Built Environment Economist - Australia and New Zealand - June-August 2022

JUNE - AUGUST 2022

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

05 VISIONARIES

16 COST PLANNING CONSIDERATIONS FOR ANTARCTIC CONSTRUCTION PROJECTS

31 THE SHORTAGE OF QUANTITY SURVEYORS IN HONG KONG

43 PRICE ESCALATION AND THE OBSCURE ART OF FLUCTUATIONS

CONTENTS 2 CEO Letter

26 Q & A: Proudest Career Moment

4 A Tribute to Charles Horner Wright

31 The Shortage of Quantity Surveyors in Hong Kong

5 Visionaries

34 Explained: Time Supply and Pricing

7

Case Studies: Substation No. 164 and 4 Parramatta

39 The Tender Process

Square

43 Price Escalation and the Obscure Art of Fluctuations

12 Scaling New Heights: How Our Industry Can Rise to the

46 Embodied Emissions: The New Frontier for Net Zero

Sustainability Challenge

Buildings

16 Cost Planning Considerations for Antarctic Construction

49 Assessing Damages: Getting the Quantum Right 52 Emerging Risk Management Approaches on Mega

Projects 22 EPDs and their Role in the Quantification of Embodied Carbon

Construction Development Projects: Part 2 56 Building Cost Index (available in print edition only)

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

Subscribe Visit www.aiqs.com.au and click on the Shop button. You can purchase a copy of this edition or subscribe for 12 months.

Contribute AIQS encourages readers to submit articles relating to quantity surveying, the built environment and associated industries including; construction economics, cost estimating, cost planning, contract administration, project engineering. Contact AIQS.

Advertise Contact AIQS to discuss available opportunities.

Contact at AIQS Anthony Lieberman Communications and Marketing Manager T: +61 2 8234 4009 E: marketing@aiqs.com.au

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

ISSN 2652-4023

CEO LETTER

ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS By now members would have received their renewal notices for the 2022-23 year.

While face-to-face activities and member engagement has been minimal over the past two years due to COVID-19, we are planning significant increases in events over the coming year. 2022-23 will see the roll-out of invigorated YQS programs around the country, implementation of construction industry engagement events (bringing together government and private sector clients, developers, contractors, financiers, insurers, and members from across the broader quantity surveying profession), and more face-to-face CPD and networking events.

Following a review of AIQS core competencies and the development of seven new competencies (32 - Commercial Management, 33 – Sustainability, 34 – BIM / Digital Engineering, 35 – Earned Value, 36 –

Cost Engineering, 37 – Project Controls, and 38 – Planning & Programming), quantity surveying professionals working across the infrastructure sector will have dedicated membership entry pathways to better enable those quantity surveyors and other built environment cost professionals with non-accredited degrees to take-up AIQS membership.

I would also like to promote the AIQS technical papers which have been released including Construction Finance Reporting, which has been updated to include guidance on construction delays and restricted site access, and the Information Paper, Replacement Cost Assessments, which has been updated to include additional material on the assessment process. AIQS has also released a template Contract for Consultancy Service, which would be particularly useful for smaller companies.

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All these documents are available on the AIQS website.

Over the next six to eight months, AIQS will be releasing technical papers on Contract Administration (Representing the Client and Representing the Contractor), Residential Tax Depreciation, Infrastructure Measurement, Infrastructure Cost Planning, and Infrastructure Estimating.

More recently, there have been concerning developments over the past few months with the New South Wales (NSW) Treasury Department looking to cap professional services fees for a two-year period for all government work.

These caps reflect salaries from over the past two years and don’t take into account the supply shortages impacting the profession. Yet again we are seeing government agencies making decisions about construction with what appears to

CEO LETTER

be a fundamental lack of understanding construction processes.

Putting fee levels aside, this represents a fundamental attack on the professional standards of quantity surveying firms, who will be required to deliver more for less. AIQS has highlighted on many occasions, that the quantity surveying professional is best placed to provide cost management services for infrastructure projects from inception, as they understand: • experience with similar projects and contracts • the level of design and identification of deficiencies in documentation • all risks associated with the project, i.e. latent conditions, constructability, procurement and escalation • a consistent approach to work breakdown structure and associated

cost breakdown structure and format of cost estimate • validation through benchmarking of design, pricing, and production metrics • qualifications, assumptions, and exclusions to provide a complete budgetary approach and align pricing during the project's development at and reconciliation with contractors.

The current proposed approach appears to be a superficial response to increasing construction costs by decreasing the fees of those professionals (quantity surveyors, architects, and engineers) who can truly assist with providing solutions for the reduction in actual construction costs.

NSW Treasury are looking at the wrong end of the shovel if they want to achieve value for money on government projects.

While AIQS (and other professional bodies) will continue to engage with NSW Treasury on this matter, it will be up to each quantity surveying firm to make a decision whether the NSW Treasury proposed commercial framework will be a viable business proposition.

GRANT WARNER CEO Australian Institute of Quantity Surveyors

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 03

VALE

A TRIBUTE TO CHARLES HORNER WRIGHT Charles Wright passed away on 12 April 2022 after an eight-year battle with melanoma.

He was in every sense a professional and a gentleman and carried on in the business until only three weeks before he died.

Such was his dedication to the profession and his stoicism that many were taken by surprise to learn of his passing.

Charles was born in Newcastle, NSW in 1948 and his family soon moved to Putney, where he stayed until the completion of his education at Hunters Hill High School. He soon began his career in construction and rose to be the chief estimator for some of the wellknown building companies in Sydney.

He took the opportunity to relocate to Darwin in 1976 for two years and never left the Territory. He soon was thinking that it wouldn’t be long before he would have been considered a “local”.

Charles began QS Services in 1990, with the practice rapidly becoming the go-to firm for many architectural, engineering and construction companies seeking professional, quality cost advice and associated services across the Top End of Australia as well as within a number of countries in the S-E Asian Region. Since 1990, it is worth noting that many other QS firms have come and gone, while QS Services remains intact and successful.

The office took in a number of cadets over the years, many of whom have excelled in the profession by their own determination, plus a work ethic instilled by Charles.

Charles’ list of achievements included the following: • Associate AIQS • Fellow AIQS • Certified Quantity Surveyor • Associate Member of Australian Institute of Building • Adjudicator #17 Construction Contracts (Security of Payments) Act 2004 (NT) • AIQS Excellence Award 2000 • AIQS Infinite Value Award for Lifetime Contribution 2015

“Charles Wright was a true gentleman whose unquestionable knowledge, passion and leadership led him to become a major influencer to the Northern Territory construction industry over make decades.

Charles was a strong advocate of the quantity surveying profession in the Northern Territory and made an exceptional contribution to the industry in the Northern Territory.

I would like to pass on my deepest sympathies to Robyn and the Wright family on his recent passing.”

Thomas Carroll, AIQS (Affil.)

• Board Member Master Builders (NT).

Such was his standing in the industry and community, it is estimated that more than 300 mourners attended his funeral service.

TESTIMONIALS FROM MEMBERS “I knew Charles for over 50 years and had the pleasure and privilege to have worked with him on countless interesting and varied projects, both within and outside of Australia.

He was the ultimate professional and put 110% effort into every job, no matter the size or complexity.

He is and will continue to be, very much missed by his family, friends, office staff, clients and professional associates.”

Peter Farmer AAIQS (Ret.)

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“I knew Charles from occasional professional dealings over the last 15 years in the Darwin construction industry. And as I later discovered, Charles was a legendary figure with great standing amongst his peers.

I found Charles to be a gentleman and I respected him for his professionalism and high quality of workmanship. I’m certain most of my colleagues would say the same.

Charles was a champion for the quantity surveying profession in the Northern Territory with his involvement in AIQS, Institute of Architects, and probably other professional bodies I am not aware of.

Charles is also responsible for providing grounding to many young quantity surveyors in Darwin through his training and mentoring over the decades.

The Darwin construction industry is much poorer for having lost Charles.”

David Johansen MAIQS

FUTURE THINKING

VISIONARIES

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

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

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 05

FUTURE THINKING

SAMUEL STAR FAIQS, CQS Principal, Archi-QS

It is with pride that I now see our profession emerging as a key player in the industry. As a quantity surveyor, we see the bigger picture when it comes to what it takes to construct, maintain, and evolve a built environment many years after post-occupancy. Very few professions are privileged to say this.

As such, I have always believed that we were underutilised. Underutilised for our in-depth knowledge of project feasibility, procurement frameworks and contracts, construction methodology, and how buildings fair over time.

When I first started my career, the quantity surveyor was little known, and far and few to come by. We had one or two predominant roles: estimating costs for builders during tender and preparation of bills of quantities.

I remember spending long nights calculating bills of quantities manually.

It was tedious, high pressure, time consuming; but laid the foundations needed to evolve my firm with the forever changing industry trends.

The Building Commissioner’s changes to legislation of late, (such as asset management plans for retirement villages, and the Stata Building Bond and Inspection Scheme, among others), has opened new doors for the quantity surveyor. I see this paving the way for future generations to grow the profession. Perhaps, we will become widely recognised for the added value we offer: ensuring projects are procured for success, ensuring construction is carried out with high quality standards, and ensuring that the maintenance of our built environment is advocated for.

CHRISTOPHER LEACH FAIQS, CQS Director, Wilde and Woollard

Quantity surveying is a profession that is a uniquely British construct and is prevalent throughout the Commonwealth and to a limited extent beyond.

The rest of the world manages quite adequately without the services of a quantity surveyor; quantities are prepared, estimates are undertaken, and things get built.

It is important to remember that nothing is ‘ordained’ about quantity surveyors being the ‘pre-eminent’ costing profession. We must work hard to stay ahead of the others who claim expertise in the costing field.

So, in order to talk about the future, we need to clearly define what we actually do. In the simplest term, our ‘core’ service is to provide professional advice, typically as either quantities and/or costs associated with the built environment.

This is something we have been doing in Australia as a profession since the 1850s, so while the outputs over time have remained fairly constant, how we go about achieving those outputs has dramatically changed as we have adapted to the technology of the time.

While it could be argued the technological changes, we are currently seeing are far more radical than earlier times, we as humans tend to anticipate future change having a greater impact than changes in the past.

Imagine what the impact of calculators would have been when arithmetical calculations were undertaken by pen, paper, and brain power.

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Going forward it is important to remember technology is just a tool, it is there to help us augment our outcomes and not the other way round. While our strengths are our analytical skills, our major weakness is we are too ready to accept what technology produces as being correct even when it is clearly not.

Arguing with the client that the multiple tenderers are wrong, and our computer model is correct does not cut it.

Even spreadsheets which have given us almost endless ways to manipulate data have also provided endless ways we can get things wrong.

While there will always be technological impacts on quantity surveying, I think the biggest challenge to our future will be attracting good people to the profession.

Our biggest strength has always been our people and a keystone of that has been the reliance upon professional migrants to fill our ranks. Smart people from overseas with ‘get up and go’ has always driven our profession.

For the profession to thrive we must continue to attract smart people, both locally and from overseas.

This has become a major challenge over recent time and does not appear to be improving especially given there are so many other opportunities for smart people both in Australia and abroad.

Although there will be both challenges and opportunities for the future, as long as we have the right people, we as a profession will meet those challenges head on, as we have over the last century and a half. However, if we cannot attract the right people then as the Super Funds ads so aptly state ‘… past performance is no guarantee of future performance…...’

EMBODIED CARBON

CASE STUDIES

SUBSTATION NO. 164 AND 4 PARRAMATTA SQUARE The value of sharing these case studies is to show the considerable reductions in upfront carbon that can be achieved regardless of project scope and scale.

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EMBODIED CARBON

Located in Sydney and Parramatta in New South Wales, SubStation No. 164 and 4 Parramatta Square are two very different projects that each achieved significant upfront carbon reductions through different strategies.

SUBSTATION NO. 164, SYDNEY SubStation No. 164 is a boutique project that features the adaptive re-use of two heritage buildings. With 7,659m² commercial Net Lettable Area (NLA), it consists of a steel structure, that supports a striking seven-level, triple glazed curvilinear glass extension atop the restored buildings so that it seems to float above the streetscape.

The heritage buildings include a 110-yearold timber and brick warehouse and the last DC electricity substation operating in Sydney completed in 1927. Both buildings lay unoccupied for over 30 years making their renovation and re-lifing a testament to sustainable development.

Exterior (above) and interior (below) of SubStation No. 164, Sydney. Source Built.

This project achieved a 21% reduction in upfront carbon emissions which was primarily accomplished through the following strategies: • Substantial retention of the existing brick façades, walls, floors, and columns. Heritage floors were used as formwork for the concrete floor topping which also enabled the required fire ratings to be achieved.

