ISSUE 29
New York Building Energy Laws Brightening the green outlook
Also in this issue: Faithful+Gould evolves Project Controls support BP-Husky joint venture Energy Auditing in U.S. hospitality industry
CONTEnTS 4
BP-Husky’s Toledo Refinery Assuring project excellence
6 Jumeirah Lakes Towers Dubai’s mixed-use waterfront community
8 Energy Audits Coming to a hotel near you
Time on Tools 10 Identifying barriers that prevent workforce crews from operating efficiently
Greener, Greater Buildings Plan 12 August deadline for NYC’s Energy Benchmarking law (Local Law 84)
14 Faithful+Gould Evolves Celebrating Richard Hall’s achievements. CEO Donald Lawson outlines his future plans
High Speed Rail 16 Improving cost predictability
Emerging PPP Markets 18 Global interest and optimism
Asian Beach Games, Oman 20 Games development transitions to mixed-use resort
Electronic Project Management (ePM) System 22 Giving a clearer picture for owners
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Welcome to this edition of Solutions, my first in the driving seat as Faithful+Gould’s CEO Worldwide Operations. Here we have a publication full of interesting items, representing much of the great work that Faithful+Gould is currently engaged in. Richard Hall, our Worldwide CEO since 2005, retired last month after 38 years with the business. His contributions to our business are legendary and we owe much of our success to his leadership. The center pages celebrate Richard’s achievements and give us the opportunity to wish him well. He’s choosing to stay on in Florida in retirement rather than return to his native U.K… no surprises there! Here in the U.S. we are very focused on furthering the carbon agenda, supporting clients in a variety of ways. Page 8 demonstrates the energy auditing services we are providing to U.S. hoteliers. This includes identifying where federal stimulus funding is available and helping clients to secure it. We’re also in a great position to advise on the carbon agenda at strategic level and page 12 outlines the challenges facing New York owners as Local Law 84 approaches. We can help you meet that August deadline – contact us to know more. I’ve further explored the sustainability theme on the center pages, introducing our expanded group-wide sustainability and carbon management division. This team has been formed by joining together our existing carbon consultancy business with a number of our Group colleagues who have particular expertise in providing sustainability advice in our carbon-critical world. Our enhanced team is especially well placed to help clients make better commercial, environmental and
design decisions. Take a look and let us know how we can help your business. Page 18 discusses PPP’s emerging markets. This year we have been proliferating our PPP knowledge base across the world, especially gaining traction in the U.K., Europe and the Asia Pacific region. In North America, Canada offers a great PPP benchmark for emerging markets to emulate and we may see some U.S. states increasingly exploring the Canadian and U.K. models. High speed rail is our focus on page 16, where we consider the challenge of achieving cost predictability on the proposed U.K. network. Here in the U.S. President Obama is proposing to invest $53 billion over the next six years to continue construction of a national high speed and intercity passenger rail network, so robust cost mechanisms will be high on the agenda. I was favorably impressed by my recent high speed rail trip between Washington and New York. Thank you for your interest in Faithful+Gould and I hope you will enjoy reading Solutions. Please get in touch with us if you’d like to know more about any of our services or initiatives. Check out our website and do please consider signing up for our short online Constructive Expertise communications.
Donald Lawson CEO Worldwide Operations
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Assuring Project Excellence for BP-Husky’s
As global demand for energy continues to rise, delivering a secure supply will require tapping a variety of sources. With a relatively energy-intensive economy, the U.S. is urgently seeking to increase domestic energy security.
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Most U.S. energy comes from fossil fuels — petroleum, natural gas and coal, with crude oil-based petroleum the dominant source. Renewable energy supplies a relatively small but growing portion of U.S. needs. Neighboring Canada’s oil sands have become increasingly important in the mission to unlock new supply. The province of Alberta contains recoverable oil sands reserves of approximately 170 billion barrels, the world’s second largest reserves after Saudi Arabia. In 2008, BP created a 50/50 partnership with Husky Energy to form an integrated North American oil sands business. As part of this, BP operates the Toledo refinery in Ohio.
For further information contact Tony Smith on 419-698-6108 tony.smith@fgould.com
unit will increase the refinery’s gasoline production, upgrade existing infrastructure and improve overall plant reliability. The project is due for completion late 2012. Like all energy sector corporations in today’s volatile economic climate, BP-Husky is focused on meeting or exceeding project objectives in this initiative. Cost certainty, schedule assurance, quality and return on investment are vitally important.
