The Building Economist - September 2018

SEPTEMBER 2018

Safer. Faster. Cheaper.

Update your mid-rise timber knowledge.

Thanks to changes to the NCC that make it easier to design and build compliant Class, 2, 3 and 5 timber structures up to 25 metres tall, a whole new range of options are available for mid-rise residential projects.

From traditional timber framing to new mass timber systems, such as cross laminated timber (CLT), you’ll discover the safety, speed, financial and environmental benefits of updating to wood.

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7 ARTIFICIAL INTELLIGENCE

14 WHEN THE BRICK HITS THE FAN

27 SEISMIC DESIGN

31 ALGAE BUILDING TECHNOLOGY

CONTENTS 3 CEO Letter

27 Seismic Design

5 Building Confidence

31 Algae Building Technology

7 Artificial Intelligence

36 Would you know if a Phoenix Operator was Stealing

14 When the Brick Hits the Fan

from you?

18 International Construction Market Survey

39 BIM from Different Angles

21 Perspectives of a Quantity Surveyor

42 Whole-of-Life Costing

23 Costing Timber

46 BIM and the Built Environment

26 Built to Perform

49 Building Construction Index (available in print edition only)

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

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THE BUILDING ECONOMIST - SEPTEMBER 2018 - 1

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CEO LETTER

FOR THE TIMES THEY ARE A-CHANGIN Welcome to the latest edition of our reshaped ‘The Building Economist’. From this edition onwards, we will be providing you with construction industry content that is broader than a specific theme. I encourage you to read the articles that we provide as the times they are a-changin.

Change brings about new challenges as well as opportunities for construction cost professionals around the world. In my CEO letter, four change/emerging areas are identified, infrastructure, BIM, prefabrication, and contingent workforce.

Innovative and ‘never been seen before’ designs continue to challenge the way in which projects are costed from the

design to construction to obsolescence.

Buildings with waterfalls, who would have thought!

Across the infrastructure sector we are seeing increasing opportunities for Quantity Surveyors and Cost Estimators, with superior skills, to work closer with Governments around the world in providing cost management and contract management services to facilitate the delivery of major infrastructure projects.

Australia is currently experiencing an infrastructure boom. The Australian Government has committed over $75 billion towards new and upgraded land transport infrastructure over the

next ten years ($55bn over next four years). State and Territory governments have a planned investment of some $190bn over the next four years, with NSW Government allocating $80bn.

Queensland and Victoria have a planned investment of around $40bn over the next four years, WA $22bn, and South Australia and Tasmania around $4bn.

On top of this is the considerable private sector funding across the mining, oil and gas and pipeline sectors of more than $38bn over the same time period.

An initiative by the G20 group of countries have forecast that US$94 trillion will need to be invested up until 2040 to meet demand. If the 56 countries involved

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 3

CEO LETTER

in this forecast stay at current levels, they are forecasted to reach US$79 trillion, a shortfall of US$15 trillion. Road transport and energy infrastructure requiring the largest injection of funds.

I read with interest PWC’s ‘2018 Middle East Capital Projects and Infrastructure Survey’. From the findings, the Middle East construction industry needs to change and improve the way projects are procured, financed and delivered.

It is great to read that the industry is responding through increased collaboration and innovation. New technologies and changes to regulation can further facilitate the delivery of capex programs. It is worth noting that the UAE Government has mandated the use of Building Information Modeling (BIM) on Government projects in Dubai, which should help drive collaboration and efficiencies if utilised appropriately.

This leads me to BIM. The utilisation of BIM as a tool for asset and cost management, as well as whole-of -life costing, is the way forward for construction cost professionals and asset managers on a global scale.

This will help further define the role of the Quantity Surveyor moving forward beyond that of estimation.

All sectors of the built environment will need to work together to enable the effective utilisation of BIM to the Quantity Surveying profession and other stakeholders involved in the development and management of construction assets.

For their part, AIQS and NZIQS have jointly developed a BIM Best Practice Guide (for Quantity Surveyors) which will be launched at the November ICEC-PAQS 2018 Conference in Sydney. The Guide highlights key knowledge areas relating to BIM, including information on what Quantity Surveyors need to know about BIM, interactions with other BIM stakeholders, specifics about 5D BIM, what to expect

on a BIM project, timeline of Quantity Surveyors’ role in the BIM Execution Plan (BEP), what information Quantity Surveyors need from 3D information models, popular 5D software options, quality assurance, and legal issues to be aware of while working on BIM projects.

In addition, AIQS is an active participant on the Australasian BIM Advisory Board (ABAB) which was established to develop a consistent approach to the adoption of BIM across jurisdictional boundaries.

AIQS is one of only two professional bodies to part of this principally government (Commonwealth, State and Territory, and NZ) advisory body.

The ultimate success of BIM depends on its ability to capture all relevant data in the BIM model, and to successfully exchange data between different project participants without the encumbrance of intellectual property constraints.

Moving to the topic of prefabrication and its increasing use across the construction sector. The benefits of pre-fabrication to the vertical construction industry are increasingly being realised by clients as a way to save money and construction time without losing out on quality or durability. Quantity Surveyors, who are brought into the equation, pre-design, are well positioned to assess and make a determination about whether prefabrication is a viable solution. I am inspired by the innovation, design and sustainability features of Daramu House in Sydney, an engineered timber building, which is due to be completed late 2019.

It is possible for a significant prefabrication industry to further develop in Australia, as long as there is a level playing field in terms of cost, quality and compliance with the National Construction Code. Ultimately, it will be up to all those in the development and constructions sector, from consultants,

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contractors, unions and employer groups, through to governments and the prefabrication industry who will determine the success, or otherwise, of building prefabrication in the Australia.

Another emerging area for the Quantity Surveying profession is the provision of a contingent workforce. The divesting of in-house Quantity Surveyors by government agencies has resulted in an increase consultancy services to government, typically through contract arrangements with a Quantity Surveying firm. More recently, we have seen an increase in the utilisation of a contingent workforce by governments, whereby a Quantity Surveyor (in this instance) will be imbedded in a government agency for a fixed duration and working under direct government supervision, though still technically employed by the Quantity Surveying company.

While this already occurs in some jurisdictions, details around engagement by some governments are still under development.

Thank you.

Grant Warner

CEO Australian Institute of Quantity Surveyors

INDUSTRY RESEARCH

BUILDING CONFIDENCE COMPLIANCE AND ENFORCEMENT

Authored by Professor Peter Shergold AC and Ms Bronwyn Weir, ‘Building Confidence: Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia’ is being recognised by industry as a roadmap to drive stronger compliance and enforcement.

Professor Peter Shergold AC is

Chancellor of Western Sydney University.

A former Secretary of the Department of the Prime Minister and Cabinet, he now chairs a number of private, public and not-for-profit boards. He has undertaken a number of previous reviews for Commonwealth and state governments on matters as diverse as gambling, vocational education, community

services, major project implementation and Medicare card security.

Bronwyn Weir is a legal practitioner specialising in government regulation.

She has had over 20 years’ experience advising on building regulation for governments, councils, licensing bodies, fire authorities and building surveyors.

Bronwyn was a member of Victoria’s

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 5

INDUSTRY RESEARCH

Building Regulations Advisory Committee for 12 years. She has also provided advice on regulatory practice in sectors including vocational education, early childhood education, food safety, the racing industry, health care and primary industries. Bronwyn is a director of Weir Legal and Consulting Pty Ltd.

• 9 to 11 focus on the integrity of private building surveyors. They recommend minimum statutory requirements for the engagement, and role, of private building surveyors, a code of conduct with legislative status and enhanced supervisory powers and reporting obligations.

The Authors (they) have presented 24 recommendations:

• 12 addresses the issue of collecting and sharing building information and intelligence. They recommend the creation of a central database by each jurisdiction and collaboration to develop a platform that can provide for information sharing to inform regulatory activities and the work of the Building Ministers’ Forum (BMF).

Information in the databases would also be accessible as appropriate, by authorised persons including owners or purchasers of buildings.

• 1 to 4 focus on the registration and training of practitioners. They recommend a nationally consistent approach to the registration of certain categories of building practitioners and compulsory Continuing Professional Development, which includes mandatory hours/units dedicated to training on the National Construction Code (NCC) and the establishment of supervised training schemes which provide better defined career paths for building surveyors.

• 5 to 7 address the roles and responsibilities of regulators. They recommend a focus on collaboration between state and local government and (where applicable) private building surveyors to improve regulatory oversight. They also recommend the provision of broad powers to audit building work and take effective compliance and enforcement action. They recommend that each jurisdiction implement a proactive audit strategy for regulatory oversight of the Commercial building sector.

• 8 goes to the role of fire authorities in the building design and approvals process. They recommend that, consistent with the International Fire Engineering Guidelines, jurisdictions require early engagement with fire authorities on designs which include performance solutions on fire safety matters.

• 13 to 17 focus on the issues of adequacy of documentation and record keeping. They recommend that there be a statutory duty on design practitioners to prepare documentation that demonstrates that proposed buildings will comply with the NCC. They recommend a more robust approach to third party review of designs and to the documentation and approval of performance solutions and variations.

• 18 to 19 emphasise the importance of inspection regimes. They recommend that jurisdictions require on-site inspections for all building works and that there be greater oversight of the installation and certification of fire safety systems in Commercial buildings.

• 20 addresses the issue of postconstruction information management.

They recommend that for Commercial buildings, a comprehensive digital building manual be created for owners which can be passed on to

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successive owners. This would include all relevant documents for the ongoing management of the building, such as as-built construction documentation, fire safety system details and maintenance requirements.

• 21 relates to building product safety.

They recommend that the BMF agrees its position on the establishment of a compulsory product certification system for high-risk building products.

• 22 to 24 deal with the implementation of the recommendations laid out above. They recommend commitment to a threeyear timetable for the implementation of the recommendations. They recommend that the BMF establish a plan for implementation which is reported against by each jurisdiction annually. They also recommend that, to deal with the issue of differing terminology across jurisdictions, the BMF develops a national dictionary of terminology.

To download the full Report, visit www.industry.gov.au and search Building Confidence.

FEATURE

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 7

FEATURE

ARTIFICIAL INTELLIGENCE: CONSTRUCTION TECHNOLOGY’S NEXT FRONTIER

ENGINEERING AND CONSTRUCTION IS BEHIND THE CURVE IN IMPLEMENTING ARTIFICIAL INTELLIGENCE SOLUTIONS. BASED ON EXTENSIVE RESEARCH, WE SURVEY APPLICATIONS AND ALGORITHMS TO HELP BRIDGE THE TECHNOLOGY GAP. By Jose Luis Blanco, Steffen Fuchs, Matthew Parsons, and Maria João Ribeirinho

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FEATURE

The engineering and construction (E&C) sector is worth more than $10 trillion a year. And while its customers are increasingly sophisticated, it remains severely underdigitised. To lay out the landscape of technology, we conducted a comprehensive study of current and potential use cases in every stage of E&C, from design to preconstruction to construction to operations and asset management. Our research revealed a growing focus on technological solutions that incorporate artificial intelligence (AI)-powered algorithms. These emerging technologies focus on helping players overcome some of the E&C industry’s greatest challenges, including cost and schedule overruns and safety concerns.

In the immediate future, we expect AI’s proliferation in the E&C sector to be modest. Indeed, despite proven high return on investment (ROI) and widespread management interest in AI solutions, few E&C firms or owners currently have the capabilities—including the personnel, processes, and tools—to implement them.1 However, a shift is coming. Stakeholders across the project lifecycle—including contractors, operators, owners, and service providers—can no longer afford to conceive of AI as technology that’s pertinent only to other industries.

Indeed, adjacent industries, such as transportation and manufacturing, are already in the process of breaking down the barriers between one another and operating more as ecosystems (for example, solutions, tools, and algorithms that were industry-specific are more likely to become effective having impact across industries)—increasing the threat of competition from market entrants that have not traditionally been capital project players.2 These lowered market barriers are compounded by the increasing ability of AI methods to work across industries.

These advances will be seen in the

mid- to long-term, but to play a role in future ecosystems—and to compete with incoming market entrants—E&C will need to catch up in its adoption of AI applications and techniques. We predict this effort will lead to the allocation of more resources to build the necessary capabilities, and to AI playing a more significant role in construction in the coming years.

So where should E&C leaders begin?

Building on last year’s report, we offer predictions for where and how AI can infiltrate construction across three categories: • Examining where AI solutions are beginning to emerge in construction today.

• Exploring AI-powered applications and use cases that have already made an impact in other sectors and that can be applied in the construction industry.

• Assessing additional machine learning algorithms and their potential E&C applications.

THE CURRENT STATE OF AI IN ENGINEERING AND CONSTRUCTION AI use cases in construction are still relatively nascent, though a narrow set of start-ups are gaining market traction and attention for their AI-focused approaches.

There are a few early-stage examples construction firms can evaluate: • Project schedule optimisers can consider millions of alternatives for project delivery and continuously enhance overall project planning.

• Image recognition and classification can assess video data collected on work sites to identify unsafe worker behavior and aggregate this data to inform future training and education priorities.

collect and analyse data from sensors to understand signals and patterns to deploy real-time solutions, cut costs, prioritise preventative maintenance, and prevent unplanned downtime.

Still, adoption of AI solutions is quite low in E&C, particularly compared with other industries (Exhibit 1). McKinsey research compared building materials and construction to 12 other industries; ten of those industries are further along in current AI adoption, and all 12 are projected to increase spending on AI at a faster pace over the next three years.

Of course, any AI algorithm is based on learning from the past. This means that AI needs a certain critical mass of data to deliver on its promise so scale will matter; as such, firms will need a significant amount of data (in this case projects) to train an AI algorithm. Therefore, the largest companies are likely to benefit more, particularly in the short term.

