documentation, transparent costing methods, and accurate quantities and costings are among them. Given the complexity of the task, the art of
estimating can take years, if not decades, to develop and refine. While that thinking can still be applied to estimators today, the current choice of tools and how they are used has an increasingly profound impact on the estimating process and the expected level of success. Now, an estimator’s ability is defined not only by their knowledge and experience, but by the tools they elect to use, and what commercial advantages those tools have to offer.
Yet two decades later, BIM has not made it to most estimators’ desks. It has been well documented that technology adoption in construction, especially as compared to other industries, is slow, close to last according to most reports. As an example, BIM was
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TECHNOLOGY
a key topic in the early 2000’s and many of us in the industry thought of BIM as the next big change in commercial estimating. Yet two decades later, BIM has not made it to most estimators’ desks.
SCALABILITY
Why? Many think that the lack of government leadership, restrictions in technology, or even the liability of the BIM model have reduced the efficiencies thought possible nearly twenty years ago. In fact, the industry as a whole still measures manually from paper plans or on-screen take-off solutions, leading many to wonder why forward progress never happened.
I would define scalability in estimating as the means to increase the number of estimates an individual or organisation can generate without increasing their workload and committing additional errors.
THREE WORDS THAT ARE CHANGING THE ESTIMATING DYNAMIC
2. reducing or eliminating the number of times information needs to be transposed
There are three words in estimating technology circles that are continuing to gain traction. Unlike BIM, these are not future potentials, but a phenomenon that is happening right now.
“Oh yes, your estimating system will integrate to job costing or procurement.” Scalability | Collaboration | Integration
In many technology discussions, these three words have become overused and clichéd - terms that software vendors may use to describe solutions that “improve productivity and reduce time”. But if you take a step back and analyse what these words really mean to a construction business, you quickly see that the benefits are real. Let’s break them down in a real-world estimating context.
Defined as “an organisation of individuals’ ability to cope and perform in an increasing or expanding workload or scope”.
From my experience, this can be achieved in three ways: 1. reducing the number of tools and/ or resources an estimator needs to complete an estimate
3. enabling access to estimate information anytime/anywhere with complex or expensive IT requirements.
COLLABORATION Defined as “the process of two or more people working together to complete a task or goal”. Collaboration in construction is all about looking at the same information on the same platform without the need to alter, change, download or transpose. As an example, does your company currently have systems in place that allows estimators, general manager, project manager and procurement interests to quickly access estimate information without exporting or printing to Excel, Word or a PDF? There are a number of signs that your company could derive value from more collaborative estimating methods. Common issues include: • estimate claim values have no direct relationship to budget values
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• budget values have no direct relationship to the construction programme • cost codes and methodologies differ from estimator to estimator, project to project • the need to transpose estimate cost data to Excel for project delivery teams • communication delays with other stakeholders prior to estimate submission.
INTEGRATION Defined as “actions or process of combining two or more things in an effective way” For many of us, integration is a term that feels more like marketing hype than useful reality. We’ve all been there: “Oh yes, your estimating system will integrate to job costing or procurement.” The truth is often different; there may be a finite set of circumstances that enables the integration feature, or you are forced to work with a software solution so compromised for estimating or project management that it’s unpractical. The bottom line is this. In the last two to three years we have seen a significant advance in commercial estimating integrations. If you haven’t recently conducted an industry search, it’s likely that your estimating and project management processes are outdated - and you’re probably wasting time and money with incomplete or inaccurate information.
THE GAME CHANGER IN COMMERCIAL ESTIMATING Historically, estimating and project management solutions have been “heavier” installed software applications, capable of supporting thousands of calculations required for large commercial estimates. Most modern
TECHNOLOGY
• standardise business processes via workflows with team alerts and consistent reporting structures. Over the past 25 years of commercial estimate software use, I’ve found that there are four consistent challenges in de-risking company estimates. 1. Construction Documentation: ensuring that the most recent drawings are catalogued for external sub-contractor access and internal use of current/ accurate measures and pricing. 2. Standardising Structures: enabling all estimators and project managers to source the same company budget structures and composites build-ups.
SaaS or web-based estimating software wasn’t designed to manage large datasets or complex parameters. That put commercial estimators at a disadvantage, as only smaller, more repeatable estimates for home builders or renovators could be expected to work within the limits of a true SaaS - based estimating solution. But here’s the exciting part. Recent investments in web-based commercial estimating software has given estimators of large, more complex estimates as much or more functionality than traditional installed applications. Combined with modern design and deep-linking of API’s to external project management or CRM solutions, companies can now create complete, 100% continuity from initial opportunity to project delivery - without the need to manage duplicate records. In a very real sense, innovative SaaS design has reinvented historical estimating methodology. That means contact information, estimate data, procurement, and job cost interests are all provided with complete visibility into where the cost information has come from and who it has been provided to.
DE-RISKING YOUR ESTIMATES BY CREATING A SINGLE POINT OF TRUTH Setting processes and procedures to derisk company estimates relies heavily on staff acceptance and constant vigilance on the part of estimating managers and owners in order to reinforce new policies. Moreover, for many contractors, the employee pool is constantly changing; new company hires take time to train and adapt to company estimating methods all of which creates an ongoing challenge to break old habits and efficiently adopt a new approach. Centralising estimate information in a single cloud-based estimating platform has a positive and immediate de-risking effect. By creating a single point of truth, you can: • eliminate double handling of estimate information • simplify management of estimate file versioning • enable multi-user in-estimate capability • stop broken cells and incorrect calculations of estimate data
3. Reporting Structures: standardising WBS structures to enable continuity of estimate reviews, reporting and hand-over. 4. Margin/Mark-up Strategy: keeping all estimates in-line with company overhead/profit calculations, allocations and spreading.
CONCLUSION Moving to a new estimating system or process can feel daunting. But when you consider examples from the past, where the adoption of new ideas and technology has consistently made the most difficult tasks easy, the benefits of embracing change are clear. Imagine, for example, not having your emails sync to your phone and computer, which used to be the accepted norm. Now, however, that tool sits firmly in your toolbox, used daily to save time and work more productively. So, here’s the question: shouldn’t you expect the same of your estimating solution? Eric Silcott is a Director at Quest Construction Software. For information about ProEst – Commercial Cloud Estimating Software visit www.questconstructionsoftware.com.au This is a paid article from ProEst.
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COVID-19
COVID-19: BOON OR BANE, A CONSTRUCTION PERSPECTIVE! BY BAGAVADEESWAR S MAIQS CQS
When the COVID-19 pandemic started conquering the shores of each land at the dusk of 2019, the stranger was ruled out as a myth. Never could one realise the probability of damage that could cause the existence of humanity and its impact to the human created barter, called the ‘economy’. The built environment and the sustainability attributed to living faced havoc and the entire human race is at the brim of death. The anniversary of COVID-19 is nearing, and the questions are still at large. Are we coping with hope, or living with certainty? Has the construction sector arisen like the phoenix? Whether humanity really wants to standstill is a million-dollar treasure hunt that I am sure no one will find an answer. Hailing from the SME business sector, I am faced with this uncertainty. What factors revived the hope of lockdown which extended for three months with conditions and further months of bleakness? Those times were crisis-driven.
TRANSFORMATION 1: SERVICES TO SELF The notification of a blanket ban on the movement of citizens is a wall, propped from nowhere. The first four days were relaxed. The relaxing didn’t extend further. Bleakness faded the vision as we are used to working on targets. With our team being spread out between house and office, we were in hibernation wondering what was next. Projects were hindered with unclear thoughts. The first major transformation was the decision to brainstorm offering the best services to self. This was the moment when we realised progressive gaps in knowledge and experience. A systematic retrospection was carried out and we decided to implement training. Starting from the basics, the journey seemed familiar with the outcome to benefit. With internet-based meeting software zooming in, it was a boon that commenced our journey into acquiring knowledge.
