Built Environment Economist - Australia and New Zealand June 2024

Building

ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS

Over the past few years, AIQS has released Practice Standards, Guidance Notes, and Information Papers addressing a range of topics, including Construction Financing Reports, Replacement Cost Assessments (for insurance purposes), Life Cycle Cost Analysis, Quantity Surveyor’s Guide to Residential Tax Depreciation, The Quantity Surveyor’s Role as an Expert Witness, and Construction Cost Assessments for NSW Estimated Development Cost Reports.

Of these, Construction Cost Assessments for NSW Estimated Development Cost Reports is the only Practice Standard, which means it is mandatory (as it has been established to satisfy regulatory requirements) for all members undertaking Estimated Development Cost (EDC) Reports in NSW. The Practice Standard was developed principally in response to the Independent Commission Against Corruption’s (ICAC) Operation Dasha Report recommendation 19, concerning the establishment of a clear, robust, and verifiable alternative to capital investment value as a jurisdictional threshold for planning panels. The Practice Standard applies when calculating the Estimated Development Cost (EDC) for State Significant Development (SSD) projects, State Significant Infrastructure (SSI) projects, and projects costed over $3M. It should be read in conjunction with Planning Circular PS 24-002 ‘Changes to how development costs are calculated for planning purposes’. It is important to note that for the Planning Secretary’s Environmental Assessment Requirements (SEARs), additional job creation estimates (during construction and post-construction) are currently required to be included in the quantity surveyor’s report.

Practice Standards are designed to clearly articulate the level of service to be provided by a Certified Quantity Surveyor (CQS), those who use their services, and provide direction of the process, professional approach and method that must be used in any specific instruction or situation. Practice Standards are not intended to provide comprehensive training, instruction or prescriptive practices and procedures.

The Construction Financing Reports publication is a Guidance Note that has been developed to create a uniform scope of service and clarify the CQS’s role in providing construction cost management services to both the Financier(s) and Developer.

As a Guidance Note, it is intended to clarify professional and industry processes, appropriate practices and procedures and advise their use and implementation, and is designed to be of assistance to members and those who use members’ services. It also serves as a guide and measure of the acceptable professional practice and conduct that should be provided by a member.

The remaining Replacement Cost Assessments (for insurance purposes), Life Cycle Cost Analysis, Quantity Surveyor’s Guide to Residential Tax Depreciation, and The Quantity Surveyor’s Role as an Expert Witness have been published as Information Papers to provide up-to-date information on the particular subject and be independent, expert and impartial in nature (and at times may challenge traditional/existing approaches to the subject matter). Information Papers do not reflect the views of any one individual or company, rather they intend to be transparent, informative and educational. AIQS Information Papers are intended to provide information in such a way as to be equally informative to AIQS members and their clients.

CEO

The Australian Institute of Quantity Surveyors

Members and their clients can access these publications on the AIQS website at aiqs.com.au/technical-documents

GRANT WARNER

THE FUTURE OF QUANTITY SURVEYING

JULIE DELA CRUZ FAIQS, CQS

Associate Director, Mace

My personal vision is to help shape individuals, especially our members, in their professional growth so they can contribute to the organisation’s agenda to be the leading professional body spearheading digitalisation, sustainability, diversity, and inclusion. That our government and local organisations, along with other professional bodies, will drive standards, digitalisation, and sustainability to achieve carbon net zero in our respective countries.

On digitalisation, I envision that our quantity surveyors will not merely be doing the traditional quantity surveying role but will be well-rounded consultants at the forefront of 5D BIM and AI skills. This way, they can help increase efficiency and focus on the client’s experience in delivering projects

and utilising prescriptive data on cost and carbon emissions to contribute to the economic value of the project.

On sustainability, I envision our quantity surveyors to not only adhere to standards such as ICMS but to embed in their daily mindset and their DNA, the importance of reducing carbon by walking the talk to embody the love for nature. They should make it a habit to use carbon calculators to measure their carbon footprint and avoid materials that contribute to increasing carbon emissions.

On diversity and inclusion, I envision that there will be a balanced ratio of men and women working in construction, especially in the Middle East. In addition, leaders should pay attention to the value of being a diverse and inclusive organisation ensuring

each one, regardless of race, gender, sexual orientation, and education will feel valued and included. That true equity will apply to all regardless of social and group status and that old norms of misogynistic behaviours are not tolerated.

In summary, I imagine a world of the built environment where quantity surveyors are digitally enabled, conscious of protecting the environment, and happy in the workplace and community.

THE UNIVERSITY OF TASMANIA (UTAS) PROJECT

The University of Tasmania (UTAS) appointed Slattery partnering with local consultants, Exsto Management (now Slattery) to provide full cost planning services from masterplanning through to the delivery and operation of its Inveresk campus in Launceston, a significant part of the university’s $370m Northern Transformation Program. The Inveresk site offers the opportunity to create a campus that provides a Tasmanian feel and experience for students, academic and public community. The new precinct encompasses several new educational buildings, new student accommodation and significant landscaping, car parking and civil works comprising nine individual projects.

The Inveresk Library was the first new building of the UTAS Northern Transformation Program and is the Inveresk precinct’s centrepiece. Slattery managed the front-end cost management services from masterplanning stage through to tender that included the development of the procurement and contracting strategies. Designed by Wardle, the building includes significant mass structural timber, a feature sawtooth roof profile and the use of industrial materials to reference the vernacular of Inveresk. Set over three storeys, the building includes group and quiet study spaces, digital and print collections and resources, meeting spaces and classrooms, featured artworks and cultural objects including the Riawunna collection, a student kitchenette, parenting room and a café.

Slattery worked closely with UTAS to exceed their objective of achieving a minimum of 20% upfront embodied carbon reduction in all their major capital works projects. The exceeding of this target on Inveresk Library has

VISUAL FEATURE

resulted in an increase on the balance of the UTAS projects being increased to a minimum 30% upfront reduction; a target that the project team is well on track to achieve across all of the projects.

Sustainability remained at the forefront of the project’s design considerations which resulted in several strategies to mitigate carbon emissions including;

• high floor area efficiency ratios

• recycled gas pipelines for the building’s foundations

• Tasmanian timber throughout the structural and internal finishes

• low carbon concrete in structural and landscaping elements

• reuse of stored rainwater in amenities and landscape irrigation

• smart waste management system through the construction and operation phases, and

• solar initiatives maximising energy efficiency.

Slattery’s innovative Carbon Planning tools enabled the comprehensive assessment of various decisions and initiatives, providing valuable insights into carbon emissions and impacts to the cost plan. By leveraging this technology, Slattery advised UTAS and Wardle on strategies to minimise their carbon footprint while optimising cost-efficiency, fostering sustainable practices that align with their goals and values.

Now completed, the Inveresk Library has received positive media attention and industry recognition, including two state awards and one national award for educational and interior architecture by the Australian Institute of Architects in 2023.

VISUAL FEATURE

Slattery’s role on the UTAS Northern Transformation program of works is nearing completion with the final of the nine projects targeting a July 2024 completion date. This represents a 10-year relationship with UTAS that has seen all their projects achieve the upfront carbon reduction targets and final construction costs being within

1% of original budget. The knowledge developed with UTAS through the delivery of these projects is now being implemented by Slattery on the UTAS Southern Transformation Program of works with the even more aggressive targets being set in regard to the use of innovative and alternate building materials.

SLATTERY TEAM

• Peter O’Donoghue MAIQS, CQS –Project Director

• Tom Dean – Project Leader

• Ian Smart MAIQS, CQS – Quantity Surveyor

• David Parry – Quantity Surveyor

VISUAL FEATURE

RAPID RISE OF AI FOR AUSTRALIA’S CONSTRUCTION INDUSTRY TO HELP SOLVE CHALLENGES AND REDUCE COSTS

By Autodesk

Construction is a significant industry that plays a key role in Australia, and yet it is at a tipping point.

The construction industry employs over 1.3 million people across the country. But it still faces the challenges that were accelerated by the pandemic, including increased labour shortages, higher material costs, and global supply chain disruptions.

This means that leaders in the construction and engineering industries are having to seriously rethink their tools, workforce skills and how they engage with clients and contractors across their projects. This is particularly pivotal in the pre-construction phase when it is time to thoroughly assess, plan and mitigate any risks that may arise during the project.

There is a clear solution though, and smart firms are adopting it. Businesses are taking up technology – including AI – in greater numbers than ever before,

and they’re doing it to stay competitive in the current environment.

The second edition of our joint annual report with Deloitte, State of Digital Adoption in the Construction Industry 2024, has recently been released and it highlights some interesting findings.

The insights in the report are informed through a survey of 933 businesses from six markets – Japan, Singapore, Australia, India, Malaysia, and Hong Kong – and conversations with industry leaders.

THE EXPLOSION OF AI ONTO THE AGENDA

Generative AI has exploded onto the agenda of senior leaders with the rapid adoption of tools like ChatGPT, Midjourney and Github Copilot. No industry is immune from the transformative potential of this technology.

Generative AI means that a new project proposal doesn’t need to start from

scratch, instead leveraging material and pricing based on projects completed by the company with similar specifications.

In fact, generative AI is expected to become as pervasive in the construction and engineering industry as foundational technologies such as data analytics and mobile apps, with 94% of businesses across Asia Pacific now having plans to integrate AI and machine learning into their business.

BUSINESSES THAT TAP INTO TECHNOLOGY RECEIVE BIG REWARDS

Companies with high rates of digital adoption are seeing the impacts on project performance. Adopting one additional technology was found to lead to a 0.75% increase in the share of total projects delivered under budget and a 0.5% increase in the share of projects delivered on time, according to findings in the report.

The benefits extend to financial performance, too – additional technology is associated with a 1% increase in profit growth and a 1.4% increase in revenue growth over the past year across the Asia Pacific.

This means that for a business with $100 million in revenue and $20 million in profit, adopting an additional technology is associated with an increase in revenue of $1.4 million increase in annual profit.

The rewards of integrating technology are clear, however there are some barriers to adoption.

COST AND LACK OF DIGITAL SKILLS TWO PRIMARY BARRIERS TO TECHNOLOGY ADOPTION

In Australia, the cost of technology is the most common barrier to its adoption. This is in the broader context of the high inflation period seen recently, where cost

pressures in the construction industry’s supply chain are a significant challenge, according to the report.

Skills gaps have also been a major barrier to Australian businesses, with overall skill shortages reported in the construction industry and technical skills gaps reported by 76% of businesses. However, this is the lowest level of technical skill gap reported in the survey across the Asia Pacific region.

