iCON / International Construction Review by Doriane Laithier

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COMMENDED, SUBSCRIPTION MAGAZINE OF THE YEAR 2010 INTERNATIONAL BUILDING PRESS AWARDS 01 QUARTER 2011 / WWW.ICONREVIEW.ORG

INTERNATIONAL CONSTRUCTION REVIEW

PLUS Will the new Aecom ‘megastore’ change the rules of the game? Police arrest top Games officials in Delhi graft probe Inside Libya’s massive university building programme Big earthquake leads to building boom in New Zealand

‘‘THE CONSTRUCTION INDUSTRY IS NOT READY FOR THE ONSLAUGHT OF COMPETITION IT’S JUST ABOUT TO GET’’ Steve Lewis on his plans for the high-tech takeover of construction

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Imagery from competition finalists will be promoted throughout a suite of Chartered Institute of Building (CIOB) publications. In each and every instance the relevant photographer will be named and credited alongside their photo. The competition is open to anyone over the age of 18 and all entries must be submitted by the 31st May 2011.

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CONTENTS

IN THIS ISSUE

06 GLOBAL ROUND-UP

18 AECOM THE MEGASTORE

28 GOING IN CIRCLES

Fluor down $163m on UK wind farm; Western design firms complain of identity theft in China; Most promising markets are most corrupt 10 DELHI GAMES AFTERMATH

With design, engineering and contracting capabilities now under its belt, Aecom threatens to change the rules of the game. But do clients want megastores? And can it pull together all its parts to create one integrated supply chain?

The Philippines has no shortage of grassroots activism, or even anti-graft law. But a major study charting 20 years of monitoring the country’s national public works department shows how hard the quest for transparency still is

Corruption probe snags top officials and Emaar-MGF stung for $41m over village

22 UNIVERSITY CHALLENGE

32 SHAKEN... AND STIRRED

Libya is building 25 new universities – all at once. It’s a bold plan, but a hastily deployed design-and-build process involving more than 20 designers and contractors from around the world has resulted in confusion and delays

A major earthquake shook Christchurch, New Zealand in September. Calvin Payne lived through it, and reports on why the loss of life was so minimal, and how a building boom is on the cards as the city repairs itself

12 LIVING PLANIT’S EVIL PLAN

Cisco, McLaren, Accenture and others rally behind a business model that aims to revolutionise buildings, cities and the entire construction process

MIKE PASKIN; ISTOCKPHOTO; CALVIN PAYNE

01 QUARTER 2011

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LEADER

THIS FEELS DIFFERENT There is bound to be a good deal of skepticism in the industry’s reaction to Steve Lewis, CEO of Living PlanIT, who claims to have found a way of delivering “smart”, energy efficient communities far faster and far more cheaply than we can deliver today (pages 12-17). His ambition, to make construction more like the manufacture of cars, ships and aeroplanes, is itself enough to make a hard-pressed sector switch off. We have heard this before, and rarely do such urgings feel helpful or take into account the true nature of the challenge of erecting structures in the real world, right now. The main barrier to his bold vision – the full commoditisation and pre-manufacture of building parts enabled by 3D object-oriented design tools made completely accessible throughout the whole supply chain – has been the fragmentation of the industry. With a few exceptions, no one company has the incentive, the financial clout or even the opportunity to do things differently. Which is why this proposition feels different. What’s notable about the Living PlanIT idea is that it proposes to by-pass the industry and go with its stunning proposition straight to developers and city-procuring authorities. To its flagship development in Portugal, dubbed PlanIT Valley, it brings a complete supply chain, from clients, designers and technology suppliers right down to the people who will “lift and stack the boxes”. A key consideration about Steve

WHO TO CONTACT

INTERNATIONAL BRANCHES

Rod Sweet iconedit@gmail.com

● CIOB AFRICA

EDITOR

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Mr Larry Feinberg PO BOX 896, Rivonia 2128, South Africa Tel: +27 11 234 7877 Fax: +27 11 234 8354 lfeinberg@ciob.co.za www.ciob.co.za

ADVERTISING & SUBSCRIPTIONS

● CIOB AUSTRALASIA

Saul Townsend stownsend@ciob.org.uk

Elizabeth Thomas GPO Box 5146 Sydney NSW 2001 Australia tel: +61 (2) 9816 4700 fax: +61 (2) 9816 4699 ethomas@ciob.org.au www.ciob.org.au

Doriane Laithier dorianel@gmail.com ART EDITOR

NEWS & LETTERS

SUBSCRIPTION RATES:

UK CIOB members Non-members Organizations

£22.50 £27.50 £33

● CIOB CHINA, COUNTRY OFFICE - BEIJING

Winnie Zhang Room 11B, CITIC Building No 19 Jian Guo Men Wai Street Chaoyang District, Beijing 100004, PRC

01 QUARTER 2011

Lewis’ claims is that Living PlanIT isn’t a single company with a new bit of technology to foist on us, but a growing “ecosystem” of technology, engineering, manufacturing, finance and other types of companies rallying behind an idea whose time arrived a long time ago. They include Accenture, Cisco, Siemens, McLaren, Buro Happold and others, all very keen to tap into a market which, thanks to global mass urbanisation and the need to cut carbon, could be worth trillions. Another consideration is that there is nothing technically impossible about the proposition. Pre-fabrication in one form or another has been around for decades. Object-oriented 3D design is well-advanced. The hardware, software and networking capabilities for smart, energy efficient buildings are pretty much ready to go. Will they actually be able to do it? All eyes will be on the Portugal site this year to see if Lewis will build the first phase of PlanIT Valley as cleverly as he claims to be able to. Buro Happold for one recognises that the task of organising a complete, global supply chain of commoditised building components is big and complex. Having said that, PlanIT Valley is one of the most ambitious and exciting projects on the horizon. If it’s a success, it could change the way we build things forever.

MICHAEL BROWN DEPUTY CHIEF EXECUTIVE, CIOB

Tel: +86 10 6528 1070 Fax: +86 10 6528 1075 wzhang@ciob.org.cn www.ciob.org.cn www.ciobinternational.org ● CIOB EAST CHINA OFFICE, SHANGHAI

Ms. Grace Tao Suite 1412, The Tower No.993 Nanjing Road West, Shanghai China 200041 Tel: +86 (0) 21 6272 9358 gtao@ciob.org.cn ● WEST CHINA OFFICE, CHONGQING

Ms Annie Wang G-11F-8, Xinyang Plaza No 8 Shapingba Avenue Shapingba District, Chongqing 400030, PRC Tel: +86 23 6547 2560 23 6547 2560 awang@ciob.org.cn www.ciob.org.cn www.ciobinternational.org

● CIOB HONG KONG

Ms Ivy Lo Room 1602, 16th Floor Tung Chiu Commercial Centre 193 Lockhart Road Wan Chai, Hong Kong Tel: +852 2543 6369 Fax: +852 311 1105 ilo@ciob.org.hk, www.ciob.org.hk ● CIOB IN IRELAND

Karen Halligan The CIOB in Ireland PO Box 54, Rathfeigh Post office Navan, Co. Meath khalligan@ciob.org.uk

Fax: (603) 2284 9754 achen@ciob.org.my ● CIOB SINGAPORE

Ms Anita Kathirayson The CIOB, Singapore Centre 116 Middle Road #09-01(D) ICB Enterprise House Singapore 188972 Tel: +65 63344116 Fax: +65 63344211 akathirayson@ciob.org.sg ● CIOB MIDDLE EAST

Ms Amy Gough Tel: +44 (0) 1344 630 791 agough@ciob.org.uk

● CIOB MALAYSIA

● CIOB HEAD OFFICE

Ms Audrey Chen 5th Floor No. 8 Jalan Bangsar Utama 9 Bangsar Utama 59000 Kuala Lumpur Malaysia Tel: (603) 2284 5754

Englemere Kings Ride Ascot Berkshire, SL5 7TB, UK Tel: +44 1344 630 706 Fax: +44 1344 630 777 memenquiry@ciob.org.uk

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GLOBAL ROUND-UP

WESTERN DESIGN FIRMS CLAIM FRAUDSTERS ARE FAKING THEIR IDENTITY IN CHINA A NUMBER of Western engineers and design firms claim that Chinese fraudsters have been trying to steal their identity to win work in their names. Atkins, Aedas, and Broadway Malyan all claimed to have discovered Chinese firms bidding for work as if they were the Western companies, reports the UK’s Building magazine. A source close to Atkins told Building: “The other firm tried to get some jobs from Atkins. They bid for work. They had set up a firm called Atkins.” An Atkins spokesperson said: “We discovered an attempt to trade on Atkins’ reputation in China and we took prompt and appropriate action. There has been no impact on our business.” Architect Broadway Malyan also said it had detected attempts to pirate its name and was taking legal advice on the issue. Aedas also said it had been targeted. David Roberts, chief executive of Aedas in Asia, said that the problem had also appeared in eastern Europe at around the same time. “A website was set up with our name and one or two of our projects on it,” says Roberts. “It disappeared very quickly. It was a very bad site.” Building raised the question of whether the fraudsters were genuine professionals looking for work or scammers set to disappear after securing an initial payment. iCON

NEW BUSINESS MODELS

LIVING PLANIT EYES MAJOR LONDON DEVELOPMENT, AND WILL SET UP ITS OWN BANK LIVING PlanIT is setting up a bank of its own to finance developments based on the technology platform it plans to use in PlanIT Valley, Portugal. Backers say PlanIT Valley will be a totally computerised eco-city and an R&D centre for Living PlanIT and its partner companies, including Cisco, Buro Happold and McLaren Electronic Systems, to develop the technologies they claim will revolutionise the construction and property business (see pages 12-17). Living PlanIT will be the major shareholder in the new bank, which will be set up with investors from the Middle East and China, Steve Lewis, Living PlanIT CEO, told iCON. “The goal is to create a new set of financial instruments that accurately price the value of what we’re doing on schemes like PlanIT Valley,” Lewis said. Lewis also revealed that Living PlanIT is in talks to deploy its methodology on more than a dozen other sites, including an unnamed regeneration area in the east of London, which Lewis said would provide jobs and residences for up to 30,000 people. Masterplanning and design, he said, would start early in 2011. Other sites include two in the US, one of those in Silicon Valley, Sao Paolo, Brazil, 10 in the Mediterranean region and two in the Far East. Not all will be new communities like PlanIT Valley. He

said the Silicon Valley deployment would be a retrofit, and others would be specific applications of technology. Living PlanIT is developing a suite of software for the design and manufacture of buildings and cities which it claims will make construction more like car manufacturing. Along with its high tech partner companies it plans to make buildings computerised to add extra revenue streams for property developers and owners. Meanwhile, Living PlanIT’s construction capabilities received a boost on November 24, when Quintain, the UK developer behind major London schemes Wembley City and Greenwich Peninsula, signed a framework agreement committing it to offering property and construction advice to help deliver PlanIT Valley. Its fee will be 3.5% of construction costs, with a minimum payment of Euros 12 million for each of the first two years, from 1 January 2011. Quintain has pitched itself as being at the forefront of sustainable and high-tech development. Among other initiatives it will deploy a pressurized air system called Envac for recycling waste at Wembley City, and says it will seek to use the Living PlanIT methodology on its London schemes. “This is extremely exciting,” Quintain Finance Director Rebecca Worthington told iCON. “We’ve only been touching the edges until now. iCON

A retrofit in Silicon Valley (pictured) is one of more than a dozen projects in the pipeline to be funded by a new bank set up by Living PlanIT

‘WE’RE DRAGGING CONSTRUCTION INTO THE 21ST CENTURY.’

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ISTOCKPHOTO

RRSTEVE LEWIS, LIVING PLANIT, P12 01 QUARTER 2011

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‘BRIC’ nations: hot spots for construction... and corruption

RUSSIA

2.1/10 154th cleanest

CHINA

Source: Corruption Perceptions Index 2010, Transparency International

INDIA

3.5/10 78th cleanest

3.3/10 87th cleanest

BRAZIL 3.7/10 69th cleanest

CORRUPTION

Most promising markets are also among the most corrupt, according to latest TI index FIRMS targeting the world’s fastest growing construction markets should be careful because they’re among the most corrupt countries in the world. Construction businesses hoping to tap into the world’s fastest growing markets should be careful because, according to a new study by Transparency International (TI), they’re also among the most corrupt countries in the world. The so-called “BRIC” nations – Brazil, Russia, India and China – which have been identified by economists as emerging fastest into “developed” status, all scored low in TI’s 2010 Corruption Perceptions Index (CPI). Brazil, with a score of 3.7 out of 10, was ranked cleanest of the four and placed 69th out of 178 countries assessed. Next came China, with a score of 3.5 and a global ranking of 78. India followed with a score of 3.3 and a country

ranking of 87th. Far behind came Russia, with a score of 2.1 and a global ranking of 154th, which means that it is seen as more corrupt than such countries as Haiti, Laos, Yemen and Congo-Brazzaville. Construction firms are keen to do business in Russia. The UK’s Trade & Industry body (UKTI) last year led a trade mission for British construction firms to Moscow, Sochi and Krasnodar in Russia ahead of the 2014 Winter Olympics. UKTI says The official delivery plan of the Olympic project records 218 projects to be constructed in Sochi, with more than US$35 billion to be spent between now and 2012 on the preparations for the Games. Other countries identified as important emerging markets for construction are Libya and Nigeria. Neither came out well. Libya scored 2.2 in the index and placed 146th in the index, while Nigeria scored

2.5 and placed 134th. The United States was shunted out of this year’s 20 cleanest league, appearing 22nd. It was outperformed by Chile, Qatar and Barbados. TI says that unstable governments, often with a legacy of conflict, continue to dominate the bottom rungs of the CPI. Afghanistan and Myanmar share second to last place with a score of

The top 20 in this year’s index, from “cleanest” at the top, are: 1. Denmark 2. New Zealand 3. Singapore 4. Finland 5. Sweden 6. Canada 7. Netherlands 8. Australia 9. Switzerland 10. Norway

11. Iceland 12. Luxembourg 13. Hong Kong 14. Ireland 15. Austria 16. Germany 17. Barbados 18. Japan 19. Qatar 20. UK

1.4 and with Somalia coming in last with a score of 1.1. Significant improvers this year, TI says, include Bhutan, Chile, Ecuador, FYR Macedonia, Gambia, Haiti, Jamaica, Kuwait, and Qatar. What it calls “decliners” include the Czech Republic, Greece, Hungary, Italy, Madagascar, Niger and the United States. “Notable among decliners are some of the countries most affected by a financial crisis precipitated by transparency and integrity deficits,” it said. To compile the index TI uses information from country experts, both residents and non-residents, and business leaders. In the 2010 CPI, the following seven sources provided data: African Development Bank, Asian Development Bank, Bertelsmann Foundation, Economist Intelligence Unit, Freedom House, Global Insight and the World Bank. iCON

Bechtel and CH2M Hill face Crossrail fee cuts as client looks to streamline delivery structure LONDON’S mega rail project Crossrail survived UK budget cuts but major US firms including Bechtel and CH2M Hill may see their fees reduced. The Crossrail project will see a 118-km rail line built connecting Heathrow in the west to Shenfield and Abbey Wood in the east via new, twin-bore 21-km tunnels under central London.