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The first step of acknowledgement is within us. If the ‘YES – I CAN DO IT’ factor is present, we can defeat anything in future.
TRANSFORMATION 2: PROMPT AND EFFICIENT SERVICING TO CLIENTS As we acquired new knowledge, it defined our best offering to our clients. This change has complimented the service to self as well as complying with the ethics defined by every professional organisation, especially as detailed in the AIQS Code of Conduct – “AIQS members shall demonstrate and attribute professional duties ethically, with honesty, competence, and in good faith, without personal bias, and in a manner which upholds the values and reputation”. The world has witnessed unexpected job cuts, synchronising with the Gartner Hype Cycle Curve, triggering the panic button and highlighting the adaptability of humans towards futuristic construction, namely:
COVID-19
1. automation with perfection 2. improving productivity with informed decision 3. less traditional construction 4. optimisation of the skillset converting labourers into technicians 5. real-time with virtual reality applying Front End Engineering Design 6. time and productivity management with real-time monitoring 7. environmental monitoring and decision making 8. innovation into construction, viz., robotics, pod, prefabrication, drones, aerial surveys, BIM (3D, 4D, 5D, 6D and 7D), FM automation (optimising 30% on the CAPEX costs), 3D printing, 3D lasers, photogrammetry and the like. With the industry turning to greener pastures, the preparations of points one and two shown above has contributed to new norms and the adaptability to live, seek greener and cleaner approaches, and an efficient productive reformation.
TRANSFORMATION 3: NEW NORMS OR ADAPTABILITY Quantity surveying is an art to envisage from conception until the project redeems sustainability. The last seven months has witnessed the highest internet usage. BIM training has gained more attention. CPD diaries filled up with webinars. Claims made some quantity surveying professionals lookup the definitions of pandemic, force majeure or opt for disruption costs. Developments in the Middle East started emphasising feasibility estimates and the subsequent review of design and tender estimates prior to bidding is a welcome revival. A few projects experienced the client-led transformation towards sustainable building process which led to brainstorming sessions. This is a positive move towards clean and green energy. This new norm benchmarked clean energy solar parks. For example, Mohammed Bin Rashid Solar Park (1000 MW), following the success of Shams
Solar Park (100MW) and the Masdar Solar Park. From an interactive session with HE Dr. Nawal al Hosany, permanent representative of the International Renewable Energy Agency, I was given the understanding that the United Arab Emirates has collaborated and partnered across 70 countries establishing new norms to clean and renewable energy. The use of manpower with health, safety and environmental measures is more prominent and the new norm of productivity is in place, safe and sound.
REVOLUTION 4: LOOKING FORWARD With opportunities to look at the moon and clean pastures, the definition of the built environment and the contributions of quantity surveyors is spreading across planets, so I believe. The world is recovering the minor speed reduction due to COVID-19 and the resilience is being monitored. CAPEX estimates, return on investment, contracts, planning mechanisms, dispute resolution mechanisms, BIM, drones,
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 31
COVID-19
Source: “Shaping the Future of Construction: An Action Plan to Accelerate Building Information Modeling (BIM) Adoption�, by the World Economic Forum in collaboration with Boston Consulting Group (BCG).
etc., has already adapted into the newly digitised construction industry as a result of COVID-19. E-tendering has rapidly adapted in the private sector in the Gulf countries.
performance management has already secured the places and proved to be disruptive in the construction sector.
The impact is positive, and humans are now more adaptive. The productivity parameters in the construction sector is likely to experience exponential growth. Cloud computing, BIM models, design analysis based on BIM, documentation management, BIM based quantity assessment and audits, e-tenders are few mechanisms that have adapted.
Construction is a key stimulus to the economy. Processes are speeding up. The community of quantity surveyors is working on the recovery and finding practical solutions through constructive collaboration.
Design, sourcing, procurement, planning and scheduling, BIM, tracking, contracts, quality management, documentation, and
CONCLUSION
Digitisation and trust in technology has improved. A more realistic contract period is a likely outcome. Tender evaluation, based on realistic programmes of the contractor, is a key performance indicator.
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When the situation of the COVID-19 closes, there will be a bounce back to the requirement of quantity surveyors to form the backbone of the industry. Data management stands paramount. Certainly a boon, but with its characteristics, COVID-19 is a bane. Definition of death is rewritten through COVID-19. COVID-19 has accelerated our expansion. A vaccine is certain to rewrite the destiny of COVID-19. The witnessed development to the construction industry and the quantity surveyors profession, has rewritten the journey of the universe. Expand, Enjoy and Exhilarate!
CONSTRUCTION FORECASTS
LOOKING BEYOND 2020
THE ACIF CONSTRUCTION MARKET REPORT IS THE INDUSTRY’S COMPASS POINTING TO THE FUTURE. The Australian Construction Industry Forum (ACIF) Report provides decision makers with comprehensive information and insight about the direction in which building and construction activity is heading.
defer many new building projects. Building work done is forecast to fall in Accommodation (down 34%), Entertainment and Recreation (down 23%), Retail/Wholesale trade (down 17%), Education (down 11%), as well as Health and Aged care (a fall of 4%) over 2020-21.
The November 2020 Report has recently been released. Bob Richardson FAIQS, CQS - Chair, Construction Forecasting Council provides this commentary in the November Report, “On balance, the contractions outweigh the areas of growth. The forecasts expect a rebound in the 2021-22 medium term. This will be mild, and it is not anticipated that work done will approach 2018-19 levels until 2025-26.”
• Residential building received a series of strong “stop” messages over the last few years including the application of macro-prudential controls, tightened credit controls applied by banks, punitive tax increases designed to knock-out foreign buyers and investors, and targeted fears of oversupply in inner city apartment developments.
SOME OF THE HIGHLIGHTS IN THE REPORT
• The value of total work done in the building and construction industry is • COVID-19 Non-residential and the measures that Residential projected to fall byInfrastructure 3.2%, Construction falling from have been taken toinclcontrol its spread,Non-residential $232 Heavy Industry Mining - Forecast billion in 2019-20 Residential to- Forecast $225 billion in Infrastructure Construction Heavy Industry incl Mining - Forecast have sent the message to- Forecast hold or 2020-21 (measured in real terms).
120
BUILDING AND CONSTRUCTION WORK DONE - MEDIUM TERM FORECASTS
100
80
Non-residential
Residential
Infrastructure Construction
Non-residential
Heavy Industry incl Mining
Residential
Non-residential - Forecast
Infrastructure Construction
Heavy Industry incl Mining
Non-residential - Forecast
Residential - Forecast
Infrastructure Construction - Forecast
Heavy Industry incl Mining - Forecast
Infrastructure Construction - Forecast
Residential - Forecast
Heavy Industry incl Mining - Forecast
120 120
AUD billion
120
100 60
100
100
80
80
AUD billion
40
60
60
80
40
40
AUD billion
20 60 20 20
--
2022-23 2022-23
2021-22 2021-22
2020-21 2020-21
2019-20 2019-20
2018-19 2018-19
2017-18 2017-18
2016-17 2016-17
2015-16 2015-16
2014-15 2014-15
2013-14 2013-14
2012-13 2012-13
2011-12 2011-12
2010-11 2010-11
2009-10 2009-10
-
40
20
2022-23
2021-22
2020-21
2019-20
2018-19
2017-18
2016-17
2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
The full Report is available to purchase from www.acif.com.au. AIQS members can download a complimentary copy of the full Report via www.aiqs.com.au 2009-10
-
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TECHNOLOGY
ACCELERATING TOWARDS A STRONGER FUTURE: THE YEAR QUANTITY SURVEYING WENT DIGITAL Digital acceleration has taken on a new meaning in 2020. Covid-19 lockdowns and restrictions on physical distancing within businesses have backed organisations into a corner. In some cases, this has forced a major rethink, in terms of how business gets done. For many organisations and industries, this has translated into fast-forwarding technology
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adoption plans to maintain business continuity, while also staying relevant. A recent survey from technology analyst IDC has revealed that while digital transformation has been identified as a priority across the Australian construction sector (and the pandemic has undoubtedly accelerated urgency) key entry barriers still need addressing.
