Built Environment Economist - Australia and New Zealand December 2022

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

ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS

The past 12 months have seen a number of issues befall the construction sector, and the quantity surveying profession in particular. At the beginning of the year, we emerged from under the COVID-19 cloud and war erupted across much of Ukraine’s borders. Coupled with continued lockdowns in China, this has

had a dramatic impact on the supply of construction materials world-wide, impacting virtually all construction projects across Australia.

Consequently, we have seen rise and fall (escalation) provisions appear in construction contracts for the first time in some 25 years. Going forward we will

likely see escalation provisions for quite some time.

In addition to supply chain shortages impacting construction materials, shortages of skilled quantity surveying professionals is impacting the ability of many firms to deliver services. With the lifting of COVID-19 restrictions

we have seen a significant increase in skilled migration applications over recent months which should (over time) assist with addressing some of the skills shortage.

Closer to home, AIQS is engaging with career advisors and participating at career expos around Australia to promote the benefits of quantity surveying as an occupation for school leavers. Insufficient numbers of school leavers taking quantity surveying as a career has fluctuated in recent years. This is impacting the viability of many quantity surveying courses to the point where there are no-longer any pure quantity surveying undergraduate courses. Going forward it will be critical to drive an increase in school leavers undertaking quantity surveying tertiary qualifications with the ultimate aim of having a number of undergraduate quantity surveying degrees.

AIQS has undertaken a major review and rewrite of the Australian Cost Management Manuals (ACMM) with the suite of documents being consolidated into two volumes. Volume One now incorporates much of the content from the previous volumes (1, 5 and 6) which has been significantly updated. New sections on procurement, contingency allowances, mapping to the ICMS, and pricing risk have been added. Most of the content from the existing Volumes 3 and 4 (life cycle costing and evaluation of sustainable development) have been excluded, with new material to be incorporated into a subsequent edition under a section on life cycle costing (which will also incorporate material on quantifying embodied carbon). Volume 2 of the ACMM retains the elemental codes with the addition of chilled beams and itemising of special provisions (YY Codes).

The Australia and New Zealand Standard Method of Measurement (ANZSMM) has

also been updated and now includes new sections on signage and pest control. Both the ACMM and the ANZSMM will be published in December 2022.

Other publications to look out for in 2023 include information papers on contract administration, residential tax depreciation, acting as an expert witness, establishing retirement village capital replacement funds and maintenance reserve funds, and a suite of infrastructure-related information papers (measurement, cost planning, procurement, and provisional & PC sums).

We have recently established a Resources Committee, based in Perth, as a mechanism to better engage with quantity surveying professionals working across the resources sector. As most resource projects in Australia are developed using bespoke measurement methods, one of the first initiatives for this Committee will be the development of a Standard Method of Measurement for Resource Projects.

An Embodied Carbon Committee has also been established to develop guidance documentation defining, measuring, quantifying, and reporting on carbon in construction projects from inception through to completion. AIQS is working in collaboration with the GBCA, NABERS, and other industry participants to deliver information to our members and their clients.

With a current strategic goal of being recognised as the pre-eminent brand in the industry, AIQS engaged a public relations firm to assist with raising the profile of the quantity surveying profession. At the time of writing, over 20 articles relating to quantity surveying have appeared in various publications, the most recent (10 November) being a half-page in the SMH and Brisbane Times on quantity surveying as being ideal for

those wanting to build a career.

In addition, AIQS’s Linkedin page has been growing steadily to 16,115 followers at end October which is used to announce new members and CQS, promote our events and membership offerings, publications, industry news, and attract, on average, two CVs per week from professionals interested in AIQS membership.

In November, an Executive Officer was appointed to assist in driving engagement across the construction sector in Queensland. Phillip Charlton will play a critical role in raising the profile of the quantity surveying profession and AIQS in Queensland through regular engagement with members, members firms, government agencies, developers, financiers, construction firms, and other stakeholders.

We have planned a significant increase in member and other stakeholder engagement events around Australia for 2023 and I hope you will be able to fit some of these into your extremely busy work schedules.

Wishing you all the best over the upcoming Christmas season and the New Year.

GRANT WARNER

CEO

Australian Institute of Quantity Surveyors

WHY IS IT IMPORTANT FOR A QUANTITY SURVEYOR TO BE BROUGHT IN AT PROJECT INCEPTION?

ANGELA IRGA MAIQS

A QS's main role in the precontact stage of any construction project is to provide accurate and timely cost advice. This ensures that clients are best placed to make decisions regarding their project.

QS's advice during the precontract phase can arguably affect a projects size, shape and material qualities. In addition to this the QS's main function and role during this phase is to:

- produce client budgets that are practical and based on current industry benchmarking

- keep design team members on task and keeping a tight control over design decisions that could impact costings of a project

- liaise with suppliers and installers to ensure cost advice is current and accurate

- provide clients with the best advice on procurement strategies to ensure value for money can be achieved

- initiate VE to give clients opportunity to save money on design where required

- identify any cost risks for a project and advise on potential risks post contract that could arise and ways to eliminate these risks prior to potential occurrence.

Ultimately the above is vital for the success of any construction project.

WEIR MNZIQS

While there are other reasons to involve a Quantity Surveyor at inception, by far the most important reason is the introduction of a reality check on budget. Given sufficient information on basic structure, proposed materiality, and external works (an often-overlooked element) a Quantity Surveyor with estimating expertise will be able to produce a preliminary budget estimate to inform the client and design consultants on the approximate likely cost.

I continue to be surprised at the number of Architects and designers who take on the risk of providing initial estimates themselves. I would suggest that an estimate from an experienced Quantity Surveyor is far more likely to be reliable than an estimate from a design processional although I accept that some Architects and designers, some I have worked with, have a very good feel for costs. I totally get the fact that Architects and designers are concerned about the fact that reporting a realistic estimated cost to the client at inception can kill a project at birth.

My experience is that a Quantity Surveyor can assist by partnering with the designer to reduce costs through value engineering to make the presentation to the client more palatable to keep the project viable.

Having our clients’ interests front of mind is a guiding principal.

DAVID

It is important for a Quantity Surveyor to be brought in during the projects inception as they help to ensure there is proper contract and cost control on the project. This guarantees details relevant to the client’s brief can be reinforced throughout the projects lifecycle. Without doing this, the client silently haemorrhages money in phases of the build. Such phases include, the design, tender and the construction process. Due to having no construction cost manager being able to advise them, the most efficient way to proceed with the project becomes undefined.

Quantity Surveyors help regarding procurement, tendering, contract, and construction technique selection to ensure that the most efficient and effective practices are engaged. Ultimately achieving the client’s brief to the highest possible standard. The further down the construction process a quantity surveyor is engaged, the greater amount of these silent damages will be incurred. The client losses the ability to control cost through construction and design if a quantity surveyor is employed too far down the construction path. Making it more difficult to achieve the works within the original budget.

To save on these additional costs, clients need to engage qualified Quantity Surveyors as early as possible. This will ensure that they have as much ability as possible to ensure value for money throughout the project lifecycle.

PLATT MNZIQS

Ensuring a Quantity Surveyor is involved in a project from inception is imperative to the financial success of a project.

At the inception of a project, the Quantity Surveyor can assist the developer or asset owner to set a realistic project budget that aligns with their brief. This project budget incorporates all projectrelated costs, not just those solely related to the construction-side.

Once a project budget is set, the feasibility of the project can then be determined early on, which reduces the risk of sunk costs that would have otherwise been incurred had the design progressed without a Quantity Surveyor’s financial nous.

The budget that is set at inception can be used by the Quantity Surveyor and project team to ensure that the design that is developing sits within the framework of that budget. This is where the Quantity Surveyor can provide sound cost advice through value engineering processes and cost checks throughout the design phases.

Furthermore, involving a Quantity Surveyor at inception can assist the developer or asset owner in gaining the funding they call for to undertake the project. Often financial institutions require a report from a respectable Quantity Surveyor outlining the project costs and any risks associated with this; having a Quantity Surveyor involved from inception provides the bank with more confidence in the project and increases their ability to lend.

I am firmly of the opinion that a Quantity Surveyor is probably best suited to give a Client early advice on cost planning, feasibility, and cost-in-use advice at the earliest stages of project inception.

I started my career in Quantity Surveying in the early 1970s at a time when this type of advice was given as part of the fee which was set by the NZIQS at that time. We relied on our own records and public reference material (generally issued by the Ministry of Works) to formulate our advice. Now, with computerisation, this data can easily be recorded in house and be much more readily available, which enables Quantity Surveyors to give more accurate forecasts of what the project will ultimately cost, including inflation over the design/construction phase, running costs, maintenance, and depreciation costs during the life of the building. This is information that the Client needs, before he finally commits to property purchase, resource and building consents and design fees.

Now that fees are generally quoted for each stage of the project the client may feel that he doesn’t need advice initially on feasibility, but I would argue that it is money well-spent!

JOHN BARBER MNZIQS

BOB MADDEN MAIQS, CQS

DANIELLE

EMOSI LUTU MNZIQS

Early involvement means that the cost consultant is fully aware of the project and its proposed outcome from the start.

To ensure that good communication between the developer, designers, the cost consultant and others are maintained thus I believe that an early input into any project is advantageous to all.

The most valuable information a cost consultant would be able to preen from early inception is an overall appreciation of the project. It is not the cost consultants prerogative to comment on the feasibility of project though he may have reservations in regard to the same and would be available to answer the developer queries if necessary.

An early engagement between the designers and the Cost Consultants will be an advantage to the Client to ensure that the overall cost is approved. I note that if a budget is not adequate the decision to adjust can be taken at that time prior to major input of design and fee costs. A project budget can only be adjusted by the Client. Alternatives may be recorded at this stage to ensure that the budget can be met.

When the project has multiple phases, it may lead to possible early preparation of:

• the site

• earthworks

• demolition

• piling

• foundation

• services connections etc.

And also, to understand why an element needs to be included at a greater size than necessary for an early phase i.e. MSB/Fire Systems/BMS/etc.

Generally, Lead Consultants are able to advise on restrictions or problems concerning any project and are also able to advise on contracts or bidding but the input by the expert cost consultant may highlight a situation previously not considered by the lead consultant for which due consideration should be made.

Most Clients are sympathetic to any advice given by an experienced construction expert.

If the cost consultant is brought into the project scenario at an early stage, he can influence any developer in regard to end cost and other relevant issues. Proof of his thoughts would need to be substantiated by others and approved by the developer.

A disadvantage to a late appointed cost consultant may be the lack of reasoning that the development group may have prior to their involvement and is subsequently not detailed hence not understood.

ATHAPATHTHU MAIQS

The inception phase is the very first stage of a project, which is crucial to transfer a client’s strategic business decision into implementation of a project. A Quantity Surveyor is a professional who provides a range of services throughout the lifecycle of a construction project, including cost, contract, commercial and procurement management. The early involvement of a Quantity Surveyor at inception stage of a construction project will result in considerable cost saving to a client by reducing the construction and maintenance costs.

The identification of a client’s requirements and the development of the business case are the primary activities at project inception stage. A Quantity Surveyor with adequate engineering and architectural knowledge can be part of the client’s team to develop the client’s brief. A Quantity Surveyor will also establish an authorised budget based on an order of the cost estimate. Establishment of a realistic budget at project inception stage will ensure that the cost of the project will be monitored and controlled throughout the project while achieving the value for money.

The Quantity Surveyor may also, without limitation, engage in other activities during project inception stage such as feasibility studies, development appraisal, design economics and procurement strategy, etc. Hence, the engagement of an experienced quantity surveyor who can add value to a project at the outset is vital for successful project completion by meeting its objectives including time, cost, and quality parameters.

KUSHANI

By Marty Sadlier FAIQS, CQS

Property underinsurance is not a new phenomenon. Research over the years has shown that as Australian property owners, we just do not get it.

Under insurance is deemed as at the time of an event or loss, the insured amount of the property was in fact only 90% or less than the actual cost required to replace and reinstate the property. This percentage can vary from insurer to insurer; however, the vast majority declare that 90% is the boundary in which constitutes underinsurance.