01 QUARTER 2011

The project survived the government’s harsh spending review on October 20, but it had £1.4 billion cut off it’s budget and completion has been put back to as late as 2020 (from 2017) to allow for construction cost savings. The UK journal Building reported October 29 that a source close to the project said some of the savings were likely to come from reducing

the roles of the Bechtel and CH2M Hill consortiums. Crossrail set up a three-tiered management system for the project, in which the client sits above a programme partner team led by CH2M Hill, which in turn directs the delivery partner team led by Bechtel. Building reported that the client is looking to streamline this delivery structure to cut duplication. iCON

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GLOBAL ROUND-UP

ENERGY

FLUOR IS DOWN $163M ON MASSIVE UK WIND FARM FLUOR wrote US$163 million off its third quarter earnings last year thanks to problems building the world’s biggest wind farm off the English coast. One analyst has claimed these problems at the Greater Gabbard offshore wind project, problems that include materials delivery, bad weather and subcontractor issues, mean the project will not be profitable for the Texasbased engineering giant. Fluor won the US$1.8 billion fixed-price contract in 2008 to build the wind farm 25 kilometres off the coast of Suffolk, England. Its developers, RWE npower renewables and Scottish and Southern Energy, claim that Greater Gabbard is the world’s largest offshore wind farm in construction, and that its 140 turbines will generate enough electricity to power 530,000 homes. Fluor says that all 140 monopiles and tower transition pieces have been installed and 53 of 140 wind turbine generators are in place. Installation and commissioning of the remaining wind turbine generators, subsea inter-array cabling and grid substations are expected to continue through the latter part of 2011. The overall project is expected to be completed in early 2012. Fluor issued a statement October 18 that said: “During the third quarter, the project experienced a variety of execution challenges, including material and equipment delivery issues, primarily relating to the installation of wind turbine generators and subsea cabling. Following an evaluation of third quarter events, the company has revised estimates to include substantial costs for additional marine vessels and other subcontractor costs associated with

equipment installation, equipment repairs and the estimated schedule impact which has been exacerbated by weather-related delays. The company has taken a number of remedial actions to mitigate further cost escalation and delays to the schedule.” The project has experienced a number of challenges since construction began in late 2008, including two fatalities and disputes between Fluor and the developers. The fatalities occurred during two separate incidents involving boats, one when a tugboat chain snapped and the other at a quayside in Harwich while loading a wind turbine. In the second quarter of 2010, Fluor says it recorded US$202 million “in claim revenue relating to costs incurred on a dispute with the client regarding specifications for monopiles and transition pieces required under the contract”. The company added: “Additional costs arising from this dispute are expected to be incurred in future quarters. The company says it continues to pursue claims for costs recoverable under the contract.” “If Fluor is having a problem, who the heck is going to build these?” Avram Fisher, an analyst for BMO Capital Markets, told US industry journal ENR. “It will be expensive until the industry figures out a cookie-cutter approach to building offshore wind projects.” He told ENR that the latest loss means that the project will be unprofitable for Fluor. Greater Gabbard Offshore Wind Limited is a 50/50 joint venture partnership between Scottish and Southern Energy (SSE) and RWE npower renewables. RWE npower renewables and SSE will share the electricity output 50-50. iCON

Fluor won the $1.8bn project in 2008

TRANSPORT

Shares fall as China heavyweight CRCC posts huge loss on Saudi CHINA Railway Construction Corporation (CRCC) has lost US$623 million building Saudi Arabia’s new railway designed to bring Muslim faithful to Mecca. The loss, announced October 26,

Client changes blamed for cost increase

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amounts to almost 63% of the company’s annual profit last year and caused its stock to fall 14% in Hong Kong and 5.2% in Shanghai, according to Bloomberg. In a statement to investors CRCC

said the loss was caused by the client, the Kingdom’s Ministry of Municipal and Rural Affairs, substantially increasing the required capacity of the railway, changing other specifications and

delaying necessary expropriation of land . The client’s changes, CRCC said, led to construction delays and the need to invest large amounts of manpower, resources and capital to meet the scheduled completion of the main part of the project in November 2010. In February 2009 CRCC signed the contract worth US$1.77 billion to build the 20km-long metro line connecting the holy cities of Mecca, Arafat, Muzdalifa and Mina. CRCC is also contracted to operate and maintain the Al Mashaaer Al

01 QUARTER 2011

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AFGHAN INVESTIGATION

Construction boss wanted by US for bribery A 61-YEAR-OLD construction manager has been jailed in India and awaits extradition to the US to face bribery charges relating to projects in Afghanistan. Australian Neil Campbell was arrested at New Delhi’s Indira Gandhi International Airport on his way from Kabul on October 15 in a joint effort between the FBI and Indian police. Campbell had been managing two projects worth just under US$16 million for the International Organisation for Migration (IOM), which is supervising $260 million in building contracts funded by the American development agency USAID. A statement released by the US Justice Department alleges that between May 25 and August 5, 2010, Mr Campbell solicited a $190,000 cash bribe from a subcontractor in Afghanistan in return for allowing him to continue working on the construction of a hospital and provincial teaching college.

Neil Campbell, who worked in Afghanistan, arrested in India

According to reports his arrest was the result of a ‘sting’ – the person he allegedly made the deal with was working for the FBI. Authorities in India told The Australian newspaper that police had found Campbell carrying US$10,000 when he was arrested and that he had been lured to India by undercover US agents with the promise he would receive the remaining $180,000 bribe there.

In a brief interview Campbell told the newspaper he was innocent and a victim of entrapment. He said he was in India on his way home to Australia, not to collect money. He said he would happily be extradited to the US, however, to escape the poor conditions in Tihar Jail. As iCON was going to press his case was still working its way through the Indian legal system. iCON

MIKE PASKIN

LEIGHTON FIGHTS FOR INDEPENDENCE AS HOCHTIEF FALLS TO ACS

rail job Mugaddassah Metro Line for three years. It is scheduled to be fully operational by May 2011. In its statement CRCC acknowledged the significance of the railway to transporting Muslim pilgrims from all around the world. CRCC said it is seeking compensation from the ministry and that the ministry is setting up a “special committee” to “negotiate the claims and compensations”. CRCC said negotiations with the ministry so far for compensation has not produced agreement. iCON

01 QUARTER 2011

AS 2010 drew to a close Australia’s Leighton Holdings fought bravely against the takeover by Spanish giant ACS of Leighton’s majority shareholder Hochtief, but resistance proved futile. Acting on behalf of thousands of minority shareholders, Leighton appealed first to Australia’s Securities and Investments Commission, and then to the country’s Takeovers Panel, but assistance was denied. Hochtief’s last defense fell at the end of November when the German corporate regulator BaFin found no objection to ACS upping its 29.8 per cent stake in Hochtief to 30 per cent, after which it can buy additional shares up to 50 per cent at whatever price it wants. In September debt-burdened ACS (Actividades des Construcción y Servicios) made a low-ball offer for Hochtief. ACS already owned a stake in Hochtief but wants full control so it can tap into Hochtief’s healthy and growing worldwide business – most of ACS’s sales come from stagnated Europe. But its share offer valued Hochtief at US$5.1bn, which Hochtief said was too low. Meanwhile Leighton, 54.5% owned by Hochtief, is a golden-egg-laying goose for the German company. In the second quarter of this year Leighton’s successes accounted for 84% of Hochtief’s quarterly pre-tax profit of €181m, and boosted its overall order backlog to the highest it

has ever been in 135 years. In October Leighton asked Australia’s Takeovers Panel to make a declaration of “unacceptable circumstances” in relation to the ACS bid. Leighton is worried about its independence as a company and about the value the bid would deliver to its 67,000 minority shareholders. Leighton wanted the Australian authorities to make ACS commit to a governance regime that protects Leighton’s minority shareholders or otherwise make a “downstream” cash bid for Leighton “at an appropriate price”. They declined. Leighton says it has operated under an independent board and management team since Hochtief acquired its stake in 1983, and that this independence has been crucial to its success. Leighton now employs 45,340 people worldwide. ACS appears willing to appease Leighton. On November 29 Leighton announced it had obtained a formal undertaking by ACS not to change Leighton’s existing governance structure. An ACScontrolled Hochtief would be allowed only four directors on Leighton’s 12-strong board, and the existing company structure and business plans would remain intact. Analysts say Hochtief has struggled for years to increase investor transparency to lift its stock market valuation so it can fend off bids like ACS’s. iCON

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COMMONWEALTH GAMES DELHI AFTERMATH

Lack of waterproofing caused damage, DDA says

ROW OVER SERIOUS DEFECTS IN DELHI GAMES Developer Emaar-MGF left fighting for a $41m guarantee as Delhi Development Authority finds faults INDIA has ordered a US$41m bank guarantee given by Emaar-MGF, builder of the Commonwealth Games’ Athletes’ Village, to be frozen in retaliation for non-completion and construction defects. The Village became the centre of worldwide attention just days before the Games as delegations from several participating countries condemned the accommodation as filthy and uninhabitable. In the end the flats were made ready in time but on October 20 the government’s urban development ministry ordered the Delhi Development Authority (DDA), the body responsible for delivering the athletes’ village, to freeze EmaarMGF’s Rs 183 crore bank guarantee (just over US$41m) after a ministry probe claimed to have found “large number of defects” in the village.

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“Such defects pertain to basement, lift pits, non-installation of required number hydro-pneumatic pumps, water proofing of terrace, fixtures for balconies, inadequate power connection, choking of pipes, incomplete landscaping etc,” the ministry said in a letter to the DDA, according to the Times of India newspaper. Apart from the ministry’s probe, an investigation by the DDA itself also found “various deficiencies” and “irregularities” in construction of the Village, it said. The biggest concern is extensive water seepage in the basements of the 34 towers comprising the village. The newspaper quotes anonymous official sources as saying that the damage is substantial and that a “complete” lack of waterproofing is the cause.

“No waterproofing has been done,” one source told the paper. “Since the basements were boarded up during the Games, no one ventured in to even check, as the DDA wasn’t handed the basements by Emaar-MGF.” Emaar-MGF on its part told the paper that the village was built to the “highest standards of quality and design” and that all milestones were achieved as agreed. The company also said all deficiencies pointed out by DDA or any other agency were rectified. The village comprises 34 towers on 27.17 acres, providing twoto five-bedroom units for the 8,000 athletes and officials who came to the Games. It was a public-private venture between Emaar MGF Land Ltd and the DDA, and was built, according to Emaar-MGF, in just 32 months. In a September 16 press release

Emaar-MGF’s managing director Shravan Gupta said: “It is a momentous occasion for us at Emaar MGF to create from scratch one of the finest Games Villages, be it in design, quality or scale. The Village, as it stands today, is a shining example of blending sustainable building techniques with modern amenities.” Gupta added: “The Village was… more challenging than conventional projects. We rose to this challenge and completed the Village within 32 months. Most importantly, our partnership with DDA for executing this project has already set a defining example of superior Indian skills and capabilities.” One of the challenges, however, was that Emaar-MGF ran out of money to fund the scheme in 2009 and received a bailout package from

01 QUARTER 2011

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Police probe goes to the heart of Games organising committee

VILLAGE s

in the 34 towers the DDA worth just over US$170m (Rs 760 crore). The bailout involved the DDA purchasing 333 flats from Emaar-MGF. Questioned over the appropriateness of such a deal, on October 21 India’s urban minister Jaipal Reddy told a television news reporter that it wasn’t so much a bail-out as a buy-back scheme in which the DDA would realise a profit of nearly US$78.5 million. Reddy admitted however that he had not been consulted about the deal. He also called it a “desperate arrangement”. Meanwhile Emaar MGF has asked the government to revoke its order to confiscate the bank guarantee, of which Rs 90 crore has already been encashed by the DDA, and has blamed the DDA for construction delays, caused by the non-delivery of utilities. iCON

01 QUARTER 2011

SENIOR figures in the Organising Committee of Delhi’s Commonwealth Games have been arrested as the Central Bureau of Investigation (CBI) continues its probe into corruption surrounding the sporting mega-event. Following police raids on their homes and offices, Lalit Bhanot, Secretary General of the Commonwealth Games Organising Committee, and VK Verma, Director General of the Commonwealth Games, have been charged with criminal conspiracy, misuse of official posts, cheating and forgery. The CBI has so far registered three cases with the courts. None so far, however, deal with construction. The biggest in financial terms relates to the awarding of a contract worth US$23.8m to a Swiss company to provide timing and scoring for the sporting event. Bhanot and Verma are accused of bending the rules to engineer the acceptance the Swiss firm’s bid even though it was much higher than other bids. In December newspapers reported that, following an anonymous tip-off, the CBI had discovered more than three dozen unopened bids for the contract stashed in the Delhi office of the Organising Committee. Two other cases relate to the allegedly fraudulent renting of vehicles in London during the Queen’s Baton Relay. Three CWG officials have been arrested in connection with that. While a success for Indian athletes, the Games were marred by construction problems, slipped deadlines and allegations of corruption. The budget ballooned from an initial estimate of US$450 million in 2003 to what India’s Business Today magazine now estimates at $15.47 billion, making it the most expensive Commonwealth Games in history. The day after the closing ceremony on October 14 India’s prime minister Manmohan Singh appointed a committee of ministers to probe allegations of corruption. It had three months to report. Since then four separate government enforcement agencies have since been scouring the country, seizing files and interviewing officials. Yet to be questioned – despite rampant speculation and even goading by the Indian press – is Suresh Kalmadi, MP for Pune, and chairman of the CWG Organising Committee.

On November 9 Kalmadi resigned from his post as secretary of the ruling Congress Parliamentary Party (CPP). The Press Trust of India quoted “party sources” as saying Kalmadi had been “asked to put in his papers” because his party sought to distance itself from him. Higher ranking political figures such as sports minister M S Gill, urban development minister S Jaipal Reddy and Delhi chief minister Sheila Dikshit were also involved in the preparations for the Games but, in what appears to be a campaign of severe psychological pressure, the media spotlight, powered by anonymous and damning briefings from police, has been trained on Kalmadi. On December 10 the Times of India, quoting “sources”, reported: “In an attempt to corner organising committee (OC) chairman Suresh Kalmadi, the CBI on Thursday questioned Lalit Bhanot, secretary general of OC, over reports that documents pertaining to the functioning of the OC had been burnt by officials. Bhanot, who is also accused in one of the cases, was quizzed for nearly two hours. “Bhanot’s questioning is likely to throw light on details about Kalmadi’s role in bungling of funds. Sources said that the CBI is trying to build its case around Kalmadi with the help of Bhanot. Another accused in the case, director general V K Verma, who has been booked along with Bhanot, is also likely to be called for questioning by the CBI.” “The agency,” the newspaper continued, “is also planning to question Kalmadi and 22 others who were part of the empowered committee. All five senior OC officials who are being investigated by CBI have implicated Kalmadi in their statements.” iCON

Lalit Bhanot (left) and Suresh Kalmadi PA

GETTY

Senior officials charged, and committee chair Suresh Kalmadi comes under severe pressure from media, police and his own party

‘IT WAS LIKE THE SURFACE OF THE EARTH HAD TURNED TO JELLY’ RRCALVIN PAYNE ON SURVIVING THE EARTHQUAKE, P32 www.iconreview.org

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In the last issue we broke the story a about plans to buyildin futuristic eco-cit delve Portugal. Here weLiving deeper into the and Pl anIT propositiond ask, business model ane its how realistic ar cl aims?