TECHNOLOGY
According to IDC, the top three digital logjams include data security, risk management and outdated technologies. While the speed of digital transformation remains a broader work in progress, it’s encouraging to see that early adopters are starting to realise the benefits of their technology investments. With construction projects continuing to increase in complexity, new cloud-based technologies like virtual collaboration tools are accelerating productivity and improving project management within geographically dispersed teams. Other benefits include a greater line of sight to address those digital logjams. And of course, maintaining workforce productivity and business continuity, as evidenced during recent lockdowns. Although the broader construction sector is still in the early stages of its digital transformation journey, IDC reported that Australia and New Zealand are spending more on digital construction solutions that aid in project documentation and stakeholder engagement, compared to other countries. Encouraging, as we look forward. It is also worth keeping in mind that 90% of the Australian construction sector is made up of smaller businesses, many with teams of around twenty. IDC suggests an inclusive approach to digital transformation is needed, for companies to successfully advance to the next stage.
KEEPING PACE WITH THE MAIN CONTRACTOR
…quantity surveyors should seize this opportunity to advance to the ‘next normal’ and bridge those hurdles that technology can solve
That said, as seen in other sectors, the larger construction firms are setting the pace when it comes to digital transformation. Today, it is increasingly common for main contractors to expect wider project stakeholders, including quantity surveyors, to have access to the same digital toolbox and ‘know how’ that they do. The good news with the arrival of cloud-based software as a service,
technology is more accessible and more affordable. This need to add digital knowledge and software to the quantity surveyor ‘work-belt’ is a positive step in the evolving role of a quantity surveyor. It will drive productivity efficiencies, enable a collaborative work from anywhere mindset, improve customer engagement and a teams’ ability to deliver a job on time and on budget. The pandemic has accelerated the need to embrace technology in more ways. It has made the construction industry realise the challenges it needs to address. And quantity surveyors should seize this opportunity to advance to the ‘next normal’ and bridge those hurdles that technology can solve.
BRIDGING THE DIGITAL DIVIDE It would be easy for quantity surveyors to feel that they are secure in their roles, as a recent report from BIS Oxford Economics reveals there is a significant gap between the number of active quantity surveyors and the increased demand in the Australian market. Additionally, with international borders closed, it means it is harder to recruit overseas talent to fill those gaps. This could lead to quantity surveyors to feel a false sense of security as demand is on their side. However, this could be short term optimism. Australian construction projects are continuing to grow in complexity, and if they are unable to find the right people with the desired skillset locally, as border restrictions ease, they will look elsewhere. A recent study from the University of South Australia recommends that quantity surveyors upskill in order to “manage a construction project productively and increase their ability in accordance with the current demand of the construction industry”. The researchers noted how the construction industry now receives more complex and sophisticated customer requirements that are not easily accommodated by traditional competencies. These new roles include risk management, adopting
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 35
TECHNOLOGY
new technology for more accurate, and automated cost estimation and planning from the beginning of a project. The role technology will play in quantity surveying will only accelerate and become more important. With multiple contractors and stakeholders involved in projects, cross-communication and transparency are vital, and it will help avoid costly delays. Recently it was reported new safety measures and a slowdown in construction material imports increased costs and caused delays. But those obstacles can be mitigated if properly managed with technology. As quantity surveyors grapple with obstacles, utilising data effectively is going to become even more important in the construction industry. For quantity surveyors taking their first digital step, Bluebeam Revu is an effective tool that delivers: • Improved productivity • Better organisational workflow • Tighter supply lines and schedules • Greater competitiveness The cost savings of utilising the right technology and data are measurable. A single, reliable data source, such as Revu, will create consistency, save time and costs.
and expedited paperless exchange of information between all parties involved in a project. This creates an environment where document markups can be completed fast and clearly. Digital documents have revolutionised the old days where a paper trail was needed with hand-marked notes, potentially creating confusion or being mistranslated along the way. Sanderson says the right software can help everyone involved in a project to get mark-ups that provide a clear, delineated scope. ‘This allows the market to price in accordance with what we want, enables us to include or exclude areas based on mark-ups, or text descriptions on drawings, quotes or any other document. It provides clarity in a clean way as opposed to handmarked versions,’ he says. Utilising software has also enhanced health and safety standards at construction sites. It has permitted teams to provide mark-ups on safety plans to show zone specific demarcations, such as displaying exclusion zones, site sheds and traffic bays. The mark-ups are updated and shared in real time so crews across a worksite have access to the latest health and safety plans.
KEEPING RELEVANT
Technology has become a crucial part in the day to day operation at Multiplex, and digital construction solutions have proven a valuable tool when it comes to cost planning estimating. It enables Multiplex Cost Planner, to be specific about costs across different groups. Multiplex Cost Planner Grant Sanderson says: ‘Technology like this allows me to work efficiently and send detailed and informative drawings and quotes back and forth with the market as required’.
Rules, regulations and methods constantly change, which is why it is vital to have a system that keeps all team members and those involved in a project up to date with the latest information. Multiplex acknowledges these changes, and it has a dedicated team within its business who oversee tracking those changes and notifying business teams, ensuring all quantity surveyors and others have access to the latest information. Without the correct information at hand instantly, designs could be compromised, dangerous materials could be sourced, creating extra costs, obstacles and delays.
Turning to new collaboration based software gives Multiplex an efficient
‘Unsuitable building product identification has been a recent area of increased
MULTIPLEX LEAPS FORWARD WITH DIGITAL SOLUTIONS
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awareness, kicked off by the combustible composite aluminium cladding problems,’ Sanderson says. As client demands get more complex and the materials needed to meet their demands are vast, Multiplex has had to keep up with the evolution in the construction sector to ensure its business stays relevant and resources and quality materials are safe. All elements of the construction sector are constantly changing because they have to meet and exceed these expectations put on them by clients and regulations. And because of the nature of the industry, quantity surveyors not only have to advance their skills, but they need to work effectively with the rest of the team to meet expectations. At Multiplex, the Cost Planning team, which is made up of quantity surveyors and non-quantity surveyors, needs to work effectively with the entire New Business bid teams. Everyone
TECHNOLOGY
Ready to start your digital transformation? Get started with Bluebeam Revu today! bluebeam.com.au
needs to understand what the clients are asking and can come up with an innovative solution to every request on a bid-by-bid basis. To future proof its quantity surveyors, Sanderson says Multiplex works to remain current, and knowledgeable of the changes and expectations of its clients so it is able to provide the best answer that can be provided.
KEEPING A COMPETITIVE EDGE Expectations are higher and getting things right the first time will keep quantity surveyors competitive. Digital transformation is vital for quantity surveyors to drive value and unlock the industries full potential. The right software allows everyone to have access to the same material, and it can be updated in real time so there is no room for confusion and accidentally working off old plans.
Turning to powerful software solutions will help quantity surveyors remain relevant in the ‘next normal’ as the world turns to technology for solutions. The way we work is changing, and we have an opportunity to reap the benefits of using digital technology to drive productivity and navigate around obstacles.