It has been reported during 2021 that some 83% of properties are consistently underinsured in Australia, with very little change to this figure over 20 years of reporting.

This statistic is based on actual claims and payouts.

Given the current pressures within the property market and more to the point, the construction industry, the percentage of underinsured properties would have risen to closer to 90%, than the 83% reported to the industry during 2021.

These pressures have only exacerbated the discussions around underinsurance and the levels of non-insurance in Australia at present. These discussions have critiqued the current ‘widely accepted’ practices that insurers, brokers, and property owners have implemented with the use of valuers reports and online cost calculators to determine construction costs. Coupled with the astounding lack of CPI and BPI implementation when determining property replacement costs.

The current construction landscape and property scarcity has once again raised the correlation between housing affordability, lack of housing options and rental cost increases to that of the crippling homelessness rates in Australia, of some 1 in every 200 Australians.

INSURANCE

The Australian Financial Complaints Authority (AFCA) received more than 300,000 complaints in its first four years of operation. AFCA started operation on November 2018, with AFCA ruling in the favour of complaints and consumers to the sum of nearly $900 million in compensation and refunds.

During the last financial year (2021-2022), AFCA saw a dramatic rise in insurance complaints, with the top four insurers accounting for around 9,400 complaints, up 19% from the previous financial year.

The history of property underinsurance in Australian is not a pretty one. A poor indictment on property insurance industry and a reflection of poor practices, naivety, insecurity, and lack of education over the year, by all and sundry. From consultants, brokers, underwriters, and the property owner themselves.

Use of online calculators, valuation tools and trying to fit the best square peg in a round hole has seen a truly disastrous approach to providing confidence to the property owner when it comes to ensuring that property insurance is adequate, adequate not only in the current market, but adequate in a market in which the property will actually be rebuilt and as such, when the cost of the reconstruction is born by the property owner.

More commonly coined, cost escalations, a vast number of property insurance issues pertaining to underinsurance, are experienced due to unfortunate event that a settlement in reached by the insurer and property owner in the current market, not in fact in the 12-18 month later when the property owner will be signing contracts for the new build.

A snapshot of the history of property underinsurance, briefly, resembles a shambles to say the least.

• 2004, consumers responding to the Australian Securities and Investments Commission (ASIC) ACT bushfire survey, 2004, found that the level of under-insurance in Australia was high. In fact, some 81% of consumers were underinsured by 10% or more.

• In 2005, ASIC, issued a report titled “Getting Home Insurance Right”. Within this report, ASIC concluded that many insurers were helping consumers estimate rebuilding costs by using web-based calculators. ASIC found that there were significant inconsistencies in the figures generated by these web-based calculators, with the largest gap recorded was some 125% between the lowest and highest estimate.

• In 2007, CPR Insurance Services, finalised a report based on CGU Insurance that found 83% of businesses have inadequate building insurance.

• 2012, Life Insurance Finder, noted that under-insurance is common in Australia. It concluded that Australia belonged to one of the most underinsured nations.

• In 2020, Canstar Research, reported that the Insurance Council of Australia noted that underinsurance is a prevalent issue in this country. So prevalent that they found that underinsurance was now at 83% of households.

Natural disasters and ultimately large insurance payouts to property owners over the length and breadth if the country has seen premiums increase across the board for property owners. Previously small postcode bordered embargoes have crept into larger local government areas and now state based increases.

Where in the past a large hail stone event would see all premiums in a certain postcode area increase with renewals, we see the exposure to insurers increasing and their need to recoup from their client base on a much larger scale.

The Insurance Council of Australia has quoted “In many cases, underinsurance is brought about from a lack of awareness of a number of elements, including owners not being aware of current rebuild costs to replace their property or contents, forgetting to update their policies after renovations and home improvements, or choosing a lower sum insured to reduce their premium.”

LEVELS OF NON-INSURANCE

These increased premiums and reduction in competition as underwriters leave the market have resulted in the increase of non-insurance in this country.

It was reported in 2006, two major insurers independently estimated that around 15% of households do not have home building insurance.

Fast forward to 2021, according to the Australian Bureau of Statistics, about 2.44 million Australian households have no house and contents insurance - that is 23% of all Australian homes. The report

Use of online calculators, valuation tools and trying to fit the best square peg in a round hole has seen a truly disastrous approach to providing confidence to the property owner …

found that the presence of on insurance was closely correlated to indicators of financial position.

A common theme shows those on lower incomes (including homeowners) are less likely to have both building and contents insurance. Of concern is that there are many non-insured who are greatly exposed in case of a loss. For example, although the rate of non-insurance is much lower for those with mortgages it is still significant.

The findings also showed that groups that come from a lower income sector are more likely to be non-insured. Noninsurance is also closely correlated with many demographic variables including life-stage, age, location, education, and country of birth.

In summary, the report found that noninsurance tends to be associated with those:

• at earlier stages of life

• living in cities and in particular regions within cities

• born in non-western countries

• in particular ‘value’ segments

• with lower levels of education

• without full-time work.

The approach to property insurance in Australia needs to change. Wholistically, across the various platforms and providers, from brokers, underwriters, quantity surveyors, and property owners.

We need to change the practices that we have been told in the past. This is our challenge. As humans, we prioritise our decisions on risk, price, possibility, exposure, and education.

CURRENT WIDELY ACCEPTED INSURANCE PRACTICES

Over the years, a valuation by a valuer has been deemed an appropriate measure of construction cost, or in this instance, the replacement value of a property, to the detriment of the industry and the insured party. The valuer’s job it is to estimate the value of something that is to be purchased. The mere fact that many valuers’ reports, when providing an opinion on the replacement value for a client’s property, is supported by a disclaimer under the figure to this effect:

Valuer 1:

“Due to the impact that any variation of construction costs has on the development……we recommend that (client name) …..obtain a quantity surveyor report to verify the costs outlined within this report. Should the quantity surveyor report determine a construction cost that materially differs from that adopted, we reserve the right to review and amend this valuation”

Valuer 2:

“It is recommended that expert advice from quantity surveyors be obtained if considered necessary in relation to the construction specifications and costs to ensure the proposal comprehensively covers the proposed specifications and scope of works and that the estimated construction cost is sufficient to complete the project”

Valuer 3:

“In regard to the Insurance Replacement Cost estimate, the valuer is not a quantity surveyor and will rely on published building costing

guides to arrive at the opinion of the re-instatement value. Should there be any concerns regarding this indicative approach you should seek the services of a quantity surveyor”

Whilst noting the shortfall these valuers reports and the express use of online cost calculators directly expose the property owner too, it must be said, why is it that the insurance industry has, over time, relied on these reports and practises?

Given the greater construction industry does not rely on these practices, in fact:

• no builder uses a cost calculator to work out how much he is going to tender for a build

• no developer uses a cost calculator to select a builder to use

• no bank uses a cost calculator to fund a development

• no bank, no builder and no developer uses a valuer to determine these either

• they use Certified Quantity Surveyors.

Moving forward, the best approach is to use a certified quantity surveyor (CQS) to calculate the amount of materials needed for building work, level of labour and how much they will cost – both in the current market and at the time of reconstruction (forecasting/escalation).

INACCURACIES OF ONLINE COST CALCULATORS

As noted previously, the once widely prolific use of online cost calculators on insurance websites was and is, fraught with danger. Misleading and carefully disclaimed, almost verbatim to that of the language used within the valuers’ reports.

INSURANCE

Around 17 years ago, in 2005, ASIC found that the level of underinsurance in Australia was high and found that there were significant inconsistencies in web-based calculators. The largest gap recorded by ASIC was some 125% between the lowest and highest estimate. What has changed through time up until today? Seemingly not that much.

In the absence of a published update by ASIC, whilst endeavouring to establish change and that improvement would have been made by these calculators, I felt it necessary to conduct a revised review of the accuracy of cost calculators for the use of establishing and determining replacement values for property.

This replacement value of the base report (BoQ tender cost) was $668,559, analysis of the review concluded the base report was a much larger cost than the online calculators estimated the value as.

The lowest value calculator: $226,160. The highest value calculator: $535,000. That is a 137% variance between the highest and lowest cost calculators and the highest cost calculator was some 25% less than our estimate.

Interestingly, when asked recently to provide an update on the accuracy of the cost calculators this year, on my review of them last year, three out of the five insurers’ websites, no longer had the cost calculator on their website.

COST ESCALATIONS AND PROPERTY UNDERINSURANCE

1. time required for insurance underwriters to evaluate, review, assess and conclude their approval or amended valuation and or settlement

2. time required for design and engineering

3. time required for authority approvals, both council and planning authorities

4. time required for tender analysis and selection of successful building contractors.

So, this then modifies the development cost to reflect what today’s cost would be to what it would be forecasted to be in say 15 months’ time.

CORRELATION BETWEEN HOMELESSNESS AND PROPERTY UNDERINSURANCE

In 2020, five different online replacement cost calculators (from insurance brokers and underwriters’ websites) where used to determine the replacement value of a residential home in Airds NSW (base report). The construction cost of the base report was established by a Certified Quantity Surveyor via a Bill of Quantities (BoQ) for the purposes of a tender review. This base report and its build methodology, construction layout was then used to compare the 5 different cost calculators. The variances are staggering. Not only do these calculators underestimate the construction value, they also do not include an allowance for the demolition of the existing structure and removal of debris from site, they also do not include for cost escalations or consultant’s fees.

When calculating the replacement cost of your property, you must include cost escalations. Why, because what something costs today, is not what that same item will cost the in the years to come, and likewise is was not what it would have cost 10 years ago.

The true replacement value of the property and to avoid underinsurance is to calculate the replacement construction cost of your property, with the addition of the costs for consultants, site works and demolition. This gives us the total development cost, the cost it will be in today’s market.

To this development cost (construction cost + consultants + site works + demolition) a requirement to then apply cost escalations to ensure that the development cost is appropriate to the time scale in which it will be rebuilt.

Likely factors to affect the cost escalations of a property for replacement value are:

It has been reported time and time again that the aftermath of a natural disaster is not just the massive cleanup and remediation of the areas. The sudden, and at times, vast loss of property results in the soaring costs of material supply and demand and ultimately construction costs, increases in rental costs and the decreased availability of property.

Given the three years we are facing of floods in Australia, with the ongoing effect the La Nina, vast amounts of property are now removed from the ‘available status’, whether as a rental or as a principal place of residence. Coupled by the lack of stock, lack of operational commercial property for business to generate incomes and production is contributing to the construction cost increases in Australia and the inability to commence reconstruction with material delays, labour shortages and extended construction programs with limited competition for rebuilding.

When calculating the replacement cost of your property, you must include cost escalations.

This lack of competition is a result of many construction facing firms leaving the industry for good. As an example, during the 2021 financial year, 3917 Australian firms were placed into either administration or liquidation. Staggeringly 28% of those firms were based in the construction industry. Only further impacting the construction costs and lack of competition and delays to construction programs.

After the event of cyclone Katrina in the US, (where over 200,000 homes were lost), the average rental price doubled.

Homelessness in Australia is an urgent and growing problem. On any given night, 1 in 200 people are homeless. The key drivers of homelessness include domestic violence, the high costs of housing, the inadequacy and inappropriateness of existing housing stock, and the discharge of people from institutions who do not have safe, stable, affordable homes to go home to.

Housing Consumer Price Index (CPI) increases have consistently exceeded increases in overall CPI in Australia.

It is my belief and one of many, that housing is a human right. It is fundamental to people’s current lives and their futures. Where housing is safe, secure, affordable, and appropriate, it gives people security and a sense of belonging and is a strong predictor for many other positive outcomes.

It is now known that of the many various forms of homelessness in Australia, when taking into account the property scenario of these people, being:

• persons living in 'severely' crowded dwellings

• persons living in boarding houses

• persons staying temporarily with other households

• persons in supported accommodation for the homeless

• persons living in improvised dwellings, tents, or sleeping out.