“WE’RE DRAGGING CONSTRUCTION INTO THE 21ST CENTURY” Cisco, McLaren, Accenture and hundreds of other companies are rallying behind a technology and business model that aims to revolutionise buildings, cities, the construction process and the whole property business as well. Rod Sweet reports

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energy production and use, recycling waste, and storing and processing information to support all essential functions from business and healthcare to education and leisure. Finally, property developers and governments will clamour for these new-style buildings, towns and cities because they will be cheap and fast to put up and they will make their owners much richer than normal buildings do. When the story broke industry reaction was muted, and sceptical. “Wow – that is some serious technobabble!” one influential engineer emailed to say. He went on: “I’m not holding my breath. People have been failing to understand the true nature of the construction industry since Latham and Egan said that it should work more like the car industry. People often set out to demonstrate ideas in new cities that are incompatible with existing ones and we get all excited for a time before they fall out of the public eye and the plug is quietly pulled.” As it happens, it won’t take long to see whether Lewis’s claims have any basis in reality. He says construction is scheduled to start in 2011 on the prototype eco-city called PlanIT Valley, designed to test and develop Living PlanIT’s technologies and business models. PlanIT Valley is a 1,700-hectare site in the Municipality of Paredes in northern Portugal. The idea is that it will eventually be home to as many as 220,000 people, a population made up of researchers and other staff employed by the Living PlanIT’s “ecosystem” of high-tech partner companies and their families. On the built-up area, about 850 hectares, will be offices, homes, schools, shops, medical and leisure facilities, not to mention all the necessary transport and other infrastructure. PlanIT Valley will be an R&D centre and test-bed for Living PlanIT’s vision of a “smart” city, one with a “brain”. In this vision built-in sensors measure occupancy, temperature, humidity and energy production and use. This data is

01 QUARTER 2011

ISTOCKPHOTO; COURTESY OF BALONAS AND MENANO, A LIVING PLANIT PARTNER; NATIONAL GEOGRAPHIC SOCIETY/JODI COBB

alking to Steve Lewis, co-founder and CEO of Living PlanIT, the impression builds that construction is like the Shire in The Lord of the Rings, a quaint backwater inhabited by hobbits unaware of the gathering menace of Mordor. That’s because Lewis claims to be leading a movement, made up of an ‘ecosystem’ of companies, finance, technology and business models, which is readying itself to meet the biggest challenges facing the built environment today: l Making buildings that use a fraction of the energy they use now; l Making whole new cities, quickly and cheaply, to cope with rapid urbanisation; and l Regenerating urban centres with low-carbon technology and powerful and lasting business models. And the industry, he claims, as it is set up today, will have very little to do with any of this. “We’re not relying on the construction industry to modernise,” he says. “We’re applying a tech industry model to the construction sector, and it causes consolidation. The guys who can’t move fast enough generally trip, fall and get consumed. “The construction industry,” he warns, “is not ready for the onslaught of competition it’s just about to get.” If Lewis’s vision is realised, whole sections of today’s built environment business would be made obsolete at a stroke. We’d have a built-environment delivery mechanism that would surpass the wildest dreams of industry reformers – whole cities would be put together the way cars, aeroplanes and supertankers are. And buildings wouldn’t be buildings, primarily, anymore: they’d be computers, regulating their own

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FORESIGHT PLANIT VALLEY

THE CONSTRUCTION INDUSTRY IS NOT READY FOR THE ONSLAUGHT OF COMPETITION IT’S JUST ABOUT TO GET

ISTOCKPHOTO; COURTESY OF BALONAS AND MENANO, A LIVING PLANIT PARTNER; NATIONAL GEOGRAPHIC SOCIETY/JODI COBB

Lewis said the first phase of building, for a projected first influx of around 7,000 residents, would start in early 2011 and be finished in less than a year. Yes, you read that correctly – less than a year. “We’re dragging construction,” Lewis says, “into the 21st Century.”

URBAN CHALLENGE: Living PlanIT aims to cut carbon and house the millions flocking to cities around the world. Development patterns now are unsustainable, it says. From top left, Rio slums, Las Vegas suburbs, and a Bangkok traffic jam. Centre, artist’s impression of PlanIT Valley

01 QUARTER 2011

channelled by a central “nervous system” and the buildings adjust their performance to maximise efficiency and comfort for the inhabitants. Sounds blue sky, but PlanIT Valley does appear to be going ahead. In 2008 the municipal government granted Living PlanIT exclusive rights to purchase the land, which is undeveloped and overrun with non-native eucalyptus trees, at pre-rezoning values. It has since been buying up 10-hectare plots with a 50-million-euro loan arranged with Matrix Property Fund Management, a London boutique investment bank. Portugal’s national government has given the scheme official status as a project of “Potential National Importance”, which offers tax breaks and greases its way through some of the hurdles other developments might face. “PNI” status also allows the state to force reluctant landowners to sell up.

A GROWING, COMMERCIAL ‘ECOSYSTEM’ The remarkable thing about the Living PlanIT initiative is that it comes largely from outside the property and construction sectors. It’s true that engineer Buro Happold is a key player. And on 24th November 2010 Living PlanIT signed up UK developer Quintain to advise on property issues and construction delivery. But that came very late in what would be considered the normal property development process. Until now the big names in the “ecosystem” have been technology companies considered key to delivering the hightech element, principally global networking giant Cisco, and McLaren Electronic Systems, which supplies data, telemetry, control and simulation systems to Formula One. The Living PlanIT board has big names in the worlds of business, academia and politics, including Mark Spelman, who leads Accenture’s Global Strategy practice, and Dr Robert Eccles, senior lecturer at Harvard Business School. The part-time executive chairman is Ian Taylor, former MP and Conservative Minister for Science and Technology and chair of the all-Party Parliamentary and Scientific Committee. Living PlanIT staffers are drawn from the worlds of finance and IT. There are three “Chief Architects”, but they’re not architect-architects, they’re software architects, all formerly senior figures in Microsoft. Lewis himself, London-born, in 1965, was formerly general manager of market development at Microsoft, in which capacity he led the launch of the company’s .Net platform. How relevant can that be, construction professionals may well wonder? In 2004 he got involved with a Microsoft client who was developing a retail and science park for companies working on green building technologies in Syracuse, New York, and RR www.iconreview.org

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RR there he encountered developers’ frustration with the construction process. He left Microsoft in 2005, forming his own company to help this developer full time. He invited Malcolm Hutchinson, founder of a company providing esecurity and identity verification, to join him. They researched the automotive, shipbuilding and aviation industries to see how waste, time and cost could be removed from the construction process, and also how to incorporate sensors into a building’s fabric. Their idea was to sell the concept to property developers. THE PROPOSITION PlanIT Valley is not actually about PlanIT Valley. The development of a futuristic eco-city is a bi-product of Lewis’s deeper strategy, which is to make money through the licensing of the ecosystem’s technology platforms. “We’re a tech firm, not a property developer,” he says. Living PlanIT’s big idea marries an urgent need – massive global urbanisation – with the companies that could profit from meeting it – property developers and tech companies. For ammunition Lewis trots out the 2007 United Nations World Urbanization Report, which predicted that the percentage of the world’s population living in cities would increase from 50% now to nearly 70% by 2050, with a global population reaching nine billion. Based on the report, Lewis has postulated that over 9,400 new cities would be needed to absorb this growth. Lewis also claims the Living PlanIT offering tackles the problem of carbon retrofitting the world’s existing building stock. At PlanIT Valley, Living PlanIT is a property developer – of necessity. “Our real estate play is really interesting,” Lewis says. “If an R&D company locates in our space, they’re paying out for a bunch of things. A 15 or 20 year lease for the office. Each

employee has got to live somewhere, buy, lease or rent. And not just that guy, but that guy and his wife and 1.5 kids. The kids have to go to school. Private education, English language, world class. They’ll have to shop. They’ll have to be entertained. They need healthcare. Insurance. They’re big consumers. So if we’re looking at somebody who earns say 200k euros a year as a senior engineer in the high-tech world, we’re getting about 80k euros per year, from property rental or purchase, school fees, the other services we’re getting a piece of. This is why developers love this model.” But the real prize lies beyond the bricks and mortar in Portugal and the 10 other sites around the world, including east London, Lewis says is in development. “You think that’s an interesting revenue stream?” Lewis says. “Especially when you consider 110,000 R&D guys? No, it’s actually not very interesting.” The real prize, he says, lies in the slices of revenue Living PlanIT will get when its “ecosystem”, including the Ciscos and McLarens, starts selling the new urban technology which Living PlanIT has enabled to a rapidly urbanising world. Living PlanIT’s contribution to the equation, apart from pulling all of the necessary elements of the proposition together and its proclaimed ability to “monetise” formerly disparate pieces of intellectual property, is software. Its Urban Design Wizard, yet to be released, will, according to Lewis, enable the unprecedented automation of the design and construction process. And its Urban Operating System, also in development, will allow whole cities to function as intelligent organisms. Lewis spells it out: “If this is a guy in the hardware engineering world, the networking world, we’re making a 25% margin off of all the intellectual property being sold by that company. So in one of our partner’s cases, over the next four years they’ll make 14 billion euros in the deployment of our

FIGHTING URBAN DECAY: The Living PlanIT proposition for developers is based on enhanced building function, as opposed to property value

ISTOCKPHOTO; COURTESY OF BALONAS AND MENANO, A LIVING PLANIT PARTNER

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Conceptual masterplan for PlanIT Valley, Portugal. Construction to start in 2011

CONSTRUCTION NEWCOMER: Formerly a Microsoft business development manager, Living PlanIT co-founder Steve Lewis started working on high-tech solutions for construction in 2004

technology in world markets. We’re making about 3 billion in cash off of that. So our end in this is really not about the real estate. It’s about the monetisation of intellectual property on a world wide basis. It just so happens we have a very high level of hygiene in the real estate play as a result of having a captive market in PlanIT Valley.” “Tech flows are 98% of our revenues in the next five years,” he concludes. Tech companies see profit in the simultaneous pressures of population growth, urbanisation and the need to cut carbon. In an interview with iCON, Buro Happold principal Andrew Comer put it succinctly: “You convert that into a real estate value and it runs into trillions of dollars. The technology companies are looking at that and thinking, wow, if we can get a percentage of that business it makes our traditional,

BIM NEEDS TO BE CRUSHED. IT’S ALL NONSENSE. IT’S 20 YEARS BEHIND THE REST OF THE OTHER INDUSTRIES

ISTOCKPHOTO; COURTESY OF BALONAS AND MENANO, A LIVING PLANIT PARTNER

existing markets ridiculously small. And the Ciscos of this world, great though they are, know they’re not going to be able to get into that market alone. They’re need to work with others to get their products to the market at the right place and in the right shape. So this is finding a way of engaging those really big, exciting, creative companies and building a business model around them that includes places to live, places to work, recreation. That’s as much a part of the proposal as the technical end.”

WHAT BUILDINGS CAN DO A key plank in the Living PlanIT strategy is to offer commercial developers an alternate financial model based on the ramped-up functionality of the ‘smart’ buildings. At the moment property developers rely on rent or sales, but if buildings offer state-of-the-art communications, security or even customer transaction capabilities, Lewis says developers could charge more, or even take a cut of revenue generated by third-party service providers through their buildings. “Developers now don’t have access to higher revenue streams,” Lewis says. “We’re looking at broadening the types 01 QUARTER 2011

of returns you can get from real estate.” What more could buildings do? Lewis says an office building could ‘listen’ to meetings and analyze what’s getting talked about so it can flag up similar content being discussed in other meetings at the same time, and any relevant content published anywhere. If buildings have sensors, displays and who knows what else built into the surfaces, plus ‘operating systems’, the potential, he claims, is unlimited. A building would be like an iPhone, where you go to the ‘app store’ and download whatever app you want. It looks simple but there are commercial relationships behind it. According to the Living PlanIT model, ‘smart’ buildings and cities would let developers tap into similar sorts of commercial relationships. It may be worth revisiting the relevance of Lewis’s experience at Microsoft. Announced in 2000, and released two years later, “.Net” was not a specific piece of new technology but a root-and-branch re-tooling of the whole offering. It was necessary for Microsoft to re-orient itself in the face of big changes to computing in the previous five years, namely the spread of the Internet, mobile devices, opensource software, security and the interoperability offered by new programming languages. It was a major strategic maneuver and it needed the cooperation of thousands of Microsoft’s supply chain partners. “When I launched .Net in a year we had 60,000 partners taking that sort of stuff to the market,” Lewis says. “The SMEs were companies with anywhere between one and 200 people. And the big guys, the Accentures, the Infosyses, the IBMs and others were the 800-pound gorillas running and clearing the trees and making a new offering in the market credible with their brands, which creates the suction in the air behind them to suck all the little guys through.” He plans to do the same thing with PlanIT Valley, and beyond. “If you look at who’s coming into the Valley you’ve got Platinum partners like Microsoft and Cisco who are large enterprises with large ecosystems of their own. Also we’ve got this whole cloud of small to medium sized businesses who are much less risk averse and who move first into new markets. We’ve also got the guys associated with intellectual property, law, finance, venture capital, media, education, government, all the various pieces of an ecosystem we’ve assembled in our business model around PlanIT Valley. These guys are the Trojan Horses driving the stuff into the world wide markets and they’ll pull us behind them which causes our growth and immediate market penetration around the world.” Lewis says there are now around 400 companies signed up as partners, including Siemens and project software vendor Aconex. By 2015, by when PlanIT Valley is planned to be fully built out, he says Living PlanIT will have 2,000 socalled “Platinum” partners and 10,000 smaller partners. On top of sharing revenue, Platinum partners pay Living PlanIT 100,000 euros per year to be part of the club. Smaller partners pay less. Even then, he says, he’ll just be getting started. When a developer shows up at PlanIT Valley and likes what he sees, Lewis says: “I want to make sure there’s a hundred thousand companies out there saying ‘That’s the way to do it. I can add value if you build that building in that way and with that infrastructure. I can immediately help you increment your revenue stream.’”

BETTER THAN BIM What completes the value proposition for developers and cityprocuring governments, says Lewis, is the total streamlining RR www.iconreview.org

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FORESIGHT PLANIT VALLEY

of the construction process. “When we throw up the buildings in PlanIT Valley in less than nine months,” Lewis says, “and they run at 80% less cost and they cost 30% less to deliver and we’ve proven it and proven it and proven it, how are you going to go build?” The method relies on what he calls “deep” design, where every aspect of the building is comprehensively modeled by software from a catalogue of standardised components (‘objects’), and that model is made accessible to a tightlyintegrated supply chain of parts manufacturers around the world. Delivery and assembly is managed on a ‘just-in-time’ basis. The technology, Urban Design Wizard, is more than Building Information Modelling (BIM). “BIM needs to be crushed,” says Lewis. “It’s all nonsense. It’s 20 years behind the rest of the other industries.” BIM today is used mostly by architects and structural engineers but the 3D model they create isn’t typically shared with the downstream supply chain. Urban Design Wizard, Lewis says, allows the model to go straight from design to cutting machine. “Say you’re installing a pipe and it’s got an energy supply, a control unit and connectors. The manufacturers can look into our model and say, ah, these things are adjacent, these things are connected and have a common operation. As a manufacturer I can now bid and say I’ll assemble those bits for you. I’m a Unilever, I can go manufacture that stuff at a much higher volume, at a much lower cost, and I can do the supply chain integration for it.” “In aircraft,” he goes on, “as soon as Boeing opened up their supply side the manufacturers could actually look into the model and say when do you need those 12,000 bolts from me? So I can align my re-tooling? And by the way I’m pulling down that digital model so I can go straight to a cutting machine. I’m not even transcribing content any longer. And because I can send you my bid and you can electronically come back to me saying I want you to shave off another half a point and the contract’s yours, and my application says, ah, awesome, I’ll do that! “Because I can automate all of those pieces I take out layers and layers of complexity, bureaucracy and cost. You could cut 50 to 60 percent of the cost of construction without even trying,” he says.

in the construction industry at the moment and adapting them,” said Brown. CATIA is good, he says, but it can’t yet fully cope with the fact that buildings, unlike cars and planes, get made outside on unpredictable terrain, in the snow and rain and wind. Lewis said Urban Design Wizard would be available to view on the Living PlanIT website by December 2010. It wasn’t there as of writing.