• An integrated design process between the design team and Built's design managers and structural engineer consultant.

• Structural efficiencies were found that enabled the deletion of a main column and reductions in structural walls.

• Concrete mixes with an average 44% cement replacement were used.

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EMBODIED CARBON

21% reduction

4 PARRAMATTA SQUARE, PARRAMATTA A1–A3 Transport 183.0

A5

Construction 77.6

0

100

200

300

400

500

Transport 55.6

A5

• Replacement of chilled beam mechanical system with low-temp variable air volume saving 33 tonnes of copper and 13 tonnes of black steel pipework and the aluminium and steel in 3,170 chilled beams.

33% reduction in upfront carbon emissions

Products 551.0

A4

• Average cement reduction of 32% across all mixes.

700

The SubStation No. 164 project achieved 21% reduction in upfront carbon emissions

A1–A3

• Structural rationalisations removed 2,000 tonnes of reinforcing steel from the tender design.

600

Global Warming Potential KgC02e/m² GFA

This project achieved a 33% reduction by employing the following strategies: • Structural rationalisation removed 2,300m³ of concrete at various strength mixes and shifted higher strength concrete into lower strength mixes, including replacing the use of 23,000m3 100MPa concrete with lower cement mixes including 65MPa, 50MP and predominantly 40MPa mixes.

in upfront carbon emissions

Products 606.0

A4

4 Parramatta Square is a new posttensioned, reinforced concrete tower with approximately 70,000m2 commercial NLA over 33 storeys and provides office accommodation for three New South Wales Government agencies.

Developed by Walker Corporation, it is located beside Parramatta train station and within the Parramatta Square urban redevelopment.

Construction 19.8

0

100

200

300

400

500

600

Global Warming Potential KgC02e/m² GFA The 4 Parramatta Square project achieved 33% reduction in upfront carbon emissions

• Rationalisation of curtainwall façade modules from 1200mm to 1800mm, saving 33% of the aluminium mullions or 60 tonnes of high embodied carbon aluminium.

SUMMARY It’s difficult to compare these projects in terms of their sustainability outcomes equitably.

One of the main reasons is that the work done at SubStation No. 164 has the effect of extending the life of these 100+-yearold buildings by at least another 60 years or nearly tripling the life-cycle analysis (LCA) assumed design life.

When considering that fact, the impact of

honouring the embodied carbon in these old concrete, steel, brick, and timber buildings goes beyond the calculated 21% reduction in upfront carbon.

In these cases, LCA modelling was integral but not the only benchmark worth considering.

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EMBODIED CARBON

Exterior (above) and interior (below) of 4 Parramatta Square. Source Built

These case studies have been reproduced with the approval from Joe Karten, Head of Suitability and Social Impact, Built and Clare Gallagher, National Sustainability Manager, Built.

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Information is the foundation of every profitable project

Maximising the financial and environmental benefits of timber projects demands accurate costing – and that requires relevant information and experience.

WoodSolutions Technical Design Guides are accessible sources of real-world costed projects, written to help you understand and more accurately cost timber developments.

Download your free copies from woodsolutions.com.au/publications.

ADVERTORIAL

SCALING NEW HEIGHTS: HOW OUR INDUSTRY CAN RISE TO THE SUSTAINABILITY CHALLENGE 12 : JUNE - AUGUST 2022: BUILT ENVIRONMENT ECONOMIST

ADVERTORIAL

Construction is at a crucial juncture. It is widely accepted that both productivity and sustainability must improve, and many construction enterprises have taken confident steps forward already.

While there is a willingness to innovate, putting brave new ideas into practice is a complicated business. The sheer size of the sustainability challenge cannot be ignored, and it will take a concerted effort to reduce total industry emissions to the necessary extent.

Quantity surveyors will have a key role to play in delivering a better built environment for future generations.

It’s hard to accurately predict how the project dynamic will change for the quantity surveyors, but the best quantity surveyors will surely be much more than cost counters as construction strives to slash carbon.

THE SCOPE OF THE PROBLEM It’s no secret that the construction sector is a primary contributor to global carbon dioxide emissions. A report from the United Nations Environment Programme (https://bit.ly/3lBs4ds) for 2019 estimated that 38% of total global energy-related CO2 emissions were generated by our sector (including operational emissions).

The report found that direct building carbon emissions must be slashed 50% from this figure by 2030, if we are to get on track for net zero carbon building stock by 2050. The UN Environment Programme has called for a “triple strategy” to achieve these aims; namely, to slash energy consumption in the built environment, decarbonise the power sector, and enact materials strategies that reduce carbon emissions throughout operation phases.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 13

ADVERTORIAL

While progress has been made in renewable energy and efficiency metrics, the rate of improvement must accelerate quickly if we are to reach these lofty targets.

On a more positive note, the UNEP’s Emissions Gap Report 2020 (https://bit. ly/3sPIm6p) found that a post-pandemic green recovery could reduce projected 2030 carbon emission by up to 25%. To achieve this, governments would need to “…systematically include building decarbonisation measures into recovery packages – increasing renovation rates, channelling investment into low-carbon buildings, providing jobs, and increasing real estate value.”

Reports such as these foreshadow that stricter carbon-cutting initiatives will be present across the board on private sector projects. Intelligent design and material innovation are a must, especially as our industry is striving to boost productivity as well as sustainability.

Uncovering efficiency and cost gains during the operations phase will be a focus area for quantity surveyors working on major builds. For this, quantity surveyors and other professionals will need to possess a strong knowledge of embodied carbon estimating.

WHY IS EMBODIED CARBON SO IMPORTANT?

technical level. Several principles and methodologies are available. While applied methods may vary, the general principles of reducing embodied carbon remain. Existing buildings should be repurposed or re-used wherever possible, while materials should be recycled or remanufactured as appropriate. Materials selected should be sustainable and lowcarbon, and emissions should be offset wherever feasible (through woodland planting, renewable energy tech, etc.)

The holistic embodied carbon approach is a relatively new advent for our industry.

By selecting the right materials, methods and design cues, project owners can deliver on builds that are both energy and cost effective in the long-term. In this new world, quantity surveyors and estimators are a key piece of the puzzle.

Top quantity surveyors will soon not only be repositories of knowledge on all things price; they will also have excellent insight on material and design considerations that can slash emissions.

It is likely that forward-thinking project managers will lean on their expertise and involve the quantity surveyors more in early-stage design and material discussions. Projects that intelligently utilise Building Information Modelling will have an advantage when it comes to analysing embodied carbon.

Team members (including quantity surveyors) can collaborate to assess the long-term energy implications

For those unfamiliar with the term, embodied carbon refers to the allencompassing CO2 emissions associated with a service or product. In a construction context, this might be the complete lifecycle carbon cost of a certain type of concrete (manufacture, transportation, installation, maintenance, disposal, etc.).

Quantifying embodied carbon is a complicated undertaking at a

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of the structure, materials used and other considerations. This skill requires some technical aptitude, in addition to broad material knowledge. Advanced estimating software is now a standard component of the quantity surveyor’s toolkit, and some platforms are intelligent enough to simplify the embodied carbon estimating process.

OPEN ACCESS DIGITAL TOOLS FOR THE QUANTITY SURVEYING MARKET Industry-wide digital transformation requires technical breakthroughs that facilitate a better way of working.

Fortunately, there are various professionals and organisations who are working to break down the barriers and establish a greener industry.

One such endeavour is Building Transparency (https://www. buildingtransparency.org/), a non-profit organisation that is taking action to address the role of embodied carbon in climate change. Building Transparency is dedicated to uplifting construction through open access data and tools that have wide application across the industry.

Their major service as of mid-2022 is the Embodied Carbon in Construction Calculator (EC3), a “…free database of construction EPDs (Environmental Product Declarations) and matching building

ADVERTORIAL

impact calculator for use in design and material procurement.”

EC3 aids in evaluating the upfront supply chain emissions of construction materials. This is particularly useful to construction material procurers, developers, contractors, and policymakers alike.

By being able to measure the amount of embodied carbon within production materials, these stakeholders are empowered to evaluate a project’s overall carbon emissions and utilise that information to procure low carbon material alternatives or, in the case of regulators, set embodied carbon limits. These measures will ensure the industry’s compliance and adherence to Environmental, Social and Governance (ESG) sustainable building practices.

The EC3 solves a persistent pain point for construction. Traditionally, technical documents reporting on the carbon footprint of a product (EPDs), have been expensive and tricky to produce. For this reason, they haven’t always been widely accessible; EPDs are often proprietary, unstructured and in print-only PDF format, mitigating the ability to compare like-for-like. With EC3, thousands of EPDs are now available in a singular and open-source database, empowering professionals such as quantity surveyors to deliver optimal outcomes. Those willing to submit an EPD to the growing database for global use can contact Building Transparency directly.

requirements of carbon-cutting professionals across the globe. Industry bodies (such as AIQS) play a crucial role by highlighting the challenges that professionals face and advocating for the best possible solutions. Just as digital collaboration is vital for modern project management, it is imperative that the best minds keep creating technologies and techniques to support delivery of a greener built environment.

EMBODIED CARBON ESTIMATING BY RIB SOFTWARE All-in-one quantity surveying and estimating software has come a long way in a few short years. The inherent power of platforms such as iTWO costX® allow for effective embodied carbon workflows in a short timeframe.

With iTWO costX® (https://www. itwocostx.com/costx/products/), intelligent functions can be used to calculate the embodied carbon of multiple building components, before expressing these results as a percentage of the project’s total carbon output. From here, a

standard report can be quickly generated to provide a high-level overview to clients.

Readers can watch this YouTube video for a demonstration of the above (https://bit. ly/3LwQSha), which only scratches the surface of what is possible in a carbon context. The user-defined columns and drag-and-drop rate libraries featured in iTWO costX® allows users to build complex workbooks very quickly. iTWO costX® is recognised in Australia and around the world as an industry leader. Users who choose the RIB solution are placing their trust in a future-proof platform that is constantly being developed to suit the evolving requirements of the industry. If you are considering upgrading your software suite to iTWO costX®, contact the RIB Australian team today (https://www. itwocostx.com/costx/page/embodiedcarbon/).

This advertorial has been paid for, and written by, our Corporate Partner, RIB Software.

Building Transparency’s premier solution is kept free by way of sponsorships with various entities. In April of this year, RIB Software agreed a partnership with Building Transparency as a commitment to the future of the industry.

Other open access digital initiatives are being rolled out for the good of construction, based on the reported

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 15

COST PLANNING

COST PLANNING CONSIDERATIONS FOR ANTARCTIC CONSTRUCTION PROJECTS

By Gary McDonald LFAIQS, CQS; Chris (CJ) Reyneke MNZIQS; and Marcel Frei NZIQS Fellow

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COST PLANNING

Antarctica is a vast, remote and largely untouched environment. The breadth and scale of this diverse continent means that no two projects will contain the same combination of challenges.

With activity on the continent increasing, quantity surveyors will be called upon more than ever before to assist the various national Antarctic programmes with construction projects to support their scientific work.

The build is planned to take place over eight years and supporting infrastructure will be installed for much of this period …

AECOM has a history of providing project services in the polar regions. AECOM’s Arctic projects include work at Alaska’s Toolik Field Station and Prudhoe Bay, and the Thule Airbase and the Atmospheric Watch Observatory Summit Station – both in Greenland. In Antarctica, AECOM has worked with the Australian Antarctic Division (AAD) on the Macquarie Island Station and the Year Round Aviation Access (YRAA) feasibility study.

AECOM has supported the United States Antarctic Programme with projects dating back over 25 years at the McMurdo and Palmer Stations and has also been involved with recent station projects from the Spanish Antarctic Campaign, the Indian Antarctic Programme, and the British Antarctic Survey where AECOM provided full engineering design services for the Halley VI Research Station.

Most recently, AECOM’s Australia and New Zealand quantity surveying business line has been providing cost management services on two significant projects for both of nation’s Antarctic programmes.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 17

COST PLANNING

in Timaru, New Zealand and ship it to the site in Antarctica in large modular sections. This approach will require the chartering of a large flat deck roll on/ roll off vessel, self-propelled modular trailers, and access to an ice-breaker.

The build is planned to take place over eight years and supporting infrastructure will be installed for much of this period to minimise both disruption to science and health and safety risks, as well as to house construction staff².