This is a paid article from Bluebeam.
It is vital to have systems and processes in places that allow for consistent communications and transparency, and this is achieved through a single data source for all stakeholders and contractors to reference. These steps will future proof the construction industry and quantity surveyors, ensure they are relevant and help organisations attract and retain the best and brightest talent within the industry.
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INFRASTRUCTURE
RAILWAY CONSTRUCTION CHALLENGES AND OPPORTUNITIES FOR THE QUANTITY SURVEYOR BY MICHAEL BYNG MAIQS CQS
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INFRASTRUCTURE
RAILWAY CONSTRUCTION WORLDWIDE Not since the late Victorian era has there been such activity to build new railways, whether they be heavy railways for passengers and freight or light railways or metro systems, the amount of work, pre-Covid-19 lockdown there were schemes on all continents as older infrastructure was enhanced or replaced. Unlike those Victorian schemes, which were identified, created and delivered by civil engineers, most if not all of the current activity involves quantity surveyors, whose task is to forecast cost and to manage schemes under way.
VALUE OF CURRENT ACTIVITY In Great Britain in the 10 years preceding November 2018, HM Government spent approximately £56 bn¹ ($AUD 101 bn at current exchange rates) on railway enhancements and network upgrades. In addition, since 2011, HM Government has promoted and pursued the creation of the High-Speed 2 network linking London with Birmingham, Manchester, Sheffield and Leeds. This ambitious scheme, the largest infrastructure scheme in Europe, is forecast to cost as much as £106.564 bn ($AUD 192 bn) at 4th Quarter 2015 prices. In addition, there are many regional schemes to connect the existing network to these high-speed lines, which require support from quantity surveyors to analyse, forecast and control costs. These cost controls are crucial to the delivery of the works as almost all these projects are funded from the public purse. The importance of effective cost control cannot be overstated if political and public support for the expansion of the railways is to be maintained.
THE CHALLENGES FOR THE QUANTITY SURVEYOR No other profession has the competencies of the quantity surveyor to manage construction costs, a skill that is demonstrated in the cost data bases developed and published by the BCIS (Building Cost Service) of RICS in London, which will complement the development of the ICMS² of which AIQS is a partner. Building works form a relatively small percentage of railway engineering project, so the profession has faced and met a challenge to develop its skills to create a similar cost database for railway engineering works, also supporting ICMS. Beginning in July 2011, Network Rail in Great Britain, developed a suite of documents forming the "Rail Method of Measurement" (RMM suite), to support the measurement and estimating of costs for engineering works. In turn, the RMM suite provides the basis to create "RCIS" - the Railway Cost Information Services forming a cost database to assist quantity surveyors working in the industry. The current version of the RMM suite, Rail Method of Measurement - Order of Cost Estimating, Cost Planning and Detailed measurement for Rail Infrastructure Works, was published by Network Rail in July 2018. It is widely used in Great Britain and is being applied in Europe, the Middle East, North America and Africa as well as Australia. Thus the first challenge has been met but there are additional challenges, to promote and develop the use of the RMM suite with quantity surveyors worldwide, to create confidence with the promoters of railway projects that it provides an essential tool in the cost management of these major schemes and to build a
credible cost database, which will form the basis for future project evaluation. Having met these challenges, quantity surveyors will have provided project promoters with the transparency of comparable costs to protect them from criticism that their scheme has not been properly evaluated before public funds are committed.
RMM SUITE - THE BASIC PRINCIPLES The first task faced by those drafting the RMM suite was to define which works constituted a railway. Whilst it is generally understood that a railway travels from Point A to Point B, along a series of separate track tracks, there was a need to define what formed the "Corridor" in which it runs. RMM devised the concept of "The Railway Corridor", which is shown on the Figure 1 on the next page. Having defined "The Railway Corridor", RMM suite provides detailed rules of measurement covering all works within it. The suite works with, and complements, other methods of measurement, such the New Rules of Measurement (NRM) and the Civil Engineering Standard Method (CESMM4) in the UK, by adding detailed measurement rules for those work classes not covered elsewhere. For example, CESMM4 has Class S, Railtrack, which has limited application for railway works incidental to other major civil engineering or building projects. It does not cover Railway Control Systems (Signalling), Train Power Systems (overhead line or third and fourth rail contact systems), the provision of Electric Power and Plant for the railway not Operational Telecommunications, which provide the fixed telephone network (FTN) essential to the management of a modern railway.
¹ Andrew Haines, Chief Executive Officer, Network Rail, addressing the All Party Parliamentary Rail Group, October 2018 ² ICMS - International Construction Measurement Standards, published by the ICMS Coalition
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INFRASTRUCTURE
"THE RAILWAY CORRIDOR" DEFINED
CENTRE OF ALIGNMENT
Figure 1: Diagram showing the cross section of a double track railway alignment including an overhead power supply system.
CATENARY MAST
CATENARY MAST FENCE
DITCH
BATTER SLOPE CESS
TOP SOIL
BALLAST
~5.80M
SLEEPERS
TOP SOIL EMBANKMENT
DRAIN
DRAIN CABLE TROUGH
CABLE TROUGH CESS
SECOND LAYER OF GEOTECH MAT
4M (13 ft)
FOUNDATION
FENCE
DITCH
Track, permanent way, is also expanded to provide rules of measurement for the many track systems in use on heavy railways, high speed and suburban routes as well as metro systems and light railways (tramways).
1
Several other categories are included that are not included in earlier methods of construction measurement, which relate directly to works under civil engineering or building contracts to reflect the needs of project promoters. These are the categories shown in Sections 3, 4, 5
Direct Construction Works
and 6 below, thus creating the basis of entire project, creation, analysis and cost management. These cost categories and elements, included in RMM1, allow for robust cost analysis and benchmark analysis as shown below.
1.01 Railway Control Systems 1.02 Train Power Systems 1.03 Electrification and Plant 1.04 Permanent Way 1.05 Operational Telecommunication Systems 1.06 Building and property 1.07 Civil Engineering 1.08 Enabling Works a 1.09 Rolling Stock b
2
Indirect Construction Works
2.01 Main Contractor's Preliminaries
3
Design, Project management and Other Project Costs
3.01 Design
2.02 Main Contractor's Overheads and Profit 3.02 Project Management 3.03 Other Project Costs c 4
Risk
4.01 Risk Allowance
5
Inflation
5.01 Inflation
6
Taxation and Grants
6.01 Tax Allowance and Grants d
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INFRASTRUCTURE
This elemental structure of cost categories forms the basis of the RCIS cost database. However, some notes of explanation are essential for the correct understanding and application of the RMM suite. a. Category 1.08 - Enabling Works; to form the "Railway Corridor" enabling works are required, which may be considerably outside it, this category provides the basis. b. Category 1.09 - Rolling Stock; modern Railway Control Systems category 1.01 often requires onboard equipment to be installed onboard trains and for "Turnkey" design, build and operate the project, rolling stock is included in the contract price, hence the inclusion of this category. c. Category 3.03 - Other Project Costs includes land acquisition, both temporary and permanently, a category essential to the cost management of major railway projects. d. Category 6.01 - Taxation and Grant is included in the schedule to allow the effects of these costs to be considered in the calculation of the Project Cost Limit for appraisal purposes. The RMM, prepared by quantity surveyors for the railway industry, addresses the challenge needed to successfully manage these projects. With the challenge addressed, what are the opportunities available to the profession by its adoption and use?