MASS COMMODITISATION Also driving down the cost of building in the Living PlanIT model is the radical commoditisation of the mechanical and electrical components. “Traditionally,” Lewis says, “you’d get a heat sensor, part of the thermostat, which talks via a cable to a control box that’s collecting signals from a whole bunch of sensors, which is talking to yet another box, which talks to a big old box in the basement which pumps air into that room. All of these things use proprietary technologies and protocols which make them a lot more costly and difficult to integrate. The industry spends lots of money on all of that glue which is providing no value-add whatsoever.” “It’s like where we were with computing a few years ago,” he says. “We had a bunch of proprietary networks, protocols, hardware and you cobbled it all together and it had a huge operating cost. And then the Internet came along. And the consolidation of the hardware. On a computer today you really only see Intel chips and AMD chips. They’ve got common design. They all talk to the networks in the same way whether its wired or wireless. We’ve taken out all of those layers of difficult and costly interfacing.” The Living PlanIT ecosystem, thanks to Cisco and McLaren, will do the same for buildings, he says. “You commoditise all these boxes. You take them out. All of these sensors are now just plug-and-play. They’re just commodity.” The buildings will designed to be “plug-and-play”, Lewis adds. To achieve this, underneath PlanIT Valley will be premanufactured service cassettes, each containing the necessary pipes, cables and control systems to regulate the flow of energy, waste and data. The cassettes will be hexagonal, Lewis says, because groups of hexagons take up less area than squares. The length of each side of a cassette is 10m. New buildings just plug into these cassettes, and if you want more buildings you snap on more cassettes. He says the technology platform will also allow developers to see buildings as lifetime assets. “In construction today everything’s on the building while the rest of the manufacturing world is on product lifecycle

OUR END IN THIS IS REALLY NOT ABOUT THE REAL ESTATE. IT’S ABOUT THE MONETISATION OF INTELLECTUAL PROPERTY ON A WORLD WIDE BASIS This model also makes certain traditional disciplines obsolete, such as construction management and quantity surveying. “When you have an accurate, polymetric model of a building linked to an electronic market of standardised components, the issue of cost uncertainty disappears.” Naturally this Urban Design Wizard will be of extreme interest to BIM software vendors and users. I raised the issue with Buro Happold’s principal Andrew Comer and Steve Brown, MD for Middle East, Asia Pacific and Africa, who also sits on the Living PlanIT board as a non-executive director. They said the closest that comes to Urban Design Wizard so far is CATIA, a suite of virtual design tools produced by French company Dassault Systèmes and sold to automotive, aerospace and shipbuilding manufacturers. “We’re taking the systems they have and looking at systems

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STEVE BROWN Buro Happold MD for Middle East, Asia Pacific and Africa, and also nonexecutive director of Living PlanIT

ANDREW COMER Principal, Buro Happold, says the Living PlanIT concept is turning the urban development business on its head

01 QUARTER 2011

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BUILT TO FLIP: Suburban homes Los Angeles, California. Lewis says “deep design” allows for the calculation of whole-life value ABOVE RIGHT: An artist’s impression of Living PlanIT sustainable communities

management. If I build an aircraft today I don’t actually sell an aircraft, I sell flight time. If I build a Westland helicopter I don’t sell a helicopter I sell flight hours. And if I sell a car all I’m doing is cost recovering and where I make my cash, as Toyota and the other brands, is on service and maintenance. “Buildings aren’t built that way. We design skimpily at the outset, we don’t simulate the outcomes that we’re trying to produce and we end up with very poor buildings as a result – partly because of the financial model that’s involved. The developer builds to flip. Some guys are transitioning over to owning and operating and they care a little bit more. Legislation is having some effect. But they really don’t think about the 50year lifecycle of that thing. They don’t simulate the deterioration of materials. They don’t think really about the investment in certain building materials at the outset – if I increase the quality and the technology base of my glass I can significantly change that ongoing ambient temperature in a building for its life, which will save me 80% of my costs in energy. They just don’t do it. And so what we’re doing is applying technologies to do the simulations that humans just cannot.” And who’s going to bolt the buildings together? “We’re working with Accenture. In construction when you talk about project management you think about Gantt charts and all sorts of other clunky tools. In our case much of the tasking and scheduling is done by software. At Boeing, the process of assembling an aircraft is driven by the digital model. As bits are completed the digital model is sequencing and packaging up items of work and ordering goods. All of that is taking place in the software, but you need some guys around that to deal with the ‘Oh F#@%!’ moments, where something happens on the site, something happens with the transportation, you have inclement weather, you have issues with labour, whatever, you need people who can handle that.” “The net impact of what we do,” he concludes, “will be the complete transformation of the construction industry.” He did say, however, that he had been in talks with a major contractor operating globally. Bovis is listed as an advisory partner, so maybe it’s Bovis.

REALITY CHECK As a veteran of high-tech business development, Lewis could be expected to have a well-honed talent for painting dazzling pictures. I was therefore keen to put some of his claims to Buro Happold, whose stake in the venture would likely be balanced by its need to protect its credibility as an engineer here and now. When presented with certain of Lewis’s claims, I detected a slight unease. Will the first phase of PlanIT Valley be built in this new way? (Lewis: “Of course. Our financial model completely supports it.”) “Yes they will be,” says Steve Brown. “Obviously some of it 01 QUARTER 2011

will be done traditionally. When you’re digging you’re digging. Foundations and so forth will depend on the ground that we’re digging in. Utilities and road conditions will be done traditionally. When we start getting onto the site of the hole we’ll be wanting to bring as many of these technologies as possible.” What about the hexagonal, plug-and-play service cassettes? Are they ready to go for 2011? “I wouldn’t get hung up on the hexagonal bit or the cassettes,” says Andrew Comer, “but certainly we’re looking at how you modularise, or componentise or systematise the components of the utilities and the information technology to get the connectivity we need. To get the city to operate in the way we want, we have to develop systems that literally can be pre-manufactured and pulled onto site. And is that ready to go? Comer: “Well, the thinking’s already been done. Developing the supply chain to be able to move into full production for something like that is obviously quite a large task. And depending on the scale of the first phase of the work and the rate at which we need to deliver it, I guess that’s going to be the challenge in front of us over the next six months and up to a year in terms of how we can make that work properly.” Who’s assembling that supply chain? “It’s something we’re going to be fundamentally involved with,” says Steve Brown. “I would like to say that you will start to see some of that technology next year but actually I think next year you’ll see mainly groundworks, because the site is very, very undulating. It’s quite steep in parts. It’s quite rocky. It’s going to be a task clearing the site for construction, putting in the link roads, the connections you need. That does take some time. That’s what I think you’ll see next year.” A big issue to work out, says Brown, is how to modularise construction for a group of buildings that range in size, that have big rooms and small rooms. “I don’t think the project is entirely about prefabricated construction by any means,” says Andrew Comer. “I suspect there will be buildings that simply can’t be built using prefabricated techniques. The modularisation or systemisation is just one aspect of this whole project. For me it’s as much about the way in which the business of urban development can be turned on its head to create something that’s sustainable, not just environmentally, but socially and economically. That becomes self sustaining in the economic sense so that the effort you put in is wasted.” He continues: “You only have to look at a city like Dubai. Some of the most unbelievable buildings have been designed but the reality is large numbers of them are standing empty. They aren’t being used to generate or drive the economy. They’ve got a real challenge. The old ‘Let’s create something wonderful and people will come and occupy it’ has been proven to be a bit of a fallacy.” And is traditional construction faced with doom? Not quite. As Steve Brown says, the system will still need somebody to put everything together, to “lift and stack the boxes”. But he maintains that the Living PlanIT model tackles the contractual barriers that stop true integration of design and construction. “The idea of this is to try and break those down by technology, by getting a group of experts together to look at how we’re going to assemble things as a kit of parts.” “There will always be a role for the contractor. We’ll still need concrete, we’ll still need people to tie bits of reinforcement together, we’ll still need somebody to put in all the primary utilities. That’s never going to change. To think that intellectuals like Buro Happold or architects, designers, can actually answer all the world’s problems is in my view naïve.” iCON

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COMPANIES AECOM

AECOM THE GAME-CHANGER? With the purchase of construction manager Tishman and QS Davis Langdon, Aecom has set out to be the world’s first construction megastore. Some say it will change the rules of the game, that locating design, cost and delivery disciplines in one big company creates an irresistible client offering. But do clients want megastores? And can Aecom really pull together its disparate parts to create a truly integrated supply chain? Elfi Middelbeek reports

147,226

187,000

237,000

O’Hare International Airport Modernization Program, Chicago, USA Program management at the world’s busiest airport in Chicago. Scheduled for completion in 2014.

100,297

10 YEARS OF GROWTH

53,686

Aecom Profit and Turnover 2000-2010 (US$000s)

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6,500,000

6,119,465

5,194,682

4,237,270

3,421,492

53,814 2,395,340

50,436 2,011,975

36,890 1,914,472

23,087 1,746,973

17,556 1,513,390

17,709

n Turnover n Profit

1,379,750

ecom has been expanding into new markets with each of its 19 acquisitions since launching on the New York Stock Exchange in 2007. Now a vast array of specialisms teem under its global umbrella, from high-speed rail technology to national security solutions, and from environmental science to international development. The summer of 2010, however, saw a particularly targeted shopping spree with the purchase of UK-based and globally active cost and project consultant Davis Langdon and American construction management firm and contractor Tishman. For the construction industry worldwide this was notable because for the first time a top-tier engineering and design firm can claim to house all the formerly disparate disciplines in the construction delivery process under one roof. John M Dionisio, Aecom president and CEO, threw down the Aecom gauntlet in August by stating in a press release: “Davis Langdon’s strong cost and project management capabilities bolster our growing portfolio of construction management services. Combined with our recent acquisition of Tishman Construction, we have significantly enhanced [our] ability to meet the growing customer demand for turnkey, integrated services.” The idea of Aecom as the world’s first construction megastore is fascinating. Some say it will change the rules of the game, that locating design, cost and delivery disciplines

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London 2012 Olympic Legacy Masterplan Framework Leading on a Legacy Masterplan Framework involving infrastructure, housing, leisure & culture. “End-state” – 2040.

SNAPSHOT OF CURRENT AECOM PROJECTS

Central-Wan Chai Bypass and Island Eastern Corridor Link, Hong Kong Road construction project. Aecom is providing review, design, tender and construction services. Expected 2012.

The Crescent, Baku, Azerbaijan Project and cost management on high rise tower project. Five towers, shopping, hotel on the Caspian Sea. Set to be completed in 2013.

in one big company creates an irresistible client offering. But two key questions arise. One, do construction clients even want multi-disciplinary superstores? And two, can Aecom pull together its many parts around the world to create a truly integrated supply chain? Before tackling those questions it might be helpful to review the history of this remarkable company.

HOW DID AECOM GET SO BIG? Acquisition has been at the heart of Aecom’s strategy since its commercial ancestor, Ashland Refining Company, was set up in Kentucky in the 1920s. Through acquisitions Ashland got into chemicals and petrochemicals and, in the 1950s, infrastructure. With America’s post-WW2 highway boom the company became one of the biggest road builders in the US. Its most fateful acquisition was buying Daniel, Mann, Johnson & Mendenall (DMJM) in 1985. DMJM offered both engineering and architecture and had experience in infrastructure. Its director, Richard G. Newman, took the helm of what became Ashland Technology Corporation. When Ashland decided to return to its roots and specialise in petroleum refining in 1989, Newman organised an employee buyback. In April 1990, the company was reborn as Aecom; the acronym stands for Architecture, Engineering, Consulting, Operations and Management. Headquarters were set up in Los Angeles, the former home of DMJM. 01 QUARTER 2011

Saadiyat Island Cultural District, Abu Dhabi Program managing construction and design on Saadiyat Island: cultural, resorts, commercial and residential. Expected 2018.

Aecom let its subsidiaries operate independently, a strategy that saw its net profit grow from $5.4 million in 1998 to $17.7 million in 2000. The new Millennium saw Aecom acquire UK-based G. Maunsell & Partners, one of Europe’s biggest engineering and construction companies. This was Aecom’s first purchase in Europe and opened the door to business in Asia and the Middle East. Maunsell boosted Aecom’s turnover from $978 million in 1999 to $1.4 billion in 2000. In 2005 John M. Dionisio took over as CEO from Newman, who remained chairman. Dionisio led the launch on the New York Stock Exchange in 2007. It was a huge success. On May 10, 2007, the company raised $472 million in its initial public offering. Shares were snapped up at $20 apiece. Shares rose to a peak $34.93 in the months after the IPO and in October 2008 they bottomed out at $17.63 thanks to the global recession. Shares spent much of November 2010

ONE-STOP FIRMS WILL BE IN A BETTER POSITION TO EXPERIMENT WITH MORE EFFICIENT TECHNIQUES AND ADVANCED TECHNOLOGIES SUCH AS AUTOMATION OF CONSTRUCTION WORK PROCESSES PROF. MIROSLAW J. SKIBNIEWSKI www.iconreview.org

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COMPANIES AECOM

COMPANIES ACQUIRED SINCE IPO IN MAY 2007 2007

HLA Envirosciences – Australia KMK Consultants – Canada l Gartner Lee – Canada l CityMark Architects & Engineers – China l Economics Research Associates (ERA) – USA l l

2008

The Services Group – USA Tecsult – Canada l Boyle Engineering – USA l Totten Sims Hubicki (TSH) – Canada l Earth Tech – USA l l

2009

2010

Savant – UK l Lim and Nascimento Engineering Corporation l (LAN) – USA l Ellerbe Becket – USA l SSI Services – USA INOCSA – Spain Tishman Construction Corporation – USA l McNeil Technologies – USA l Davis Langdon – UK l RSW Inc. – Canada l

above $27 which, considering the global recession, seems to indicate that the market has high hopes. In 2009 the group restructured under the Aecom name as one consultancy giant. Reported to generate a turnover of US$6.1 billion and a profit of US$187 million in 2009, Aecom is now, according to Engineering News-Record, the world’s highest-revenue design firm, employing 45,000 people in 500 offices spread over 100 countries. In 2010 Aecom bought five companies (see box), diversifying its professional technical services with Inocsa’s expertise in high-speed rail technology. In August 2010 Aecom bought QS Davis Langdon for $324 million and in July American contractor Tishman for $245m, bringing for the first time design, cost and contracting expertise under one roof. It also bought Canada’s McNeil Technologies for $355m. McNeil offers national security and intelligence solutions. All this increased Aecom’s presence in Europe, the Middle East and Canada. Aecom has been a big, hungry fish, but Aecom’s Bill Hanway, MD for UK and Ireland, insists that it’s no shark: “Our recent merger with Davis Langdon is a good example of how we grow – we do not adopt a hostile approach, it is about joining forces with like-minded professionals to deliver better services for our clients.”