All these categories are connected and intertwined with the high levels of underinsurance in Australia. If property owners are unable to equally, rebuild in a timely manner, or unable to rebuild to the same standard due to underinsurance, or unable to rebuild at all due to underinsurance, we are only providing more scenarios and pressure manifesting the homelessness rate in Australia.

The stark reality is that many rental properties will have been destroyed. There is already a tremendous supply and demand for rental properties, without the added demand for emergency housing.

Rental properties will just not be available for these homeowners that have lost their properties. With interest rates being so low, in most cases, homeowners will need to be paying much higher rates for rental fees as compared to mortgage repayments. This will see an exponential rise in homelessness for both homeowners that are insured and also uninsured. Many homeowners will not only be homeless but unemployed. Many businesses will not survive the rebuild process and the triple whammy will be homelessness, unemployed and uninsured. For the homeowner that wishes to stay local, finding a rental, keeping a job will be difficult.

This will drive construction costs up and further construction programs to creep further out.

WHAT’S GOING HAPPEN WITH BUILDING COSTS

Anyone trying to build a home recently has run up against a monstrous problem

– there’s been an extraordinary blowout in costs since mid-2020.

A big part of the problem is demand. The ABS released its February 2022 data on building approvals for detached and multi-units covering all states and territories. Here are some salient quotes from the ABS:

“Multi-unit approvals were up by 17.9 per cent in 2021, recording almost 78,000 approvals for the year.

“This is an encouraging sign that apartment construction will return prior to the return of overseas migration.

“Building approvals for detached housing also remained elevated at the end of 2021 to produce the strongest year on record.

“There were over 150,000 approvals for detached homes 2021, 26.0 per cent up on the previous year and 11.0 higher than the previous calendar year record set in 1988.”

So, slowing down the titanic force of demand will take time. Given all this, what’s else is driving cost increases and when will a sense of normalcy return to construction?

Supply chain

The ability to secure supplies in a timely manner and at a reasonable price was blown out of the water by COVID. Overseas manufacturers had to close their doors to protect staff health. Australia’s domestic production of construction materials is simply inadequate for meeting national demand.

Another element is freight difficulties. The cost of a container has pretty much trebled in the past year or so as shipping numbers ground to a crawl.

INSURANCE

It feels entrenched, but things will ease eventually. As our COVID recovery slowly filters through, supply chains will gradually crank back to normal. Subject to a few unknowns – such as future variants and the resilience of our trading partners –current expectations that by year’s end supply chains will speed up substantially and we will probably be running at near pre-covid levels by mid-2023.

Government stimulus

Government stimulus saw huge demand for new-build property and vacant land in 2020 and 2021. The Homebuilder grant was designed to stimulate the construction industry… and it did just that. Of course, this stimulus has ended, and is probably having limited impact on material and labour costs now. That said, there’s still assistance out there – particularly at state level for first homebuyers. But, overall, I think the effect of stimulus on demand and costs has faded dramatically in recent months.

Established property prices

The runaway cost of real estate in the recent year has resulted in many sellers changing their construction plans. While some localities are reporting the rate of price growth has slowed, others (e.g., Southeast Queensland) say the pace is picking up again.

Homeowners in many jurisdictions chose to improve their existing home through renovation and extensions, rather than upgrading into another new property. This has added to demand for labour and materials.

The renovation wave will continue for a little while yet, although increased costs will dampen enthusiasm to some degree. Expect it to continue to influence costs throughout most of this year and into the next at least.

Lack of labour

The need for contractors and materials has tied up construction resources i.e., supply is low, while demand is high. In this free market of ours, builders have been increasing their margins, if possible, while some entrepreneurial tradies are probably trying to make hay via inflated quotes while they can.

Meanwhile several builders have gone broke because they signed fixed-price contracts before the cost boom. As their projects progressed and costs ramped up, they found themselves falling further and further in a hole until, eventually, they were going to make a financial loss by completing their builds. Under those conditions, it’s smarter to close the business than continue working.

The fallout of this is less builders available in the market – so even less supply vs. strong demand. That said, the market has a way of sorting this out. Things will self-correct throughout this year and into the start of 2023.

Marty Sadlier FAIQS, CQS is the Founding Director and Owner of MCG Quantity Surveyors

UNDER THE QUANTITY SURVEYING UMBRELLA

Did you know that 100+ job titles sit within the quantity surveying profession?

In this edition, we explore the numerous job titles and associated key responsibilities that are within the Building and Infrastructure sectors. In future editions we will cover the Utilities and Resources sectors.

QUANTITY SURVEYING

BUILDINGS SECTOR

JOB TITLE KEY RESPONSIBILITIES

Commercial Manager A Commercial Manager is responsible for overseeing and managing the finances of a project as it progresses. They are typically the head of a commercial team, overseeing the work of quantity surveyors, estimators, and planners.

Contract Administrator

Contracts Manager

Cost Consultant

A Contract Administrator develops, negotiates, and evaluates company contracts. They are charged with ensuring that both parties are complicit with the terms of the contract, as well as ensuring that all payments are in accordance with the contract abide by any relevant laws.

A Contracts Manager assists in the tendering process for projects; executes deliverables of client contracts; and monitors, manages, and reports on commercial and contractual governance across projects.

A Cost Consultant provides estimates and advice regarding the cost of construction works and provides estimated costs on the future (life cycle) costs the asset will incur.

Cost Manager A Cost Manager is an integral part of a construction team. The Cost Manager is concerned with projecting and managing the expenditures of a construction business, monitoring finances, and identifying potential cost risks to prevent spend over budget.

Cost Planner

A Cost Planner investigates financial feasibility in the early stages of a proposed project and throughout the design stages. This assists clients and contractors in determining whether a project is feasible within their time and budget constraints.

Estimator

An Estimator quantifies the materials, labour, and equipment needed to complete a construction project. This includes the process of forecasting the financial and other resources needed to complete a project within a defined scope. They account for each element or cost breakdown required for the project—from materials to labour—and calculate a total amount that determines a project's budget. Note that Cost Estimators also work with Product Suppliers.

Loss Adjuster/Assessor

MEP Quantity Surveyor

Procurement Manager

Production Estimator

Project Manager

A Loss Adjuster/Assessor estimates quantities and costs of materials related to insurance claims.

An MEP Quantity Surveyor specialises in feasibility, cost estimation and planning, measurement, preparation of BOQs, and contractual obligations specifically for the MEP requirements for construction projects.

A Procurement Manager purchases all the necessary materials for the contractor’s projects, searching for the most cost-effective and appropriate materials for each job.

A Production Estimator is responsible for preparing BOQ's and take offs, preparation of purchase orders, and calculation of client variations.

A Project Manager oversees the planning and delivery of construction projects. They ensure that work is completed on time and within budget. They organise logistics, delegate work and keep track of costs.

Quantity Surveyor (covers Graduate and Senior)

Quantum Expert

A Quantity Surveyor estimates and monitors the costs of construction through the lifetime of a building, from feasibility through design and construction to demolition or repurposing.

A Quantum Expert quantifies values, costs, and damages. They carry out data analysis by reviewing project information including raw accounting data, drawings, letters, financial data, and change orders.

QUANTITY SURVEYING

JOB TITLE KEY RESPONSIBILITIES

Senior Building Estimator

Senior Estimator

Tax Practitioner

INFRASTRUCTURE SECTOR

A Senior Building Estimator leads tender bids utilising subcontract and consultant data and cost bases to produce tender proposals. They analyse and predict labour, material, and time requirements for projects and analyse differences between estimated cost and actual cost and adjust bids accordingly.

A Senior Estimator provides cost estimation services as well as determines contractual, financial, technical, and operational risks and to find opportunities to minimise risk and maximise gross profits.

A Tax Practitioner at the completion of a construction project produces tax depreciation schedules.

JOB TITLE KEY RESPONSIBILITIES

Capital Allowance Consultant

Chief Estimator

Claims Consultant

A Capital Allowance Consultant calculates a tax deduction claimable for the decline in value (depreciation) of capital assets. This is a deduction that can be claimed as an expense, for the ageing, wear, and tear of an investment asset.

A Chief Estimator helps completing construction projects by providing cost estimates. Other duties include procuring competitive projects, collaborating with subcontractors, training estimating staff, soliciting information from subcontractors, and taking part in periodic reviews.

A Construction Claims consultant provides advice as to how contracts can be set up and managed to avoid claims. They tailor individual solutions and offer experienced, professional advice on a wide range of issues including, claims avoidance.

Commercial Advisor Refer to Commercial Manager.

Commercial Manager

A Commercial Manager is responsible for overseeing and managing the finances of a project as it progresses. They are typically the head of a commercial team, overseeing the work of quantity surveyors, estimators, and planners.

Construction Manager

A Construction Manager is responsible for the management of the physical construction processes and the coordination, administration, and management of resources on a construction site where construction work is being performed.

Contract Administrator

Contract Advisor

Contract Manager

A Contract Administrator develops, negotiates, and evaluates company contracts on behalf of an organisation. They are charged with ensuring that both parties are complicit with the terms of the contract, as well as ensuring that all payments are in accordance with the contract abide by any relevant laws.

A Contract Advisor advises on but not limited to Contract Management. They draft, negotiate, and advise their client on Contracts, Agreements and Deeds, Consulting Agreements and Confidentiality Agreements etc.

A Contract Manager oversees projects performed between one organisation and another. They are responsible for coordinating every aspect of the project from reviewing and approving contract terms to coordinating deadlines, approving budgets and more.

QUANTITY SURVEYING

JOB TITLE KEY RESPONSIBILITIES

Contract Specialist

A Contracts Specialist is responsible for a wide variety of procurement and contracting duties including drafting contracts, work orders, work requests and interagency agreements; preparing tender documents and conducting tender processes; ensuring all legal, insurance and any bond requirements are met prior to award.

Contracts Officer Refer to Contract Administrator.

Cost Advisor Refer to Cost Consultant.

Cost Auditor A Cost Auditor undertakes a detailed review of the construction contract documents and audit of the costs invoiced to the client. They monitor and evaluate the progress of a project.

Cost Consultant A Cost Consultant provides estimates and advice regarding the cost of construction works and provides estimated costs on the future (life cycle) costs the asset will incur.

Cost Controller A Cost Controller manages the project costs. Tasks include developing, controlling, planning, and forecasting the project's budget. They make sure that costs are under control by managing labour, material, and overhead costs to ensure that the project finishes within the approved budget.

Cost Controls Manager Refer to Cost Controller.

Cost Engineer

Cost Estimator

A Cost Engineer manages the costs involved on a construction project. This includes activities such as cost control, budgeting, forecasting, estimating, investment appraisal and risk analysis.

A Cost estimator quantifies the materials, labour, and equipment needed to complete a construction project. This includes the process of forecasting the financial and other resources needed to complete a project within a defined scope. They account for each element or cost breakdown required for the project—from materials to labour—and calculate a total amount that determines a project's budget.

Cost Manager

A Cost Manager is an integral part of a construction team. The Cost Manager is concerned with projecting and managing the expenditures of a construction business, monitoring finances, and identifying potential cost risks to prevent spend over budget.

Cost Planner

A Cost Planner investigates financial feasibility in the early stages of a proposed project and throughout the design stages. This assists clients and contractors in determining whether a project is feasible within their time and budget constraints.

Cost Planning Manager Refer to Cost Planner.

Estimating Manager

An Estimating Manager manages and directs the organisation's estimating functions. They are the primary member of the estimating team who have overall responsibility for the creation of budgets and estimates. They are responsible for the oversight of the estimating process for all projects bid and awarded, and establish standardised procedures, methods, and processes for estimating and training estimating resources.

Estimating Specialist

An Estimating Specialist is responsible for compiling estimates of specialist elements i.e., tunnelling, signaling, etc.