OPPORTUNITIES FOR THE QUANTITY SURVEYING PROFESSION The development of the RMM suite, supporting a better understanding by quantity surveyors, of the cost drivers for these major railway projects, provides
opportunities for all grades within the profession and for the supply chain as well as delivering more effective cost certainty to project promoters.
first developed my contribution to the work developed from 2011 by Network Rail in Great Britain. The work in New South Wales now forms part of RMM1.
For quantity surveying practices and for surveyors employed within engineering practices, it provides the opportunity to enter a major market it which the profession has had marginal representation and influence, without offending our engineering clients.
Having set out the challenges and opportunities, it seems only right to list some of the hurdles, which growing quantity surveying involvement in the commercial management of projects presents.
By building on the core competencies of quantity surveyors, estimating, measurement and commercial management, RMM suite offers those prepared to move away from building works to retrain in civil and railway engineering works, an opening to enter a relatively new, much bigger international market. For prospective new entrants to the profession, the cadets, the chance to enter the market of commercial management of major railway project, is seen as a big selling point for centres of further education offering railway engineering as an option to existing degree courses.
FINAL THOUGHTS The growing involvement of quantity surveyors in the strategic management of heavy and light railway projects has been aided by the introduction of the RMM suite in Great Britain. In addition to Great Britain, I have seen work growth in Europe, the Middle East, Africa, Asia and Australia.
These include: • resistance to the introduction, by a new entrant - the quantity surveyor - to an existing, established market of new methodology and application • sensitivity be railway civil engineers to the erosion of their traditional prime position in project commercial management • scepticism of the ability of the quantity surveyor to offer more reliable, trustworthy cost advice. In existing markets, where the RMM suite and its associated skills have been applied, these hurdles have been overcome. However, quantity surveyors proposing to enter the rail construction sector will face these hurdles time and again. By developing and aligning the RMM suite to the principles of ICMS and sharing experience and knowledge through its members, I believe that the involvement of quantity surveyors in major railway projects, internationally, will become an accepted norm.
Indeed in Australia, working in 2007/8 for the then Transport Infrastructure Development Corporation of New South Wales, on the proposed upgrades of the lines from Quaker's Hill to Vineyard and the remodelling of Glenfield Junction, I
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TAKEOFFS
HOW TO CREATE BETTER QUANTITY TAKEOFFS Quantity takeoffs are essential in estimating costs accurately in the construction industry. Along with setting the schedule for materials purchasing, it involves estimating the real costs of a construction project. When done correctly, the process can help teams stay on budget while optimising workflows and preparing for worst-case scenarios.
Nevertheless, creating quantity takeoffs is a complicated process, traditionally prone to error and many changes. But setting up quantity takeoffs right from the start can provide the right foundation for a successful project. In our article, we’ll discuss how businesses can improve quantity takeoffs to maximise efficiency from the very beginning of a project.
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Improving the quantity takeoff process for your projects can pay off significantly in the long-run.
TAKEOFFS
WHAT IS A QUANTITY TAKEOFF? First, let’s dive into the fundamentals of the preconstruction process, which typically starts when bidding begins. In a basic sense, a quantity takeoff is a list of all of the construction materials, including raw and prefabricated elements for a project; each quantity and amount of every material to be sourced is included in the list. Takeoffs are frequently adjusted through the estimation process. This way, when the estimators set the final price for a project, they are using the most accurate information possible. With accurate estimates, contractors are more prepared to meet project budgets and timelines. Accurate estimations also reduce construction waste, which is a considerable expense for the construction industry worldwide.
WHY IMPROVE QUANTITY TAKEOFFS Improving the quantity takeoff process for your projects can pay off significantly in the long-run. Benefits include: • Increased Budget Certainty: For starters, improvements in takeoffs can increase budget certainty and reduce the risk of inaccurate estimates. These inaccuracies are what derail projects and cause significant cost overruns. • Save Time: Time is a limited resource on a construction project. Having realistic and accurate takeoffs ensures a more seamless construction planning process, empowering teams to meet ambitious deadlines. • Build Trust: Trust and communication are critical components of any project. With more accurate quantity takeoffs, a team’s rapport and confidence improve, as well as relationships with
vendors and clients. This makes it easier to bridge in and work with other stakeholders on future plans.
5 TIPS TO IMPROVE QUANTITY TAKEOFFS Several essential steps can excel your efficiency and accuracy in the quantity takeoff process. Below, let’s take a look at five leading strategies to enhance takeoffs.
1. REDUCE AND REMOVE MANUAL PROCESSES The way you input data for quantity takeoffs can be a considerable barrier for efficiency. When estimators use methods like spreadsheets and Excel templates for calculating quantity takeoffs, there is a significant increase in human error and risk with inputting data. Instead, automation can help eliminate those time-consuming back-office processes involved with project planning. When quantity takeoffs are optimised with automation, the processes are more accurate and calculated in a fraction of the time. Using technology to create digital quantity takeoffs is the easiest way to incorporate automation into the process. The right software will use details in designs and construction documents to analyse and generate a list of all materials needed. With customisation options, an estimator can later go into the system and make the right adjustments, if needed.
2. USE BIM A step beyond a pure digital takeoff is a model-based takeoff. BIM or building information modeling is another way to create more accurate quantity takeoffs. Building information modeling is defined as, “An intelligent 3D modelbased process that gives architecture, engineering, and construction (AEC)
professionals the insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure.” Assemble is one example of a tool that is used by teams to generate threedimensional model-based takeoffs. This is a great example of how Assemble users can validate traditional 2D takeoffs with Assemble in 5 easy steps: 1. Publish your model to Assemble 2. Organise your Assemble model inventory by level and category 3. Switch the Assemble model viewer to orthographic mode 4. Select the item(s) you want to verify (ex. Brick Vnr on 8″ CMU Wall) 5. Visually validate the location of the selected items and the takeoff quantity against your 2D drawings. Right or wrong, you now have a lot more insight into the quality of information in your model and the assumptions you’ve made in your traditional takeoff process. And by the way, this whole process took a matter of minutes. Using BIM to create takeoffs allows you to make your planning process more efficient with the most accurate visual and specification data from your project. Furthermore, teams can better address changes and alterations in a simulation rather than having to make last-minute and costly changes on the construction site.
3. PREPARE FOR THE WORST-CASE SCENARIO TO OFFSET The cost of construction materials is constantly on the rise. More critically, material costs fluctuate due to everything from the weather to fuel pricing around the world. Then you also have to account for the high cost of construction waste. The cost of construction waste includes unexpected expenses like tracking,
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TAKEOFFS
recycling, storage, and permits for managing construction waste. Quantity takeoffs that do not account for these unexpected costs in an accurate manner can derail profits and schedules. By determining these factors and areas with the highest risk for material rises early on, you can prepare for the worstcase scenario with more precision.
Aim to integrate your quantity takeoffs into as many construction processes as possible. 4. OPTIMISE WORKFLOWS Larger construction projects, in particular, are more likely to have more takeoffs due to the scope of the project. Therefore, it is necessary to make improvements to your quantity takeoff workflows before scaling up. Collaborative takeoff software is crucial to this part of the process. When you have cloud-based tools to manage takeoffs, everyone is able to work within the digital space to manage the process as one, cohesively aligned team. Through the use of the cloud, you are also able to save information in real-time even as edits are being made. This way, you speed up the time it takes to conduct meetings and make changes to documents with less chance for miscommunication errors.
5. PRIORITISE INTEGRATIONS If not appropriately integrated into other construction processes and tools, there is a risk of losing valuable data from the takeoffs. Aim to integrate your quantity takeoffs into as many construction processes as possible.
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Start by using the latest and most successful software and technology, including BIM models. But don’t stop there. You also want to choose the right takeoff solution needs to integrate with your existing platforms and systems. This requires your teams to identify those processes that work for them now. Then you can find project management tools and other estimating programs that seamlessly integrate and complement your current systems, helping to maximise your efficiency.
