Built Environment Economist - Australia and New Zealand - December 2021 - February 2022

DECEMBER 2021 - FEBRUARY 2022

The text pages of this publication have been printed on paper manufactured in Australia and produced from responsibly managed forests.

13 Q & A WITH MARIA ORLOVIC FAIQS

15 BUILDING ON THE BEACH – QUANTITY SURVEYORS ADD VALUE TO SURF LIFE SAVING CLUB REBUILDS

22 INFRASTRUCTURE Q & A

31 QS VISIONARIES

CONTENTS 2 CEO Letter

31 QS Visionaries

4 Tribute to Stephen McCoullough FAIQS

33 Sustainable Temporary Adaptive Reuse (STAR) – Turning

6 Life Cycle Cost Analysis

Underused or Vacant Property into a STAR

9 Looking Beyond 2021

37 Building Better Places means Collaborating on the

10 All In… on Being Human

“Bigger Picture”

13 Q & A with Maria Orlovic FAIQS

42 Supply Chain Leadership: Putting Added Value Above

15 Building on the Beach – Quantity Surveyors Add Value

Price 46 How do Construction Costs Really Work?

to Surf Life Saving Club Rebuilds 22 Infrastructure Q & A

49 Disaster Recovery

28 Indemnities in Construction-Related Contracts

50 Building Cost Index (available in print edition only)

About Built Environment Economist is the flagship publication of Australian Institute of Quantity Surveyors (AIQS). Produced quarterly, Built Environment Economist seeks to provide information that is relevant for quantity surveying, cost management and construction professionals.

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Disclaimer AIQS does not take any responsibility for the opinions expressed by any third parties involved in the writing of Built Environment Economist.

ISSN 2652-4023

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 01

CEO LETTER

ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS Despite the COVID-19 related impositions placed on AIQS over the past 20 months, AIQS has continued to drive increased awareness of built environment cost professionals. With face-to-face meetings being largely unavailable, engagement has been via virtual meetings and the lodgement of submissions and position papers to governments and other stakeholders. A summary of these activities can be found in the AIQS 2020-21 Annual Report.

For those built environment cost professionals engaged as cost

estimators in construction firms, AIQS has been working with the Australian Construction Industry Forum and the Australasian Procurement and Construction Council members to develop industry position papers to be adopted by governments with respect to the appropriate and equitable allocation of risk associated with sub-surface conditions, utilities, and limitation of liability clauses in construction contracts. Whether these matters are resolved in an appropriate time frame is yet to be determined. That said, AIQS will be publishing what it considers to

02: DECEMBER 2021 - FEBRUARY 2022: BUILT ENVIRONMENT ECONOMIST

be the most appropriate and equitable approach to the allocation of risk.

The one common theme across these three matters is the apparent lack of expertise within governments, resulting in what appears to be an automatic reflex of requiring all risks to be transferred to the contractor, irrespective of whether the contractor is best suited to manage the risk. Unfortunately, this is driven in part by legal advice which has the consequence of perpetuating the unbalanced and costly approach to procurement.

CEO LETTER

The AIQS Infrastructure Steering Committee has developed seven new competencies (commercial management, sustainability, BIM/digital engineering, earned value, cost engineering, project controls, planning and programming) to attract professionals, who mainly work on infrastructure and resource projects, into membership.

A Pathway 2 (membership entry) taskforce has developed membership entry requirements to better enable those quantity surveyors and other built environment cost professionals with non-accredited degrees to take-up AIQS membership.

AIQS has established a Resources Steering Committee, based in Perth, which will identify and deliver initiatives to assist cost professionals working in the resources sector (including mining, petrochemical, and renewable energies) as well as identifying and resolving any impediments to AIQS membership.

During July 2021, AIQS lodged a submission for the ‘Inquiry into Procurement Practices for Commonwealth Government Funded Infrastructure Projects’ and gave further evidence in support of its submission at the public hearings in October 2021.

The AIQS submission addressed the following issues to achieve greater cost certainty: long term planning, complexity, stakeholders, market capacity, industry standards, procurement, level of design, planning, change in contractors approach, budget development/funding, risk, and how to achieve cost certainty.

On the publications front, the significantly revised Australian Cost Management Manuals are scheduled for release in the new year. The current six volumes will be merged into two volumes with seven sections - cost planning, feasibility guidelines, procurement, construction cost management, analysis, engineering cost services management, and life cycle cost analysis). The AIQS elemental codes have remained largely unchanged.

by the AIQS Diversity and Inclusion Steering Committee. All members are encouraged to appraise themselves of the revised Code of Conduct which is available on the AIQS website. The revised Code of Conduct is applicable from 1 January 2022.

AIQS is engaging with government, industry, and its members on the assessment and measurement of embodied and operational carbon for buildings and infrastructure projects.

Slattery has recently launched a Carbon Planning Service to address and educate clients on the embodied carbon of their current and future developments. WT Partnership (Sydney) has been engaged to deliver infrastructure cost engineering, quantity surveying and construction cost management services on the new Atlassian headquarters which will be the worlds’ tallest commercial hybrid timber building, operating on 100% renewable energy and includes solar panels built into the facade.

Built environment cost professionals are well positioned to take on carbon-related services that supports industry-wide goals to reduce carbon footprints.

Information papers on contract administration (representing the client and the contractor), residential tax depreciation reports, determining infrastructure developer contributions, and life cycle cost analysis are all scheduled for publication over the coming months.

The AIQS Code of Conduct now incorporates the International Ethical Standards, as a result of the work done

GRANT WARNER CEO Australian Institute of Quantity Surveyors

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 03

VALE

STEPHEN MCCOULLOUGH FAIQS TRIBUTE

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VALE

We have lost a true stalwart of the quantity surveying profession.

Stephen represented the quintessential professional ensuring standards across the profession were maintained to the highest levels. His commitment to the quantity surveying profession was unwavering and his contribution to the AIQS Victorian/Tasmania Chapter over many years is a testament to his selflessness.

Stephen was, and will remain, a great inspiration to aspiring quantity surveyors having joined Donald Cant Watts & Corke (DCWC) in 1980 as a cadet and was appointed a Director in 2003. This company-focused longevity is rare these days and it is a testament to Steven’s resolve and dedication. He remained with DCWC as a Director until his passing.

Stephen become a member of AIQS in 1984 elevating to Associate grade in 1998 and then Fellow grade in 2009.

Highlights during Stephen’s time as a member of AIQS included: • serving on the AIQS Victorian/ Tasmania Chapter Council for 10 years including being Chapter President from 2010-2012 and also held positions as Treasurer and Secretary • hosting many Council meetings and APC interviews in DCWC’s boardroom • contributing to strategic meetings • supporting AIQS events, including CPD and YQS events, and Chapter Annual Dinners • mentoring younger AIQS members.

Peter Clack FAIQS, CQS, past AIQS National President and Victorian/ Tasmania Chapter Councillor remembers Stephen: “I had the honour of knowing Stephen

for approximately 20 years both as a work colleague and an AIQS Victorian Chapter Councillor. I can honestly say Stephen was at all times a true gentleman, always diligently carrying out tasks put in front of him whether that be for DCWC or the AIQS. Stephen was always very approachable even though he held a high executive position within the quantity surveying community. My condolences to Stephen’s family at this sad time.”

The following highlights some of the projects that Stephen was responsible for during his time at DCWC. A large number of these projects extended over many years, and he undertook many of the technical roles which were required on the more complex projects. He then passed his knowledge on to young professionals. Whilst undertaking these roles, he never lost sight of the importance of teamwork and collaboration. He provided an example to all he worked with of how you treat people with respect and consideration, even when under considerable pressure himself.

REDEVELOPMENT OF THE ROYAL MELBOURNE HOSPITAL Stephen led this project alongside his DCWC colleague Glenn Corke FAIQS in 1988. The client reflected at the completion of the project that the DCWC team did an exemplary job in the provision of cost planning and quantity surveying services. The project was awarded a Certificate of Merit by the Property Council of Australia.

OTHER HOSPITAL PROJECTS The outstanding work Stephen delivered on the redevelopment of the Royal Melbourne Hospital, attracted other

hospitals to want to work with him and his DCWC team. These included Royal Women's and Children's Hospitals, Box Hill Hospital, Sunshine Hospital, Royal Hobart Hospital, Footscray Hospital, Ballarat Hospital, and Monash Children's Hospital. Stephen's reputation in providing cost planning services for major hospitals grew until he was recognised by the Victorian Government as a subject matter expert.

JUSTICE Stephen’s reputation with the Victorian Government in health allowed him to transition into other projects including Heidelberg Police and Court House, Latrobe Valley Police and Courts Complex, Morwell, Ararat Prison, Parkville Juvenile Justice, Ravenhall Prison Facility, and Victorian Prison Facilities Masterplan

RESEARCH AND EDUCATION Stephen provided quantity surveying services on research and education projects including Monash University New Horizons, Monash University Biosciences Learning and Teaching Building, Walter and Eliza Hall Institute of Research, Melbourne University Law Facility, Melbourne University Veterinary Sciences, and Wesley College.

PRIVATE PUBLIC PARTNERSHIPS Stephen had multiple roles on these significant projects working for both Government and the private sector sponsor. His roles included cost planning, whole of life cost planning, and the preparation of public sector comparator estimates. Some of the key projects on which he fulfilled these roles included Royal Children Hospital, Casey Hospital, Footscray Hospital, Victorian Schools, and New Royal Adelaide Hospital.

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 05

SUSTAINABILITY

LIFE CYCLE COST ANALYSIS

It’s about best value rather than lower cost

BY STEPHEN BALLESTY FAIQS, CQS

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MAKING THE CASE

LCC is an area that built environment cost professionals are uniquely positioned to influence improved outcomes for constructed assets across all the facility life cycle or project phases - design, construction, and asset/ facilities management.

As early as the management aspect of terotechnology (1976), life cycle costing was defined as being concerned with the ‘cost of ownership’. Even then this was not considered a new or radical concept.

Life Cycle Cost Analysis (LCCA) provides a valuable comparative and management tool that can influence design, specification, construction, operations, and sustainability performance.

AIQS INFORMATION PAPER

FACILITY MANAGERS/OPERATORS

The new AIQS Information Paper on Life Cycle Cost Analysis, to be released early 2022, will provide essential information on the context and practice of LCCA and its contribution to a more sustainable, productive, and liveable built environment.

CONTRACTORS/SUPPLIERS

Increasingly, asset owners are seeking to apply responsible management principles and take into account environmental, social, and governance criteria. They consider it important to reflect their corporate values and concerns into their projects instead of merely considering the potential profitability and/or risk presented by an investment opportunity.

This Information Paper integrates elements of leading publications and relevant guidelines, specifically taking account of the latest in life cycle thinking whilst providing details on the relationship between whole of life costs (WLC) and life cycle costs (LCC). It also sets out the benefits and components of LCCA, standards, and the opportunities for built environment cost professionals.

LIFE CYCLE

Additionally, there are other criteria and metrics that built environment cost professionals should consider, and be aware of, including circular economy and the 17 Sustainable Development Goals in support of the United Nations’ 2030 Agenda.

The LCC process requires a level of due diligence from all interested parties and stakeholders and involves assessing costs incurred and evaluating alternatives that have impacts on the total costs of the constructed asset or facility throughout its’ life cycle. However, experience has shown life-cycle data to be notoriously scant and that the matter of LCCA can be more complex than appears at first glance.

In addition to the application of the analytical skills of built environment cost professionals, successful LCCA requires knowledge and understanding of: • interested parties and stakeholders’ ownership objectives • operational objectives of end-users • design intent, functional requirements, and variables • project scope, status, and available relevant data/documentation • life expectancy concept and related impacts which affect asset/facility performance

• formulation, presentation, and interpretation

BUSINESS CASE/FEASIBILITY

• consistent application of established terminology, standards, and calculation methodology.