More broadly across the region, 42% of construction companies surveyed cited a lack of digital skills as a barrier to digital adoption.

However, Australian businesses that are implementing technologies are seeing strong benefits, with almost 80% of technologies being successful. For example, Coates, a major equipment rental company, uses its cloud-based ‘Coates Connect’ platform to offer realtime information to customers and managers on the location, use and status of equipment. This allows for higher utilisation rates and greater productivity.

KEY ACTIONS TO IMPROVE DIGITAL ADOPTION

It’s clear that businesses both want and need to improve digital adoption so that they can benefit from AI and the established and new technologies that are entering the scene.

Some of the key actions companies can take towards this important goal include:

1. Start Small and Pilot Projects

Companies can start small by piloting technology on selected projects and accounting for change management costs when scaling up to implement their chances of successful digital transformation. In fact, the first step to successfully implementing AI is

data standardisation and having an operational common data environment (CDE) for teams.

2. Choose Your Champions

By selecting champions of tech transformation in the business, motivation will be kept high and the vision in clear sight when implementing a new solution.

3. Track Success

There are a range of success measures that can be tracked when it comes to digital adoption. These can include things like employee use and satisfaction, as well as traditional metrics like efficiency and avoided costs.

4. Build a Digital Ecosystem

A digital ecosystem means having a group of collaborative partners and industry members as well as those within the company itself to support the digital journey and help to find the right solutions and best practices.

5. Check for Readiness

Ask: is your business AI-ready in terms of skills, data systems and architecture? Do you have a CDE in place that can provide a platform for technology expansion? This will give you a great roadmap to figure out where and how you can get started in the right direction towards digital transformation and receive the huge benefits technology can bring.

To find out more and check out all the findings, the report The State of Digital Adoption in the Construction Industry 2024, can be downloaded here.

This is a paid advertorial by AIQS Corporate Partner, Autodesk.

DIVERSITY AND INCLUSION IN THE AUSTRALIAN CONSTRUCTION INDUSTRY

By Leila Khanjaninejad and Sara Wilkinson from the University of Technology, Sydney

WHAT’S THE PROBLEM?

Ideally, any industry or profession would optimise its performance partly through representing the national population it serves. This diversity would promote a greater understanding of projects, and the people impacted and/or served by the project. Furthermore, a diverse, representative workforce would ensure organisations would be able to serve clients better with staff who have greater empathy and understanding of their clients’ needs and capacities. That’s the ideal, but how diverse and inclusive are we?

“…Achieving comprehensive D&I remains a significant challenge.”

The Australian construction industry is one of the most culturally diverse industries, with over half of its workforce born overseas; a sharp contrast to the national average of about 27% (ABS, 2021). This diversity also encompasses gender, disability, sexual orientation, and age. Recognising the undeniable shift towards greater diversity in the workforce, coupled with the untapped

benefits of diversity and inclusion (D&I), the Australian construction industry is actively exploring strategies to enhance its inclusivity and embrace this diversity.

However, despite the implementation of formal policies and initiatives aimed at addressing D&I management in the construction sector, achieving comprehensive D&I remains a significant challenge. This is exacerbated in some respects by the absence of standardised benchmarks and clearly defined processes for assessing the efficacy of these programs, which leaves organisations to rely on self-assessment methods.

1 Australian Bureau of Statistics 2021, ‘Cultural diversity of Australia’, ABS, <abs.gov.au/articles/cultural-diversity-australia>.

THE BENEFITS OF DIVERSITY AND INCLUSION

Five major benefits of increasing diversity and inclusion in an organisation include:

1. BETTER MORALE

When employees feel included, their morale and enthusiasm are enhanced. Morale reflects the mental and emotional condition of the workplace and the employees’ beliefs in the organisation and its goals. Job satisfaction declines when morale is low and can impact home life too. D&I training includes

implementation of coping mechanisms, resilience tools and policies to support staff to boost trust and to maintain a safe, healthy workplace.

2. INCREASED PRODUCTIVITY

Improved staff morale is related to better productivity, as greater buy-in to the company mission and vision results in greater inputs of time and energy. D&I advisors can act as a bridge to voice employees’ concerns to management, enabling positive actions to be taken, which can positively impact productivity and quality of work.

3. HIGHER SOCIAL CONSCIOUSNESS

Underlying morale and productivity is the sense of responsibility managers and employees feel for each other within an organisation. This ‘sense of belonging’ has a positive impact on people. D&I training, which promotes care, compassion, and connectivity, can help employees know that they are appreciated and a valued part of ‘the whole’. Compared to using financial incentives to increase output, this team-centric approach fosters enduring commitment.

DIVERSITY, EQUITY AND INCLUSION

4. POSITIVE PARADIGM SHIFT

Society is shifting its views on race relations, inclusion, and diversity. Previous practices were inadequate at best. A genuinely inclusive workplace encourages authentic and actionable discourse and collaboration.

5. BETTER BOTTOM LINE

With better morale, productivity, social consciousness, and a positive paradigm shift, the financial health and performance of a company are positive. People perform better when they are connected and included. Research shows that organisations with happy, healthy staff are more likely to increase revenue and profit.

“…How do professional practices and businesses increase inclusivity and diversity in their workforce?”

THE CHALLENGES WE FACE

The Australian construction industry faces numerous challenges in building a diverse workforce that is reflective of the nation’s population. Furthermore, the solutions to these challenges are complex. Existing literature predominantly concentrates on identifying and elucidating critical issues such as inequality, bias and discrimination, attraction, and retention of under-represented groups, including women, LGBTQ+, people with disability, and the dearth of diversity within the construction industry.

Given the barriers, how do professional practices and businesses increase inclusivity and diversity in their workforce?

There remains a pressing need for a proactive and more rigorous adoption of evidence-based strategies to support the industry in its efforts to improve workforce D&I. Research has identified the issues minority groups face but there is a need to focus on identifying ways to assess and mitigate them. The challenge lies in the uncertainty surrounding the selection of appropriate metrics and indicators for assessing and enhancing workforce D&I within the organisational setting, as well as the degree of influence each indicator holds.

Uncertainty in measuring the D&I program effectiveness affects various stakeholders, mainly:

• Construction companies and industry associations: It creates assessment challenges, potentially costly in terms of time and resources, hindering industry-wide progress in social sustainability and D&I.

• Underrepresented groups: Lack of measurements prolongs ineffective programs, dissuading their participation in construction careers, worsening labour shortages, and raising costs.

CLOSING THE GAP

We need to agree on a framework to facilitate the assessment of D&I programs in the Australian construction industry. An agreed industry framework will enable companies to evaluate their D&I within their operations against a standardised benchmark and decide whether to focus on one specific aspect or address multiple facets of D&I.

This approach will yield advantages and benefits for all parties involved in the construction industry.

Academics at UTS are working on a project to establish metrics and guidelines that empower the construction industry and its organisations to effectively assess the success of their D&I programs. With these metrics in place, it will be possible to measure the impact of D&I initiatives across our industry. This not only enables organisations to pinpoint their areas of strength but also facilitates the identification of areas for improvement and allows us to share best practices, thereby accelerating the collective progress towards achieving greater diversity and a more inclusive workplace environment.

We will be using a mixed-methods approach, combining qualitative and quantitative methods to conduct multi-phased research. This will result in the identification of key indicators and metrics for assessing D&I program success. These metrics will develop benchmarking tools for performance evaluation against industry standards, which can be followed by the establishment of a feedback loop, an iterative process for testing the effectiveness of the metrics, and the creation of training materials for implementing these metrics. If you are interested in participating in the project, please contact the authors.

This article was written by Leila Khanjaninejad from the TD School & Sara Wilkinson from the School of Built Environment, University of Technology, Sydney.

WHAT DO YOU ENJOY MOST ABOUT BEING A QUANTITY SURVEYING PROFESSIONAL?

THYAGI FERNANDO MAIQS, CQS Associate, Muller Partnership

I believe it is the most versatile profession in the construction industry. One of the aspects that I find most appealing about quantity surveying is the opportunity to work on diverse and challenging projects. From residential developments to large-scale projects, each project presents its unique set of complexities and learning opportunities.

Being hands-on in this profession allows me to witness live projects firsthand, gaining insight into construction methodologies, building design, and construction processes tailored to specific locations. Moreover, the chance to travel to project sites further enriches my knowledge and experience in the field.

Another rewarding aspect of quantity surveying is the sense of job satisfaction derived from making a positive impact on the built environment and society. By ensuring that projects remain within budget constraints, I contribute to the successful completion of developments while fostering lasting relationships with clients.

This profession also offers significant room for career progression and development, with opportunities to specialise in various areas such as contract administration, cost planning, tax depreciation, and dispute resolution. Pursuing professional accreditation such as AIQS enhances ones employability and industry recognition, promoting both personal growth and advancement within the field.

The quantity surveying profession has afforded me the flexibility I need as a mother which is a significant advantage. Having the flexibility to work from home while effectively managing my responsibilities is paramount. This profession enables me to adapt my work environment to accommodate personal needs without compromising professional commitments.

My love for quantity surveying stems from the ever-evolving nature of the work, which presents new challenges and learning opportunities on a daily basis. The dynamic and demanding nature of the profession continuously pushes me to enhance my skills and capabilities, ultimately allowing me to progress and excel in my career.

Q&A – WOMEN IN QUANTITY SURVEYING

LAUREN WILSON NZIQS (AFFIL.)

Quantity Surveyor, Latham Construction

Quantity Surveying provides excellent opportunities for women in a traditionally male-dominated industry. With careers in consultancy, main contracting, specialist trades, and many more, there is a wide range of options to suit our personalities and comfort levels.

I took up QS study with the approach of, ‘If boys can do it then so can I’. What I didn’t appreciate initially was the level of support that’s available for women in Quantity Surveying. Over the last seven years, I have found advocates, supporters and mentors in all corners of the industry. A positive discovery has been that many of my greatest supporters are men, within both NZIQS and my company.

My Site Managers keep an eye out for me, ensure I am listened to during meetings, and seek my

input on projects. They have often redirected contractors to me when those contractors have sought to discuss commercial items ‘among the men’. Equally, I have subcontractors who notice when I have been left off the email chains and will ensure I am included. I’m blown away by the level of awareness that is demonstrated daily by so many people.

It’s still a tough industry with long hours, high stress, and tight deadlines. I wouldn’t be able to do it without the help of family for childcare, life admin, and mental support. Many of my friends have left the industry in the last few years due to the long hours and lack of flexibility, which is a huge loss. However, it’s encouraging to see many companies working to better support women in their teams.

