Built Environment Economist - Australia and New Zealand December 2024

ADVANCING QUANTITY SURVEYING PROFESSIONALS

Over the course of the 2024 calendar year, AIQS continued with the implementation of initiatives that contribute to achieving the Institute’s strategic goals of:

1. Having a governance structure that is both agile and supportive

2. Having a robust membership base reflecting the depth and breadth of the industry

3. Leading a profession which is diverse, equitable and inclusive

4. Seen as driving industry standards and innovation

5. Being at the forefront of education for the profession

6. Recognised as the pre-eminent brand in the industry.

Critical to achieving these strategic goals has been the establishment of interconnected committees designed to encourage increased engagement with stakeholders across the broader quantity surveying profession. The inputs to and outputs from these committees are aimed at raising the profile of the quantity surveying profession (and all the roles that it covers). This will ultimately be measured by increased recognition and direct engagement by government and private sector clients. In addition, AIQS expects to see increased high-quality continuing professional development and online learning capacity being made available.

It will be important for AIQS members to engage with their local chapter and provide input to various committee initiatives that are being driven for the benefit of current and future members.

By way of example, the strategic goal of Seen as driving industry standards and innovation is not just about developing standards and trying to lead change and innovation across the quantity surveying profession, rather it’s what these professional standards represent and the impact their implementation has.

The development and publication of standards such as Construction Finance Reporting, Estimated Development Cost, Replacement Cost Assessments, and Residential Tax Depreciation, is to raise the profile of the Certified Quantity Surveyor, the services they offer, the expected level of professional service and branding for the profession and AIQS.

With the release of standards, we have seen an increased demand for quantity surveyor services in numerous areas, with an emphasis on the level of professional service expected by clients. This should assist in reducing the race-to-the-bottom in professional fees which has been prevalent for several years.

As a member-based professional association, AIQS has an important role in raising the professional standing, profile, and expertise of the broader quantity surveying profession.

Alongside the chapter-based standards-related committees (Building Committee, Infrastructure Committee, Resources Committee, Utilities Committee) there is a Membership Committee and an Events Committee which will interact with outputs from other committees and feed into national committees to ensure a consistent approach while reflecting different methods of application

due to regulatory requirements and government systems.

These committees may also include subject matter experts who are currently not AIQS members which is also an important aspect in raising the profile and engagement with relevant stakeholders.

The implementation of the work undertaken by these committees will have a significant impact on the profession and the construction sector.

It is important for as many members as possible to participate in these committees and influence the future of the quantity surveying profession, and the implementation of professional, technical and behavioural standards through your companies and the broader construction industry.

Finally, I would like to thank all the members and other stakeholders who have contributed to the betterment of the profession and the Institute over the past year. I wish all members a safe and festive break over the Christmas and New Year break.

GRANT WARNER CEO

The Australian Institute of Quantity Surveyors

VICTORIA CROSS STATION

VISUAL FEATURE

Sydney Metro’s Victoria Cross Station is playing a pivotal role in the transformation of North Sydney into a vibrant, thriving precinct only minutes from Sydney’s CBD. At the heart of this transformation is a reimagined commuter experience that goes beyond getting from A to B.

The NSW Government awarded Lendlease the contract to deliver the Victoria Cross integrated station development, made up of the metro station and over station development; a 40-storey commercial and retail building above the station’s entrance. The station itself, open for passenger services in August 2024, connects North Sydney with the CBD faster than ever before with fast, reliable and safe metro services every four minutes in the peak.

The station boasts Australia’s biggest underground railway cavern, measuring an enormous 300 metres long, 25 metres wide, and 16 metres high.

A project of this size comes with its challenges and constructing Victoria Cross Station was no easy feat. The northern entrance has a unique liftonly access, the only entrance of its type on the network, as the tunnel depth combined with the constrained site ruled out the use of escalators. Materials and equipment had to be strategically maneuvered through a 2.5 metre square-shaped entrance, similar in size to a standard garage door.

The platform ceiling itself is a marvel, lined with 240 glass reinforced concrete panels each weighing approximately 200 kg.

Over the course of construction, 4,011 tonnes of reinforcement steel was used to reinforce concrete structures such as floors, walls, columns, and lift shafts. The platform ceiling itself is a marvel – lined with 240 glass reinforced concrete panels each weighing approximately 200 kilograms.

VISUAL FEATURE

More than 5,000 people worked on the delivery, design and construction of this complex station, which includes 14 lifts and 19 escalators, as well as 22 Opal gates designed to support the tens of thousands of people who pass through the station each day.

Equally important to the construction of the station was the development of an integrated precinct elevating North Sydney into a premier hotspot for retail and dining experiences right on the doorstep of Victoria Cross Station.

The size and scale of this mega station future-proofs North Sydney for the expansion of the surrounding precinct in years to come.

This article and all images were provided by

Sydney Metro.

THE FUTURE OF QUANTITY SURVEYING

PETER NG LFAIQS, CQS Chairman and Founder, Beria Consultants Limited

Our profession is experiencing a transformative shift driven by technological advancements. Visionaries in this field are the application of the Building Information Model (BIM) and cloud computing to enhance efficiency and accuracy in quantity surveying and cost management. In addition, the necessity of digitalisation makes the documentation works more effective and accessible than the traditional quantity surveying practice. The integration of artificial intelligence (AI) further empowers surveyors to make data-driven decisions, predicting project outcomes more effectively. With the new technology, it enables quantity surveyors to conduct real-time monitoring, data analysis, streamlining workflows and reducing cost.

Obtaining the high efficiency, accuracy and data information, quantity surveyors are evolving from traditional roles into strategic advisors in areas such as sustainability, risk management, procurement and project management. This evolution allows us to provide valuable insights that align with the growing demand for ecofriendly construction practices.

In consideration of the growing demand for eco-friendly construction practices. In consideration of the growing importance of Environmental, Social and Governance (ESG) principle, we could manage carbon budgets ensuring sustainability is embedded in cost estimates from the outset, with the proper data to track carbon emissions

and conduct cost-benefit analyses for sustainable practices, helping stakeholders make informed decisions that align with ESG goals.

To catch up with the fast-changing world and demand of quantity surveying graduates equipped with the new knowledge, institutes and universities need to incorporate more new technology subjects in quantity surveying and cost management courses. BIM, cloud computing, AI, drones, mobile technology, internet of things, block-chain knowledge, and digitalisation should be included in the training to address the industry demands. I hope that there will be a new image of our profession.

CONSTRUCTION COST ESCALATION

MEASURING THE IMPACT OF DIFFERENT TRADES BY SECTOR

By Niall McSweeney and Cody Bui MAIQS

COST

BEYOND THE GENERIC 3–5% ANNUAL ESCALATION

One of the most important aspects of cost planning is the management of cost escalation, especially when navigating high-value projects that extend over long durations. The current landscape has been earmarked by inflated costs and economic volatility; as a result, numerous projects have experienced significant financial strain. Identifying, and more importantly, addressing these challenges proactively is crucial to the success of any development project

Perhaps the most common approach applied to the estimation of escalation in the construction sector is the assumption of a general figure (usually between 3-5% per annum) that is grounded in the broader context of general inflation rates. This approach, while widely used, simplifies the complex dynamics of market fluctuations and specific cost drivers relevant to construction projects, and fails to account for the significant impact the price of different trades has on escalation rates.

‘First principles thinking’ is a problemsolving technique that breaks down a complex problem into its most basic foundational elements, until it cannot be deduced any further. By returning to first principle while estimating cost escalation, we can dissect the key components that shape escalation rates, providing a deeper comprehension of this seemingly arbitrary percentage. We can also discern why specific trades are more critical to certain sectors than others; after all, fluctuations in a particular trade do not uniformly affect all sectors.

SECTOR-SPECIFIC DEPENDENCIES ON VARIOUS TRADES

Buildings, whether they be schools or warehouses, are comprised of countless components, and no two structures are exactly alike. The cost distribution in a warehouse, for example, is heavily skewed towards structural components such as concrete and steel, whereas a hospital invests more in service trades like

electrical systems and mechanical components. Consequently, a surge in prices of structural materials like steel or concrete significantly impacts industrial projects. In contrast, a rise in copper prices – crucial for mechanical piping and electrical cabling – affects a hospital project more than it would an industrial warehouse. Understandably, these sector-specific nuances must be taken into consideration when managing cost escalation.