ADVISORS/FACILITY PLANNERS

INFLUENCE ON COSTS OVER TIME

THE CHALLENGE

• techniques, databases, necessary inputs, and risk assessments

CERTIFIED QUANTITY SURVEYOR

CONSTRUCTION MANAGERS

DESIGNERS/CONSULTANTS

ADVISORS/FACILITY PLANNERS

SUSTAINABILITY

DESIGNERS/CONSULTANTS

INFLUENCE ON COSTS OVER TIME

CONSTRUCTION MANAGERS

CERTIFIED QUANTITY SURVEYOR

CONTRACTORS/SUPPLIERS FACILITY MANAGERS/OPERATORS

LIFE CYCLE

To truly achieve solutions for a sustainable built environment, no longer can we afford for WLC and LCC to be seen as an add-on or an optional service.

Stephen Ballesty FAIQS, CQS is a Director at In-Touch Advisory, an AIQS Fellow member since 1997 and he received an AIQS Lifetime Achievement Award in 2013 for service to industry.

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 07

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FORECASTS

LOOKING BEYOND 2021 The Australian Construction Industry Forum (ACIF) Construction Market Report provides comprehensive information and insight about the direction in which building, and construction activity is heading.

• Non-Residential Building will continue to slide down over the next two to three years.

• Infrastructure construction activity is expected to grow strongly, by 7.5% in 2022, as expanded infrastructure development programs pursued by the AUSTRALIAN BUILDING AND Non-residential - Actual Commonwealth and State Governments CONSTRUCTION WORK DONE flow through into construction activity Residential - Actual on the ground. This will carry through to ($ billion, 2018-19 prices) Infrastructure Construction - Actual at least 2023-24.

The November 2021 Report is now available.

Bob Richardson FAIQS, CQS is the Chair of the Construction Forecasting Council and provided the following commentary.

Heavy Industry incl Mining - Actual

“The value of work done this year is forecast to increase by 6% (in real terms) to $256 billion. House building is at the forefront of the rebound, and government support and incentives such as the New South Wales Government’s recent announcement of 6,000 new homes is encouraging. This growth will drive expansion in employment and with governments also committing to a new wave of infrastructure investment, including in energy, transport, and water as well as in ‘social’ infrastructure buildings, our forecasts are insightful.”

120

$ billion

100

80

60

• The surge in Residential Building has two more years to run.

2023-24

2022-23

2021-22

2020-21

2019-20

2018-19

2017-18

2016-17

2015-16

2014-15

2013-14

2012-13

Non-residential - Actual Non-residential - Actual Residential - Actual Residential - Actual Non-residential - Actual Infrastructure Construction - Actual Non-residential - Actual Infrastructure Construction - Actual Residential - Actual Heavy Industry incl Mining - Actual Residential - Actual Heavy Industry incl Mining - Actual Infrastructure Construction - Actual 120 Source: ACIF CFC Infrastructure Construction - Actual 2011-12

20

2010-11

40

TRENDS OUTLINED IN THE REPORT INCLUDE:

120

Heavy Industry incl Mining - Actual Heavy Industry incl Mining - Actual 100 100

100 100 80 80

$ billion $ billion

120 120

illion billion

• Work done in Heavy Industry including Mining is expected to increase significantly – growing by more than 20% over the next three years.

80 80

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DIVERSITY

ALL IN… ON BEING HUMAN!

BY MIKAEL HEINONEN AAIQS, CQS

For a significant amount of time (even longer than the time we have been talking about BIM) there has been an ongoing question raised - how to increase female participation within the construction industry.

Currently in Australia (and mirrored globally) women actively participating in construction is only around 12 - 18%, which varies depending on the source.

And when you look specifically at women on the front line in trade roles that number is less than 5%.

With skills shortages impacting the construction industry the world over, an opportunity exists to tap into 50% of the population which traditionally the industry has not addressed. Greater diversity and inclusion can also accelerate a positive transformation in solving the industry’s multitude of system-based symptoms. And from a pure business perspective, there is a multitude of evidence across several wellregarded sources (e.g., World Economic Forum, BCG, and McKinsey) that have published findings highlighting the sound business case for greater diversity.

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… for any meaningful change to occur, the majority within the system needs to consider change if a change is to occur.

DIVERSITY

DON’T THINK DE & I… THINK HUMAN So why after so many years with a lot of great effort by many good people has little changed in the numbers? One view is that within many organisations, Diversity, Equity & Inclusion (DE & I) represents a purely tokenistic approach with a positive result being a ticked box.

However, token efforts ultimately will only result in token results with the potential for further harm, division, and internal resentment.

Therefore, increasing diversity efforts alone is not the answer. To elaborate further, if you have a manager who already doesn’t listen to their team, chances are any change to that team's makeup will not make that manager change. So, unless leaders see a need to change, not much else will change. You must change the mind of the leader. And you must enable and give the majority population tools that allow them to see alternative worldviews.

Equity and inclusion start with access.

To understand access, you need to have

a hyper-personalised understanding of each individual and their perspective.

It is not about whether the person you are talking to is female and what access females need, rather I suggest people consider a less binary approach and throw away gender, age, race, etc., and consider going all-in and choosing a human-first strategy.

Anytime you interact with someone you have a hierarchy of choices you can pick from, and these choices help determine how you interact with someone. By

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 11

DIVERSITY

choosing a human-first approach, it means that you make a choice higher up the hierarchy each time you interact with someone, you treat them as a fellow human regardless of their characteristics.

Alternatively, you can then go further down the hierarchy to characteristics, and this is the choice to treat someone based on their characteristics i.e., gender, age, race, etc.

So how do you create inclusion? You first treat people as humans and not human characteristics. A human-first strategy looks to create a bias-free environment based on inclusion and consideration for the needs of each individual. A humanfirst strategy has the opportunity to solve many other disconnects we encounter more broadly such as generational gaps, race, etc.

FOCUS ON THE ENVIRONMENT A RMIT study “Women in Construction: Exploring the Barriers and Supportive Enablers of Wellbeing in the Workplace”, released in February 2021, found that 60% of females didn’t feel supported enough when faced with serious issues in the workplace. Without fixing issues internally, no amount of recruitment is going to help the industry’s dilemma. All stages of the employment lifecycle need to be considered as a whole because of the potential to impact each other.

As humans, we like to group with people that are ‘like’ us, as a means to avoid conflict. In male-dominated industries such as construction, people have become very comfortable with operating in an environment where everyone is the same. However, this has its drawbacks in unacceptable behaviours, lack of innovative mindsets, and the general status quo where things have become engrained as we have ‘always done it’.

However, conflict should be encouraged,

NO

ATTRACT

RECRUIT

POOR ROLE MODEL ACTS WITH INCLUSION

LEADERSHIP CONSISTENCY

IDEAL ROLE MODEL

RETAIN

YES

Figure 1

as it is through productive disagreement where things like innovation can occur. Therefore, we must create a psychologically safe environment within our sector where we encourage debate so that we are both respectful in hearing each participant's views and each participant is willing to take risks in speaking up about your ideas and being wrong. It is also through the sharing of ideas that we can alleviate adversarial conflict through the creation of common understanding. Inside of a shared reality, we divorce the identity of individuals from the topic being debated.

Productive disagreement is a muscle, and it starts with curiosity and humility.

Being curious about what alternative perspectives exist. Being humble when we might be wrong is an act of bravery.

Finding our shared humanity amidst division is a higher calling.

BAD ROLE MODEL MODEST ROLE MODEL

TALKS ABOUT INCLUSION

NO

Figure 2

dialogue. Great leaders articulate the purpose and embody role model behaviours and desired culture. Humanfirst leadership provides a solidly anchored reference frame that serves as both a sure foundation and a navigation aid for decision making.

Finally, if you are considering how to become a leader that considers a humanfirst strategy, I strongly encourage you to consistently challenge your current worldviews because within a system where it is dominated by a single cohort, such as males within the construction industry, then the amount of inertia to make a change will always be experientially larger than any minority's efforts to change it.

Therefore, for any meaningful change to occur, the majority within the system need to consider change if a change is to occur.

CONSISTENTLY LEAD BY EXAMPLE Like with most organisational situations it comes down to leadership and this is no different. As we know with change behaviour, leadership plays a big part, where leaders need to walk the talk.

Leadership requires consistency of both what leaders ‘say’ but also ‘what they do’.

Leaders should influence and align stakeholders through non-adversarial communication, consistent and genuine

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Mikael Heinonen AAIQS, CQS is a Certified QS, member of the AIQS Technology & Innovation Committee; NAWIC Male Ally; Chief Enabler at the Build Better Network and Co-founder of Collabaloop a technology startup helping construction businesses communicate and support with their employees more effectively.

DIVERSITY

Q&A WITH MARIA ORLOVIC MARIA ORLOVIC FAIQS WAS THE FIRST FEMALE AIQS MEMBER TO ELEVATE TO FELLOW GRADE MEMBERSHIP.

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 13

DIVERSITY

MARIA ORLOVIC FAIQS Senior Cost Consultant at Arcadis

1. What is it like as a female working in the construction industry?

I expect a woman’s experience of working in our industry to be comparable to those of others, but I only know the career path I walked. I never understood the lack of gender balance in the construction industry, simply because it is something I chose for myself as a person and not as a woman. Men still dominate in numbers, but thankfully seeing a woman or other genders working in our industry is no longer a ‘novelty’ to be frequently pointed out. I am grateful this question has faded over time and that many object to the very idea of such differentiation.

However, the need for more female role models in STEM (science, technology, engineering, and mathematics) and the built environment is still very relevant today, whilst our industry procrastinates towards gender equality. Throughout much of my career, I have been a member of industry women’s networking organisations in Australia then the UK and within employer gender groups, because we still do not attract and retain enough females in our industry.

2. Have you faced any obstacles within the industry based on your gender?

Under past societal influence, I witnessed women in the industry tested for their emotional resilience to the point of bullying. Some explained this “toughening up” as a favour towards career survival and it is difficult to judge whether younger males were also treated this way and did not speak up. In contrast, the all-male leaders of

companies I worked for at the time, were advocates of respectful professional behaviour and challenged their own unconscious bias whilst balancing our requests against any positive discrimination. If there are obstacles to a woman’s career in our industry, it is generally difficult to prove unless implicit witnessed behaviours or written records exist. Partly due to unconscious bias, as well as variations of individual personalities and acceptable behaviour interpretation. However, numbers do not lie. If the percentage of men progressing (based on comparable career longevity) is much higher, there is something fundamentally wrong in that organisation.

Motherhood or other female linked carer duties are often cited as hindrances in our demanding industry, but consider the smiles and compliments given to the father who must leave a meeting early to pick up his child from school, whilst it is unlikely such adulation exists for the mother doing the same.

3. Over the course of your career, how have you seen the industry change in terms of inclusion and diversity?

The inherited socialised sexism of past decades was obvious in the 1980s.

Macho behaviours with nude women calendars as an industry marketing token and wolf whistles on-site were common. The 1990s witnessed a drive to attract females into the industry, amongst a general push to raise professional standards and ethics. Women looked forward and tended to ignore side comments or outdated attitudes, instead focusing on doing a great job and pushing through that elusive glass ceiling. Whilst attending a Press for Progress event in 2018, a young woman pointed out that this drove sexism underground and my generation had a lot to answer for. I found myself revisiting the basic core belief that gender balance

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in our industry should be so normal, that it would never need mentioning.

Technology has brought forward a more informed and enlightened generation who are exposed to a variety of genders and people around the globe. Business saw the power of social media and individuals in this digital consumer-focused age.

Major organisations are now seeking better diversity, equity, inclusion, and belonging (DEIB) initiatives, alongside their sustainability targets.

4. What do you feel is a way for us to accelerate this change?

Each decade I optimistically tracked towards gender parity, but the World Economic Forum’s 2021 Global Gender Gap Report predicts it will take another 136 years. Our industry saw change due to two key accelerators. Firstly, corporate agendas finally accept that board diversity improves profits but requires support. The other is society celebrating inclusion and diversity to the point where being different, should be as normal as being the same. The “me too” campaign was amongst many global calls for equality. Equality applies to all minority groups in varying degrees, but ‘belonging’ covers every person. It is no longer about highlighting gender alone, but the whole inclusivity spectrum to bring forward best talent in a changing and global conscious operating environment.