I recently had to explain to a male colleague that site office facilities on a new project need more than urinals. Previously, we’ve had discussions to highlight that women should be given a uniform that fits instead of men’s sizes and that the budget for safety boots needs to reflect the difference in cost. Women shouldn’t have to buy men’s boots just to meet the budget.

My priority is to continue approaching these sorts of things positively. A light joke goes a long way and collectively, we can build a stronger and more welcoming industry for more women to excel.

COST CONSIDERATIONS FOR THE QUANTITY SURVEYOR ON TIMBER STRUCTURES

By WoodSolutions

“Get the contractors in early.” This is one of the best pieces of advice we always hear when we talk to teams who have successfully delivered low- to mid-rise timber projects. Getting in touch with the product suppliers early and talking to your team of experts (like engineers and builders) from the start can cut down on surprises in costs down the road. Building an expert team early on also reduces risks of misinformation or surprises in the project timeline.

After you’ve created an expert team, what are the next steps to consider in costing a project? WoodSolutions has compiled a comprehensive list of considerations specifically tailored to assist the quantity surveyor in accurately costing low- to mid-rise timber buildings.

DESIGN DEVELOPMENT AND SHOP DRAWINGS

Contacting suppliers and manufacturers early on gives you ample opportunity to determine who exactly will be responsible for designs. Talking about these responsibilities with the manufacturers upfront helps address any design issues and you can discuss certifications and standards. Especially if your product is coming from overseas, ask your supplier if they have worked to the Australian Standard before and ask if they have compliance experience.

This is also a great opportunity to discuss shop drawings and enquire if they are included in their quotes. Shop drawings play a crucial role in the construction process by providing detailed guidance for fabricators, subcontractors, and installers, helping to ensure that the final built environment meets the design intent and performance requirements of the project.

COSTING TIMBER

If shop drawings are included, will they include loading plans to assist your teams on-site?

Creating a collaborative environment here between professionals and connecting them with the manufacturers can make for a smoother experience for your project.

MATERIAL COST AND CONNECTIONS

Material cost is an obvious one to consider and often there will be misinformation in the market about timber and engineered wood pricing. Speaking to experts and suppliers directly eliminates the risk of receiving incorrect information and can shed light on the many cost-saving benefits of using wood products.

Getting quotes from suppliers early on provides a great deal of guidance on the products you are after as well as giving you specific grading and standards certification at the beginning of the project.

You should also consider provisional pricing and discuss your options with the companies who provide quotes. Are you considering imported materials? If you don’t discuss supply upfront, there is the potential to incur greater cost down the track due to time delays or insufficient supply.

When you are working with timber, connections are a major player in the project. Always check with manufacturers to see which connections are compatible with their product offering.

Ask if connections will be supplied pre-assembled and if the product they supply will arrive at your site machined and ready for your connections to be installed.

COSTING TIMBER

DELIVERY, COVERINGS, AND STORAGE

Talk to suppliers early about how they plan for delivery. Will the elements arrive in a shipping container? Find out if the product will arrive on-site protected or if you need to identify storage solutions. Will the elements arrive with protective coverings that also allow the timber to breathe while still protecting it from the elements? Many suppliers deliver elements packed in the order of installation for ease of construction. If your supplier doesn’t offer that option, you will need to make further considerations for this in your planning and costing.

FINISHES, COATINGS, AND TREATMENTS

An important visual aspect of your design will be the timber’s finish. We recommend requesting samples when they are available so that you can visualise which finishes are offered by your supplier. The timber finish plays a key role in the aesthetic and design of the project, so it is a good idea to start early and be specific when considering what the resulting timber will look like when tenants move in. It is also beneficial to consider what each finish requires in maintenance for the life of your project. Thinking ahead can result in savings down the road.

When it comes to timber treatments, ask your supplier – whether they are in Australia or in Europe, what they offer in terms of the Australian Standards. Mass timber elements can be treated for issues like termites just like traditional stick frame houses would be.

Be sure to talk to companies about coatings that can protect your products from the ingress of water and even UV damage. This is especially important in elements that will be left exposed. Avoid issues upfront by preparing with longlasting coatings.

DUTIES, TERMS, AND WARRANTIES

You always want to discuss liabilities, warranties, and durability with your supplier.

Find out what the processes and procedures are for correcting any issues with the product, should they arise, during your project.

It is also best to find out early on if companies want payment upfront or if they offer terms. Do you need to consider any foreign currency costs? If so, talking to professionals about these considerations early is best practice. If you are getting your products from overseas, it is important to dive into duties early on to avoid unexpected costs for imports.

Take this opportunity to discuss liabilities now as well. Where does the buyer and seller liability end and begin in these processes?

WHOLE PROJECT EVALUATION

Upfront and detailed coordination of building services means that all considerations can be addressed early on. When comparing costs, it is essential to take an integrated approach, considering the entire project scope. While mass timber materials may initially appear more costly, a comprehensive evaluation of wholeof-project expenses often reveals their competitiveness. The value of timber goes beyond upfront costs, it offers numerous advantages, including:

• facilitating fast installation

• minimising onsite risk, noise, and waste, and

• providing benefits to the wellbeing of building occupants and to the environment as a low carbon material.

DELAY ANALYSIS METHODOLOGIES

By Paul McArd FAIQS, CQS and Andrew McKenna

A lot has already been written about various delay analysis methodologies. The purpose of this article is to summarise the pros and cons of the most-commonly accepted methodologies and highlight where they might best be used.

Regardless of the delay analysis methodology selected and whether it is mentioned in the Society of Construction Law (SCL), the analysis should be based on common sense and substantiating evidence, as exemplified in the ruling of Justice Hammerschlag in White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166.

AS-PLANNED IMPACTED

Delay analysis is the assessment of a causal event (the alleged delay) over time. The impact of the delay is measured against a program. The program(s) relied upon in the analysis depends on the delay analysis methodology selected.

Notwithstanding the delay analysis methodology selected, the delay(s) to be analysed must satisfy the three-part chain of causation, whereby:

1. A delay event/causal event has occurred

2. Progress is delayed, and

3. Completion is (or is likely to be) delayed.

Almost as simple as as-planned v as-built. A prospective methodology that relies on impacting the originally planned sequence of works (the ‘baseline’ plan) with the delay event(s). Ideally, this program was approved commensurate with the commencement of the works.

PROS CONS

Quick to produce

Depending on the complexity of the program, easy to understand

Demonstrates the criticality (the critical path) of the delay event(s) on the original, planned sequence

Demonstrates causation

Does not rely on as-built information, in case as-built information is not available

Useful as a ‘litmus’ test, prior to a further, more detailed analysis.

The as-planned program rarely reflects what actually happened

The analysis is hypothetical and prospective, therefore delay cannot be used to determine cost

The baseline might contain errors

Does not consider progress or concurrency

Almost no judicial support. Refer: Great Eastern Hotel v Laing Construction Ltd ([2005] EWHC 181.

DELAYS

REQUIRES

An as-planned program with accurate logic links between activities and a critical path that reacts to change

The baseline program should still be relevant at the time of the delay event i.e., nothing has significantly changed (other than the delaying events)

The quantification of the duration of the delay to be ‘spliced’ between the respective impacted program activities.

AS-PLANNED V AS-BUILT

A simplistic, retrospective methodology, which in its simplest form compares the as-built program to the planned (baseline) program. Usually used to substantiate ‘global’ claims, whereby the various heads of claim are not independently assessed, rather they are bundled into a single claim.

PROS CONS

Quick to produce in its simplest form i.e., comparing the as-planned program to a single as-built

Requires minimal program updates i.e., frequently updated programs are not available

Easy to understand if the project is simple and there are very few delays

The analysis can be broken down into ‘windows’ or time slices for clarity, such as the time-slice windows analysis methodology.

The baseline and as-built programs must be very similar

Fails to consider concurrency in its simplest form

The ‘as-built’ program is rarely dynamic with a historical critical path i.e., only start and finish dates are recorded

Causation is generally inferred, not proven

Some judicial support, especially in the form of a time-slice windows analysis (as-built program with critical path).

Refer: V601 Developments Pty Ltd v Probuild Construction Pty Ltd [2021] VSC 846.

REQUIRES

An accepted, simple, as-planned program

An as-built program that is very similar, in terms of key sequence, to as-planned program. Does not need to be a program with a critical path, although much more convincing if it is

A very convincing narrative or a variation of the methodology that uses timeslices and a critical path that has been determined contemporaneously.

TIME IMPACT

A prospective analysis demonstrates the causality of the delaying event, at the time of the delaying event, using a current project program.

PROS CONS

It demonstrates causation at the time of the delay

Ideally used to demonstrate causation during the project

Can be used to demonstrate delays (convincingly) after the completion of the project by retrospectively impacting the baseline program contemporaneous program updates

Relies on established facts

Best method of analysis during the project

The chain of causation is satisfied

Allows for changes to logic, durations, and the critical path

Progress and concurrency are considered.

Costly and slow to produce, especially if impacting the baseline retrospectively (post-project completion)

Requires good supporting, contemporaneous records

Being a prospective form of analysis, it might not demonstrate the precise, actual delay to completion

Some concerns of its suitability in demonstrating delay after the fact when it is a prospective form of analysis.

DELAYS

REQUIRES

Good as-built records

Regularly updated programs accompanied by supporting change management documents

Dynamic programs that are responsive to change i.e., a ‘real’ as-built, not simply indicative start and finish dates of completed activities.

AS-BUILT BUT FOR

Also referred to as a “collapsed as-built”, this methodology is the most difficult to prepare. The activities associated with the delay events (Fragnet) are removed from the updated as-built program. The impact of the respective delay event is established by determining the difference between the impact on critical key dates before and after the respective fragnet is removed.

PROS CONS

Analyses the effect of delay(s) on actual completion

Requires concise and documented asbuilt logic

Relies on verifiable as-built data May require several iterations to demonstrate the employer and contractor delay events

Judicial acceptance

Each delay is clearly identified in a descending chronological order

Excellent for proving prolongation costs, as the period of each delay is known, and each will have their own specific associated costs

Typically, only actual costs/damages can be claimed and this method links events to their actual contribution to prolongation.

Looking ‘backwards’ at what happened can be confusing

Difficult to produce, especially if a ‘running’ as-built program has not been maintained i.e., very difficult to define logic, when it is apparent that either the logic does not exist or records are not available to substantiate the changes to the logic in the as-built program.