The Toledo refinery, now trading as BP-Husky Refining LLC, was opened in 1919 and has undergone numerous upgrades and expansions to achieve its current design capacity of 160,000 barrels of crude oil daily. The refinery converts crude oil into products including gasoline and diesel fuels, aviation fuels, propane, kerosene and asphalt.
Faithful+Gould’s integrated Project Controls function provides early identification of potential threats and opportunities to project objectives and an accurate assessment of the current status and forecast of the project. Among other cutting edge reporting methodologies, we have implemented best practice Earned Value Analysis (EVA) to provide BP-Husky with valid, timely and auditable project performance data on which to base management decisions. Our experience shows that organizations whose projects perform well against sanctioned objectives are more likely to be granted funds to execute future projects.
As part of the capital improvements planned at the Toledo refinery, Faithful+Gould is supporting BP-Husky with Project Controls services on a major equipment upgrade. These services include cost and schedule control and project reporting. This project’s goal is to improve efficiency and competitiveness by reducing energy consumption and lowering operating costs. The project involves replacing two older catalytic reformers and a hydrogen plant with a single state-ofthe art 42,000 barrel per day (bpd) reformer. The new
Faithful+Gould supports energy companies in overcoming business challenges in their capital and asset management programs. We assist our clients through all stages of development, including planning and feasibility, engineering and design, project management, construction supervision and operations, maintenance and turnarounds. Our client portfolio comprises many key organizations, including BP, Exxon, Marathon, BASF, Ontario Power Generation, ConocoPhillips, Dupont, GE, Ineos and Total. Issue twenty-nine
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JUMEIRAH LAKEs TOWERS The Dubai property market continues to suffer the effects of global financial crisis, with many developments on hold and banks still reluctant to lend. However construction sites are looking busier than last year, with stable construction costs and low interest rates providing an incentive to build now.
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Among Dubai’s success stories is Jumeirah Lakes Towers (JLT), a high-density waterfront mastercommunity development of residential and office towers, alongside hotels, leisure and retail outlets. Spearheaded by government owned DMCCA, the development plans a total of 87 towers catering for an ultimate population of 120,000. The landmark 65-story Almas Tower, situated in the center of the community and surrounded by water, is the development’s focal point. Almas houses the Dubai Multi Commodities Centre (DMCC) and Dubai’s pearl and diamond exchanges. Seventy-eight towers are clustered in groups of three, situated around four artificial lakes and surrounded by landscaped gardens. Eight further towers will line the JLT Embankment areas, with over 50 different property developers taking on individual towers.
Although the later commercial developments are not able to attract full occupancy at present, earlier developments secured high occupancy. The residential towers are 80-90 percent occupied in spite of the market downturn. The location, with its proximity to two metro stations and the Sheikh Zayed highway, combined with the development’s community vibe, has made JLT a desirable place to live. This has been a long-term project, started prerecession during huge demand for property development in Dubai. The period since has seen much economic turbulence. The master developer needed cost certainty while adapting to changing circumstances during times of spiralling inflation, followed by plunging construction costs and restricted cash-flows. The project’s timescale has of necessity changed, but the past eight months have seen the pace pick up again. Fifty-nine towers are now complete and a further 27 are expected to finish by 2014. Faithful+Gould was appointed to deliver project and cost management consultancy services for the infrastructure, the community common area construction and the construction of DMCC’s own three towers. Working closely with the client, the project team delivered a program management plan and reporting structure tailored to JLT’s constantly changing site conditions and specific design requirements.
A small dedicated logistics team from Faithful+Gould was deployed by the client to manage and co-ordinate construction activities. Challenges have included the logistics of co-ordinating the activities of the 86 sub-developers with up to 50 independent contractors, their equipment (up to 15,000 vehicle movements daily), materials and workers (80,000 at peak) all on a very constrained site - Jumeirah Lakes Towers occupies just under two square kilometers of land. As development progressed and some towers became occupied, co-ordination became more complex on the congested construction site. The story of Jumeirah Lakes Towers reflects the wider market for high-end quality real estate in Dubai. Current market conditions are unable to support the levels of completion previously seen in the emirate, but the market is nonetheless encouraged to see progress on some previously stalled developments. There are also indications of a new way of doing business. More prudence overall, including tighter financial control, is a sign of the times and is generally agreed to be a welcome and necessary step toward a leaner and fitter property market. Our Middle East operation is headquartered in Dubai, with offices in Abu Dhabi, Qatar, Oman and Saudi Arabia. We are active in all sectors and our U.A.E. workload currently includes Etihad Railway, Najmat on Reem Island, GASCO Habshan 5 gas processing plant, Al Ain’s Wildlife Park and Resort and Khalifa Port Industrial Zone.