Davis Research Station - Photo Credit: © Greg Stone/AAD 2019

Davis Research Station Aerodrome Environmental and Economic Assessment: Following the identification of a suitable site in the Vestfold Hills region of East Antarctica, approximately six kilometres from Davis research station, the Australian Antarctic Division commissioned an environmental and economic impact assessment for a new runway. The project team considered the impacts of a paved runway constructed from pre-cast concrete pavers, made in Australia, transported by ship and assembled on site. Approximately 11,500 pavers weighing 10 tonnes each would be required for the apron, taxiway and runway. The pavers would be transported by barge from the cargo ships, transported to the aerodrome site on trailers and then craned and grouted into place. If approved, the proposed Davis aerodrome would have been the first paved runway in Antarctica¹.

AECOM was originally appointed to provide planning and engineering

services for the provision of the YAAA programme. As an outcome of the original study, the AAD selected AECOM to deliver further analysis and business case input which included project cost planning – led by Gary McDonald from our Brisbane office. Following detailed environmental and economic assessments, the Federal Government elected not to proceed further with the Aerodrome project¹.

Antarctica New Zealand’s Scott Base Redevelopment Project: The design for this project as approved by Cabinet includes three large, interconnected buildings for accommodation and welfare spaces; science and operations; and engineering vehicle workshops and storage. The project also encompasses the redevelopment of the Ross Island Wind Energy (RIWE) scheme. The construction methodology that has been developed is to build the entire base

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AECOM’s role is to provide cost planning support during the remaining design phase; financial administration of the construction contracts, and; financial reporting throughout. AECOM’s services are being provided from our Christchurch office where Antarctica New Zealand is also headquartered. Marcel Frei and Chris Reyneke were both on location in Antarctica at Ross Island earlier this year to complete Antarctic Field Training; to view the existing base, RIWE scheme, and neighbouring McMurdo base; and inspect the planned redevelopment site.

KEY FACTORS UNIQUE TO ANTARCTICA There are several factors that set Antarctica apart and construction activities and buildings require considerable planning to respond to the unique challenges.

The Antarctic Treaty: The Antarctic Treaty was originally signed by 12 nations in 1959; it entered into force in 1961 and the total number of Parties to the Treaty now totals 54. The Treaty sets out the key terms and provisions for activities on the continent³. A key aspect of the Antarctic Treaty is environmental protection since the adoption of the protocol on environmental protection to the Antarctic Treaty in 1991. This requires that all Treaty partners “commit themselves to the comprehensive

COST PLANNING

Scott Base Redevelopment Image Credit: Hugh Broughton Architects

protection of the Antarctic environment and dependent and associated ecosystems and … designate Antarctica as a natural reserve, devoted to peace and science”⁴.

Geographic and Climatic Factors: Conditions across Antarctica vary considerably. Antarctica is often described as the harshest and most hostile environment on the planet. By the far the world’s coldest continent, typical winter temperatures are between -20 to -30 °C in the coastal areas and -40 to -70 °C in the interior. Even in summer, mean temperatures only climb to between -4 to -30 °C at the coast and -20 to -35 °C in the interior⁵. Considered one of the world’s great deserts, Antarctica is extremely dry and arid. The Antarctic atmosphere contains only around 10% of the water-vapour concentrations of the temperate latitudes. The average annual precipitation over the polar plateau is around 50mm⁵. Surface winds are amongst the strongest and most

persistent anywhere on the planet.

These ‘katabatic’ winds are formed through cold dense air that is directed on downward ice inclines toward the sea, becoming denser and picking up speed as it moves⁶. Not only do these winds create extreme wind loads; they also exacerbate the already extreme cold with added wind chill. Due to its axially tilted orbit of the sun, Antarctica experiences very long summer days and winter nights – the geographic pole theoretically experiences a six month night over winter⁵. While Antarctica is a land mass, only less than 1% is ice free⁷.

This means construction will take place either on ice or the frozen rock and soils (permafrost) of the ice free regions.

Logistics: Antarctic stations are extremely remote locations. Only a limited amount of transport and logistic activities take place in Antarctica.

Summer sea freight is generally supported with Ice Breakers to clear shipping channels in the seasonal sea

ice. Shipping activity to Antarctica is increasing, no longer limited to the ‘Antarctic Gateway cities’, with vessels departing to Antarctica from close to 60 different ports⁸. Many Antarctic stations also receive air logistics from fixed wing aircraft using ice or gravel runways and helicopters. Other than in emergencies, flying is limited to the Summer months. Due to its remoteness, cold temperatures and long distances involved, logistics in Antarctica, while available, remains challenging.

KEY COST PLANNING CONSIDERATIONS The unique natural environment and the remote location of Antarctic projects coupled with the extreme climatic conditions means that both the direct and indirect cost of construction is much higher than for local projects. Key areas for consideration are highlighted below:

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COST PLANNING

On-site Work: Antarctica’s extreme climatic conditions mean that construction activities are severely constrained. Due to daylight limitations, the effective construction period tends to be limited to between four to six months over summer. The low ambient temperatures often necessitate outdoor work to be undertaken in ‘extreme cold weather’ (ECW) clothing to protect against cold weather illnesses such as frostbite and hypothermia. Both the lower temperatures and ECW gear encumber working and lower construction productivity. Mechanical plant and equipment will require winterising.

This may include changing over to low temperature oils and coolants, electric heating blankets to engine bays, providing diesel air heaters to cabs, and in some cases providing undercover storage. These measures effects both labour and plant resource productivity (constants) which must be factored in to the cost planning exercise⁹ ¹⁰. The presence of permafrost and the lack of commercially available aggregate are two key factors that must also be considered when estimating earthworks costs.

Permafrost requires additional measures for excavation, such as the use of explosives, thawing techniques or heavy mining equipment. Engineered fill must first be site won and graded.

Modularisation and Prefabrication: The constraints of on-site work lead many Antarctic projects to incorporate a degree of prefabrication. Prefabrication can range from the off-site preconstruction of individual building elements right through to full volumetric modular construction.

The benefits of prefabrication are that the construction can be undertaken in a typical construction environment where the climatic risks are lower and quality control is more easily assured. However, the benefits of prefabrication must be weighed against the available logistics options (typically based around the

twenty-foot equivalent unit standard) and other complexities prefabrication can introduce (such as the requirement for increased craneage; protection of completed elements during transit and construction; the weathertightness, passive fire, seismic, thermal and acoustic integrity of construction joints; the difficulty of remediating defects or damage to prefabricated elements and so on).

These measures effects both labour and plant resource productivity (constants) which must be factored in to the cost planning exercise.

Design Considerations: The extreme climate drives a number of cost relevant design considerations that early stage cost plans must anticipate. The persistent katabatic ‘gravity’ winds mean any buildings on the continent must be designed to withstand increased wind loads which can require increased primary and secondary structure.

Buildings must also be designed to avoid the effects of wind-driven snow. Snow drifts can cause nuisance if allowed to accumulate at egress points or if meltwater from summer thaw achieves building ingress. A common approach is to give structures as aerodynamic forms as possible and to elevate them above the ground to allow the wind driven snow to pass beneath¹¹. The building envelope, including flashings, will be detailed in a manner which prevents snow particles from finding their way inside the thermal envelope. The extreme temperature differential between the internal and external environments means that

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particular attention is given to the detailing of thermal breaks – which can often be costly to achieve. The thermal envelope overall, is an obvious area that requires higher than normal performance – and therefore drives cost.

The prevailing ‘ground conditions’ of permafrost and ice have a direct influence on foundation designs. Whereas foundations in rock and permafrost may include relatively conventional solutions (such as precast concrete pads and steel piles or anchors), stations on the ice shelf require alternative bearing – so called ‘elevated building lift systems’¹¹. These systems typically include a hydraulic jacking system for raising the building or its footings as snow accumulation raises the surrounding relative ground level.

Logistics: As previously noted, logistics to Antarctic is challenging due to the infrequent logistic activities to its few remote stations and the limitations around year round access. Many stations have annual sea and air freight arrangements in place to service normal operations. Any significant construction projects will more than likely require additional logistics using either existing or new freight channels depending on the nature of the existing supply agreements in place; whether these can be scaled up and whether or not they are suitable for the logistics required to support the proposed construction project. The nature of the project cargo – personnel, containerised materials, standard break bulk or large volumetric modules – and the nature of the available sea and air freight will determine the logistics strategy. Sea freight will need to consider whether or not icebreaker support is required and bookings for both cargo vessels and ice breakers may need to be confirmed many seasons in advance; so early planning is essential. The current international shipping constraints are likely to exacerbate this. Due to limited shipping windows, some materials may

COST PLANNING

need to be shipped to Antarctica the season prior to enable construction early in the following season. Air freight, where available, is costly so would tend to be reserved for personnel and critical items.

Environmental Management: Any substantial construction work will require a Comprehensive Environmental Evaluation (CEE) in order to comply with the environmental provisions of the Antarctic Treaty. The CEE will set out how the project will reduce environmental impacts to an acceptable level including minimising impacts on local flora and fauna; the management of any hazardous materials; the containment of construction debris, and; the removal of any demolition or construction waste from the continent.

Preliminary and General Costs: Like any remote locations project, consideration needs to be given to the transport of construction personnel to the site and the provision of temporary accommodation and welfare. Additional requirements for Antarctic projects includes the provision of ECW clothing and appropriate

field training to ensure personnel are equipped for safely managing their work within the extreme climatic conditions.

Predeparture and field training requirements for deployed personnel vary considerably between the various national Antarctic institutes. The cost of additional fuel (typically winterised diesels or aviation turbine fuels) purchase and transportation for construction plant and equipment will also need to be carefully calculated.

Quantitative Risk Analysis: The many risks and uncertainties arising from the extreme climate and remote location of Antarctic projects means that both the inherent and discrete risks tend to be much higher than for conventional projects. From an estimating perspective, it is essential that both the inherent risks within the base cost estimate, and the cost impacts of any unmitigated discrete risks are given regular due diligence.

Quantitative risk assessments should be undertaken to provide indications of realistic contingencies at the desired probability levels.

SUMMARY With activity on the Antarctic continent increasing, quantity surveyors are well positioned to support construction work with robust construction cost management. By considering and understanding the unique political, environmental, and technical factors and risks encountered in Antarctic projects, quantity surveyors can ensure cost advice is reliable, effective and value adding.

This article has been written by Gary McDonald LFAIQS, CQS, AIQS Past President, AECOM Technical Director; Chris (CJ) Reyneke MNZIQS, AECOM Technical Director – Past NZ Technical Practice Lead Cost Management; and Marcel Frei NZIQS Fellow, Registered QS, AECOM Associate Director – Christchurch QS Team Lead.

¹Australian Antarctic Division, "About the Davis Aerodrom Project," 2021. [Online]. Available: https://www.antarctica.gov.au/antarcticoperations/travel-and-logistics/aviation/davis-aerodrome/about-the-project/. [Accessed 30 April 2022]. ²New Zealand Ministry of Foreign Affairs and Trade, "Proactive release – Scott Base Redevelopment Implementation Business Case," 2021.

[Online]. Available: https://www.mfat.govt.nz/en/media-and-resources/proactive-release-scott-base-redevelopment-implementation-businesscase/. [Accessed 30 April 2022]. ³Secretariat of the Antarctic Treay, "The Antarctic Treaty," 2022. [Online]. Available: https://www.ats.aq/e/antarctictreaty.html. [Accessed 30 April 2022]. ⁴Secretariat of the Antarctic Treaty, "Environmental Protection," 2022. [Online]. Available: https://www.ats.aq/e/environmental.html. [Accessed 30 April 2022]. ⁵Britannica, "Climate of Antarctica," 2022. [Online]. Available: https://www.britannica.com/place/Antarctica/Climate. [Accessed 1 May 2022]. ⁶D. Brockett, "Antarctic Katabatic Winds - GCAS Literature Review," 2005. [Online]. Available: file:///C:/Users/marcel.frei/Downloads/ Brockett_D_Lit.Review%20(1).pdf. [Accessed 1 May 2022]. ⁷B. Davies, "Grounding Lines," 2022. [Online]. Available: https://www.antarcticglaciers.org/glacier-processes/grounding-lines/. [Accessed 1 May 2022]. ⁸A. H. McCarthy, L. S. Peck and D. C. Aldridge, "Ship traffic connects Antarctica’s fragile coasts to worldwide ecosystems," Proceedings of the National Academy of Sciences, vol. 119, no. 3, 2022. ⁹A. Gunars, "Effect of Cold Weather on Productivity," Cold Regions Research and Engineering Lab, Hanover, NH, 1986. ¹⁰P. Diedericks, "Optimizing Winter Construction," in Proceedings of the CIB Task Group 58: Clients and Construction Innovation Workshop, Alberta, 2009. ¹¹J. Weale, L. Barna, W. Tobiasson and J. Mercer, "Elevated Building Lift Systems on Permanent Snowfields," The U.S. Army Engineer Research and Development Center, Hanover, NH, 2014.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 21

EMBODIED CARBON

EPDS AND THEIR ROLE IN THE QUANTIFICATION OF EMBODIED CARBON

By Stephen Mitchell

INTRODUCTION The growing interest in reducing the embodied carbon footprint of new buildings and infrastructure has many built environment professionals searching for credible methods, data, and tools to support their clients’ objectives.