Our industry is fundamentally a cluster of businesses that are heavily reliant on both individuals and society. The way forward relies on respecting and celebrating each individual, particularly addressing unconscious bias when providing opportunity or when sponsoring (not just mentoring) individuals, and by making DEIB part of each organisation’s business strategy goals led from the top.

Behaviours are driven from above and senior management should reflect such a culture of the organisation and be chosen accordingly.

CASE STUDY

BUILDING ON THE BEACH

QUANTITY SURVEYORS ADD VALUE TO SURF LIFE SAVING CLUB REBUILDS Since 1910 Surf Life Saving New Zealand (SLSNZ) has protected beaches and saved thousands of lives. Today there are more than 4,500 volunteer lifeguards based in 74 clubs throughout the country.

These clubhouses provide a vital base for lifeguards and are crucial for the safety of New Zealanders. However, many are no longer fit for purpose and require large scale upgrades or even complete rebuilds. With earthquake damage, rising sea levels, and longevity in a difficult environment to consider, rebuilding is no easy feat, especially for a charity.

In 2021, four SLSNZ clubs completed rebuilds with assistance from members of the New Zealand Institute of Quantity

Surveyors (NZIQS). Now Taylors Mistake and New Brighton, both based in Christchurch, Papamoa, in the Bay of Plenty, and Lyall Bay, in Wellington are enjoying their brand new clubhouses.

Club members are thankful they chose to work with a quantity surveyor and believe this simplified a challenging process.

Members from each club, as well as the quantity surveyors, explain more about the collaboration.

Stu Bryce from New Brighton and Viv Buckley from Taylors Mistake both found themselves without an inhabitable clubhouse following the major earthquakes in Christchurch in 2010 and 2011.

Bryce says that although the building survived in terms of structure, it did not survive in terms of function.

“With each earthquake, more and more of the concrete and cinderblock structure fell off. It became clear that it wasn’t safe for us to be using this as our base.”

Buckley faced a similar situation in Taylors Mistake.

“Initially we had some cracks in the walls and put up framing so that we could still function, thinking that we would just repair the clubhouse. After each successive earthquake, it just got worse and worse until the building was deemed unusable.”

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 15

CASE STUDY

was needed due to ageing buildings and growing clubs.

“The previous club was 30 years old and was badly deteriorated due to the coastal environment. It was also too small for the massive growth in Papamoa. It was built to hold 100 members and now we have over 800.”

The total cost for each of the four clubhouses lay somewhere between $3.5 and $5.5 million. As surf life saving clubs are charitable organisations, finding enough money to fund projects of this scale is difficult. That is why it is important to understand how to spend money efficiently without cutting corners to ensure any new builds can stand the test of time.

Pearson believes having a quantity surveyor involved from the beginning helped the club have a clear understanding of project costs and assist in the securing of funding.

“In 2015 we actually started operating from three temporary portacoms on the beach.”

…having a quantity surveyor involved from the beginning helped the club have a clear understanding of project costs and assist in the securing of funding.

Despite being based in Wellington, the rebuild of the clubhouse at Lyall Bay was also affected by the earthquakes.

NZIQS Executive Director and President of SLSNZ, Marilyn Moffatt, explains how the continuing earthquakes changed initial plans.

“Originally, we had hoped to use the existing foundations, which were 60 years old. After the earthquake, it became clear that we needed new foundations. The increase in cost was significant. We had already budgeted the project, and then we realised considerable additional costs would be required.”

For Jim Pearson of Papamoa, a rebuild

16: DECEMBER 2021 - FEBRUARY 2022: BUILT ENVIRONMENT ECONOMIST

“The quantity surveyor did a fantastic job of monitoring ongoing costs and forecasting for final cost to completion and contingencies. They also provided valuable input to value engineering opportunities and the assessment of monthly claims and variation requests. All of this helped immensely in the project’s cost projections and requests for funding.”

Each of the four clubs received significant funding from the New Zealand Government. In May 2020 Central Government budget allocated $2.75 million annually to surf life saving club capital funding. In addition, some of the clubs received shovel-ready funding to replace the money that they were unable to raise due to COVID-19 restrictions and the loss of traditional fundraising opportunities.

This funding was hugely beneficial and allowed the clubs to complete

CASE STUDY

the projects, but it came with added responsibilities. This is one place where the clubs believe that quantity surveyors were invaluable.

All club members agree that the funding bodies required significant reporting on how money was being spent. However, by working with a quantity surveyor this was taken care of.

Bryce believes relaying the correct information to the Government and receiving the money would have been more difficult if the club had tried to manage the reporting internally.

“The quantity surveyor’s ability to respond to funders quickly and answer any questions was brilliant. They needed accurate information presented in a clear and concise way and this was all taken care of.”

Phil Griffiths MNZIQS, a quantity surveyor who oversaw the financial aspects of the New Brighton club development, believes clear reporting to funders and clients is an area where working with a quantity surveyor provides both funders and clients project certainty.

LYALL BAY SLSC, WELLINGTON Architects: Archaus Engineers: Beca Construction: Homestead Construction and CLR Construction

“Funders often require initial and drawdown reports to be completed throughout a project. Each funder often requires different items and risks to be reviewed and reported on. Working with us to provide these funding reports allowed the club all of that information to secure the funding of the project.”

“This is where a quantity surveyor can provide projects and clients value. If funding is required, the correct process must be followed at each drawdown.”

Quantity surveyor Garry Suckling MNZIQS, who worked with the Taylors Mistake club also agrees that working with a quantity surveyor is useful for those on a tight budget.

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CASE STUDY

“An advantage of working with a quantity surveyor from the beginning is that it gives people a better idea of how much things cost and what they need and what to do to get the desired result. Working with a surveyor from the start and carefully planning means you are less likely to have unexpected costs spring up mid-project.”

“We were incredibly thorough in the planning stages, and we said it's not prudent to start a project unless we have all the funds in place to complete it.

These estimates meant we could properly budget for a long-standing club that future volunteers can enjoy.”

At the end of the project the Taylors Mistake clubhouse even won a 2021 Canterbury Public Architecture Award presented by the New Zealand Institute of Architects.

TAYLORS MISTAKE SLSC, CHRISTCHURCH Architect Malcolm McClurg/ Wilson and Hill Architects Quantity Surveyors: Garry Suckling MNZIQS, Suckling Stringer & Associates Structural & Geotech Engineers: Davis Ogilvie Construction: Miles Construction

Unlike the other clubs, Lyall Bay did not work with a quantity surveyor from the beginning. Moffatt believes involving a quantity surveyor initially would have been an advantage.

“On reflection, it would have been helpful if we had used the service. We were probably naive about the whole project and we had a lot of issues with cost increases. We had to make changes to the design to try and keep what we needed with the ever-increasing cost of the club. Our original estimate was $1.8 million, but in the end, the total cost was over $4.5 million.” We were grateful that in the latter stages of the project several NZIQS members offered advice.

When building a surf life saving clubhouse, materials must be carefully chosen to withstand the environment.

Martin Grace MNZIQS, a quantity surveyor who worked on the Papamoa club, explains the materials needed to be durable as well as affordable and maintainable.

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CASE STUDY

“In replacing an aging building, the new facility was designed to meet current standards including dealing with thermal comfort through adequate insulation, heat, cooling, and ventilation.”

“Other aspects included provisions to deal with vandalism such as providing anti-graffiti coatings to external walls.

The lower floor was constructed with appropriate maintainable materials, finishes and drainage to deal with the risk of flooding and the surrounding conditions.”

Both Suckling and Griffiths agree finding adequate materials was a challenging aspect of the project but believe they didn’t need to make too many compromises despite working with a charity on a tighter budget.

Griffiths says it was vital they planned for a long-term solution.

“From a quantity surveying perspective, there were several considerations for the environment that we definitely needed to think about as we were putting together a price estimate. For example, as well as rising sea levels we need to plan for erosion. We need to make sure the foundations will not erode away leaving the building uninhabitable again. We need to make sure we are picking materials that can hold up against the coastal environment.”

NEW BRIGHTON SLSC Architect: Ken Powrie, South by South East Quantity Surveyor: Phil Griffiths MNZIQS, Rhodes & Associates Engineers: Julian Ramsay, Raumoko Construction: Citycare

For Suckling, working with SLSNZ was a special opportunity. He is a member of the Taylors Mistake club and has been involved in SLSNZ for 55 years.

Griffiths also enjoyed working with the community organisation. “The team at New Brighton were fabulous to work with.

They looked at the design, we had some early meetings with a select number of their members and then they trusted us to get on with the job.”

“Working with clubs can sometimes be

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CASE STUDY

difficult when too many people try to get involved and confuse the situation but they were easy clients to work with.”

SLSNZ Chief Executive Officer Paul Dalton believes it is essential that many clubhouses around the country are upgraded and is happy the Government has finally offered funding. Recently, 33 additional clubs submited applications for over $60 million of projects over the next three years.

“You just look at the data and you see that the majority of Kiwis live within a very short distance of the beach. This is our number one playground but it is a very risky environment.”

PAPAMOA SLSC Project Managers: The Building Intelligence Group Architects: Jigsaw Architects Quantity Surveyor: Martin Grace MNZIQS, Rider Levett Bucknall Structural: WSP Civil: Kirk Roberts Geotechnical: CMW Construction: Naylor Love

“Big waves, dangerous currents, rips, we've got it all. We have to have that extra level of supervision. We rescue 500 to 700 people a year from drowning.

Upgrading these buildings is absolutely critical for our safety. The funding from the Government has come at a crucial time when we're seeing huge escalations in building costs. To have another pot of money to be able to access will make a huge difference.”

This article was supplied by the New Zealand Institute of Quantity Surveyors (NZIQS).

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Q&A

INFRASTRUCTURE

We asked members of the AIQS Infrastructure Steering Committee and selected NZIQS members to tell us what the most interesting infrastructure project they have worked on and why, and their role in that project.

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Q&A

MIKE O’SHEA FAIQS, CQS AIQS Director and Chair AIQS Infrastructure Steering Committee Project: Olympic Dam Copper Uranium Mine – South Australia

Why I selected the Olympic Dam Mining project Of all the infrastructure projects that I have worked on in the UK, Europe, and Australia, I have selected the Olympic Dam Mining Project as it was the first project that I worked on in Australia and a game-changer for both my career and personal life. I came to Australia for 18 months and I am still here.

The journey to commencing on the project After five years in Holland and 18 months in Scotland, I was back in Currie & Brown’s London office and looking for another challenge. It was a Tuesday, and I had a call from the Senior Partner Mr Tether who was in Singapore after visiting Australia. He didn’t quite ask me what I was doing on Saturday, but it sounded a bit like that, and I quickly realised that a smart answer like washing my hair was going to be, as they say, a career limiting move. He mentioned that there was a project next week in Adelaide and went on to briefly discuss some general things about Singapore and Australia. So, after he put the phone down, I scurried along to see one of the other partners in the London office and long story short spent the week organising visas, travel etc and left for Australia on the Saturday. I flew via

Perth to Adelaide, arrived on a Monday and started work on the Tuesday.

Project – Pilot Plant and main project At that time, the project was being managed by Roxby Management Services (RMS), which was a joint venture between Western Mining Corporation (WMC) out of Perth and British Petroleum (BP). BP was one of Currie & Brown’s major clients in the UK and other overseas countries and they were looking for a Quantity Surveyor to work on the Pilot Plant. I was seconded into RMS offices and fascinated by visits to site and going underground and learned quickly why people in the bush have corks on their hats!

The Olympic Dam mine is a large copper uranium underground mine located in South Australia, 550 km NW of Adelaide.