For further information contact Martin Hunt on +971 (0)4 405 9100 martin.hunt@fgould.com
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Energy Audits... Coming to a U.S. hotel near you
The hospitality sector is one of the most energy-intensive in the marketplace and the average U.S. hotelier is just beginning the sustainability journey. Rising energy costs are now driving owner-operators, as well as larger corporations, to actively seek energy efficiencies. This is a fragmented industry with a huge number of stakeholders. There is no such thing as a typical American hotel. In 2009, the U.S. hospitality industry was comprised of 50,800 properties with more than 4.7 million rooms and generating $127.2billion in revenues 1. Traditionally these facilities have had high levels of energy consumption but smart energy efficiency strategies can make dramatic and cost effective improvements. A good place to begin is with an energy audit of the building. Energy audits provide performance analysis and schemes such as ASHRAE 2 which identify how the facility is using energy, where waste is occurring and how to implement energy efficiency improvements. Faithful+Gould recommends an ASHRAE Level II energy audit, ensuring an appropriate degree of thoroughness without overspending. The audit involves reviewing all building systems such as lighting, heating, cooling, hot water, roof, building envelope and other components. This quantifies current energy consumption and cost, gives an overall energy utilization index (EUI), and identifies energy conservation measures (ECM) available to 8
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improve energy efficiency, typically with a payback of zero to eight years. These are prioritized by the highest payback per dollar spent and by savings over a fiveyear period. Also included are the resulting reduction in emissions, utilities and maintenance expenditures. For example, in a recent audit the average payback of the recommendations was two-and-a-half years. Some ECMs can have little or no initial cost, yet yield significant savings. An energy audit should be viewed as an investment, not a cost. The simple payback on the energy audit itself is less than four months. Areas of audit specific to the hospitality sector include actual observation of night-time operating procedures, review of laundry practices and review of a conference area’s actual usage versus energy practices during unoccupied times. The audit will also document performance improvement over time, provide benchmarks for improvements and, for larger corporations, provide consistent evaluation across the portfolio. Once an energy audit is completed and ECMs are evaluated, clients can prioritize expenditures to maximize their goals, targeting ROI and reduction in greenhouse gases among many other benefits. Good housekeeping measures can also be implemented throughout the building, adding to the energy efficient solutions. Creating successful energy awareness depends on buy-in from all stakeholders including staff. An employee engagement program can develop behavioral changes to address some of the facility’s energy use, questioning everyday procedures without the need for major capital investment.
A further benefit is that energy conservation efforts also affect the attitudes and loyalty of customers, local community and suppliers. In a recent empirical study of the effects of energy saving treatments on hotel guests’ satisfaction, Cornell University researchers3 found that carefully designed conservation treatments do not diminish the guest experience. Faithful+Gould’s experience of supporting U.S. hoteliers with energy auditing services includes identifying where federal stimulus funding is available and helping clients secure it. Additionally, the audit may qualify the property for tax credits, grants, subsidized financing or incentives. Many states have implemented a range of new laws and programs to improve building efficiency, promote alternative energy and cut greenhouse gas emissions (see our New York Energy Laws article on page 12). For nationwide hospitality corporations, navigating the different state-specific requirements will also be part of the challenge. Our specialists will advise on compliance with local legislation. Within the hospitality industry, Faithful+Gould also offers cost management, project management, owner’s representation services, property condition assessment and LEED sustainability consultancy. Our client portfolio includes Marriott International, Crown Plaza, Disney® and Hilton Grand Vacations Club.