LOOKING AT THE BIGGER PICTURE When it comes to improving quantity takeoffs on your projects, consider the broad scope of how these enhancements fit into your long-term business goals. Identify how much money and time you expect to save when new processes and technology to improve the estimations. With measurable data to back up your case, you can start implementing the above processes that help set up project success from the start.
At Autodesk Construction Solutions, our mission is to help teams meet the world’s rapidly expanding building and infrastructure needs, while making construction more predictable, safe and sustainable. Autodesk Construction Cloud is the first step in realising this mission. As we continue to build, we look forward to partnering closely with you to help drive productivity, reduce risk and guide the industry forward. For more information contact acs.apac@autodesk.com This is a paid article from Autodesk.
CASE STUDY
UNIVERSITY OF MELBOURNE’S STEMM 6 GREEN STAR BUILDING THE PROJECT The team at Donald Cant Watts Corke (DCWC) recently delivered one of the first STEMM 6 Star Green Star buildings for the University of Melbourne worth over $100m. The University of Melbourne Life Sciences Building involved the delivery of a world-class institution for the Faculty of Veterinary and Agricultural Sciences, Faculty of Medicine, Dentistry and Health Sciences, and the Faculty of Science. The project included the development of large practical laboratories for the teaching of biosciences, biomedicine, veterinary science and microbiology as well as spaces for problem-based learning, teaching in small groups, a variety of student and collaborative work areas, and accommodation for 100 staff. DCWC was engaged by the client to provide full Quantity Surveying and Cost Management Services for the project. Managing multiple stages of work, the world-class institution was delivered under budget.
some services that enable the University to continue normal operations • Early Works: To demolition the existing building and build the basement retention system (retaining wall and piling) • Main Works: The main building works. The role, for both stages of the project, included undertaking value management cost control, conducting tender analysis of the contractor submissions, administering the construction contracts along with any post-contract cost advice and general cost advice required throughout the project. The cost planning team worked with the client and design team during design phases, providing robust cost advice on all elements to test that initial budgets set are achievable and maintained. The DCWC team took a project delivery approach that minimised the risk of budget shortfalls or late delivery based on lessons learnt in similar projects. They understood and captured the local
market conditions and construction issues that a project like this would generate and were able to be on the ground to deal with issues as they arose during the design and construction phases. This complimented a hands-on approach to delivery with the directors and associates involved in the day-to-day delivery of this project.
RESEARCH IS PARAMOUNT To ensure the highest quality delivery of the STEMM building, DCWC utilised their cost database, benchmarking, and intellectual property to rapidly confirm the base data and project requirements. They embraced coproduction of knowledge and innovative solutions through an agile and outcome-oriented relationship with the University of Melbourne and the wider project team. The quality outcomes in the delivery of this world-class tertiary building can be directly linked to the research undertaken.
THE METHODOLOGY The Victorian quantity surveying team were able to provide the University of Melbourne with full faucets of cost management from inception to completion of the project. The project involved several stages including: • Enabling Works: To make safe existing services for demolition and reconnect
Figure 1: Supplied by The University of Melbourne, photographer Adrian Vittorio.
Figure 2: Supplied by The University of Melbourne, photographer Sarah Fisher.
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QUANTIFICATION
VALUING VARIATIONS BY GRAHAM TOPP MAIQS, CQS
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QUANTIFICATION
Most competently drafted construction contracts contain a prescribed valuation mechanism to determine the value of a variation. Typically, the valuation is a tiered approach: • based on prior agreement; • applicable rates or prices in the contract; • rates or prices to the extent it is reasonable to use them; or • reasonable rates or prices (being market rates in most instances) plus reasonable allowances for overheads and profit.
Whilst construction contracts often refer to “reasonable” rates or prices, those contracts do not assist in defining the bounds of reasonableness.
VALUING A VARIATION In a well-coordinated contract, prescribed mechanisms direct the valuer (or superintendent in an Australian standard context) to a specific list of rates or prices. Absent this, the valuer should consider the rates and prices that form the pricing schedule, bill of quantities, schedule of rates or other contract schedules that include rate or price information.
Whilst construction contracts often refer to “reasonable” rates or prices, those contracts do not assist in defining the bounds of reasonableness. This
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QUANTIFICATION
turns on traditional quantity surveying fundamentals of measurability, the volume and nature of work, the conditions under which work is carried out, the sequences of work, market conditions, and so forth. Invariably, a change on a construction site is rarely an isolated event, but instead part of a more-widespread change of design, construction materials, methodology, or client preferences.
I will leave aside the initial question of whether there is entitlement under the construction contract for the contractor to claim a variation. The seeds of many disputes are sown in the argument over who bears responsibility for variations or changes on a construction project. These arguments are best orchestrated by experienced legal practitioners.
THE VALUATION PROCESS The first step in the valuation process is to consider the appropriateness of the rates that form the contract. That is, how similar is the work forming the variation to the work that formed the rate in the contract. If the work is identical, then the valuation of the change ought to be straightforward. For example, a variation that requires the contractor to increase the area of a concrete slab foundation. If the increase in the area does not give rise to a change in the work methodology, the planned productivity, or the resources required to perform the work, the valuation ought to simply be the increase in the quantity multiplied by the cubic metre rate for concrete in the contract. Simply put, the contract rate is applicable to additional work that is performed under identical conditions.
The correct approach to valuation is driven by the terms of the construction contract and the circumstances. If the additional work is similar and executed under similar conditions, for example, a change to the specification of the concrete slab, the contract rate should be adjusted. In this example, if there is no change to the work methodology, rate of production or the resources required, the valuation is to simply omit the proportion of the contract rate for the planned concrete material and apply the cost for the new specification of concrete material. The adjustment of a contract rate should not be seen by the contractor as an opportunity to recover cost overruns that may have arisen from underestimation in tender prices or inefficiencies in work performed to date. Similarly, it should not be seen by the employer as an opportunity to reduce or discount a contract rate that provides the contractor with a margin (off-site overhead and profit) that is greater than the tendered margin for the contract as a whole. Smart contractors often include a greater percentage for margin against items of work that are likely to be varied post contract award.
the change in material type, this change is likely to require a greater number of labour resources as well as different types of plant and equipment. For example, expedient concrete works often require on site mixing trucks that work back-to-back to ensure the concrete is poured and finished before it starts to cure. The valuer may need to consider savings in formwork, reinforcement and the like. Time related costs may also require consideration. The first principles approach for a star rate should quantify the specific resources required to perform the variation work. Rates of production are then applied to produce a reasonable rate per cubic metre of concrete in substitution for the rate in the contract. If planned resources are included in the rate, or a proportion of it, the first principles approach should have regard to the contract rates for those resources. If the change falls outside the contractor’s capabilities or expertise, a specialist subcontractor may be required. The contractor or valuer may need to seek pricing from the market, ideally through a competitive tendering process. The correct approach to valuation is driven by the terms of the construction contract and the circumstances. The valuer should consider the circumstances as they relate to each claim.
If the work required for the change is dissimilar, a new rate (often referred to as a “star rate”) may be estimated from first principles. For example, a change from a standard specification of concrete to rapid-set, fast curing, concrete (also known as “expedient concrete”). In addition to
Whilst construction contracts, such as GC21, typically refer to valuers and valuations, the work being undertaken is to quantify time and cost of variations by a Quantity Surveyor and not a Valuer.