It is the fourth largest copper deposit and the largest known single deposit of uranium in the world. It's made up of underground and surface operations and operates a fully integrated processing facility from ore to metal. In mid-2005, BHP Billiton gained control of WMC Resources.

My role on the Pilot Plant and main project

definitive control estimate was required against which the actual costs could be monitored, and forecasts could be made. The budget for the Pilot Plant was $20 million. The role on the Pilot Plant included preparing the cost estimate and budget, contract administration and preparation of monthly cost reports.

As the Pilot Plant was being constructed the very preliminary design for the main project was developing and my role included preparation of very high-level cost estimates for projects ranging from 2 million, 4 million to 6 million TPA. The project scope included mine, metallurgical plant, water pipeline, tailings dam and infrastructure including the town (Roxby), roads, buildings etc with a capital cost value of $1+ billion.

Summary It was an exciting project that allowed me to use my oil and gas experience on the metallurgical plant. The project was more ‘agricultural’ than oil and gas as it didn’t use such exotic materials. It was in a large remote area, underground and the scope included water pipeline, township, etc. It provided me with a springboard into water, rail, and road projects around Australia.

To ensure that the Pilot Plant could be completed within an allocated budget a

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Q&A

BARRY CALVERT FNZIQS, REG QS

Project: Interislander Ferry Terminal, Wellington From my perspective, all infrastructure projects on a larger scale are exciting to work on. One of the most interesting projects that I have worked on is the proposed new Interislander Ferry Terminal in Wellington. The project is now public knowledge with an approved budget, so the information following is no longer confidential. See the links immediately below for media announcements.

• https://bit.ly/32ZOEpP

• https://bit.ly/3IuQcsu My role in the project was as Senior Estimator working with Beca’s principal Project Manager and lead Civils Designer to provide KiwiRail (the client) with multiple concept design options and associated rough order cost estimates.

The design options included different ferry types and sizes, wharf configurations, terminal locations, and capacities. I no longer work for Beca but, from memory, I think we produced

around 15 different ROC estimates over roughly 18 months.

What made this project so interesting was the types of structures and complex nature of working in both the marine environment and in a central city location.

Some options included state highway motorway flyovers, sheet piled coffer dams, floating jetties, rail infrastructure and in one option we looked at building the terminal over the Wellington fault line, requiring an innovative raft slab design.

ALI HAMKA MAIQS

Project: The Sydney Metro project Since 2017, I have been fortunate enough to have worked on one of the most complex infrastructure projects undertaken in Australia, the Sydney Metro project. I worked for Arup Australia on the Metro Martin Place project and directly for Sydney Metro on the Crows Nest project, holding senior commercial roles on both.

The Metro Martin Place project stands out as a once in a generation opportunity

for Sydney. The sheer complexity of integrating a live metro environment into a retail and commercial precinct by combining transport engineering and premium tower designs allowed for an engineering marvel in the heart of historic Martin Place. To work with Macquarie Bank as the project sponsor and a world class contractor like Lendlease in bringing these concepts to life will always be a career highlight.

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Joining Sydney Metro in 2020, I was able to bring 15 years of commercial experience to the organisation and to the Crows Nest Metro Station project. This project is a construct-only with Sydney Metro having undertaken the full design and A.W. Edwards constructing the station. This will be one of the biggest construct-only projects that New South Wales has undertaken and I am excited to be playing a role in bringing it to life.

Q&A

MARCEL FREI FNZIQS, REG QS

Project: Scott Base Redevelopment for the New Zealand Antarctic Institute One of the benefits of working for AECOM as a Quantity Surveyor is the opportunity to work on a range of large and complex social infrastructure projects. I’m currently involved with three particularly significant projects for our region which our Christchurch based team of 13 is busy delivering.

phase of another significant piece of sports infrastructure, the $500 million Canterbury Multi-Use Arena for the Christchurch City Council, which will deliver a state-of-the-art multi-use arena with a seating capacity of 30,000 for sports events and will hold up to 41,000 spectators for large music events.

The $350 million Parakiore Recreation and Sports Centre is currently moving into the internal fitout phase and, when complete, will provide Cantabrians with the largest aquatic and indoor recreation and leisure venue of its kind in New Zealand. At the same time, we are in the preconstruction

Arguably, however, the most interesting project we have on at the moment, due to its unique location, is the $350 million Scott Base Redevelopment for the New Zealand Antarctic Institute. Antarctica is the coldest, harshest place on Earth.

Operating safely and effectively in an

environment this extreme is challenging.

Due to the remote location and short summer period, the window to build in Antarctica is small. The proposed plan is to pre-construct a fully self-sufficient off-the-grid building in a New Zealand port and ship it to Antarctica on a large heavy transport vessel in large modular sections. The logistics are complex and costly as all materials and consumables will be transported to Antarctica, with all waste brought back. All of these constraints make cost management particularly challenging, but also very interesting and highly rewarding.

BUDDHIKA (JAGATH PRASANNA JAYATILLAKE) FAIQS, CQS Project: Yas Island Development I was a client-side island wide cost advisory team member from Davis Langdon AECOM for the $40 billion dollar Yas Island Development in Abu Dhabi.

The overall development consisted of three phases to develop the 25,00ha Yas Island from scratch to create one of the region's most extensive entertainment and business districts.

Phase one included a series of mega projects to construct a 5.5km F1 racetrack, Ferrari World indoor theme park, five-star hotels including the

iconic Yas Marina hotel, marinas with superyacht capacity, two golf courses, clubhouses, reclaimed shorelines, landscape, and island wide infrastructure.

All to be operational in three to four years.

The island's infrastructure development was designed to cater for all three phases including an island-wide road network, including a highway with a 1.1km tunnel connecting the island to the mainland, island-wide potable water storage and reticulation, surface water and sewage management systems, vacuum solid

waste disposal systems, irrigation network, pumping stations, substations, and power supply networks.

Like all other facilities constructed on this island, the magnitude, variety, complexity, speed of construction, ultra-contemporary technology, unique designs, and innovative construction methodologies of the infrastructure make Yas Island one of the most exciting infrastructure developments I have ever worked on.

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Q&A

MURRAY SNEDDON FNZIQS, REG QS Project: Tararua Wind Farm Having worked on a number of infrastructure of projects, they can become ordinary in relation to the estimating role, so something new that was a complete game changer was always an exciting challenge.

As an Estimating Manager for one of the largest construction companies in New Zealand at the time, my most interesting infrastructure project was the civil portion of Tararua Wind Farm, which constructed the Tararua Ranges to the Southeast

of Palmerston North. As Estimator for the project, staying in touch with the operations side of the project was and always will be important throughout any project. Constructed in two stages, the first being 48 turbine foundations, followed by another 55 foundations along with several kilometres of access tracks, lay down areas and crane pads.

Added to this were control buildings and transformer pads at each turbine, plus the maintenance building.

On completion of stage one in December 1999, it was at the time the largest wind farm in the southern hemisphere. Whilst the overall construction appeared not too complex or difficult, the logistics of such a location demanded special attention and demanded a thorough risk analysis, and how best to manage it. Being consistently windy, and in particular bitterly cold with the occasional snow in the winter months, the downtime was always going to be an issue.

NATALIE BEESON MNZIQS, REG QS

Project: Jubilee Line Extension Project I have been lucky enough to be employed by three major New Zealand infrastructure clients in their major project delivery teams, as well as one in London. I was involved in the Jubilee Line Extension Project (JLEP) having studied this project as a student in 1991, then joined the project controls team in 1999 which was an amazing opportunity.

I worked with some very knowledgeable individuals and eventually under the Bechtel project controls team running the TubeLines (PPP for Jubilee, Northern and Piccadilly lines) major projects.

JLEP had to be delivered for New Year’s Eve 1999, to enable the Dome to be easily accessible for the New Year’s celebrations.

My role was supporting a team bringing together the tracking of the closeout of works and prepare reports to government on the progress, highlighting any issues arising. I had to use my excel skills and graphical presentation experience to make these reports user friendly.

My motto is that I should still be learning something new in the business I am in

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everyday, so I am curious. I ask questions in order to understand the relationship of functions within the industry and to identity where improvements can be made with more planning. I love finding golden nuggets, whether from my colleagues or discovering a new source of information.

This trait has led me back to the project controls arena, here in New Zealand. The biggest issue I have is the differences in terminologies across our relatively small infrastructure industry.

Q&A

JOHN EATON MAIQS

Project: M4 Smart Motorways project Perhaps not the most headline project I have worked on in my 37 years as a Quantity Surveyor, but the project I will nominate is the M4 Smart Motorways project for Transport for NSW (TfNSW).

The M4 Motorway is a 35km long motorway that opened in Sydney in the 1960’s. It stretches from Concord in the inner west to Lapstone in the Blue Mountains. The M4 Motorway connects to the M5 WestConnex at Haberfield and also intersects the Westlink M7 at Eastern Creek.

The M4 Motorway has become the first smart motorway in NSW with new road structures and technology being installed from Parramatta to Penrith.

A Smart Motorway, also known as a Managed Motorway in Victoria, uses

real-time information, communication, and traffic control systems in and alongside the roadway to improve traffic flow. Variable road signs and messages communicate to drivers how to best travel along the motorway for a safer, more consistent journey with less congestion.

This involves an extent of technology and systems integration not normally required on an older, traditional motorway.

Apart from the technology and innovation, I appreciated the innovative approach TfNSW took to the delivery of the construction. Specifically, the degree of collaboration between the client and the contractors and the maximum use of the flexibility the GC21 form of contract can offer.

colleagues, the entire team worked to identify issues, and emerging risks, early and to use the provisions in the GC21 form of contract to negotiate equitable solutions when resolving those issues and mitigating any emerging risks from the new technology.

I believe Quantity Surveyors are best suited to these types of contracts where emerging change can be fairly valued and therefore equitably negotiated as it occurs, both from a time and cost perspective. This leaves the potential for end of project claims not necessary.

It also meant that working on the project was a pleasure because serious conflict was avoided. A rare occurrence in today’s market.

I worked as a Commercial Manager on the project and, together with my

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LEGAL

INDEMNITIES IN CONSTRUCTIONRELATED CONTRACTS Over the past few years, Australian construction has seen an industry-wide increase in the use of indemnity clauses for projects of all sizes. Traditionally, standard construction contracts such as AS2124 and AS4000 contracts included indemnity clauses which were limited in their effect and principally required to find the insurance cover that was required of one of the parties.

However, indemnity clauses have become more common, it is increasingly important for principals, consultants, and contractors to be aware of the reasons for the inclusion of these clauses in their contracts and their impact on the traditional risk profile.

PURPOSE An indemnity clause refers to a provision in an agreement where one party agrees

to protect the other party from any loss or damage in relation to a risk or a category of risk.

Depending on the width and precision of the terms used, indemnity clauses can either perform a useful purpose of identifying clearly a reasonable contractual obligation, or alternatively if drawn too widely, impose unexpected and unanticipated liabilities on the person giving the indemnity.

INTERPRETATION OF INDEMNITY CLAUSES The Courts have struggled with the principles they should apply in interpreting indemnity clauses. In a leading case of Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82, the Court considered at paragraph 182 that:

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“the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity... the principle, in the form in which we have expressed it, does no more than express the general approach to the interpretation of contracts and it is of sufficient generality to accommodate the different considerations that may arise in the interpretation of a wide variety of exclusion and limitation clauses in formal commercial contracts between business people where no question of the reasonableness or fairness of the clause arises."

LEGAL

Insurance in respect of public liability and contractors, all risks and professional liability are usually required in construction contracts and accordingly, the indemnity should be linked to those insurable risks.

That case reflected the struggle, on the one hand, to apply consistent ordinary contract interpretation principles to a wide variety of contracts, while at the same time realising that an indemnity clause inserted by way of a standard inclusion in a contract to be just, should

be interpreted strictly, in order to avoid unexpected unfairness in its application.

The Courts have been conscious of the fact that the term indemnity and indemnity clauses occur commonly in insurance contracts. Accordingly, the Courts have taken an approach, given that those insurance contracts are typically drawn by the insurer and included in standard policies offered to the potential consumer, that the term should be interpreted with a view to providing the widest reasonable cover to the insured.