It is possible that an external third party enters and leverages E&C data to train its models—a scenario that would likely result in improvement across the industry as a whole but limited competitive advantage for individual firms—but this seems unlikely given the enormous restrictions on data sharing and data ownership.

FIVE AI-POWERED APPLICATIONS FROM OTHER INDUSTRIES TRANSFERRABLE TO CONSTRUCTION AI encompasses a large universe of possibilities and use cases, including machine learning, natural language processing, and robotics. Our research has homed in on five AI applications used in other industries that have direct application in the construction sector:

• Enhanced analytics platforms can

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 9

FEATURE

1 leadingExhibit in AI 1adoption today also intend to grow their investment the most Sectors leading in AI adoption today also intend to grow their investment the most Future AI demand trajectory1 Average estimated % change in AI spending, next 3 years, weighted by firm size2

applications can forecast project risks, constructability, and the structural stability of various technical solutions, providing insight during the decisionmaking phase and potentially saving millions of dollars down the road. And second, these applications can enable testing of various materials, limiting the downtime of certain structures during inspection.

RETAIL SUPPLY CHAIN OPTIMISATION FOR MATERIALS AND INVENTORY MANAGEMENT

Current AI adoption % of firms adopting one or more AI technology at scale or in a core part of their business, weighted by firm size3 1

Based on the midpoint of the tange selected by the survey respondent.

Results are weighted by firm size. See Appendix for an explanation of the weighting methodology.

2

TRANSPORTATION ROUTE OPTIMISATION ALGORITHMS FOR PROJECT PLANNING OPTIMISATION Currently available technology already offers transportation companies the ability to optimise routes and improve traffic navigation. In the future an AI technique called reinforcement learning, which allows algorithms to learn based on trial and error, could provide even more effective optimisation as well as solve for objective functions (e.g. duration or cost of fuel).3 Such technology could be directly applicable to E&C project planning and scheduling, as it has the potential to assess endless combinations and alternatives based on similar

projects, optimising the best path and correcting themselves over time.

PHARMACEUTICAL OUTCOMES PREDICTION FOR CONSTRUCTABILITY ISSUES The pharmaceutical industry has emerged as a leader in investing its large R&D budgets into predictive AI solutions, which lower R&D costs in the long run, chiefly by forecasting medical trial outcomes. These applications can be directly applied to the construction industry—particularly in major projects with R&D budgets as large as those of Big Pharma—in two ways to forecast outcomes. First, predictive

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AI has changed the game for the retail supply chain by reducing manufacturing downtime, reducing oversupply, and increasing predictability of shipments— all resulting in impressive reductions in costs, logistical burdens, and variability.

Supervised learning applications (e.g., gradient-boosting trees4) will become directly applicable to E&C as modularisation and prefabrication become more prevalent. More projects are using off-site construction for large quantities of materials, and the need for enhanced supply chain coordination will become critical to control costs and overall cash flows.

ROBOTICS FOR MODULAR OR PREFABRICATION CONSTRUCTION AND 3-D PRINTING While use of modularisation and 3-D printing is advancing in construction today, there could be a longer-term opportunity to maximise the benefits of these approaches through machine learning. For example, robotics industry researchers have successfully trained robotic arms to move by learning from simulations.5 In E&C, this application might someday be applied to prefabrication techniques and maintenance operations for oil and gas as well as other industrial sectors.6

FEATURE

HEALTHCARE IMAGE RECOGNITION FOR RISK AND SAFETY MANAGEMENT In the healthcare industry, machinelearning methods are creating breakthroughs in image recognition to support the diagnosis of illnesses (e.g. detecting known markers for various conditions). Down the road, this technology could be applied to drone imagery and 3-D-generated models to assess issues with quality control, such as defects in execution (both structural and aesthetic) and early detection of critical events (e.g. bridge failure).

These techniques could help engineers compare developing and final products against initial designs, or train an unsafebehaviors detection algorithm to identify

safety risks in project sites based on millions of drone-collected images.

ADDITIONAL MACHINE LEARNING ALGORITHMS WITH POTENTIAL TO DISRUPT E&C The number of AI solutions applicable to E&C are potentially endless. To scratch the surface, we offer a focused look at a few of the possibilities in machine learning (Exhibit 2).7 While machine learning is but one branch of AI, its breadth of supervised and unsupervised learning techniques, as well as deep learning convolutional and recurrent neural networks, offer myriad business

Exhibit 2 Artificial intelligance and example business applications

Supervised learning

Machine learning (including deep learning using convolutional neural networks and recurrent neutral networks) Unsupervised learning

Commercial excellence • Refinement of go/no ratios Linear/quadractic discriminant analysis • Pricing of fixed price contracts Simple neural networks • Future bids optimisation Reinforcement learning Operational excellence • Solutions offering refinement Decision trees, random forest • Contractor segmenting and management Logistic regression models • 3D twin modeling Neural networks • Constant design optimisation Cluster behaviour production Stakeholder managemnt • Sentiment analysis Naive Bayes Talent retention • Segmenting employees for targeted plans Gaussian mixture models Business development • Segmenting clients to prioritise development Gaussian mixture models Recruting • Segmenting candidate pools for tailored campaigns K-means clustering

cases for investment.

Several use cases will be applicable across the broad spectrum of E&C stakeholders, including owners, contractors, and operators:

REFINING QUALITY CONTROL AND CLAIMS MANAGEMENT Firms can use deep-learning techniques to enhance quality control. Neural networks can, for example, assess drone-collected images to compare construction defects against existing drawings. These networks are also capable of helping owners and firms alike understand the likelihood that a contractor or subcontractor will file a claim, enabling owners and firms to proactively allocate contingencies and deploy targeted mitigation plans.

INCREASING TALENT RETENTION AND DEVELOPMENT One major challenge the E&C industry will face over the coming years is attracting and retaining top talent.

Leaders can tackle this issue by applying both unsupervised machine learning algorithms such as Gaussian mixture models, which can segment employees based on likelihood of attrition, and developing targeted plans to retain them.

K-means clustering can identify potential candidate pools and tailor recruiting strategies to attract the right talent. AI algorithms can also help leaders locate and predict overarching talent pain points such as turnover, skill or labor shortages, and flaws in organisational design. For example, it might help forecast labor shortages for skilled craft in specific geographies, or plan for hiring or locking contracts to limit costs or project delays.

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FEATURE

BOOSTING PROJECT MONITORING AND RISK MANAGEMENT E&C stakeholders can use neural networks, using drone-generated images and laser generated data capturing project progress, to teach an AI how to create 3-D “twin models” to match BIM-generated models. These applications would dramatically reduce decision-making cycles in a construction project from a monthly basis to a daily basis—through full automation of the project scheduling and budgeting update on the combination of BIM, AI, drone, and laser capabilities.

CONSTANT DESIGN OPTIMISATION Owners and contractors can employ a recommender system approach (supervised learning) that uses cluster behavior production to identify the important data necessary for making a recommendation. These applications can recommend to engineers and architects the use of a specific design, such a structural solution (for example, type of connections—welded or bolted) or architectural finishes (for example, curtain walls vs window walls) based on various criteria (for example, total cost of ownership, timeline to complete execution, likelihood of defective constructions-mistakes during execution). The end result is that owners and contractors have more information with which to make an informed decision.

Several other applications have a specific use case for E&C contracting firms:

BUILDING COMMERCIAL EXCELLENCE AND A COMPETITIVE EDGE By assessing previous project bids and replicating elements of the successes

while avoiding elements of the failures, supervised and unsupervised learning algorithms can boost an E&C firm’s project win rate, enhance margins, and ensure project value. Linear/quadratic discriminant algorithms, for example, can enhance a firm’s forecasting ability to estimate a lead’s likelihood of being accepted (i.e. go/no-go ratio) and likelihood of closing (i.e. get/no-get ratio). Simple neural network algorithms can be used to assess the rates or lump-sum price discounts clients may be willing to pay for a project, while in the future, reinforcement learning could help optimise bids and designs based on prior successful bid decisions.

These algorithms can also predict what combination of services might be most attractive to clients, particularly as firms move toward offering integrated solutions rather than traditional one-off projects.

FIRM REPUTATION AND RISK MANAGEMENT Given the recent wave of earnings misses and project write-offs in the E&C industry, the confidence of the market and individual clients in a given firm’s ability to meet commitments has dropped. Because of this shift, firms are losing project bids and the market is penalising stock prices. Firms can apply machine learning to rapidly address market and client concerns.

For example, Naïve Bayes algorithms can be employed to perform sentiment analysis on a firm’s market perception and inform the launch of targeted, reputation-building efforts needed to preserve its backlog and stock price. Algorithms can also be used to profile customers based on their characteristics and desires to better target business development efforts and improve retention.

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WHAT LEADERS CAN DO TO GET AHEAD OF THE CURVE AND TAKE ADVANTAGE OF AI There are several steps that all stakeholders can take to get ahead of the curve in AI:

IDENTIFY HIGH-IMPACT USE CASES BASED ON A FIRM’S STARTING POINTS Firms need to identify the areas of major need and what AI-powered use cases can have the most impact in the short term. Without a clear business case, ROI, and burning platform, E&C firms will be inefficient in the use of time and resources, which can create frustration, increase skepticism in the organisation, and cause firms to lose momentum.

Leaders should prioritise their investments based on the areas where AI can have the most impact on the firm’s unique situation and need—for example, safety or talent retention—and where it will be easiest to implement in the firm’s current stage of digital maturity.

DEDICATE A SIGNIFICANT PORTION OF R&D INVESTMENT TO DIGITAL CAPABILITIES IMMEDIATELY Today, the E&C industry is investing roughly 1 percent overall into technology—a significantly smaller proportion than other industries, such as financial services and manufacturing.

Because the impact of AI is contingent on having the right data, E&C leaders cannot take advantage of AI without first undertaking sustained digitisation efforts.

This includes investing in the right tools and capabilities for data collection and processing, such as cloud infrastructure and advanced analytics. McKinsey research finds that companies with a

FEATURE

strong track record of digitisation are 50 percent more likely to generate profit from using AI.

EMBRACE THE ECOSYSTEM CONCEPT AND UNDERSTAND SOLUTIONS FROM OTHER INDUSTRIES For too long, the E&C sector has operated within a vacuum. Given the move toward ecosystems discussed above, industry insiders need to look beyond sector borders to understand where incumbents are becoming more vulnerable and to identify white space for growth. Both owners and E&C firms can explore nontraditional partnerships with organisations outside the industry to pool advanced R&D efforts that have multiple applications across industries (for example, start-ups, universities, or even major players in other sectors where AI is more evolved). For E&C firms that can pursue unsolicited bids or real-estate development, such partnerships could be a way to increase data points and generate value. In addition, owners and firms can ensure corporate development teams have the talent and topical expertise to assess potential technologies with the entire ecosystem in mind.

ADAPT THE TALENT CAPABILITIES OF THE COMPANY The industry will need to reverse its trend of underinvesting in developing talent and place significant focus on hiring people from other industries with backgrounds and skill sets in AI and digital technologies. In addition, firms will need to reskill their current workforces to acquire the necessary capabilities to thrive in the digital age and provide training in necessary concepts, such as machine learning algorithms.

CHANGE INTERNAL PROCESSES TO ACCOMMODATE THE INNOVATION THAT AI WILL BRING Today, the processes critical to actualising AI solutions—such as how to propose and implement a new idea— are handled several levels below the CEO. But top leadership needs to be involved in developing these processes and bolstering employees’ flexibility to innovate. While seemingly a simple step to take, ensuring the C-suite is influencing process development is a key enabler of preparing to embrace AI.

FIRST MOVERS AND FAST FOLLOWERS WILL BE REWARDED The concrete steps outlined above can serve as an immediate starting point for firms to pursue AI. Indeed, early movers will set the direction of the industry and reap both short- and long-term benefits.

Though E&C tends to lag behind by measure of technology adoption, now is the time for owners and firms to act and secure their places at the vanguard of pulling AI applications and techniques into the sector.

About the authors Jose Luis Blanco and Matt Parsons are partners in McKinsey’s Philadelphia office; Steffen Fuchs is a partner in the Dallas office; and Maria João Ribeirinho is a partner in the Madrid office.

Article from “Artificial intelligence: Construction technology’s next frontier”, April 2018, McKinsey & Company, Inc., www.mckinsey.com. Copyright (c) 2018 McKinsey & Company. All rights reserved. Reprinted by permission.

1. For more information, see “Reinventing construction through a productivity revolution,” McKinsey Global Institute, February 2017.

2. For an example of the impact platforms and ecosystems will have on industries, see Tanguy Catlin, Johannes-Tobias Lorenz, Jahnavi Nandan, Shirish Sharma, and Andreas Waschto, “Insurance beyond digital: The rise of ecosystems and platforms,” January 2018.

3. For further reading on reinforcement learning, see Michael Chui, James Manyika, and Mehdi Miremadi, “What AI can and can’t do (yet) for your business,” McKinsey Quarterly, January 2018.

4. “Gradient boosting” is a powerful, predictive machine learning technique that enables the assessment of many weak hypotheses to build a more accurate prediction.

5. Michael Chui, James Manyika, and Mehdi Miremadi, “What AI can and can’t do (yet) for your business,” McKinsey Quarterly, January 2018.

6. Michael Chui, James Manyika, and Mehdi Miremadi, “What AI can and can’t do (yet) for your business,” McKinsey Quarterly, January 2018.

7. For further information on each of these techniques, see Michael Chui, Vishnu Kamalnath, and Brian McCarthy, “An executive’s guide to AI,” accessed March 9, 2018

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LEGAL

WHEN THE BRICK

HITS THE FAN The forecast impending downturn in residential development places stress on all participants in the construction industry as the good times may not continue forever.