UNDERSTANDING THE MAKEUP OF RATES AND VARIETIES OF ESCALATION

Construction product rates are normally made up of three components: supply, delivery, and installation. However, different trades exhibit different cost structures. For instance, painting is normally labour-intensive with minimal supply costs, while the ready-mixed concrete trade has a higher proportion of supply costs. Trades like carpentry or brickwork, on the other hand, may have a more balanced distribution between supply and installation costs.

Escalation rates also vary significantly among supply, installation, and delivery costs, as each component is influenced by distinct factors. Supply costs are primarily driven by fluctuations in raw material prices, which are subject to international market dynamics and manufacturing expenses. Conversely, installation costs are more directly impacted by domestic factors, such as the cost of living and inflation rates. Delivery costs, however, are closely tied to fuel prices, reflecting changes in energy markets. For any given trade, each cost component can exhibit unique escalation patterns.

As such, it is important to note that a reduction in product or supply costs may not necessarily result in a lower overall escalation rate, especially if it is offset by a rise in labour costs.

Figure 1: Trade group cost breakdown for different sectors (illustrative data)

ESCALATION

ESCALATION

This intricate relationship underscores the need for a nuanced understanding of how different factors interplay in influencing the total cost escalation of a project.

PRICING TOGETHER THE COST ESCALATION PUZZLE

Table 1 illustrates the variables impacting the sector trade cost split, components of a rate, and different escalation rates for different components of the rate. From there, the escalation rate can be calculated for different trades and different sectors.

By dissecting the unique factors that drive cost changes and their varied impacts across sectors, we can derive valuable insights that unlock more accurate forecasts and feasibility studies. With enhanced predictability, development projects can avoid budget obstacles that might otherwise derail progress and profitability in the everevolving construction landscape.

DISCLAIMER

This publication has been prepared for general guidance on matters of interest only and does not constitute

professional advice or services of Altus Group, its affiliates and its related entities (collectively “Altus Group”). You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy, completeness or reliability of the information contained in this publication, or the suitability of the information for a particular purpose. To the extent permitted by law, Altus Group does not accept or assume any liability, responsibility or duty of care for any consequences of you or anything else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. The distribution of this publication to you does not create, extend or revive a client relationship between Altus Group and you or any other person or entity. This publication, or part thereof, may not be reproduced or distributed in any form for any purpose without the express written consent of Altus Group.

This article was written by Niall McSweeney and Cody Bui MAIQS from Altus Group.

Table 1: Correlation between sector cost breakdown and trade escalation rate calculations (illustrative data)

BROADENING THE SCOPE OF THE PROFESSION

PETER TULLA FAIQS, CQS

Director, Rider Levett Bucknall

Peter Tulla is a Director of Rider Levett Bucknall (RLB) in South Australia, Western Australia, and the Northern Territory and Director of RLB’s Oceania Board. Recently appointed Chair of the Global Board, he is in his 11th year of serving on the RLB Global Board and has been a strong champion of innovation and technology within RLB.

Peter has been providing an informed view on the allocation of cost and risk during all stages of the development lifecycle, specialising in conceptual estimating, cost planning, procurement guidance and service to an active network of clients in South Australia and beyond. He has been involved across a wide range of projects in many sectors whilst working in Adelaide and a five-year stint in Darwin in the 1990s.

“Embrace every opportunity to gain experience, ask questions, and don’t be afraid to make mistakes.”

Q: CAN YOU SHARE ANY EXPERIENCES ON CHALLENGING PROJECTS IN YOUR CAREER THUS FAR?

A: It’s exciting to reflect on Adelaide’s growth; I’ve led our team on some of Adelaide’s iconic landmarks. Three projects stand out for me: Adelaide Central Plaza, the new Terminal at Adelaide Airport, and the Hardened & Networked Army Edinburgh Defence Precinct project.

The Adelaide Central Plaza was a comprehensive project that took three years to complete, from concept to final delivery. It required meticulous planning and coordination. RLB provided cost planning, Bills of Quantities and contract administration services on two simultaneous construction contracts for the base building and David Jones fitout.

At the same time, I was involved in a new terminal project at Adelaide Airport, spanning nine years from initial concept to final completion.

The project initiation was influenced by the unpredictability of the aviation industry and included a complete new terminal, with all new information technology services and associated landside and airside works.

Negotiating and managing an actual cost guaranteed maximum price (GMP) to assisting Adelaide Airport Ltd. obtain finance generated great satisfaction and deepened my understanding of large-scale project financing and stakeholder management. Running these two projects was a challenging and incredibly rewarding experience that sharpened my strategic planning abilities.

The large-scale Hardened Networked Army defence project at RAAF Edinburgh in South Australia also stands out for me. It was another pivotal moment in my career due to the exceptional client-consultant team and outstanding management – from the defence project director to the lead project manager. It was a rare occurrence where all elements aligned perfectly and resulted in a smooth, efficient delivery.

This experience underscored the importance of a cohesive team and effective communication in achieving project success.

These projects presented diverse challenges. It’s important that you embrace and learn from challenges in your career and life. They taught me the value of making a strong start and maintaining consistent performance throughout the project lifecycle.

Q: HOW DID YOU NAVIGATE THE CHALLENGES OF MANAGING A HIGHSTAKES PROJECT EARLY ON?

In all projects, knowing the scope inside-out is crucial. Understanding the client’s goals is fundamental, ensuring every decision aligns with their objectives. The scope is paramount, and adhering strictly to it is essential –it becomes a guiding principle. It’s how we add significant value – ensuring cost efficiency, manage risk, and guide project success and ultimately client satisfaction.

Q: WHAT IMPACT HAVE YOUR CONTRIBUTIONS HAD ON YOUR ORGANISATION?

Locally, it’s been exciting to work with my colleagues and build our management structure that oversees an office that has grown substantially.

We’ve grown from just quantity surveyors to include the skills of building services estimators, civil and infrastructure cost planners, advisory services, and project managers.

It’s gratifying to reflect on how the efforts of our leadership team have translated into tangible growth and success for RLB. We’ve played a key role in the infrastructure growth in South Australia, on vital transport and health precincts, defence and education projects.

My involvement with RLB’s Global and Oceania Boards has allowed me to be deeply involved in strategic planning and governance. That’s a rewarding role. I’ve had the opportunity to influence the direction and growth of the organisation.

My contributions have helped drive RLB’s expansion and solidify our position as a leader in cost consultancy and quantity surveying. Through strategic initiatives and effective governance, we’ve been able to adapt to industry changes, embrace new technologies, and expand our global footprint.

The development of RLB’s own cost planning and cost management software has had significant impact.

This development program started in the 1980’s. I joined the ICT Committee in the 1990’s and am now the Oceania Board representative on this committee. It has been extremely satisfying to see us build software that provides us a commercial advantage.

Q: WHAT OPPORTUNITIES FOR THE PROFESSION ARE KEEPING YOU INSPIRED?

Serving on RLB’s Global Board has allowed me to be part of the decision making as we evolve our commitment to ESG and establish how RLB will be able to contribute to meaningful change in the industry. I’m proud to be part of a company that understands our ethical responsibility, not just to meet regulations but to improve social outcomes through our work.

In setting measurable benchmarks and sharing best practices across our global network, we’re enhancing sustainability in construction and ensuring that the places we help to build create positive, lasting impacts for the communities they serve. This dedication to doing what’s right drives me to continue pushing for a more sustainable, responsible, and values-led business at RLB.

INTERVIEW

New opportunities for career paths working within the profession are opening up beyond the quantity surveyor role: specialists who analyse and interpret complex data to provide actionable insights for project costs, risks, and efficiencies – using algorithms to predict cost overruns, optimise resource allocation, improve efficiency, or help identify and mitigate risks.

The profession is already broadening with new technologies. These careers will support the precision and efficiency of cost consultancy and quantity surveying and drive innovation and competitiveness within the industry. We’re already using our significant data ‘warehouse’ to benchmark projects, report to clients, and develop new products – it would be greatly beneficial to provide interactive reporting to clients in the near future.