Environmental Product Declarations (EPDs) are among the most widely used and credible sources of carbon footprint and other environmental impact data for building and construction products.

EPDs are communication tools that bring the results of comprehensive, scientifically

based complex environmental life cycle assessments (LCAs) into a transparent, freely available, and user-friendly format, presenting the information in a consistent, comparable format.

Many people compare EPDs to nutrition labels on food. A food nutrition label includes a serving size and the quantity of nutrition indicators such as energy, protein, fats, and so on, per serving size that could affect your health. An EPD will list a product’s declared unit and the quantity of environmental indictors such global warming potential (another term for carbon footprint), emissions to water

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pollution, and other variable, per declared unit that could affect the environment.

The example below includes environment impact data for the production of a cubic metre of sustainably sourced Australian dressed kiln-dried softwood from the EPD developed by Forest and Wood Products Australia.

It is important to note that an EPD does not include a claim that a product is more sustainable or environmentally preferable than another product. An EPD simply supplies the verified data to inform better decision making by those specifying and using building materials.

EMBODIED CARBON

Figure 1: EPDs are like food nutrition labels but instead of serving size and nutrient content per serving they provide a declared unit and environmental impact per declared unit.

Source: EPD Australasia Programme.

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EMBODIED CARBON

WHAT STANDARDS DO EPDS COMPLY WITH? One of the benefits of EPD’s are that they are based on consistent globally agreed approaches and standards, so when we are comparing products from different local or international manufacturers, we are comparing apples with apples.

The core standard that EPDs must comply with is ISO14025 Environmental labels and declarations — Type III environmental declarations.

EPDs must also comply with Product Category Rules (PCRs) so that the data in EPDs provides results for the same suite of environmental indicators for all product categories. This is to make sure all construction products do not cherry pick the data but present a complete picture so fair comparisons can be made between the environmental performance of different products. In the case of building and construction products the best practice PCR is the European Standard EN15804 Sustainability of construction works - Environmental product declarations - Core rules for the product category of construction products.

I will write more about the standards in a future article, but for now EN15804 is the same PCR standard that EPDs prepared by many established EPD Programmes for products manufactured in Europe, United States, China, southeast Asia, Egypt, Turkey, and Latin America. The international nature of the EPD programme framework makes it very attractive for building product manufacturers that trade products around the globe.

There has been rapid growth in take-up of EPDs around the world over the last five years, including in Australia and New Zealand – and EPDs have been published for over a thousand products.

Companies such as Holcim, BlueScope, Infrabuild, and Dulux all have EPDs published with EPD Australasia. Industry associations have also published EPDs for generic timber products such as structural kiln-dried softwood and hardwood.

As of May 2022, EPDs are available for many major Australian and New Zealand construction products including: • Ready-mix concrete for nearly every region in Australia and New Zealand • Masonry blocks and pavers • Structural steel • Steel reinforcement • Structural softwood and hardwood (treated and untreated) • Plywood, MDF and particleboard products • Thermal insulation • Residential cladding • Commercial façade systems • Paints and coatings • Lighting • Insulated panels • Pipes (PVC, polyethylene and polypropylene as well as pre-cast concrete) • Landscaping products • Internal linings • Flooring and floor systems.

ARE EPDS AVAILABLE FOR ALL PRODUCTS? Worldwide there are over 80,000 EPDs for building and construction products.

While there are only 130 EPDs published

by EPD Australasia the EPDs provide data (including embodied carbon data) for over a thousand products. We expect a greater diversity of building materials

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suppliers will develop EPDs in the coming years as demand is increasing dramatically from developers, specifiers, and associated consultants.

USING EPD DATA AND TOOLS The data in construction product EPDs is meant to be used for making projects more sustainable. Many practitioners use software tools to apply the data in EPDs. A few tools that integrate EN15804 compliant EPD data with which we at EPD Australasia are familiar are: • Infrastructure Sustainability Council’s Materials calculator: An Excel-based tool available to members • The Australian based eToolLCD. A life cycle-based design software for buildings and infrastructure. The tool allows subscribers to upload EPD data for incorporation into their projects for LCA-based environmental assessments • New Zealand based LCAQuick: A free tool developed by BRANZ that helps architects, designers and structural engineers make sustainable design decisions. It evaluates the carbon footprint and other environmental impacts of a building design • The US based Embodied Carbon in Construction Calculator (EC3): A free database of construction EPDs and matching building impact calculator.

RECOGNITION OF EPDS BY GREEN BUILDING AND INFRASTRUCTURE RATING SCHEMES All major voluntary building and infrastructure sustainability rating schemes have embraced EPDs as they turn their focus to measuring and

EMBODIED CARBON

reducing upfront embodied carbon footprints of their certified projects.

Both Green Star green building rating schemes operated by the Australian and New Zealand Green Building Councils and the IS Rating scheme of the Infrastructure Sustainability Council have recognised EPDs for construction products verified to ISO14025 and EN15804 as providing credible product carbon footprint data for organisations seeking certification.

RECOGNITION OF EPDS BY AUSTRALIAN, NEW ZEALAND AND UNITED STATES GOVERNMENT PROGRAMS Australia The robust governance framework and independent verification are reasons that EPDs for construction products verified to ISO14025 and EN15804 are recognised by the Australian Government as a fasttrack for carbon neutral certification of products under their Climate Active Carbon Neutral certification scheme. This recognition is embedded in the Climate Active technical guidance manual in https://bit.ly/3tTS34j New Zealand EPDs for specific products compliant with ISO14025 and EN15804 have been assessed as the preferred option due to being the highest level of data quality in the New Zealand Government's technical methodology for assessing the embodied carbon of new buildings.

The methodology will be required if proposals to implement the regulation of embodied carbon proceed. You can see the methodology in https://bit.ly/3nbkirl United States The State of California’s Buy Clean California Act (BCCA) has mandated

maximum limits on the embodied carbon footprint of the following specific construction materials: carbon steel rebar, structural steel, flat glass, and mineral wool board insulation. Suppliers must provide an independently verified EPD as proof that their product does not exceed the mandated limits.

The Federal Build Back Better Act included $250 million in grants to enable manufacturers of construction materials to disclose the embodied carbon of their products via EPDs. Transparency alone has a demonstrated impact on reducing emissions. Recent case studies from Washington State show that requiring the disclosure of EPDs for concrete reduces embodied CO2 equivalent emissions by 20%. These reductions were largely driven by two major projects that simply required EPDs at time of bid, incentivising concrete suppliers to compete on both cost and carbon emissions.¹

unverified, and companies do not find them as useful as process LCA and EPDs to measure and reduce the impact of their products. Neither are they subjected to the same ISO14025 compliant governance frameworks.

This article was written by Stephen Mitchell, Chair of EPD Australasia

WHY EPDS? There are several methods that provide data for use in embodied carbon assessments. EPDs are based on process LCA method which is the most useful for companies trying to understand and reduce impacts of their products and processes. This is because the method is highly specific to different complex production process and supply chains.

EPDs for construction products are required to be monitored annually to ensure they are in line with reported results and updated and reverified every five years. Some companies updating their EPD are finding reductions in their carbon footprints in the order of 10-15%.

There are other LCA methods to derive data, and data sources based on these methods, however, they are not agreed internationally, data can be old and/or

¹Third Way 2021 Building Back Better with Clean Materials Offers Big GHG Savings. Accessed at https://www.thirdway.org/blog/building-backbetter-with-clean-materials-offers-big-ghg-savings

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 25

Q&A

WHAT ARE YOU MOST PROUD OF IN YOUR CAREER THUS FAR? 26 : JUNE - AUGUST 2022: BUILT ENVIRONMENT ECONOMIST

Q&A

CARL LOBATO MAIQS What I am truly most proud of in my career thus far is my contribution to projects that have a meaningful impact on improving people's personal and working lives.

For example, when starting my career as a quantity surveyor, I did not expect to be working on the largest data centre projects across Australia. Technological innovation over the last several years has enabled businesses to do more with less, be more efficient and push efforts to reduce both environmental and infrastructure footprints. Whether

for work or socialisation, fast, reliable data plays a massive role in our lives. The demand for real-time data transmission is at an all-time high.

Another project in which I have worked that had a meaningful impact was the Exeter deaf Academy, a brand-new facility transforming the way deaf children learn. The academy offers a specialist curriculum, teaching, support and care to Deaf young people, the majority of which have accompanying additional needs. This is a fantastic place for young people to learn and the new

teaching spaces and accommodation help to build confidence in the students, show them their value in the world and help them believe they can achieve anything they want. I was very honoured to play a role in the development of the new facility.

Many projects that we all work on have a huge impact on peoples working and personal life, sometimes this isn’t realised. I am incredibly grateful for the support throughout my career and looking forward to what lies ahead.

NAYANI PABASARA LANDAGE – NZIQS AFFILIATE I am most proud of how I achieved my childhood life passion into my professional career and uplifted myself to become a tertiary education academician in quantity surveying. That feeling of achieving our goals becomes indescribable.

I’ve always wanted to become a teacher from a very young age. However, after completing my school education, I got selected to study my bachelor’s in

quantity surveying at the only university that offered the degree in the South Asian region. Afterwards, I started my career as a project quantity surveyor; soon, I moved to an academic career in teaching quantity surveying. Having successfully served in Sri Lanka for more than a decade, I decided to move to an international career. The high demand for the academic sector in New Zealand opened the door to enter the tertiary education sector. It was

exceptionally challenging initially, but I had the opportunity to use many years of experience to ensure a successful outcome and also accomplished becoming an NZIQS member.

I recently received a thanking note from one of my graduates saying, “It is great to know that teachers like you still exist.”

It feels good when you know you added value and made a positive difference in someone’s life.

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Q&A

AUTUMN LU MAIQS I’m most proud of the way I guided my clients through new alternative procurement/contract model and achieved optimal commercial outcome.

One example is Nepean Hospital Redevelopment Stage 1, which was Health Infrastructure New South Wales’s (HINSW) first VECI project where I acted as the client-side cost manager.

I reviewed its proposed commercial mechanism which included VECI, ECI and GC21 deeds of agreement to ensure responsibilities among different parties were clearly outlined and my client was not exposed to any immediate commercial risk. I guided the successful Contractor (CPB) to compile and submit compliant ECI Offer and Main Works

Offer, managed the contractor’s cost planning deliverables during the ECI planning phase so the benefit of ECI model being cost certainty had been realised and maintained while the project was under design. I also reviewed and assessed the contractor’s Main Works Offer in an open book manner to minimise scope ambiguity and ultimately achieved a reasonably priced commercial offer and cost-effective design entering the lump sum contract. The project recently completed construction and is set to open soon.

The project was a success to HINSW as it’s not only delivered within budget but also streamlined and formalised the VECI/ECI model and its management for

other HINSW VECI/ECI projects. It was a massive amount of effort, but the feeling of pride I got when the lump sum contract was signed with both the client and the contractor being the winners in the room or when I drove by the completed 14 storey hospital tower was incredible.

I have since used this experience with School Infrastructure New South Wales, delivering their first ECI project (Fort Street Public School) and their first VECI project (Greater Western Sydney Cluster).

MBM has allowed me to expand my horizons over the past 12 years from the initial measurement of cost plans to the successful commercial management of a project ranging up to $600m.

LINDSAY BUCKINGHAM – FNZIQS, REG QS “Running away and joining the circus in 1981!”

Let me explain. Classically trained, starting as an 18-year-old cadet in the “big” George & Sons Dunedin office in 1976, I returned to the hometown office in Invercargill, increasing the local office head count to three. In the middle of my “professional years” and QSRB study, the giant Bechtel Corporation

rolled into town to execute the $185m third potline at the NZAS Tiwai Point aluminium smelter. As the preeminent engineering and construction company in the world, I embarked on a career initially as a planning and scheduling engineer because the cost engineering roles on the project were all filled. Project controls positions including estimating and cost engineering flowed naturally into construction and project management

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roles on mega projects around the world.

I am proud to have been able to use my skills as a classically trained quantity surveyor in an industry where the first question was “a what surveyor?”. It has taken me around the world and back again and I like to think I have left my quantity surveyors mark on and opened doors to an industry that traditionally few of us are fortunate to be involved with.