Quantity Surveyors are well advised to revisit the scope and breadth of their responsibilities in the preparation of progress certificates, particularly as it is anticipated that greater reliance will be placed on their expertise when “the brick hits the fan”.

We have reviewed three cases which provide valuable guidance to Quantity Surveyors in carrying out their duties.

THE DUTY OF CARE In the case of a Quantity Surveying firm v Cosmarnan Constructions P/L & 3 Ors [2003] NSWCA 66 revised, the New South Wales Court of Appeal dismissed an appeal by a bank-appointed Quantity Surveyor against a trial court ruling awarding $665,025 in damages against the Quantity Surveyor.

In that case, the Quantity Surveyor was appointed by a joint venture to certify the correctness of progress claims submitted by the builder carrying out the joint venture’s residential development project.

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The Quantity Surveyor’s appointment was contained in the loan facility obtained by the joint venture partners and worded in this manner: “Bank approved Quantity Surveyor is to confirm contract price, time frame and approve all drawdowns of the facility.

Quantity Surveyor is also to confirm that minimum of $750,000 in equity has been applied to the development prior to the initial drawdown of the facility. A list of bank approved Quantity Surveyors is attached for your information.”

It appears that the project experienced unexpected delays and ultimately the

LEGAL

builder was unable to complete the same, although it progressively made claims for works carried out. It further appears that not only was the work incomplete, the works carried out were defective and those that were not were subjected to extensive vandalism.

The joint venture partners sued the Quantity Surveyor in the District Court both for breach of contract and in negligence.

On the matter of tort, they asserted that that the Quantity Surveyor negligently misrepresented both the degree of completion of the works and the quality of the workmanship of the building work that had been completed every time the Quantity Surveyor certified as to the correctness of a progress report.

They gave evidence that they relied on the Quantity Surveyor certificates for purposes of presenting the relevant progress reports to their financier for payment and that the Quantity Surveyor breached its duty of care to the joint venturers in this regard when it: (1) stated in each of its progress reports that: ‘The standard of workmanship is reasonable at this stage and poses no financial concern to the project.

The quality of workmanship achieved to-date is not seen to adversely affect the market price of the Development’ in circumstances where there was substantiated unworkmanlike work and faulty work on the site; and (2) failed to observe and/or to report to the joint venturers that there were faults and defective workmanship in the building work to enable them to hold back an appropriate sum from progress claims on account of such faulty building work and defective workmanship.

The issue therefore was whether the

Quantity Surveyor’s statement in each of its progress reports constituted negligence.

The trial judge relied on the testimony of the expert presented by the joint venturers, who opined that the true extent of completion of the works was 75% instead of the 95% indicated by the Quantity Surveyor in its progress report.

The trial judge therefore held that the Quantity Surveyor had indeed been negligent and awarded damages.

The New South Wales Court of Appeal upheld the trial judge’s findings and ruled that: (1) the joint venturers relied upon the Quantity Surveyor to exercise at least reasonable care in the inspection and verification of the progress of building work before expressing the opinions in its various progress reports; (2) the expert evidence presented at trial showed that the progress certified by the Quantity Surveyor as having been achieved had not occurred; (3) the joint venturers’ reliance on the Quantity Surveyor’s expertise was established and the assessment of damages was proper.

The Quantity Surveyor would have been better advised to require supporting certificates as to completion and quality from specialist consultants, architects and engineers on a regular basis.

NEGLIGENT VALUATIONS The case of LM Investment Management Limited (In Liquidation) (Receivers appointed) v a Quantity Surveying firm [2015] NSWSC 1902 highlights how troublesome negligent variations could be for Quantity Surveyors.

This case involved a mixed warehouse and office complex development subject of the usual interrelated agreements such as a loan agreement between the developer and its financier for the project funding, a building contract between the developer and the builder, and a tripartite builder’s side deed executed between the financier, developer and builder.

The Quantity Surveyor was engaged by the financier by way of a letter-agreement which required the Quantity Surveyor to ‘administer the loan agreement’ by way of preparing assessments of each progress claim. The engagement further stated that the Quantity Surveyor’s monthly progress reports ‘will be the basis of the [financier’s] advances under first mortgage funding’ and that the Quantity Surveyor ‘must assess the value of information provided by the [developer and builder] and, based on this assessment, provide an independent estimate and monthly reports’.

It appears that the development was substantially delayed and, after finding that the value of the project on completion had been significantly reduced, the financier refused to provide further funding. The project was eventually discontinued by the builder for non-payment and the developer was placed into liquidation.

Both the financier and the developer sued the Quantity Surveyor claiming that the Quantity Surveyor reports overvalued the work that had been done particularly certain trade works. They sued under the then Section 52 of the Trade Practices Act 1974 (Cth) for misleading conduct, for breach of contract and for breach of the Quantity Surveyor’s duty of care.

The plaintiffs claimed damages amounting to the difference between the amounts advanced by the financier to pay the builder and the amounts that

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 15

LEGAL

the Quantity Surveyor ought to have recommended on the basis that they would not have advanced the additional amounts but for the Quantity Surveyor’s recommendations.

in the amount of the difference between what was lent under the loan facility and what would have been lent had the Quantity Surveyor not engaged in wrongful conduct.

The issue before the court was whether the Quantity Surveyor performed its duties in accordance with widely accepted competent professional practice.

According to Ball J at [64]:

The court found on the basis of expert evidence that the Quantity Surveyor’s reports were critical to the financier’s drawdown approval process and that Quantity Surveyor failed to perform its obligations in the valuation of the original budget in progress recommendations and that, whilst the site inspections were carried out satisfactorily, the process of converting this information into a reasonable recommended payment was not completed satisfactorily.

Noting that: (1) the Quantity Surveyor was a firm of expert Quantity Surveyors (2) engaged by the financier for the express purpose of providing advice in relation to matters within its area of expertise (3) on terms that made it clear that the financier would rely on its advice in approving drawdowns on the loan facility, the court held there was little doubt that the Quantity Surveyor breached its contractual and tortious duties to the financier, and also contravened Section 52 of the Trade Practices Act 1974 (Cth).

“In Australia, it is well established that where a lender advances money on the basis of a negligent valuation or misleading or deceptive conduct, the lender is entitled to recover the difference between what was lent and what would have been lent on the true value of the property. If the transaction would not have proceeded at all, generally speaking, the lender is entitled to recover the whole loss that it suffers from the transaction: see Kenny & Good Pty Limited v MGICA (1992) Limited [1999] HCA 25; (1999) 199 CLR 413.”

ERRONEOUS VALUATIONS In Rockdale City Council v Calibre Construction [2015] NSWSC 1980, a consent authority council sued a builder to recover unpaid contribution towards the construction of a dedicated access road in accordance with the parties’ Works-in-Kind Agreement executed as part of a development consent for a multi-storey residential development.

The builder disputed the claim on the basis that the council’s Quantity Surveyor overstated the balance of the contribution due to the council by understating the credit to which the builder was entitled, being its costs for constructing a holding tank under the proposed road, ripping

The court therefore awarded damages

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up of surface paving, excavation and disposal of spoil.

In determining the amount of contribution to which the council was entitled, the court had occasion to determine whether the Quantity Surveyor’s report fulfilled the requirements of a Quantity Surveyor’s determination of the ‘estimated cost of construction of the new access road’ as specified under the parties’ Works-inKind Agreement.

In considering the scope of the Quantity Surveyor’s brief, the court found that ‘construction of the new access road’, for which the Quantity Surveyor’s determination was sought, embraces so much of the ripping up of surface paving and so much of the excavation and removal and tipping of materials as was necessary for the placement of a roadway, and that this extent of works was inherently and unavoidably a part of the construction of the road such that the parties must have intended that it be costed as part of the Quantity Surveyor’s determination.

But the court found that the Quantity Surveyor omitted these elements in its costing based on its erroneous interpretation that these costs were part of building the holding tank, and not part of the “estimated cost of construction of the road”. The court therefore ruled that the council was not entitled to this portion of its claim.

Notably, the court stated at [89-90]: “This is not a case where the Quantity

LEGAL

Surveyor has merely made an error in the discretionary judgment which the parties agreed he should be entitled to exercise. Rather, he has failed to undertake his contractually appointed task because he has failed altogether to estimate the cost of a significant aspect of the road construction….”

It however appears that the court considered the parties responsible for the Quantity Surveyor’s error for their failure to clearly define the scope of the Quantity Surveyor work, by commenting that: Per Fagan J at [90]: “…That is a clear indication that the task of the appointed expert was limited to estimating cost for given works. A Quantity Surveyor would not be expected to have the qualifications appropriate to discriminate between the work which should be regarded as part of the road and that which should be seen as part of constructing the tank.”

SUMMARY These cases highlight several important aspects for a Quantity Surveyor.

and capable of practical implementation.

It should be noted that the appointment above was for the Quantity Surveyor to ‘approve all drawdowns of the facility’. This obligation appears overbroad and creates a wider-than-intended assurance on the part of a Quantity Surveyor in the course of certifying progress and payments.

it is prudent practice for a Quantity Surveyor to ensure that its consultancy agreements or contracts are thoroughly reviewed and that the standard wordings of their progress certificates do not inadvertently provide assurances that are wider than required under their appointment.

A separate and carefully crafted agreement that clearly delineates the scope of the Quantity Surveyor’s responsibilities should also be executed between a Quantity Surveyor and its clients to avoid the situation, that arose above, where the contract governing the discharge of the Quantity Surveyor was established under a clause in the loan facility documents.

Quantity Surveyors should insist on proper scoping in drafting their briefs to ensure that their duties are clearly defined and to avoid situations where their determinations are disputed or where negligence is asserted against them by providing appropriate qualifications to their reports.

A Quantity Surveyor should also be alert to any restrictions contained in its appointment which may operate to hinder or prevent the Quantity Surveyor from properly performing its functions.

In view of the significant weight placed by industry players on the expertise of Quantity Surveyors, and the consequences of a breach by them of their duty of care to their clients,

This article has been written by Doyles Construction Lawyers.

For further information about this topic or if you have any questions in relation to this article, contact doyles@ doylesconstructionlawyers.com

Firstly, the wording of the Quantity Surveyor’s appointment must be clear

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INDUSTRY RESEARCH

INTERNATIONAL CONSTRUCTION MARKET SURVEY 2018 18 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

INDUSTRY RESEARCH

Leading global professional services firm, Turner & Townsend, has released the International Construction Market Survey Results for 2018.

The Survey brings together data and experience from 46 markets around the world, to provide an insight into the current state and direction of the global construction industry.

Steve McGuckin, Global Head of Client Programmes opens the report with “Global construction volume is on the up and the future is looking bright.

But the industry faces more work with fewer workers. The challenge for the supply chain is how to convert this increased output into profit. ‘Good news’ is a repeated undertone in this year’s survey. Underpinning this optimism is an accelerating global economy. In the ten years after the global financial crisis, growth among the major advanced economies has averaged half the pace of the previous ten years. This prompted an extended period of exceptionally low interest rates and sparked concern over stagnation and years of slow growth. But now the giant boiler rooms of the USA and European Union are once again firedup and brightening global prospects.”

THE SURVEY DETAILS SIX KEY CONSTRUCTION FACTS FOR 2018-19 1. Global construction costs are expected to rise 4.3 percent in 2018 following a 4.0 percent rise in 2017.

2. 21 of the 46 markets measured are expected to warm up in 2018, just two are expected to cool.

3. New York once again holds the top spot for highest construction costs, ahead of Zurich.

4. Perth and Muscat were the only two markets to see falls in construction costs.

5. Five markets were identified as running hot and three, Amsterdam, San Francisco and Seattle, were seen to be overheating.

6. There are signs that some weaker performing commodity driven markets are set to warm in 2018, notably Perth and São Paulo.

CONSTRUCTION COSTS ARE INCREASING According to the Survey, “The average construction cost increase for 2018 is forecast at 4.3 percent.” This compares to a 2017 actual figure of 4.1%. The Survey also cites that “there are no regions expecting to see declines in costs in 2018, which may reflect the great optimism emerging across the globe. The lowest forecast for construction cost inflation is 0.3 percent in Madrid.”

The following infographic shows forecasted cost escalation 2018-2019.

The Survey rates markets as cold, lukewarm, warm, hot or overheating. In a cold market there is typically intense competition among contractors for very little work, reducing cost pressures.

Markets are considered warmer as competition decreases and prices begin to rise, as demand increases in relation to supply.

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 19

INDUSTRY RESEARCH FORECASTED COST ESCALATION 2018-2019

According to the Survey, “the five most expensive places to build are New York, San Francisco, Hong Kong, Zurich, and London.” This is based upon the

average build cost in USD for six different types of building: Apartment high-rise, Office block prestige, Large warehouse distribution centre, General hospital,

Primary and secondary school and Shopping centre including mall.

AVERAGE COST OF CONSTRUCTION (USD) PER M2 Singapore Madrid Seoul Santiago UAE Muscat Buenos Aires São Paulo Bogotá Kigali Johannesburg Moscow Warsaw Kampala Jakarta Dar es Salaam Shanghai Beijing Ho Chi Minh City Istanbul Nairobi Bangalore

New York City San Francisco Hong Kong Zurich London Dublin Seattle UK South Sydney UK Central UK North Scotland Amsterdam Paris Tokyo Munich Toronto Doha Melbourne Houston Brisbane Northern Ireland Perth 0

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To download the full Survey, visit www.turnerandtownsend.com

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INTERVIEW

PERSPECTIVES OF A QUANTITY SURVEYOR SADMIR CERIC

Sadmir Ceric started his career as a junior Quantity Surveyor in 2003, whilst completing his degree and graduating in 2004 from Curtin University of Technology (Bachelor of Applied Science, Construction Management and Economics). He joined Ralph Beattie Bosworth (RBB) in 2011 and in 2016 Sadmir accepted the position on the firm’s Board of Directors.