As the industry increasingly values data-driven decision-making, the ability to interpret and leverage data will become a fundamental skill. Graduates adept at using these technologies will enhance their capability and career progression and contribute to the advancement and innovation within the profession. This shift is fostering a more dynamic, interdisciplinary field that offers a broader range of career opportunities. It’s an exciting time to enter the profession.

Q: WHAT ADVICE WOULD YOU PASS ON TO A GRADUATE EMBARKING ON THEIR CAREER

TRAJECTORY?

The most crucial advice I can offer graduates is to stay curious and openminded. Your education has given you a solid foundation, but the real learning begins on the job. Embrace every opportunity to gain experience, ask questions, and don’t be afraid to make mistakes.

Each challenge is an opportunity to learn and grow. Build a strong work ethic and maintain a positive attitude. These qualities will help you progress in your career.

Q: HOW IMPORTANT IS MENTORSHIP,

AND HOW SHOULD A GRADUATE FIND A MENTOR?

Mentorship is valuable at any stage of your career, not just when you’re starting out. Finding a mentor could be seeking out someone you admire within your company and asking for their advice. It doesn’t have to be a formal mentorship program; day-today interactions with experienced colleagues can be just as beneficial. Even sitting in the office next to a senior member and observing how they go about their business can be a valuable part of your learning experience. Professional associations, industry events, and online forums are great places to connect with potential mentors.

Q: WHY IS NETWORKING IMPORTANT, AND WHAT STRATEGIES CAN HELP BUILD PROFESSIONAL RELATIONSHIPS?

Networking is crucial as it helps you build the relationships that can support your career development. Start with your colleagues; getting to know them can create a supportive work environment. Attend industry events and join professional associations to connect with others in your field. As an industry, post-COVID, we haven’t got back to engaging with those events as fully as we were before.

The impact of COVID-19 on networking has been significant. We all adapted quickly to virtual meetings, and less so to online networking events.

There are definite benefits to virtual events, such as accessibility and making global connections, but those casual face-to-face conversations before and after meetings can provide valuable insights to an individual’s motivations that you wouldn’t otherwise get in a virtual meeting. They’re what helps build strong professional relationships.

Networking and mentorship are ongoing processes. They require effort and genuine engagement, but the rewards are well worth it. Many of the colleagues you work with and people you meet on your projects now will likely be with you throughout your career.

This interview was conducted with Peter Tulla FAIQS, CQS from RLB.

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THE ROLE OF AI IN QUANTITY SURVEYING

By Stanley Chang MAIQS, CQS

This is a summary of a research paper on the transformative impact of Artificial Intelligence (AI) technologies such as ChatGPT, Microsoft Copilot, and Google Gemini on traditional quantity surveying practices in construction. This research was presented at the Pacific Association of Quantity Surveyors (PAQS) Congress 2024 in Brunei Darussalam in August.

INTRODUCTION

The rapid advancement of AI is revolutionising various sectors, and quantity surveying is no exception. AI technologies such as ChatGPT, Microsoft Copilot, and Google Gemini are transforming traditional quantity surveying practices by automating tasks, improving decision-making, and enhancing accuracy. This article explores the integration of AI within the quantity surveying profession, its benefits, challenges, and the industry’s readiness to adopt these innovations.

AI encompasses the simulation of human intelligence processes such as learning and problem-solving in machines. Its application in the construction industry has the potential to significantly enhance efficiency, precision, and data-driven decisionmaking. For quantity surveyors, a profession traditionally reliant on manual data processing and judgement, AI offers a transformative shift towards automation and innovation.

RATIONALE AND PROBLEM STATEMENT

The construction industry faces persistent challenges, including a shortage of skilled labour and the need for more accurate project cost estimation.

The COVID pandemic exacerbated these issues by driving many construction workers out of the industry. AI technologies provide a viable solution by automating repetitive tasks, reducing human error, and enabling better resource management. Despite these potential benefits, the adoption of AI in quantity surveying remains limited due to a lack of understanding and practical guidance on integrating these technologies effectively.

APPLICATIONS AND BENEFITS OF AI

AI can streamline numerous quantity surveying tasks, from cost estimation to project management. By analysing historical data, AI models can predict future project costs with greater accuracy, reducing the risk of budget overruns. AI also supports real-time project monitoring, enabling surveyors to make more informed decisions quickly. Moreover, AI-powered tools facilitate better communication and coordination among stakeholders, enhancing overall project efficiency.

For instance, AI-driven regression models can predict construction costs by analysing factors such as materials, labour, location, and building features. This predictive capability allows quantity surveyors to provide more accurate and reliable cost forecasts for clients, improving project planning and execution.

CHALLENGES OF AI ADOPTION

Despite the clear advantages, several challenges hinder the widespread adoption of AI in quantity surveying. A primary barrier is the high cost of AI implementation, which can be prohibitive for smaller firms.

Additionally, there are significant learning curves associated with AI technologies, necessitating extensive training and upskilling for quantity surveying professionals.

Moreover, the construction industry is characterised by its reliance on human judgement and expertise. Many quantity surveying professionals remain sceptical about AI’s ability to replace traditional methods, particularly in tasks that require nuanced decisionmaking. This scepticism is reflected in the survey results, where a substantial proportion of respondents expressed only moderate confidence in the accuracy and reliability of AI-generated outputs.

PRIVACY CONSIDERATIONS

AI’s integration into quantity surveying also raises ethical and data privacy concerns. For example, building automation and management systems (BAMS) often lack robust security measures, making them vulnerable to cyber threats. Ensuring data privacy is crucial, especially when sensitive project information is involved. Additionally, ethical considerations regarding AI’s role in decision-making must be addressed to prevent issues such as bias and accountability lapses.

Ethical dilemmas also arise from the potential displacement of jobs due to automation. While AI can perform certain tasks more efficiently than humans, its adoption should be balanced with efforts to retrain and upskill the workforce, ensuring that professionals can transition to roles that complement AI’s capabilities.

SURVEY FINDINGS AND ANALYSIS

This research paper included findings from a survey that was

conducted among quantity surveying professionals, revealing diverse perspectives on AI adoption. While many respondents acknowledged the potential benefits of AI, a significant portion reported not using it in their daily work. The survey highlighted that consultants are more likely to adopt AI compared to contractors and developers, reflecting varying levels of readiness across different sectors of the industry.

Interestingly, the survey found that the primary motivation for using AI was to improve work efficiency and presentation quality. However, confidence in AI-generated content was mixed, with most respondents preferring to refine AI outputs before using them. This cautious approach indicates that while AI is seen as a valuable tool, it is not yet trusted to operate independently without human oversight.

The survey also revealed that many quantity surveying professionals are unaware of AI’s use by clients and contractors to verify and compare their work. This lack of awareness suggests a communication gap within the industry regarding the extent of AI integration in verification processes. Ethical considerations were another key concern, with varying opinions on whether using AI for quantity surveying tasks constitutes professional negligence.

CONCLUSION AND RECOMMENDATIONS

The study concludes that AI has the potential to enhance quantity surveying practices by improving accuracy, efficiency, and strategic decisionmaking. However, the industry must overcome several barriers to fully realise these benefits. These include addressing the high cost of AI tools,

reducing the learning curve through targeted training programs, and fostering a better understanding of AI’s capabilities and limitations among professionals.

To facilitate smoother AI integration, it is recommended that industry stakeholders develop best practices and guidelines for AI adoption. This includes creating a robust ethical framework to ensure the responsible use of AI and implementing data privacy measures to protect sensitive information. By embracing AI while addressing these challenges, the quantity surveying profession can leverage technology to drive innovation and remain competitive in a rapidly evolving industry.

In conclusion, the adoption of AI in quantity surveying is not just about automating tasks but about enhancing the profession’s overall value proposition. By integrating AI thoughtfully and strategically, the industry can unlock new levels of efficiency, accuracy, and insight, ultimately leading to better project outcomes and a more resilient construction sector.

This article is a summary based on research conducted by Stanley Chang Hon Wah MAIQS, CQS, Mok Chun Hou, Sier Pei Ying, and Lu Siaw Hui from RLB Singapore.

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COST COST INFORMING DESIGN

By Nick Clements MNZIQS

You would have heard one of the sayings, ‘designed to a budget’ or ‘built to a price’. Both of these sayings have negative connotations, but then again, is thinking about cost a bad thing?