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CONTRACTS
COMMONLY COMPLICATED PROVISIONS IN SUB-CONTRACTOR CONTRACTS BY KIRAN VEMPATI MAIQS
Contracts play an essential role in the construction industry; misinterpretation of contract clauses could lead to dangerous consequences such as termination of contract and liquidated damages. Some of the common pitfalls by subcontractors are often misinterpreting these contract clauses such as scope of works (SOW), payment schedule, financial capacity, liquidated damages and proper insurance documentation related to the specific trade. Quantity surveyors are equipped with the skillset of selecting and depicting the various contract terms for the intended use in terms of construction delivery and material procurement. However, this situation can be improved and prevented by sub-contractors employing the services of a quantity surveyor to look after the different standard contract types besides their regular estimation duties. Some of the conditions to be considered within typical contracts are: • insurances • Indemnities
• extension of time • variation schedules • site conditions • liquidated damages • dispute resolution • contract termination process. These clauses should be carefully discussed and agreed between the head contractor and sub-contractor before signing the contract, as these can lead to challenging legal situations if ignored.
Quantity surveyors are equipped with the skillset of selecting and depicting the various contract terms for the intended use in terms of construction delivery and material procurement.
Sub-contractors usually expect their estimators to complete the contract documentation. Understanding the critical contract clauses and high-risk conditions can help sub-contractors deliver their projects cost-effectively. From my experience, disputes that often arise are due to misinterpretation of SOW, unpaid variations, and workmanship. Financial capacity of the sub-contractor and a head contractor is another essential factor for the successful completion of the project. Subcontractors usually provide their history of existing creditors, suppliers and bank statements to demonstrate their financial capability to perform the work across the project. Besides, the contract termination for the sub-contractor can be based on the breaching of fundamental terms of the contract or for not providing sufficient evidence to show cause for the notice issued head contractor. The sub-contractor environment is cost competitive; the majority of trades are awarded under a lump sum price usually with AS4902. A detailed exclusions and inclusions list of the
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CONTRACTS
work can play an essential role while negotiating the contract. These days many projects are delivered under design and construction (D&C) contracts. Sub-contractors sometimes qualify that their tender price and agreement does not constitute a D&C delivery method, highlighting this in the tender negotiating stage can save unforeseen costs during the project lifecycle. Value management options are offered to the contractor to consider specific trades, including design documentation provided by the supplier. Figure 1 shows the detailed design and constructs contract chain in the construction industry. Work cover and public liability insurance are other essential contract documents; insurances assure that the sub-contractor is covered adequately to perform works under the contract. Besides, if the proposed project is a Construction, Forestry, Maritime, Mining and Energy Union (CFMEU) site, then the sub-contractor is required to maintain additional documentation such as Incolink. A thorough review of SOW by a subcontractor with a head contractor at the negotiating stage will help avoid room
for error and unnecessary variation claims. For Instance, a contract is signed between a sub-contractor and head contractor for a tiling package, a section of tiles in the architectural drawing specifies vinyl finish. This error is not reviewed correctly at the SOW review stage, and the head contractor could reject that claim. A detailed review of SOW clause can avoid additional variations across the project lifecycle.
completion. Clause 34.7 in AS4000 explains the conditions for LD. For example, an apartment project requires a sub-contractor to complete wall tiling to all bathrooms by a specific date, and the sub-contractor had underquoted the tiles. The principal could be entitled to LD's if an alternative solution is not considered. The alternate solution could be sourcing tiles from local supplier immediately to avoid LD.
Sub-contractors sometimes overlook latent conditions clauses. With proper due diligence and site access provided by the contractor, these conditions can be covered at the tendering stage. Site measures, examinations and reasonable enquiries of the project site are some of the checks to be considered by the contractor.
Progress payments schedules prepared by sub-contractors often result in clarification with a head contractor as they cannot specify the breakdown of all works completed in that period. Besides, many contracts require 30 days end of month for payment, and some contractors adopt with a 45-day end of month for payment for progress payments². These payment terms are passed on to sub-contractor from a head contractor as part of back to back contract. These terms can usually be reviewed by an estimator and discussed with a head contractor at the tender review stage.
Latent condition clauses 25.1 & 25.2 of AS4000 standard contract explains the conditions anticipated by the contractor and notice requirements for variation claim based on this clause². Examples of these include unforeseen site conditions or events, which are not shown on tender documents. Liquidated damages (LD) are costs borne by the sub-contractor when they fail to complete works by the date of practical
PRINCIPAL DESIGN AND CONSTRUCTION CONTRACT
CONTRACTOR
SUPERINTENDENT SUPPLY AGREEMENTS
SUBCONTRACTORS
CONSULTANT
CONSULTANT
SUBCONTRACTORS
SUPPLIERS
Figure 1: Design and Construct Contract on a construction project
References ¹ http://www.constructionlawmadeeasy.com/designandconstruct. ² AS 4000.
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Disputes between a sub-contractor and head contractor that arise from claims, made during the project, can be resolved by the arbitration process, as mentioned by Clause 42 in AS 4902 and AS 4000 contracts. Also, the contractor should give the sub-contractor written notice about any dispute, and both parties must attempt to resolve the issues. Meditation and arbitration are the processes used to resolve any claims and variation disputes. In conclusion, the contract chain (Figure 1) importantly shows the contract structure between the various parties to complete a project successfully. To achieve this goal, all the parties involved in the contract should know about the stringent provisions in contract forms and resolve them to reduce the financial risk involved and enhance the prosperity of the construction industry.
AMPLIFY AMPLIFYYOUR YOUR ACHIEVEMENTS ACHIEVEMENTS APPLY APPLYFOR FORCERTIFIED CERTIFIEDQUANTITY QUANTITY SURVEYOR SURVEYOR(CQS) (CQS)DESIGNATION DESIGNATION aiqs.com.au/advance-cqs aiqs.com.au/advance-cqs
CONSTRUCTION CONTRACTS
PREVALENCE AND IMPACT OF PRIME SUSPECTS FOR INEQUITABLE TERMS IN AUSTRALIAN CONSTRUCTION CONTRACTS SURVEY CONDUCTED BY JEREMY COGGINS BACKGROUND Whilst there is an absence of empirical research apropos the specific nature of inequitable risk allocation in construction contracts, a wealth of anecdotal evidence exists that several terms which are ‘prime suspects’ for unfairly allocating risk are regularly included in contemporary Australian construction contracts. Oftcited examples of such inequitable terms include, amongst others: a. Design warranty clauses which provide that the (sub)contractor warrants that it has reviewed the contract drawings and specifications and is satisfied the design is one which: (a) is suitable for the construction of the works and (b)
when constructed, will be fit for the purpose of achieving the design intent shown in the contract documents; b. Role of the Superintendent clauses which provide that the (sub)contract Superintendent is not required to be impartial and is acting as an agent of the principal/head contractor; c. Liability for consequential loss clauses which provide that the (sub)contractor shall indemnify the principal/head contractor against any claim for consequential loss without limitation; d. Proportionate liability clauses which provide that the (sub)contractor's indemnity with respect to injury, loss and/or damage shall not be