For further information contact Jack Wexler on 404-874-3638 jack.wexler@fgould.com 1 American Hotel & Lodging Association (AH&LA) 2 American Society of Heating, Refrigeration
and Air Conditioning Engineers 3 http://www.hotelschool.cornell.edu/research/chr/
pubs/reports/abstract-15499.html, March 2011
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®
Asset-intensive owners are constantly under pressure to seek innovative ways of identifying efficiencies. Labor costs and excessive stand-by time can combine to adversely affect owners’ balance sheets. Maximizing the amount of working time available to the workforce should ultimately result in a significantly leaner and fitter organization – something that is becoming more and more vital as profit margins shrink while the economic downturn continues. Faithful+Gould’s Time on Tools® service is a standardized process that identifies the root cause of the barriers that prevent workforce crews from operating efficiently. The methodology quantifies the impact of those barriers and provides data essential to the development of mitigation plans. Our Time on Tools® service takes the form of a program of studies that can be conducted on any program of work, i.e. capital projects, routine maintenance operations, facilities maintenance and shutdown/ turnarounds. It’s equally applicable to projects in the industrial arena, as well as in the property/ commercial sectors. In the appraisal stage of the Study Program we ensure that that we have a complete understanding of the client’s priorities and can adjust the focus of the Study Program to suit all needs. Our methodology puts an experienced performance consultant into the field, to directly observe the crew for an entire shift. Unlike other productivity approaches, Time on Tools® analyzes stand-by time, identifying and 10
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analyzing anything that prevents crews from working. It’s a simple and cost effective means of measuring down-time and increasing working time. Time on Tools® differs from time and motion studies. Time and motion studies focus on working time and are often perceived as confrontational by the workforce. Promoting a collaborative environment is especially important for this exercise. During the work study, the crew’s opinions are sought. These are reported to the owner, anonymously and non-confrontationally, allowing candid, constructive feedback and alleviating any union representatives’ objections. As independent observers, we don’t make any judgments about which party, either owner or crew, is responsible for a barrier. Owners can then instigate objective discussions involving the right people, to make the most positive impact to a mitigation effort. This is a low cost, high value investigation. Study Programs costing in the tens of thousands of dollars can bring huge savings to project owners. On one assignment we identified barriers that when mitigated led to a fifteen percent increase in working time on a subsequent project – equivalent to many hundreds of thousands of dollars in construction cost savings, and many millions of dollars in additional production time. Comparing projects within an owner’s program helps determine how future projects should be executed and scheduled. We can also compare performance against
best practice data compiled during our long industry experience. These comparisons allow the effectiveness of mitigation initiatives to be measured against an initial benchmark. The owner’s next step is to act upon the data collected. Most will conduct a cost analysis to quantify, in dollars, the scale of lost opportunity. Potential savings can then be determined and resources allocated to study each barrier, to implement a process improvement plan. At this point the cycle can start again, with the improvements measured by a further Study Program. Time on ToolsŽ was developed by Faithful+Gould as part of our productivity analysis and benchmarking services for refineries and chemical facilities. We have successfully utilized this service for major owners in this sector including BP, ExxonMobil, Shell, Tesoro and Valero. Having chalked up around 700 studies for owners across the U.S., we are now taking these best practice methodologies and strategies into other sectors, notably the biotechnology, high-tech manufacturing and retail industries.
For further information contact Dan Leng on 562-314-4200 dan.leng@fgould.com Issue twenty-nine
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NYC’s Local Law 84
Greener, Greater
Buildings Plan New York City’s especially dense urban environment contributes to its carbon footprint, so it’s fitting that one of the nation’s most comprehensive set of energy efficiency laws has been mandated here. The new legislation places NYC at the forefront of municipal efforts to improve energy efficiency in existing buildings.
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NYC’s building energy efficiency program, the Greener, Greater Buildings Plan, is part of the broader PlaNYC 2030, the city’s sustainable development plan, and a major part of the effort to meet NYC’s greenhouse-gas reduction target of 30 percent by 2030. In December 2009, Mayor Bloomberg signed the four legislative components of the Greener, Greater Buildings Plan, providing a comprehensive set of efficiency laws. The fours laws address the critical area of energy use in existing private and public sector buildings. Local Laws 85, 86 and 87 focus on the NYC Energy Code, energy audits and retro-commissioning, and lighting upgrades and sub-metering. Local Law 84, the Energy Benchmarking law, is the one that everybody’s talking about right now. It aims to improve the energy (electricity, natural gas, fuel oil, steam) and water efficiency of New York City’s largest existing buildings. All eligible property owners 1 must comply with Local Law 84’s requirement to report on (‘benchmark’) the annual energy and water use of their buildings through an online tool 2 called Portfolio Manager, which is maintained by the U.S. Environmental Protection Agency (EPA). Once the initial data is in Portfolio Manager, the tool allows you to streamline a building or property portfolio’s energy and water data, tracking key consumption areas, performance and cost information. The Mayor’s Office of Long Term Planning and Sustainability will publish the data online so buildings can compare their energy use with themselves over time and with other buildings of similar size and type. The new legislation applies to residential and commercial buildings larger than 50,000 gross square feet, two or more buildings on the same tax lot totaling more than 100,000 gross square feet, or two or more buildings held in condominium ownership and governed by the same Board of Directors, totaling more than 100,000 gross square feet. For the vast majority of owners, this is totally new. The original plans stated that data should have been filed by May 1, 2011. However in view of the large numbers – over 20,000 – of properties affected, the Mayor’s office has notified a grace period of three months while owners acclimatize to the new