My vision is cost-informed design, making better design decisions because you understand their impact. This doesn’t mean a cheap product but conscious decisions between cost, scope, and specification.

AN OPEN CHEQUEBOOK

I can only remember one occasion in my career when I was given an unlimited budget. During my engineering days, our team had figured out how to cast expansion joints from silicone rubber. Having successfully perfected a small one for NZ Steel, they then had a large 1m diameter one blow deep inside a rotary kiln that had to be sourced from Germany. This meant the plant was down, at a cost of $150,000 an hour (in the early 1990s). They said, “whatever it takes”. Our team worked around the clock for three days and we were nervous as hell as to whether it would work or not. It wasn’t until we split the mould that we knew we had succeeded.

So, unless you are making 1m rubber joints or are lucky enough to have a client with an open chequebook, you will be designing to some form of financial constraint. Too often we have estimated projects where the cost has come out massively over the client’s budget, which is an undesirable result for all involved.

My interest in the relationship of design and cost began in 1993. As a Marketing Manager, I remember saying, “Why can’t the designers’ computers talk to our costing computers; they are both computers, aren’t they?”.

While that showed how little I knew about computers, this was the start of my journey of exploring how information can move more efficiently through the construction process.

Back then there was an exceedingly long gap between design decisions and understanding the cost implications. Worse still, the costing methods were typically based on $/m2 , which wasn’t accurate enough to respond to small changes in detail.

H1 EXAMPLES SHOW THE BENEFITS

Meeting the requirements of H1 is a classic example of the disconnect between design choices and cost. The code allows the designer’s levers for the R values of slabs, walls, roofs, and windows but each click on those levers costs money. So what is the best combination for your design? Making it even more complicated, design choices on window areas, ceiling heights, and building proportions can also affect the thermal performance.

While designers have tools like the BRANZ Calculation method tool to determine how their design and specification can meet the thermal requirements of H1, what they don’t know is the cost. Is adding 100mm

of EPS under a raft floor more costeffective than R7 in the ceiling, or do you spend more on the windows?

UNDERSTANDING COST DETAIL OPENS THE DOOR TO INNOVATION

There is no silver bullet for reducing the cost of building houses and no magic construction system or process that will dramatically lower the cost of building. There will be a lot of small innovations that add up to make a significant impact many of these get lost in traditional estimating.

During my early working career, I took part in discussions about pre-primed interior mouldings, exploring how we could recover the cost of painting to save the painter time. If a painter worked out their cost based on the floor area this is entirely lost.

Winstone Wallboards has a system that replaces framing studs with a metal angle that saves around $1,000 a house (with a bonus thermal performance of the wall) but relies on the frame plant passing on the reduction in studs.

Our exercise for H1 just used generic systems, there will be proprietary systems out there that give a better R bang-for-buck, but it can be hard for the developers of these to get their cost-to-benefit message out.

This article was written by Nick Clements MNZIQS from YourQS.

INDEPENDENT CERTIFIER

By Mike Hanson MNZIQS

STANDARDS

INTRODUCTION

Standards New Zealand updated its standard conditions of contract for building and civil engineering construction, resulting in the release of NZS3910:2023 one year ago. This update responds to the evolving needs of the construction industry, introducing significant changes for those involved in contract administration. Most notably, the role of the Engineer to Contract (EtC) has been split into two distinct roles: Contract Administrator (CA) and the Independent Certifier (IC).

This article explores the impact of this shift, drawing on my experience managing projects and administering construction contracts.

It highlights how a hands-on approach to the IC role, despite the push for greater separation, often results in smoother project delivery and fewer disputes.

THE EVOLUTION OF NZS 3910:2023

One of the most notable revisions is the redefined EtC role, now divided into two positions: the CA, responsible for administrative tasks on behalf of the principal, and the IC, tasked with making impartial decisions and certifications. Unlike the previous model, where the EtC combined the duties of agent, expert adviser, and independent certifier, these new roles are independently engaged by the Principal, emphasising impartiality.

WHY A PROACTIVE IC IS CRUCIAL

A key driver behind the separation of roles was to clarify responsibilities and enhance impartiality; however, experience suggests that an integrated and proactive IC approach can lead to better project outcomes. Clear boundaries between CA and IC functions are essential, but so is

the need for the IC to stay engaged throughout the project lifecycle and across all project correspondence, thereby being able to offer real-time input rather than intervening solely as a reactive decision-maker.

BENEFITS OF A PROACTIVE APPROACH

1. Ensuring Seamless Project

Execution: A hands-on IC involved from the early project stages will anticipate issues before they arise, enabling smoother processes and practical timely decisions.

2. Avoiding Costly Delays and Disputes: Unlike a passive, lighttouch IC role, which focuses solely on certification and adjudication, a proactive IC can prevent delays by addressing variations and other emerging issues promptly. Staying well-informed throughout the project lifecycle and understanding the project’s nuances can enable the IC to make faster, more accurate decisions, helping avoid delays that lead to costly claims and disputes.

3. Fostering Collaboration: Under the 2013 standard, the EtC was actively involved from the early project stages, shaping contracts, and participating in procurement discussions. While the new standard separates the IC and CA functions, the IC’s proactive involvement remains essential to creating a collaborative project environment.

For instance, on a recent major retail outlet centre projects that used NZS 3910:2013, our team saw the benefits of close collaboration. The EtC and project management teams worked together under the same roof, maintaining strong relationships and effective communication with all stakeholders. Even as roles evolve and projects move onto the new form of contract, I believe maintaining continuity through engaged ICs will prove beneficial for successful outcomes.

POTENTIAL RISKS OF A PASSIVE IC ROLE

Separating the IC role entirely from the CA can lead to reduced engagement, which could have unintended consequences. Poor performance by either the CA or the IC could negatively impact the project, leading to variation claims by the Contractor or issues with the Principal. For example, if a warranty issue arises due to improper execution, it could be unclear whether the CA or the IC is responsible. The relationship between the CA and IC becomes critical, and back-to-back liability provisions may need consideration.

If the IC becomes a passive figure only involved in certification and adjudication, they risk being seen as a “poor man’s adjudicator” – brought in only after disputes have escalated, making resolutions more complex and costly, and leading to avoidable project delays.

PRACTICAL SCENARIOS UNDER THE NEW FRAMEWORK

The 2023 standard introduces flexibility in structuring the CA and IC roles, with potential scenarios including:

1. CA and IC Roles Performed by the Same Person: A single person may fulfil both CA and IC roles. This setup affords flexibility to the project team, streamlined communication, and a reduction in costs. However, it relies heavily on the individual’s professional ethics for impartiality, and without clear guidance as to when this setup is appropriate, i.e., for small or less complex projects, this flexibility could be misapplied.

2. IC Engaged Separately from CA: To preserve impartiality, some Principals are opting to engage ICs from a firm different from the CA. While this may appear to promote impartiality, it often limits the IC’s daily interaction with the CA, leading to a primarily certification-focused

IC role that may not be conducive to ensuring the project’s smooth operation – a key feature of the old EtC role.

3. Expanded Role for the IC: On complex projects, the IC may be given additional responsibilities typically handled by the CA, especially regarding dispute resolution, balancing prompt decision-making with increased costs. Principals should carefully consider the trade-offs between expense and operational benefits.

IMPARTIALITY OR ISOLATION?

One reason for splitting roles was to address concerns about impartiality. The thinking is that separating CA and IC functions eliminates conflicts of interest. As a result, Principals may assume they need to engage the CA and the IC from separate firms to maintain impartiality. Such a rigid interpretation of impartiality might result in the IC not being involved in the project until the construction stage, which contrasts with the EtC’s typical involvement from the initial project stages, including contract shaping and procurement deliberations. This loss of continuity could be detrimental. It is essential to note that the contract does not mandate that the CA be employed by a different firm than the IC; in fact, the roles can be performed by the same person. Achieving true impartiality is less about physical separation and more about the professionalism and ethics of the professionals in the CA and IC roles. The Society of Construction Contract Practitioners (SCCP) promotes a code of ethics to ensure accountability, regardless of whether the CA and IC are from the same or different firms.

True impartiality is best achieved by integrating the IC into the project from the outset, allowing them to gain a complete view of issues as they develop and offer timely, informed solutions.