Q&A

PAUL RAE – MNZIQS, REG QS A career highlight for me has been a project that drew on all my career experience and funnily enough wasn’t one of the high profile “big” projects I have been involved in, it was a small winery.

The client, with architect in tow, arrived on our doorstep in June 2018 needing to take a concept for a new 738m2 winery through design, building consent, and construction ready for harvest in March 2019, a 9-month programme including Christmas.

Far from standard, the new building was to be built into a hillside, supporting the wineries namesake 20T rock.

• split the building consent and begun foundations without completed architectural drawings.

Emptying our entire toolkit, we:

By the grace of God, we got there! The grapes arrived literally as we completed sectional handover.

• engaged with a contractor who had vertical supply chain, in an ECI basis, based on a schedule of rates • booked production space and shop drawings for steel and precast without final scope

This project was an absolute team effort and testament to client, contractor and consultants all working together with a singular goal.

• negotiated a lump sum fixed price off preliminary drawings and schedule of rates

ANYA GUTHRIE – MNZIQS I was fortunate enough to start my career at the beginning of the economic boom in Perth, Western Australia. I worked alongside and learnt a lot from three of my directors at the time taking their feedback as an opportunity to learn and improve rather than criticism. This allowed me to grow within the industry and work on exciting large developments.

The proudest part of my career was to work on a large cultural and historical

landmark from its initial stage, throughout design development, and its completion. All aspects of the quantity surveyor profession were put in place and tested over the duration of this development. The collaboration between architects, engineers, artists, and contractors was interesting, challenging and rewarding. I am proud to have this experience and contribute my skills, knowledge, and experience to this exiting project.

Now living and working in New Zealand I am reflecting on this experience with a great honour. No matter how big or small, easy, or complex the project is the principals of quantity surveyors’ profession remains the same: measure, estimate and control the cost from concept to completion stage of the project.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 29

Q&A

NGA (KELLY) PHAM MAIQS Having my background in quantity surveying certainly helps me to build my career within the construction and property industry. A project is only progressing if it’s feasible and profitable, which means balancing between the project expected returns and its costs. Having a quantity surveyor who scrutinises project costs, provides advice to enable clients to make informed project decisions, or manages cost claims plays a crucial role in a project's success.

I have learnt that “a missing line can cost a million dollars”. We often need to account

for things that are not explicitly shown on drawings or project information; yet they can make a huge difference in cost (yes – it’s always recommended to read the project assumptions and exclusions in our reports).

good work ethic. You cannot ‘plug your figures from the sky’. You need to have a good solid and reasonable basis of your estimates. You are counted on by your clients and your project team to provide trusted and accurate cost advice.

It is so often that our clients need our cost advice before they make any project decisions. It means we need to be smart about how we can work efficiently while still maintaining high levels of accuracy.

Looking back, I am thankful that I started my career as a quantity surveyor and I believe this is a place that you can harness and learn a solid foundation for the start of your career in the construction and property industry.

Most importantly, I think being a quantity surveyor teaches me about having a

ALEXANDER CHUL MAIQS I am fortunate to count many proud moments in my career. The easiest to recall are the many satisfactory outcomes achieved for our clients and the gratitude received. The most memorable have been those shared with colleagues who have become life-long friends.

However, the proudest moment in my career involves a case where we had to facilitate a constructive outcome between stakeholders who began with irreconcilable differences. As the quantity surveyor / cost manager, we had a pivotal role to deliver expert and objective

evidence-based advice to guide the decision-making process in a respectful, inclusive, and constructive manner.

acknowledge that the effectiveness of our role as trusted advisors is underpinned by integrity, respect, and courage

It is genuinely rewarding when an intractable and complex monetary issue is resolved in a way that is satisfactory to all parties. The ability to broach a peaceful settlement is especially important accomplishment because of the emotional attachment people have to money and unique skills and experience we offer as a profession should not be under-estimated.

It is only after overcoming challenges that you appreciate the opportunities, experiences and advice previously provided to you to enable you to make a positive impact. The profession has afforded me the opportunity to be mentored and to work together with wonderfully talented individuals to make a difference for which I am forever grateful and proud.

Despite our technical ability to provide cost and value advice, it is important to

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HONG KONG

THE SHORTAGE OF QUANTITY SURVEYORS IN HONG KONG

By Dr. Peter Ng FAIQS, CQS

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HONG KONG

Hong Kong’s construction expenditure over the next ten years is forecast to range from US$28 billion to US$42 billion per annum across both private and public sectors. The government will continue to invest in public housing and infrastructure developments, such as land resource expansion, hospital redevelopment, and road and railway network development. Undoubtedly, these plans will require a large amount of construction professionals such as quantity surveyors. However, given the current industry status, there is a shortage of these professionals in Hong Kong.

Due to the shortage of quantity surveyors, the industry will need to enhance the efficiency of quantity surveying works.

Such drivers encourage us to discover newer technologies including Building Information Modelling (BIM), IoT and block-chain and consider how they could assist in their work being completed in a more effective manner. An example would be the wide use of BIM when conducting measurement and cost estimation. To a certain extent, it saves time in the heavy loading resulting in a faster takeoff while maintaining accuracy.

In addition, the necessity of digitalisation makes documentation work more effective and accessible.

It is believed that the wide use of BIM will diminish the use of traditional Bill of Quantities (BoQ), alongside the concurrent rise of smart building developments with the exploitation of big data, artificial intelligence and machine learning supported by input from quantity surveyors.

The industry will need to enhance the efficiency of quantity surveying works.

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There is an opportunity for quantity surveyors to create a niche for themselves in the market as the best people to manage the models, as they can analyse the vast amounts of data generated by this new modelling process. At Beria Consultants, we are currently adopting the use of 5D via the BIM model for taking off, estimating, and achieving cost control. In parallel, we are processing the digitalisation of our cost data and relevant contract data with the aim of consolidating our knowledge to enable a more effective and efficient practice for future projects. We are exploring the possibility of applying artificial intelligence and machine learning into our field and with the aim of assisting cost plan preparations.

With the COVID-19 outbreak, there has been a noticeable shift in working practices, driven partly by limitations on in-person gatherings (i.e., face-to-face meetings) and working from home. The pandemic accelerated the adoption of new technologies and creative initiatives.

At Beria Consultants, the advancement of cutting-edge technologies has allowed us to smoothly implement work from home arrangements, using video conferencing software to foster digital collaboration. As a result of the implementation of many COVID-19 policies, a lot of work will still need to be done in order to recover lost ground as companies and personnel relocate away from Hong Kong. One of the most significant changes brought about by the rise of new technologies in the workplace has been on working practices; the younger workforce is in favour of more flexible working arrangements, as they are able to deliver their work just by linking up to fast wi-fi and making use of data hubs like the cloud.

There is much potential for quantity surveyors to adopt these technologies to work remotely. Be it making the building site a potential office, quantity surveyors can update cost plans remotely and

HONG KONG

create BoQ whilst on site. Not only will this make for a faster costing process, but it will also ensure a more accurate final model. The new technologies have the potential to cut down some of the heavy labour required for BoQ measurement and the large filing process of cost data and documentation.

The recent wave of emigration from Hong Kong has also worsened the shortage of quantity surveyors situation, particularly across middle management staff. Just in the past year alone, Beria recorded almost 4% of staff leaving Hong Kong to immigrate abroad. This was primarily around staff between the ages of 30 to 50, as they saw an opportunity to gain better development for their children, better quality of life, or becoming a permanent resident in foreign countries.

There is much potential in these technologies that we can adopt to enable quantity surveyors to work remotely.

Beria's experience is consistent with the findings of a recent survey published by the Hong Kong General Commerce Chamber that suggested middle-aged employees were more likely to emigrate, as respondents in the survey indicated that the age 30 to 50 bracket is the dominant group leaving Hong Kong.

The survey also described a significant increase of about 35% in the number of companies facing brain drain. It also highlights that the increase in professionals leaving Hong Kong would undoubtedly have major economic implications on the city. For example, Beria experienced a high turnover rate of over 40% last year. Given the increased competition in hiring experienced

quantity surveyors in the market, there has been a knock-on impact driving up salaries as well.

Employers, as a result, will need to consider increasing salary and other benefits as retention measures to encourage staff to stay. Meanwhile, the job pool is still in demand – quantity surveyor graduates from local universities this year are believed to have 100% employment rate, with most graduates holding several offers at hand. In attempt to address the quantity surveyors shortage, Beria is trying to take on apprentices to attract young professionals from other fields to transition into the construction industry. While early results are promising, it requires extra resources to be allocated towards in-house training as well as extending our recruitment drive to trainees currently undertaking part-time courses in local institutions. We hope that these efforts can contribute to reducing the employment shortage in the future.

In my view, to overcome the current shortage of quantity surveyors, a rethinking of quantity surveying works is necessary and requires a timely adoption of new technology. This needs to be supported by higher and further education institutes to ensure training can adapt to the changing image of the quantity surveying profession.

In particular, this needs to reflect working environments that suit young professionals who expect flexibility and habits that are influenced by a modern, global community supported by disruptive technologies and social media. This new high-tech image is what quantity surveyors should come together to figure out.

This article is written by Dr. Peter Ng FAIQS, CQS. He is the Chairman and Founder of Beria Consultants Limited in Hong Kong.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 33

TIMBER

EXPLAINED: TIMBER SUPPLY AND PRICING

By Laurence Ritchie

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TIMBER

INTRODUCTION Tall timber projects have seemingly popped up all around the nation in recent years. Whether it’s 10+ storeys in Perth, Brisbane or Melbourne or 30+ storeys in the centre of Sydney (albeit in composite form), timber construction appears to be mainstream for forward thinking, climate responsible developers.

As this premiere selection of towers grows, so too have the prices of structural timber, which have risen at unprecedented rates since late 2020. A key issue in a booming housing market, it seems as though every man, woman, dog, cat, and galah have their own take on the reason for this price growth and what we can expect next. In this article, we take a closer look at the reasons for the price growth in structural softwood in Australia and around the world and suggest what price movements we might be able to expect in the coming months.

This image is authorised for the promotion of FWPA only. For non-FWPA usage you must obtain permission from studio@tomroephotography.com

This article draws on a range of information and data sources, but perhaps none more so than the highly topical and valuable insights offered by Kevin Peachey, Statistics and Economics Manager at Forest and Wood Products Australia (FWPA). Kevin regularly releases the ‘StatisticsCount’ newsletter, which should be required reading for any cost consultant wanting to explain movements in the price of timber-based building products in Australia. Articles from Kevin’s newsletter can be found on the Forest and Wood Products website (https://www.fwpa.com.au/news/ newsletters/statisticscount-newsletter. html).

Before we delve into the inner machinations of Australia’s timber pricing, it is helpful for us to have a highlevel understanding of the landscape of Australia’s timber industry. While certainly not wholly to blame, Australia’s

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 35

TIMBER

current market position leaves the economy vulnerable to international price fluctuations for structural timber.

This is hardly unique to timber – many of the products that make up Australia’s homes are imported from somewhere – but it may be felt more as timber framing is difficult to substitute. Yes, builders can move to steel framing, but this market suffers from a similar dynamic, and requires a leap of faith for builders who have always preferred the superior workability of timber framing (our only renewable building material, I might add).

Over recent years, it has been typical for approximately 25% of the ~2 million cubic meters of structural softwood products used in construction and DIY projects around Australia to be imported.

While we will generally purchase these softwood products from whoever is selling at the lowest price, it is normal to see the majority of our structural timber imports sourced from Eastern and Northern Europe, with a healthy portion also sourced from Canada.

While analysts have noted the minimal growth of Australia’s softwood plantation area since 2009-10, and the expectation that imports of softwood will need to double by 2050 in order to keep up with demand, until mid-2020 there were few concerns about immediate supply beyond the expected seasonal bushfire damage.

Cue the entrance of COVID-19, and the accompanying cash splash by governments desperately trying to prop up economies via the building sector.

Image credit: Laurence Ritchie

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Almost overnight, the world’s construction industry was turbo charged.

Buoyed by government grants and mammoth announcements of social housing and public infrastructure, demand for the building products which go into renovations, detached, and

TIMBER

low-rise semi-detached housing spiked around the world. While necessary, this spike in demand came at a difficult time for the structural softwood industry in North America.

Canada is renowned as a timber powerhouse, in 2016 pumping out more export timber (known as ‘lumber’ in their dialect of the Queen’s English) than any other country. It may not surprise you then to know that Canada also dominates the USA’s lumber imports, accounting for over 80% of those received in 2020.