THE MEGASTORE PROPOSITION Echoing his boss, John Dionisio, Hanway says the construction megastore is the way of the future: “In Europe the industry is becoming more efficient in the procurement and delivery process and the best way forward is to be agile and flexible, to provide both individual consultancy services and also a broader, all-inclusive product.” So far, the markets seem to agree. “There’s a view in the industry that the client wants one throat to kill. You now – one-stop shopping,” says Avram Fisher, a BMO Capital Markets analyst based in New York. Fisher told iCON that investors favour really big companies. www.iconreview.org

“It’s easier to invest in a three billion dollar company than a 300 million dollar company. There are companies of both sizes in the capital markets but in order to get that big it requires adding different dimensions to the company.” Megastore consolidation has its theoretical proponents. One of these is Miroslaw J. Skibniewski, Professor of Construction Engineering and Project Management at the University of Maryland. “The benefits of this approach are likely to outweigh its increased cost through better communications between designers and construction contractors who will work in one organisation, and consequently less rework and better quality of the finished product,” he said. Skibniewski believes the megastore concept will change the future of the industry. “One-stop firms will be in a better position to experiment with more efficient construction techniques and advanced technologies such as automation. Designers, QSs and independent contractors will work in a better coordinated environment, sharing more project-related information among themselves, and reducing inefficiencies.” In short, one company stands poised to offer the sort of supply chain integration that decades of reports, reform

JOHN M. DIONISIO The man who must bring it all together Age: 61 Position: Chief Executive Officer, President and Director, Aecom Technology Corporation.

Annual Compensation:

RARELY HAS A MULTIDISCIPLINARY TEAM HAD THE ‘BEST IN CLASS’ SKILLS IN ALL DISCIPLINES RON GERMAN, STANHOPE agendas and new forms of contract such as partnering have so far failed to do. But is it what clients want? Not everyone thinks so. One view is that Aecom-style consolidation takes the intimacy out of a process that clients find scary and difficult. “People’s experience of large organisations is that they don’t offer a personal service, that what you’re getting is a corporate body,” says Professor David Boyd of Birmingham City University and author of Understanding the Construction Client. “Therefore you get the marketing people and the public relations people, but it’s very difficult to get down to speak to the people actually doing the work.” “The majority of clients want to deal more intimately with organisations,” he added. “And therefore the deal with the individual fits in an intimate way. I think it will be joint ventures and amalgamation which will be able to put up as good a show as Aecom.” One of the UK’s most experienced clients, property developer Stanhope, remains unconvinced. Director Ron German said he wouldn’t take claims of a ‘one-stop-shop’ at face value: “We have never found a third party that can truly put themselves in our position and therefore make judgements that would deliver the best outcome. And rarely has a multi-disciplinary team had the ‘best in class’ skills in all disciplines,” he said. Big companies also have a reputation for breeding bureaucracy and distance between top management and the people on the ground. This is why Jack W. Plunkett, CEO of Plunkett Research, based in Texas, says there will always be room for the little guys as long as they aim for the right market. “Small shops need to capitalise on their ability to build personal relationships and respond quickly to client needs without undue layers of management or bureaucracy,” he told iCON. We spoke to one such ‘little guy’: Tony Rizk, whose 50person engineering and construction firm in Garden Grove, California specialises in government and industrial projects,

Salary $978,479 Bonus $2,500,000 Total Annual Compensation $3,478,479 Born in New York, Dionisio received a BSc in Civil Engineering from The City College of New York in 1971, followed by a MSc in Civil Engineering from the Polytechnic Institute of New York in 1976. He joined Frederic R. Harris Inc. in 1971 which became part of Aecom in 1990. He steadily climbed the ladder, from manager of the New York Operations and then northern region manager up to executive vice president in charge of all US Operations from ’93 to ’96, ending up President from ’96 to ’99 and finally CEO of the subsidiary from ’99 to ’03. In 2000 he oversaw the merger between subsidiaries Frederic R. Harris, DMJM Infrastructure and Holmes & Narver Infrastructure. In 2003 he became executive vice president and chief operating officer of Aecom and in 2005 became CEO of Aecom. He introduced Aecom to the New York Stock Exchange in 2007.

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BILL HANWAY Aecom’s main man in Europe until Jan. 2011 Age: 49 Position: Executive Director of Operations Europe Born in Tokyo and raised in the US, Bill Hanway earned a degree from the Graduate School of Design at Harvard University. He moved to London to focus on masterplanning in South Africa and Europe and worked for the London office of EDAW from 1997. He worked his way up to Chief Operating Officer for EDAW, which was acquired by Aecom in 2005. He was appointed Aecom’s managing director for the UK and Ireland and then executive director of operations in Europe in 2009. In January 2011, Hanway began reporting to Steve Morriss, whom Aecom had appointed Chief Executive for Aecom in Europe. Morris joined Aecom from Mouchel, where he was MD of its 4,000-personstrong Government & Business Services division. His 22-year career also includes senior executive roles with Serco PLC and WS Atkins. Aecom was reportedly looking for a high-profile outward face for the organisation who could pull together all the recent acquisitions.

01 QUARTER 2011

which brings him into direct competition with Aecom. Rizk is just fine with that. He says small companies shouldn’t completely specialise if they want to compete with the big fish: “Small companies should focus on their area of strength, yet maintain a diverse knowledge base that will allow the company to provide multiple services under one contract,” he said. Bill Hanway agrees. In fact, he says it’s not the small companies that should worry about Aecom, but the mediumsized ones. “The very good boutique firms answer one set of specific needs with much larger firms providing a larger scale, collaborative model. It is important to note that these two conditions are not mutually exclusive and on many projects, work together to provide a better solution for clients. On the other hand, middle-sized firms have a greater challenge and will likely need to decide which direction they want to pursue.”

TRUE INTEGRATION? The bigger question for now, perhaps, is whether Aecom truly can provide the sort of game-changing multi-disciplinary integration it says is on the cards. For the time being Aecom’s top board will be plenty busy just digesting the fish it devoured in 2010. Considering it only started operating under one name in 2009, the challenges of bringing together many disparate IT and accounting systems, company cultures and management structures are bound to be immense. Prof. David Boyd highlights two main internal problems: competition and communication. “They still have great barriers between their various divisions,” he says. “Each division is still operating as a profit centre and the board is looking at each of them to see that they’re performing. Therefore they’re in competition to some extent. “I think it’s a bit of a fallacy to say that because they’re under one name they’ll all work together and there won’t be any internal communication problems.” Naturally, Bill Hanway disagrees. He says they’ll group individuals under the normal business functions: business development, client interface, IT, HR – as he says: “all the structural components tying together our business. So the teams then work under leadership on those issues.” As for internal competition, Hanway says it’s not an insurmountable problem. They’ll have two major offerings: management support services and professional technical services. He adds that internal competition is reduced by the vast diversity among Aecom’s business lines, end markets and geographies. ASSESSING THE COMPETITION URS Corp. and Jacobs Engineering are Aecom’s main rivals. Each aims to be the construction megastore of choice. Although Jacobs boasts a higher net profit figure, at $399.9 million in 2009, that’s down 5% compared to 2008. URS reported a $269.1 million profit in 2009, an increase of 22.4%. Aecom might not have the highest net profits but it does appear to be growing faster, with profit increasing by more than 89% between 2007 and 2009. All three rely on the US government for work, with Aecom reportedly pursuing nearly $15 billion in new government contracts in 2010. This could be a shrinking pie, however.

President Obama’s plan for $50 billion in extra stimulus funding for roads, rail and runways will have a tough time getting through the new Republican dominated Congress. All three expand through acquisition, but Jacobs stands out because instead of focussing on transactional projects it concentrates on professional relationships. Avram Fisher says Jacobs’ strategy is best paraphrased as, “We will maintain our relationships with our existing clients and grow that relationship so that we own the client.” By contrast, he says, Aecom’s would be, “We want to own the people who have the best relationships with the best clients and grow our business that way.” The best example of Jacobs’ business model is its relationship with NASA; Jacobs currently has 11 contracts with the space administration, providing work for more than 3,500 Jacobs employees. URS and Aecom are more similar. Both acquire companies to grow and they were described by ENR in July as the “dual centers of a new universe of engineering megafirms”. But Aecom has the edge with its global footprint, where URS still relies strongly on the North American market. In June, however, URS acquired the UK-based Scott Wilson: a multi-disciplinary design and engineering consultancy firm with international reach in Australia, Canada, China, Eastern Europe, Hong Kong, India, the Middle East and South East Asia.

FUTURE EXPANSION Aecom’s future looks promising because of demand for infrastructure in new markets in India and Brazil. In August 2010 Aecom’s Planning and Design arm won the Nova Luz urban regeneration project in Sao Paulo. In India, Aecom was recently awarded one of the leading educational institutions’ award for best infrastructure consulting firm. Aecom’s success in the Asia Pacific region is also expected to grow. In Hong Kong, where Aecom is already closely involved in large infrastructure projects such as the city’s highspeed rail scheme, new projects are being set up to help the city cope with its expected population growth. Professor Skibniewski argues that Aecom might spread itself too thinly around the world. He says that difficulties in finding enough staff to manage a global portfolio of projects could make them vulnerable to failure. Possibly, but with construction unemployment in the US alone hitting 17.3%, there should be plenty of talent out there. Besides, the trend now in the global design and engineering world is to hire local. “There are a lot of firms working internationally that are not moving people around the world,” says Jan Tuchman, Editor-in-Chief of ENR. “Companies setting up major offices in China are hiring Chinese engineers and Chinese architects.” Another problem could be an overdependence on US government projects. Too much reliance on US government projects could be risky with the US economy still recovering from the recession and the state of the government’s finances. But Bill Hanway is optimistic. “These are challenging times, but they’re also full of opportunity,” he says. With the INOCSA and Davis Langdon acquisitions, Aecom is now well-placed to explore Russia and the former Soviet Republics. There have been rumours that Aecom is looking to acquire a major UK architecture firm, something Hanway neither confirms nor denies. iCON

IT’S A BIT OF A FALLACY TO SAY THAT BECAUSE THEY’RE UNDER ONE NAME THEY’LL ALL WORK TOGETHER AND THERE WON’T BE ANY INTERNAL COMMUNICATION PROBLEMS PROF. DAVID BOYD www.iconreview.org

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PROJECT LIBYA UNIVERSITIES

EDUCATION IN A HURRY Libya has embarked on a remarkable programme of building 25 new universities all at once. It wants them right away but, as Kristina Smith reports, a hastily deployed design-and-build process involving multiple designers and 13 contractors from around the world has proven a match even for the Islamic Republic’s cash and political will

ibya has plans. Colonel Gaddafi, Libya’s leader since 1969, has made no secret of his ambitions to head up the ‘United States of Africa’ and is developing his country accordingly. The volume of infrastructure work required there is enough to take any contractor’s breath away. At the heart of these plans is a programme to build more than 25 new university campuses around the country, in locations which vary from coast to desert, city to camel route. The aim is to transform education not just in Libya, but throughout Africa, with students coming from all over the continent to study. “It’s a very bold idea,” says Dan Stanescu, design manager for Hill International, which is providing design review services to the government. “What is remarkable about this programme is that the government has made the decision to provide higher education in places where there is no educational infrastructure at the moment. This should result in institutions promoting unusually high standards everywhere, including in the middle of the desert.” It’s a major challenge. On top of thousands of other major projects, the client, ODAC (Organisation for Development of Administrative Centres), wants the universities fast. But so far there are 13 contractors from around the world, all used to different codes and standards, working to designs that are not as complete as they’d thought. The result has been delay, and a much bigger task for Hill. “The main problem for all the companies is that the client was in a hurry to sign the contract and we didn’t receive the stage D drawings until a year later,” says Auro Garlaschi, CEO of Italian contractor Impregilo which is constructing three campuses. “We had to mobilise to do the work but the designs were not ready.” Mobilising in Libya is no simple task. To populate the thousand-strong camps needed to construct these projects in their remote locations, contractors must bring in skilled workers from overseas on work visas, a process which currently takes 60 days. The last thing a contractor wants is to have workers hanging around without enough to do. This problem is not unique to the universities projects, adds Garlaschi, but is common across public sector projects at the moment due to the huge number of them being processed. Impregilo, which has worked in Libya for over 40 years, has several contracts with a number of government departments.

IN AN IDEAL WORLD… Libya’s ambitions to provide world-class educational www.iconreview.org

TEAM OF MANY NATIONS l Campus l Client design team l D&B contractor l Contractor nationality H Tripoli

institutions are reflected in its decisions to use international designers. In 2007 it appointed several design consortia to work on masterplans for the universities. A BDP-led consortium won a contract to design 10 campuses, Argus, an alliance between Arup, Buro Happold, Davis Langdon and Keppie Design won 12 campuses, four of which architect LDY worked on. Spanish design house Idom won the contract to design the biggest campus Misratah and RMJM was later appointed to design two campuses. The plan was that the international design teams would take the designs as far as RIBA Stage D. Contractors would then be employed on a design and build basis to complete the designs and start building. The rationale was that it allowed construction to begin while design progressed and it allowed systems and technology which could be supplied and

WE HAD TO MOBILISE TO DO THE WORK BUT THE DESIGNS WERE NOT READY. AURO GARLASCHI, IMPREGILO maintained locally to be specified by the contractors. In an ideal world, design and build might not have been the contract form of choice. For complex projects, a more traditional approach where the design is fully completed before contractors are taken on often works better than design and build, says Eric Butterworth, managing director of Hill International UK project management, who is heading up Hill’s team. An added complication has been that few of the contractors are familiar with this form of contract: “I don’t think that the contractors that are appointed really

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understand design and build,” says Butterworth. Impregilo’s Garlaschi says: “The actual scope of the work was design-completion and build: the client would issue the stage D design and we had the task to complete the design. In the end we had to deeply modify the designs so it became redesign not design-completion.” On most design and build projects what constitutes ‘design development’ and what constitutes ‘redesign’ is up for negotiation. That’s what will happen here. Impregilo will be arguing for extensions of time and some compensation, says Garlaschi. “From one side, there is a lot of goodwill from the client to cooperate, to solve the problem, but there are a lot of problems we are overcoming at the same time. For our side, we are spending money in indirect costs without making reductions to cover those costs.” Less than a year after the designers came on board, in

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April 2008, ODAC announced that it had entered into contract on 19 campuses, with contractors from a variety of countries (see table), although the Stage D designs were not available at that point. The reason for the rush was that ODAC needed to secure a budget, so contractors were appointed on the basis of costs per square meter for notional areas, with the proviso that adjustments could be made once the designs were finalised. Six further construction contracts have yet to be let for a variety of reasons, from difficult ground conditions to local politics. Two campuses, from a list which had initially been 27strong, have been abandoned. A further two universities and a military college, which aren’t part of the programme being overseen by Hill, are under construction. Hill International was appointed as project manager for RR