QUANTITY SURVEYING

JOB TITLE KEY RESPONSIBILITIES

Forensic Cost Estimator

A Forensic Cost Estimator is responsible for preparing an analysis and presentation suitable for a judge, jury, arbitrator, mediator, or any other party charged with making a decision or recommendation in a case. They rely on the opinions of the other technical experts and on relevant dispute resolution language within the applicable contracts. They will frequently have to prepare a written report or narrative. This report elaborates upon and explains the rationale and reasoning underlying each element of cost included in the Forensic Estimate and goes along with any arithmetical computation of the reasonable cost of the line items involved in the various claims and allegations.

Independent Advisor An Independent Advisor is usually an experienced professional practitioner working with the client's team, independent of the supply team, monitoring and helping the client to manage the design process from its earliest stages and throughout construction.

Independent Certifier An Independent Certifier provides specialist advice, monitors compliance with design, specifications and statutory standards and ensures all project requirements are met.

Independent Estimator An Independent Estimator (IE) is a defined role in an Alliance project to confirm that the TOC (Total Outturn Cost) is a fair and reasonable estimate of the outturn cost, consistent with agreed commercial principles, the target schedule, the risks/opportunities being assumed by the alliance and other relevant factors. The IE’s review must also confirm the probabilities assigned to individual risk and opportunities through Monte Carlo simulation to validate that the allowances for risk and opportunity are reasonable and represent value for money.

Planner

A Planner is involved in making careful choices on ways to complete tasks so that projects can be finished on time and within budget. The role of the Planner is to develop a plan to complete a construction project based on budget, work schedule and available resources. A Planner determines what and how much needs to be done while Programming defines who and when the operations will be performed. although Planning and Programming are different processes, they come together within project programming.

Procurement Advisor

Procurement Manager

A Procurement Advisor handles the needs of company projects. They oversee members of the procurement team assigned to the project. They create policies and protocols related to the procurement of subcontractors, consultants, labour, materials, and plant needed for a project.

A Procurement Manager, also known as a Purchasing Manager, is a supply chain and logistics professional. The Procurement Manager purchases all the necessary materials for the construction company's projects, searching for the most cost-effective and appropriate materials for each job.

Procurement Officer

A Procurement Officer provides procurement expertise and assists the project team to plan, develop, source, and manage procurement arrangements to effectively meet organisational and project objectives.

Procurement Specialist

Program Manager

A Procurement Specialist, also known as Procurement or Purchasing Manager. They manage vendor relationships and oversee order placement, including of materials.

A Program Manager manages a collection of projects. A project represents a single, focused endeavour. A program is a collection of projects – together all the projects form a connected package of work. The different projects complement each other to assist the program in achieving its overall objectives.

JOB TITLE KEY RESPONSIBILITIES

Programmer

Project Controls Coordinator

Project Controls Engineer

Project Controls Manager

QUANTITY SURVEYING

A Programmer manages both time and resources to ensure work is completed on time. They create timetables for the entire project, which includes determining the timing of tasks and when specific materials will be needed.

A Project Controls Coordinator manages, integrates, coordinates, and reviews the work of the Project Management group to develop, implement, feed, reconcile, and maintain valuable project control databases and reports.

A Project Controls Engineer develops, implements, and maintains cost controls on a project, and provides centralised planning and scheduling on many projects.

A Project Controls Manager manages and oversees the project controls for engineering, construction, and other projects. They establish controls and operating policies that identify, monitor, and mitigate risk factors that could impact the success of a project.

Project Manager A Project Manager oversees the planning and delivery of construction projects. They ensure that work is completed on time and within budget. They organise logistics, delegate work and keep track of costs.

Purchasing Manager

Risk Estimator

Risk Manager

Refer to Procurement Manager.

A Risk Estimator defines the project risk factors in costs of previous projects, identifying unknowns at estimation stage and undertakes analysis of construction risks applying the Monte Carlo method, including determination of contingency.

A Risk Manager monitors and controls those measures needed to prevent exposure to risk. They identify the hazard, assessing the extent of the risk, providing measures to control the risk, and managing any residual risks.

Scheduler Refer to Programmer.

Tax Practitioner

Transaction Manager

A Tax Practitioner at the completion of a construction project produces tax depreciation schedules.

A Transaction Manager coordinates and manages major commercial transactions, high value and high-risk infrastructure procurements, and/or complex collaborative agreements between the government and private sector, and can be summarised as procurement activity that doesn't fit within a traditional procurement framework for reasons such as value, complexity or the nature of the supply market i.e. creation of a new market or innovation to an existing one. ‘Transactions’ are usually high value, complex and one-off construction projects (even though they may have a long operational period after construction).

Value Engineer

Value Engineering Manager

A Value Engineer improves the value of the project by examining the function of each item or element and its associated cost. Refer to Value Engineering Manager.

A Value Engineering Manager reviews new or existing materials and methods during the design phase to reduce costs and increase functionality to increase the value of the product. The value of an item is defined as the most cost-effective way of producing an item without taking away from its purpose.

If you feel that your job is related to the construction costs and isn’t listed here, we encourage you to let us know via marketing@aiqs.com.au

By Laurence Ritchie

Seemingly against all odds, the United Nations’ recent COP 27, held in Egypt’s idyllic Sharm El-Sheik, resulted in some meaningful outcomes for the global economy. Following days of in-person meetings and no doubt months of strategic diplomacy, attending nations found consensus on a selection of topics, notably including a disaster relief fund for nations most affected by climate change. While critics of the international meeting have raised concerns over the actual commitment to this agreement (not to mention the many topics where consensus wasn’t reached), the published conclusions indicate that there is a clear and broadly acknowledged expectation that climate change is and will continue to impact our built environment in adverse ways.

This will come as no surprise to readers of the Built Environment Economist, who in the last 12 months may have seen articles introducing and discussing Environmental Product Declarations (EPDs), the ‘cost’ of carbon, and embodied carbon. Led by the Green Building Council of Australia and other guiding institutions, our local design and construction industry is quickly learning how to build more sustainably, resulting in positive outcomes for the entire supply chain, not to mention the end user.

In this context, it is understandable why we continue to observe the rapid uptake of wood-based construction products. Our only commercially available and truly renewable structural material, timber continues to pop up in buildings of all size, ranging from public pools and recreation centres to high rise towers in our capital cities. As with any new material, however, this rapid rise to celebrity hasn’t come without questions of merit.

In this article we’re going to attempt to investigate perhaps one of the most common questions in an impartial

scientific manner. Specifically, we’re asking: is plantation softwood actually sustainable? Joining us in answering this is Rod Keenan, Chair of Forest and Ecosystem Sciences at the University of Melbourne. Rod has a long background in forestry, with direct experience in both plantation and native forests. He’s also up to speed with the latest research, making him the perfect expert for this exercise.

There are lots of timber suppliers in the market, so why plantation softwood specifically? Well, while there are local suppliers of beautiful native hardwoods, and approximately 20-30% of the timber we use is imported, most of the structural timber we utilise is locally grown plantation softwood.

So, where better to start than the nursery? These facilities can be found dotted around the nation, often closely tied to the local plantations (and community).

Nurseries are amazing places. Here highly skilled staff combine age-old approaches with modern technology and science to find tree species that exhibit preferential traits for growth. Desired traits typically consider growth rate, fibre length and quality, susceptibility to pests, and in recent years also resilience in the face of rapid climate change (pine saplings planted today won’t be harvested for 30 years, when the environment will likely be very different to today).

Seedlings are germinated either from seeds or cuttings in a specially built indoor facility, safe from the impact of weather events, birds (who love a free meal), and other pests. Once they have grown a strong enough root system they are transported to the outdoor nursery where they are continually monitored for health and development into saplings, boasting a healthy and robust root system.

While there are few environmental concerns at this stage, the industry continues to innovate to reduce its impact. For example, local company Arborgen utilises smart irrigation meters to measure soil temperature and moisture levels to minimise irrigation needs and employs natural organic fertilisers, (as opposed to synthetic fertilisers) if needed. A technique familiar to many a vegetable gardener, they also plant alternative crops to naturally increase soil fertility, creating a healthy, supportive medium for young trees.

Interestingly, planting some tree species on agricultural land can have a detrimental impact on the quality of the timber fibre which is produced. Rod notes here the difficulty associated with converting fertilised agricultural land to softwood plantations, as the residual levels of synthetic fertiliser in the soil can supercharge tree growth to a point where the tree gets ‘speed wobbles’, affecting wood fibre properties.

As winter sets in, these hardworking seedlings are transported to the plantation where they are planted by the million. It is illegal in Australia to clear native forests for plantations, so all the trees are planted on previously harvested areas. Over the next ~30 years of growth the new stand of trees is pruned, monitored, and periodically thinned, (meaning selectively logged to remove smaller stems and increase productivity

… planting some tree species on agricultural land can have a detrimental impact on the quality of the timber fibre which is produced

SUSTAINABILITY

of the stand), but otherwise left to do its thing. Over this period the trees grow from barely a foot in height to over 30 meters, with a diameter of approximately 50cm at chest height.

There is little contention about the environmental benefits here – the well understood process of photosynthesis means these plants absorb CO2 from the atmosphere as a central component to their growth. While there is a process known as ‘respiration’ in which this cycle is reversed for a short period during the evening, trees have ultimately been shown to absorb far more carbon than they emit.

So, what are the curly questions at this stage of a tree’s life? Some raise concern over irrigation and fertiliser/chemical use, others over growing a single species at scale – let’s take a closer look at the lot.

The first of these is easy; at this stage we don’t irrigate our plantations in Australia, so we can put that one to bed. What about the other two? As Rod noted above, too much nutrition in the soil can be a real problem for growers, so any fertiliser use is minimal. “How minimal?” I hear you ask. Well depending on soil type and geography, a pine plantation may receive just one or two targeted fertiliser applications in its entire 30-year rotation. Compare this to agriculture where short cycle crops require fertiliser applications every year, and the broader fertiliser discussion is put into perspective. Most plantation sites also receive an application of herbicide before or soon after planting to reduce competition with grasses and weeds.

Some are concerned about plantations being monocultures that contain little biodiversity. While Australian softwood plantations are mostly comprised of exotic Pinus species, these can still be home to native plants and animals. Rod

notes that many plantations have belts of native forest within the estate, near rivers and streams, or on steep slopes. Shrubs and grasses can also be grown under the trees to support insect populations and limit erosion or runoff. Of note, the native species hoop pine (Araucaria Cunninghamii) has been planted extensively in Queensland and these plantations provide habitat for many native birds and plant species.

After roughly 30 years in the ground, we reach the time for harvest, which for many pine plantations means a clear fell of many hectares at a time. This can create unpleasant visual scenes for many, but just as agricultural producers harvest lettuce and tomatoes for our Christmas lunch salads, so must plantation managers harvest trees for our construction industry.

Key questions at this stage often centre around deforestation and soil carbon. To be clear, plantation harvesting is not deforestation. Plantations are grown on rotation, meaning once harvested the site will be prepared for planting the next crop of trees.

Rod acknowledged the complexity on soil carbon, but fundamentally found there to be little overall impact; “it’s a complex area, but foresters work hard to minimise soil disturbance at the time of harvest because they want to retain as much carbon and nutrients on site to maintain future tree productivity. Harvesting can boost soil carbon because some of the carbon in leaves, branches and roots of harvested trees that is left on site will end up in the soil.”

Rod also confirmed my experiences when working with foresters and harvesting teams on the ground… “These people really care about the natural environment – plants, wildlife, soil and water. They work on the land every day, and it’s in

their best interest to ensure operations are both sustainable and supportive of local ecosystems.”

From harvest, logs are transported to a local sawmill by truck for processing. Beyond the diesel emissions of the transport, this process is typically zero waste, where even the sawdust is used in energy generation or sold as garden mulch or for animal production. Depending on their intended use, sawn lengths may be distributed and sold for DIY and timber framing or manufactured into the engineered wood products now utilised in large-scale structures.

The environmental story of plantation softwood is generally a positive one. While there will likely always be concerns regarding land use and harvesting processes, this traditional yet technologically advanced industry’s long term attachment to the lands on which it operates means that sustainability must be central to the long term viability of its operations. As Australia’s demand for sustainable, low carbon building materials continues to grow, specifiers can be confident that plantation timber is ready for the job.