This extreme reliance left US construction market sensitive to shocks from Canadian producers, and what do you know… there just happened to be a number of severe shocks which coincided with COVID-19.

Canada’s largest structural timber producing state, British Columbia, has had a few difficult years. Swept with wildfires in 2017 which collectively decimated hectares of productive forest, and victim to a plague of mountain pine beetles which destroy ecosystems and wreak havoc for foresters, supply was starting to constrict years before COVID-19 induced supply chain and logistics stresses. With a significant uplift in construction activity (either new build or renovations) resulting in increased demand for structural wood products, and declining supply from their largest importer, American distributors had to look to other markets in order to feed their hungry economy. Desperate for stock, these distributors were willing to pay more in order to secure the product, resulting in sky rocketing price growth in the US (up to and exceeding 400% of pre-pandemic prices). Some may recall social media posts from this time comparing how much lumber US$1,000 would buy before and after this record growth. While often tongue in cheek, the few lengths of lumber shown in the images were not far from the truth.

Image credit: Laurence Ritchie

Seeing this need, some international producers who typically supply Australia quickly rose to the occasion, diverting much of their Australian stock to their higher-paying American customers.

Even with our local industry operating at maximum efficiency – which included processing logs partially burnt in the 2020 bushfires – it was impossible to increase total supply to meet demand, resulting in price growth for fabricators and distributors which then trickled down to the jobsite. Australian builders have been fortunate to avoid the magnitude of price growth witnessed in the USA, however nonetheless, price growth has been significant, and supply stunted since the pandemic (and associated stimulus measures) began.

So, what comes next? With structural softwood pricing at an all-time high and

our local sawmills running at full capacity, the industry is questioning what is around the corner.

While the US timber pricing eased slightly through 2021, further natural disasters – this time in form of floods and landslides which cut the world off from much of British Columbia’s timber industry – resulted in another spike, keeping international supply tightly constrained.

This demonstrates the sensitivity of the American lumber market, which in turn affects Australia’s local supply.

Assuming there are no further shocks to the USA’s timber supply, and that the extreme demand for new detached homes (and therefore structural softwood) wanes as government stimulus is wound back, we may expect timber supply to start to return to pre-pandemic levels.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 37

TIMBER

Image credit: Keith Webb

This rebalancing of our market may take a further 12 months to occur as builders work through their backlog of projects which have necessarily been delayed due to material (and labour) shortages.

While this forecast considers the immediate future of supply, it is also important for us to look to the medium and long terms. Continued uptake of timber construction is a great win for the environment, not to mention the builders and building occupants who work with or around it every day. Every piece of sustainably sourced timber that goes into a building, locks up carbon which has been removed from the atmosphere through photosynthesis, directly fighting climate change while delivering a warm, relaxing, and welcoming environment. However, as Australia’s demand for structural softwood increases so too should our areas of plantation softwood if we are to shield our market from fluctuation in international supply and pricing.

Engineered Wood Products (EWPs) offer a partial solution to this problem.

Made by joining multiple smaller timber elements together to produce a complete product, EWPs can render lower grade timber – which is currently chipped or used to make pallets – suitable for structural loads typical in residential design. While EWPs with higher performance and structural capacity are turning mainstream in Australia’s commercial construction market, the lower-strength versions will find their place in smaller scale detached residential construction in the coming years.

In parallel, it’s important that Australia accelerates the growth of our softwood plantation area. Plantations offer a host of benefits for our people – they are great carbon sinks, they offer both wind and sun protection (most useful when implemented alongside agriculture), they play host to a range of recreational activities, they support entire regional communities and of course they supply our construction industry. However, with a typical softwood plantation taking decades to reach harvesting

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maturity they say the best time to plant them was 30 years ago, but the next best time is now.

Ongoing support of and investment in the timber supply chain will bring stability to our market in future years. As presented in this article, there are both short- and long-term strategies which will insulate Australians from the dynamics of global timber pricing, supporting sustainable, efficient, and affordable construction for decades to come. While COVID-19 has had major impacts on all construction supply chains, it has exposed underlying problems which we now have the opportunity to address and resolve for a more sustainable future.

This article was written by Laurence Ritchie. Laurence Ritchie is the Cost and Program Estimator at WoodSolutions.

Woodsolutions have paid for, and written, this advertorial. Learn more at https://www.woodsolutions.com.au

TENDER PROCESS

THE TENDER PROCESS AND ITS POTENTIAL IMPACT THAT CAN THEN LEAD TO PROJECT COST CHALLENGES

By Paul Johnson MAIQS, CQS

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TENDER PROCESS

This article came about following a LinkedIn post I wrote in March 2022 after the collapse of two building contractors with operations in South East Queensland.

The post was specifically about the construction tender process, and how their typical short durations can lead to project cost challenges.

Some of the feedback at the time included: “And it gets shorter for us further down the food chain at subcontractor level and the issuing of every document, drawing, specification, and brief with the statement that we are to comply and cross check all these documents and allow for the most onerous condition” – Matthew Leitch (Fredon) Since then, I have discussed this topic with colleagues and in meetings with contractors. Many people are of similar opinion that short tender timeframes, and the subsequent delay in appointment creates undue pressure on contractors.

… I consider that a generally longer tender period would alleviate some of the cost and time pressures during a tender period.

In my over 25-year career in the construction industry, I have worked as an estimator, cost planner and quantity surveyor for developers, contractors, subcontractors and in consultancies.

I have also taught measurement and contract administration subjects at Bond University.

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As an estimator/cost planner I have been involved in projects of up to $500m including working in the direct delivery on site. I have worked in Sydney, Gold Coast, Brisbane, Auckland and in Orlando Florida. I currently run Alto Cost Management, a quantity surveying consultancy that I established in July 2018.

The Australian construction market in 2022 is wrought with challenges and continues to evolve: • Material price escalation is at an alltime high • Many materials have long lead times • Construction contracts limit the ability to pass on rising material costs • Skilled labour is in demand with availability of staff impacted by COVID-19 lockdowns • Tender margins vary and can sometimes be extremely low for the relative risk • Tender periods are typically of short duration.

Whist tender periods have almost always been that way, it is becoming more and more common for owners and their consultant advisors to take significantly longer to appoint a successful tenderer.

Given the usual delay in appointing a contractor, I consider that a generally longer tender period would alleviate some of the cost and time pressures during a tender period.

The duration for a construction tender varies depending on the project value or complexity. The majority are less than three months, many even under one or two months.

A construction tender can operate broadly as follows, this example is for a fairly typical four-to-five-week tender

TENDER PROCESS

period on a fully documented or design and construct tender:

• Bid team meets to review scope of works, programme, and methodology

WEEK 1

• Potential value engineering items proposed.

• Document set received from the client

WEEK 4 – WEEK 5

• Workload assessed and decision made whether to prepare builders Bill of Quantities (BoQ) in-house or to issue to external quantity surveying forms • Documents issued to quantity surveying firms for preparation of a bill of quantities, and to a programmer for a schedule and/or methodology • At the same time these documents may be issued to the market, sometimes without a clear scope of works • Estimator communicates with the market.

WEEK 2 • BoQ is underway and tender RFI’s sent back to the client for a response • Request made for extension of time • An addendum could be received and range in complexity from one or two new reports to a full document reissue • Estimator communicates with the market.

WEEK 3 • BoQ continues and is issued to the contractor • Contractor adds rates or the BoQ to determine the budget • Bulk checks carried out (if time available) and packages sent out to the subcontractor market • Request for extension of time could be made and a further addendum could also be received for inclusion in the tender

• Rated BoQ's and tenders return from the subcontract market • Pricing comparison/ subcontractor analysis carried out • There may or may not be trade coverage and the contractor may have to use historical rates from previous projects to fill the gaps

months) from February 2021 • Construction Tender Period: 25 days (just over one calendar month which commenced on 1 July 2021 and was initially proposed for completion on 4 August 2021) • Forecast Tender Award: 1 September 2021 (one month following tender close).

There were six addenda issued during the tender period and the tender close date was extended to circa 11 August 2021.

• Value engineering items (or smarts) are proposed to assist in winning the project

Our office was appointed by one of the four tenderers to operate the tender for them, we were successful in that regard over other consultancies due to the extensive cost planning and estimating work we have carried out.

• Some value engineering items may not even be viable or accepted by the client but are still utilised to potentially win the project

Our works included builder’s BoQ trade packages, pricing of the BoQ and subcontractor price analysis to produce the final tender.

• In-house tender reviews performed and price finalised

During the tender period, the bills of quantities were issued to the builder after two and a half weeks and subsequently issued out to the tender market.

• Tender issued to the client/project manager.

In that relatively short tender timeframe, the contractor will have been required to include all designed scope, all scope gaps and everything else for a completed tender price, should they be successful in winning the project. It is then likely that they will wait a number of weeks or months for a response, or for the successful contractor to be appointed.

These are two project examples over the past year.

PROJECT 1 The project was tendered in the latter half of 2021 for a proposed design and construct contract.

• Documentation Period: 93 days (four

As is often the case with design and construction projects, the design may not be complete at tender, and it is the responsibility of the contractor to complete the design. The scope gaps in the documents were required to be included in the tender price.

Even after the initial tender period which closed on 4 August 2021, and with award forecast for 1 September 2021 the works only commenced on site in late November 2021, close to three months after the initial forecast tender award date.

At the time, the tender period was extremely compressed.

The design was incomplete, and a series of assumptions were required to enable a complete tender to be submitted.

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TENDER PROCESS

All builders would have been required to allow substantial tender allowances in their respective pricing.

proposed an alternative at tender which ultimately was not accepted during construction.

PROJECT 2 The project was tendered in early 2022 by a local client-side project management company: • Construction Tender Period: Just over 1 Calendar month which commenced on 10 January 2022 and was initially proposed to close on 10 February 2022) • Forecast Tender Award: 25 February 2022 for Design and 14 March 2022 for Construction.

As at 23 April 2022, this tender has still not been awarded.

In both of the examples described above, the contractor and subcontractor market would have devoted significant resources for a project with a forecast award date that was then extended three or more times longer than the initial tender period.

In those short tender timeframes, there would almost certainly not have been a high level of trade coverage, with any gaps potentially covered with historical cost data. Commitments for material orders would have to have been placed on hold until potential approval/ appointment.

Given current price escalation, this could pose significant risk and I know of one contractor in mid-2021 that was still using reinforcement rates 30% lower than what the market was advising.

In instances where a contractor may have included value engineering options to secure a project and not accepted by the client, the contractor would then be under a high cost pressure from the outset. There was also one project I know of in Queensland where this occurred for a façade element where the contractor

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SUMMARY/CONCLUSION Noting the above, a tender period can be significantly compressed, often relying on an incomplete design, and then leaving the builder to bear all the risk, in the hope of then gaining a few percent margin over the project.

I feel that incorporating longer tender periods where project risks can be effectively evaluated could lead to less project cost challenges and potentially avoid receiverships that have occurred recently in this South East Queensland construction market.

This article has been written by Paul Johnson MAIQS, CQS, Managing Director of Alto Cost Management.

TENDER PROCESS

PRICE ESCALATION AND THE OBSCURE ART OF FLUCTUATIONS

By Lawrie Saegers MNZIQS and Marcus Hogan

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ESCALATION

Unless you have been stuck on a deserted island for the past two years, you will be aware that the pandemic (and latterly the war in Ukraine) is impacting our supply chains, leading to higher and more volatile pricing within the construction sector.

Throw in the highest inflation rates in 30 years, border restrictions and surging demand, and there is no wonder that the construction sector is facing the most difficult period it has seen in recent memory.

In an effort to provide some clarity on ways to deal with cost escalation and fluctuations, Marcus Hogan, Professional Practice Director, Te Kāhui Whaihanga New Zealand Institute of Architects and Lawrie Saegers, Managing Director, Rawlinsons discusses how the market is changing and responding, the types of fluctuations provisions (evidential and formula), and their associated issues.

WHAT WE ARE SEEING “In the past, contractors were comfortable to offer fixed prices and accept the risk of escalation, but with increases now potentially running into the double digits on some building elements, they can no longer continue to absorb ever-increasing prices”, Marcus says.

While for many years, fluctuations in New Zealand and around the world have generally not been paid, in the last two years (and especially the last 12 months) things have changed. Now, most in the industry feel they are in a state of flux with to how to deal with the situation and the issue of payment for cost fluctuations is back on the table.

If those budgets are stretched too much due to increased contingency to deal with fluctuations, then their scope will be cut …

“Our integrated ‘just in time’ economy has been disrupted”, Lawrie says.