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PROJECT LIBYA UNIVERSITIES

RR the pre-construction phase in February 2008, a role which encompasses design review, technical advice and commercial advice. Its initial brief was to oversee the designs to Stage D, due at the end of December. Later, Hill’s contract would be extended to February 2013, the date when construction of all the campuses are due to end. It wasn’t long after Hill’s appointment that it had to put the brakes on the whole process in order to make sure the briefs were good enough to ensure the client would get the facilities it needed. Butterworth explains the issue: “The designers asked the client: ‘What’s the brief?’ and the client replied; ‘You are the experts, you should be telling us’.” So the briefs which BDP, Argus and the others received were sketchy — numbers of students, teaching staff and faculties. However when Hill reviewed the information it found conflicting statistics. So Hill went back to Libya’s Ministry of Education to confirm what was required at each location, a process which took eight weeks. “The consequence of the review varied from campus to campus,” says Butterworth. “Some were redefined, most needed some adjustment.” One direct result was that the deadline for the production of Stage D designs shifted back to May 2009. Hill also persuaded ODAC to appoint educational advisers to advise on the impact of the curriculum on design and FF&E (furniture, fittings and equipment) advisers who are vital in helping to determine the layout of certain spaces and connectivity between spaces, for example in laboratories and their supporting rooms. The urgency of this programme was again underlined when in November 2008 ODAC formally handed 18 sites over to the contractors who were issued with Stage C designs and urged to mobilise and start preparatory works. NO DOMINANT CODES It was not until June and July of 2009 that the stage D designs were finally handed over to the contractors. Their

design teams then had to progress the designs, adhering to British Standards and codes and a UK-based specification set jointly by the masterplan architects. Hill’s role now was to help ODAC vet the contractors’ proposed designers and then to police their designs. To meet this challenge, Butterworth assembled a crack team of design managers, each with a wealth of both technical and overseas experience, among them Dan Stranescu, Kamil Nourouz and Alex Amos (see box). “It was challenging assessing the capability of the designers and their capability with British and European standards, and their ability to deliver fully co-ordinated design services,” says Stranescu. “There are enormous variations in the contractors’ approaches to design and construction. When you are dealing with consultants in European countries, there is a certain level of difficulty. When the consultants come from other parts of the world including Turkey, China and Korea, their standards are very different.” Some contractors have had to change their design teams because of this difficulty in working with unfamiliar codes. It soon became apparent that Hill would need to do more if it were to keep the designs on track and the designers onside. Rather than reviewing designs from a distance, as is often the practice, Hill has elected to use a workshop approach with meetings in the designer’s home country, Libya or the UK. “We must take a step closer to them and let them understand that our comments are to help them and to help us too,” says Nourouz. “We are not telling them off.” “It is very important to maintain a good relationship with the designers and keep the designs progressing,” says Butterworth “Sometimes it’s more about guidance sometimes it’s about getting them back on track if they are drifting towards a claim situation.” One of the biggest stumbling blocks has been the use of British Standards and design codes, particularly for the M&E consultants. “Most of the designers, even if they have worked

A NOSE FOR THE WIN-WIN Overseeing a complex project like this requires as much diplomatic skill and experience as technical ability. Alex Amos, one of Hill’s A-team design managers, has it in spades

“You can plan as much as you like but if you work overseas almost all of the plans get modified, some very severely,” says Alex Amos, who has spent 52 years working on everything from petrochemical projects to housing in Europe, the Middle East, North Africa and Malaysia. Sometimes he’s cast as a trouble-shooter, but he stresses that he never goes in with guns blazing. His approach is to assess what’s what and

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then find a solution that saves face for everyone. He oversees the four university campuses under construction by Chinese contractor Changjiang. “Working with anybody, particularly the Chinese, you have to get their respect and trust and establish that very quickly. You must never let them down,” he says. The design review process with Changjiang has been challenging. The contractor had to change its design team to find designers more at home with British standards and codes. Hill’s role is to keep things moving for the client while always being aware of the commercial tensions, especially potential claims. A lifelong freelancer who has also run his own businesses, Amos started in London working for firms including BDP and Fitzroy Robinson Partnership. When an opportunity to earn more working in Holland on a Saudi petrochemical project came up, he took it and spent six years there. A two-year stint in Istanbul arose from an

assignment for a British firm of architects which was working for a Turkish developer on a large residential and commercial development. Sent over for a meeting in Turkey, Amos discovered that the client was about to boot the architect off the job. His solution was to totally redesign the 120-villa complex, working for the client rather than the architects. But at the same time he managed to secure the UK practice’s outstanding £100,000 in design fees. Perhaps it was his nose for the win-win situation that led a firm of Chinese Malaysian architects to hire him as design manager for a five-star hotel in Kuala Lumpur. His brief was to get rid of the project manager, but when he arrived he found that the project manager wasn’t really at fault. He managed to smooth out the problems so that the hotel could be successfully built. “I have always found that where there’s a problem, I’ve managed, with others of course, to solve it,” says Amos.

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Zliten, Courtyard

with British Standards, are not used to working with them every day,” explains Hill director Andrew Hinkins one of two project managers on the programme. “The architects and structural engineers perform pretty well, but it’s been a real struggle for some of the MEP consultants because the systems are much more complex, as are the interfaces between systems.” There are no dominant codes in Libya, explains Hill associate director and project manager on the universities programme, Omar Massoud, a fact that visitors to Libya might notice when they see both two-pin and three-pin sockets in their hotel rooms. There have been more MEP workshops than any other, says Massoud, with the consultants responding well to this approach: “We seem to make progress almost every time we have a workshop,” he says.

THE OLD COMPLICATIONS FINISH, BUT THERE ARE ALWAYS NEW COMPLICATIONS In order to beat out some of the issues such as coordination and integration, Hill proposed a system of pilot buildings, where each contractor selected one building to develop as fast as possible. “When contractors were trying to work on a dozen buildings at the same time, there were all sorts of frustrations,” says Butterworth. “The architects would be working on one structure, the engineers on another and the MEP consultants on another.” The genius of this plan is that it also satisfies the client’s need to show construction progress on site, in line with the political will.

TRACK RECORD Contractors are on site at several of the campuses now, although some of them have only been able to build the 01 QUARTER 2011

boundary walls and prepare the sites, at least some activity for ODAC to show to the Ministry of Education. Others have progressed further. According to ODAC’s website, Misratah is the most advanced. Impregilo reports that four buildings are now coming out of the ground: two faculties are at second floor level with the in-situ concrete frames and the community building and library have their foundations in place. Campuses at Darnah, which is being built by Turkish contractor Mesa and Al-Marj which is being built by Arsel, also of Turkey, are also starting to take shape. As you might expect from a country consisting largely of sandy deserts, ground conditions are making life interesting on a number of projects, including both of Impregilo’s other campuses at Tarhuna and Zliten (Al-Maghrib). At Tarhuna, underground caves have made it necessary for Impregilo to carry out grouting operations before work on the foundations can begin. And in the coastal location of Zliten, saline soils have made further ground investigation necessary. Despite the ongoing struggles on this immense programme, there is an unwavering belief amongst all those involved that these universities will be built, although it seems clear now that few will make the 2013 deadline. Underlining this belief is Libya’s track record in delivering great construction projects, such as the Great Manmade River, a network of pipes supplying 6,500,000 m³ of fresh water a day from aquifers beneath the Sahara to northern Libya which was built whilst the country was still subject to sanctions. “It is not easy, but we are expecting a few difficulties,” says Garlaschi. “Every day there are challenges. The old complications finish, but there are always new complications. In the end we have always completed all of our projects in Libya successfully, and the client has always been satisfied.” iCON

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CORRUPTION DISCLOSURE

TRANSPARENCY IN ACTION Imagine a world where governments automatically published data allowing citizens to monitor the transparency and efficiency of their big public construction projects. That’s the idea behind “CoST”, a seven-country pilot supported by the World Bank. Kristina Smith reports on the first tentative steps of this bold undertaking

t’s a great idea. Get all public sector projects to publish information at set stages so that everyone can see things are being done properly. And if they aren’t being done properly, people can take the government to task. This is the big idea behind the Construction Sector Transparency Initiative, or CoST, a pilot project spear-headed by the UK to root out mismanagement and corruption in global construction. Seven countries volunteered for the pilot which has been funded by the UK’s Department for International Development (DFID) with support from the World Bank: UK, Ethiopia, Malawi, the Philippines, Tanzania, Vietnam and Zambia. The pilot is at an interesting stage. September and October last year saw five of the seven countries publish information about projects they’ve been monitoring, with the others set to follow soon. Only now will we see who is interested in this information and what they are prepared to do about it. “There are big question marks related to politics,” says Christiaan Poortman, chair of the International Advisory Group overseeing CoST. “It is one thing to disclose information, but what are the repercussions and how do we deal with them? The demand side for this information is still something we need to work on.” It could take years for this ‘demand side’ to be generated. Which means it will be difficult for possible funders such as governments, donor organisations and the private sector to see the benefit of their contributions. When the UK’s then Secretary of State for International Development, Hilary Benn, first announced CoST in 2007, it seemed to be all about fighting corruption. He said: “The global construction industry has a poor reputation for corruption, with a conservative estimate of 10 per cent of its $4 trillion global turnover lost to corruption. The new initiative will help deliver a ‘get what you pay for’ culture to the industry. It will help create greater transparency around the flow of money, and the quality of roads, schools, hospitals that are built with it.”

That didn’t go down too well in some quarters. Bob McKittrick who is leading the UK’s efforts had to modify his tack when speaking to the public sector clients whose projects he was hoping to vet. “We were using the ‘corruption’ word at the beginning, but it didn’t go down very well,” he says. “It’s not an anti-corruption initiative, it’s a transparency initiative,” says Poortman, a former World Bank regional vice president and now director of Global Programmes for Transparency International. “Whatever mismanagement one might uncover can be related to anything. It can be sloppy work, inefficiency or it can be corruption. “That’s important because if you want to bring people in, it’s important that they don’t go in it with the idea that they will be fighting corruption. They go into it with the idea of how the efficiencies of construction can be improved, which can sometimes involve fighting corruption.”

FAIR DEAL FOR ALL So CoST is being sold as a way for all those involved in construction projects to get a fair deal. Citizens can make sure the money they pay in taxes is being spent efficiently on constructing roads or schools or hospitals. Funders can ensure their money is being wisely spent. Countries with poor reputations can demonstrate to the world’s construction firms that they are a good place to do business in. And for contractors and consultants, the CoST initiative should bring a level playing field and potentially open up new markets around the world. The inspiration for CoST came from the Extractive Industries Transparency Initiative (EITI) which was launched in 2002 and now has 30 countries signed up. EITI now has a quality assurance role in which it ‘validates’ compliant countries to say that they are disclosing information and monitoring those disclosures, a process which was set up in 2007. It is financed 40% by industry, 40% by member countries and 20% by host country Norway. Central to these transparency initiatives is the involvement

WOULD YOU DISCLOSE THIS? The CoST Initiative calls for the disclosure of “Material Project Information” (MPI). Here is what the countries piloting CoST For the Contract of Works: - Number of companies expressing interest - Number of companies short listed - Number of companies bidding - % of companies short listed who went on to bid l Estimated length of project in weeks at commencement date l Actual length of project l

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l Actual length of project as a % of estimated length l Price for the Main Contract of Works: - Initial estimated price - Price at contract start date - Price at contract completion date l Instances of re-award of the main contract with recorded reasons l Formal instructions to remedy defective works:

- Number of those issued - Value of those issued - Number of those implemented - Value of those implemented l Any other recorded indication of the contractor failing to meet the specification, listing the source of the information and a brief comment on the nature and severity of the failure l Changes to the scope of the project

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ODA 2008

of a wide range of stakeholders including client, funders, construction companies and associations and civil society. So the first step for each pilot country was to assemble a multistakeholder group (MSG). For some countries, such as the UK, finding members for the MSG was a challenge. “The problem wasn’t finding competent people, it was just finding people,” says McKittrick, former UK boss of Scott Wilson and a past president of the Institution of Structural Engineers. In other countries, NGOs are more forthcoming, supported by motivated volunteers who want to see public money better spent (see case study on the Philippines, pages 28-31). Some countries have had to bring in new legislation to make sure that the relevant information is released. In the Philippines the government brought in a new Freedom of Information Act. In other countries, it’s a simple directive to say that all contracts executed by public sector need to be fully transparent. Having assembled itself, the MSGs had to find some willing public clients to volunteer their projects. This was no mean task. Some countries got cold feet. Ethiopia decided there was no need to take part in CoST because there was no corruption in their construction industry. Poortman had to explain that since Ethiopia had a reputation for corruption their involvement was necessary if only to prove that all was above board. Once clients were on board, each country carried out a ‘baseline survey’, examining a number of projects to work out what information was already available. These baseline surveys, some of which can now be read on the CoST website, will allow comparison between countries and also allow progress to be measured at a later date.

01 QUARTER 2011

THERE HAVE BEEN MOMENTS WHERE I HAVE HAD TO GO OUT AND LEAN ON PEOPLE CHRISTIAAN POORTMAN, TRANSPARENCY INTERNATIONAL

For the project managers being asked to divulge the information the exercise opened a can of worms. Their complaints included: it was time-consuming and took resource away from project delivery; the general public isn’t interested in the information anyway; disclosure will just create a smokescreen for corruption to continue behind; the private sector might use the information against their public sector clients; and it might release commercially confidential information to competitors. Extracting all the information required called for experts. So each country appointed an Assurance Team to delve into the project documentation in order to extract what CoST called ‘Material Project Information’ (see box). This information comes from all stages of the project, including inception and design, with one of the aims of the pilot being to bash out exactly what data is and isn’t needed. If the CoST system were to be taken up, this information would be disclosed as a matter of course, automatically generated where possible, with the Assurance Teams carrying out random checks. One big lesson came when the Assurance Teams presented their findings to the MSG so it could decide what and how to publish. Members had no idea what the Assurance Teams were talking about. So CoST is now working out ways to translate information so that non-technical people can understand it. Finally, the MSGs have published the information on the pilot projects. September and October saw UK, Ethiopia, Malawi, Zambia, Vietnam all disclose their project reports which are available through the CoST website. The Philippines and Tanzania have started the disclosure process, although the reports aren’t on the website yet. It has taken longer to get here than anticipated, admits Poortman. Every step of the way has been slower than expected, with the final step of disclosure delayed in some cases by political considerations. And although each country was supposed to appoint a champion at government minister level, they haven’t always come through for the CoST cause, says Poortman. “It’s not always easy to find them. Sometimes you find them and then when the going gets tough they are less of an ally than you expected them to be. There have been moments where I have had to go out and lean on people or explain to them or cajole them.” However, Poortman feels that the pilot to date has been a success. There has been support from organisations such as FIDIC, the International Federation of Consulting Engineers and the European International Contractors (EIC) group. Other countries, including Guatemala and El Salvador, have expressed their interest. Poortman sees a future where each country wanting to be involved demonstrates its commitment by getting the right legislation in place, setting up their own MSGs and beginning disclosure. “There could be international secretariat that provides guidance, information and final analysis and an international board to set policy and to decide whether countries are being admitted to CoST, and whether they have reached the final stage. “There’s a certain amount of funding that will be needed to get countries to the starting line and to the finishing line. Some will come from the countries themselves, some from outside. But this will not be on a bankrolled basis.” The most likely funder, says Poortman, is the World Bank. The question of how long the World Bank and participating countries are willing to stick at it before they see results still remains. iCON For more information visit: www.constructiontransparency.org

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CORRUPTION THE PHILIPPINES

n the late 1980s, a group of Philippine people took issue with an advert they had seen in a newspaper. The regional office of the Department for Public Works and Highways (DPWH) was advertising the fact that it had completed 20 public works projects. This group, which had been volunteer monitors in the 1986 government elections which ousted President Ferdinand Marcos, decided to verify the information. When they visited the sites and found that regional officers were making false claims, the group, known as the Concerned Citizens of Abra for Good Governance (CCAGG), asked the Secretary of the DPWH Vincente Jayme to investigate. Their findings were affirmed, resulting in the suspension of 11 project engineers and the sacking of the district engineer and the assistant engineer. CCAGG, many of whom come from the laity of the Roman Catholic Church, is driven by its desire to see a fair deal for the province of Abra, one of the poorest in the Philippines. Cofounder Pura Sumangil is an auxiliary nun who does not draw a salary from the NGO. Instead she contributes some of her income as a teacher to CCAGG. “(It’s) love for the province of Abra,” Sumangil says. “Every time others picked a fight with us because of our work we’d tell ourselves, if it weren’t for love of Abra we’d long be gone from here.”