REQUIRES

A dynamic as-built CPM program that has been contemporaneously updated and the changes, including logic, documented Requires as-built logic that can be very difficult to prove after the fact.

WINDOW ANALYSIS

A window analysis is sometimes (erroneously) used to describe a time-impact analysis. Rather it means applying any method of delay analysis to several windows or time-slices between two dates rather than the whole of the works.

It can also mean a variation of the asplanned v as-built (time-slice window analysis), which uses an as-built critical path over several windows of time.

This article was written by Paul McArd FAIQS, CQS and Andrew McKenna from Accura Consulting.

UNDERSTANDING ESTIMATED DEVELOPMENT COST (EDC) IN NSW

By Sarah Bozionelos

ESTIMATED DEVELOPMENT COST

As a quantity surveying professional, I’ve witnessed first-hand the transformative power of industry terminology. On 4th March 2024, the landscape of construction in New South Wales shifted as Estimated Development Cost (EDC) replaced the familiar Capital Investment Value (CIV) terminology under the Environmental Planning And Assessment Regulation 2021.

While not all governing bodies have fully embraced this change, quantity surveyors have swiftly adopted EDC, aligning with the updated guidelines provided by the Australian Institute of Quantity Surveyors (AIQS). Join me on a journey through the impact of Estimated Development Cost on quantity surveying reporting and the nuanced changes it brings to our profession.

The transition to EDC terminology has sent ripples through quantity surveying reporting practices, reshaping the way we approach project assessments and evaluations. Two critical types of reports, Detailed Cost Reports for Council submission, and Employment Estimates for Fair Trading submission, have undergone significant revisions in response to this change.

But don’t worry! It may seem more daunting than it actually is. Remember, at its core, the objective of the report remains unchanged; only the terminology has shifted. As for the other changes, leave those to us to clarify in detail below.

1. REFORMS IN DETAILED COST REPORTS

The evolution of Detailed Cost Reports reflects the dynamic nature of our profession. We now operate within a tiered framework, categorising projects based on their EDC.

For projects under $3 million, nonAIQS-member quantity surveyors can provide elemental summary reports, while larger endeavours exceeding $3 million require the expertise of AIQS Certified Quantity Surveyors (CQS), providing detailed elemental breakdowns, inclusive of GST.

The intricacies of State Significant Development (SSD) and State Significant Infrastructure (SSI) projects further stratified based on cost thresholds (>$75 million within Sydney metro and >$35 million outside of Sydney metro), also require detailed elemental breakdowns, excluding GST. These reports can only be prepared by a CQS (or equivalent registered quantity surveyor with a professional body) residing in NSW.

2. EVOLUTION OF CIV AND EMPLOYMENT ESTIMATES

The transition to EDC terminology has breathed new life into our CIV and Employment Estimates submitted to Fair Trading. As we adapt to this change, we find ourselves navigating familiar territory with a fresh perspective.

This revamped report format mirrors the revised Detailed Cost Reports for SSD category projects while introducing a crucial new component: employment estimates. These projections forecast the retention and creation of jobs during both construction and operational phases, adding depth to our project evaluations and planning processes.

WELCOME CHANGE

The transition to EDC nomenclature underscores the importance of transparency, accuracy, and accountability within the quantity

surveying profession and the demands on the ever-evolving and complicated nature of construction. AIQS has released guidance on report requirements, aiming to not only streamline, but to establish reporting standards. For so long, we have been left to our own devices enabling unqualified or under-qualified persons to carry out services, driving price, undercutting and undermining the reputation of the profession and our capacity and value as quantity surveyors. Finally, we have a chance to shine at a stage of reporting that is usually underestimated. As industry standards evolve, the quantity surveying profession is given the opportunity to become more empowered, more professional, and more sought after.

As quantity surveyors, we stand at the forefront of change, embracing the evolution of our profession with open arms. The transition from CIV to EDC terminology marks not just a shift in language, but a testament to our scope depth that is not widely known outside of our own profession.

Together, let us navigate this transition with confidence, knowing that our profession’s future is bright and filled with endless possibilities.

This article was written by Sarah Bozionelos from Archi-QS.

MANAGING YOUR RISKS AS A CONSULTANT

By Greg Hansen, Austbrokers Countrywide

The transition from an employee to an independent consultant can be an exciting one; new opportunities, independence, and control over your working future. But it can also be a daunting one; new risks, signing contracts, personal accountability and personal liability. A range of new questions arise:

• Can I be sued?

• Do I fully understand what I am signing?

• What happens if I get sick?

• Is my house safe?

• How can I protect myself?

• What about when I retire?

Insurance is one of the key pillars of risk management, allowing a consultant to transfer their risk away from personal liability to their insurer.

With this in mind, the primary value to the consultant is protection. This becomes even more important in consulting practices, especially for sole traders or small businesses, where it is not just the business that needs protection but also the personal assets of the individual consultants.

In addition to your own protection, more and more frequently, insurance is also becoming a commercial reality. In an increasingly litigious society, many businesses are quite staunch in their insurance requirements for all third parties they engage and will not even allow you on their site without proof of insurance.

“To operate without insurance coverage is to expose your clients to unnecessary risk…”

So, irrespective of your personal view of your risk profile, to be in business and win contracts there is an underlying commercial reality that insurance is going to be a requisite item.

As a profession, however, it is prudent for all businesses to carry insurance. To operate without insurance coverage is to expose your clients to unnecessary risk, which may deter them from using your services. As a consultant, your utilisation of appropriate insurance offers risk management and protection to your client as well. In the event of a claim arising, both you and your client would much prefer an insurer was involved and able to settle a claim, rather than civil litigation that may involve the possibility of having to sell your house to pay for the loss you allegedly incurred.

INSURANCE

A profession as a whole having to carry insurance adds a level of accountability and credibility, to ensure the protection of the client or consumer, and this is why a range of consulting professionals (including quantity surveyors in some states) have insurance as a compulsory part of their licensing regime.

WHAT INSURANCE?

Particularly when starting a new business, keeping costs down is always important, so understanding the priority insurances to consider will assist in best allocating your expenditure. Insurance for consultants come under two key areas:

1. Third-party covers that are designed to indemnify someone else if you cause them to suffer a loss (e.g. design errors)

2. First-party covers that are designed to indemnify you if you suffer a loss (e.g. someone steals your laptop).

Third-party covers are often mandatory in consulting contracts and the products that are key to a consultant’s business include:

• Professional Indemnity – the key product; your advice is your core business and therefore your core risk

• Public Liability – required to be onsite for accidental bodily injury or property damage.

First-party covers usually are not large or complex as consulting businesses are generally portable and asset-light, but some key areas for a consultant to be aware of as the most frequently required insurance products are:

• Portable Property – can include laptops and cameras, as well as surveying equipment

• Corporate Travel – both interstate and overseas, includes medical as well as luggage

• Workers Compensation – statutory product for injury to employees

• Office Insurance – if you do have a static location that you work from

• Income Protection – consultants do not get sick leave, so this becomes more important!

“Will your Professional Indemnity Insurance offer cover when it counts?”

SIGNING CONTRACTS

Will your Professional Indemnity Insurance offer cover when it counts? This can all boil down to what you sign. Insurance does not offer cover for any assumed or contractual liabilities where you may sign up for additional risks above and beyond common law provisions – and to be fair to the insurance industry, that is not an unreasonable stance to take.

There are some key areas of risk to keep a look out for where businesses attempt to create one-sided contracts that pass off a disproportionate level of risk onto the consultant:

• Any contract that assumes ‘all’ risk and ‘all’ losses

• Waiving subrogation rights

• Waiving proportionate liability rights/contracting out of the Civil Liability Act

• Hold Harmless clauses

• A failure to limit liability to the actions of the consultant

• Clauses requiring work to be completed to a ‘high’ or the ‘best’ standard

• Warranty and Guarantee clauses.

Not only are these contracts not fair or equitable between a consultant and their client, but they also create a significant commercial risk to the consultant. If a breach of contract is alleged above and beyond what your insurance may cover, the additional liability goes back to the consultant directly and will be coming out of their own pocket.

Things like hold harmless agreements or waiving subrogation or proportionate liability rights all prejudice your insurer as they cannot pursue any contributory negligence, which will impact the extent to which your insurance policy can adequately protect you. Consultants often provide a part of a much larger contract with many parties involved, so the difference between you only being required to pay for your percentage of the loss versus being required to pay for the entire loss can easily be tenfold.

When reviewing a contract for potential conflicts with insurance, it is always advisable that the consultant also seek independent legal advice as to the actual interpretation and application of the contract terms.

SUB-CONTRACTING AND INSURANCE

If you are being engaged on a subcontract basis to work with your client jointly on a larger project, never assume you are being covered by their insurance.

Their insurance will likely protect them for the work you are doing on their behalf, but it may not extend to cover you personally.

The risk is not that you will be sued by the end client (as they will likely engage the principal contractor), but that the principal contractor’s insurer will bring you into a claim via a subrogation action where they believe you have contributed to the loss. Insurances can extend to cover sub-contractors, but if your client offers this, always seek confirmation in writing.

“…Always seek confirmation in writing.”

A common misconception is that if your client does not require you to have insurance, this is because you are being protected by their insurance – this is rarely the case so beware!

Turning this scenario around, if you need to engage a sub-contractor to assist you on a large contract or contribute additional services outside of your area of expertise, always be aware of the risks associated. Your contract with your client may require you to guarantee that any sub-contractors you use have the same level of insurance as you, and to mitigate any risk to your business, you should seek evidence of your sub-contractor’s insurance policies just as you are required to evidence your own.

When a large loss arises, courts can often look to whoever has insurance in place to pay for a loss, so ensuring that your sub-contractors carry their own insurance is a critical component of your risk management strategy, as you do not want to be left having to pay for the loss caused by someone else.

RETIREMENT RISKS?

A common question is, “Once I stop working, can all my insurance be cancelled?” The correct answer is that most policies can, however Professional Indemnity cannot.

Professional Indemnity works on a ‘claims made’ basis, which means you require active insurance at the time the claim is made as opposed to when you gave the advice. This differs from most other insurances which work on an ‘occurrence’ basis and your insurance just needs to be active when an event occurs. In the situation that you cease consulting (whether through returning to employment, retiring or selling the business), consideration has to be given to the potential longevity of the risk attached to your advice.