This has caused difficulty in the interpretation of indemnity clauses in other contexts where the Court has had to struggle with the issue of whether an indemnity clause is to be interpreted widely or narrowly. A practical but unsatisfying resolution could be that indemnity clauses are to be interpreted widely in insurance contracts and narrowly elsewhere. However, the law

likes consistency and some of the width reserved for insurance indemnities appears to be migrating into commercial contracts.

In the case of the State of New South Wales v Tempo Services Ltd [2004] NSWCA 4, the Court was required to consider an indemnity clause as follows: "The contractor shall be liable for and indemnifies and shall keep indemnified the Government against any liability, loss, expense, damages, claims, suits, actions, demands or proceedings, whether arising under any statute or at common law, in respect of personal injury (including illness) to or death of any person arising out of or in connection with or caused by the performance of the services".

The case involved a cleaner who was injured at work and the State claimed an indemnity in respect of her successful

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LEGAL

claim for personal injury from the cleaning contractor under the cleaning contract. The judge at first instant had found that the indemnity clause did not cover the accident in question because Tempo Services bore no blame for the accident, and it was not in respect of the actual performance of services but more in preparation to perform the services.

However, the Court on appeal unanimously decided that the clause was to be interpreted without any consideration of the causal connection or fault of the parties. If it came within the ambit of the indemnity clause, then the indemnity was triggered.

It is to be remembered that the cleaner tripped over an obstacle on the playground maintained by the State, but the State's involvement or negligence was not considered to reduce the indemnity clause provided. Further, the Court interpreted the indemnity clause to not only cover the amount paid out to the injured person but also the costs reasonably incurred in defending her claim. Accordingly, one should be very careful of the extent to which an indemnity clause is inserted in a construction contract.

Construction contracts traditionally have a balance of risks and responsibilities and obligations that are shared between the parties. A poorly drawn indemnity clause can disrupt those balances very substantially.

INDEMNITY CLAUSE LIMITATIONS It is prudent for the parties in respect of an indemnity clause to consider to what extent they wish to limit its operation.

Typical limitations follow the lines of the indemnity clause considered in Palace v RCR O'Donnell Griffin Pty Ltd (in liq) [2021] QCA 137 which provided in para 5 that:

“….under the indemnity clause, [the] liability to indemnify the respondent against personal injuries claims was to be “reduced proportionally to the extent that the act or omission of [the respondent] contributed to the loss, damage, death or injury.”

This type of limitation will be designed to ensure that where there is fault or negligence on the part of the indemnified party that its negligence will be taken into account in reducing the value of the indemnity.

Further, a temporal limitation on the indemnity could be introduced, that is for example, "while works are being actually performed by the contractor on the site".

This would mean that where, for example, over a holiday period, a child was injured on-site by the negligence of the principal, the contractor would not be expected to indemnify in respect of that loss.

INSURANCE The subject matter of the indemnity should ideally be in respect of a risk against which insurance can be taken out by the indemnifying party. Insurance in respect of public liability and contractors, all risks and professional liability are usually required in construction contracts and accordingly, the indemnity should be linked to those insurable risks.

insurance rather than the party acting as a self-insured participant.

There is no value (other than warm feelings) in the widest indemnity clause given by a party with no assets and no insurance and no comfort in being an indemnifying party with no insurer.

INDEMNITY CLAUSES AND RISK It is important to realise that indemnity clauses are dangerous unless carefully considered and carefully drafted. In many cases, they should be made mutual, that is, each party indemnifies the other from any breach of the contract.

In this way, both parties do not disturb the obligations under the contract but preserve a clear right to indemnity where a breach occurs.

CONCLUSION The indemnity clauses are important provisions in a construction contract or a consultancy contract or a supply contract, which should receive attention before the contract is signed. Their use should be carefully considered and tailored to the purposes of the contract and to the extent in which it is fair and/or efficient to impose an obligation on one or the other contracting party.

Perhaps a limitation on the following lines: "to the extent that insurance otherwise required under the contract covers the liability" should be suggested by a contractor.

The parties to a construction or consultancy contract should consider carefully the extent of cover provided by their insurance and ensure as far as possible that the indemnity given to the other party is able to be covered by

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This article has been written by the team at Doyles Construction Lawyers. www.doylesconstructionlawyers.com

FUTURE THINKING

VISIONARIES

According to the Cambridge Dictionary, a visionary is a person who has the ability to imagine how a country, society, industry, etc. will develop in the future and to plan in a suitable way.

AIQS has handpicked two Fellow CQS members to tell us about their visions for the construction industry and quantity surveying profession.

TONY AVSEC FAIQS, CQS Looking into my crystal ball on my desk (yes, I do have one), after over 40 years so far in our industry (that’s a scary thought when you put it in writing!) where do I see and hope our industry will be in the future?

I’d love to see the true embracing of the manufacturing mindset and Lean Six Sigma (think lean construction). Think about what Toyota did in the 1990s with the focus on reduction in the parts count on the final assembly line. For us, that’s the construction site. If we can work out how best to break up a building into

larger, but still easily transportable and industry standard components on-site, there would be a massive reduction in on-site labour.

Cross-laminated timber buildings have already demonstrated this even without adding the next level of robotics to take away the repetitive, and sometimes inherently dangerous, tasks on which we spend a small fortune to protect a fragile human being. We’re there on some parts, like curtain walling and bathroom pods, but we are still not fabricating those offsite modules like a true manufacturer to improve their cost competitiveness.

The COVID-19 pandemic has accelerated industry change, showing us what is possible, collaborating remotely. It’s now possible to get input easily from a specialist from anywhere in the world.

Much travel time has been saved but it relies on all attendees being savvy with the technology. With your own project using cloud-based Google Streetview style apps like Openspace for virtual site visits, and virtually collaborating over your project BIM in MS Teams with Revisto, it amazes me what is possible right now if we can embrace the future.

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FUTURE THINKING

BOB RICHARDSON FAIQS, CQS “We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein About every decade I have heard that quantity surveying was doomed by a new technology and the rise of people who thought the quantity surveyors’ task was simply technical. Those doomsters were clearly wrong and here we still are having adapted to whatever changes and challenges were thrown our way.

system will be a substitute for human decision makers and the need for a human sanity check on outputs produced.

Client Focussed Manager The client focussed QS will increase the intangible benefits beyond the traditional roles of service delivery.

Take all predictions with a pinch of salt!

The fundamental needs will be to pay attention and seek to understand a client’s issues, situation, and business drivers not merely the building or infrastructure they are wanting. Few of us really practice this approach. Such focus develops trust, helps define problems and encourages the sharing of information and collaboration. Anything less than “the client’s interest comes first” brings into question whose interests we are serving.

Change tends to be evolutionary rather than revolutionary.

The future skills of the QS will need to be more adaptive and digitally focused.

In the last ten years the speed of change particularly in technology can feel understandably overwhelming.

Construction will need to adapt, be collaborative and attract people from a different diverse, cultural, and technical background such as strategists, space scientists, anthropologists, cognitive and systems thinkers, data analysts and data scientists, digital operatives, and robotic programmers.

Many ideas and predictions in my experience, rarely occur in the time predicted if ever. How many predicted the global financial crisis of 2008 or the pandemic of the last three years!

Two types of QS will emerge 1. The technology advanced knowledge cost engineer or 2. The client-focussed manager Knowledge Cost Engineer The knowledge cost engineer will be an expert in all forms of technology i.e.: • BIM • Artificial Intelligence (AI) • Advanced Software technologies • Additive manufacturing techniques • Digital mapping • Blockchain • Virtual reality and augmented reality, • Robotics and automation • Prefabrication and offsite construction The good news is that no knowledge cost engineer, artificial intelligence, or expert

I have always believed in the concept of Total Cost Management (TCM) in which cost managers/quantity surveyors apply their professional and technical expertise to managing cost throughout the life cycle of any enterprise, program, facility, project, product, or service.

Governments struggling to establish economies impacted by the pandemic are looking to the construction sector to help stimulate the economy again through the built environment and infrastructure we need.

Whatever the future holds we must adapt and embrace it and take a more valued position. The new sectors and technologies are a great opportunity to do so.

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Tony Avsec FAIQS, CQS

Bob Richardson FAIQS, CQS

Sources / References • Australian Institute of Quantity Surveyors (2012) Cost and Management Review • Royal Institution of Chartered Surveyors (2015) • Cunningham (2014) and Shafie et al.

(2014) • RICS News & opinion (2020)) • Emily Segal novel Mercury Retrograde, by Deluge Books.

• Susskind & Susskind (2015) • Trusted Advisor Associate (2021)

SUSTAINABILITY

SUSTAINABLE TEMPORARY ADAPTIVE REUSE TURNING UNDERUSED OR VACANT PROPERTY INTO A STAR

BY PROFESSOR SARA J WILKINSON, DR GILL ARMSTRONG AND PROFESSOR JUA CILLIERS

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SUSTAINABILITY

Plenty of stories and opinion pieces ponder the future of the high street and CBD, as we learn to live with COVID-19.

Some suggest no return to previous patterns of work and consumption; working in the office two to three days a week and shopping online rather than visiting the high street. With the growing vacancy in commercial and retail sectors in Sydney and Melbourne; is it a permanent or temporary change?

If it’s temporary; how long is temporary; and what, if anything, can we do in the interim?

Researchers at UTS, Professor Sara Wilkinson, Dr Gill Armstrong, and Professor Jua Cilliers are searching for solutions. Sustainable Temporary Adaptive Reuse (STAR) is a re-activation strategy for underused buildings that may not lead to a permanent change of use. This project is funded for three years by the City of Sydney. STAR can be a low-cost intervention for existing buildings, addressing economic, social, and environmental stress.

This article presents a new approach to managing vacancy by seeking to achieve a diversity of new uses on a temporary basis, without permanently transitioning to new uses. It contrasts a ‘wait and see’ holding position which reduces economic and social activity. Excess vacancy adversely affects adjacent or surrounding service businesses, transportation, and arts events, contributing little to solve stresses cities face. Ultimately, vacancy affects value, and risks increased building decay and defects.

This article explains the rationale and background of the project with case studies illustrating temporary adaptive reuse.

There are significant advantages of asset repurposing over redevelopment.

LIVING WITH COVID-19 Previously, office workers did the nine to five, bookended with a commute.

Retail and health services, arts and culture opened beyond working hours, encouraging workers to stick around before commuting home. These land uses are concentrated in CBDs. Rob Harris’s (2021)¹ new book; London’s Global Office Economy: From Clerical Factory to Digital Hub, traces the history of the office. Paper-based offices of the 17th to 20th centuries morphed from small load-bearing brick, timber, or stone buildings to skyscrapers.

Large areas were storing paper-based records. Small individual office layouts gave way to large open plan ‘factories’ populated by clerks. Handwritten documents were superseded by typed documents, and in the 1980s, computers and digital technology arrived. Since then, the office has morphed as different workplace cultures demanded different configurations (Wilkinson & Nanayakkara, 2020)². The take home; the only constant is change.

And then COVID-19; a huge global change. The risk of infection spread meant government lockdowns required people to stay home. Some preferred home working; citing better work-life balance with no long commute. Workers stated preferences to work two to three days a week in the office when lockdowns finish. If this occurs, there

will be less office workers in our CBDs than pre COVID-19, which will impact retail and service sectors. Parts of the retail sector are experiencing a triple hit; lack of national and international visitors, growth in online shopping, and fewer office workers.

MELBOURNE AND SYDNEY MARKET OVERVIEW Knight Frank’s overview of the AsiaPacific market concluded COVID-19 induced lockdowns have exposed the weaknesses of income-producing properties, with a two-tiered market forming. More resilient prime assets hold value, while non-prime assets see their values deteriorate with partial and/or full vacancy increasing. As a result, there are moves to convert buildings with five drivers identified: 1. uncertainties around occupier demand over the medium- to long-term 2. e-commerce disruption rendering retail assets obsolete 3. prolonged weak international tourism impacting hospitality assets 4. the growing importance of environmental, social and governance (ESG) 5. emergence of sectors with structural tailwinds.