“In the past, in the construction industry, you could go into a store and take what you wanted off the shelf. Now there’s less stock on the shelves, and what is there is significantly more expensive.”

This is primarily the result of supply chain and logistic issues coming out of our major traders, the US, Europe and China.

It’s combining with labour constraints as well - the labour pool is a lot tighter.

When you combine that with increased costs and surging demand, prices inevitably rise.

Additionally, costs that were relatively stable and predictable are increasingly volatile. Contractors have less control, leading to uncertainty for them and their clients.

WHAT CAN THE INDUSTRY DO TO EASE THE PAIN? Marcus has considered using fluctuations provisions to deal with the price escalation issue.

“The benefit to the contractor of including a suitable fluctuations provision in the contract is that the risk for pricing escalation (that they have no visibility or control over) is removed.”

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The fluctuations provisions contained in New Zealand’s standard form construction contracts (such as NZS 391X suite of contracts and NZIA SCC) have been rarely used since the mid-eighties and are only applicable if they are selected in the specific conditions.

“The approach has been to transfer the risk of price escalation onto the contractor, and while this may not yield a particularly competitive price, escalation has been sufficiently stable for contractors to accept the risk without specifically pricing for it”, Marcus says.

Following COVID-19, with price escalation having hit record highs, the use of fluctuations provisions is becoming commonplace in new contracts.

“While the inclusion of fluctuations provisions in the contract transfers the risk back to the principal, it does mean that contractors are more willing to submit lower prices knowing that if labour or material prices escalate, the contractor will be compensated by an adjustment in the contract price.”

Further, the selection of a fluctuations provision does not mean there is unrestricted recovery for the contractor or limitless exposure to escalating costs for the principal, as the provision will usually sit within wider provisions in the special conditions, which will set out the rules around its operation.

It is a myth that a fluctuations provision only ever results in an increase to the contract price, as a decrease can also occur.

TWO METHODS FOR CALCULATING FLUCTUATIONS With the provisions not having been widely used, principals and contractors need to

ESCALATION

understand what options are available and the impact on the contract price of the selected option. The provisions in the standard form contracts can be divided into two broad categories: the 'formula method' and the ‘evidential method’. Each method requires a different process.

Formula Method (Contained in NZS3910 and NZIA SCC) Under the formula method, any adjustment is calculated by reference to the labour and materials indices published by Statistics New Zealand. Any amounts for nonadjustable elements are deducted from the provisional scheduled amount at the time of each interim payment and then adjusted by the output of the formula. In essence, the formula calculates the difference between the indices at the time of the base date and the month of the interim payment.

Evidential Method (Contained in NZIA SCC) Under the evidential method, only the adjustment of materials is allowed for and if the market price of a material changes at the time of purchase when compared to the estimated cost of the material at the base date, then the contract price is adjusted to reflect the change in the price of that material.

This approach is similar to the usual practice of evidencing costs in any claim from a contractor, especially when dealing with cost-reimbursable contracts, claims for “Net Cost” and/or the various forms of open-book tendering.

“Usual evidencing practice includes ensuring the claim is reasonable (and not ‘aspirational’), that it represents a genuine circumstance that was not included or reasonably foreseeable, and that there is reasonable mitigation to limit the claimed cost. The same approach can be deployed to evidence fluctuation claims”, Lawrie says.

PROS AND CONS

THE WAY FORWARD

“Both options risk passing all the inflation onto the principal, however, the principal may not be adopting much more risk than they would have already taken under a lump sum contract, where the contractor applies an unspecified risk allowance for fluctuations”, Marcus says.

“Cost fluctuation is a live issue, but I believe it can be managed fairly and equitably by using either of the fluctuation options referred to above”, Lawrie says.

“The formula option is designed to compensate the contractor for most of the escalation, but it is limited by indices (released by central government that are calculated quarterly and retrospectively).

The formula can be refined by adjusting the predicated labour and material ratios for each trade package; however, this approach would require an adjustment to be calculated for each trade versus a global adjustment to the scheduled amount.”

Because the evidential method returns the full amount of the escalation to the contractor, it may be their preferred option. However, the evidential method is administratively heavy and could require the contractor’s methodology for pricing to be exposed, which may be undesirable.

The fluctuations provisions in the standard form contracts have sought to achieve a balanced approach for both the principal and the contractor, but the devil is in the detail and the formula could lead to inequitable outcomes, due to its formulaic nature. For example, the labour and material ratio are set at 60/40 and are applied to the scheduled amount, which does not accurately reflect the labour and material ratios which vary in each trade. While this ratio can be adjusted in the formula, it would still only apply to the scheduled amount. For a more representative ratio to be used, a different formula for each trade would be needed.

“Without adopting a fair approach to the issue, the risk we collectively run is that government clients - particularly those who need to build housing, schools, hospitals, community facilities, wider infrastructure and so forth - may delay or even scrap their projects. Budgets for these projects are set well in advance and are difficult to change. If those budgets are stretched too much due to increased contingency to deal with fluctuations, then their scope will be cut, which in turn erodes the wider economic, environmental and social benefits they are designed to provide.

“The same issue applies to the private sector, where supporting developments - such as apartments, hotels, bars and restaurants, offices, carparks and the like - need to show a solid financial return as well as sufficient cost certainty to be funded, particularly by external parties,” Lawrie says.

“This can be a difficult balance to strike, but it is entirely possible when the industry works together in an open and collaborative environment, as was generally the case when claims for compensation arising from lockdowns in New Zealand were agreed”.

This article has been prepared by Lawrie Saegers | Dip QS, MNZIQS, CMinstD Rawlinsons Limited – Christchurch and Marcus Hogan |Reg Arch, LLM, BArch, Te Káhui Whaihanga New Zealand Institute of Architects.

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 45

EMBODIED CARBON

EMBODIED EMISSIONS: THE NEW FRONTIER FOR NET ZERO BUILDINGS

By Ivana Brown

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EMBODIED CARBON

As embodied greenhouse gas emissions become increasingly important in achieving net zero by 2050, NABERS, a national program to rate building sustainability performance, is investigating what can be done to accelerate the transition for change by creating consumer led demand for low carbon materials and construction.

NABERS is developing a framework for how to measure, verify and compare embodied emissions of a building allowing the industry to compare performance.

While there is plenty of work in order to finalise the framework, a lot has been learnt so far. The quantity surveying profession may have an important role to play in accelerating this transition.

managed'. Buildings with NABERS ratings save an average of 30-40% on their energy over ten years. This track record makes NABERS well placed to tackle the challenge of reducing embodied greenhouse gas emissions in buildings.

WHAT IS NABERS?

• Building materials (extraction, transportation, and manufacturing)

NABERS stands for the National Australian Built Environment Rating System. It is a national program that provides simple, reliable, and comparable sustainability measurement you can trust across building sectors like offices, hotels, shopping centres, apartments, data centres, and more.

Over the last 20 years, NABERS has proven that 'What gets measured, gets

WHY IS EMBODIED CARBON IMPORTANT? Embodied emissions in the production of building materials currently represent 16% of emissions from buildings and construction globally. This will increase to 85% by 2050 as buildings become more efficient and the energy grid decarbonises through increased renewables.¹

The quantity surveying profession may have an important role to play in accelerating this transition.

WHAT ARE EMBODIED EMISSIONS? Embodied emissions are the greenhouse gas emissions released when making a product or service ready for consumption or use. In buildings, this includes:

• Construction activities (on-site fuel and electricity as well as transport) • Repairing, refurbishing, and replacing materials and equipment in a building • End of life (demolition and waste disposal) Most of these emissions, around 70% – 80%, happen before the building is

BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 47

EMBODIED CARBON

EMISSIONS IN 2019

16%

POTENTIAL EMISSIONS BY 2050

• There is general consensus that the progress is more important than perfection and a solution can evolve and iterate over time.

15%

84%

85%

Embodied emissions = Operational emissions

completed, and once they are released, they can't be put back. This creates a clear rationale to influence embodied greenhouse gas emissions early in the design process, well before construction begins, allowing maximum benefits to be realised.

state of the market is, and how this problem could be solved. So far, our engagement discovered that:

WHAT IS NABERS DOING?

• The industry is starting to mobilise with interest building across the sector.

This includes investors, policy makers and industry peak bodies who are all influencing emissions reductions.

Those who are involved with design and construction are exploring a range of actions to reduce emissions

NABERS is developing a world-leading framework to measure, verify and compare embodied greenhouse gas emissions in new buildings. This would be the first national framework that would boost transparency around building sustainability for investors, building owners and tenants. It would help create consumer-led demand for low carbon construction materials.

The framework is being built in close partnership with the states, the Australian government and industry. NABERS has undertaken significant engagement with these stakeholders to better understand what the problem is, what the current

• The industry is highly fragmented with multiple ways of calculating embodied emissions in buildings including different tools, benchmarks, data, and calculators existing in the market

• There is a recognised gap in the market and a strong desire for a fit for purpose NABERS embodied emissions framework that would set a methodology that industry and government could use to create consistency and comparability • Calculating embodied emissions is complicated, with a multitude of choices to be made including what boundaries

¹ Source: GBCA 2021

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you set, what emissions data you use or what calculator you use

What has become clear is that whatever NABERS does create, it would need to be a tool that the industry can trust, producing reliable and comparable outputs so that investment can be directed into buildings and products having the most impact.

Quantity surveyors may have an important role to play. They can provide the expertise on the quantities of building materials needed and be involved in projects from a very early stage. There is also potential for quantity surveyors to help collate the data required to measure embodied emissions. AIQS is engaging with NABERS to help us better understand how quantity surveyors could be part of this process.

There is still lots to work to do to determine the details around what a framework looks like, how it works and who exactly needs to be involved.

Working closely with the industry and government on a national scale will ensure that what NABERS is developing and is best placed to be a national framework that can accelerate a consumer led shift of low embodied emission buildings.

This article has been prepared by Ivana Brown, Sector Lead - Accelerating Net Zero Buildings at NABERS. If you would like to know more about NABERS please visit www.nabers. gov.au.

MENTAL HEALTH

ASSESSING DAMAGES

GETTING THE QUANTUM RIGHT BUILT ENVIRONMENT ECONOMIST: JUNE - AUGUST 2022: 49

LEGAL

Disputes arising from building contracts typically arise when a breach is committed by a party resulting in a demand by the other for damages.

However, for an aggrieved party to quantify its losses, the affected construction industry participant relies on a few key aspects.

This article canvasses these aspects as enunciated from time to time by the court in some landmark cases on the matter.

GENERAL RULE The classic formulation on damages as compensation for losses sustained for breach of contract dates back to the English case of Robinson v Harman (1848) 1 Ex 850, 154 ER 363: “The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.” (per Parke B.).

In Australia, the long-standing judgment in Bellgrove v Elridge [1954] HCA36 has been upheld time and again in various succeeding cases.

In that seminal case, the court assessed damages in the specific context of building contracts. It was held that the prima facie calculation of damages is the expense required to rectify the defects protested and give the aggrieved party a similar building which is substantially per the parties’ contract. However, the work to be undertaken must be necessary to produce conformity with the agreement and that undertaking the works ‘must be a reasonable course to adopt’.

The intention is to restore an innocent party to its original standing where

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it receives substantially what it had contracted for in the first place.

In the construction context, the quantum of damages generally involves the cost of rectifying defects caused in breach of the building contract.

REASONABLENESS In the English contract law case of Ruxley Electronics & Construction Ltd v Forsyth [1995] 3All ER 268 which is cited and relied upon in several Australian cases, the House of Lords focused on reasonableness and ‘the loss truly suffered [by the innocent party]’ in quantifying the damages.

The innocent party’s ‘cost to cure’ claim was rejected in that case, with the House of Lords finding that it was unreasonable in the circumstances to award damages equivalent to the cost of demolishing and rebuilding the swimming pool (built at a depth of 6 feet instead of the contracted 7.5 feet), as such cost is wholly out of proportion to the benefit to be obtained especially where the owner had no intention to rebuild. The innocent party was therefore only awarded a nominal amount of damages for general inconvenience and disturbance.

In the 2005 case of Scott Carver v SAS Trustee Corporation [2005] NSWCA 462, the defendant relied on Bellgrove to argue against an award of damages in circumstances where it was proven that the defects in the built pavilion did not affect SAS Trustee Corporation’s future rental stream. The NSW Court Appeal sustained SAS's entitlement to recover damages, holding that the restriction regarding costs recovery enunciated in Bellgrove must be ‘a reasonable course to adopt’.

In the 2009 case of Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8, a tenant demolished a foyer it was leasing

LEGAL

without waiting for the landlord’s consent and the landlord sued for damages amounting to the cost to restore the foyer to its original condition. The tenant argued that as there was no diminution in the value of the whole building, the landlord should only be awarded nominal damages (citing Ruxley).