Businesses are aware of this too, though; they also know Professional Indemnity works on a claims-made basis and consulting agreements will not only say that Professional Indemnity is required but will also stipulate a duration after the completion of the contract that cover must be maintained for. This duration is often between three and seven years (using the statute of limitations as a benchmark), however, durations as long as 10 years have been seen in client contracts. This is a highly important planning piece, especially if you only intend on doing one or two short-term contracts, as you may be signing up for a requirement to purchase a minimum of four years’ cover. If you are planning on costing insurance into your fees for the job, or if you are planning on ceasing consulting soon be especially wary of these clauses and factor in added costs accordingly.

“Thankfully, the insurance industry does handle these risks well.”

Thankfully, the insurance industry does handle these risks well.

When no active advice is being given and the cover is only required for past work, insurers will offer discounted coverage to reflect the decreasing risk and will also allow clients to purchase a single policy that runs for multiple years – an especially helpful offering if you are selling your business as you will have access to a cash flow to fund the multiple year coverage.

MANAGING YOUR RISK

As a consultant, clients will engage you to offer them a specialist service they cannot do themselves. Insurance is no different. There are too many areas that can cause issues to consider arranging your own insurance as being effective risk management.

Austbrokers Countrywide can arrange appropriate insurance policies that cover your business activities and explain where insurance is appropriate. If you would like to obtain any advice on your individual needs do not hesitate to contact us at info@abcountrywide.com.au

This is a paid advertorial written by Greg Hansen, Manager – Professional Risks at Austbrokers Countrywide.

CAN THE HOUSING CRISIS SHAPE A BETTER FUTURE?

By Fraser Main FAIQS, CQS

Housing is fundamental to every Australian’s health, wellbeing, security and sense of community – so it’s critical and urgent that all parts of the complex, interconnected property sector tackle the housing problem fast.

“Whether renting or owning, we all need a place to call home.”

Solutions to the current housing crisis will not be solved by looking at how we did things in the past – and our responses will shape communities for generations.

To achieve a range of appropriate housing options with optimal community outcomes, developers and governments should look for progressive, future-focused professional support to de-risk delivery, optimise long-term value, and manage assets and facilities effectively across their longest possible lifecycle.

Whether renting or owning, we all need a place to call home. As the population grows, we’ll continue to need more dwellings, so the first challenge is supply. This comes with an opportunity: in addressing supply, we have a chance to look to the future and create the kinds of housing that will better suit the changing needs and expectations of our diverse communities.

WHO HAS THE POWER TO DRIVE STRATEGY AND SUPPLY?

Governments hold many levers in the housing sector. The federal government controls the population; state governments control planning rules and government services; and local governments implement planning and processes in their area. It’s natural, then, that we look to government for solutions – but greater alignment and coordination are needed among all levels of government to accelerate real change.

The primary task of governments must be to create an environment that can increase supply in the right places at the right time and price (a marketbased price, not any price),

“Governments can help catalyse the private sector’s contribution by creating an environment for [it] to operate efficiently.”

and crucially, to ensure the infrastructure and services are in place for liveable precincts and thriving, diverse communities. This means getting on with housing and infrastructure in tandem – actioning whatever can be built most efficiently.

Despite the power of governments to move the needle, the private sector will undoubtedly play an enormous role – particularly large corporate asset managers, financiers, and investors. Governments can help catalyse the private sector’s contribution by creating an environment for the private sector to operate efficiently. Government can support the private sector through planning credits and other measures that offer more carrots and less stick to incentivise risk-taking at a reasonable margin. The government can then step in to fill any gaps that the private sector is unwilling or unable to fund. This will include opening up their property assets to the private sector to develop and operate.

More flexibility in planning and permitting will also help developers with large portfolios to be more nimble and get projects up faster. By allocating flexible ‘in-principle’ portfolio-wide permits, developers will have a greater pool of options across their sites, with opportunities to harness the highest and best uses for particular sites while still delivering on government priorities.

HOUSING IS AN INTERCONNECTED, DYNAMIC SYSTEM – WITH OPPORTUNITIES FOR CHANGE

A crucial question is whether we still want people to be able to own a home or whether Australia’s housing culture needs to shift towards other models such as a rental model that is structured and managed to provide tenants more security and stability.

If we do want home ownership to remain part of ‘the Australian way’, we’ll need innovation to enable more young people to enter the market. Shared equity is a start, but there are other opportunities, such as rent-to-buy and co-living, established through a professional management model but embedded by the occupants. More of these models are emerging and have the potential to create a new level of community.

“Education will be needed to help residents of inner and middle-ring suburbs accept density as good for everyone.”

If home ownership is no longer the primary goal, the focus needs to be on incentivising enough supply to maintain affordable rents and a spread of well-managed options for all market segments.

The housing debate tends to focus on young people and growing families, but it’s vital to consider other parts of the complex dynamic, such as students and older Australians.

There’s a cycle of housing that creates supply if it moves smoothly, but blockages in the system will create problems for the market as a whole. These blockages also hinder the delivery of services and other social infrastructure.

Developing enough purpose-built student accommodation is a highly efficient strategy that will alleviate pressure on the rental market while providing living options appropriate to students’ education and social development.

At the other end of the spectrum, our nation’s Baby Boomers will soon need to downsize into housing that they can maintain, or move into purpose-built residential facilities that provide a pathway from independence to higher levels of care when needed.

Crucially, governments should consider measures to enable older Australians to continue to live in their local area if they choose, so that they can continue to enjoy the benefits of the community and services they know and value.

Another important factor in solving the housing crisis in cities is density –but it’s contentious. Education will be needed to help residents of inner and middle-ring suburbs accept density as good for everyone.

These aspects of housing are inextricably interconnected, and we all have a role to play in enabling the natural flow and maximise supply where and when it is needed. Together, we can plan and build the homes Australians need, want and deserve.

This article was written by Fraser Main FAIQS, CQS from WT Australia.

BUILDING BRIDGES, NOT BARRIERS: CONQUERING THE COLLABORATION CONUNDRUM IN CONSTRUCTION

By Ian Moss from Payapps

The construction industry is built on collaboration. A symphony of construction professionals, including architects, engineers, project managers, quantity surveyors, contract administrators, and subcontractors, working harmoniously to bring construction projects from concept to completion. Yet, an alarming paradox exists: disputes across the supply chain appear to be rampant. They lurk in the shadows, threatening to derail even the most well-planned projects.

Payapps’ 2024 research report, “Building the Future: Navigating Challenges and Opportunities for Quantity Surveyors and Contract Administrators,” surveyed over 1,000 professionals across five countries. The extensive survey aimed to understand the dynamics of job satisfaction, productivity, financial management effectiveness, collaboration dynamics, and technology adoption among quantity surveyors and contract administrators.

The research findings showed over half of quantity surveyors and contract administrators grapple with up to five weekly supply chain disputes, while 38% face an even higher frequency of disputes. These conflicts, often stemming from miscommunication, misaligned expectations, and payment delays, cast a long shadow over project success, with 54% surveyed saying disputes with progress claims often impact project timelines.

One in two quantity surveyors and contract administrators surveyed have SIX or MORE DISPUTES with subcontractors weekly.

UNMASKING THE COLLABORATION CONUNDRUM

Collaboration is the cornerstone of construction, yet several key factors contribute to its breakdown:

1. Transparency Deficits:

Open communication and real-time project information are essential for building stakeholder trust and alignment. However, many construction projects still operate in silos, with critical information hidden from view. This lack of transparency breeds suspicion and creates a fertile ground for misunderstandings to escalate into disputes.

2. Communication Gaps:

Disparate communication channels, such as emails, phone calls, and physical paperwork, create fragmented information flows. Without a centralised platform, crucial details can get lost in the shuffle, leading to delays, errors, and conflicting instructions. This communication breakdown can quickly escalate into disputes, especially when subcontractors feel they are not heard, or their concerns are not addressed.

3. Misaligned Objectives:

Construction projects involve a diverse range of stakeholders, each with their own priorities and goals.

While the central project team may prioritise completing the project on time and within budget, subcontractors might focus on maximising their profits and securing timely payments. These divergent objectives can create friction and conflict, especially if there is a lack of clarity around contractual obligations and payment terms.

4. Manual Processes and Lack of a Single Source of Truth:

Manual processes and lack of visibility into the supply chain are significant contributors to disputes and financial strain for construction companies. With 26% of quantity surveyors and contract administrators surveyed relying on outdated methods like spreadsheets and paper-based systems, this can lead to errors, delays, and a lack of accountability. This lack of visibility makes it difficult to identify and address potential issues early on, increasing the likelihood of disputes down the line. “Bad news doesn’t age well,” and the longer a dispute lingers, the harder it becomes to find a resolution that satisfies all parties.

32% of quantity surveyors and contract administrators surveyed seek improved stakeholder collaboration.

THE HIGH COST OF CONFLICT

These disputes are not just minor annoyances but a significant drain on resources. The financial impact alone is staggering, costing the industry billions annually. But the ripple effects extend far beyond financial losses:

• Project Delays: Disputes often lead to work stoppages, pushing back crucial milestones and causing costly overruns. This can be especially damaging in the current climate of rising material costs and labour shortages, as highlighted in a Payapps report in 2023, where these issues were identified as top challenges for the industry.

• Fractured Relationships: Constant conflict erodes trust between parties, hindering future collaboration and potentially damaging reputations. In an industry built on relationships, the breakdown of trust can have long-lasting consequences.

• Legal Battles: Disputes can escalate into legal proceedings, further draining resources and creating long-term animosity. Legal fees and settlements can quickly add up, eating into project profits and company reserves.

• Employee Morale: Dealing with frequent disputes can be demoralising, leading to burnout and high turnover among your most valuable quantity surveyor and contract administrator professionals. In fact, 32% of quantity surveyors and contract administrators surveyed were unhappy with their worklife balance. Poor employee experience can exacerbate the existing skills shortage in the industry, making it even harder to find and retain qualified staff.

Payapps research also uncovered regional variations in dispute frequency.

COLLABORATION

Australian quantity surveyors and contract administrators saw greater weekly disputes with subcontractors than their New Zealand or UK peers. 54% of Australian quantity surveyors and contract administrators experience six or more disputes per week compared to the average of 47%, highlighting the need for tailored solutions that address the specific challenges of each region. While some areas may benefit from greater standardisation of processes, others might require a more nuanced approach considering local regulations and industry practices.

54% of respondents say disputes with progress claims and or incomplete information often impact project timelines.