REAL WORLD ADJUSTMENTS:

Transitioning from NZS 3910:2013 to the 2023 standard has presented notable adjustments. On a large-scale construction project that switched standards just as construction commenced, our team made the following adjustments:

• Carrying Over Special Conditions: While NZS 3910:2023 aims to reduce special conditions, certain unique and ‘standard’ conditions from the 2013 contract were still necessary. These had to be quickly adapted to fit the new framework to avoid delays.

• Adjusting the Budget: The decision to engage an IC from a separate consultancy resulted in additional budget being required, meaning a draw on the professional fee contigency was needed.

• Adjusting IC Responsibilities: Without a proactive IC, there was potential for delays on certain critical decisions. Contract clauses were introduced to engage the IC earlier and include the IC in all contract correspondence, including that for extensions of time (EOT) claims. This ensured there was accountability and mitigated the risk of delays.

CONCLUSION

The redefinition of the EtC role in NZS 3910:2023 addresses impartiality whilst

also allowing for flexible role structures. However, as this article has argued, a model where the IC is not merely a reactive certifier, but a proactive partner remains the best path to project success. I have consistently seen the benefits of maintaining a strong, engaged IC presence throughout the project lifecycle. Principals adopting this approach can avoid delays, minimise disputes, and ensure better project outcomes.

This article was written by Mike Hanson MNZIQS from RDT Pacific.

WHAT VALUE DOES YOUR COST MANAGEMENT TEAM PROVIDE WHEN REDUCING UPFRONT CARBON?

THOMAS NOLAN Head of Estimating and Cost Planning, Laing O’Rourke

At Laing O’Rourke, our cost management teams, particularly those in estimating and cost planning, play a pivotal role in achieving our carbon reduction Science Based Targets. We are committed to reducing Scope 1 and 2 emissions (fuel and electricity) by 42% by 2030, Scope 3 emissions (purchased goods and services) by 25% by 2030 and reaching net zero by 2050 with a 90% reduction across all scopes.

From a cost management perspective, two key pillars support our targets. Firstly, we adopt a first principles approach in our estimates and bids. This involves detailed quantity takeoffs, allowing our estimators to assign a carbon value to each quantity.

For instance, every cubic metre of concrete in our bid includes an allowance for the carbon embodied in

the material. Similarly, this approach applies to diesel-powered plant and equipment, where we accurately forecast fuel consumption, and consequently, carbon emissions. This method creates a bespoke baseline estimate of carbon against the design and enables collaboration between our estimating team, sustainability team and the broader bid team to identify the best carbon reduction initiatives, such as using electric cranes, employing different construction methodologies or using biodiesel. Each initiative employed is then shown as a carbon reduction (compared to the carbon baseline from the business-as-usual approach) and we can demonstrate the total carbon reduction that will be achieved on each job. This process is a critical step in planning and measuring

our carbon emission performance against our Science Based Targets. Secondly, Design for Manufacture and Assembly (DFMA) and Modern Methods of Construction (MMC) are integral to our operations. Early involvement in project design allows us to deliver high-quality projects, including proposals with low-carbon solutions, at a reasonable cost, ensuring value for money for clients. These methods provide valuable data and enable engagement with our supply chain partners to explore carbon-reducing innovations, such as recycled materials and electric plant and equipment. This approach also offers more certainty on carbon emissions, independent of marketdriven cost fluctuations.

TOP TIPS FOR A BETTER CONSTRUCTION INDUSTRY

By Mikael Heinonen MAIQS, CQS

Workplace and industry culture is a result of the behaviours that people themselves exhibit and the behaviours people tolerate. Starting small and making changes to behaviours and perspectives at a micro level can lead to a better construction industry.

Here are 15 tips for anyone in the construction industry to adopt to start making change within their sphere of influence.

1. LEAD WITH QUESTIONS

Next time someone comes to you looking for help, rather than leaping into solution mode, try asking:

1. “How can I help you?” – This clarifies immediately what the person wants.

2. “What would you do?” – This prompts people to respond to their own problem or question.

2. ASK FOR HELP

If you’re crunched for time and/or stressed with a work task, don’t hide and try to do it all yourself; ask a colleague for help.

Most people don’t bite and there is nothing wrong or weak with seeking help.

Inevitably, there will be a time when your colleagues will need help and you can return the favour.

3. BEST AND WORST PROJECTS

Ask a colleague what were the best and worst projects (or workplaces) they have worked on, and why.

This tip is about building connections and sharing learning through stories. The positive experiences can also be amplified to evolve the system in a beneficial direction.

4.

ACKNOWLEDGEMENT OF OTHER PEOPLE’S WORK OR IDEAS

Next time you are in a meeting, don’t take someone else’s idea or work as your own. Ensure you acknowledge them. Simple.

And if you see someone accepting credit for someone else’s idea just repackaged, give a shoutout to the original contributor.

5. UNDERSTANDING THE INFLUENCE OF CONTRACTS

Ask your PM how your project is contracting and incentivising (head contract plus subcontractors) (i.e., fixed price, unit rate, cost, etc.)

6. REMOVE DISTRACTIONS

Next time someone comes by your desk to talk, look up/stand up, turn away from your screen, and put your phone away.

Your phone doesn’t even need to be in use, as studies have shown that just having it on the table can reduce attention.

It’s simple. For more meaningful conversations, keep your phone and screens away.

7. WALK THE TALK

When you’re drafting a subcontract, make sure the terms are NOT any more onerous than your head contract terms.

Businesses are much better off managing the relationship rather than being heavy with your divorce clauses.

CULTURE

8. LEARNING SKILLS FOR YOU AND YOUR COMPANY

Ask yourself and/or your team what skill would you like to learn today that would also benefit the business, and then make it happen!

...Work together proactively and positively to make any necessary changes to ensure everyone can thrive.

In most instances, when weighing up the cost of learning that new skill, the benefit to the business of that new skill, and the savings from not rehiring, there is no contest.

For those worried about people leaving after spending money on upskilling, do you want to run a company in a way that you have such untapped potential ‘just in case’ they leave and go to your competition?

9. DON’T SAY “PEOPLE ARE DISENGAGED”

Next time a team member is not performing and seemingly disengaged, try first looking at the environment and asking, “Do we have an environment that fosters disengagement?”.

In any instance, work together proactively and positively to make any necessary changes to ensure everyone can thrive.

10. MAKE YOUR BED

”If you make your bed every morning, you will have accomplished the first task of the day” – Admiral McRaven at University of Texas commencement speech 2014.

11. FORGET PERFECTIONISM

Many parts of construction require a great deal of precision, however on our complex projects making the best decision right now should be preferred over perfectionism if better project outcomes are the goal.

Waiting for perfection can delay or even inhibit making a decision altogether, which is ironically a decision in itself.

Instead, learn to understand what doesn’t need to be perfect, particularly in decision-making, asking questions, and probing the opportunity cost of doing something now vs. waiting for perfect.

12. BE CURIOUS BEFORE COMPELLING

“It’s okay to advocate a position, but do so after imagining the possibility the other person might be right” – David Marquet.

13. WOMEN IN CONSTRUCTION

Males, seek to better understand what it is like being a female working in the construction industry.

Don’t assume – ask!

And reflect on whether you have witnessed any of these challenges. Is there anything you could do differently?

Check-in with a friend, colleague, or family member you haven’t connected with for a while.

14. COMBATING LONELINESS

Check-in with a friend, colleague or family member you haven’t connected with for a while.

Construction can be lonely – long hours, FIFO, etc. Extended periods of loneliness can be unhealthy, and connection is the cure.

15. SAY THANK YOU

It’s the simplest form of expressing gratitude. But how often do you use it?

This article was written by Mikael Heinonen MAIQS, CQS from Collabaloop.

GOOD RECORDS PREVENT BAD CLAIMS – PART II

By Kevin Windross FAIQS (Ret.)

RECAP ON PART I

In Part I, the concept of good records and how they should be prepared was discussed. In Part II we look at the types of records that comprise the good records and prevent those bad claims in a guidelines format.

The inter-relationships between the various elements of a comprehensive set of records are set out below. The reader is encouraged to ‘tailor’ the format to match the particular project being constructed, the key elements and the contractual requirements. Each and all facets might become key information at claim time.