The High Court found for the landlord, holding that whilst the principle is as enunciated in Robinson that the standard measure of damages for breach of contract is the sum required to place the innocent party in the same situation as a completed contract (i.e., rectification costs), as held in Radford v De Froberville (1977) 1 WLR 1262, the words ‘the same situation, with respect to damages, as if the contract had been performed’ do not mean ‘as good a financial position as if the contract had been performed’.

The High Court also confirmed Bellgrove in ruling that aggrieved owners of building are entitled to rectification costs but that the twin tests of ‘necessity’ and ‘reasonableness’ must be met, with the test of ‘unreasonableness’ to be satisfied only by fairly exceptional circumstances.

The landlord was held entitled to have the foyer rectified to its original state.

In Willshee v Westcourt Ltd [2009] WASCA 87, the court relied on Bellgrove and Tabcorp to reiterate the reasonableness principle in awarding rectification costs. Mr Willshee was granted the cost of replacing the limestone on his house which the court ruled was the amount required to put Mr Willshee in the position he would have been in had his house been constructed according to the specified quality.

The Tabcorp ruling was considered in calculating losses for faulty building work.

In the 2011 case of Tranquillity Pools & Spas Pty Limited v Huntsman Chemical Co Pty Limited [2011] NSWSC 75, the

court considered whether pool owners were entitled to have their faulty pools substituted or to instead adopt a lesser method of rectification.

Citing Wilshee and Tabcorp, the court found that an award of rectification that is out of all proportion to the benefit to be acquired is tantamount to unreasonableness. The pool owners with failed pools were held entitled as against the pool manufacturers to full replacement of the pool and making good of the premises.

In the 2015 case of Zeman v Bollard [2015] NSWCATCD 13, the court again referred to Bellgrove and held that ‘where the works are not in accordance with the contract and the builder has not, before termination or the time for performance, brought the works into conformance, the measure of damages is the reasonable cost to do so’.

SUMMARY In the matter of quantum of damages for breach of contract for defective building work, Bellgrove v Eldridge remains the general rule.

It should always be kept in mind however, that the issue will turn on the specific facts of the case where factors such as necessity and proportionality go into whether the quantum is under the law to be considered reasonable.

Quantity surveyors undertaking quantification of damages should therefore consider the surrounding circumstances in addition to actual computation of relevant rectification costs.

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

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RISK MANAGEMENT

EMERGING RISK MANAGEMENT APPROACHES ON MEGA CONSTRUCTION DEVELOPMENT PROJECTS PART 2 - RESULTS FROM INTERNATIONAL CASE STUDIES

By Jery Johnson MAIQS and Suranga Jeyasena

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RISK MANAGEMENT

INTRODUCTION In this paper, the word ‘PM’ refers also to the ‘Project and /or Development Monitor (acronym ‘P&D Monitor’) We have analysed the risk management strategies implemented on megaprojects that were investigated. They are summarised and discussed below (not in any order of priority).

RISK MANAGEMENT (RM) STRATEGIES ADOPTED ON MEGAPROJECTS The following is a list of RM strategies that were deployed on those case study projects.

Risk 1: Schedule Overrun - The Mitigation Strategies; • Make early inquiries with the authorities about their utilities capacity to serve the project and inform them about the utilities’ requirements (e.g., power / chilled water supply demand and supply) • Make early inquiries with the authorities, with their clear requirements and appoint an experienced consultant (e.g. Architect of Records/Authority Liaison Officers/PROs with in-depth local knowledge about requirements as megaproject have over 200 approvals/No Objection Certificate to secure from start to finish. Visit authority offices, and communicate time to time to make inquiries with authorities proactively about potential changes in laws and requirements throughout the planning and delivery (e.g. use of PROs/Government Liaison Offices) and also make sure to apply knowledge gained across other similar projects.

Risk 2: Cost Overrun - The Possible Mitigation Strategies: • All development costs and design parameters to be benchmarked against their peers (preferably 5-10 reference projects) and use of an experienced ECC with extensive CBI/ design economics studies data/ information • In cost plus contracts, get cost certainty with a Guaranteed Maximum Price (GMP) and ring-fence preliminaries costs and contractor’s margin • When establishing an Initial Development Budget (IDB – ‘Notto-exceed’) (to be included in the Financial Appraisal & Business Case - BC) use a cost range (P45 to P90/95) rather than point estimates and be transparent and provide full information/report to the decision makers based on the MCS or any other scenario analysis or a detailed qualitative analysis. If there is a requirement to give a point estimate, make it robust and comprehensive and have the ‘reference design’ (MP & Concept Design possibly with a design freeze) attached to it • IDB shall be maintained throughout the development process with the careful adjustments made at each stage (e.g. on receipt of construction tenders and contract award) to reflect all necessary risks/contingency allowances and still benchmark against a number of similar projects.

• Use a risk-based cost estimating method, including itemised risk allowances and attach details including assumptions/calculations • Build cost cushion into estimates to deal with market demand/trend such as high-end finishes, Home Automation (HA), swimming pool, etc (owner’s requirements might change during

construction for off-the-plan sales and tilt towards the market demands) and scope changes (gaps/authority/ additions/shared cost increases) • Make inquiries about potential changes in laws and requirements throughout the planning and delivery.

Beef up the sales contract to include ‘force majeure’ events that might increase the cost such as Government regulations on CCTV system upgrade (facial recognition capability) / Energy Efficiency Rating (increase from 5 to 7 stars) / sustainability principles (e.g., rainwater harvesting/water efficient irrigation/rain garden) / 24/7 fire alarm connection to civil defence • Manage expectations of the stakeholders by carefully caveating the cost estimates and specifying inclusions, exclusions, and assumptions.

Risk 3: Authority Approvals (AAs) Including Environmental Agency and Public Support / Public Relations – The Possible Mitigation Strategies: • Use a AAs tracker with schedule linked to master schedule with realtime updates • Early, intensive stakeholder engagements to understand powerful stakeholders’ needs, requirements, interests, influences, and views • Possible inclusion of design for open community spaces and social and community buildings into the project objectives • Early engagement of the worker unions • Environment NGOs and engage with Government Departments (and request for a joint-up approach) and adapt the project processes to match with the client LEED and government

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RISK MANAGEMENT

to balance risks, embed flexibility of functions, use of BIM model from outset; design to cost, make use of DfMA, provisions to maintain functional flexibility and future proof design

authorities’ requirements. And execute EES to confirm firm commitments • Handle environmental authorities with practical technical (D,C&OP Operational) proposal with easy wins • Provide solid technical solutions early before issues emerge at initial planning approvals stage itself, make commitments and keep promises made • Strategic recruitment of authority liaison officers and consultants (e.g., local architects and Architect of Record – AOR) and provide regular briefings and regular updates to all key authorities/public.

Risk 4: Poor Business Management, PM and CM Practices and Systems – The Possible Mitigation Strategies: •

Adopting Educated Approaches to Planning & Delivery. E.g., Front-End Approaches (ECI, Strategies During Feasibility, Planning & Design, and Procurement stages):

1) Focus on the business case, value additions, PM Plan (PMP & PMFFramework), and select a costeffective contract/delivery model 2) Pursue combined financing routes with equity and debt finance and syndicate finance (not sole finance by one financier) to increase the finance pool and reduce risks 3) Risk management using MCS 4) Enhance the project scoping 5) After Detailed Design (DD) stage, develop early cost models for BM team with contingencies linked to project Work Breakdown Structure (WBS) system with details of the project packages/elements 6) A robust design management – develop plan for mixed-use properties

7) Use of PCS and ECI to address and find the most suitable design and construction methodology considering the Operational and Maintenance (O&M) requirements from the early stage using ‘options appraisal’ 8) Due diligence of proposed tender and contract documentations for removing errors/ambiguities/ conflicting information 9) Use performance-based approach to partner selection 10) The selected main contractor should be ‘Programme’ focused, preferably a project-based JV 11) Develop, monitor, and manage a benefits realisation plan 12) Develop a focused stakeholder management and comms plans 13) Engage the operator early in the master plan stage itself and make use of their tremendous and useful experience.

•

Leadership, Governance, Oversight, Project Monitoring & Control and Assurance System (During PostContract Stage):

1) Fast-track the project using experienced professionals and proven methodology with design and construction overlaps to de-risk the project 2) Proactively managing a prioritised design deliverable schedule related to Provisional Sums (PSUM) works and variations in line with the

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updated MS and Design-EngineeringProcurement-Construction (D-E-P-C) schedules and vetted to ensure it matches the construction process/ sequence at site and criticality and confirming any slippage accurately while monitoring the contractor’s own concurrent delays 3) Sound governance of change and variations management (with tools to assess variation costs – e.g., priced BoQs/CBI) and Employers Approval (EAs) process 4) Use of portfolio or program management system 5) Performance monitoring using metrics and KPIs to support Management Information System (MIS) 6) A top-class leadership – role modelling, decision making autonomy (delegation of authority and at point of need), ownership of outcomes, work hard on relationships, retaining talented people and avoiding key staff turnover, etc.

7) Gateway development approval process and documentation to match the stakeholders’ requirements and unique project profile 8) Robust claims and dispute management including Due Diligence and Project Assurance (DD&PA), protocol, processes and escalation map, MS and procurement schedule monitoring, being neutral, etc.

Risk 5: Financing Risks - The Possible Mitigation Strategies: • Lenders not to finance 100% of the project cost. Better to use a combined debt-equity finance arrangement • Learning was that a syndicate financing approach is effective on megaprojects due to the greater

RISK MANAGEMENT

possibility and requirement to finance additional costs • Appoint an experienced Development Monitor (DM) to protect client’s and financier’s interests • Develop mixed-use properties with both early and long-term revenue streams to balance the risk and reduce cost of finance

good level of RM across large number of megaprojects with proven benefits as demonstrated in the case studies.

ACKNOWLEDGEMENT

• Use ‘Side Agreements’ (tri-partite) (SA) effectively and re-establish the baselines as soon as possible to gain commitment and avoid ‘time at large’.

Authors acknowledge the Australian Government RTP Support (Fee Offset) Scholarship provided to the 1st Author in the provision of research training program (RTP) at RMIT to pursue a PhD (Built Environment) degree between 2020 and 2023.

CONCLUSION

REFERENCES

It has been revealed that the contractual claims and disputes, and environmental issues have the potential to critically affect all megaprojects as we have seen across all case study projects. Potential disputes shall be avoided by conducting comprehensive due diligence reviews throughout the Design and Construction (D&C).

1) Burcar, et al., 2013. Risk Register Development and implementation for construction projects. Gradevinar, 65(1), 23-35.

The ‘finance risk’ is also real, as six projects studied had faced this risk (with two almost coming to a halt) and equity finance and syndicate finance helps to manage financial liquidity on megaprojects.

Also managing force-majeure events is critical as they tend to affect every megaproject due to their large size and longer time horizon and are mostly unforseen.

Sometimes it is even stated as PM’s roles and their majority (over 90%) of the monitoring, control, managing and reporting efforts on megaprojects is all about managing the ‘inherent risks’ to the megaproject baselines and wider performance outcomes, and relevant timely communications and mitigation actions.

The portfolio PM approach facilitates a

2) Black, K. (2010) “Business Statistics: Contemporary Decision Making” 6th edition, John Wiley & Sons.

3) Flyvbjerg, B. et al., 2003.

Megaprojects and risks: An anotomy of ambition. Cambridge,UK: Cambridge University Press.

4) Grieman, V.A., 2013. Megaproject Management: Lessons on risk and project management from the Big Dig. Hoboken,NJ:Wiley. doi:10.1002/9781118671092.ch9.

5) Sanchez-Cazorla, et al., 2016. Risk Identification in Megaprojects as a Crucial Phase of Risk Management: A Literature Review, Project Management Journal, 47(6), 75-93.

Jery Johnson MAIQS BSc (Hons) QS, MSc (Applied Science), MRICS, Director ABAC Pty Ltd. Suranga Jeyasena BSc (Hons) QS, MSc(Building), BSc(Hons)QS, Dip(Arbitration), MCIOB, AIQS.SL, Head of the Department of Building Economist, UoM, Sri Lanka.

This paper has been adapted from the Proceedings of the 44th AUBEA Conference, 27-29 Oct. 2021, Deakin University, Australia where the 1st Author Presented a research paper on the topic. Thus, the Authors take this opportunity to thank the AUBEA organisers and review panel members for the facilitation.

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BCI

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BCI

BUILDING COST INDEX

JUNE 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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ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS

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