requirements. But from August 1, no further extensions can be expected. The state has announced an initial $500 fine for properties that fail to file and additional fines of $500 per quarter for further violations. The responsibility falls to the owner, managing body or commercial tenant and may seem daunting at first sight. On the upside, Local Law 84 creates an opportunity to adopt a proactive approach to improving a building’s energy efficiency. As energy costs continue to rise annually, it makes good financial sense to focus on energy efficiency measures. Benchmarking allows owners to get an accurate picture of energy and water consumption, to compare these controllable operating expenses with similar buildings and to plan for better future performance. With superior energy performance, a building could achieve an Energy Star rating. The visibility of the published data will benefit the real estate market in the future, allowing prospective buyers and tenants, banks and other financial institutions, as well as existing owners, to identify a building’s efficiency and the associated cost implications. The rating also contributes to the overall picture of a building’s financial health and quality of management. As carbon and cost savings become evident within the inspiring NYC model, we may see other states and municipalities adopting local benchmarking laws to improve their built environment. Analysis and evaluation of energy and water consumption is always a prudent step for any owner, irrespective of legislative requirements. Significant financial benefits can be achieved from relatively easy, low-cost changes, such as retro-fitting light fixtures, installing insulation or recalibrating major mechanical/energy consuming components. Faithful+Gould has global experience of cost-effective sustainability in the built environment. Our benchmarking expertise can assist all clients nationwide and in NYC specifically we can act as benchmarking administrator, inputting data on clients’ behalf and electronically submitting all results to the City. We are also strongly positioned to help clients in all locations, to audit and improve their overall energy usage. 1
2
T o determine if your property is required to meet the guidelines of Local Law 84, go to www.nyc.gov/ggbp or www.urbangreencouncil.org/resources/benchmarking The tool can be accessed at www.energystar.gov/istar/pmpam
For further information contact Paul Alders on 212-252-7070 paul.alders@fgould.com Issue twenty-nine
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Retiring after 38 years at Faithful+Gould, Richard Hall looks back on the growth of a global business. I feel immensely privileged to look back on my career with Faithful+Gould. Thirty-eight years ago I joined a small parochial quantity surveying practice in the north east of England. Today I’m leaving a global business, a serious player, active in every sector and respected by clients and peers alike. That growth and diversification is what I’m most proud of. It’s not solely my achievement by any stretch of the imagination. It’s been a team effort all the way along. I’ve been fortunate to surround myself with excellent people, we’ve weathered good times and bad, and we’ve reaped what we’ve sown. When I joined Faithful+Gould in 1973, we had a predominantly industrial base, very different to the property clientele of most of our competitors at the time. That specialism served us well, became the foundation for our earliest global expansion and remains a significant strength today. We’ve gone on to diversify into many markets, products and services, always maintaining our position as a leading player in the industrial sector. I’ve also served on our parent company Atkins’ Executive Board for 15 years, giving me another opportunity to contribute. Watching the wider business grow from its flotation, only weeks after acquiring Faithful+Gould, to becoming an 18,000-strong company, has been an exciting experience. At the same time I’ve been proud to ensure the retention of Faithful+Gould’s very special identity within the wider talent of the Atkins Group. 14
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Relocating to the U.S. has been an unexpected and exciting way to spend the last five years of my career. Carol and I have loved living here and I’ve valued the opportunity to contribute to the growth of our U.S. business. Faithful+Gould has put independent cost management squarely on the map here and I know from client feedback that we’re meeting an absolutely critical need. The challenge is to develop that further and grow the American business even more and I know our team is well-placed to do just that. I know I’m leaving the business in safe hands. Our longterm succession planning has resulted in Donald Lawson’s exceptionally capable leadership, backed by a talented senior management team. I’ve worked closely with Donald for 25 years and I know he’ll take the business forward in new and exciting directions. Donald will be chairing the International Steering Group, where he’ll continue to have the support of the worldwide management team. I confess I’m looking forward to spending a lot more time with my family. Carol and I are expecting a second grandchild so there’s lots of fun and happy times ahead. I’m going to spend more time fishing and golfing, and plan to continue living the American dream right here in Florida! I know I’ll miss the business, and will always be curious and wondering about all those opportunities out there as we emerge from recession. It’s a strange feeling to reach retirement and still be anticipating what lies ahead for our business, knowing that I won’t be involved! But I’m confident that further great things lie ahead for Faithful+Gould. It’s been an honour to work with my wonderful team and valued clients over so many years – I thank you all for your loyalty and support and I wish you continued success.