Over the last 15 years, Sadmir has worked as a professional Quantity Surveyor across many sectors including traditional building and construction, mining, oil and gas, infrastructure, marine and civil, on projects of varying sizes and complexities.

Sadmir has been on the AIQS Western Australia Chapter council for around 10 years, holding the position of Councillor, Secretary, Vice President and is currently the President.

1. WHAT ARE THE BIGGEST OPPORTUNITIES AHEAD FOR THE QUANTITY SURVEYING PROFESSION? The Quantity Surveying profession today is different to that of the profession twenty or so years ago. Yes, the principals of the profession are still the same but the Quantity Surveying firms, in addition to the ‘Traditional QS’ services

of Bills of Quantities, Cost Planning and Estimating, Contract Administration and the like, offer a lot more services, such as Arbitration, Feasibility Studies, Due Diligence Reports, Value Management, Insurance Valuations, Expert Witness, Bank Reports and Audits. In short, the Quantity Surveying profession has had to evolve and/or diversify to provide a suite of ‘traditional’ and ‘non-traditional’ services to the dynamic market.

In my opinion, Quantity Surveyors must ensure that the profession stays relevant in the fast paced, everchanging market conditions and technological advances that we see on daily basis. We know that Quantity Surveyors bring great value to

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 21

INTERVIEW

projects, for example, by making sure we provide quality advice pre and post contract which ultimately saves project/ client money. However, from personal experience, Quantity Surveyors are not great marketers and advertisers of work and/or profession and we should and can do a lot better on this front. Quantity Surveyors need to be more pro-active and bullish in marketing themselves and our profession.

It is therefore important for the Quantity Surveying profession to embrace the changing market conditions, technology/ software and move forward with the times, while constantly keeping in line with the core principles of our profession.

2. HOW ARE NEW TECHNOLOGIES INFLUENCING THE WAY QS OPERATE? It is an exciting technological era that we are living in. Innovation and technology are moving at lighting speed, new apps and software are released almost daily and existing software platforms are updated just as fast. The new technology and software are having an impact and an increased influence on the Quantity Surveying profession.

Forefront example of this, over the last few years, is the introduction of Building Information Modelling (BIM) and 3D models, which are having an increased influence on Quantity Surveying. An increasing number of Architects and Engineers can provide a 3D model to the Quantity Surveyor who, with the right training, is able to view, interrogate and generate quantities from the model if required. Being able to properly utilise the model, has meant that the ‘traditional’ scale ruler and take-off paper training is now supplemented with additional training to be able to perform

a 2D on-screen take-off and 3D model quantity generation.

It is important to note that generating quantities from a 3D model or BIM is by no means the ‘be all and end all’, far from it. Quantities will be only as good as the model and Quantity Surveyors spend a substantial amount of time checking and querying the model the same way they once queried the design documentation such as 2D drawings. A good Quantity Surveyor can understand and know what information isn’t reflected on the design, and yet this ‘missing’ info is crucial to the project and therefore to the budget.

Utilising new software has resulted in a number of benefits such as, increased speed of the quantity take-off, decreased amount of printing, drawings are stored electronically and others. However, this does come at a cost. The cost of software subscription/maintenance isn’t insignificant and the additional continual ‘up-specking’ of hardware to optimally run the software adds to office overheads.

In the near future, we may see Quantity Surveyors utilise remote drones to undertake site inspections!

3. WHAT COULD BE DISRUPTIVE TO THE QS PROFESSION? The introduction of BIM in the industry has resulted in some talk that the Quantity Surveyors will become redundant. That estimates, Bills of Quantities, material take-offs and other elements of our services will become so automated that there will no longer be a need for a Quantity Surveyor to be involved. The fact is that any new software and technological change does cause disruption to the Quantity Surveying office due to training of staff

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and switching from one platform to another. It does not mean redundancy to our profession. In fact, many Quantity Surveyors are now able to interrogate BIM and/or 3D model in a similar way that they would a 2D drawing and are able to utilise it during measurement as a viewing tool or for quantification.

There have also been some comments that Artificial Intelligence is a potential disruptor to our profession. In my humble opinion, I do not believe that this will have a significant impact on the Quantity Surveying profession, at least not in the near future. Projects will always require the ‘QS Intelligence’ to understand the ‘un-knowns’ or risks which haven’t been documented or defined. A Quantity Surveyor’s role will change/morph with the times, but I do not believe that it will ever be made redundant.

TIMBER

COSTING

TIMBER

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TIMBER

It seems not a week goes by without the announcement of another engineered timber project around the world. Recent decades have seen incredible growth in engineered timber projects, with significant buildings of up to 10-storeys in the UK, structures of up to 18-storeys in Canada, and a plethora of projects in Europe (including Mjøstårnet which, at 22 storeys, will be the tallest in the world when completed later this year). As ever, Australia is near the front of the pack, with significant projects in Melbourne, Sydney, Brisbane, Adelaide, and soon Perth.

While timber structures have been utilised for buildings of all classes around the world, Australia has seen most focus on buildings in Classes 2 and 3 (multi residential/short term residential) and Class 5 (offices). Indeed, most building designs can be optimised to suit engineered timber systems, which can deliver both the open, flexible spaces afforded by a column and beam design (with a 9m x 9m grid now common), or the high performance, comfortable spaces resulting from loadbearing-wall structures, where timber panels are utilised to deliver efficient floor and wall elements.

Both of these structural systems have been widely utilised to successfully deliver state of the art projects, with panelised construction used for multi-residential, accommodation, and education projects throughout the country (e.g. Forte, The Green, and Monash University Student Accommodation in Melbourne to name a few). Furthermore, column and beam designs have been utilised to deliver some of the country’s most photographed office projects including International House (Sydney) and 25 King (Brisbane).

WHAT IS ENGINEERED TIMBER? Forté Apartments image acknowledgements: Architect was Andrew Nieland/Lendlease Photography by Emma Cross.

Engineered timber products are not particularly new to the world. In fact, all products we commonly see used

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in mid-rise projects were developed in the 20th century (Cross Laminated Timber, the most recent addition to the family, emerged in the 1990s), meaning they have all been tried and tested in structures for at least twenty years.

Engineered timber products can be divided into two main groups: ‘Massive’, and ‘Light-weight’ systems. The term ‘Massive’ timber refers to “an element not less than 75mm thick as measured in each direction formed from chemically bonded laminated timber” (NCC2016) and includes products such as cross laminated timber (CLT), laminated veneer lumber (LVL), and glue laminated timber (Glulam). Each of these products excels in different areas of structural use, and as such, timber designs will typically utilise a mix of two (or sometimes all three).

CLT, often described as ‘jumbo-plywood’, is manufactured by gluing and pressing three or more layers of timber boards that have been arranged so each layer is perpendicular to the last. This twoway strength makes the product highly efficient in shear, and well suited to panelised use in walls or floors.

LVL is also produced as a panel, however consists of many thin veneers that are oriented to parallel and are then glued and pressed together in thicknesses of up to 75mm. With all (or most) veneers aligned in the same direction, LVL is incredibly strong as a beam, column, or one-way slab.

Finally, Glulam comprises lengths of timber which have been aligned in the same direction and glue laminated to produce high strength linear sections which are typically used as columns and beams.

The lightweight alternative to the above ‘massive’ systems, sees wall stud frames (consisting machine graded pine or LVL studs) and floor cassettes (consisting high span floor joists which are pre-fixed to a flooring panel for speedy installation)

TIMBER

utilised in a panelised fashion. While perhaps lacking the natural beauty of the massive options identified earlier, this system is highly efficient and structurally sound in buildings of up to eight storeys.

With capacity within the industry to fabricate wall frames and floor cassettes in a highly efficient frame and truss plant, the lightweight solution is an attractive option for most mid-rise Class 2 and 3 buildings.

COSTING TIMBER So how is costing timber different to costing any other building material? In reality, it’s not the timber that changes things, it’s what the timber allows the design team and builder to do.

Engineered timber products are fabricated to order, facilitating further prefabrication if required, they are light (timber is 20% the weight of reinforced concrete), they are easy to fix to (think an impact driver and some screws rather than a hammer drill and epoxy), their assembly requires no wet trades or hot works. They can be lifted with edge protection pre-installed, essentially avoiding live edges altogether.

What’s more, timber floor panels (whether massive or cassette) require no propping, meaning services rough in can commence the day after a floor above is installed.

When combined, these factors have been seen to result in on site programs that are almost a third shorter than if the building were built following traditional in-situ techniques. This saving is well illustrated in the case of Forte, Australia’s first mid-rise timber project. Constructed

by Lendlease in Melbourne’s Docklands in 2012, this 9-storey project was installed on site by a team of up to 6 people (including crane crew) in just 10 weeks.

This time saving directly impacts all time related costs in the project, including preliminary costs for the builder, interest costs for the developer, and risk exposure

for all parties involved.

While time savings generally account for the largest proportion of cost savings in a timber project, other characteristics unique to timber can result in further savings. For example, the light weight of timber means that massive timber panels rarely exceed 2 tonnes, and lightweight panels rarely exceed 1.5 tonnes. This comparatively small weight allows for the use of lower capacity cranes on a project, reducing both the weekly hire and footing costs.

International House Sydney image acknowledgements: Designed by Tzannes architects for Lendlease.

Photography by Ben Guthrie

Importantly, the prefabricated nature and low weight of timber elements has been found to result in incredibly safe sites.

With a supervisor to worker ratio many times higher than experienced with larger structure workforces, no live edges, no high-risk trades, and on site cutting kept to a minimum, timber construction sites experience reduced occupational health and safety risks to all workers on site.

WOODSOLUTIONS’ ROLE The most important stage of a timber project is right at the start. It is important that timber projects are costed with the material, and what it means for a project in mind (this must also be considered in the design). If used correctly, timber construction can be faster, safer, quieter, and ultimately cheaper than traditional systems WoodSolutions is here to help this happen. The WoodSolutions Mid-rise Advisory Program team has offices in Melbourne and Brisbane. The team is available to provide free project-specific advice throughout all stages of a project.

With expertise in costing, programming, engineering, planning, design, and construction, the team is well equipped to support you through your next timber project – simply contact us at info@ woodsolutions.com.au

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 25

INDUSTRY RESEARCH

BUILT TO PERFORM

The Australian Sustainable Built Environment Council (ASBEC) in partnership with ClimateWorks Australia released, in July 2018, a report titled ‘Built to Perform’ which forms part of their Building Code Energy Performance Trajectory Project.

Carbon Ready Code would maximise the potential for new construction to cost-effectively contribute to achieving the overarching zero carbon goal, and prepare buildings built today for the 2050 zero carbon environment in which they will ultimately be operating.

This Report investigates opportunities for the National Construction Code to contribute to the decarbonisation of Australia’s economy in line with the Paris Agreement - Australia has committed to reducing economy-wide greenhouse gas (GHG) emissions by 26 to 28 per cent below 2005 levels by 2030.

Referring to the National Construction Code, the Report states that increased minimum energy requirements in the Code are essential to address market failures in the delivery of higher performance buildings that have seen a widening gap between industry leaders and minimum requirements.

Improved energy performance of buildings presents a win-win-win opportunity, reducing stress on the electricity network, offering bill savings, supporting a least-cost pathway to a zero-carbon built environment, and improving health and resilience outcomes for households and businesses. A Zero

Analysis, conducted by the research partners and contributors, shows that by 2030, even conservative improvements in Code energy efficiency requirements, could deliver between 19 and 25% of the energy savings required to achieve net zero energy in new residential buildings, 22-34% of the required energy savings

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for commercial sector buildings, and 3556% for public sector buildings.

With regards to construction costs, the benefits of the energy efficiency targets set out in this report could be delivered at a construction cost premium of between 1% and 4% of typical construction costs for detached homes, and around 1-2% for commercial office buildings.

The Report outlines a set of energy performance targets for different building types across different climates, based on societal cost-benefit analysis of energy efficiency and on-site renewable energy opportunities. The goal of the analysis is to assess the contribution that the Code could make towards achieving GHG emissions reductions in line with overarching zero carbon targets.

To download the full Report, visit www.asbec.asn.au

PERSPECTIVES

SEISMIC DESIGN WOULD YOU LIKE YOUR PROJECT

COSTS SHAKEN, OR NOT STIRRED? THE BUILDING ECONOMIST - SEPTEMBER 2018 - 27

PERSPECTIVES

There’s a little-known topic floating around major projects which has occasionally caught out an unsuspecting sub-contractor or contractor, leaving them punching up for project variations or down for compliant installations.

Commonly referred to as a ‘Seismic job’, these projects solicit raised eye-brows, frustration and a certain fear of the unknown.

Since 2010, AS1170.4 Section 8: ‘Parts and Components’ has been mandated by the National Construction Code in Australia, but it doesn’t jump out at you. Structural Engineers ensure our buildings are built to survive building movement in wind and seismic events, but Section 8 requires the non-structural element be able to withstand this movement (acceleration). This allowance reduces the risk to life safety for the occupants, enables egress from the building, and ingress in the case of postdisaster facilities with the intention to be ‘serviceable for immediate use’. These non-structural elements include, but are not limited to: ceilings, partition walls, all building services, plant and equipment, etc. Some people have been known to refer to the Parts and Components as ‘2nd fix elements’, or the ‘non-primary structure’. Whatever you call them, it’s mandated by the NCC, a ‘Duty of Care’ to occupants exists under OH&S regulation, and a ‘Safety in Design’ obligation for design professionals.

The industry ramifications from the Grenfell Tower ‘fallout’ has ensued multiple ‘Acts’ around product conformity and installation compliance regime; products might conform, but the installation requires design compliance.