EXPERIENCE MATTERS: DISPUTE FREQUENCY ACROSS TENURE

Interestingly, the Payapps report revealed that dispute frequency varies across the tenure of quantity surveyor and contract administrator professionals. Early-career professionals who are still learning the ropes typically encounter fewer disputes. However, as they gain experience and take on more complex projects, the frequency of conflicts increases. This trend peaks in midcareer roles and gradually declines as professionals gain more knowledge and develop stronger conflict-resolution skills. This highlights the importance

of ongoing professional development and targeted dispute prevention and resolution training for quantity surveyor and contract administrator professionals at all stages of their careers.

TECHNOLOGY: THE KEY TO COLLABORATIVE SUCCESS

While the challenges are significant, the future is not bleak. Technology offers a powerful solution to the collaboration conundrum. Purposebuilt construction software, like Payapps, can transform how teams work together, fostering a more collaborative and less contentious environment.

Payapps empowers construction professionals with a powerful progress payment claim solution they need to overcome the challenges outlined in our research. By providing realtime visibility into project progress, centralising communication channels, and automating workflows, Payapps helps to break down silos, enhance transparency, and ensure everyone is on the same page. This reduces the likelihood of disputes and equips teams to address them swiftly and effectively when they arise. Additionally, Payapps’ focus on compliance helps to minimise disputes arising from contractual or regulatory issues.

EMPOWER YOUR TEAM, PROTECT YOUR PROFITS

Collaboration is the key to unlocking the full potential of the construction industry. By addressing the root causes of conflict and embracing technology, we can build a more resilient, efficient, and profitable future for all stakeholders.

Visit Payapps.com and download the full report to understand other challenges and opportunities faced by quantity surveying and contract administration professionals. Discover how technology can empower you and your team to work smarter, not harder, and build a more collaborative, efficient, and profitable future.

You can download your free copy of the Report from the Payapps Website (payapps.com/resources)

Ian Moss is the Head of Marketing for Australia & New Zealand at Payapps. With over 20 years of experience in the business technology sector, Ian is passionate about empowering professionals with specialised technology to enhance their work and business outcomes.

This advertorial has been sponsored and authored by Payapps.

EMBODIED CARBON: RETROFITTING REIMAGINED

UPFRONT CARBON

OVERVIEW

Embodied carbon – the greenhouse gas emissions generated during the manufacture, construction, maintenance, and demolition of buildings – accounts for 35–45% of a standard building’s lifecycle carbon emissions.

These emissions are ‘locked in’ before a building’s first occupants step through the front door.

We have measured the embodied carbon from real-world projects to quantify the savings that are possible when we retain existing buildings.

Almost half a tonne of upfront embodied carbon can be saved for every square metre retained from an existing commercial office, when compared to an equivalent new-build project.

Retaining a structure and envelope –the substructure, upper floors, columns, external walls, roof, stairs, and internal structural walls – allows us to preserve nearly three quarters, or 74%, of a building’s upfront embodied carbon.

We hope, by putting ‘concrete’ data behind a concept, we can contribute to the evidence base and elevate the essential conversation about embodied carbon.

RETROFITTING IS RISING UP THE DEVELOPMENT AGENDA

Retrofitting, refurbishment, adaptive reuse, upgrade, uplift…

All these terms capture the same idea of enhancing an existing structure or system to improve its performance, efficiency, and functionality, and to achieve its highest and best use. Human beings have always retrofitted older buildings.

“Our industry needs rapid change and creative solutions to addressing emissions in the built environment. With early adopters and ambitious projects guided by benchmarked data, we can expedite Australia’s net zero carbon target.”

But a host of drivers are pushing Australia’s property industry towards retrofitting. In the office sector, for instance, the national vacancy rate is at its highest level since 1995, especially among lower-grade building stock, as tenants rethink their space requirements and shift to higher quality stock. Many building owners are also looking to upgrade their buildings to improve their energy efficiency.

In 2018, the Green Building Council of Australia (GBCA) estimated that around 80,000 ‘mid-tier’ office buildings were ‘ripe for retrofit’. These buildings, below Premium or A Grade, were typically constructed before the year 2000 with outdated and inefficient technologies that make them energy guzzlers. And that’s just offices.

Retrofit is also growing in appeal as construction costs escalate, higher interest rates increase holding costs, and as the planning process becomes more difficult to navigate.

The net zero agenda adds a new value of dimension to all building projects, as retrofitting an existing building is the most efficient way to reduce the upfront embodied carbon emissions of any development project.

Our data confirms that retaining the structure and envelope of an existing commercial office building can save 300–500 kilograms of greenhouse gas emissions per square metre of gross floor area.

Graph 1 illustrates why retrofitting is so important in the embodied carbon discussion.

ELEMENTAL BREAKDOWN OF GWP IN COMMERCIAL BENCHMARKED PROJECTS

1

Graph

This graph shows the percentage of global warming potential (GWP) –which assesses the impact of different greenhouse gases on global warming, not just carbon dioxide – from the upfront embodied carbon emissions of a typical commercial building. This graph covers materials, transport, and construction, and shows that the ‘cold shell’ – the basic structural elements –is responsible for nearly three quarters of a building’s upfront embodied carbon emissions.

Graph 2 shows that by retaining the structure and envelope building elements – the substructure, upper floors, columns, external walls, roof, stairs and internal structural walls – we can preserve 74% of a building’s upfront embodied carbon, as represented by the grey elements in the graph.

This means we avoid using highcarbon materials to construct a new superstructure, such as concrete, steel, aluminium, and glass.

“Retaining the structure and envelope of an existing commercial office building can save 300–500 kilograms of greenhouse gas emissions per square metre of gross floor area.”

When we remove these elements from the dataset, our focus changes. Rather than thinking about how to reduce the embodied carbon in concrete and steel, we begin to consider how to specify low-embodied carbon finishes and plasterboard for internal walls, for example.

Not all buildings are right for retrofit; but by assessing the embodied carbon that will be saved through retrofitting, developers can make informed decisions.

ELEMENTAL BREAKDOWN OF PRESERVED GWP FROM RETROFITTING

UPFRONT CARBON

CASE STUDIES

The embodied carbon savings can be a powerful story to tell potential tenant customers when repositioning an existing asset.

QUEEN AND COLLINS, MELBOURNE

Slattery was engaged by The GPT Group to provide carbon planning on the refurbishment of buildings known as the ‘Gothic Bank Complex’ at the corner of Queen Street and Collins Street in Melbourne’s CBD. This included three 19th century neo-gothic architectural landmarks and a 1990s office tower.

Our team reviewed the existing buildings and calculated the carbon savings achieved by retaining and refurbishing the structures, rather than building new.

As you can see from Graph 3, by refurbishing the existing Queen and Collins buildings, an indicative saving of 22,086,000 GWP (kgCO2-eq) was achieved. This saving excludes the carbon savings made by not demolishing the existing building.

DIFFERENCE IN GWP OF QUEEN AND COLLINS

Graph 2

UPFRONT CARBON

The main difference between the hypothetical new build (scenario 1) and the refurbishment (scenario 2) is the large carbon savings in the superstructure, specifically the upper floors, external walls (including the envelope), and the internal core walls. The upper floors consist of reinforced concrete slabs, while the external walls contain a mixture of steel, glass and aluminium. All these materials are very carbon intensive.

By refurbishing the corner of Queen Street and Collins Street, the quantity of carbon-intensive materials was reduced, leading to a significant saving of more than 22,000 tonnes of greenhouse gas emissions. This saving is equivalent to removing 4,800 fossil-fuel powered cars from our roads for 12 months, or the annual carbon footprint of 1,100 standard homes. This underscores the size of the saving that just one retrofitting project can deliver.

“…The quantity of carbon-intensive materials was reduced, leading to a significant saving of more than 22,000 tonnes of greenhouse gas emissions.”

150 LONSDALE STREET, MELBOURNE

Wesley Place, home to a complex of mid to late-19th century and early20th century ecclesiastical buildings, has been transformed by Charter Hall. Construction on the $60 million repositioning of 150 Lonsdale Street was completed in 2022.

We measured the upfront embodied carbon of the refurbishment and compared this to the estimated upfront embodied carbon of knocking down the asset and rebuilding. By using the documentation provided, we calculated the carbon associated with demolition

and then built a hypothetical carbon model using our extensive benchmark data.

As Graph 4 illustrates, refurbishing the existing asset achieved an indicative saving of 25,813,000 GWP.

Like the Queen and Collins building, the main differences between the hypothetical new build (scenario 1) and the refurbishment works (scenario 2) are the GWP savings achieved across the carbon-intensive areas of the upper floors, the external walls and the internal walls. These building elements contain carbon-intensive materials such as reinforced concrete, structural steel, glass and aluminium. When the upper floors, external walls, and internal walls and partitions are combined, they account for 72% of the total GWP within the hypothetical new build. This, once again, emphasises the potential of retrofitting.

By refurbishing the existing asset, more than 25,800 tonnes of carbon emissions was avoided, which is the equivalent to removing 5,611 fossil-fuel powered cars from the road for 12 months, or the annual emissions of 1,290 standard homes.

“Not all buildings are right for retrofit; but by assessing the embodied carbon that will be saved through retrofitting, developers can make informed decisions.”

REGULATION, STANDARDS AND TOOLS ARE DRIVING TRANSFORMATION

The question of how to address embodied carbon is complex and challenging to answer.

However, several regulatory developments in 2023 are sparking new conversations across Australia’s construction industry. We provide some examples below to illustrate the direction of travel.

INTERNATIONAL

The state of California has adopted changes to its building code that will limit embodied carbon emissions in commercial and school buildings. The whole building embodied carbon policy, which will be effective 1 July 2024, sets an historic precedent for building codes across the United States.

NATIONAL

The Australian Government is proposing to mandate climate reporting, based on the International Sustainability Standards Board’s new framework, from 1 July 2024. ASIC chairman Joe Longo has said it will be the “biggest change to corporate reporting in a generation”.

UPFRONT CARBON

This will require Australia’s biggest companies to disclose their carbon emissions across a range of categories, including the Scope 3 emissions generated in their supply chains. This will have cascading implications for the construction industry, as embodied carbon emissions are Scope 3 emission.

NABERS, the National Australian Built Environment Rating System, is currently developing a framework to measure, benchmark and certify embodied carbon emissions. Informed by industry expertise, NABERS expects to release the framework in 2024.

The Property Council of Australia and Green Building Council of Australia released a suite of policy recommendations in 2023 under the banner of Every Building Counts. This urges the federal government to adopt the NABERS framework for embodied carbon, set new minimum reporting requirements within the National Construction Code, and create a national embodied carbon database for products and materials.