This article has been written by Laurence Ritchie, WoodSolutions Advisor.

TERMINATION OF CONSTRUCTION CONTRACTS

LEGAL

In a perfect world all construction contracts would end with both parties having satisfactorily discharged their contractual obligations in faithful compliance with their contract and therefore the contract has now been executed and there is nothing further for each party to fulfil. Accordingly, the parties are thereby discharged from their obligations under the contract.

However, parties to a contract, including construction contracts, can also be discharged from the obligation to comply with their contract prior to its contemplated end date where they mutually agree to do so, where a party exercises an express or implied legal right to terminate the contract, or where the contract is terminated through the operation of the legal doctrine of frustration.

In Martech International Pty Ltd v Energy World Corporation Ltd (2006) FCA 1004, Justice French noted that:

“In summary the word ‘termination’ when referring to the discharge of a contract has a variety of possible meanings. It may be limited to nonconsensual termination by the action of one or other party to the contract. It may extend to discharge of the contract by effluxion of time. That is a consensual termination in the limited sense that it is part of the agreement from the outset. The word may also be construed as applying to a discharge of a contract by agreement or by abandonment which may be taken to amount to the same thing. Its meaning … depends upon the language of that clause and related clauses of the Agreement. It is also to be construed by reference to the context of the Agreement as a whole.”

In the construction context, it bears noting that even where defects have

been identified following a builder’s performance of works, the existence of defects in the works does not necessarily translate to a termination of the contract. In such circumstances, the construction contract could nevertheless be deemed as having been finished by performance, albeit granting the owner a potential right of action for rectification and/or damages.

DISCHARGE BY AGREEMENT

As a corollary to the key legal principle that contracts have the force of law between the parties and must be complied with in accordance with their own terms, the parties are equally free to agree to end their construction contract by agreeing for whatever reason to discontinue their contract.

“Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. …In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. … The obligations of written agreements between parties cannot simply be ignored or brushed aside. (Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) HCA 55)

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have

understood those terms to mean. Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". (Electricity Generation Corporation v Woodside Energy Ltd (2014) HCA 7).

Whilst a termination of the contract by agreement appears straightforward, both parties are well advised to consider the potential survival of any contractual obligations such as where a builder has agreed under the erstwhile contract to say unrestricted warranties or confidentiality obligations.

Where a construction contract provides for a walk away regime by agreement, the parties should also ensure that they strictly follow that regime to preserve their entitlements. This is especially relevant to a builder who remains unpaid at the time of agreeing to terminate the contract halfway through the construction.

the contract will be discharged. There is no need for either party to formally discharge the contract as it is abandoned by mutual actions and consent.

In Wallera Pty Ltd v CGM Investments Pty Ltd (2014) VSCA 32, Justice Kiefel said:

“Abandonment may be seen as a conclusion that parties have no further interest in a contract continuing, even though they may have said nothing to that effect. It may nevertheless be clear that they both regard it as at an end. This can more readily be discerned where one or more parties have ineffectively attempted to bring the agreement to an end, and both behave as if it was ended.

In Paal Wilson & Co AS v Blumenthal [1983] 1 AC 854, Lord Brandon described abandonment as follows:

Essentially, each party to the contract is considered as having walked away from their agreement.

WHERE THE CONTRACT IS FRUSTRATED

Under the doctrine of frustration, a contract can be discharged in neutral circumstances where neither party has committed a breach. A contract that becomes incapable of performance due to an unforeseen event or circumstance that arose after the contract was formed is considered as having been frustrated by that event.

ABANDONMENT OF THE CONTRACT

Parties can also end their contract by abandoning it, notwithstanding that they may not have entered into any express agreement to do so.

Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed, the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract. (Ryder v Frohlich [2004] NSWCA 472)

If both parties manifest an intention to abandon or abrogate their agreement,

“Where A seeks to prove that he and B have abandoned a contract in this way, there are two ways in which A can put his case. The first way is by showing that the conduct of each party, as evinced to the other party and acted on by him, leads necessarily to the inference of an implied agreement between them to abandon the contract. The second method is by showing that the conduct of B, as evinced towards A, has been such as to lead A reasonably to believe that B has abandoned the contract, even though it has not in fact been B’s intention to do so, and that A has significantly altered his position in reliance on that belief. The first method involves actual abandonment by both A and B. The second method involves the creation by B of a situation in which he is estopped from asserting, as against A, that he, B, has not abandoned the contract”.

Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract… “It was not this that I promised to do”. (Davis Contractors Ltd v Fareham Urban District Council, [1956] 2 All ER 145)

The contract is thereby brought to an end forthwith, without more and automatically. It does not depend on the choice or election of either party. It depends on what actually has happened and its effect on the possibility of performing the contract. (Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497)

The task of the court then is to determine on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances: "whether the contract which they did make is . . . wide enough to apply to the new situation: if it is not, then it is at an end". (Codelfa Construction Pty. Ltd. v. State Rail Authority of N.S.W. [1982] 149 CLR 337)

LEGAL

Under Australian common law, the parties to a frustrated contract are left to bear whatever loss falls on them at the time of frustration without prejudice to any rights and obligations that may have accrued to them prior to the contract ending.

This position however has been altered by legislation, specifically the Frustrated Contracts Act 1978 (NSW), Frustrated Contracts Act 1988 (SA), and the Australian Consumer Law and Fair Trading Act 2012 (VIC), which allow courts to adjust the parties’ losses in such circumstances.

WHERE A PARTY EXERCISES A RIGHT OF TERMINATION

A more contentious means of ending a contract is where a party exercises the right to terminate the obligations of the parties to perform their respective contractual obligations.

Such right could be conferred expressly by agreement in the parties’ contract (as in the case of clauses providing to one or both parties the right to terminate for convenience or for the other party’s insolvency), or implied by law (such as where a party’s wrongdoing grants to the innocent party the right to terminate their contract for breach, whether actual or anticipatory (i.e., repudiation) breach.

a. Right to Terminate for Convenience

Construction contracts are sometimes drafted to allow a principal to terminate the contract for its convenience. As such provisions do not generally allow the same right to terminate for the builder’s convenience, these clauses are onerous and a builder is advised to ensure that it obtains fair compensation for its work where a principal seeks to exercise such right.

b. Right to Terminate for Breach

A right of termination for breach could be conferred by contract such as in the case of termination for default provisions in the usual construction contract. Such provisions generally include an agreed list of breaches which are deemed to be so substantial as to allow the nondefaulting party to terminate the contract.

It bears noting in this regard that a termination for default regime in a contract generally provides for strict notice requirements and the provision of a reasonable period within which the wrongdoer is allowed to remedy the default, failing which the right of the innocent party to terminate the contract becomes crystallised.

Parties seeking to terminate construction contracts for the other party’s breach should therefore ensure that they follow these procedures to the letter to avoid losing the termination right and ensure that they exercise their contractual right to terminate reasonably and in good faith.

In the construction context, serious breaches and the appropriate quantum of damages were analysed in several landmark cases such as Bellgrove v Eldridge (1954) 90 CLR 613 (where the breach affected the foundation of the house), Ruxley Electronics & Construction Ltd v Forsyth 1996 1 AC 344 (where a pool was built to the incorrect depth), Tabcorp Holdings Ltd v Bowen Investment Pty Ltd (2009 HCA 8) (where a lessee renovated leased premises foyer without the landlord’s consent, and Willshee v Westcourt Ltd (2009 WASCA 87) (where a builder built the external walls without using the agreed high-quality limestone).

c. Right to Terminate for Repudiation

To be distinguished from a termination right based on a defaulting party’s failure to perform the contract (actual breach),

is a termination right based on the other party’s repudiation of the contract (anticipatory breach).

In such circumstances, the other party has not committed a breach yet but acts in a manner which demonstrates that it is either unwilling or unable to perform its contractual obligations, that is, evincing an intention no longer to be bound by the contract or stating that it intended to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way (Shevill v Builders’ Licensing Board [1982] 149 CLR 620). The contract is terminated only when the innocent party accepts that repudiation and is able to show that it itself was willing, ready and able to perform the contract.

CONCLUSION

Contracts can end in different ways and it is important to be mindful of the key principles surrounding a valid termination of the contract to ensure that a party’s rights, entitlements and particularly their causes of action are preserved and are able to be effectively prosecuted.

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

www.doylesconstructionlawyers.com

VISIONARIES

VISIONARIES

PETER GILL, Managing Director, Infrastructure at Donald Cant Watts Corke

It is deeply concerning to me that the reputation and standing of the Quantity Surveying profession in both the builtform and infrastructure sectors is diminishing in Australia, and that our industry’s work is not held in as high regard as it is in other markets.

yourself with their expectations, and establishing effective communication to prevent any nasty surprises

- Added Value: looking beyond the documentation to challenge design, constructability, and standards

- Enhanced Standard: adding value to clients’ standards, particularly by advising on forms of contract and delivery models

- Leadership Offering: providing the right people with the right experience to magnify each unique service offering.

Perhaps, in part, this is of our own making. However, this means QSs now have the valuable opportunity to be pro-active and employ positive initiatives to boost our position in the wider professional services industry and provide the high standard of work our clients deserve.

These initiatives include:

- Reporting: providing comprehensive reports with every project, ensuring the ongoing trust of clients eager to feel involved in all aspects of their projects

- Genuine Director Involvement: Directors should take the time to undergo and facilitate key training exercises, mentor staff, and ensure the quality of product

- Care: engaging in targeted and effective conversations with clients throughout the project timeline, right up to delivery of final product

- Client Journey: guiding clients on the project journey, familiarising

Throughout my career, I’ve sought to ensure clients aren’t just provided lip service, but instead a bespoke project journey where they feel valued, understood, and ultimately comfortable with our direction.

It is my pleasure to work with experienced advisers who work hard to raise the bar and evolve with our everchanging industry. In doing so, they devise new ways of improving our overall service to clients, continually building on high standards year on year.

Facing a volatile market, we must all be agile and dynamic – responding to challenges not only swiftly, but effectively and with deep commitment to our clients’ needs.

The crises we as quantity surveyors face: global market challenges, shifting client needs, and in how our specific profession is perceived, should all be seen as opportunities. Opportunities to challenge old-fashioned ways of thinking about our industry and re-evaluate and enhance how we deliver the best results for our clients.

“… we must all be agile and dynamic”

BONDI PAVILION RESTORATION:

PRESERVING THE ‘PLAYGROUND OF THE PACIFIC’

Built on Sydney’s most famous stretch of sand, Bondi Pavilion has been part of community fabric for more than 90 years. But the building was bowing, riddled with cracks and resting on foundations that had not stood the test of time. How did Altus Group cost the heritage restoration of this beach beauty?

CASE STUDY

If the walls of Bondi Pavilion could talk, they’d tell stories of bathers who frolicked in the foam in neck-to-knee swimmers. They’d tell tales of poker-playing officers who gathered to swap war stories. And they’d whisper secrets of the bright young things who gathered for ‘Surf and Dance’ socials in the late 1940s.

From the day that the Bondi Pavilion opened in 1928 – with its Turkish and hot sea water baths, ballroom and expansive verandahs overlooking the sparkling Pacific – it was a sign of the times. As the eras evolved, so did the Pavilion. Out went the Turkish baths and in came an amusement arcade, an amphitheatre, and later a childcare centre and netball courts.

In the 70s, Prime Minister Gough Whitlam and wife Margaret watched a young David Gulpilil tread the boards. Parts of the Pavilion were later used for ballet classes, others to broadcast the local radio station, and others for community group meetings.

But the colonnaded façade and terracotta roof tiles that captured the essence of Mediterranean and Georgian revival architecture were loved and loathed in equal measure. One Waverley councillor in the 1970s famously told the Sun Herald: “I’d like to put a bomb under the Bondi Pavilion and a new start made on a casino”.