IS FOR GOING IN CIRCLES With an auxiliary nun leading one of many civil works anti-corruption campaigns, the Philippines has no shortage of grassroots activism, or even anti-graft legislation. But a major study charting 20 years of monitoring the country’s national public works department – seen as the most corrupt body in the country – shows just how difficult the quest for transparency remains. Kristina Smith reports Other volunteers are similarly committed. Engineer Melchor Pacopia was moved by a television documentary on Abra’s roads and bridges to return to his province and live off his savings while he worked for the organisation. Later he had to take on consultancy jobs, donating part of his earnings to CCAGG. There are many such groups in the Philippines, some set up with the help of CCAGG, others independently. They are united by their anger at the substandard roads, bridges and public buildings they see getting built around them. It is this sort of people power which the Construction Sector Transparency Initiative (CoST) wants to harness in its bid to monitor public projects and take to task those responsible for mismanagement or corruption. Because the Philippines, one of the seven countries taking part in the CoST pilot, has been working with this model for

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which monitors around 10 per cent of projects to check that they comply with the rules, found that of the more than 2,000 projects assessed, only 20 percent complied. Other DPWH statistics for 2008 show that 1,925 out of 2,838 projects assessed required corrective action and written explanations from the DPWH personnel and contractors involved, and 353 required removal and replacement. As a result, more than a hundred DPWH engineers were issued warnings, 31 were suspended for a period of six months to one year, and four were perpetually disqualified from handling projects. While most crafty specification substitutions must be going on unchecked, some become blindingly obvious. Take the

EVERY TIME OTHERS PICKED A FIGHT WITH US BECAUSE OF OUR WORK WE’D TELL OURSELVES, IF IT WEREN’T FOR LOVE OF ABRA WE’D LONG BE GONE FROM HERE TRANSPARENCY CAMPAIGNER PURA SUMANGIL

many years, CoST commissioned not-for-profit organisation Procurement Watch, based in Manila, to produce a study of the Philippines’ anticorruption initiatives over the past 20 years. The 76-page report, entitled “A Study of Anti-Corruption Initiatives in the Philippines’ Construction Sector”, is illuminating and discouraging at the same time.

ISTOCKPHOTO

THE FISH ROTS FROM THE HEAD Despite the efforts of CCAGG and other NGOs, sensational stories in 2009 show how deep-seated corruption is in the Philippines. The World Bank had discovered that between $30m and $45m of a $150-m loan for the National Road Improvement and Management Project had been pocketed by a cartel of contractors and officials. “Numerous officials... participated in an institutionalized cartel, replete with collusive tendering, bid rigging, price fixing, and routine payment of bribes and kickbacks,” according to the bank’s Department of Institutional Integrity. In the media frenzy that followed a DPWH source who did not want to be named said that some top officials wanted to resort to giving out payolas (cash gifts) to journalists to “manage the crisis”. The World Bank acted swiftly to blacklist contractors who were members of the cartel. It is not clear, however, what action the DPWH took against its officials who had been involved. Incidents such as these only add to the widespread perception that the DPWH is the most corrupt government department in the country. Even figures from within the DPWH support this theory. For 2007 and 2008, the department’s Quality Assurance Unit, 01 QUARTER 2011

case of the Pasig-Potrero River Diking System, also known as the Megadike, a project intended to stem the flow of volcanic water and mud from Mount Pinatubo to the Central Luzon provinces. In 1996, the Megadike collapsed, causing losses to the government estimated at pesos 48 million. The Ombudsman, who is part of the DPWH and whose job it is to process complaints, is now filing a case against DPWH officials, alleging they are responsible for the Megadike’s faulty design and for allowing the contractor to revise previously approved designs and specifications. Among those being taken to task is former Undersecretary and later Secretary at the DPWH Florante Soriquez, at the time programme director of the Mount Pinatubo Rehabilitation-Project Management Office, and Bienvenido Leuterio, director of the DPWH’s Bureau of Design. The culture within the DPWH seems to come from the leadership, lending credence to the adage, “the fish rots from the head”. The general theme is that secretaries with an engineering background have steered a truer course than career politicians. Edmundo Mir, retired DPWH Undersecretary and an official since the 1960s, says that even in the corrupt Marcos era, there were DPWH heads who would not countenance corrupt practices. He recalls the arrival of one such leader, Vicente Paterno, appointed Minister of Public Works and Highways under Marcos, who identified wrongdoers on his very first day and sacked anyone who refused to reform. When Corazon Aquino took over as president from Marcos, she first installed politicians to the top role at the ministry. Later appointments, such as Fiorello Estuar, who had a PhD in civil engineering and headed the department from 1987 to 1991, were considered better leaders. Likewise, the longest serving secretary of the DPWH Gregorio Vigilar, who worked for two presidents, had a civil engineering degree and had headed the Philippine Army Corps of Engineers for many years. Under Gloria Arroyo, who became president in 2001, there have been some controversial appointees. She appointed career official and then Undersecretary Florante Soriquez to secretary when Soriquez was facing a variety of lawsuits for graft and corruption and had failed a lifestyle check. And after Soriquez came Hermogenes Ebdane, a former chief of the RR

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RR Philippine National Police (PNP), whose name had been mentioned in the “Hello, Garci” tapes, a recording of alleged fraudulent election operations in 2004. PORK BARREL PROJECTS DPWH cannot take all the blame for the problems with public works projects however. The broader political system must shoulder some of the responsibility. New roads and bridges are big vote-winners in the Philippines, and so a portion of the money DPWH oversees is available for allocation by senators and district representatives. In 2008, just under 20% of DPWH budget was allocated by Congress, but the percentage has been as high as 47%, in 2002. This means that DPWH engineers and officials have no say in whether the “pork barrel” projects should go ahead or not. Decisions are made, not on the basis of economic need or benefit to the community, but on how popular it will make the local mayor or governor. A further serious problem with this arrangement is that politicians are known to pre-select the contractors who will work on the programme. Under the Government Procurement Reform Act of 1993, this should not be possible: anonymous bidders have to first submit technical tenders, with those who are successful then submitting their prices. But there are ways round this. A local mayor, once he has decided to build a road or bridge in his area, puts the design and specification together with the help of his favourite contractor. This means that when bids come to be assessed those contractors and suppliers who had a hand in writing the specifications have a competitive advantage are much more likely to win the contract. The Bids and Awards Committees, which were set up by Government to keep an eye on these things, do report these corrupt practices to the agency heads, but the agency heads seem unable or unwilling to take it further. Observers note that given the calibre of DWPH leadership and a political system which discourages fairness, it is not surprising that numerous attempts to reform the department and the law over the years have met with limited success. Anticorruption measures within the DPWH include a computer-based registry of contractors that allows officials to check their eligibility, and a document tracking system that aims to stop unscrupulous DPWH personnel soliciting bribes for sorting payments or processing documents. There are also the Quality Assurance Unit, already mentioned, and the Ombudsman. Outside the DPWH, other government bodies flag up potential anomalies in projects. The National Economic Development Authority has a system which monitors projects and records when there are cost overruns on foreign-assisted projects. Here, as in many of the systems set up to fight corruption, the final step of holding those responsible to account is lacking. The information gathered in its databases is never used other than for analysis, with staff avoiding talking about what they call the ‘C’ word. There is also the citizen watchdog Pro-Performance System (PPS) which is part of the President’s Office, set up by president Arroyo to make sure the 149 infrastructure projects she committed to were carried out properly. Its members, however, have limited technical expertise, which means that most of the checks they carry out apply to project timelines. The future of the PPS after president Arroyo’s term finished in June 2010 was unclear. When the Government Procurement Reform Act was enacted it was lauded as one of the most advanced procurement laws in the world. Its goal was to remove the www.iconreview.org

Transparency campaigner Pura Sumangil (seated left) signs a memorandum of understanding with DPWH Secretary Rogelio L. Singson (seated center) to promote transparency in October 2010. An auxiliary nun, Sumangil has been fighting to make the DPWH more accountable for over 20 years

I DON’T BELIEVE IN WITCH HUNTS LITO MADRASTO, THE PHILIPPINE CONSTRUCTORS ASSOCIATION

practices that allowed corruption in the bidding, award, and implementation of contracts. But the legislation’s intent has not easily translated into practice, especially at a regional level, either because certain projects or elements are not covered by the law, or implementation is weak or local laws contradict it. Woven into this Act is the principle that citizens should be involved in governance. This is not a new principle, but one that is enshrined in the 1987 Constitution which orders the State to “respect the role of independent people’s organizations to enable the people to pursue and protect, within the democratic framework, their legitimate and collective interests and aspirations through peaceful and lawful means.” Earlier laws and directives have seen NGOs involved in procurement and construction. In 1988 President Aquino’s issued an order which said that NGOs must be included in the prequalification, bids, and awards committee (PBAC) and the project monitoring committee (PMC) for local government projects funded by the national government. In 1989, a further piece of legislation said that NGOs should be part of the Regional Project Monitoring and Evaluation System set up to promote transparency in the delivery phase of projects. NGOs are now routinely invited to keep an eye on the tendering process, validate that the technical specifications set forth in the tender documents are technically sound, and confirm the integrity of the procurement process. But while a number of NGOs are technically able to monitor the early stages of the project, most admit that once a project starts they’re lost. The frequency and timing of inspections are critical, for instance if a substandard component is installed and then covered up by the next part of the structure. And untrained observers may find it difficult to identify whether a material or item meets specification. There are examples of success, however. Vigilant monitoring of a road project in Iloilo allowed one NGO to flag up a deficient part of the contractor’s work with the DPWH engineer. The DPWH ordered the contractor to remove and replace the deficient segment of the road. On top of the technical challenges, NGOs also face political opposition, some of it very open. In July 2000 the ‘i-witness’ TV programme highlighted the work of CCAGG with the Commission on Audit (COA) which had uncovered overpricing in the construction of a temporary detour bridge at Sinalang, which remained unpassable even after the contractor had been paid. Repairs to the existing bridge were also found to be substandard and overpriced. CCAGG wrote to the head of the DPWH and the Commission on Audit (COA) recommended the prosecution of several

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CORRUPTION THE PHILIPPINES

DPWH employees. Abra governor Maria Zita Claustro-Valera complained that “the local leadership was made to appear (on TV) as stealing money meant for bridges and roads in Abra” and that endorsing the partnership between CCAGG and the COA “would be tantamount to accepting your premise that the people of Abra may not trust this governor anymore, the DPWH and the COA”. To appease Valera, the COA excluded provincial projects from the value-for-money audits in which the CCAGG would be involved. Participatory audits were scrapped a few years later when a new COA chairman was appointed.

CORRUPTION EMBEDDED IN THE DPWH: Summary of QAU reports, 2005-2008 2005

2006

No. of projects assessed

2,641

2,180

2,171

2,838

No. of projects that complied with specifications

1,083

971

464

560

No. of projects that required corrective actions from the contractors and written explanations from RD, DE, PE, and ME

1,402

1,172

1,491

1,925

No. of projects that required removal and replacement

156

216

353

No. of DPWH engineers issued warnings

108

102

No. of DPWH engineers suspended for six months

No. of DPWH engineers suspended for one year

No. of DPWH engineers perpetually disqualified from handling projects

Source: BRS Annual Reports

IN AND OUT OF FAVOUR Recent history gives some indication of the challenges that a multi stakeholder group, as advocated by CoST, might face in the Philippines. Bantay Lansangan or Road Watch, combines 23 member groups including CSOs, contractors, road users and media groups, government agencies, elected representatives from local governments, anti-graft agencies such as the Ombudsman and the World Bank. It was the World Bank which insisted on the creation of Bantay Lansangan in 2007 as one of a raft of conditions required in order for the bank to release a $232 million loan for the second phase of the National Roads Improvement and Management Project, after the first phase had been corrupted by bid-rigging and tender inflation. The Transparency and Accountability Network (TAN) which co-ordinates the work of NGO watchdogs was chosen as the Bantay Langsangan co-ordinator. TAN’s executive director Vincent Lazatin, who now also heads up Bantay Lansangan, was shocked by the warmth and candour of DPWH officials in early meetings. “I was very surprised because I always thought that these kinds of agencies are in denial about the problem,” Lazatin says. But the DPWH officials said: “Yes, there is corruption and we need your help.” This new alignment was not to last, however. DPWH officials were offended when one of the monitoring 01 QUARTER 2011

2007

2008

organisations, called KARSA, went straight to the media in 2008 when it found out that the Bontoc-Tabuk-Tuguegarao Road in the Cordillera Administrative Region had no detailed plans or programmes of work, and that some of the works were defective. KARSA, which had been trained up by CCAGG before the Bantay Lansangan initiative, had been used to taking the press along with them on inspections. “We have to manage that relationship with DPWH,” says Lazatin. “It’s a balance we have to strike between that kind of activism that has been effective versus the sort of new partnership that we are trying at the national level.” Another stumbling block occurred when Bantay Lansangan spoke out in support of the World Bank’s decision to sanction the contractors who had been involved in the cartel on the first phase of the road programme. In a statement to the press, Lazatin said: “The bank’s findings warrant swift and decisive action from the government because really, in corruption, the biggest losers are the Filipino people who end up paying for overpriced and poorly built roads. We will closely monitor national government actions related to the World Bank findings,” After this statement, regional members of Bantay Lansangan reported that they were struggling to get access to information, where before DPWH officials had given them open access. DPWH denied that any changes in the relationship had occurred. Two years on from its formation Bantay Langsanan was facing different problems. Enthusiasm from the 23 organisations who signed up to the World Bank’s initiative has evaporated. Just four turned up to a meeting in 2009 called to revive members’ interest. At the beginning of 2010, Bantay Langsanan was addressing the issue of future funding, hoping to attract support from donors, although Lazatin realises he is in a difficult situation as it will probably take seven to 10 years for the group to have the intended impact. “We haven’t had the kind of impact that people might expect. The cost of roads is still the same,” says Lazatin. “We can’t claim to have reduced corruption in the DPWH. So we are in a difficult situation where we are trying to pitch BL as a viable partnership with the DPWH and yet not have much to show for it.” In fact Bantay Langsanan has been cold-shouldered by the DPWH leadership. It had no direct access to former Secretary Edbane and had to deal with undersecretaries, assistant secretaries and middle managers. A letter to Edbane voicing a number of concerns never even received a response. Flora Cerna, project co-ordinator for TAN sums this situation up: “We realize that the continuity of the partnership depends to a great extent on middle management. But if you want real change, radical forms, you need the commitment from the top, from the head of the agency.” When Procurement Watch’s report was compiled, the Philippine’s CoST pilot work was just beginning. This was the view from Lito Madrasto of the Philippine Constructors Association, the private sector representative on the multi stakeholder group which was to steer CoST: “I don’t believe in witch hunts. It doesn’t work... So my approach has always been to do something about the system, do something on the policies, do something about the procedures.” There is a discouraging circularity about all this. If the report demonstrates anything, it’s that changes to policies and procedures over the years haven’t worked. iCON Download Procurement Watch’s report, “A Study of Anti-Corruption Initiatives in the Philippines’ Construction Sector”, from www.constructiontransparency.org