Process-wise, the structural engineer’s responsibility ended with the structure and the load bearing walls, the internal fit-out design responsibility in the hands of the architect and the services layout to the Service Engineers: neither of which are trained to design for earthquakes. So,

what happens next: the specifications from NATSPEC have abstract sentences such as: • ‘provide bracing to prevent lateral movement’ • ‘provide for seismic performance’ It’s easy to miss these if you’ve been building or Quantity Surveying for many years. These terms haven’t made it into university courses except for those chosen by structural engineers.

Essentially, they get missed, ignored or given a manufacturer’s solution. Much like trusting a peddler of ACP, everyone has a different approach to ‘selling a compliant solution’, often wrapped up in specification guarantees, siloed design and a methodology that receives no peer review.

Why aren’t you hearing this being spruiked from the rooftops? ‘We have solutions’.

Seismic is only being provided where it is specifically being asked for. If the certifier is aware of the obligation, if the installer has previously been burnt financially with non-compliant installations, where the contractor had liquidated damages for project delays. I have heard time and time again in the industry: ‘Don’t tell them what they need, we sell them what they want’.

BUT WHY THE INTEREST NOW? On Friday 20th July 2018, the Victorian Building Authority (VBA) released the following statement in its VBA Mail:

DESIGNING CEILING INSTALLATIONS FOR EARTHQUAKE ACTION The VBA is aware that ceilings in buildings may not be designed to meet the requirements of AS 1170.4 – 2007 Structural design actions Part 4: Earthquake actions in Australia.

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Volume One, Clause B1.2 (c) (ii) and Volume Two, Clause 3.11.3 (c) (iv) of the National Construction Code require buildings to be designed to resist seismic loads calculated to AS 1170.4 - 2007 Structural Design Actions Part 4: Earthquake actions in Australia as appropriate.

Section 8 of the Standard requires ceilings to be designed to resist earthquake forces, except where they are located within domestic structures less than 8.5m tall and “Importance Level One” structures. The Standard also applies to walls, partitions and other nonstructural elements.

Designers, contractors, installers, builders and building surveyors are reminded that the requirements of AS 1170.4 – 2007 need to be considered when designing ceilings, walls, partitions and other non-structural elements within a building.

Until this VBA message, South Australia was the only state to my experience attempting to comply with AS 1170.4 Section 8 on every Government project.

The Department of Planning, Transport and Infrastructure South Australia has provided some clear direction to begin the market’s education by communicating the following documents: Seismic Restraint of Engineering Services G172 and Seismic Suspended Ceilings G173.

As previously indicated, NATSPEC generic specifications call up AS 1170.4, or suggest seismic requirements be considered, and this is supported by the NATSPEC Technotes DES 030 – Seismic Design Actions on Non-structural Components. Issued in April 2014, there has been little attention given to it, and no other Australian Standard updates to date that would prescribe greater attention until now.

AS/NZS 2785, Suspended ceilings – Design and installation, is presently in under re-development and expected to

PERSPECTIVES

shake things up. There were over 200 submissions during it’s ‘Public Comment’ period and ‘clears the confusion’ with prescriptive direction, calculations and minimum project documentation requirements. It also acts on the seismic design of walls for ceiling loads, reiterates the restraint of building services and prescribes services clearances like NZS 4219 (a code lacking in Australia).

WHAT ARE THE COST IMPLICATIONS FOR PROJECTS? Construction is not a charity, and seismic compliance requires design review, improved or additional materials, modification of installation methods and installation review/sign-off (depending upon jurisdiction/facility purpose).

Seismic 1.0 saw sub-contractors (installers) winning tenders, finding out ‘seismic’ is required and relying on manufacturers to provide them with a ‘compliant design’ and fighting over the additional cost. Unfortunately, there will be multiple variations as entire sections will require redesign due to a lack of buildability, clashes due to nonconsidered bracing interfering with services, firebreaks, etc.

Seismic 2.0 sees constructors clearly informed prior and ensuring their sub-contractors are fully aware of the obligation to install a compliant system.

Sub-contractors have considered the costs although they are still heading into a battle for plenum real estate as the many services and internal fit-out usually require additional bracing which were never on the tender documents.

Variations will follow, although less variations as consideration was previously outlined.

Seismic 3.0 involves the engagement of seismic engineering service with the design team. Many construction materials are generic with minimum material strengths and masses allowing generic

seismic design pre-tender. A holistic and integrated approach is employed to ensure ceilings can maintain connection requirements, internal walls are designed for dynamic shelf and ceiling loads, while building services are laid out with a knowledge of all seismic restraints and clashes are detected earlier. We have the technology for multiple consultants to engage on electronic documents across multiple layers in real time. This method ensures all tenders are based upon great information and modification is simpler with real time information and less interaction/delays to rework an issue.

WHAT CREATES GREATER COSTS? When designing for seismic compliance, the following elements influence the

forces designed as per structural considerations.

As with structural engineering, the importance level (IL) of a building dictates the safety margins being applied to a building and the wind/seismic event they need to withstand. The Importance Levels are outlined in the National Construction Code Table B1.2a as follows: A generic description of building types has been provided to which Importance Levels have been assigned. The “Importance Level” concept is applicable to building structural safety only. More specific examples are provided in the following Table. The examples are not exhaustive.

Occasionally ‘creative accounting’ gets applied to reduce the Importance Level of a facility. Beware, these facilities have

Importance Level

Examples of building types

1

Farm buildings and farm sheds.

Isolated minor storage facilities.

Minor temporary facilities.

2

Low rise residential construction.

Buildings and facilities below the limits set for Importance Level 3.

3

Buildings and facilities where more than 300 people can congregate in one area.

Buildings and facilities with a primary school, a secondary school or day care facilities with a capacity greater than 250.

Buildings and facilities with a capacity greater than 500 for colleges or adult educational facilities.

Health care facilities with a capacity of 50 or more residents but not having surgery or emergency treatment facilities.

Jails and detention facilities.

Any occupancy with an occupant load greater than 5000.

Power generating facilities, water treatment and waste water treatment facilities, any other public utilities not included in Importance Level 4.

Buildings and facilities not included in Importance Level 4 containing hazardous materials capable of causing hazardous conditions that do not extend beyond property boundaries.

4

Buildings and facilities designated as essential facilities.

Buildings and facilities with special post disaster functions.

Medical emergency or surgery facilities.

Emergency service facilities: fire, rescue, police station and emergency vehicle garages.

Utilities required as backup for buildings and facilities of Importance Level 4.

Designated emergency shelters.

Designated emergency centres and ancillary facilities.

Buildings and facilities containing hazardous materials capable of causing hazardous conditions that extend beyond property boundaries.

Importance levels must be assigned on a case by case basis. Table sourced from NCC 2016 Guide to BCA Volume One – Amendment 1, Page 85.

Section B1.2, National Construction Code 2016 © 2016 Commonwealth of Australia and States and Territories of Australia

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PERSPECTIVES

a lifetime of service to provide and a ‘duty of care’ associated. There are effective measures possible for interior designs in IL4 environments, for example a postdisaster government service will have the interior of all essential services on certain floors and design for IL4, whereas the functions not required immediately post-disaster such as HR and external organisations sharing the building may have an interior designed to IL3. As an indicator for rising from IL3 to IL4, the acceleration calculation increases by the multiple 2.08.

by, and your feet sink in the sand? Soft sand behaves like a liquid in earthquake movement (liquefaction). Good site testing can reduce the cost/design risks.

This value varies from 0.8 to 1.1, the lower the better).

PROBABILISTIC HAZARD FACTOR (Z)

Controlling the mass of materials is essential to reducing the loads placed on the many connections and members that make up the non-structural elements.

Areas that introduce mass without consideration for it are: acoustics, product substitution and ‘standard solutions’ without specific engineering design.

Generally, there is a direct relationship between the outcomes of reducing loads, with service loads considered also but able to be reduced also.

It may sound like a location issue, but different areas of Australia are known to be more seismically active. These values are outlined in AS 1170.4 (Australian Standard for Structural Design Actions), with some major variations from 0.03 in a major city to 0.12, although a recent amendment means that the minimum ‘Z factor’ is now to be 0.08 to ensure a minimum safety level across the country.

To illustrate this, it is said that Newcastle had not been identified as a higher risk area for earthquake prior to the devastating 1989 event and that that area of the hazard map was then ‘painted’ based upon the experience. Localised values can be sought through good geological surveys and may allow an improvement of the design requirements.

This value therefore varies from 0.08 to 0.13 generally, with a few outliers including Meckering in Western Australia 0.2 and Macquarie Island 0.6.

SITE SUB-SOIL CLASS As per structural engineering, a firm subsoil reduces the need for deeper footings and the accelerations calculation for nonstructural elements. Have you ever stood still in the ocean, waves passing you

MASS (M) Force equals mass times acceleration (F=ma). Acceleration is defined by the previous topics, which are generally outside of the designers control. The key to lateral forces is ‘Mass’.

WHAT’S HAPPENING GLOBALLY The USA has a more prescriptive approach to Earthquake design applying a KISS principle to construction based upon regional risk and facility purpose.

Standardised walls and ceiling exceeding load requirements are ensured, often with a great deal of bracing to the soffit and (very conservative) over-engineered elements.

New Zealand takes a scaled approach, similar to Australia, although with greater probabilistic hazard factors and vertical acceleration considerations.

New Zealand also has workplace seismic compliance clearly identified in OH&S legislation due to ‘Duty of Care’ provisions, something not realised in Australia but reasonable to consider.

30 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

Utilising a ‘USA approach’ to seismic compliance in Australia and New Zealand is not appropriate as we haven’t overengineered our systems and attempt to ‘value engineer’ constantly, presently to our detriment with major non-compliance with AS1170.4 part 8.

With architectural and building services components comprising up to 70% of a building’s value, significant damage to these elements resulted in some buildings being declared economic losses [in Christchurch], even when the structure itself was not badly damaged.

Ferner et al, NZSEE 2014.

WHY HASN’T THIS FEEDBACK MADE IT BACK TO QUANTITY SURVEYORS? I’m no Quantity Surveyor, but I assume the multiple cost-overruns and delay lawsuits are still taking flight from the latest facilities to attempt compliance.

There are eight years of buildings that are not compliant if they didn’t design the multiple elements for seismic. There are architects who have designed major New Zealand facilities only to have a six-week re-design delay, or worse, outcomes that are not able to be printed.

Retrofitting Seismic Design elements is challenging, disruptive, costly and frustrating for all parties. Get it right now in your estimates, seek out good data and open the discussion as our facilities owners are entitled to it, and the lives of the people inside them.

The Newcastle Earthquake happened on a public holiday, three days after Christmas.

Had it been a workday, the estimated loss of life is 300-500 people, in a low-density industrial town. Now imagine this occurs in one of our major cities.

This article has been written by Jordan Bartlett, KCL Engineering Australia.

SUSTAINABLE TECHNOLOGY

ALGAE BUILDING TECHNOLOGY: IS IT THE NEXT SUSTAINABLE TECHNOLOGY? By Assoc Prof Sara J Wilkinson, University of Technology Sydney, Faculty of Design Architecture and Building, School of Built Environment.

Prof. Peter Ralph, University of Technology Sydney, Faculty of Science, C3.

INTRODUCTION Buildings and the energy used therein, contribute around 40% of total global greenhouse gas emissions (GHG). It follows that reducing building-related GHG emissions could significantly contribute to mitigating global warming.

One option is to use renewable energy, which is said to dominate energy production in the 21st century. This article focusses on an as yet, untested technology in Australia, Algae Building Technology (ABT) and what Quantity Surveyors need to know about it.

Algae Building Technology. Probably you are thinking; what is this? How does it

work? More importantly, what would it cost? And probably, a whole host of other things too. It may surprise you to learn, Becquerel discovered the photovoltaic (PV) effect 179 years ago in 1839; however, PV energy was inefficient and expensive until in 1941, when Ohl invented the solar cell. Over a relatively short period of time, a number of developments in battery storage and smart electricity grid management, have greatly reduced costs and transitioned PV to a viable energy alternative. To give you an idea in the 1950s, PV cost AUD$2,723.32 per watt in 2016 money, slowly then swiftly, the cost of solar cells fell to AUD$1.14 per watt by 2016. This example demonstrates that sudden, disruptive and often

unpredictable technology shifts occur that can render technologies viable and attractive, this has occurred with solar; and it could happen for other renewable technologies.

Global biomass energy production in 2014 reached 88 GW, including 116.1 billion litres of biofuels (Rosillo et al., 2016); as such bio-energy is no longer a transition energy source. The Clean Energy Council’s Bioenergy Roadmap (Clean Energy Council 2013) proposed that by 2020 the contribution from Australian biomass for electricity generation could be 10,624 GWh per year, which is six times that generated in 2013.

Long-term potential for electricity from biomass by 2050 could be 72,629 GWh/

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SUSTAINABLE TECHNOLOGY

year, approximately 40 times the 2013 level (Clean Energy Council 2013). So, what is algae building technology, and; how does it work?

ALGAE EXPLAINED TO NONSPECIALISTS Algae are either single-celled microbes (microalgae) or multi-celled organisms (macroalgae or seaweeds) that photosynthesise. Algae grow from the tropics to the poles, in freshwater, saltwater and in the soil. For the most part, we are only describing microalgae in this article. Algae need light, nutrients and CO2 to grow and produce new biomass. The biochemical diversity of cellular products produced by algae is immense and therefore the products that can be “grown” in these cells can also be used across a wide range of industries. Algal biomass can be used in biofuels, human food supplements, functional foods, feedstock for livestock, fishmeal for aquaculture, bioplastics, industrial enzymes, pharmaceuticals, nutraceuticals, the list of applications is virtually endless.