SOME THOUGHTS ON A TEMPLATE TO CONSIDER

A good set of records should comprise:

1. Essential

2. Project-Specific, and

3. Contractual records.

I ESSENTIAL RECORDS

The example in Table 1 shows what might be considered the absolute minimum records to be kept. This can be tailored to suit the record-keeping regime of the project and can be linked to labour returns and Bureau of Meteorology data, respectively used, in creating the records.

The contract might mandate that labour returns are provided by the contractor on a daily basis. Cross-referencing and attaching each daily labour return to the respective record would be close to optimum.

Similarly, many contract terms are generally prescriptive in delay events due to weather.

If working in a hot climate, the records can be tailored to suit this regime and any contracted or mandated impositions of working in heat included.

SITE DAILY RECORD Contractor/Client Address

DATE

JOB NAME No

LABOUR PHOTOGRAPHIC RECORDS

I PROJECT-SPECIFIC

The following list might be considered for an individual project:

• Industrial/safety issues

• Delays/causes/notes

• Site meetings

• Site visitors/client/arch/engineer

• Material deliveries

• Plant/on/offsite

• Site instructions/DWGS issued/ received

• Variation details

• Daily progress/program

Material deliveries, plant on and off site, instructions and the like, represent dayto-day project-specific activities, that may require recording. This example was taken from an actual fire optic (FO) cable rollout project wherein the client provided the cable to the contractor to roll out over several suburbs.

All deliveries to site, including many drums of all types of FO cable, were noted in the requisite section and several references were made to potential delays, resulting from a lack of FO cable.

Note that the plant on/offsite section was also populated with details of breakdowns to cable hauling equipment.

Some say “Records work both ways” and in my view, it’s a valid comment, given the above.

I CONTRACTUAL INCLUSIONS

The following items included in the FO rollout records might be considered to cover contract terms, totally dependent on the actual contractual terms and requirements, so read your contract prior to setting up the recording regime.

Table 1: Essential Records Example

SCEPTICISM AROUND BIM

By Rehan Pawaskar MAIQS, CQS

INTRODUCTION

The construction industry has been notoriously slow to adopt new technologies. In Australia, the uptake of Building Information Modelling (BIM) has faced similar obstacles, despite promises of productivity gains, cost savings, and improved project outcomes. BIM, a tool that has been around for over two decades, is still underutilised and misunderstood. Despite its immense potential, the full range of its capabilities remains largely unexplored.

In this article, we will address the scepticism surrounding BIM and how, when effectively leveraged, it can revolutionise the construction sector. Emphasising collaboration between designers and cost management consultants/quantity surveyors, we will explore strategies to optimise the use of BIM.

UNDERSTANDING THE SCEPTICISM

Scepticism around BIM adoption in the industry arises from several concerns. These include misconceptions about the technology, high implementation costs, the learning curve for existing professionals, and interoperability challenges between different BIM software. Some firms fear that the initial investment may not yield the expected returns, and others lack the knowledge and skill sets required to integrate BIM seamlessly into their workflows.

Despite these concerns, BIM has demonstrated its potential in projects worldwide. By focusing on its benefits and addressing these challenges, we can highlight the reasons why professionals should give BIM a second, more comprehensive look.

UNDERUTILISATION OF BIM

While BIM has gained some traction, particularly in government-funded projects that mandate its use, many in the private sector still use it in a limited capacity. Typically, BIM is adopted for design coordination and clash detection, leaving its potential for cost estimation, facility management, and lifecycle costing untapped. Even when BIM is utilised for 3D modelling, the power of integrating 4D (scheduling), 5D (cost estimation), and beyond is often neglected.

In April 2023, Autodesk, in collaboration with Deloitte, released ‘The State of Digital Adoption in Construction Report 2023,’ surveying 229 construction and engineering executives across Australia, Japan, and Singapore. The report found that nearly two in five businesses are using Building Information Modelling (BIM) and cloud management software, with over a quarter expecting to implement these technologies in the future.

THE CASE FOR BETTER COLLABORATION

One of the core principles of BIM is enhancing collaboration among all project stakeholders. In Australia, the gap between designers and quantity surveyors remains a critical issue.

Designers typically create intricate models, but often these are not fully optimised for cost estimation, leaving quantity surveyors to work with 2D drawings.

Better collaboration between designers and cost management consultants can transform BIM’s effectiveness. Early engagement of cost managers in the design phase allows them to guide decisions based on cost implications, using BIM data to provide real-time cost feedback. This ensures a more accurate and efficient cost estimation process, reducing the likelihood of budget overruns.

THE POTENTIAL OF BIM: REVOLUTIONISING COST MANAGEMENT

BIM’s greatest potential lies in its ability to streamline cost management processes. With BIM, quantity surveyors can extract detailed quantities directly from 3D models, significantly improving accuracy and efficiency. This also reduces the time spent on manual take-offs and minimises the risk of errors.

Moreover, BIM allows cost consultants to model various design scenarios and see the impact on cost in real time.

BIM’s greatest potential lies in its ability to streamline cost management processes.

This fosters a data-driven decisionmaking environment where design changes are evaluated based on their financial implications. Such capabilities are crucial for large-scale projects where even small design adjustments can lead to significant cost fluctuations.

OVERCOMING THE CHALLENGES

For BIM to truly transform the construction industry, stakeholders must address the barriers head-on. Here are some recommendations:

1. Early Engagement: Quantity surveyors should be involved from the early stages of design, ensuring that cost management is an integral part of the process. This would lead to more cost-effective and wellcoordinated outcomes.

2. Standardisation: Developing industry-wide standards for BIM implementation can reduce confusion and promote consistency. Australia could benefit from a national BIM framework that sets clear guidelines for data sharing and collaboration. AIQS can play a crucial role in incorporating ANZSMM requirements into this BIM framework, ensuring that quantity surveying standards and measurement protocols are effectively integrated.

3. Technology investment: While the initial cost of adopting BIM can be high, the long-term benefits far outweigh the investment.

Government incentives for BIM adoption in the private sector could also spur wider uptake.

4. Software Interoperability: Addressing software compatibility issues is critical.

Investing in open-source or widely compatible platforms can enhance collaboration across disciplines.

5. Education and Training: Investing in training programs for professionals is essential. Both designers and cost managers should have a solid understanding of BIM’s capabilities and how to leverage them effectively.

CONCLUSION

BIM represents a transformative change in how construction projects are managed. To capitalise on BIM’s benefits, we must overcome scepticism and cultivate greater collaboration between designers and cost management consultants. By doing so, we can unlock a new era of efficiency, accuracy, and innovation in the construction industry.

The journey towards full BIM integration may not be without its challenges, but the rewards are undeniable. The sooner we embrace this transformation, the more competitive and resilient the construction industry will become.

This article was written by Rehan Pawaskar MAIQS, CQS from Turner & Townsend.

JUMPSTARTING THE BUILD-T0-RENT MARKET

By Ian Menzies FAIQS, CQS, Kate Kirgizova, and Brendan Browne MAIQS, CQS

BUILD-TO-RENT

The plan for tackling Australia’s housing affordability crisis looks great on paper, with a target of 1.2 million new homes across the country over five years from mid-2024. However, reality isn’t keeping up with ambition. Over the past decade, on average 150,000 to 200,000 dwellings have been completed per year, falling far short of the current target of 240,000 new homes per year. Facing ongoing population growth and housing shortages, how can the property sector get more high-quality yet affordable residential options off the ground quickly – especially for renters?

Approximately a third of Australians rent rather than own a home. The trend towards rentals is increasing, influenced by factors such as high house prices, more single-person and single-parent households, and population growth in major cities.

In some ways, BTR is an easier product to build...

This is creating a new opportunity for investors and developers in the form of the build-to-rent (BTR) asset class, which is well established in the United Kingdom, the United States and several European countries.

The rapid growth of the BTR ecosystem around our biggest cities could be a very powerful lever for alleviating pressure in the housing sector, boosting rental availability for Australians desperately needing more housing options.

STILL EARLY DAYS

Although BTR in Australia has passed its infancy stage, the market has a way to go before it can be considered mature.

...There’s nothing more efficient than standardisation and replication.