Donald Lawson, Faithful+Gould’s new CEO Worldwide Operations, outlines some of his plans for our future. I’ve worked closely with Richard Hall for 25 years and I’ve had the opportunity to learn much from him during that time. I know I speak for everyone at Faithful+Gould in acknowledging his inspired leadership and his commitment to our business success. We all wish him well in his retirement. Richard has always been a force for change within our business, tirelessly driving us forward into new markets and new areas of expertise. His example will certainly underpin my own plans for taking the business forward as a leading multinational provider of commercial, project management and cost management services. I’m fortunate to have had a very varied and rewarding experience at Faithful+Gould since joining our Edinburgh office in 1986. I’ve been responsible for gas mains replacement, commercially managed corrosion protection on off-shore oil installations, ran £2million fit-outs of government buildings and delivered a retail program for a number of high street banks. Inevitably I spend much of my time in London but endeavor to spend time in offices throughout the U.K. and, increasingly, a range of global locations where we are situated. An early priority is to spend more time in the U.S., where I look forward to building a fruitful relationship with our 3500 Atkins colleagues who have joined from the Group’s major acquisition of PBSJ in Tampa. This will enable us to further grow our U.S. market, adding strength in environmental, transportation and program management disciplines. Globally I want to ensure that we attract and retain the best people, with an emphasis on our professional learning and development opportunities. Investment in our graduates ensures the best quality leaders, business managers and technical experts for our business, and I’d like to highlight the support we offer individuals to achieve professional chartered status via the appropriate institutions.
A current initiative is our new sustainability and carbon management division, which comes under my personal sponsorship within the wider Atkins Group. Formed by the merger of Atkins’ sustainability team and Faithful+Gould’s well established carbon consultancy business, this expanded service operates under the Faithful+Gould brand and creates a new centre of excellence to help clients address all their environmental needs. Throughout my career I’ve been passionate about technology and the benefits it brings to the management of built environment projects. I’ve been able to drive this agenda at Faithful+Gould, allowing us to fully explore and utilize a growing range of tools and processes to support our service offering and meet our clients’ needs. Staying close to clients is one of my maxims and I hold longstanding client relationships in high regard. My own relationship with clients in the finance sector will remain a key part of my working life. As Richard hands over the reins, I’ll be continuing with my own hands-on style of management. I’m enormously excited about the future for Faithful+Gould and I look forward to sharing it with our valued client base and our talented management team.
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Improving Cost Predictability High speed rail is on the agenda for many countries seeking an alternative to domestic aviation. The U.K. government considers that a new high speed rail (HSR) network would transform the U.K.’s economic geography, providing a genuine alternative to air travel. This would slash journey times between cities, deliver a huge increase in rail capacity to meet rising demand for long-distance rail travel, and ease overcrowding on existing railways.
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A Y-shaped national U.K. HSR network is proposed. This links London to Birmingham, Manchester and Leeds, and includes stops in the East Midlands and South Yorkshire, as well as direct links to the HS1 line. Phase two covers the onward legs to Manchester and Leeds. Construction costs are estimated at $52billion. The development of major HSR proposals is not restricted to the U.K. Here in the U.S., the President is proposing to invest $53billion over the next six years to continue construction of a national high speed and intercity passenger rail network. The White House says this will create a major economic
The AVE on the Jalon Viaduct between Madrid and Barcelona, Spain Image: Spanish Rail (featured in Greengauge 21’s Fast Forward report)
boost. The Department of Transportation also has existing work ongoing with several states, to plan and develop high speed and intercity passenger rail corridors. These range from upgrades of existing services to entirely new rail lines exclusively devoted to 150 to 220 mph trains. In California, cost estimates are in excess of $45billion for the California HSR. Transportation projects are typically subject to uncertainties due to long planning, design, implementation and operational timescales, which often involve complex internal and external interfaces. Over the project development and implementation phases, the project scope will often change, leading to a degree of uncertainty in both budget and schedule. Rail is no exception. Optimism bias tends to be high, with most rail projects out-turning at a 40-50 percent higher cost than anticipated. Schemes usually take longer than planned and do not always deliver the anticipated benefits. When benchmarked against other countries, U.K. railways construction costs are often found to be significantly higher. Sir Roy McNulty’s value for money review is currently underway with his findings soon to be published, but the question frequently asked in the U.K. is ‘does HSR have an average cost per kilometer?’ The validity of like for like comparisons must of necessity be questioned because of variability in unit rates for HSR projects. This is due to issues such as: Consistency of pricing (currency and date) Project timescales and phasing Location of project and local variations Whether all life cycle costs are included Establishment of the corridor (urban, suburban, wilderness) Route alignment Local labor rates New build or upgrade of existing facility Traffic type (passenger/mixed traffic/frequency/ rolling stock)