SolarLeaf, BIQ Building, Hamburg.

32 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

ALGAE AS A BIOFUEL To convert algae from cells growing in water to a final product requires some process engineering. Firstly, the cultured cells need to be harvested, flocculated or centrifuged (de-watering), once the cells are more concentrated, usually they need to be ruptured to access the compounds of interest such as omega-3 oils or proteins. The product must be chemically separated from the cell debris and purified to the level required for the specific product. To convert the oils (lipids) into a biofuel requires additional chemical processing such as hydrothermal liquefaction (high temperature and high pressure conversion of oil to hydrocarbon).

EXISTING ALGAE BUILDING TECHNOLOGY To date there is one completed building using algae building technology, the BIQ House, built in Hamburg in 2013, which comprises 15 apartments on four floors, with a gross floor area approximately 1600m² [1]. In 2013, a team of designers including building engineers Arup, Strategic Science Consult of Germany, and Colt International designed the BIQ House for an International Building Exhibition (IBA) in Hamburg.

200m² of integrated photo-bioreactors (PBRs) in 120 vertical panels, on two façades, generate algal biomass and heat as renewable energy resources in a low-energy residential building.

The PBR panels are on sliding tracks and can screen the balcony areas. This façade panel system provides a thermally controlled microclimate around the building, noise abatement and dynamic shading.

SUSTAINABLE TECHNOLOGY

HOW DOES IT PRODUCE ENERGY? Microalgae are cultivated in flat panel glass PBRs. A combination of sunlight and constant turbulence, causes the microalgae to grow producing heat and phosphorous; which is a nutrient.

The turbulence is created by air and/or carbon dioxide injected from the base of the panel. The heat produced, solar thermal heat, has an efficiency of 38%, compared to 60-65% for a conventional solar thermal source and the biomass production of light energy has a 10% efficiency compared to 12-15% with a current conventional PV [1], and so production levels in 2018 are not as efficient as alternatives; but this may change. Furthermore there are 300,000 to 500,000 species of algae and each will produce different amounts of biomass.

BIQ data is based on one species only.

Biomass and heat are transported to an energy management centre, or plant room in the basement, where the biomass is harvested and the heat is recovered.

Algae sequesters carbon dioxide and produces oxygen. In the BIQ, the algae removes up to six tonnes a year of carbon dioxide. Excess solar thermal heat from the PBRs pre-heats domestic hot water, warms the interiors, or is stored below ground. The biomass is harvested and collected, with up to 80% converted into methane (offsite), which can then returned to generate electricity and heat, or sold on elsewhere if preferred.

Heat production from the solar thermal heating of the water of about 40°C (150KWh/m2/yr) is reintroduced into the system via a heat exchanger in the heating network or stored below ground in geothermal boreholes. The boreholes store heat from 16-35 °C. Carbon dioxide (flue gas) is supplied, as required, to the microalgae in the bioreactor façade [1].

Microalgae absorb sunlight and the

bioreactors provide dynamic shading to the interior, with the amount of sunlight absorbed and shading, dependent on algae density. With more sunlight, algae grow faster providing more shading [2].

According to Arup [2], PBRs are highly efficient for algal growth and require minimal maintenance. The PBRs have four glass layers: a pair of double-glazing units creating a cavity, filled with argon gas to minimise heat loss.

Maximum temperature within the PBRs is around 40°C, as higher levels will harm the microalgae. This temperature poses a challenge to applying the BIQ system to conventional housing, as the relatively low maximum PBR temperature limits the practical use of the extracted heat to mainly a pre-heating function for other building systems. Furthermore, the maximum growing temperature for the algae species used in Hamburg may limit panel use to only the cooler regions of Australia, as air temperatures can exceed 40°C in many areas and the algae species used there would die. However, it is possible to use other algae species that thrive under Australian conditions.

The total energy system conversion efficiency is 27% (when you add biomass methane + solar heating )[2], whereas PV systems yield an efficiency of 12-15% and solar thermal systems 60-65%, so total energy conversion is lower. However, the BIQ building’s façade provides energy directly to several building services systems, delivering additional energy benefits through summertime shading, and by providing a harvested biomass for additional use.

Take up and acceptance of Algae Building Technology requires education to develop an understanding of the systems’ benefits for owners, users, and built environment professionals such as Planners, Surveyors, Project Managers, Contractors, Facility Managers, Certifiers,

Property Managers and, of course, Quantity Surveyors [2].

ISSUES FOR QUANTITY SURVEYORS Various built environment professional practitioners and stakeholders possess knowledge and skills which they exercise in respect of design, engineering (including structural, mechanical, electrical, and façade), valuation, property management, cost management and control, planning, building certification and regulations. Each professional and stakeholder possesses different expertise and skills, which they exert at different times during the development of a project.

Quantity surveyors prepare procurement and tender documents and manage costs during the construction phase.

They also advise clients on the likely future maintenance costs of different building designs.

Our Algae Building Technology research involved interviewing experienced practitioners to ascertain their views from the 16 professional groups listed below: 1. Quantity Surveying 2. Architecture 3. Civil Engineering 4. Structural Engineering 5. Chemical Engineering 6. Façade Engineering 7. Services Engineering 8. Mechanical Engineering 9. Planning 10. Building Construction 11. Building Certification 12. Project Management 13. Building Surveying

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 33

SUSTAINABLE TECHNOLOGY

TABLE 1 - ENVIRONMENTAL ISSUES RAISED BY PROFESSIONALS

This is a substantial barrier to overcome, even with offsets through sales of product to third parties and energy savings. However, on the plus side, this technology will position New South Wales and Australia in a low-carbon economy. It is clear that ways need to be found to reduce overall construction costs by standardising the product and developing and adopting a viable business model.

1

Biomass and biofuel are good for the environment

2

Develops another renewable fuel source

3

Sequesters carbon

4

Reduces carbon footprint

5

Lowers greenhouse gas emissions

6

Mass adoption could help lower urban heat island effect in urban settlements

7

Reduces loads on existing energy infrastructure

8

Need to adopt biology in the built environment

9

Could produce sustainable fabrics as a by product

10

Can claim innovation points in green building rating tools

11

Potential protein source for food production

12

Other renewables produce more energy

13

Leaks and potential contamination need to be managed

14

Food not viable as many regulations governing production

15

Complexity of biological systems for building owners and managers

16

Current environmental benefit is negative within the building lifecycle Source: Wilkinson et al, 2016.

14. Property Development

practitioners are summarised in Table 1.

15. Sustainability Manager 16. Valuation The technology was explained to them and we asked what they thought would be drivers and barriers to adoption.

This article reports on the environmental issues and economic / cost issues that our research identified. Full discussion of the technological, legal and regulatory, and social issues are reported in our feasibility study. The environmental issues, both positive and negative, raised by the

ECONOMIC / COST ISSUES For most professionals who were interviewed, cost is the main barrier to algae system development and adoption.

The Quantity Surveyor stated that the goal cost wise for hospital faรงades in Australia in 2016 was around AUD $350 m2. The cost of the faรงade on the German building was USD $2,200-2,300 m2 or, approximately AUD $3,300, which was nearly ten times more expensive.

34 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

Additional costs would be incurred in the design phase; researching, developing and communicating the technology to the design team. Further costs would be incurred during construction, appointing contractors able to construct and install this specialist technology. Contractors are likely to add a premium to their tenders to cover unforeseen costs associated with a new and unknown technology.

Finally, additional costs arise during operation with the maintenance contract.

Sourcing replacement components may be a challenge and result in higher costs, especially if required at short notice, although the use of standardised and easily replaceable components would help keep costs down.

A related cost issue is that there is only one complete building to inform the industry or probable costs for this technology. Only after several buildings are completed using this technology will there be sufficient cost data to draw reliable conclusions about costs.

Without reliable data, cost management risks are significantly higher, a factor that is a barrier to adoption all by itself.

A summary of all the economic / cost issues are listed in Table 2.

WHERE TO NEXT? Introducing a new technology involves education and training in the design, specification, construction, operation and maintenance of the systems. Some

SUSTAINABLE TECHNOLOGY

of the issues that will require further investigation are the design, fabrication, installation, cleaning of the glazing panels and maintenance of the systems, as well as understanding of the durability and lifecycle of components and panels.

goes ‘live’ retrieved on 4 February 2016 from http://www.arup.com/ News/2013_04_April/25_April_World_ first_microalgae_facade_goes_live.aspx

There are also health and safety protocols to develop around certification within the Building Code of Australia, leakage, impact damage and potential contamination. It is likely that there will be some reticience in some areas to adopt this new technology on the basis of production and energy efficiency levels, based on aversion to risk; however, this is much the same for all new innovations.

Remember, if we look at solar in the 1950s, it was niether a cost effective nor an efficient technology, and this may be the case for ABT.

TABLE 2 - ECONOMIC/COST ISSUES RAISED BY PROFESSIONALS

So now you know a little more about ABT, how it can mitigate the impacts of climate change and cost issues related to QS practices. The benefits and barriers identified from interviews with 24 professionals in Sydney and Melbourne during 2016 need to be acknowledged, investigated and managed if the stakeholders are to feel comfortable adopting this innovative technology. Work is underway to test an Algae Prototype Panel (APP) at University of Technology Sydney towards the end of 2018. Quantity Surveyors will be at the forefront of advising clients about the pros and cons, and risks associated with this innovative technology.

REFERENCES [1] Buildup, 2015. The BIQ House: first algae-powered building in the world.

Retrieved on 21st September 2016 from; http://www.buildup.eu/en/practices/ cases/biq-house-first-algae-poweredbuilding-world [2] Arup, World’s first microalgae façade

[3] Wilkinson, S. J., Stoller, P., Ralph, P.,

& Hamdorf, B. (2016). The Feasibility of Algae Building Technology in Sydney. City of Sydney Environmental Performance Grant 2015. DOI: 10.13140/ RG.2.1.4349.6560.

1

What is the value of end product?

2

Production is very expensive compared to other renewables such as PV.

3

What scale is needed to make it viable? 10 metres square or 100 metres square? What is the return on energy production?

4

Cost was the main barrier to development and adoption.

5

Potential revenue from other industries – e.g. industrial chemicals or sustainable materials.

6

Façade cost of German building was US $2,200-2,300 m2 compared to Australian hospital facades which are around AUD $350 m2.

7

Cost of PV 20-25 years ago was prohibitive, and eventually economies of scale will be achieved.

8

Additional costs in design.

9

Additional costs in construction.

10

Additional costs in maintenance and operation.

11

Capital value could be higher as unique technology or, lower if ABT is perceived as too complex, expensive, green wash or a white elephant.

12

Long-term cost savings as ABT produces on site energy and energy costs will increase.

13

Would be more attractive to market (in value) if technology can power, light, heat and cool buildings.

14

Valuer assesses income, maintenance and capital expenditure (Capex) and needs benchmarks.

15

ABT assists Australia towards a low carbon economy.

16

Loss of Net Lettable Area (NLA) from additional thickness of the façade and plant room makes it less economically attractive.

17

Payback period is unknown and needs to be reasonable within lifecycle of building i.e.

25 years.

18

Some clients may pay more to show green credentials, proof of concept and innovation to be first into the market.

19

Warranty – Is there one, and how long does it last?

Source: Wilkinson et al, 2016.

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 35

SPOTLIGHT

WOULD YOU KNOW IF A PHOENIX OPERATOR WAS STEALING FROM YOU? 36 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

SPOTLIGHT

An illegal phoenix company is one that deliberately racks up debts then goes into liquidation to avoid paying them.

The operators then set up shop under a different name – completely debt free.

This dodgy behaviour is hitting the building and construction industry hard and as Quantity Surveyors it’s good to be aware so you don’t get caught up in it.

Honest contractors and workers are left in the lurch without their entitlements, super and bills being paid.

It’s important to understand that occasionally the need to wind up a company may arise from events outside a business owner’s control – such as a loss of key customers. Business rescue is legitimate and the Australian Taxation Office (ATO) will work with those in this category to provide education and advice.

When phoenix activity is deliberately used to defeat creditors, it’s illegal and it’s a big problem for Australia.

A recent report by Pricewaterhouse Coopers (PwC), “The Economic Impacts of Potential Illegal Phoenix Activity” estimates the annual cost of illegal phoenix activity to the Australian economy at between $2.85 billion and $5.13 billion, which includes the economic impact on: • Employees - lose between $31 million and $298 million in unpaid entitlements (wages, annual leave, pay in lieu of notice, redundancy, long service leave and superannuation).

• Businesses - lose between $1,162 million and $3,171 million as unpaid trade creditors.

• Government - loses $1,660 million in unpaid taxes and compliance costs.

The report was commissioned by three Phoenix Taskforce member agencies – the ATO, Australian Securities and

Investments Commission (ASIC) and the Fair Work Ombudsman.

WHAT’S BEING DONE ABOUT ILLEGAL PHOENIX ACTIVITY?

The Phoenix Taskforce is a group of 32 Federal, State and Territory government agencies taking a whole-of-government approach to combating illegal phoenix activity.

The Government has announced a comprehensive package of reforms to address illegal phoenixing including:

As a group, they have developed sophisticated data matching tools to identify, manage and monitor suspected illegal phoenix operators. They support businesses who want to do the right thing and will deal firmly with those who choose to engage in illegal phoenix activity.

WHAT ARE THE WARNING SIGNS? Get suspicious when:

• New phoenix offences under the Corporations Act. • Allowing the ATO to retain tax refunds where another liability is present.

• Making a director personally liable for outstanding GST. Illegal phoenix activity is not new. For many years government agencies have applied their respective tools to combat breaches of the law. There have been many solid outcomes, in both civil and criminal penalty terms.

• You don’t receive a payslip.