Uncertainty around housing policies, taxes and charges remains a barrier for developers and investors. International investors are deterred by current tax regimes and are looking at additional risk premiums to reduce their exposure, which makes it harder for the numbers to stack up.

We have, however, seen a lot of activity in the BTR space over recent months. Melbourne is leading the charge, with recent policy updates and re-zonings across many suburbs. Sydney is catching up, with a $1.5 billion precinct proposed for Marrickville, and multiple high-rise blocks promising more affordable prices in inner suburbs. Brisbane has several projects underway and other states are also encouraging BTR inflow through tax concessions and similar initiatives.

As Australia navigates the investment challenges, local contractors are under pressure due to BTR project uncertainty or delay. Some BTR projects have encountered delays or undergone significant changes – with a lot of rework needed. However, as the market becomes increasingly familiar with BTR and some stable trends are emerging, the contractor market is gaining more confidence in this space.

In some ways, BTR is an easier product to build, with greater uniformity and fewer purchaser-led changes to the design, making the process easier for the contractor to manage and reduce risk on the contractor’s side.

‘COPY AND PASTE’ APPROACHES CAN UNLOCK EFFICIENCIES

Rolling out more BTR developments quickly and at the right cost is going to require efficiencies – and there’s nothing more efficient than standardisation and replication. That doesn’t mean there’s no room for creativity. In fact, innovative thinking will be crucial for creating the right templates to follow. To create an affordable product that delivers value over many decades, developers will need to work to understand the needs, expectations and lifestyle preferences of their potential tenants and embed these insights into the design.

Significant cost savings and time efficiencies can be unlocked through standardisation opportunities in the planning, design, procurement, and construction phases (including the possibility of automation and prefabrication).

...Many developers are still working on their first BTR projects, so it will take time to land the right approaches to standardisation...

These efficiencies can be maximised by investing early in digital tools such as BIM and digital twins, which can deliver significant benefits by reducing errors, delays and costs during design and construction, as well as revolutionising facilities management.

Of course, given the newness of Australia’s BTR scene, many developers are still working on their first BTR projects, so it will take time to land the right approaches to standardisation, but we expect to see more uniformity emerge in design and construction methods. There is also an opportunity to explore the potential for efficiencies in procurement, such as panel arrangements to streamline the rollout of projects and increase consistency.

Signs of streamlined processes and greater stability will give the sector confidence and much-needed momentum.

PLAYING THE LONG GAME

Attracting and retaining good tenants will be key to a stable long-term revenue stream. Crucial inputs to maintaining high occupancy and tenant satisfaction are how well the facility is managed and maintained.

As facility management being a major ongoing cost, any efficiencies here will add up over the long term, and the opex savings could far outweigh the potential extra upfront capex investment. To drive operational costs down without compromising quality, developers should consider opportunities for lower maintenance and higher durability in every decision. Smart technologies may be well worth the extra upfront investment, especially if they reduce human time, which is often the greatest cost in facilities management.

Ultimately, good decisions about the life of a building are grounded in reliable information and a long-term perspective.

With efficient design and construction, and high-quality property management, there’s every reason to expect to see its full potential unlocked.

Comprehensive whole-of-life cost management will reveal the total costs associated with the asset over its entire lifecycle. Any options can be analysed in terms of capital costs as well as lifecycle costs for the same systems or products, informing annual cost savings, net savings over the lifecycle, and payback periods.

A NEW CHAPTER IN AUSTRALIA’S HOUSING JOURNEY

While the BTR market is still navigating some early ups and downs, and there is still some hesitancy from the investor side, green shoots are emerging. Signs of streamlined processes and greater stability will give the sector confidence and much-needed momentum.

The BTR market could be a gamechanger in the housing crisis. With efficient design and construction, and high-quality property management, there’s every reason to expect to see its full potential unlocked. We’re looking forward to seeing this new asset class alleviating the current ‘rental squeeze’ and delivering quality, sustainable housing for the growing number of Australian tenants.

This article was written by Ian Menzies FAIQS, CQS, Kate Kirgizova, and Brendan Browne MAIQS, CQS from WT Partnership.

OPINION

THOUGHT LEADERSHIP ACROSS APAC

By Stephen Ballesty FAIQS, CQS

In addition to the access we all have to quality AIQS events and webinar updates, it has been a privilege to be exposed to some amazing built environment thought leadership across the Asia Pacific (APAC) region in recent months. Amongst the plethora of industry events and professional development opportunities on offer, I’ve been directly involved in three events, and the judging of excellence awards for multiple bodies.

My updates on these three events chronologically are as follows:

World Workplace Asia Pacific 2024 (WWAP’24) in Singapore during 23-24 July.

This was a successful two-day IFMA conference, expo and awards event attracting 670 participants from 17 countries including attendees, presenters, exhibitors and sponsors.

An event highlight was the keynote panel session on ‘FM’s role in addressing Global Challenges: insights from our IFMA Fellows’.

This session featured five IFMA Fellows:

• Stephen Ballesty (AU, Moderator)

• Lynn Baez (US, IFMA Global Board Chair)

• Jeffrey Budimulia (SG)

• Kenneth Foo (HK), and

• Tony Khoo (SG).

This panel addressed global challenges and emerging issues highlighting IFMA’s 2023 ‘Evolution is Never Finished’ paper and the ISO 41000 series of FM standards providing an APAC regional context for the delivery of ‘Sustainable FM’.

IFMA’s 2023 paper identifies six emerging topics, this provided a discussion framework for the panel, who brought their combined 150+ years of leadership experience and regional insights on the challenges and opportunities for built environment professionals across:

• PropTech – utilising technology to manage and optimise real estate operations.

• Artificial Intelligence and Generative AI – transforming how facilities are designed, operated, and maintained.

• Climate Change – significant direct and indirect impacts on the FM profession today, and future industry challenges to manage and mitigate climate risks and consequences.

• Circular Economy – as a way of thinking about the use of resources, beyond existing linear economies.

• ESG Reporting – environmental, social, and governance frameworks organisations should use to evaluate and communicate their commitments and performance to their stakeholders.

• Wellness and Wellbeing – the physical, mental and emotional health considerations supporting our quality of life.

Additionally, the panel examined the work of ISO/TC 267 and the implications of the ISO 41000 series of FM standards. In particular, the recent 2024 publications of 41011, 41016, 41017, 21019, and 41030 covering vocabulary, technology, emergency preparedness, sustainability, performance, and the climate change amendment of ISO 41001:2018/Amd1:2024 FM Management Systems Standard (MSS). The conference also enabled us to celebrate the local adoption of this MSS by Singapore Standards in July as SS ISO 41001:2024.

This panel session was significant, noting that there have only ever been 134 IFMA Fellows recognised worldwide (1992-2023) with 44 now

emeritus, leaving 90 active of which only eight are currently based in the APAC region. Note: global numbers were increased by three new IFMA Fellows being elevated in October 2024.

Separately, I was invited to present a concurrent technical session: ‘Decarbonization & ICMS#3’, which was also well received as an essential issue for cost management reporting.

The conference included a variety of hospitality events that showed off Singapore and the SIFMA’s Best of FM Awards Reception and Gala Dinner.

Ideaction.24 in Melbourne during 2-5 September demonstrated FMA Australia’s commitment to the importance of strengthening the FM industry through education and professionalism. This was the 34th annual outing for Australia’s largest facilities management (FM) conference and exhibition, this year’s theme was: ‘Building FM: From Theory to Reality’ packed with a full programme of experts, and keynote speakers brimming with ideas to be put into action.

There were 19 plenary sessions including leading keynotes on leadership, culture, technology and trends; a discussion panel: ‘Legislation & Regulation is Important to Shift the Needle’; and the ‘great debate’: “There is no place for unconventional methods in Facilities Management, we must stick strictly to Industry Standards”. Plus, there were 16 concurrent sessions across four streams, each with four presenters exploring the contemporary issues of:

• Smart FM for Smart Buildings

• Beyond Sustainability – Embracing the ESG

• Future FM Talent – Securing Skills

• Aligning FM – Driving Value.

My presentation was titled, ‘Achieving Sustainable FM via the ISO 41000 series’. This session included an FM standards update and provided a detailed look at the new ISO/TR 41019:2024 ‘Facility Management’s Role in Sustainability, Resilience and Adaptability’, published in late June. This technical report, focusing on aligning FM standards with the UN’s Sustainable Development Goals (SDGs), presents built environment professionals with concise guidance on a range of complex and dynamic challenges.