What can be done to improve the cost predictability of rail schemes? We suggest that the most successful schemes will explore a range of issues and implement various tools and techniques. It’s especially vital that sufficient exploratory work is done during the project’s pre-construction phase, to ensure a robust proposition. Particular attention should be paid to the commercial aspects of the scheme, including the estimation of capital costs, life cycle costs and the identification and management of risk. Scheme costs can be greatly reduced by considering the following: Make use of an experienced project management team. Aim for standardization (stations, structures, rolling stock), as tailored design solutions increase costs and can take longer to implement. The relationship between capital and life cycle costs and potential trade-offs. Keep procurement strategy as simple as possible Limit breaks in program, i.e. reduce the number of phases, as stopping and starting a project can significantly increase the costs. Faithful+Gould has unprecedented knowledge and expertise within the rail industry, reinforced by strong links with our parent company Atkins, the largest consultant engineer in the U.K. rail sector. We have been involved with several future high speed schemes at exploratory proposal level, as well as our practical U.K. experience as project and cost managers for the HS1 fit-out at St Pancras and at Ebbsfleet International, and the feasibility stage for HS2. In the process we have built up comprehensive cost modelling expertise. Our global rail experience elsewhere includes projects and clients such as Kuwait Metro Feasibility Study, Norwegian High Speed Rail Study, Metro West (Ireland), Manchester Metrolink, Glasgow Airport Rail Link, London Crossrail, Ultraspeed, Docklands Light Railway (various), Dubai Metro, Union Railways (UAE) and Wien to Kosice Freight Upgrade Study.
For further information contact Carin Rautenbach on 562-314-4200 carin.rautenbach@fgould.com
emerging Markets Public-Private Partnerships (PPP) have suffered in the U.K. but are attracting optimism in new emerging markets. The challenge is to develop a PPP approach to reflect local markets and conditions – ‘localizing’ is essential for future PPP projects. The global financial crisis had a profound impact on the U.K.’s PFI/PPP markets. Illiquidity, initially within the banking sector and subsequently the bond markets, has been compounded by the contraction in risk 18
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appetite among investors, causing a number of projects to be reviewed, delayed or mothballed. However there is considerably more momentum elsewhere, in what are known as ‘emerging PPP markets’. The March 2011 PPP in Emerging Markets Conference in Kuala Lumpur showed buoyant interest and a strong Asian focus. There are a range of economic, social and political motivations for developing PPPs including the sharing or apportionment of risk, the integration of specialist yet complementary skill sets, culminating in improved efficiency, as well as the provision of a recognized
Image: Singapore Sports Council
investment vehicle conducive to the attraction of private sector investment. Motivations vary from country to country and evolve over time to reflect changes in government policy or shifts in micro and macro-economic indicators. The types and form of infrastructural provision procured under PPP also varies, influenced by the level of understanding and sophistication in the use of partnership and concession-based procurement. International PPP markets are at very different stages in the maturity cycle, making cross-jurisdictional evaluation problematic and compounded by subtle differences in legislative frameworks and tendering processes. North America has been relatively active, particularly in Canada. The Canadian market has seen a substantial spread of social and economic infrastructure, including hospitals, schools, judicial and office accommodation, and now has a greater focus on infrastructure and transportation. Canada has substantially adopted the U.K. model and although the market has slowed recently, Canadian PPP looks here to stay and, with its simpler structure, is a great benchmark for other emerging markets to emulate. In the U.S. PPP has been used for many years but as a concession partnering agreement, which doesn’t include a whole life approach to hard and soft facilities management or an availability based payment mechanism model. However with last year’s Financial Close on California’s Long Beach Courthouse PPP, the U.S.’s first accommodation PPP, Texas and Arizona have been keen to explore the U.K. or Canadian models. Faithful+Gould has been the trailblazer for all PPP projects in Singapore, tipped as the hub or gateway for future Asian PPP. We recently acted as funder’s Technical Adviser on the S$1.6billion Singapore Sports Hub PPP. This is the world’s first PPP-procured sports stadium, incorporating 55,000 seats and the world’s thinnest and widest retractable roof. This project recently won Project Finance magazine’s Global PPP Deal of the Year
2010. Singapore’s PPP appetite has reduced during the global economic crisis and their focus is now on setting up investment vehicles to provide finance for other developing Asian countries pursuing PPP. There is currently real interest and appetite for PPP in the Middle East. Faithful+Gould is currently working with local partners in Kuwait and the UAE to develop accommodation and transportation-based PPP and BOT (Build Operate Transfer) projects. We are also exploring opportunities in Qatar, Saudi Arabia, Oman and Egypt. Our experience suggests that successful PPP projects have clear objectives from the outset, with transparent evaluation criteria and processes defined at a very early stage. The emerging markets opportunity also brings a range of potential challenges, including political, economic and financial risks. There are also risks associated with the lack of managerial skills, inadequacy of institutions, corruption, lack of transparency, social issues and income inequalities in the local operating environments. Faithful+Gould’s global network provides PPP expertise and advice to a wide range of governments. We bring global best practice to localized delivery, offer problem solving for community and environmental benefit, and actively drive the carbon agenda.