There are significant advantages of asset repurposing over redevelopment. While there are opportunities to repurpose assets for alternative or mixed-uses, no ‘one-size-fits-all’ as location, demand and local infrastructure informs what is viable.

Repurposed uses range from healthcare, co-working/flex space to residential (including build-to-rent) and logistics

¹ Harris, R. 2021. London’s Global Office Economy: From Clerical Factory to Digital Hub. Routledge, Abington, Oxon. ² Wilkinson S., & Nanayakkara, K. 2020. Workplace culture, office space needs and demand. RICS Property Journal. Oct 2020. https://ww3.rics.org/ uk/en/journals/property-journal/workplace-culture-office-space-needs-and-demand-post-covid-19.html

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SUSTAINABILITY

(Knight Frank, 2021)³. While the viability of repurposing buildings varies, this is an opportunity for owners, investors, and developers to meet evolving market demand.

The 2021 London market revealed increasing tenants, deferred office moves, and lease extensions, looking for short-term, flexible accommodation until economic conditions become more certain. This shift saw the flexible and serviced office market expand rapidly, underpinning the growing demand for a broader office market. Jansons (2021)⁴ observed a flight to quality with healthy workplaces with eco-friendly specifications being a priority. The pandemic has changed the office market, seemingly for the better and perhaps irrevocably.

IS IT PERMANENT OR TEMPORARY? Some talk of ‘bounce back’ and return to ‘normal’; where others speak of irrevocable changes to work patterns, office usage and retail behaviours. A US Microsoft study of 61,000 employees, concluded home working dropped the quality of employee outputs. Staff spent less time in meetings, had fewer realtime conversations and worked in silos. Crucially the strengths of ties between employees reduced and less networking occured and the study concluded this could have a negative impact on higher quality work outputs and culture. Questions arise, such as; is it a permanent or temporary change? If it is temporary; how long is temporary; and what, if anything, can we do with underused or vacant property in the interim?

SUSTAINABLE TEMPORARY ADAPTIVE REUSE (STAR) STAR is a strategy to deal with underoccupancy as a low-level intervention. It offers an alternative option for vacant space alongside practices such as brand repositioning and mothballing, and more demanding interventions such as irreversible demolition and future-proofing through deep retrofit. This also leads to the question of whether current costing methods to evaluate options are equipped to evaluate STAR. Showcases of adaptive reuse projects tend to be on a whole building, reusing obsolete buildings which have been vacant for long periods. Permanent change of use is the most common type of adaptive reuse. There are examples of adaptive reuse on shorter timescales, as a temporary use for buildings scheduled for demolition. In each case, it is assumed that the building is wholly, or at risk of becoming wholly vacant. However, this assumption is unrealistic and more nuanced understanding of vacancy and adaptive reuse is needed. The scattered nature of vacancy distribution, across markets, means adaptive reuse, on a whole building and permanent basis is not useful for many owners. Even when vacancy rates are perceived as high, wholly vacant buildings awaiting a permanent use change, can be in short supply. Partial or temporary adaptive reuse is likely to be more practical.

STAR is a re-activation strategy for underused buildings that can be temporary from the outset, or may lead to a permanent change of use. It can be a whole or part building basis and is useful where owners perceive the vacancy

as temporary, or seek to test local demand in new or unfamiliar markets.

However, while temporary adaptive reuse can re-active space with economic benefits, environmental costs can be an unintended consequence. Though adaptive reuse retains embodied energy within existing structures, the temporary nature of STAR needs consideration as temporary reuse may increase adaption, potentially increasing construction waste.

A further challenge is in writing design briefs and specifications for more usual and unfamiliar new uses, calling on advanced skill sets for quantity surveyors managing STAR projects.

Principles of compatible use, universal design, reusable fixtures and fittings, are important in sustainable temporary adaptive reuse. Addressing the unintended environmental consequences of temporary reuse needs consideration from the outset. In STARs favour, the lowcost economic drivers of STAR align with minimising consumption of materials, fixtures and fittings. Sustainability can be enhanced if the infrastructure is developed, which encourages reuse or recycling of waste generated by the temporary nature of STAR. Sustainable practices in construction and real-estate practice to lease space need to be considered at the design, construction, and making good stages of STAR. Demand for space changes over time, and vacancy can be temporary. A healthy level of vacant space offers room for growth. However, pockets of mediumterm vacancy, can depress economic and social activity, adding to reduced confidence as vacancy headlines as evidence of decline (Millington, 2013) .

Coupling vacant space with high demand uses, on a temporary basis can support

³ Franklin, Neil. 2021. Remote working led to drop in high quality output, https://workplaceinsight.net/remote-working-could-lead-to-drop-in-highquality-output-microsoft-study-concludes/ 27th. September 2021. ⁴ Janson, T. 2021. The commercial property market is changing rapidly, and for the better. Accessed on 21st Sept 2021 from https://workplaceinsight. net/the-commercial-property-market-is-changing-rapidly-and-for-the-better/?utm_source=mailpoet&utm_medium=email&utm_campaign=27921

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urban centres until markets change, without having a long-lasting disruption to supply for uses normally in demand.

In addition, not all tenants seek longterm tenancies. City of Sydney research identifies space users currently undercatered by urban centres which focus mainly on retail and commercial office space. Their publication, Making space for culture, highlights the need for cultural infrastructure and demand for social value of cultural space (City of Sydney, 2020). STAR is a low-cost intervention for existing buildings, for addressing economic stress, and meeting social and cultural goals.

CASE STUDIES Real-world cases of temporary adaptive reuse demonstrate STAR is viable.

Local Government Areas in Australia, and internationally, have initiatives promoting temporary reuse on a partial building basis. These tend to be street or precinct level initiatives, seeking to re-invigorate footfall frequency in public space, part of economic renewal. One example is Melbourne’s Shopfront Activation Program, reusing retail space temporarily to artists, entrepreneurs and artisan makers to test business ideas and build new connections between entrepreneurs and the commercial property sector. Another example is a street-level regeneration initiative

by Croydon Borough Council; the ‘Croydon Meanwhile Use Toolkit’ which involved a community competition and educative events to support users and entrepreneurs to engage with owners.

A temporary housing project is the repurposed aged-care facility for a popup crisis housing centre at Lakehouse, South Melbourne, by Housing for All

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Australians (HAA) and the YMCA. While this is a temporary across-use adaption, it highlights the possibilities of temporary reuse to address local social needs, especially where existing and proposed new uses are highly compatible.

Further examples exist in Sydney’s Popup Theatre Pilot Project, which examined spaces for temporary reuse to theatres and performance spaces. The challenges revealed in the pilot study highlight the need for greater focus on the socio-technical decisions which enable temporary adaptive reuse. The viability of STAR is driven by local context and demand. STAR practice needs to be evaluated across different types of vacant spaces and combinations of viable new uses. This evaluation needs to be done before we can claim with certainty that STAR can be a generalisable, mainstream option in the economic recovery from COVID-19.

IS THERE A STAR IN YOUR PORTFOLIO? There are options for temporary adaptive reuse, and opportunities can be realised with the provision of a robust set of resources for stakeholders to assess potential sites. Adaptive reuse is not new but looking at viable short term options post COVID-19 is, and it may be worth advising your clients of the potential to turn an underused or vacant asset into a STAR. We will be publishing resources in 2022 for this purpose.

Professor Sara J Wilkinson, Dr Gill Armstrong, and Professor Jua Cilliers are academic professionals from the University of Technology Sydney (UTS) School of Built Environment.

COLLABORATION

BUILDING BETTER PLACES MEANS COLLABORATING ON THE ‘BIGGER PICTURE’

BY DAFYDD WYN OWEN AND DAVID SOMEK

Infrastructure Australia issued its 2021 Infrastructure Plan in September 2021.

This Plan outlines an expansive reform agenda to deliver infrastructure that works and adapts towards the current and future needs of people and places.

Infrastructure investment has formed a key plank in Australia’s economic response to the COVID-19 pandemic. Combined, the Australian and State and Territory Governments have committed to deliver

$225 billion in infrastructure investment between 2020-21 and 2023-24.¹

We need to transition to managing infrastructure as an integrated system of systems.

However, there is a host of systemic and enduring challenges affecting Australia’s infrastructure sector. Australia's current infrastructure planning and delivery approach impedes productivity, stifles innovation, and challenges the sector’s financial sustainability. Decisionmaking falls short of consistent best practice, procurement and contracting arrangements can drive poor investment outcomes, and the lack of project

¹ Infrastructure Partnerships Australia 2021, Australian Infrastructure Budget Monitor 2020-21, Infrastructure Partnerships Australia, Sydney, viewed 7 April 2021. Available via: infrastructure.org.au/wp-content/uploads/2020/12/Australian-Infrastructure-Budget-Monitor.pdf.

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coordination contributes to capacity constraints.

More than ever, these overarching principles must be embedded in our collective approach to planning and delivering infrastructure: 1. Infrastructure investment is driven by economic, social and environmental outcomes to enable people and places to flourish and prosper.

2. Managing and planning infrastructure as a system drives more informed decision-making leading to higher quality, faster and cheaper infrastructure solutions that better align with the needs of people and places.

3. Collaboration and integration across the infrastructure ecosystem will drive a financially sustainable and highperforming infrastructure industry.

Record levels of infrastructure investment represent the most significant opportunity for progressive change in the infrastructure sector.

A FOCUS ON OUTCOMES The fundamental role of infrastructure is delivering social, economic and environmental outcomes to enable people and places to flourish and prosper.

Australia’s current and future attractiveness as a place to live and for businesses to invest in is underpinned by the quality, accessibility and performance of its economic and social infrastructure.

In an increasingly connected global economy, our cities and regions are competing to attract highly skilled labour (when the borders reopen) and new business investment and capital.

As a result, infrastructure quality and performance have never been more critical to Australia’s prosperity.

Desired outcomes set the absolute purpose and objectives for investing in infrastructure solutions. Making outcomes the focus of infrastructure investment forms the basis for unlocking our ability to:

and the M12 Motorway), education and social infrastructure projects, a range of urban renewal projects, the Upper South Creek Advanced Water Recycling Centre, and a range of other critical enabling infrastructure.

1. Integrate new solutions and interventions properly into the existing infrastructure system.

Strong commerce, freight, logistics, advanced manufacturing, health, education, and scientific sectors will benefit from the creation of a Western Economic Corridor. This will create knowledge-intensive jobs near areas of significant population growth.

2. Realise greater potential and value from the existing built form.

3. Enhance the resilience of existing infrastructure systems.

4. Realise the full value of the supply ecosystem in delivering desirable outcomes.

5. Unleash the potential of digital transformation across infrastructure.

Nowhere is the opportunity for getting this right (and the potential risk of getting it wrong) more paramount than the development of Sydney’s Western Parkland City, home to the future Western Sydney International (Nancy-Bird Walton) Airport and surrounding Aerotropolis.

Underpinned by the Western Sydney City Deal, all three levels of government are investing over $20 billion² in the future of Western Parklands City. Its industries and thriving community generate more than $56 billion per year in Gross Regional Product.

The Western Sydney International Airport will be a catalyst for much of Western Sydney’s future prosperity, and the surrounding Aerotropolis will be the beating heart of Western Parkland City.

This will be accompanied by city-shaping infrastructure, making Western Parklands City the most connected place in Australia, and the population is likely to grow to 1.1 million by 2036³. Key infrastructure will include the Western Sydney Metro Airport Line, major road and rail infrastructure (including the Northern Road upgrade

A NEED FOR A SYSTEM OF SYSTEMS APPROACH The stakes are high. The decisions we make now will impact generations to come. So we need to get it right.

The development of Western Parklands City highlights how the built environment is a deeply interconnected and complex system. Economic, social and environmental assets and networks are inextricably linked with themselves, the community, and the natural environment.