After weathering time and tides, Waverley Council commenced an iconic restoration project to secure Bondi Pavilion’s place for future generations.

Surveyor Patrick Ferreira assessed every crack to understand the extent of the patching required. “Every crack was unique and demanded its own solution – the only way to price it was for the heritage architect to survey the façade, and for each crack to be measured and a remediation scoping document for each ‘grade’ of crack to be produced.”

Altus Group had been engaged by Waverley Council in 2017 during the project’s concept phase to provide full cost management services. Altus Group’s team was led by Director Barry McBeth, with Mr Ferreira delivering cost management services throughout the precontract phase, including initial estimates, detailed cost planning and advice, and a bill of quantities. Mr Ferreira then handed the project to Senior Quantity Surveyor Michael Tse, who took the project through construction, undertaking progress claims and assessing variations.

Architecture firm Tonkin Zulaikha Greer (TGZ) developed a concept that responded to the two priorities of the Bondi Pavilion Conservation Management Plan: the colonnade façade; and its role in Australian beach and surf culture. The idea was to restore the Pavilion to its former glory while creating contemporary spaces for the community to enjoy.

When work began two years ago, the entire Pavilion was falling apart. The building was “literally bowing in the middle,” Mr Ferreira says. Floors were rotting and the famous arches were falling from the façade.

program is difficult to quantify until we get stuck into the works.”

Adept negotiation skills were “critical” with this number of unknowns. “When the client holds most of the risk, particularly on heritage projects, the quantity surveyor must be prepared to negotiate with the contractor to ensure costs are reasonable and don’t blow out.”

The Pavilion was built on sand, for instance, and this unearthed major structural issues. It was back to the drawing board to redesign part of the sub-structure, with 200-plus screw piles installed to support the new and existing structures.

The ambition to maintain the frames of every heritage window and door required careful costing, Mr Ferreira adds. “TZG provided an extensive document where every window and door had its own unique remediation scope. As an example, we had to work out every detail, down to how much putty and the extent of timber replacement needed in each frame.”

METICULOUS MEASUREMENT

“Meticulous” is often a word used to describe heritage restoration projects –and the meticulous work of Altus Group’s team started with precise measurement of the Pavilion’s seemingly countless cracks. With the help of a heritage architect, Altus Group’s Senior Quantity

The Bondi Pavilion proved a ‘mystery box’ that unfolded with the restoration, Mr Ferreira adds. “All heritage projects throw up unexpected costs and it is not uncommon to encounter latent conditions. We knew to expect the unexpected. However, the extent to which they would influence the project cost and

TRASH AND TREASURE

Signs of the past were revealed like the layers of an onion. Remnants of the old tunnel used by bathers to walk from the changing sheds to the beach were uncovered. The tunnel had been blasted away on military advice in 1942 to alleviate the threat of invasion. Archaeologists were called in to determine its historical significance and to preserve what remained.

The role of the quantity surveyor is often as hidden as the treasures that lie beneath the surface of heritage projects.

The Spanish-style terracotta roof, in a state of disrepair, was replaced with 33,000 multi-coloured tiles that were chosen after the architects pored over old black and white photographs. The rooftop is also adorned with 217 solar panels, which supply 71% of the building’s energy needs. The project is on track to be awarded a five-star green rating by the Green Building Council of Australia.

Floor mosaics by Warramiri artist, Terry Dhurritjini Yumbulul, were also carefully restored and reinstalled in a new part of the Pavilion. Created by the artist to recognise the Traditional Custodians of Bondi as a gift from the people of Arnhem Land, the work may be the first example of an Indigenous mosaic in Australia. “When undertaking the estimate, a lot had to factored in. It wasn’t a simple exercise and

the reinstatement of the mosaic needed to be considered with detailed attention.”

Not every item uncovered was a treasure. “There were extensive remediation issues around the site – lead paint, asbestos, and a substantial amount of general solid waste buried under the building that had to be carefully removed.” This was, once again, a painstaking and cost-sensitive process, but an impressive 90% of construction waste was recycled throughout the project.

The Bondi Pavilion project hit the now familiar Covid-19 snags, with the pre-tender estimate commencing in March 2020 just as the world went into lockdown. “It was an uncertain time, and an even more uncertain market. The question of whether costs would rise or fall made forecasting escalation a

CASE STUDY

challenge.” Site visits proved impossible, as the key team members lived outside the approved radius.

“During our production of the pre-tender estimate, we returned to first principle cost planning to ensure the estimate was undertaken correctly. A project of this nature is not simply about materials and labour. The methodology of the works also needs to be considered and was a key driving factor for costs,” Mr Ferreira notes.

BONDI’S BEATING HEART

The restoration, unveiled in September 2022, has breathed new life into this beach beauty. The transformation of nearly 8,000 sqm of internal and external space has re-established Bondi Pavilion in the heart of the community. There’s an art gallery, community radio station and pottery studio. There’s a tourist and box office, flexible function space and the new Bondi Story Room, where visitors can learn about the area’s history and people. The old amphitheatre, where the dressing sheds were located for many decades, has been replaced with a 2,667-square-metre courtyard that can accommodate 2,000 people at film and music festivals. Best of all, it remains a place to sit, sip and watch the surf roll in.

The role of the quantity surveyor is often as hidden as the treasures that lie beneath the surface of heritage projects. But as Patrick Ferreira says: “A building doesn’t get built without a budget.” Altus Group’s meticulous approach to cost management will ensure Bondi Pavilion remains the playground of the Pacific for many more years to come.

This case study has been provided by the team at Altus Group.

SUSTAINABILITY

ESG EASY AS 123

By Sara Wilkinson

Environmental Social Governance, or ESG, is gaining traction in the commercial property sector and owners and investors are increasingly looking for stock which incorporates these features in construction and management. This article explains what ESG is and how it manifests itself in building so that quantity surveying professionals can increase their awareness of what some clients may be looking for in new projects and retrofits.

As the built environment is responsible for 38% of total global carbon, or greenhouse gas emissions, commercial property owners and investors have a significant opportunity to accelerate the transformation toward sustainability in their portfolios.

WHAT DO YOU MEAN BY ESG?

ESG is one of the most important issues currently facing businesses across all industries globally. ESG refers to the three key factors when measuring the sustainability and ethical impacts of an investment in a business or company. Most socially responsible investors now assess companies using ESG criteria to screen investments. ESG goes beyond environmental issues such as climate change, energy efficiency or resource scarcity, and includes all non-financial issues not typically captured by traditional financial reporting. So how does this affect property and construction?

The COVID pandemic from 2019 onwards has focussed people more on environmental and social equity issues, and commercial property investors have joined a growing group of institutions shifting toward sustainable, community-driven practices and policies. With the result that ESG property considerations have become a priority for investors at every stage in the asset lifecycle; from screening potential acquisitions to development of new buildings, to optimising operational efficiency such as building energy usage in servicing tenants. Quantity surveying professionals provide professional advice to clients at every stage of the lifecycle and need to be aware of what ESG is, and how to advise clients.

In late 2022, with some forecasting a global economic recession, with the result of increased building vacancy, many clients are looking to minimise their risk and to protect investments. The recognition and acknowledgement of ESG features could help to minimise risk.

The development and application of frameworks and guidelines within commercial property helps the sector to become more sustainable and affects positive change within workplaces and across portfolios, which is highly advantageous to stakeholders. With environmental concerns becoming more prominent there is strong justification to integrate current frameworks, and to develop frameworks for future use, into all facets and aspects of property and the built environment.

Environmental criteria include climate change and greenhouse gas emissions, which built environment professionals will be familiar with. Also incorporated are resources depletion including water. Waste, pollution, and deforestation are included. All have considerable contributions to construction and building operation.

In the social category, consideration is given to working conditions including child labour and slavery –the specification and procurement of materials and on-site labour conditions are very important. Local communities and indigenous groups are included in this section. Other social issues are health and safety, conflict, employee relations and diversity.

In the Governance criteria, considerations include executive pay, bribery and corruption, political lobbying and donations, board diversity and structure and tax strategy.

Clearly many, if not all, of these criteria are directly, or indirectly, associated with construction and property management, which are discussed further below. Figure 1 on the next page summarises some of the components of ESG.

HOW IS ESG DIFFERENT TO CORPORATE SOCIAL RESPONSIBILITY (CSR)?

ESG shifts the expectations on businesses from being focused on CSR, which has been adopted by some organisations for many years. CSR provides a qualitative assessment of a company’s effects on its stakeholders and society. ESG, on the other hand, measures a business's impact on the environment and society, using quantitative measurement methods with the aim of delivering long-term stakeholder value. As a result, organisations are creating sustainability strategies that focus on generating value amongst stakeholders who include staff, customers, suppliers, investors, and community groups whilst managing their obligations to society and the environment. Concurrently, stakeholders are requiring that companies become more transparent about their performance.

Quantity surveying professionals provide professional advice to clients at every stage of the lifecycle and need to be aware of what ESG is, and how to advise clients.

SUSTAINABILITY

ENVIRONMENT (E)

• Climate change

• Greenhouse gas (GHG) emissions

• Resource depletion, including water

• Waste and pollution

• Deforestation

SOCIAL (S)

• Working conditions, including slavery and child labour

• Local communities, including indigenous communities

• Conflict

• Health and safety

• Employee relations and diversity

CSR was developed as a tool for companies to demonstrate and map their sustainability credentials relative to the changing expectations of the market, especially as expectations moved to recognising the importance of environmental sustainability, which evolved into include social sustainability criteria. This concept of CSR is evolving and dovetailing into ESG frameworks. However, CSR is not the not the same as the ideas underpinning ESG. The notion that ESG can do good for investors and the investment, as well as looking good, is critical to expanding the ESG roll out.

Whilst ESG and CSR are both concerned with the impact a company may have on the environment and society, in general CSR is a model adopted and applied by a business within their parameters and frameworks to guide their operations. ESG is typically focused

GOVERNANCE (G)

• Executive pay

• Bribery and corruption

• Political lobbying and donations

• Board diversity and structure

• Tax strategy

proactive investing that concerns itself with looking good, doing good and driving economic outcomes. Whilst adoption has been slow and there are challenges in extolling the virtues of this investment framework to all and to measuring success, it is gaining momentum and quantity surveying professionals need to be aware of ESG and how it might feature in their projects, and what advice they can provide for clients.

HOW CAN ESG FEATURE IN CONSTRUCTION AND PROJECT MANAGEMENT?

Source: Western Asset 2018

around being a tool for investors to determine a company’s ‘social and sustainability’ credentials, and thus, determine, if an investment is sound. CSR’s more internalised view is important in developing and growing ESG as a framework, that will become increasingly applicable in corporate real estate management. Figure 2 illustrates the differences between CSR and ESG.

In recent years discourse around what ESG is and how it works has evolved into a discourse around responsibility with a review of investment approaches. Rather than something to be viewed as mandatory, ESG should be viewed as useful in targeting causes and focal areas important to capital partners. The allocation of the causes and focal areas can drive positive impacts across the ‘E’ ‘S’ and ‘G’ components, while freeing up more capital through the image, rightly or wrongly, of

Quantity surveying professionals have a significant role in advising clients throughout the building lifecycle. ESG is applicable to both new build, retrofit and ongoing building maintenance. For example, at project inception, quantity surveying professionals may be asked for advice on design, specification, procurement and costs and there is an opportunity to discuss ESG related issues and whether the client would benefit from adoption and reporting of ESG. The next question becomes which ESG attributes would the client wish to adopt? Clearly this will vary from client to client and the project type. For example, construction of a hospital or social housing would have different ESG issues compared to a casino or office building.

The ESG issues to consider are design, construction methods and their impacts on the workforce – for example, consideration of working in hot conditions. The project could opt for more off-site manufacturing to reduce exposure of labour to intense heat. This would need to be offset against environmental issues such as embodied carbon and transportation of materials and so on. However, intense heat and working conditions can be ameliorated with good site facilities for staff and

CSR VS ESG REPORTING

CSR ESG

Audiences Consumers, employess, communities and NGOs

ESG relates to its impact on accessibility to capital and the cost of capital

Primarly targeting investors, potencial investors, influencers (financial media), benchmark and indices (MSCI, SASB, FTSE4Good, etc.)