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reduced proportionately to the extent that another party (such as the Superintendent, Head Contractor or Principal) has contributed to the injury, loss and/or damage; e. Latent conditions clauses which provide that the (sub)contractor bears the risk associated with the discovery of latent conditions; f. Time bar clauses for extension of time (EOT) claims which provide that the (sub)contractor must submit a written EOT claim to the Superintendent within six working days or less from when the (sub)contractor should reasonably have become aware of the cause of delay occurring;
CONSTRUCTION CONTRACTS
g. Qualifying causes of delay clauses which fail to provide the (sub) contractor with an extension of time entitlement for one or more acts of delay caused by the principal/head contractor; h. Discrepancies in contract documents clauses which provide that the (sub) contractor shall not be entitled to any extra costs it incurs caused by a direction of the Superintendent with respect to interpretation of any ambiguities or discrepancies that exist in the (sub)contract documents; i. Notification of variations clauses which provide that, to be entitled to payment for a variation, the (sub)contractor is required to give written notice to the principal/head contractor notifying a variation claim within a specified time period (e.g. 5 days) after a direction from the Superintendent is received; j. Termination for convenience clauses which provide that the principal/head contractor may terminate for their convenience at any time; and k. Recourse to security clauses which provide that the principal/head
contractor may have recourse to the security provided by the (sub) contractor without prior notice. In order to fill the empirical research gap, and to test the anecdotal evidence, a questionnaire survey was conducted by the authors to quantitatively gauge the prevalence of the terms listed in a) to k) above in construction contracts, and the extent to which the party bearing the risk allocated by the terms has: • been able to price for the risk in their tender; and • suffered negative financial impacts due to the risk. The questionnaire was distributed via an internet-based survey tool to samples drawn from the following two separate populations: Survey 1: Contractors operating within the Australian construction industry; and Survey 2: Australian construction lawyers and professionals. These populations were selected due to their commercial knowledge and ‘handson’ experience working with construction
contracts. The sample for Survey 1 was drawn from the members of the following professional contractors’ associations: Air Conditioning and Mechanical Contractors’ Association (AMCA), Master Plumbers’ Association (South Australia), National Fire Industry Association, Master Builders (South Australia), National Electrical and Communications Association (South Australia), and Australian Subcontractors Association. The sample for Survey 2 (construction lawyers and professionals) was drawn from members of the Society of Construction Law Australia (SoCLA), and Australian Institute of Quantity Surveyors (AIQS). The surveys asked respondents to provide data with respect to the last two completed building contracts on which they had worked. Thirty-three responses were received for Survey 1. However, 11 respondents completed only 20% of the questionnaire before abandoning it, and two did not list any details with respect to the last two completed building contracts on which they had worked. Therefore, only 20 responses were suitable for the purposes of data analysis. These 20 responses
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CONSTRUCTION CONTRACTS
<$250k
10%
0%
$250k<$500k
15%
7%
$500k<$1m
15%
0%
$1m<$2m
21%
3%
$2m<$5m
18%
13%
$5m<$10m
5%
16%
$10m<$20m
13%
10%
$20m<$100m
3%
13%
$100m<$500m
0%
19%
>$500m
0%
3%
Did not answer
0%
16%
Total
100%
100%
FIGURE 1: FREQUENCYFigure OF TERMS IN CONTRACTS 1: Frequency of terms in contracts 90%
85% 84%
77%
80% 70%
69%
65% 56%
60%
48% 44%
50%
62% 55%
59%
35%
40%
61%
64%
72% 68%
84% 74%
77%
56% 39%
30% 20%
13%
10%
W ar ra nt )L ie Su iab s pe ilit r in y te fo rc nd on en se t q (d ue )P nt ro ia l lo po rti ss on at e lia (e bi )L lit at y en tc on dit (g io )E (f) ns OT EO qu Tt ali im fy e (h in ba )D gc rs isc au re s es pa of nc ie de si la n y co (i) nt No r ac tif td ica (j) oc tio Te s n rm of in v a at ria io tio n fo ns rc on (k v en )R ien ec ou ce rs et o Se cu ri t y
0%
ft he
As shown in Table 1, 61% of the contracts which the respondents provided data in Survey 1 have a contract sum of less than $2 million, and 45% of the contracts which the respondents provided data in Survey 2 have a contract sum of more than $10 million.
Survey 2 Construction lawyers & professionals
ol eo
Despite the small sample sizes, the sample for Survey 1 represents subcontractors working on construction projects across all six Australian states, and the sample for Survey 2 represents construction lawyers and professionals working on construction projects in five Australian states.
Survey 1 Contractors
(c
Whilst the use of an an internet-based questionnaire survey allowed rapid collection of data from a significant sample size across a wide geographical area, sample sizes appear to have been restricted by the significant level of time commitment required to complete the survey arising from the need for respondents to read and understand the 11 sample contract terms included in the survey and analyse corresponding terms in two contracts they had worked on before answering questions.
Contract sum
(a )D es ig n
Twenty-five responses were received for Survey 2. However, eight respondents completed only 30% of the questionnaire before abandoning it, and one did not list any details with respect to the last two completed building contracts on which they had worked. Therefore, only 16 responses were suitable for the purposes of data analysis. These 16 responses provided data with respect to a total of 31 construction contracts.
TABLE 1: SIZE (BY CONTRACT SUM) OF THE SURVEYED CONTRACTS
(b )R
provided data with respect to a total of 39 construction contracts.
Survey 1: Contractors
Survey 2: Construction lawyers & professionals
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CONSTRUCTION CONTRACTS
TABLE 2: CUMULATIVE NUMBER OF TERMS IN THE SURVEYED CONTRACTS
FIGURE 2: EXTENT TO WHICH TENDER SUMtender ALLOWED FOR PRICING OF RISK Figure 2: Extent to which sum allowed for pricing of risk (1 = RISK NOT PRICED, 5 = RISK (1 = FULLY risk notPRICED) priced, 5 = risk fully priced)
Cumulative no. of terms in a contract
Survey 1 No. of contracts
Survey 2 No. of contracts
0
4
1
1
2
1
2
2
0
3
1
1
4
1
3
(d) Proportionate liability
1.4 (n=26)
5
0
4
(c) Liability for consequential loss
1.3 (n=25)
6
(b) Role of the Su peri ntendent (a) Design Warranties
6
2
7
4
5
8
3
6
9
3
2
10
11
0
11
6
2
1.3 (n=26)
(k) Recourse to Securi ty
1.2 (n=27)
(j) Termination for conv enience (i) Notification of variations
1.7 (n=28)
(h) Discrepancies i n contract documentation
1.2 (n=23)
(g) Extension of Time (EOT) qualifying causes of delay
1.3 (n=23)
(f) Extension of Time (EOT) time bars
1.5 (n=29) 1.4 (n=22)
(e) Latent conditi ons
1.7 (n=26) 2.3 (n=33) 1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
FIGURE 3: EXTENT NEGATIVE FINANCIAL IMPACTS EXPERIENCED DUE TO INCREASED RISK Figure 3: Extent negative financial impacts experienced due to increased risk allocation ALLOCATION (0 = NEVER, 100 = ALWAYS) (0 = never, 100 = always) (k) Recourse to Securi ty
43 (n=10)
6 (n=11) 14 (n=15) 1 (n=19)
(j) Termination for conv enience (i) Notification of variations
59 (n=14)
33 (n=14) 47(n=16) (n=14) 46
(h) Discrepancies i n contract docs (g) EOT qualifying causes of delay
64 (n=12)
25 (n=15)
(f) EOT time bars
68 (n=13)
18 (n=16)
(e) Latent conditi ons
49 (n=12)
10 (n=17)
(d) Proportionate liability
33 (n=9)
7 (n=15)
(c) Liability for consequential loss
24 (n=15)
4 (n=20)
(b) Role of the Superi ntendent
29 (n=13) 24 (n=18)
(a) Design Warranties
29 (n=19) 0
10
20
30
Construct ion lawyers & professionals
45 (n=15)
40
50
60
70
80
Contractors
Jeremy Coggins is an Associate Professor at the School of Natural and Built Environments, University of South Australia.
BUILT ENVIRONMENT ECONOMIST: DECEMBER 2020 - FEBRUARY 2021: 55
CONSTRUCTION CONTRACTS
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BCI
BUILDING COST INDEX
DECEMBER 2020
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.
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