Planning and delivering an interconnected system that enables people and places to prosper requires moving away from considering infrastructure as a series of discrete, independent, and sector-specific physical assets.

We need to transition to managing infrastructure as an integrated system of systems.

This involves managing infrastructure solutions as ‘interventions’ on the system, with each asset and its subsequent lifecycle understood in relation to the broader system. In addition, a system perspective should be supported by the use of digital twins to provide simulated views of the existing system.

² https://wpca.sydney/creating-places/the-western-parkland-city/ ³ https://www.greater.sydney/metropolis-of-three-cities/vision-of-metropolis-of-three-cities/western-parkland-city-vision

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Critically, project and program outcomes should be defined in alignment with the broader integrated infrastructure system. The planning of individual projects and programs recognises the interdependencies of projects across different forms of infrastructure.

Genuine consideration must be given to optimising, managing, integrating, and re-using existing assets to achieve desired outcomes within the integrated system.

Thinking holistically about infrastructure challenges, assets, and services with numerous dynamic interactions and perspectives creates opportunities to deliver greater outcomes for people and places.

COLLABORATION AND INTEGRATION MATTERS Managing infrastructure as an integrated system is a necessary but not sufficient condition.

Delivering highly interconnected and inter-dependent infrastructure, such as that planned across Western Parkland City, requires long-term collaboration and integration across the infrastructure ecosystem.

Australia’s current approach to infrastructure planning and delivery is fragmented and is a major roadblock to success. Infrastructure is often treated as a ‘zero-sum game’ as reflected in unbalanced risk allocation and penaltyladen commercial models. Designers, consultants, contractors, and supply chains are often kept at arm’s length from each other. Only when it’s ‘their turn’ do these participants become fully invested in the project. It’s difficult to imagine any other industry taking such a disjointed approach to major projects.

A new delivery model is required to transform the infrastructure sector, founded in long-term, collaborative and trust-based relationships.

By shifting towards long-term, collaborative relationships focusing on outcomes, there are significant benefits for both owners and the ecosystem.

While this adds a new degree of discipline, it also allows contractors to offer real-world experience to the project from the start. In addition, there is potential to identify novel approaches to achieve client requirements (such as energy efficiency or natural lighting) while reducing project complexity, expense, and unpredictability.

Implementing collaborative models with longer-term relationships is supported by international best practice, including Project 13 and the UK Construction Playbook.

The benefits of developing long-term relationships are myriad, including lower project costs for the owner, increased profitability for contractors, faster completion, and fewer contract disputes. Effective communication and understanding can also help to correct plan and specification problems while reducing delays. Cooperation and coordination of operations engender better decision making and the prevention of final product flaws, assuring the owner's satisfaction.

Focusing on collaboration rather than transactions makes it possible to build support for continual improvement and long-term relationships that will extend into future projects. By investing in a long-term relationship, owners provide certainty for the supply chain and help to establish a more financially sustainable, healthier ecosystem.

THE RISE OF THE DELIVERY ENTERPRISE High-performing teams form the foundation of successful infrastructure delivery, and industry best practice calls for integrated teams that drive collaboration and achieve better outcomes. Pioneering projects such as LXRP (the Victorian Level Crossing Removal Project) and the Sydney Water P4S (Partnering for Success) adopted this model. It’s a model that stands in stark contrast to the fragmented approach, which stifles genuine collaboration and leaves room for misunderstandings about customer goals and project specifications.

Sydney Water chose NEC4 contracts⁴ to support its P4S program due to its focus on collaborative behaviours to deliver up to $4 billion in building works and services between 2020 and 2030. It is the first significant infrastructure provider in the country to employ NEC as its primary procurement method.

The new NEC4-based strategy entailed replacing its traditional transaction-based supply chain with three regional delivery consortia. Each consortium currently offers a comprehensive spectrum of design, building, maintenance, and facilities management services for each region’s water and wastewater assets, resulting in projected annual program savings of 5-10%.

This integrated teams approach encourages collaboration and thus helps to optimise business processes, reduces costs and eradicates bottlenecks.

Removing boundaries between the parties involved while integrating their capabilities and functions produces better outcomes for everyone concerned.

When teams recognise their work is interconnected, they more easily see that they’re striving for the same goals.

⁴ https://www.neccontract.com/NEC-in-Action/Case-Studies/Partnering-for-Success-P4S-Sydney-Water-Australia

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Consequently, transparency is at the heart of integration. Integrated teams are open about their work and appreciate the work of others. Integrity, active listening and teamwork are all required. When done correctly, they ensure that everyone is working together rather than against each other.

The most effective teams function as networks of collaborative partnerships, fostering information exchange and complementing each other’s talents to get superior results.

Effective delivery enterprises are characterised across three key integrated streams: information, organisation, and process. This involves determining what

work is needed to accomplish the goal, assigning those tasks to contractors, and arranging those contractors in a decision‐ making framework. The result is an organisation consisting of unified parties acting in harmony to execute tasks to deliver outcomes for people and places.

A NEED FOR CHANGE Transformational change can only occur by getting projects and programs right from the start. The stakes are extraordinary. The actions we take now will influence future generations for decades to come. We must get it right.

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Dafydd Wyn Owen is a Partner and David Somek is a Director at HKA. HKA is the leading global consultancy in risk mitigation and dispute resolution, using our multi-disciplinary expertise to provide a comprehensive set of specialist services. If you would like to know more about HKA, please visit http://www.hka.com for more information.

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PROCUREMENT

SUPPLY CHAIN LEADERSHIP

PUTTING ADDED VALUE ABOVE PRICE New Plymouth District Council

Like many other organisations, the New Plymouth District Council (NPDC) in New Zealand has relied on traditional procurement methods when tendering for work – but its team knew they needed to change.

NPDC recognised that it had a combative relationship with its suppliers - focussed on achieving the lowest price first. Suppliers were kept at arm’s length, relationships were only managed according to the contract’s terms and the council was overlooking the added value that potential partners could offer the region.

The team saw an opportunity to do things differently and put relationship building first. NPDC developed a new approach to its contracting culture called ‘Supply Chain Leadership’, which requires NPDC to prioritise shared values when choosing suppliers and to lead, rather than just manage, its relationships with partners.

THE CASE FOR CHANGE NPDC is responsible for construction, maintenance and upgrade works for roads, water infrastructure, and other services that support the Taranaki region.

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The supply chain required to meet these needs includes a range of contractors, subcontractors, and professional services.

The traditional tender process is designed to determine whether a supplier can deliver on a client’s needs and complete a project on time and on budget. Each party is bound to what’s written down in print, with little flexibility to achieve anything outside of the contract. NPDC analysed some of the common features of its procurement and found that it was having unintended consequences on the timeliness, quality, and safety of NPDC’s project delivery.

PROCUREMENT

NPDC analysed some of the common features of its procurement and found that it was having unintended consequences on the timeliness, quality, and safety of NPDC’s project delivery.

David Langford, NPDC’s Group Manager of Infrastructure and Planning, motivated his team to try a different approach while procuring infrastructure maintenance services that focus on understanding its suppliers’ needs, instead of forcing them to meet NPDC requirements.

“I have a genuine interest in knowing what makes things hard for suppliers to deliver us optimum results,” says Langford. “The idea behind this ethos is to know and understand your supplier, that way we can unlock value-add opportunities.”

BECOMING A SUPPLY CHAIN LEADER To become a supply chain leader, NPDC needed to learn how its procurement processes and systems contributed to each partner’s challenges and understand the delivery failures of its projects.

The influence of a supply chain leader is felt throughout the supply chain – inspiring and motivating partners to focus on the larger goals of the project and the community’s needs. To do this, NPDC started applying its internal leadership skills – to motivate, inspire and care for its staff – to the organisations within its supply chain.

“We’re trying to develop a culture here that we have staff that are not just good at execution and planning but are prepared to challenge the status quo, be a bit curious, push the boundaries and do some innovative stuff,” says Craig Stevenson, NPDC Chief Executive.

LOWEST PRICE CONFORMING A key part of NPDC’s review of its approach was looking at how the ‘Lowest Price Conforming’ method might be contributing to poor outcomes. The process prioritises tenders that meet the minimum requirements for the cheapest price.

The team found that this ‘low price’ culture created a destructive cycle that stripped away all the added value that they could receive from suppliers and undermined the sector’s long-term sustainability.

“When we’re tendering our contracts with ‘Lowest Price Conforming’, the signal we’re sending is that what’s important to us is the getting the cheapest possible price – things that add value like health and safety, training, and quality are all sacrificed to achieve the lowest price, and our contracts play the game we set for them in order to win jobs,” says Langford.

Many of its contractors were dealing with low margins, inappropriate risk allocation and underinvestment in skills and quality control. This caused project delivery challenges including high levels of realised risk, rework, and reduced profitability, which in turn, contributed to poor practices and increased risk for workers.

NPDC redefined its interpretation of value for money. Its team began looking for opportunities to maximise the added value that partners could create for each dollar spent, including a particular focus on creating positive social,

environmental, and economic outcomes for the Taranaki community.

“As we developed our concept, we had to do a lot of work with our suppliers to develop trust,” says Langford. “We needed to be really clear about why we wanted to behave differently in future and the outcomes we were hoping we could achieve.”

“We have transformed our relationship with suppliers from a dysfunctional one, to one that allows them to perform at their best, while unlocking numerous value-adds for the community, and we are constantly looking at new ways to do this.”

RETHINKING CONTRACTS NPDC needed to embed a new contract that aligns with its change in behaviours, which saw it adopt NEC4 as its standard form – a contract that helps apply good project management practices, while fostering trusting and collaborative relationships between all parties.

In 2019 NPDC tendered for its maintenance contract, but instead of using ‘Lowest Price Conforming’, it used a weighted attribute system with the most weight given to how the contractor would upskill its current and future workforce.

Other contract changes included: • extending the contract length from one year to ten years – creating stability so suppliers can invest in their business, their subcontractors, and their people • requesting contractors set a maximum of 60 hours per week for its workers to help reduce fatigue • reducing traffic management, such as Stop/Go signs, to remove the risk to workers.

The maintenance contract was awarded to Downer. The ten year term meant the company could significantly invest in the project and its subcontractors, including

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PROCUREMENT

building a $1 million bitumen terminal at Port Taranaki. Previously bitumen was brought to New Plymouth from Tauranga.

By being able to import it to a local port, it reduced the project’s carbon footprint, boosted local jobs, and brought a new resource into the region.

“When NPDC placed health and safety, diversity, and sustainability ahead of cost, what it told us as Downer and the industry is that they really cared about us and they were prepared to invest in our safety and in our people,” says Craig West, Downer’s Executive General Manager of Transport Services.

In 2019 NPDC and Downer began an ongoing trial of using recycled household plastic as a bitumen substitute in road asphalt.

The initial trial saw the equivalent of 83,000 plastic yogurt pots shredded and mixed into the new asphalt road surface.

“Applying NPDC’s supply chain leadership to other major projects you would see a much healthier industry, much more collaboration and a significant change in the outcomes produced in the infrastructure industry about how we meaningfully can contribute to communities, growth of our people and the economic health and wellbeing of our regions.”

A BETTER APPROACH FOR A BETTER TARANAKI Taranaki’s construction sector is worth $400 million per annum to the region but is under-resourced in terms of the available workforce. NPDC’s Supply Chain Leadership approach actively supports the sector by prioritising partnerships with contractors that benefit the wider community.

“Recently we needed to replace a bridge in one of our parks,” says Langford. “Looking at the project from a supply chain leadership perspective, we sought a supplier who was prepared to work with youth on the project to give them a pathway into entering the construction industry.”

NPDC measured the productivity impact of its new procurement and contract

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process on its Dawson Street roundabout project in New Plymouth. Contractors originally bid for the work under the assumption it would use a Stop/Go traffic control. After NPDC awarded the contract, it requested that the successful bidder implement a full road closure and offered to cover traffic control on a cost reimbursement basis.