Long-term Reputation Risk mitigation and financial stability

Source: Merhantcantos, 2019

consideration of working hours outside of the hottest periods of the day. All the issues would need investigating and quantifying for a final decision to be made. Quantity surveying professionals with their construction knowledge and quantitative skillset are well placed to advise clients on these options.

Much of the data exists for example on Health and Safety, it is a case of documenting it and using it in decision making. Take the decision to adopt one form of construction over another. Records of OH&S issues could be used to advance the case for one method over another. Quantity surveying professionals would need to draw up a framework for decision making which highlights all relevant ESG issues and then quantifies or assesses the impact of each so that an informed decision can be made by the client. The examples given above are by no means comprehensive, and as can be seen from figure 1 there are numerous factors which can be considered.

Furthermore Green Building rating tools, such as Green Star cover environmental performance and design attributes and operation and performance attributes too in some cases. There does need to be a clear distinction and division between the two systems of sustainability rating tools and ESG. They should be seen as complementary.

EASY AS 123?

So, is ESG easy as 123? As you might expect the answer is yes, and no. Yes, in that we have a good idea of the ESG issues that relate to assessing building design, construction and procurement and building maintenance processes. And no, in that getting comprehensive reliable data to quantify and then undertake a comparative assessment of each issue can be challenging. However, that should not deter the quantity surveying profession from considering

ESG issues in commercial projects and from discussing it with clients. All innovations are challenging to start with, but that should not deter us from embracing them. Inevitably over time better quality information becomes available to enable faster, more informed decision making to occur. Forward thinking professionals will want to ensure their clients are provided with the best, holistic professional advice for their projects to minimise risk and maximise success. So have a think about ESG on your next project.

PhD FRICS AAPI

Professor of Sustainable Property at Faculty of Design Architecture & Building School of Built Environment, University of Technology Sydney

Approach Doing well by doing good

The systematic application of environmental, social and governance dicliplines within a business

Benefit ROI for CSR is the positive impact a focus on stakeholders can have on the retention, loyalty and recruitment of employees and customers, due to its effect on reputation

Sara J. Wilkinson. BSc MA MPhil

is

MIKAEL HEINONEN MAIQS, CQS DISCUSSES CULTURE AND COLLABORATION.

1. WHAT MADE YOU WANT TO BE A QUANTITY SURVEYOR?

During my school holidays I would do labouring jobs for my dad and other family friends who worked in the construction industry. I loved being

in and around construction sites, and the blank canvas that goes through an ongoing transformation. And when I was on-site, I would use my imagination along the way to picture what the end product would look like until it was all done. I knew all the effort that had gone

into building the finished product, and I still today go past old projects and tell my kids, “I helped build that!” So, when I finished high school, I knew I wanted to work in the construction sector, but there was actually no glamourous reason for choosing quantity surveying

at the time other than I heard it paid well. Notwithstanding that, I have been fortunate that being a quantity surveyor has given me a broad set of important skills that I wouldn’t have learnt in other professions, many of which continue to help me today.

2. WHAT DROVE YOU TO WANT TO CHANGE THE CULTURE/COLLABORATION WITHIN THE CONSTRUCTION INDUSTRY?

The construction industry is innately adversarial. For 25 years working on different sides of the fence in commercial roles, I got to a point where I had just had enough of the constant positioning at the expense of meaningful collaboration. So, I started to research and explore how other industries operated and used this to push for change on the projects I worked on. As a consequence of this research, I started peeling away the layers of our industry to understand why we operated in such an adversarial way, and what impact it was having on organisations and individuals.

I came to understand the multidimensional and interconnected nature of the industry and its challenges. It was this that inspired me to try and help the industry understand more broadly how it was harming itself, and then to inspire its participants to drive positive change one individual at a time. Over the past two years I have refined that mission from speaking to more and more people, and in 2021 co-founded a certified social enterprise called Collabaloop to push for a sustainable way to influence change. Our primary social purpose is to improve the outcome of participants within the construction industry with an initial focus on new starters.

3. WHY HAVE YOU FOCUSED COLLABALOOP ON NEW STARTERS SUCH AS APPRENTICES, TRAINEES, AND GRADUATES?

Meaningful change often takes a generation, so we decided to look at how can we influence positively all new starters to the industry before they’re negatively affected. And when you look at the talent crisis the industry currently faces, we need to be able to attract and retain the talent to be able to deliver the pipeline of upcoming projects.

4. HOW ARE YOU USING TECHNOLOGY TO AFFECT WORKPLACE CULTURE/ COLLABORATION?

Technology is ubiquitous in our lives, especially with the younger generation. However, we also understand that while we are looking to communicate and engage with people through our platform, our goal is to enhance human interactions and communication, not replace them. Our technology gathers collective intelligence of the real-time actions in the workforce and offers offer an automated way for leaders and support personnel to keep pulse, measure signals and make meaningful, intelligent decisions.

5. WHY IS COMMUNICATION SO IMPORTANT TO PRIORITISE POSITIVE COMMUNICATION IN THE CONSTRUCTION INDUSTRY?

Communication is key to any successful relationship, whether it be personal or work related. Ultimately as humans our behaviours and the decisions we make are based on our past experiences and the information you have available to you. Communication is the means in which we transfer information. If we were to operate in siloes (which we often do), then whenever we had gaps in our information, we would look to fill them with our own stories.

By communicating, we instead try to ensure both conversing parties understand all the available information.

When we prioritise communication, we have a better opportunity to make decisions in the best interest of the project, rather than an individual.

6. WHAT ROLE DOES DATA HAVE IN ENABLING THE IMPROVEMENT OF WORKPLACE CONDITIONS?

In construction there are many opportunities and uses for collecting and analysing data, especially considering we are one of the least-digitalised sectors. Most current initiatives to capture data focus the outputs of productivity. The problem with this is: people are not robots, people build projects.

It’s just as important to be able to identify weak signals across the project as knowing the projects status and schedule. People have their own aspirations, and their own challenges –therefore, teams have their own strengths and weaknesses. By gathering collective workforce intelligence, data helps in the identification and analysis of underlying trends or systemic issues that might be present, and allows these to be addressed at a project, organisational, or even a government policy level.

Mikael Heinonen MAIQS, CQS is the Co-Founder of Collabaloop.

LIFE CYCLE

LCA AND EPD'S

By Ceire Kenny

My role as a Life Cycle Assessment (LCA) and embodied carbon specialist revolves around engaging with the business at a project and portfolio level at key decision-making stages to leverage LCA data and facilitate informed choices.

LCAs for buildings are complex in the sheer amount of materials and products that go into them. As with all LCA there is a preferred hierarchy of data to ensure that the LCA model accurately reflects the geographical region, manufacturing process, manufacturing technology, and temporal relevance of each material.

In the context of running LCAs for projects to facilitate decision making, Environmental Product Declarations (EPD) are incredibly valuable as they provide verified environmental impacts specific to that supplier’s product that will be installed on site.

In the murky world of sustainability claims, glossy brochures, vague statements on company websites, and greenwashing, EPDs provide clarity, assurance, and transparency on environmental impacts.

Knowing that products who have an EPD had to follow EN15804, ISO 14044/40, and adhere to the relevant Product Category Rules gives me confidence that the emissions intensity stated covers the system boundary and environmental indicators that is relevant to my assessment and has followed a methodology that aligns with our criteria for completeness and accuracy. Most importantly the third-party verification gives further credence to the results, creates accountability in the industry, and is the most defining difference between the science of EPDs and the wild west of greenwashing. This confidence in the reported emissions intensity is incredibly relevant when making side by side comparisons of products and providing advice to those making procurement decisions on a project or portfolio level. EPDs can also provide other important information on the LCI datasets used, age of data, declaration on any averaging of data, assumptions / exclusions made, description of manufacturing processes,

geographical location of manufacturing facilities, percentage of recycled content, material composition, and more. Currently, no other single document out there holds this amount of information relevant to my decision making all in one place. And that information is powerful.

As an added bonus to this treasure trove of data, EPDs are also recognised by rating tools such as Green Star / LEED/ BREEAM and rewarded with contributing to points under certain credits. It is far easier to make the case for selecting a product that not only meets all performance requirements and other due diligence criteria but is transparent in its emissions and benefits rating tool criteria.

Having an EPD does not inherently make a product sustainable, but it does demonstrate the important step of a supplier investing in understanding where their emissions come from and being willing to openly share this with their clients. In an industry that has a history of being incredibly competitive, sustainability is one space where it is

widely recognised that collaboration is necessary to get to where we need to go. Over the years as that EPD is renewed, it can also serve as an official record of the decarbonisation of that product due to the manufacturer’s efforts to reduce their footprint.

I use EPDs most frequently as part of an iterative LCA process. LCA is an amazing way to measure environmental impact, however at the end of the day it remains just that … a measure. To unlock the true power of LCA, it must be conducted iteratively alongside the progression of the design (as opposed to a “postmortem” approach after all decisions are locked in). LCA should be leveraged at a strategic business and portfolio level, however the example below is at a project level.

A preliminary LCA should be conducted early on at opportunity and origination stage to inform the development brief and set ambitious yet viable targets for the project. At early concept design, fast and agile LCAs should be conducted

as major decisions about the building’s structure, layout, and envelope are made.

Also, at this stage a reduction roadmap is developed to demonstrate how the project will hit its embodied carbon target. As part of developing this roadmap I can use EPDs to inform potential reduction scenarios and suggest low embodied carbon products early on to project team. EPDs really shine during the tender and procurement phase.

All suppliers for key works packages that have been identified are asked to provide EPDs in the specification and as part of the tender process. We then run these EPDs through our existing LCA and compare how these products help or hinder our embodied carbon target. A preferred product from a sustainability standpoint is identified and communicated and is then overlayed with other project criteria.

When different suppliers offer solutions that meet the same or similar price points, logistic capability, and satisfies all performance criteria, sustainability

can be an important differentiator. As procurement decisions are finalised and we reach detailed design, a full and complete LCA is conducted and EPDs are collected for rating tool submission. Finally, data and lessons learnt from this project are rolled up into companywide benchmarking to help inform the future projects. As you can see, EPDs are integral to the data collection and decision-making process throughout.

EPDs are so vital for my role… and in my opinion there are not nearly enough of them. I implore manufacturers that if you don’t already have an EPD to invest in getting one. If you were looking for a sign, this is it.

Ceire Kenny is a Sustainable Futures Manager at Lendlease.

THE FUTURE OF AFFORDABLE HOUSING IN AUSTRALIA

By Gavin Balharrie MAIQS, CQS

AFFORDABLE HOUSING

Australia’s population is ever-expanding, increasing on average 1.4 percent since 2017 and estimated to reach approximately 29 million in five years' time (according to the Australian Bureau of Statistics). The need for affordable housing, has never been greater; an essential solution to supporting the varying demographics of Australians.

Understanding how affordable housing differs from social and public housing options, is essential to continue to bolster the argument for greater investment in affordable housing Australia-wide. The individuals who seek affordable housing options, are seeking just that; homes that they rent for a period within inner-city suburbs, that are affordable. The needs of these individuals differ significantly from those who may be experiencing a time of crisis and require emergency, short term accommodation in social housing, or those who may be experiencing homelessness, family violence or other scenarios which render them in need of public housing. Understanding the difference between these often-misunderstood options is essential, and when married with the number of Australians unable to currently afford housing, positions an argument which strongly highlights the vitality of affordable housing across the country. However, the solution extends beyond simply ‘building more affordable homes' and stretches into the realm of property quality, durability, and longevity.