• The company name and ABN changes, but the phone number stays the same.

• Your super hasn’t been paid.

• Your pay is late, or underpaid.

• Equipment isn’t replaced.

HOW DOES THIS AFFECT ME AND MY FAMILY? • Illegal phoenix companies avoid paying workers, creditors and suppliers.

• They often pay invoices late, rack up debts and don’t pay tax, ripping off everyone from tradies to the wider Australian community.

• They undercut honest businesses and gain an unfair competitive advantage by driving legitimate ones out of business.

RIGHT, HOW CAN I HELP? If you raise the alarm early, phoenix companies can be caught before they fold and rob you of your payments, entitlements and super. The following are simple checks you can do to protect yourself: • Use the ABN Lookup at abr.gov.au to check if an ABN has been cancelled.

• Search the registers at asic.gov.au to check if a company is registered.

• Call your super fund and check your super has been paid.

If you suspect an individual or business of engaging in phoenix activity, let the ATO know by: • Calling the phoenix hotline on 1800 807 875.

• Reporting it online at www.ato.gov. au/reportphoenix.

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 37

Illegal phoenix activity

SPOTLIGHT

• Ask for references. Call referees and ask questions such as: • Emailing your information to phoenixhotlinereferrals@ato.gov.au.

You can find out more at www.ato.gov.au/ phoenix.

SIMPLE CHECKS TO PROTECT YOUR COMPANY The ATO is working with the property and construction industry to help you get your tax obligations right, the first time.

To protect your business from unscrupulous operators, we recommend you do your research before starting work with a new client, or supplier.

SIMPLE CHECKS THAT YOU CAN DO • Confirm the registered business name, ABN and ACN (if they are a registered company), via the Australian Business Register at abr.business.gov.au.

• Do their quotes include GST? If so, check that the business is registered for GST (this can also be done through the Australian Business Register).

• Search ASIC's banned and disqualified register to see if the business or director has previously been involved, or is currently involved, in a liquidated entity.

• Check their licences, qualifications and registrations. You can verify licence details by checking with the relevant state or territory bodies.

• Would they recommend the contractor?

• What kind of work did the contractor complete for them?

• Did the contractor finish on time and within budget?

• Were there any problems?

• Did the contractor listen to concerns and willingly make any necessary changes?

• Were they satisfied with the contractor's work and how it was done?

• Were there any issues with communication or any other problems?

• Search the contact numbers and addresses provided by the contractor on available directories.

• Make sure you get a physical or street address not just a postal address.

• Do a web search - this can alert you to issues that might make you think twice about entering into a business relationship. Visit their website and social media to check for reviews.

• Ensure you learn the warning signs of an illegal phoenix company to protect your business.

These include:

• The company name may change, but the staff remain the same.

• They pay invoices late.

• They request payments to a new company.

If you can't find anything on their business, or there are any 'red flags', we recommend you invest in paid checks as an extra precautionary step.

ADVICE FOR THE PROPERTY AND CONSTRUCTION INDUSTRY The ATO is committed to making things easier for those working in the property and construction industry.

To help you get your tax and super obligations right we have developed a new destination webpage to provide specific guidance for the property and construction industry.

The webpage provides advice on: • Checking an ABN. • Checking for GST Registration.

• Support for contractors.

• The difference between an employee or contractor.

• Taxable payments annual report.

• Illegal phoenix activity.

• Help with paying debt.

You can view the webpage at: ato.gov.au/ propertyandconstruction

• Companies that significantly underquote.

• Directors that have been involved in liquidated entities.

38 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

This article has been written and supplied by the Australian Taxation Office.

ICEC-PAQS CONFERENCE

BIM FROM DIFFERENT ANGLES ICEC-PAQS Conference 2018 will house the 3rd International QS BIM Conference and is being held at the International Convention Centre Sydney, 18-20 November 2018.

Several leading professionals have been selected to deliver high-potency presentations.

We have hand-picked abstracts to showcase in this article.

Presentation Title: A Comparative Study of BIM Contract Conditions among Hong Kong, UK and US Speaker: Dr Paul HK Ho, Division of Building Science and Technology, City University of Hong Kong The Government of the Hong Kong

Special Administrative Region actively promoted the use of Building Information Modelling (BIM) in major capital projects in its Policy Address 2017. While BIM appears to be a world-wide trend, local employers, consultants, contractors and subcontractors are concerned with their risks and liabilities when using BIM. Therefore, proper contract conditions setting out the obligations, responsibilities and liabilities of the contracting parties are essential for successful implementation of BIM. In responding to this industrial need, the author has drafted standard conditions of contract for BIM on behalf of the Hong Kong Institute of Surveyors. The

purposes of this study not only outline the proposed Hong Kong BIM contract conditions, but also compare with the UK’s CIC BIM Protocol and US’s AIA BIM and Digital Data Exhibit.

Following the traditional approach in legal research, the methodology consists of three discrete steps: (1) factual analysis, (2) issue identification and (3) location of legal authority. In this regard, a number of facts and legal issues is identified including priority of contract documents, obligations of project participants, digital data and BIM management, risk allocation, intellectual property rights, indemnity and insurance, and termination of the agreement. Besides comparing with

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 39

ICEC-PAQS CONFERENCE

UK and US’s practices, deductive and inductive reasoning is given according to the primary and secondary legal authority. These could critically assess the suitability of the proposed BIM contract conditions. It is found that there is a wide variety of BIM practices in Hong Kong. The BIM contract conditions should be structured flexibly to suit different clients’ needs.

Presentation Title: BIM and Globalisation of Labor Force Speaker: Mr Tse Tung, Hong Kong Institute of Surveyors Findings had shown that most BIM model received from the design team had not been fulfilling the standard for Quantity Surveyors to deliver their service. Amendment on these models are required and it would be very time consuming for the Quantity Surveyor to adjust the model to suit the tendering purpose. As a result, this paper aims to find the best solution to standardise the modelling practice and transfer the information to localise professional for the use of tendering. BIM can act as a platform to extract most of the information from the modelers using artificial intelligent and pass and filter the most useful information to local professionals. The best business model for implementation of BIM is to select the right modeler at the cheapest labor cost and pass on to unique individuals using the best artificial intelligent technology and model format.

It is a matter to control the workflow and standardise the procedure. The methodology is by using real life case studies to define the limitation of each

method currently using in real life practice and propose the best solution to solve the problems we are facing.

Presentation Title: Developing New Standards of Measurement for Building Works in Malaysia Speaker: Sr Sharifah Noraini Noreen Syed Ibrahim Al-Jamalullail, Perunding DMA SDN BHD Many industry players in Malaysia realise the need and importance of embracing BIM to be able to compete and win new construction projects. BIM is a time and cost saver as it allows those involved in the architecture, engineering, Quantity Surveying and construction field to identify problems even before construction begins. Due to this development, the current Standard Method of Measurement needs to be reviewed. The Royal Institution of Surveyors Malaysia (RISM) has acknowledged the need to update and change the existing standard method of measurement of Building Works for Quantity Surveyors in Malaysia to be more BIM - friendly.

A Taskforce has been established to review the current standard and recommend a new one. The taskforce consists of members of RISM, Architect and Engineers Institutions, Public Works Department, Construction Industry Development Board, Developers, Contractors and Suppliers as well as academicians from different universities.

A comparison of other standard methods of measurement from other countries i.e. Singapore, Hong Kong, Australia and United Kingdom were undertaken.

Different work sections were divided

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amongst the task force members for further study and development. It is discovered that the tabulated format would be the recommended way forward as it simplifies the adoption of the measurement method for Building works based on the information featured within the 3D model. It is hoped the newly developed standard of measurement for Building Works would spur the adoption of BIM in the QS profession.

Presentation Title: The Possible Effect of Digital in Construction to the Cost Engineering and Quantity Surveying Profession Speaker: Eugene Seah, Surbana Jurong Group The Cost Engineering and Quantity Surveying profession has been established for a long time, even having biblical references on the profession.

Digital in construction, on the other hand, is a disrupter to the traditional practices of the professions. It is not only the process that will have to change, but the knowledge of information communication technologies, social adoptions and the basic knowledge of how to use software and hardware and cope with its new processes, will have to be ingrained in the profession. Digital as a disrupter will change the way we work, the way we measure and the way we interact with design teams. This paper brings to the attention of readers how digital in construction is going to and has changed some work procedures, communication styles and even measurement methodologies for the profession and yet, having the need to stay focused on the core of the profession. It comes from

ICEC-PAQS CONFERENCE

insights on what the Integrated Digital Delivery (IDD) model in construction is having on the effect projects and suggests ways on how the we can cope with the sudden change. These suggestions can be directed to institute of higher learning or can be used for inhouse training for practitioners. It is found that the core knowledge and subjects must be strengthened and perhaps having a problem-based approach to learning for the when it comes to IDD, there is a need to know programming for instance. The profession will have to adapt to use of new software and hardware and process change.

Presentation Title: Adopting technology for better cost advice Speaker: Silas Loh, Rider Levett Bucknall Singapore The landscape of the construction industry is undergoing a period of change. Quantity Surveyors are feeling the pressure to meet demands to provide value-added services in times of increased competition and rapid change.

Toor and Ofori (2012) said the changing landscape of the industry demands that current practitioners as well as future professionals should be proactive to drive change instead of merely coping with developments.

Much is asked these days how advanced Quantity Surveyors are in adopting the technology of Building Information Modeling (BIM) in their practice as other professionals in the construction industry are already demonstrating their BIM capability and reaping its benefits. But, what is BIM? Perhaps an effective definition is provided by

Schewegler et. al. (2001) as the process of creating an information database for a project in which lifecycle information is expressed in an interoperable manner to create, engineer, estimate, illustrate and construct a construction project.

To deliver more sophisticated cost management services, it is very important for Quantity Surveyors to embrace and become a key player in the BIM environment. Ultimately, what clients want from all their consultants is to complete their construction projects within three important parameters – time, cost and quality. Quantity Surveyors ought to note that quantity take-offs from BIM software and automated quantities technologies is only part of the process to meet the value add.

Presentation Title: Introduction to Elemental Design Analysis (EDA) Technique and Integration of EDA into BIM Speaker: Sr. Chin Keh Liang, Perunding PCT Sdn Bhd

traditional methods in two aspects, namely: i) the analysis used gives information on design data within each element (and to a less extent on cost data) instead of only cost data of an existing building analyzed from its priced bill and is named Elemental Design Analysis (EDA); and ii) by using the relevant EDA, a priced approximate Bill of Quantities (BQ) for a similar proposed building can be produced at its initial schematic design stage whereby it shows the allocation of the up-to-date costs to major items of works within each element iii) as such, it allows the designer and the building client to easily identify the causes of price variant due to structural design, quality of finishes, price fluctuation, architectural changes, etc. as the design progresses and to take appropriate actions to control the cost at every design stage. The traditional methods will NEVER give such BQ at its initial stage of design to facilitate such cost control.

In today’s competitive market coupled with the ever-increasing prices, the discerning building client has placed more emphasis to build a value-formoney building and within its initial cost budget. The use of the traditional functional unit costs, elemental cost analysis (ECA), or some similar method to establish its initial cost budget and cost plan may not satisfy such exacting requirements.

Elemental Design Analysis (EDA) technique is a ground-breaking cost planning technique which aims to fulfil such requirements. It differs from the

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THE BUILDING ECONOMIST - SEPTEMBER 2018 - 41

ANALYSIS

WHOLE-OF-LIFE

COSTING PART ONE - AN INTRODUCTION

WHOLE-OF-LIFE COSTING OR LIFE CYCLE COSTING HAS, OVER THE LAST FEW YEARS, BECOME INCREASINGLY REQUESTED BY CLIENTS OF QUANTITY SURVEYORS. WHY IS THIS HAPPENING AND WHAT IS THE SKILL AND KNOWLEDGE NECESSARY TO MEET CLIENT’S NEEDS? WHAT IS WHOLE-OF-LIFE COSTING As Quantity Surveyors, we are familiar with capital costs, but the total costs of a project from start to finish can often be ignored.

Whole-of-life costing is the process which determines all of the costs of owning a building including initial

capital expenditure, operational and maintenance costs and disposal costs.

These costs will occur over the lifetime of a building and the decisions made at the start of a project will affect these costs.

undertaken. The risks in the estimation of future costs can be reduced by the application of forecasting techniques. The main technique used is to apply historical costs from similar projects.

Whole-of-life costing is necessarily a forecasting exercise and, as such, can be a black art. The uncertainty of future costs necessitates that risk analysis be

For example, the cost of painting a door is easily known, so the future cost of repainting a door over the life of a building is easily predicted. The difficult

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ANALYSIS

part is determining the time when the door will need to be repainted. The timing can be a factor of the maintenance program, the location of a project, the usage of the door and the amount of abuse the door will receive.

The most common technique to calculate the planned preventative maintenance costs and replacement costs is to use the estimate of capital costs. The future costs of a building can be extrapolated by using the initial capital costs and projecting them based on their likely timing.

TYPES OF COSTS There are three main costs: planned preventative maintenance, replacement costs, and operating costs.

Planned preventative maintenance is planned or scheduled maintenance of plant and equipment designed to avoid breakdowns and lost time. Examples include scheduled visits from skilled technicians to maintain lifts, escalators, air-conditioning, heating, lighting and electrical services. It also includes works such as touch-up painting and repairing

cracks or minor damage to reduce the need for major repairs or replacements.

Planned preventative maintenance is an annual cost.