STATE

The NSW Government’s State Environmental Planning Policy (Sustainable Buildings) 2022 came into force on 1 October 2023. This requires developers to disclose embodied carbon emissions generated on large projects, including offices, hotels and serviced apartments, and state-significant developments like health, education and cultural buildings. Other sectors, like retail and industrial, are expected to be included in future stages.

LOCAL

The City of Melbourne launched its Retrofit Melbourne Plan in October 2023 with a determination to reach

Queen & Collins, credit: Sharyn Cairns

150 Lonsdale Street, credit: Tommy Miller

UPFRONT CARBON

its target of net-zero emissions by 2040. This includes a goal that all mid-tier commercial buildings are ‘zero carbon ready’ by 2040, with a plan to tackle embodied carbon. More than 80 buildings will need upgrades each year to reach this target; currently, the Council averages just seven.

EMBODIED CARBON DATA CHANGES FITOUT DECISIONS

When undertaking a new build project, the key building elements with the highest upfront embodied carbon are the building structure and envelope.

However, when the decision is made to retrofit, refurbish and fit out an existing building, these embodied carbon intensive building elements are generally preserved and the embodied carbon emissions associated with these works eliminated.

In fitout works, therefore, the key building elements are:

• Fitments such as loose furniture, workstations and joinery

• Finishes, for ceilings, floors and internal wall

• Internal partitions and screens

• Building services.

CASE STUDY: GPT DESIGN SUITES, MELBOURNE

Slattery was engaged by The GPT Group to provide carbon planning on various office fitouts in Melbourne.

Our data demonstrated the most carbon-intensive elements of the new commercial office fitouts were the internal walls, fitments and finishes. Identifying the priority upfront embodied carbon elements was the first step towards targeted action.

We provided alternative design and specification strategies to reduce the upfront embodied carbon of these elements and quantified the indicative carbon savings and the financial costs and savings.

Following this work, one site achieved a 43% reduction in upfront embodied carbon when compared to the reference project.

Some of the strategies implemented on these projects included:

• Incorporating re-used or refurbished loose office furniture items

• Redesigning workstations and joinery to minimise the use of carbon intensive materials

• Specifying lower or carbon neutral floor, wall and ceiling finishes

• Reducing areas and heights of internal partition walls.

This case study highlights the importance of project specific, databacked advice to guide design decision making. When existing structures

and envelopes are retained, project teams still need to consider how their decisions impact embodied carbon outcomes because there are significant carbon savings possible.

RETROFIT OPPORTUNITIES OVERWHELM THE OBSTACLES

As the focus on carbon intensifies, many companies are taking positive steps to address operational carbon. The next natural step is to address embodied carbon.

There are many reasons why building owners choose to rebuild rather than retrofit. This may be because the existing building has structural integrity issues or insurmountable site constraints.

It is true that retrofitting an existing building may reveal hidden costs – like asbestos – or require some creative design to meet current building codes or leasing preferences.

But often the obstacles are based on the misconception that newer is a better product.

AVERAGE ELEMENTAL PERCENTAGE BREAKDOWN OF GWP IN SLATTERY COMMERCIAL WORKPLACE FITOUT BENCHMARKED

PROJECTS

Graph 5

UPFRONT CARBON

When we retain older buildings, we preserve future heritage and history, strengthen community connections and maintain the distinct character of our cities.

We minimise waste sent to landfill and the disruption that comes with demolition. We often accelerate project timelines, reducing risks associated with time costs.

When weighing up these benefits alongside the embodied carbon emissions and costs associated with offsetting prevented, the scales tip in favour of retrofitting.

Durkin, P. 2023, ‘Commuters captured under tough climate regime’, Australian Financial Review, 23 October. Kwan, C. 2024, ‘CBD office vacancies highest since 1995’, Australian Financial Review, 23 January. Gudkov, A. 2023, ‘Key climate reporting developments unveiled’, Australian Institute of Company Directors, 27 June. City of Melbourne 2023, Retrofit Melbourne, October.

Clean Energy Finance Corporation 2021, Australian Buildings and Infrastructure: Opportunities for cutting embodied carbon Eberhardt, E. 2023, ‘California limits embodied carbon in statewide building code’, Dezeen, 21 August.

Green Building Council of Australia 2017, Opportunity knocks: Accelerating energy efficiency for mid-tier buildings, 13 November.

Green Building Council of Australia and Property Council of Australia 2023, Every Building Counts NABERS, NABERS Embodied Carbon Public Consultation, 6 November.

NSW Government Department of Planning and Environment, 2023, Sustainable Buildings SEPP FAQs.. Property Council of Australia 2023, Strong demand for office space.

World Green Building Council 2019, Bringing Embodied Carbon Upfront.

GPT Design Suite, 550 Bourke St, credit: Lynton Crabb

This article was written by the Tom Dean, James Mortensen, Natalya Partington, and Malcolm Wren from Slattery and first published in March 2024.

NAVIGATING THE NEW LANDSCAPE: THE EXPANDING ROLE OF THE NSW BUILDING COMMISSIONER

By Jim Doyle

In recent years, the New South Wales (NSW) construction sector has undergone substantial transformation to address growing challenges in building quality and consumer protection. The Building Legislation Amendment Act 2023 stands at the forefront of these changes, significantly expanding the powers of the NSW Building Commissioner to enhance regulatory oversight and enforcement. This article examines how these broadened powers affect the building industry and the implications for stakeholders seeking compliance in an evolving legal landscape.

OVERVIEW OF THE BUILDING LEGISLATION AMENDMENT ACT 2023

The Building Legislation Amendment Act 2023 was introduced in response to recurring issues in building standards, consumer complaints, and high-profile construction defects.

The legislation aims to strengthen the regulatory framework, empowering the Building Commissioner to take decisive action against noncompliance, oversee critical stages of construction, and ensure that safety and quality standards are upheld across all projects. This increased oversight is seen as a pivotal step toward improving industry confidence and consumer protection.

The Building Legislation Amendment Act 2023 has resulted in the amendment of the following legislative instruments:

• Building and Development Certifiers Act 2018 (NSW)

• Building Products (Safety) Act 2017 (NSW)

• Design and Building Practitioners Act 2020 (NSW)

• Home Building Act 1989 (NSW)

• Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW)

• Strata Schemes Management Act 2015 (NSW)

• Strata Scheme Management Regulation 2016 (NSW)

EXPANDED POWERS OF THE BUILDING COMMISSIONER

1. INCREASED ENFORCEMENT CAPABILITIES

The Act bolsters the Building Commissioner’s enforcement powers by granting the ability to issue stop work orders, rectification orders, and enforce corrective actions more effectively. These powers enable swift intervention where immediate risks to health and safety or non-compliance with building standards are identified. The Office of the Building Commissioner in NSW has already demonstrated the impact of its strengthened enforcement capabilities, particularly through initiatives like the Construction Industry Doctorate Program (CIDP).

Introduced in partnership with local universities, the program addresses compliance and quality concerns while promoting improved practices. By aligning regulatory oversight with industry innovation, the Building Legislation Amendment Act 2023 enables the Building Commissioner to effectively drive compliance through education and enforcement, including stop work and rectification orders.

• Relevant section: Stop work orders are outlined under Section 29(1) of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020, as amended by the Building Legislation Amendment Act 2023.

Notably, the NSW Building Commission regulates all building and construction in NSW. For instance, under the amended Home Building Act 1989 (NSW), the Commissioner is empowered to enter and inspect any residential site, examine records, and

even undertake destructive testing if reasonable grounds exist without any warrant (such as the one required by NSW Police for entry to private premises).

2. GREATER OVERSIGHT OF BUILDING PROJECTS

With a mandate to oversee critical construction stages, the Building Commissioner can now intervene earlier to ensure compliance throughout a project’s lifecycle. This oversight extends to the design phase, where the Commissioner can verify that approved designs align with regulatory standards and consumer expectations.

• Relevant section: The Building and Development Certifiers Act 2018 (NSW), amended by the Building Legislation Amendment Act 2023, provides the regulatory framework for certification and oversight.

3. AUDITING AND COMPLIANCE FUNCTIONS

The Commissioner’s auditing and compliance functions have been broadened to include a wider array of building practitioners. The legislation permits targeted audits of developers, contractors, and designers to ensure adherence to standards. These audits are instrumental in identifying systemic issues and creating a culture of accountability.

• Relevant section: Section 9 of the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 specifies the auditing and investigation powers of the Commissioner, expanded by the new legislation.

LEGAL

IMPLICATIONS FOR BUILDERS AND DEVELOPERS

1. COMPLIANCE REQUIREMENTS

Builders and developers must thoroughly understand their obligations under the new regime. Compliance requires maintaining accurate documentation and ensuring all work aligns with approved plans and building codes. This may necessitate revising internal quality assurance procedures to meet the Commissioner’s expectations.

• Relevant section: The Design and Building Practitioners Act 2020 was amended to include updated compliance requirements.

2. PENALTIES FOR NON-COMPLIANCE

The legislation introduces stiffer penalties for breaches, including substantial fines, stop work orders, and restrictions on practicing in the industry. The risk of reputational damage also looms large for those who fail to comply, as increased transparency means enforcement actions can significantly impact business prospects.

• Relevant section: Penalties are set forth in Section 89(2) of the Design and Building Practitioners Act 2020 and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020. Additionally, the power to order – Stop Works, Prohibition or Rectification in respect of residential buildings in NSW and to penalise for non-compliance to a maximum of $330,000 for a corporation or $110,000 for an individual.

3. BUILDING PRODUCT SAFETY

The Building Products (Safety) Act 2017 (NSW) has been amended to

include wider obligations/sanctions applicable to all in the supply chain (from the manufacturers, designers, certifiers, contractors and subcontractors) for non-conforming and non-complying building products.