As a result of this change: • the project was delivered two weeks ahead of schedule (on what was originally a nine-week programme) • costs were reduced by 15%, compared with the original tender price • operators increased labour productivity on the site by 39%, due to removing the non-productive Stop/ Go traffic control (measured as total project cost per person, per hours worked).

A BEACON FOR THE SECTOR NPDC’s innovative approach to procurement was also recognised by the New Zealand Construction Sector Accord. The Accord is a genuine partnership between government and industry that’s focussed on creating a higher performing construction sector for a better New Zealand.

The NPDC’s Supply Chain Leadership project won the inaugural 2021 Construction Sector Accord Beacon Awards. The judges applauded the NPDC for the bravery and leadership it demonstrated in looking beyond price and ensuring that smaller businesses and their people were protected.

“For me success in the future is when we’ve got a good strong culture of supply chain leadership across all government

– central and local – where we’re no longer tendering our work with ‘Lowest Price Conforming’ and having mature conversations about the trade-off between cost and additional value that we can achieve by taking a smarter approach to procurement,” says Langford.

DAVID LANGFORD New Plymouth District Council’s Group Manager

This article was supplied by the New Zealand Institute of Quantity Surveyors (NZIQS).

Using a more collaborative contract form also increased innovation, including a trial to use recycled household plastic as a bitumen substitute in road asphalt. The initial trial saw the equivalent of 83,000 plastic yogurt pots shredded and mixed into the new asphalt road surface.

NPDC has even worked with contractors to use bitumen emulsions as a substitute for traditional bitumen road binders.

The emulsions don’t include volatile and flammable agents, such as kerosene, and can be sprayed at a much lower temperature – typically about 80 degrees Celsius compared to more than 140 degrees for normal bitumen.

This change significantly reduced the risk of truck fires and injuries to workers, and the lower application temperature means less heat energy is required.

NPDC estimates that the switch has reduced its CO2 footprint by about 500 tonnes of carbon per annum.

New Plymouth District Council

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CONSTRUCTION COSTS

HOW DO CONSTRUCTION COSTS REALLY WORK?

BY TONY BEAN MAIQS

This isn’t a fairy story. It happened!

A friend of mine came into a small inheritance. She decided to extend her house and get the kitchen that she had always wanted. She contacted a builder who drew up some drawings and submitted them to her with a quote. The quote was more than she wanted to pay.

“No problem”, says the builder, “we will simply reduce the area.”

extension. The builder kept the original roofline, creating a porch 4m x 4.5m in size, saying that it was easier to continue the original roof line, rather than cutting in valleys or creating half gables. He discounted his original quote by 40% in proportion to the area created. He also created a deck under the porch at a minimal additional cost.

What had been a simple 8.5m x 4.5m extension became a 4.5m x 4m

The result was that my friend wound up with an ok kitchen, but it felt cramped

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because it was surrounded on three sides by walls. It would have been much better if the kitchen overlooked a family room, creating an impression of space around it, as had been in her original proposal.

The builder went away wondering why he didn’t make any money on the job.

He had always priced on $x per sqm for extensions, but this one didn’t make any money, why?

CONSTRUCTION COSTS

a. relocation of existing services b. external services such as electricity, sewer, and stormwater c. kitchens, bathrooms, laundries, WCs, etc, including the cost of HVAC. I also include the cost of wall tiling to kitchens, bathrooms etc in this category.

3. Demolition and making good.

4. Perimeter costs – distance around the outside of the building.

5. Area costs – size of the building.

6. Corners – there is a cost associated with the cost of the complexity of the footprint of every building.

7. Internal walls – including doors, robes, etc.

8. Other costs such as the cost of joinery and internal stairs.

9. External works – retaining walls, fences, gates, driveways, sheds, clotheslines, and so on.

4500

KITCHEN

KITCHEN

KITCHEN

KITCHEN

DECK

DECK

8500 FAMILY ROOM

10. Margins and contingencies.

FROM THE ABOVE, DID THE BUILDER REDUCE THE COST OF THE BUILDING?

8500

4500

8500

4500

8500

4500

FAMILY ROOM

REVISED PROPOSAL REVISED PROPOSAL ORIGINAL PROPOSAL ORIGINAL PROPOSAL Image 1

As soon as we start to talk about the cost of construction, we immediately start to think in terms of cost per sqm of construction. This can lead to some bizarre results like the one above.

BUILDING COSTS ARE MADE UP OF SEVERAL DIFFERENT COMPONENTS: 1. Fixed costs and time-related charges.

2. Services and service areas:

• There was no saving in the time that he took to build the extension. Rather, it would have cost him slightly more because he added another activity, building the deck, but he got paid for that.

• There was no change to the services.

• There was a slight change in the extent of the demolition, but the cost remained about the same.

• He reduced the perimeter of the external wall by 4 metres, but his costs in making good offset any savings he may have made.

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 47

CONSTRUCTION COSTS

• He reduced the area of the building, but not the cost. He retained the shape of the roof as in his original proposal, so the cost of the roof trusses and sheeting, plus the cost of the soffit lining did not alter.

• There was no change in the shape of the roof over the original proposal. If he had altered the shape of the roof and not created the porch, he would have incurred increased costs.

• There was no change in the internal walls.

• Joinery costs remained the same.

• There was no change to external works.

• He sacrificed his margin because he believed that he could always build at a certain rate per sqm.

DID HE REDUCE THE COST OF CONSTRUCTION? No. The only reason he reduced his quote was that he firmly believed that cost was somehow related to the area and no other factor.

I discovered this way back when we used the dimensions off drawings and scale rules to measure things. I needed to speed up the measuring process, so I started using take-off sheets. I built up rates for each of these items and used the formulas behind them as a template for my estimates. Nothing ruins an estimate as quickly as leaving something out.

I still use these allowances when I am providing an opinion of probable cost for building designers at concept drawing and preliminary sketch plan stage. Estimates are only educated guesses. If you use one parameter to determine construction cost, your guess will be either too high or too low. If you use 10 parameters, your guess will be 10 times more accurate.

Estimates need to be refined during the design process. When this happens, the

client can get what they want for what they are prepared to pay. If this does not happen, then the question of cost is left until the job goes out to tender and the bids are received. It is at this stage that about 30% of domestic projects are either ditched entirely or go back to the drawing board for review.

THESE ARE MY FORMULAS FOR EACH COST ITEM FOR A SINGLE STOREY HOUSE: 1. Fixed Costs: Surveying, site sign, small tools, delivery, certification fees, final clean, temporary supply connection, site establishment tip fees, and hopper hire.

2. Time-Related Charges: Portable toilet hire and clean, wages and salaries including site managers, administrators, foremen, leading hands, apprentices plus an allowance for non-productive time for carpenters and other directly employed trades.

3. Services 1: Plumbing permit, gas connection and meter, electrical switchboard, relocation and/or diversion of existing services, cold water connection, underground power, sewer, stormwater, agricultural line, sumps, strip drains, water tanks and pumps including concrete pads and sewerage systems.

4. Demolition: Demolition and making good.

5. Measured Separately: Bulk excavation, internal footings, piering, retaining walls, structures below floor level – base brickwork etc., sub-floor door, verandahs and soffits, party walls, skylights, scaffold, hoisting, lifts, and hoists.

6. Perimeter: Perimeter footings, eaves, termite protection, external brickwork, damp proof course, wall frames, frame and pre-sheet carpentry, skirting, cornice, insulation, sarking,

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plasterboard, cornice, external and internal wall finishes, windows, garage doors, external doors, fascias, gutters, and barge flashings.

7. Area: Floors, both timber and concrete, building permit, contract works insurance, home owners warranty insurance (equates to a cost per square metre), ceiling insulation, ceilings, painting, light and power points, roof trusses and structures, roof cladding, soffits, floor finishes (measured separately), corners (building geometry) structural steel, hips, valleys, gables, soaker flashings, etc.

8. Internal Walls: Skirting, cornice, wall frames (including labour), plasterboard, internal doors, robes, and robe fit-out.

9. Services 2: Smoke detectors, external taps, stacks, light fittings, security systems, fixtures for kitchens, bathrooms, ensuites, laundries, toilets, solar systems, and heating (including HVAC, ceiling fans and bathroom fan/heater/lights, fireplaces, and hot water services).

10. Other Costs: Kitchen joinery, vanities and mirrors, wall tiles, and internal stairs.

11. External Works: Decks, balustrades, posts and columns, pergolas, steps, paving, fences, etc.

12. Landscaping: External masonry, swimming pools, sheds and detached garages, external lighting, letterboxes, clotheslines, etc.

13. Margins and Contingencies: Contingency, margins, and GST (if not included in prices).

This list is comprehensive but not allinclusive, there will always be something that estimators have not experienced before but that the client just must have in his castle.

DISASTER RECOVERY

SKILLS

BY KAI RALA MCKINNON-BARBOSA With changes being driven by the advancement of construction technology, digital tools, procurement strategies, what is the role of a quantity surveyor in disasters?

My interest in using the skills and knowledge of the construction industry for disaster recovery stems from my experiences growing up in the top end of Australia. The threat and result of damaging cyclonic storms were a constant backdrop.

Many projects that I have been involved in throughout my career have comprised of reconstruction or resilience buildings including the costing of rapid-build housing to replace lost stock in remote communities, and lifecycle costing studies that looked at construction methodologies and materiality options in providing long-term alternatives to mass evacuations and annual rebuilding. Whilst studying at the University of Newcastle, I was fortunate enough to travel to earthquake-stricken Nepal in 2017 to design and document house reconstruction in a remote village and investigate sanitation solutions for a school with Healthhabitat, an Australian charity.

The 2019-2020 summer fires touched close to home for many Australians.

Many houses burned and people became

trapped on the New South Wales south coast as the fires raged. 17 million hectares across Australia were affected by bushfires that season.

These experiences have highlighted to me that the knowledge and experience of individuals with specialised skills such as quantity surveyors can play a valuable role in disaster affected communities.

Climate-related disasters are going to become more common with the growing need for decision-makers to have access to valuable advice. Seeking this advice from trusted sources will become a necessity in making informed policy and investment decisions. As built environment cost professionals, quantity surveyors can offer valuable input into the budgeting requirements for reconstruction and estimating the cost that devastation from disasters can inflict on a community.

My Honours research showed that there is an absence in the utilisation of the skillsets of the quantity surveyor in disaster recovery, therefore decisions are driven by other sources of data. Take for example, insurance data which provides a gauge of the devastation of a disaster.

However, this only takes into account the payout or commercial cost of a disaster for those built assets that are correctly insured and who’s policy conditions have been met. How are the reconstruction

costs of properties that are uninsured or underinsured going to be estimated?

Providing accurate advice on the cost of reconstruction presents as an opportunity to develop analytical tools that broaden cost benefit analysis frameworks. These tools may help inform wider disaster mitigation and capacity building in communities to cope with the effects of disasters. For example, undertaking research incorporating geospatial and statistical information to yield a deeper understanding of the cost factors. If these tools can be applied to benchmark construction costs in a similar manner to replacement cost assessments, then the quantity surveyor could provide value to decision-makers.

The skills of the quantity surveyor can add value to decision-makers and recovering communities, but it requires further research and input from resourceful quantity surveyors as well as disaster recovery experts. I hope this piece sparks an interest and I look forward to discussions in the future as we deal with this changing world.

This is article has been written by AIQS Student member, Kai Rala McKinnonBarbosa who works as a Project Surveyor at Rider Levett Bucknall.

BUILT ENVIRONMENT ECONOMIST: DECEMBER 2021 - FEBRUARY 2022: 49

BCI

BUILDING COST INDEX

DECEMBER 2021

THE BUILDING COST INDEX IS PUBLISHED IN THE PRINT VERSION OF THE BUILDING ENVIRONMENT 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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ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS

Level 3, 70 Pitt Street, Sydney, New South Wales, Australia 2000 +61 2 8234 4000 www.aiqs.com.au