Replacement costs are an allowance for the replacement of plant, equipment and building materials when their useful life has ended. There are simple examples, such as the replacement of floor finishes when they are worn out; replacement of lift motors; and the repainting of walls, ceilings and doors. These costs can come from the original capital cost breakdown but will happen at different years over the life of an asset. The timing of these costs will also be dependent on the level and type of usage, location and maintenance program. As an example, if a building is in the tropics it will be subject to high level of humidity and, as such, metal materials will need replacing much sooner than usual. The timing of replacement can be forecasted based on information provided by suppliers, previous experience from facility managers and the lifespan of plant and equipment in the Australian Taxation Office Tax Rulings.

Operating costs includes utilities, cleaning, insurance, rates, property

management and administrative costs.

These costs unlike, planned preventative maintenance and replacement costs, are not extrapolated from the capital cost but need to be researched and calculated.

Input from services engineers may be required to determine the amount of electricity, gas and water that will be used. The estimated cost of the services can then be calculated based on the rates from local authorities. Other costs such as cleaning, insurances and property management may be based on the size and type of asset. These are annual costs that recur every year.

Other costs that may need to be included are finance and disposal costs. Disposal costs include sales, demolition and site remediation.

The following graph shows various types of costs and their timing, in particular how operational and maintenance costs will be higher initially as the Facility Managers learn how to operate the plant at peak efficiency and the maintenance regime is refined. Near the end of the life of the building the operational and maintenance costs will increase due to the age of the plant and structure:

CASH FLOWS

Design, Purchase Construction

Operation

Disposal

Maintenance Development Start Up

Disposal

LIFE (YEARS) THE BUILDING ECONOMIST - SEPTEMBER 2018 - 43

ANALYSIS

STUDY PERIOD OF A WHOLE-OF-LIFE COSTING The expected life of a building is generally 50 years. Parliament House in Canberra is designed to last 200 years.

A client is likely to be interested in a lower lifespan such as 20 or 30 years.

There is some sense in only looking at a shorter study period than the actual lifespan of the building. As whole-oflife costing is a forecasting exercise, the longer the study period the more inaccurate the result.

There are several reasons for a shorter analysis period including: • obsolescence due to changes in technology and materials (when was the last time you used a fax machine?).

• obsolescence due to changes in economic conditions.

• obsolescence due to the function of the building ceasing to be required.

A purpose-built factory may become obsolete well before the actual building is obsolete.

• changes in design fashion or leasing requirements.

• mid-life upgrades.

• changes in purpose of a building.

• changes in fire or Occupational Health and Safety obligations.

THE CLIENT’S NEED Whole-of-life costing is increasingly being used by clients for two main reasons: 1. To manage and better understand the cost of built assets over time, and 2. To meet requirements of sustainable development.

The recent significant increase in infrastructure construction is one area where the corresponding increase in the maintenance of these assets is of interest to a client.

The types of assets that whole-of-life costing is increasingly being requested for includes:

limitations such as available information and its accuracy.

• Prepare and analyse the results.

Prepare a risk analysis to inform the client of the likely risks. The analysis can be simple or complex depending on the client. Propose the most economical option.

• educational facilities.

• hospitals.

• community assets.

• social housing.

• energy and transport projects.

The basic reason is that the entity constructing these assets is responsible for their future upkeep and hence the future costs. The increase in PublicPrivate Partnership projects, and similar schemes, requires clear and accurate costs of ownership so that the project is feasible for the investors at the start.

USING WHOLE-OF-LIFE COSTING As we have seen above there are several parameters in preparing a whole-of-life costing. As such, it is necessary to carry out the following: • Define the objectives to support the analysis.

• Determine the study period for the analysis i.e. the expected lifespan of the building or more likely the expected period of ownership.

• Define the options being analysed.

• Consider the operating and maintenance regimes for the asset.

• What costs will be analysed i.e. will staffing costs be included.

• Identify any assumptions or

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NET PRESENT VALUE ANALYSIS To analyse various options, the future costs need to be converted to a present value. Discounting of future values is done using a formula. The theory behind it is that where someone has the choice of incurring a cost now, or into the future, they would prefer the future cost.

In reverse, that person would prefer to receive a payment now rather than in the future, so the future payment should be discounted.

To calculate the equivalent present value the following formula can be used: Net Present Value = FV/(1+r)^n FV = future value of the cost n = number of intervals (usually years) between the present and future cost r = discount rate For example, the cost of $100 in three years’ time with a discount rate of 10% would have the following Present Value: NPV = 100/(1+0.1)^3 = 100/1.331 = 75.10 The above technique can be used to prepare an options analysis.

The following example shows how three materials with different initial capital costs, maintenance costs and replacement timing can be analysed to make a choice based on the lifetime cost of the material.

ANALYSIS

Option

Initial Capital Costs ($/m2)

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

NPV

Carpet

35

$13.64

$12.40

$11.27

$10.25

$9.31

$8.47

$7.70

$7.00

$6.36

$19.28

141

Vinyl

75

$4.55

$4.13

$3.76

$3.42

$3.10

$2.82

$2.57

$2.33

$2.12

$1.93

106

Ceramic Floor Tiles

120

$1.82

$1.65

$1.50

$1.37

$1.24

$1.13

$1.03

$0.93

$0.85

$0.77

132

In the above example, the vinyl has a higher initial capital cost than the carpet but is the cheapest option based on a simple 10-year analysis using NPV techniques.

The choice of discount rate can change the outcome of an analysis. The choice of discount rate can be determined based on various methods. The most common method of determining the discount rate is the interest rate for Government borrowings for the term of the analysis.

This is commonly the long-term bond rate which, as at the time of writing, is 2.73%.

Operation Costs Carpet

$15/m2/year

Cleaning costs each year

Vinyl

$5/m2/year

Cleaning costs each year

Ceramic Floor Tiles

$2/m2/year

Cleaning costs each year

$35/m2

Replacement cost in year 10

Repair Costs Carpet

CONCLUSION The preparation of a whole-of-life costing has several benefits.

Whole-of-life costing provides a methodical technique for the analysis of the total project costs over a buildings lifetime. It allows decisions to be made on verifiable amounts and not just assumptions. It is a forecasting tool and a measurement tool of actual versus forecast costs. As life cycle costs can be two to three times that of the original capital costs, they need to be accounted for in the forecast budgets for any organisation that holds assets over the long term.

A methodical analysis of project options

An accountable and transparent analysis

Planning of future costs and analysis against actual costs

Part 2 of Whole -of-life Costing will feature in the December edition of The Building Economist.

Potential to select materials and designs on their best overall life cost

Securing funding for Government projects

This article has been written by Andrew Park, Associate Director, mbm- independent advisors to the Australian property and infrastructure sectors.

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 45

BIM

BIM BUILT AND THE

ENVIRONMENT HOW 5D-ENABLED SOFTWARE SUPPORTS THE QUANTITY SURVEYING PROFESSION

46 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

BIM

We’re all familiar with BIM by now – the transformational technology has been a well-discussed issue for Quantity Surveyors in Australia and around the world. While Australia has not issued binding BIM mandates in the same way that other countries like the United Kingdom have, it is evident that the technology will have a major bearing on the future of Quantity Surveyors in Australia.

Many of the oft-spoken benefits of BIM are theoretical – in an effort to provide some hard facts to back up the conceptual notions, we have covered the application of BIM in revisioning, and as a general tool for Quantity Surveyors hoping to improve their output.

HOW WILL BIM IMPACT QUANTITY SURVEYING AS WE KNOW IT? Historically, industry professionals often feel threatened by the advent of new technologies that changes the way they do business, and perhaps with good reason. There are numerous examples of automation or changing societal values making certain jobs obsolete.

These fears are unfounded when it comes to the application of BIM in the Quantity Surveying profession. While BIM will fundamentally shift the way that surveyors perform their role, this doesn’t mean that the current or future value of the profession will be swept away by automation.

The value of 5D BIM lies in the ability to append useful repositories of information to a model. Ensuring this process is correctly applied will require close collaboration between designers and Quantity Surveyors going forward.

Beyond this initial work, Quantity Surveyors will still have to extract

quantities, interpret their accuracy and align them as required with standard methods of measurement.

It’s possible that the average time a Quantity Surveyor spends on a project will be shortened by the arrival of BIM, but the reduction will be in timeconsuming aspects of the job that don’t require specialised experience. Much of the time spent on projects going forward will be on value-added work, such as confirming the information at hand, verifying that scope has been correctly applied and supplementing any information that was not modelled for various reasons.

All these tasks require the experience and technical knowledge that only a Quantity Surveyor can provide. From this, we can confidently state that Quantity Surveyors going forward must have a strong knowledge of advanced software, or else risk a competitive disadvantage against their peers.

Software platforms that combine traditional 2D measuring with 5D BIM takeoff are an ideal starting point for those looking to add BIM surveying to their skillset. Exactal’s CostX® platform is the result of years of development from Quantity Surveyors and Estimators, so new users can be confident that the software is tailored to suit common industry processes.

To demonstrate the value of BIM-enabled software to professionals in our industry, we have gone in-depth below on how a common revisioning issue can be mitigated thanks to the application of BIM.

ELIMINATE SCOPE CREEP AND CONQUER REVISIONING WITH 5D BIM As Quantity Surveyors will surely know,

scope creep is the progressive growth of project quantum and quality over that provided in the project cost budget.

Scope creep can be a major cause of cost overruns and client dissatisfaction when it comes to construction project outcomes. Changes to the building function, quantum and quality that occur regularly throughout the design process can have a direct impact on the project cost budget.

To effectively control the project budget, scope must be clearly defined and managed throughout the design and delivery stages. While major changes or design revisions are usually easy to identify, the more insidious form of scope creep arises from the numerous small and minor changes which occur throughout progressive design iterations. Although none of these revisions have major consequences on their own, they can have a cumulative effect which can lead to major cost implications if undetected.

Traditionally, the designs for the architectural, structural and MEP (mechanical, electrical, and plumbing) aspects of a construction project have been undertaken by separate parties working independently but communicating periodically to coordinate their discrete designs. In many instances this would lead to a staggered issue of redesign information on distinct drawings and documentation. Faced with this situation, the Quantity Surveyor must search through a multitude of unconnected information to identify the ‘clouded’ revisions and hunt down numerous ‘hidden’ changes.

In 2018, BIM is starting to come to the fore as an aid to the revisioning process. BIM uses 3D dynamic computer modelling to create a virtual representation of a building,

THE BUILDING ECONOMIST - SEPTEMBER 2018 - 47

BIM

encompassing geometry, spatial relationships, geographic information, quantities and properties of the building components. Multi-disciplinary project teams use model-based technology to share building data and collaborate in real-time on design, construction and lifecycle management.

With the advent of BIM however, there is an increasing complexity of buildings themselves driven by ever more dramatic building forms. Interpreting and accurately quantifying these forms from two-dimensional representations can prove difficult and time-consuming.

This process increases the risk for the Quantity Surveyor in reliably and accurately assessing the associated quantities and costs. Against a backdrop of reducing margins, it is vital that Quantity Surveyors have access to the best tools available.

Specialised estimating software, such as CostX®, allows the inherent property information embedded in each object in the model to be extracted rather than simply measured. This results in huge time savings and improved accuracy when it comes to quantity takeoff.

As BIM design evolves, the relationships between the building’s entities in the model mean that as one object is altered, all of those that are affected by that change will be updated accordingly.

Using CostX®, these changes can be visually represented in colour-coded 3D form, providing an unequivocal view of the alterations made between each model iteration. The software’s ability to recognise altered, deleted and new objects within the model, allied with the ability to extract the embedded quantity and specification data attached to each object, means that the time required for updating the project budget can be drastically reduced. While the

model may be continually evolving, the Quantity Surveyor is able to provide frequent updates to monitor against the established project cost budget.

Our industry has been focussed on sustainability and whole-of-life costing in recent years – to achieve these aims, surveyors can employ BIM to quickly measure and analyse the alternative costs of ‘what if?’ scenarios, enabling swift feedback to designers and clients.

As a counterpoint, the ease with which alternative designs can be tested may encourage some Architects to test the water with alternative solutions, to ensure that none of the contingency sum that has been provided in the budget gets left on the table!

BIM is rapidly increasing in prevalence throughout the construction industry, and it has become evident that the technology is here to stay. Quantity Surveyors require advanced BIM-enabled software that allows them to become part of the collaborative process themselves. Such software can effectively mitigate the risk of scope creep and allow users to advise on cost with much greater confidence.

licences are available, depending on your needs and the size of your enterprise. The CostX® range also includes options for Quantity Surveyors who only require a few of the features listed above.

Exactal have also recently launched ConnectX, a construction management platform designed to support intelligent project collaboration and control.

ConnectX combines six powerful modules to improve communication, document management, contracts administration, tenders, defects and quality management throughout the lifecycle of a construction build.

Designers and Quantity Surveyors are likely to collaborate closer than ever in the future – integrated project management software such as ConnectX guarantees that no time is lost on oversights or lapses in communication.

When you consider the range of benefits available to Quantity Surveyors who embrace BIM, it's clear that we cannot afford to go without the technology any longer. It’s time to put our misgivings to one side and embrace the concept that will shape our industry for many years to come.

ENHANCE YOUR EFFICIENCY WITH ADVANCED BIM SOFTWARE As early adopters of BIM technology, Exactal can provide cutting-edge construction software options in 2018 that have been refined to suit the specific needs of industry professionals.

Exactal’s flagship estimating platform CostX® has been constantly advanced since launch in 2004. The software supports auto-revisioning for 2D and 3D drawings, ensuring estimates remain up-to-date throughout multiple revisions and mitigating the risk of scope creep.

Portable, standalone and network CostX®

48 - SEPTEMBER 2018 - THE BUILDING ECONOMIST

This article has been written by Tony Shaw (MNZIQS), Principal Product Specialist, Exactal.

BCI

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

BUILDING COST I N DEX SEPTEMBER 2018 THE BUILDING ECONOMIST - SEPTEMBER 2018 - 49