CASE STUDIES

1. RECTIFICATION ORDERS

In January 2024, a building work rectification order was issued for the Lachlan’s Line apartment development in Macquarie Park. The NSW Building Commissioner found significant defects in the concrete of the basement level, which, if left unaddressed, could have led to a collapse over time. The Commissioner ensured that the developer, Greenland, complied with the rectification order to fix the defective concrete within eight months. Despite the long-term risks, the Commissioner assured residents that there was no immediate danger. This example demonstrates how the Building Legislation Amendment Act 2023 empowered the Commissioner to enforce immediate action to rectify these defects.¹

2. STOP WORK ORDERS

The NSW Building Commissioner has exercised its expanded enforcement powers through numerous orders issued since the Building Legislation Amendment Act 2023. For instance, a stop work order was issued to AHAA Investments Australia Pty Ltd for failing to follow approved designs in Gosford in April 2024. Additionally, several prohibition orders were issued in 2024, barring developers from receiving occupation certificates due to critical defects in their buildings. These orders are part of

the Commissioner’s proactive approach to identify and rectify defects before occupation, ensuring public safety and compliance.²

NSW BUILDING COMMISSIONER RESIGNS

Mr David Chandler, the NSW Building Commissioner (appointed for five years since in 2019) has recently confirmed he will leave the job in August this year.

CONCLUSION

The Building Legislation Amendment Act 2023 significantly strengthens the regulatory framework within the NSW construction industry by empowering the Building Commissioner with expanded oversight and enforcement powers. Builders, developers, and industry professionals must remain vigilant and proactive in understanding these changes, implementing rigorous compliance measures, and maintaining quality standards. Ultimately, these reforms are intended to restore consumer confidence and uphold the integrity of the NSW built environment.

CALL TO ACTION

Construction industry stakeholders should consult with legal professionals to navigate the new regulatory landscape, understand their obligations, and align practices with the Commissioner’s standards. Taking proactive steps now will help mitigate risks and foster a stronger culture of compliance and accountability across the industry.

This article was written by Jim Doyle from Doyles Construction Lawyers.

1 Jeffrey, D. 2024, ‘‘No danger’ to residents of Sydney apartment buildings with hundreds of homes ‘at risk of collapse’’, 9 News, 17 Jan, <9news. com.au/national/apartment-complex-northern-sydney-macquarie-park-risk-collapse/00bde588-6f4b-44be-9339-bc967bc82b1b>. ² Fair Trading 2024, ‘Register of Building Work Orders’, NSW Government, <fairtrading.nsw.gov.au/help-centre/online-tools/rab-act-ordersregister>.

WHY IS THE AUSTRALIAN CONSTRUCTION INDUSTRY FAILING TO

DELIVER ON ITS FULL

POTENTIAL?

By Robert Wildermuth FAIQS CQS

OPINION

Post-Covid, in 2024, many sectors of the Australian construction industry continue to be problematic. The nature and extent of each problem varies depending upon the role a party plays within the industry.

The construction industry is complex by nature and comprises many process streams that collectively involve millions of activities and decisions (moving parts). Construction is a practical science, though not always an exact science. By this, I mean there are often several ways to achieve a desired outcome.

It is typically difficult to not only solve the major problems of the construction industry, but even to identify them, because of the millions of moving parts

to the construction process. This leads to a scenario where too often, many are seduced into addressing symptoms rather than the root cause.

Each root cause usually results in many symptoms. These symptoms often then give way for secondary symptoms to arise, and further symptoms consequently arise from the effects of these.

Because of the difficulty in quarantining root causes from the symptoms, people often, in their haste for immediate improvements, end up implementing solutions to address a problem’s symptoms rather than its root cause. Thus, the root cause and other associated symptoms continue unabated.

1 Inadequate and incomplete construction documentation (including specifications)

WHAT ARE THE ROOT CAUSES OF THE MAIN PROBLEMS?

It is widely acknowledged by many industry participants that there are numerous problems existing in the Australian construction industry. I am frequently asked the question: “What is the main problem, and is there a silver bullet solution?”

In my opinion, there is no one standout primary problem, but instead, several possible contenders (root causes) causing the most significant problems.

I set them out in the table below, along with my assessment of the potential root causes and symptoms:

Banning minimum scale of professional fees

2 Inept and unethical corporate behaviour and poor practices Shareholder apathy

3 Declining numbers of suitably qualified and skilled tradespeople Ineffective government policies and training providers

4 Illegal unionism Ineffective industrial legislation and enforcement

5 Poor regulation or regulatory failures Ineffective government policies

6A A legal profession hijack of the industry in relation to contracting arrangements and risk allocations

6B Long-term financial sustainability

THE NUMBER ONE PROBLEM AND ITS ROOT CAUSE – THE BANNING OF MINIMUM SCALES OF PROFESSIONAL FEES

I strongly believe that many current problems or symptoms the industry faces can be traced back to one

significant event that occurred in 1979. This event was the banning of Scales of Minimum Professional Fees by the Trade Practices Commission in 1979.

Symptom of Items 1 and 2

Symptom of Items 1 and 2

These scales of professional fees subsequently became recommended or guideline scales of professional fees which were then ultimately banished altogether in any form by the Australian Competition and Consumers Commission (ACCC) in 1984.

In my view, these events have caused

and continue to cause both unforeseen and detrimental problems to the Australian construction industry. It was designed in simplistic theory to reduce the cost of professional fees through competition. This reduction in professional fees has undoubtedly been achieved; however, the not-insignificant additional costs indirectly caused have made the successful prosecution of these types of contractual claims difficult and/or uneconomical.

The passage of time (40-odd years) has effectively severed the causal linkage to the root cause event, with many simply accepting poor and substandard documentation as an industry normal standard. Unfortunately, most of today’s industry participants (anyone under 60 years of age) would not have

REF

1 Abolition of Minimum Scales of Professional Fees

experienced an industry with minimum scales of professional fees and the comprehensive quality documentation that flowed from that environment.

I recall during the late 1970s, it was common for most projects to be construct-only and have only variations for client-requested changes that were lucky to exceed double digits by number. Most projects had Bills of Quantities (BoQ) measured and paid for by the clients. Any discrepancies in the documentation were usually corrected during the BoQ measurement process, which occurred before the BoQ was issued to call tenders from contractors. Consequently, contractor requests for information or clarification during construction were rare compare to the typical number on a project today.

For example, Stage 5 of the Brisbane Cultural Centre constructed around 1998 had over 4,500 RFI’s and approximately 1,700 variations and contractual claims.

In the late 1970s, the amount of abortive, disruptive, and non-productive works was minimal (primarily being those self-inflicted by contractors), and it was a pleasure to work in the industry. A stark contrast to today’s commonplace ‘dog-eat-dog’ fight from start to finish of the construction process. Is it any wonder the level of mental health in the construction industry has gradually deteriorated since the 1970s? That’s another issue for another day.

The consequences or symptoms flowing from this event (the banning of minimum scales of professional fees) can be summarised in the following matrix:

Professional Fees reduced The standard of training professionals has reduced, and the number of construction-related professional cadetships collapsed

Completeness of design documentation and coordination reduced

Significant increases in the level of variations arising from incomplete design documentation

Clients move away from design responsibility and construct-only procurement contracts

1. Clients move to design-and-construct procurement contracts

2. Significant increases in the amount of delay and disruption to the contractor’s work. This is often difficult to record and problematic, proving causal effect linkages because of the number of moving parts impacted. The ultimate outcome consistently erodes the contractor’s margin which jeopardises the longer term sustainability of the construction industry.

OPINION

CONCLUSION

In my view, the Australian Federal and State Governments hold the biggest keys to solving the biggest problem plaguing the Australian construction industry – extremely poor and noncomprehensive project documentation. They say: “You can’t be what you can’t see”.

Well, trust me: You can’t build what you can’t see.

One reason why it is the biggest problem, is simply because over time it has ingrained itself so much that acceptance of poor and incomplete project documentation has become widely considered as ‘business as usual’. This is a fact, and it is hard to argue it is not, but that does not make it right, nor does it mean it is contributing to the most efficient construction costs possible (the ‘optimal cost of construction’). Unfortunately, if anyone currently raises the topic of poor and incomplete project documentation as a problem, they are often branded a lunatic.

Secondly, the unrecoverable additional cost (including disruption, delay, and adverse productivity outcomes) and mental health consequences flowing directly and indirectly from poor and incomplete project documentation are conservatively estimated at more than 10% of project costs. This would amount to monetary costs alone (putting aside the human costs) in the order of AUD$20B per annum (based upon an estimated annual total construction spend of AUD$200B in 2020 in Australia).

Interestingly, in most cases, the clients or sponsors for large or mega-projects are State and/or Federal Governments.

Well, hello – It is time to ring the bell and for these stakeholders to wake up and stop ignoring the biggest problem for which they (as a collective group) hold the keys to solving. The answer is certainly not to push the design onto the contractor as they have been doing for quite some time, because that usually does nothing towards improving the prospects of achieving the optimal construction cost for a project.

“Every project has an optimal construction cost for which it can be built.”

The optimal construction cost target for a project ‘is what it is’, irrespective of the client’s budget, the contractor’s tendered bid or even the risk allocation. All parties need to understand this elementary fact.

Getting as close as possible to the optimal construction cost target must be the primary focus for all stakeholders. The appropriate procurement model must have the best prospects of delivering the project as close as possible to the optimal construction cost target. By necessity, this involves producing comprehensive and coordinated construction documentation along with avoidance of unnecessary variations and associated delays and disruption (caused by incomplete briefs and poor project documentation).

There has been a lot of talk in recent times around risk allocations, particularly with respect to some of the largest or mega-projects. Risk allocation only determines who pays for what, so whilst important, it should not be the primary focus, particularly for clients. If the contractor achieves near the optimal construction cost, then the prospects of the client obtaining its project within its budget are certainly improved.

As sure as the sun rising every morning, if contractors suffer delays, disruption, and loss of productivity because of deficient project documentation, their project cost will likely exceed the project optimal cost, and irrespective of the form of contract, they will pursue their client for these costs.

Common sense suggests the parties would be best placed to formulate a procurement process that facilitates the avoidance of costs that need not be incurred, delivered through sensible risk allocation, competent design and project management. Relationship-based forms of contracting certainly have the characteristics to achieve these types of outcomes.

The Australian Contractor’s Association’s CEO Jon Davies has published their framework for achieving Sustainability in the Australian Construction Industry. Interestingly, collaboration and relationships contracting are a pillar of the ACA’s framework.

Poor quality project documentation in Australia is potentially costing contractors, clients and/or consumers, collectively AUD$20B per annum.

Australian Governments at Federal and State level should all wake up, smell the roses, and realise the solution is solely in their collective hands to make legislative changes that would positively improve the Australian construction industry and deliver more construction ‘bang for their buck’ and importantly, reduce a substantial amount of unnecessary mental distress caused by poor and incomplete project documentation.

This article was written by Adjunct Associate Professor Robert Wildermuth OAM, FAIQS, CQS from Wildermuth Consulting Pty Ltd.

BUILDING COST INDEX

JUNE 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.