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SPECIAL REPORT NEW ZEALAND EARTHQUAKE

ALL SHOOK UP On September 4th an earthquake bigger than Haiti’s hit New Zealand, but you may not have heard about it because there was only one, possibly related, death. But Christchurch’s building stock was severely damaged, resulting in one of the world’s biggest insurance claims last year. Calvin Payne lived through it, and reports on why the loss of life was so low and how a building boom is on the cards as the city repairs itself

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ave you ever been woken up by a major earthquake? Neither had I, until September 4th 2010. It was like waking up in the cabin of a yacht getting pounded onto rocks by a hurricane. “Is it an earthquake?” my wife said as I fought to get to my feet. We’d moved here from the UK three years ago and had never felt a wobble. It was pitch black – even the streetlights were out. The walls and floors were moving in and out and up and down and the noise was deep and loud and very frightening. By the time I could respond she’d left the room to get to our three children. That initial shake lasted 40 seconds, from 4:35am, which is a long time when you’re in the middle of the world ending. By 5:00am the road outside our house was a traffic jam. We live on the side of a hill, an ancient volcano as it happens, and it seemed like everybody in Christchurch was trying to get up it. A panic had set in that the quake happened at sea and that we were in for a tsunami. A lot of people live in low-lying areas and without radio or television or Internet, nobody knew what was going on. By 6:00am, however, the traffic jam was going the other way as people realised there wouldn’t be a tidal wave and started rushing back to their homes and families. Luck was with Christchurch that Saturday morning: by 4.35 the nightclubs had closed and the early workers and runners were just getting up. It was a beautiful, dry sunny day, and a conference of 500 GPs happened to be in town just in case we needed them. Fortunately their services were not called for. There were two serious injuries and one fatal heart attack during the “Big Shake”, registered at 7.1 magnitude on the Richter scale. Compare that to the 250,000 deaths and ongoing trauma caused by the less severe earthquake in Haiti in January 2010, and we feel even luckier. This luck is partly down to timing, and partly down to New Zealand’s approach to earthquake risk and building controls.

OVERDUE The Darfield Quake – so-called because the actual epicenter occurred near the town of Darfield – was on a previously unknown fault line now called the Greendale Fault. South

Island New Zealand was actually overdue a “Big One”, but it was more likely to happen on the main Southern Alps fault line. The Darfield Quake happened on a new fault line, which determined it as a 16,000-year event. That more people did not die in their homes is down to the buildings. New Zealand has only been settled by Europeans since the early 1800s, so most buildings, with the exception of some Maori Marae, are less than 200 years old. The original structures were built using timber frame and weather board, normally with a tin roof. They were generally low-rise, two storeys maximum. This style has continued and performs well under earthquake conditions. The timber frame flexes and as long as the foundations remain stable the damage is normally limited to cracks in board and decorations. The tin roof is light and doesn’t normally break up the way tiles and slates would. For a number of years building codes in New Zealand have included earthquake protection requirements to preserve structures and lives, such as seismic bracing, and seismic building and services joints. Seismic building joints are inserted between buildings of different ages as well as at intervals in large buildings and large areas of wall, ceiling and floor finishes. These joints allow the building to flex and move and only cause minor damage to finishes and structure. Seismic joints in services allow similar movement and are flexible so that services remain intact. Precast concrete, mainly in the form of tilt slabs, has been used extensively for many years and most of these buildings also performed well during the quake. Tilt slab involves reinforcing and concreting a slab on the ground and then once cured tilting it to the upright position to form a wall or structural element. Originally these structural elements were cast on site but are now more commonly cast in a precast yard and transported to site. Many historic buildings in Christchurch, such as the Cathedral, have had strengthening works undertaken which helped minimise damage and in most cases save buildings and probably lives. Infrastructure, including roads and services, performed well in the earthquake generally because RR

LEFT: Beckenham Shoe Shop on the morning of the quake. Still closed.

CALVIN PAYNE

RIGHT: Donaldson Printers on Colombo Street, Sydenham, on the morning of the quake. Found to be fatally compromised, it was a priority demolition (above).

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SPECIAL REPORT NEW ZEALAND EARTHQUAKE

Christchurch railway station clock with the front face stopped at 4:35, when the quake hit. It has since been braced with plywood and steel. The side face of the clock has been restarted

RR of robust design. We had power, water and even broadband working again at our property by the end of the day. Some properties did not even lose power. I can’t resist relating another significant detail. In 2009 I wrote in this magazine about the New Christchurch Airport Control Tower (iCON Q409), which I helped build through my employer at the time, Hawkins Construction Ltd. It was built, on a design-and-build contract, to withstand a 2,000-year earthquake event. Almost a year to the day after the official opening it faced a real-life test, and performed well under an even greater, 16,000-year event. AFTERMATH The government acted quickly, declaring a state of emergency and deploying teams to evacuate and survey damaged buildings. These teams used a colour-coded label system to notify the public and owners – red for unsafe buildings that would have to be repaired or demolished, yellow for unsurveyed or unsure and green for safe for use. Social upheaval was kept to a minimum. Our house and several other local ones were burgled in the week after by looters, but our culprit, a 17-year-old male, was quickly tracked down and given a three-year prison term.

TO SEE IT ON THE GROUND WAS INCREDIBLE – LIKE THE SURFACE OF THE EARTH, TREES, ROCKS, EVERYTHING, HAD TURNED TO JELLY

CALVIN PAYNE

Life was preserved, thankfully, but there was extensive property damage in Christchurch, a city of just under 390 thousand. The cost of repair is estimated at NZ$4 billion (US$3 billion, approximately), making the Darfield Quake one of the world’s five biggest insurance claim events in 2010. Some land lurched sideways by up to 5m at the new fault line, which was 29km long and can be clearly seen etched on the landscape. This produced some interesting gaps in fences and hedges as well as unwanted kinks in rail lines. Large cracks opened up horizontally and vertically including through houses and properties. Thousands of homes and offices will need to be demolished and rebuilt. The areas most affected fall into two categories, those in areas where significant liquefaction occurred and older masonry buildings, typically with lime mortar, that had not had not been subject to strengthening works. Liquefaction is where the underlying sand or silt liquefies

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with water during the earthquake and bubbles up, forming sand volcanoes up to 500mm tall. In some cases residents’ whole gardens where covered in a layer of muddy silt. Liquefaction also caused significant subsidence as the sub soils compacted and whole areas will need to be strengthened before rebuilding. Some domestic dwellings have used brick or block cladding around a timber frame. In general the blockwork did not perform well, with cracking and displacement around openings because of differential movement. The most widespread damage was thousands of collapsed chimneys. No one was injured by these chimneys, thanks probably in most cases to the tin roofs that deflected the rubble. But it does pose a problem, as the chimneys are necessary for the log burners that are the main form of heating here. The government has used this opportunity to encourage the replacement of log burners with more efficient heat pumps, funded through insurance. It didn’t end with the “Big One.” There have been over 3,000 aftershocks since, 13 of them over 5.0 on the Richter scale, which have caused further property damage. The day after the quake I was helping some friends make their home safe when one of these hit. We were just five kilometers from the epicenter. To see it on the ground in daylight was incredible – like the surface of the earth, trees, rocks, everything, had turned to jelly.

AND NOW THE BOOM Financially, New Zealand has mechanisms in place to deal with disasters of this scale. The government formed the Earth Quake Commission (EQC) in 1945 to underwrite insurers’ liability. Providing householders have house and contents insurance the EQC provides the first $100,000 of house cover and $20,000 of contents cover, while any amount above this is covered by the relevant insurance companies. When it comes to commercial property, however, insurance companies are on their own. In the first three months after the quake the EQC recorded over 160,000 individual claims. The major recovery and repair works have been split into management packages by the EQC and insurance companies. For example a major local contractor has been awarded the management of all the domestic work up to $100,000 by the EQC. This contractor will manage the subcontractors and suppliers necessary to repair the thousands of homes across the Canterbury Region. That’s just the beginning. The large volume of bigger-ticket items, repair and rebuilds valued over $100,000, plus infrastructure and land remediation work, is currently being divided up by the insurance companies. More than 2,000 houses will need to be totally rebuilt, not to mention the business premises, schools, hospitals and office blocks destroyed or seriously compromised. This will certainly soak up all spare capacity of the major contractors in Christchurch and likely from farther afield. Although the global recession has had a muted effect on New Zealand it has not been totally immune, and the industry announced three weeks before the quake that as many as 20,000 construction jobs would be lost in 2011. That prediction is now unlikely to come true as the reconstruction of Christchurch will see the biggest building boom here in decades. Right now there is a lull as the EQC and insurance companies assess the extent of their liabilities and get the bulk of the sub-$100,000 packages underway. But significant activity is expected starting February or March. Full reconstruction will take years. iCON Calvin Payne FCIOB is Director of Pacific Programme Management Ltd based in Christchurch.

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Construction Research and Innovation - The inspirational journal from the CIOB CRI, successor to the well-regarded Construction Information Quarterly, will continue to publish top quality practitioner-relevant papers to keep you well informed. And it's going to do more...

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We forget how building types morph dramatically. Imagine Manhattan without skyscrapers. In his new book Richard Barras identifies IT and sustainability as the main factors now driving change in the form and function of buildings. But how, exactly? Rod Sweet reaches for the crystal ball Manhattan in 1874, and above, Manhattan today

In the late 1800s two key innovations, the passenger elevator and the load-bearing structural steel frame, combined with the high rents demanded in the dense city centres of Chicago and New York to push buildings higher than anybody thought previously possible. The speed at which they climbed was startling. The New York World Building topped out at a glorious 18 storeys in 1890, only to be dwarfed by the 55-storey Woolworth Building in 1913.

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In his new book, “Building Cycles: Growth and instability”, Richard Barras, senior partner of research firm Property Market Analysis, identifies the skyscraper as the most dramatic physical manifestation of new construction technology on the built environment in modern history. Its development poured petrol on the fire of speculative finance. Investors shouldered each other out of the way and the sky became comprehensively punctured as developers urged their buildings higher to recover exorbitant downtown real estate costs. Manhattan got some 26 million square feet of new, vertical office space between 1931 and 1934 alone. 20

Construction Research and Innovation | Vol 1 | Issue 2

So potent was this combination of new technique, demand, new business modalities (the concentration of financial services) and the apparently irresistible urge among developers to be taller than anybody else, that the skyscraper as a form would easily survive the Great Depression of the 1930s. Vacancy in New York’s financial district shot up from 1% in 1929 to 22% by 1933. The Empire State Building, finished in 1931 and the world’s tallest building until 1972, stood three-quarters empty for 10 years and didn’t return a rental profit until 1950. The extent to which the historic skyscraper boom in New York in the 1920s actually contributed to the Wall Street crash of 1929 - just as the property bubble led to the sub-prime crash of 2008 amplifies Barras’ overall theme that building cycles are both sources of instability and drivers of innovation and growth. It took a long time for the skyscraper to crop up elsewhere in the world. Barras records that after the Second World War, 75% of the world’s high-rise office stock was still in just New York and Chicago. A further 17% could be found in other big

North American cities, while the rest of the world could claim only 8%. But was the skyscraper to be denied universality as a viable building format? Not in the least. The diffusion of this innovation was just as inevitable, Barras notes, as the spread of the Gothic cathedral from the Île de France outward to all European capitals. Further, the outward and upward reach of the skyscraper was fuelled by subsequent innovations in curtain walling, shell-and-core and fast-track construction techniques. In 1965 a European peak in high-rise floor numbers built equaled for the first time those built in the US, which suffered a slump that year. Hot on the heels of both Europe and America, however, was the Asia Pacific region, where unprecedented levels of office development - first in Hong Kong, Seoul, Singapore and Tokyo, and latterly in Chinese cities such as Shanghai and Shenzhen - set a steep growth curve in the cumulative total of high-rise office stock that passed the American tally at high speed in 2000 and continues to leave it well behind.

Shopping centres They don’t alter skylines like skyscrapers do, but Barras argues that the enclosed shopping centre - another American invention - has had just as profound an effect on urban function throughout Europe and the world. Created in the 1950s in response to several factors - mass car ownership, suburban development, an expanding highway network - the ‘mall’ ushered in such a step change in the scale economies of retailing that traditional town and city centres all over the West are still reeling. The mall “crossed the Atlantic”, as Barras notes, in the 1960s, landing first in north-western Europe (UK, Ireland, Benelux and Scandinavia), and spreading in successive cycles to France and Germany, Iberia and Italy and thence to Central and Eastern Europe. Its last dramatic surge has been in Russia,

Analysing building cycles

Urban activity has been dramatically altered by the shopping centre, which seeks to emulate the traditional downtown by offering not just retail, but cinema, restaurants, health & fitness services and recreation opportunities all in one location reachable by car and safely shielded from the vagaries of the weather. By 1975 malls had siphoned off some 14% of high street sales in the UK, while two other sub-forms of the out-of-town shopping experience - the superstore and the retail warehouse - had ensured a rapid and sustained tailspin in high street turnover.

The shape of the future

Foresight

which inhabits a league of its own. Barras writes that since 2002, some 23 million square metres of shopping centre space has been completed just in Russia.

Foresight

Barras identifies two key factors that will shape economic growth and urban development in the coming decades, ICT and sustainability. Barras notes that online shopping had, in its first decade to 2008, accounted for 8% of total retail sales. He calls this an unprecedented achievement for a retail innovation in Britain, where the historical first-decade capture is more like 3%. It’s not just online shopping, however. Information itself, he says, citing Dominique Foray, author of The Economics of Knowledge, has become “the most valuable commodity traded within the knowledge economy”, and this shift in importance from the material to the virtual, he says, “has fundamental implications for the future pattern of economic growth and investment”. For one thing, the share of fixed capital devoted to storing and transporting data, as opposed to goods and people, is growing. One thinks of huge, barely-manned server farms and city streets torn up to lay fibre optic cable corridors. But a potentially more profound effect of the knowledge economy

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The share of fixed capital devoted to storing and transporting data is growing. Look at the rise of places like Reading and Bracknell as software HQs

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has been increased investment in buildings in formerly peripheral locations close to motorway junctions serving information-led sectors like finance, distribution, logistics and business services. Barras notes that in the UK between 1981 and 2004 the share of output contributed by such sectors rose from 58% to 70% (while manufacturing shrunk from 26% to 19%). The rise of places like Reading and Bracknell, west of London’s M25 motorway, as preferred locations for software company HQs and multi-tenant business parks captures this trend. Further, these buildings themselves show how investment priorities have shifted from fixed capital to information. Their fabric is comparatively lighter and less expensive. Aesthetic considerations give way to flexibility and operational effectiveness. Writes Barras: “the unit construction cost of a business park office may only be onethird that of a prestige city centre office block, even before allowance is made for the differential in land cost.” Construction Research and Innovation | Vol 1 | Issue 2

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