Affordable housing does not necessarily translate into 'lower cost construction’ as the costs required to construct, design, and build the homes remain consistent with build-to-sell properties. What affordable housing does translate into, is higher yields and lower developer margins, which are necessary to provide tangible lower sale prices. Higher yields are essential to make development

AFFORDABLE HOUSING

feasibilities sustainable, but run the risk of costing more to develop, due to being denser and more compact than other spaces with open plan living. As a result, affordable housing options may spread across spaces that take up fewer square metres, on average, than build-to-sell homes and units; but the cost to develop each square metre increases due to the mere density of these developments.

to identify and use energy in a more sustainable, practical way. Economically, these implementations would also be of relevance, whereby its upfront investment has the capacity to reduce running costs, post construction – extending the life span of the developments. Other aspects such as resilient and higher resistance surfaces, materials such as floating floorboards which have markedly longer lifespans, and masonry, may contribute to higher construction costs (when compared with other build to sell apartments), but also enhance the longevity and durability of the development.

per cent. There has also been additional provisions and planning schemes put in place to streamline the planning process to aid economic recovery, creating thousands of jobs and bolstering the rapid delivery of social and affordable housing.

Developers, backed with government support, are looking to build-to-rent modelling and/or combining affordable housing within public housing/private apartment project. It has become clear that more attention toward life cycle costing modelling is needed, to ensure that it is embedded early in the costs of the planning phase. This is especially important, to lower the running costs of affordable homes and in turn, ensure viability in long term budgeting especially as developers/governments remain as stakeholders of these projects. Examples of implementations include energy monitoring and smart building systems, which could be used

WT has been at the forefront of affordable housing costing in Australia, having been involved in numerous high-quality, affordable housing options nationwide. Projects include Amelie Housing in New South Wales, and the Gateway Development Project in Victoria, both of which required extensive planning, inspections, and financial reporting to be deemed feasible in the property market. Both projects were valued at approximately $90 million, but were thoughtfully constructed and planned, and involved careful consideration into architectural consistency, sustainable principals, and dwelling sizes.

However, the need and quality of affordable housing in Australia has not equated into traction at all state levels. Victoria’s Big Housing Build programme is a $5.3m billion investment in social and affordable housing delivering 12,000 new dwellings including 9,300 new social housing dwellings and replacing 1,100 existing dwellings. This investment aims to boost total social housing supply by 10

New South Wales has included affordable housing as a part of its development proposals, especially for Key Workers such as nurses and first responders. In light of this, housing affordability does play a key role at Federal level with the Labor government, recently announcing a five-point plan, which intends to address the cost-of-living pressures in Australia as home ownership becomes increasingly less achievable for the population. The budget announcement in 2022 involves a $10-billion Housing Australians Fund, which will aim to deliver 30,000 affordable (and social) homes to Australians.

This announcement could not come at a better time but considered action and legislative response is essential to move forward and address the issue at play. While simply building more affordable housing is easier said than done, it will effectively meet the changing and diversifying needs of Australians long into the future. Longevity is at the heart of affordable housing, and investment into the sector provides an exciting opportunity for our ever-increasing population.

INCLUDES INFORMATION FROM:

Population Projection: https://www.abs.gov.au/statistics/people/population/population-projections-australia/latest-release Budget and Investment: https://www.theurbandeveloper.com/articles/federal-budget-2022-property-sector

Affordable housing does not necessarily translate into 'lower cost construction’ as the costs required to construct, design, and build the homes remain consistent with buildto-sell properties.

Gavin Balharrie MAIQS, CQS is a National Director at WT Partnership.

PLANNING AND PROGRAMMING PITFALLS - PART 1

By Paul McArd MAIQS, CQS

WHAT IS PLANNING AND PROGRAMMING?

The words planning and programming are often used interchangeably to describe two distinct functions of project management. Planning constitutes how the project will be executed (the plan), whilst programming concerns the communication of the plan.

Planning starts at the time of tender and continues through to completion. The plan constantly evolves as the project progresses, as should the program.

The program consists of a sequence of logic-linked activities in line with the project plan of varying duration from commencement to completion, typically in the form of a Bar (Gannt) Chart. A good plan is constantly updated to reflect change and progress. A planner manages this process and its communication through the program. However, to successfully execute the plan, the project must “own” the program.

THE CRITICAL PATH

The project critical path is usually determined through programming software using the critical path method (CPM). Simplistically, the critical path identifies the most time (or resource) sensitive sequence or “path” of activities through the program from start to finish. The CPM is also widely accepted as the preferred method of demonstrating the causation and effect of delaying events.

COMMON PITFALLS

The baseline master program or “contract” program is a static document

Whether it be due to a delaying event, subsequent mitigation strategy, or work not captured in an earlier revision, for a program to be a useful project management tool it must be updated to reflect any significant deviation from the originally intended plan. Otherwise, the program will become irrelevant.

No matter how robust and detailed the original plan is, it will invariably change throughout the course of a project. An accompanying (basis of schedule) document which substantiates and justifies the changes must be submitted with the revised baseline, and its approval sought from the clients representative or otherwise.

The program is solely used for the purpose of monthly reporting

It is often a requirement that projects status be reported against the baseline or “contract program” to demonstrate progress. The planner or program operative often only considers the works planned to have been undertaken in the previous nominal time frame (typically a month) between reporting periods. Activity commencement and completion dates or a perceived percentage complete of activities in progress are simply input, overriding the planned logic. The activities after the update are rescheduled in accordance with the preceding activities’ anticipated completion date based on a software algorithm. This is “programming”, not planning.

Program Updates

The planner or program operative should instead update the program contemporaneously by modifying the as-planned logic and activity durations to reflect what occurred more frequently than the nominal reporting period. Additional activities (or “fragnets”) should be added where necessary to rationalise a change to activity duration. Similarly, future activity logic and durations should be reviewed and any changes noted in the basis of schedule document, and be accompanied by substantiating records. This way, a “live” (as in it has a historical critical path) as-built program is maintained and a more robust forecast is communicated.

Multiple programs

A project should have a single master

program that incorporates the intent of the entire construction process from commencement to completion in an appropriate level of detail. Shortterm (look-a-head), detailed programs should be developed by the respective contributor. However, their content must relate directly to the master program, which is managed solely by the planner or program operative.

Managing and controlling multiple programs is difficult and time consuming. Often contractors see it as prudent to have two master programs: A “contract” program for reporting and a “target” program to actually work to. This approach is fraught with trouble since the project will have a different status for each program for the same works in the same respective period. Therefore, making it difficult to prove causation in the event of delay and for the party privy only to the “contract” program to understand their key interfaces and deliverables.

Planning and programming are not the same. The program is the “vehicle” by which to communicate and update the plan. It should not be seen as just a contractual obligation, but an essential tool in the management of projects.

Join us for Part 2 of the Planning & Programming Pitfalls series of articles where we will discuss the following salient issues:

• The baseline level of detail

• Updating programs without the support of contemporaneous records or justification and “Actualising” programs

• Contingencies and delay allowances

• Demonstrating cause and effect.

Paul McArd MAIQS, CQS is an AIQS Expert Witness, Managing Director and Quantum Expert at Accura Consulting.

By Stephen Ballesty FAIQS, CQS

OUR BEGINNINGS

In 2011, a small group of FM professionals under the leadership of Stan Mitchell, ISO/ TC 267’s founding chairman, formulated a proposal to the International Standards Organisation (ISO) to establish a formal committee to create international standards for Facilities Management (FM).

In doing so we needed to overcome several hurdles:

1) ISO’s apparent lack of recognition of FM.

2) The belief that FM’s functions were already covered by ISO 55000 Asset Management.

3) The recruitment of a sufficient number of National Standards Bodies (NSBs) to support our proposal.

These hurdles were overcome and international FM standards initiative was made possible due to the existence of multiple FM membership bodies worldwide, EuroFM and Global FM, plus the previous work of the Australian Government’s FM Action Agenda (200408), and the European FM standards committee CEN/TC348’s EN15221-1 to -7 (2006-12).

Following two (2) detailed business cases, and the support of 17 NSBs, ISO/TC 267 was established by February 2012. Our first plenary meeting was held in Berlin in November 2012, and was attended by 26 delegates from nine (9) countries.

ISO/TC 267 has formulated business plans, an organisational structure and formed Working Groups in order to develop, and to date, publish six (6) FM standards / technical reports plus a conformality assessment guide:

■ ISO 41001:2018 Facility management –Management systems – Requirements with guidance for use

■ ISO 41011:2017 Facility management –Vocabulary

■ ISO 41012:2017 Facility management – Guidance on strategic sourcing and the development of agreements

■ ISO/TR 41013:2017 Facility management – Scope, key concepts and benefits

■ ISO 41014:2020 Facility management –Development of a facility management strategy

■ ISO 41018:2022 – Facility management – Development of a facility management strategy

■ ISO/IEC 17021-11:2018 Conformity assessment – Requirements for bodies providing audit and certification of management systems – Part 11: Competence requirements for auditing and certification of facility management (FM) management systems

Advisory Groups were also formed to form the purposes of:

■ AG1 – Roadmap to propose and coordinate new work item proposals

OUR PROGRESS

During the intervening years much work has been done to expand ISO/ TC 267, encouraging NSBs to establish Mirror Committees to enable likeminded individuals to contribute to the international FM standards initiative.

■ AG2 – Communications to promote awareness and adoption of the ISO 41000 series

Many of these publications have been progressively translated, covering nine (9) languages so far. Our flagship Management System Standard ISO 41001 along with its associated conformity assessment guide that enables organizations to achieve certification

FACILITY MANAGEMENT

of their FM systems was published in 2018. ISO 41001 will shortly be reviewed following its 5-year anniversary.

ISO/TC 267 during this time has pursued multiple activities including the formation of Task Groups to investigate specific issues, such as the alignment of the ISO 41000 series with the United Nations’ Sustainability Development Goals (SDGs).

We have also held 15 plenary meetings, hosted by 12 countries across most continents to build broader international participation and cooperation. During 2020-22 all meetings have been virtual due to COVID-19 restrictions. Currently, 51 countries are involved in ISO/TC 267.

10-YEARS ON, TODAY AND BEYOND

We have covered a lot of ground in the past 10-years, and now with the current ISO/TC 267 Chair, Duncan Waddell, have a solid plan for the future.

Today we have a further seven (7) publications under development (or revision) across our six (6) active Working Groups (WG) include:

■ WG 1, Concepts and Context

■ WG 4, Strategy and Policy

■ WG 5, Human Experience

■ WG 6, Digital, Data and Technology

■ WG 7, Emergency Management

■ WG 8, Performance Measurement and Improvement

AG1 have a roadmap for the future with new proposals under consideration as part a pipeline of potential new standards.

AG2 have a dynamic communications strategy that includes for a website, a social media presence, a You-Tube account, promotional videos, information materials, industry presentations and much more.

Australia is leading the project for ISO/TR 41019 ‘The role of FM in Sustainability and Resilience’ (working title) based on the alignment the ISO 41000 series with the United Nations’ 17 SDGs for a better world.

Our next planned in-person plenary meeting is schedule for May 2023 in Trondheim, Norway.

However, perhaps the most rewarding aspect of involvement in ISO/TC 267 over the past decade has been the way the international FM community has rallied around the ISO 41000 series. This community is not only about the pursuit of excellence in FM, but is the basis of true colleagues and friendships that transcend the global challenges we face.

For FM standards are a journey, not a destination, for those like-minded individuals who participate directly within ISO/TC 267 there is value in the process. The return on the investment of this enormous volunteer effort is the demonstration of FM’s role as the foremost contributor to a more sustainable, productive and liveable Built Environment for all worldwide.

We look forward to the next 10-years!

For more information on FM standards visit: https://committee.iso.org/home/ tc267.

Stephen Ballesty FIQS, CQS has been a member of Standards Australia’s MB-022 Committee for FM standards for over a decade, and has represented Australia at ISO/TC 267 since its inception in 2012. Stephen is a Director of In-Touch Advisory is the AIQS representative on Standards Australia’s MB-022 Committee for FM standards and is an Australian delegate to ISO/TC 267 for the ISO 41000 series.

BUILDING COST INDEX

DECEMBER 2022

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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