The conference included a range of outstanding social and networking events. The presentation days were followed by exclusive site tours of the Melbourne Cricket Ground and the ANZ Gothic Branch at 388 Collins Street.

The host destination for next year’s Ideaction.25 conference will be Adelaide, South Australia.

ICREMV 2024 in Sri Lanka, the 8th International Conference on Real Estate Management and Valuation conference was held on 10, 19, and 24 October. This hybrid event was organised by the Centre for Real Estate Studies (CRES) of the University of Sri Jayewardenepura, Sri Lanka in collaboration with RICS, the Government Valuation Department, the Urban Development Authority, the Colombo Municipal Council, the Institute of Valuers of Sri Lanka, the EMV Alumni Association, the EMV RCB Club, and EMV CREW.

The conference attracted approximately 150 in-person attendees and over 400 online participants with the theme of: ‘Charting the Future: Synergies in Tourism and Real Estate for Sustainable Development in Sri Lanka’.

ICREMV 2024 featured over 60 local and international speakers covering an array of topics related to real estate management, valuation methodologies,

sustainability practices, and the impact of technology in the sector.

ICREMV 2024 provided a hybrid platform for academics and practitioners to present and discuss the most recent innovations, trends, and concerns as well as practical challenges encountered and solutions adopted in Real Estate Management and Valuation. My virtual plenary presentation was titled, ‘Optimizing Asset Performance and User Experiences: Facility Management Standards for Sustainable Development and Enhanced Property Values’.

This session focused on ‘Sustainable Development’ as a crucial component of performance and value, and the role of the Built Environment professionals in the delivery of quality-of-life outcomes. There was an update on the activities of ISO/TC 267 and the status of the ISO 41000 series. The relevancy of the ISO/TR 41019:2024 ‘FM’s role in sustainability, resilience and adaptability’, published in June and the ISO/UNNP PAS 53002:2024 ‘Guidelines for contributing to the United Nations Sustainable Development Goals (SDGs)’, plus multiple materials and tools like RICS’ ‘Whole life carbon assessment for the built environment’ (2023).

On the path to ‘Sustainable FM’ the message is clear: there is a requirement for urgent action involving more integrated and holistic approaches. But don’t despair – our built environment professionals are up to the challenges –it’s not too late and we’re not alone.

I’m encouraged by the commitment to thought leadership across our APAC region.

This article was written by Stephen Ballesty FAIQS, CQS from In-Touch Advisory.

CONTRACTOR CLAIMS FOR HIGH INFLATION AND HYPER-ESCALATION

By Keith Keown MAIQS

Generally, Australian contracts expect the contract sum to allow for inflation and price fluctuations. Such contracts are usually lump sum, fixed price or hard dollar contracts. This inflation provision is made at the time of tender and is part of the estimating process. Inflation calculations will usually be based on looking at current economic trends and then forecasting forward, adding percentages to simulate inflation on the labour, plant and material components in the tender bid.

There is a risk in such forward estimates but in the pre-COVID (March 2020) economic environment, inflation was both low and reasonably predictable. Client organisations and most contractors considered this a risk that contractors understood and were best able to manage.

POST-COVID HYPERINFLATION

Post-COVID, particularly in particular in 2021 and 2022, there has been substantial inflation. The Australian Bureau of Statistics (ABS) noted in their September 2022 PPI Index:

“Building construction prices rose 2.7% in the September quarter and 12.8% over the past twelve months, the largest annual increase since the series began.

Supply chain instability and high shipping costs, coupled with ongoing skilled labour shortages are continuing to drive up construction costs this quarter.”1

Examples of such extreme inflation include the of price steel which was over 20% higher in 2022 than in 20212 and most Australians are aware of the substantial increases in energy prices. It is worth noting that in some cases, prices have since come down as it has with steel.

There are many reasons for this inflation including disruptions to the supply chain caused by COVID, the war in Ukraine and more locally poor weather and flooding on the Australian East Coast. From 2023, the knock-on effect of attacks on shipping in the Red Sea and more recently problems in the China economy.

This sudden and extreme inflation has been termed ‘hyper-escalation’ and has become the basis for claims from contractors. Such claims argue that inflation has become unpredictable and extreme and that there is an obligation on clients to support contractors. It is worth noting that the time between tender submission and contractor mobilisation and procurement can be

substantial and can be longer if the contractor is providing design.

Contractors argue that it is unfair in the current economic environment to make them absorb the impact of this long award and mobilisation period and for clients to obtain, “an asset for below actual cost”3. The Australian Constructors Association goes on to note that this damages the longterm sustainability of the Australian construction industry and that, “the construction industry already accounts for almost 25 per cent of all business insolvencies in Australia”.

HYPERINFLATION CLAIMS

I PRINCIPAL

Some construction contracts include inflation. Such provisions are often called ‘rise and fall’ or ‘fluctuation’ clauses.

Where such clauses are present, a hyperinflation claim may not be required, although there are arguments that the clauses do not cover all the inflation the contractor has suffered during this period of extreme inflation.

1 ABS 2022, Producer Price Indexes, Australia, Australian Bureau of Statistics, <https://www.abs.gov.au/statistics/economy/price-indexesand-inflation/producer-price-indexes-australia/jun-2022>.

2 Macromonitor 2024, Iron and steel products, Index change from 204.6 to 258.6, <https://macromonitor.com.au/resources/>.

3 Australian Constructors Association 2022, Construction cost inflation, <https://www.constructors.com.au/wp-content/uploads/2022/07/ Construction-cost-inflation_July-2022.pdf>.

Where there are no such clauses and the contract is a lump sum form, the claim will most likely be ‘outside’ the contract and will be on some form of goodwill or ex-gratia basis.

The best approach to the client will have to be discussed with the contractor’s legal team.

I QUANTUM

Addressing the quantum requires a good understanding of the contractor’s estimate, current rates and prices and some understanding of the economy and finance. Quantity surveyors and estimators are probably in the best position to review and prepare such claims.

The basis of the quantum will usually be the contractor’s tender bid as it is this that has been undermined by hyper-escalation. Inflation during the delivery stage will most likely be tied to the program and if there are delays, delivery stage inflation should be picked up in the ‘extension of time’ claim.

I CLAIM PREPARATION

The contractor’s tender bid will have to be examined and a detailed breakdown of the tender estimate is required.

This is essential to identify the components that make up the tender bid. Once this is done, the impact of hyper-escalation on each component must be considered.

This can be straightforward on simple components such as labour or concrete as there is plenty of inflation data on these items. However, many of the components that make up a tender are compound items like mechanical equipment and activities like excavation or traffic control. If these items cannot be broken down into simpler components, a judgement will have to be made on these. A good understanding of construction and construction works is required.

Once these components are identified, an inflation calculation can be done. This calculation is usually done with the use of indexes that measure the rate at which prices increase over some time. The time period is an important part of this calculation as the inflation calculation will usually be based on the period from when the contractor obtained his quote during the tender period and when they ‘locked’ in the price with his supply chain. Note that in some cases the contractor may not have been able to lock in such prices if the supply subcontract allows for rise and fall or fluctuations.

Inflation indexes are available from many sources such as the ABS, government and industry bodies including AIQS, who provide the Building Cost Index.

Indexes will not be available for all construction components and again a judgement must be made. An explanation will have to be provided in the claim on where the index comes from and why it is appropriate. As a general rule, indexes from government bodies will have more credibility.

As noted above, some prices will have come down and this must be factored into a claim. In addition, any escalation built into the tender must be deducted from the claim. Failing to do this undermines the legitimacy and accuracy of the claim.

The result will be a claim document that provides a detailed explanation of what has impacted the contractor, how the hyper-escalation was calculated, and the amount being claimed. It is worth noting that although such hyperescalation sums can be large, they are unlikely to be the huge sums that some contractors expect.

This article was written by Keith Keown MAIQS from Contract & Commercial Resources Pty Ltd.

BUILDING COST INDEX

DECEMBER 2024

THE BUILDING COST INDEX IS PUBLISHED IN THE PRINT VERSION OF THE BUILT 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.