For further information contact Ryan Brady (U.S.) on 602-445-3570 ryan.brady@fgould.com or Campbell Gray (U.K.) on +44 (0) 131-221-5600 campbell.gray@fgould.com Issue twenty-nine
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Beach Games December 2010 saw Oman play host to the second Asian Beach Games, a multi-sport event regulated by the Olympic Council of Asia.
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The 2010 Asian Beach Games showcased a diverse range of sports: beach soccer, beach handball, beach kabaddi, beach sepaktakraw, beach volleyball, beach waterpolo, beach woodball, bodybuilding, jet-skiing, marathon swimming, sailing, tent pegging, triathlon, and waterskiing. The Games has reinforced Oman’s recognition on a global scale, strengthened its reputation as an international sport and eco-tourism destination and created new economic opportunities. Oman has remained stable during recession with government spending on infrastructure supporting the economy’s growth. Unlike other major players in the region, Oman made a concerted effort to avoid over-building and its construction industry continues to be very active at present, reinforced by the government’s Vision 2020 economic plan. The Games required the development of the one million square meter Al-Musannah Sports City, a coastal site 150 kilometers from Muscat, the capital city.
The project featured a mixture of sporting facilities, 200-berth marina and dedicated playing pitches with temporary spectator stands. Other developments included a 4-star hotel, apartments for media and administration staff, a variety of restaurants in the athletes’ village, a press center and a business center. The master-planner and developer for the Games site was Omran, Oman’s government-owned tourism investment, development and management company. Started in June 2008, the project’s completion in less than 900 days marked a record for an Omani development of this size and scale. More than 2,500 workers spent more than twelve million man hours to finish the job. Challenges included the nonnegotiable completion date. Omran started handing over the project to the Muscat Asian Beach Games Organizing Committee (MABGOC) in October and all elements of the project were completed in time for the December event. Faithful+Gould’s value engineering input included the use of Omani
natural products, such as stone and marble, thus limiting carbon footprint and saving time and money. Legacy was an important consideration for this project. Major event host cities typically seek long-term benefits such as regeneration, tourism, economic positioning and transfer of knowledge. Faithful+Gould’s project management role has included helping Omran to achieve best value on transitioning the Sports Village to a mixed-use residential, commercial and tourism resort development, due for completion in October 2012 (the hotel is already operational). With the support of the Ministry of Tourism, Oman Sail was set up in 2008 to rekindle Oman’s maritime heritage and to inspire young Omanis to take up sailing as recreation and as a competitive sport. Building on the success of the Asian Beach Games, Oman has begun to establish itself as a world class venue for international regattas. The 2011 Extreme Sailing Series was hosted at The Wave, Muscat, in February, followed by the inaugural dinghy regatta at the Millennium Resort, Mussanah. Faithful+Gould provided project, cost and construction management services for the construction of the Games’ facilities. The Games site was completed in time and on budget, often requiring round-the-clock input from the professional and works teams. In spearheading the aim for ISO Certification Standards for Health and Safety, our project management team encouraged a culture change in the site environment. We were especially proud when the site earned the safety accolade of twelve million hours incident-free. Health and safety will continue as part of the project’s legacy, as the government has now legislated for a minimum standard of compliance. Globally, our experience in the sports sector includes supporting our parent company Atkins, the official engineering design services provider for the London 2012 Olympic and Paralympic Games. We have been active in the Middle East since 2004 and we now have offices in Oman, Dubai, Abu Dhabi, Qatar and Saudi Arabia. Alongside Omran’s Asian Beach Games development at Musannah Sports City, our portfolio in Oman includes Octal’s new PET plant and Glorei’s Muttawar mixed-use development. We are also working on several cost management commissions including the recently awarded Wadi Adai Interchange.
For further information contact Wilfred Asamoah on +968 24 560 478 wilfred.asamoah@fgould.com Issue twenty-nine
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A clearer picture for owners With our Electronic Project Management System When it comes to the successful execution of a capital project or portfolio of projects, visibility and control are vital. Leaders of corporations, institutions and government agencies are demanding clearer and more easily accessible information upon which to base their decisions. Our electronic Project Management System (ePM) provides a comprehensive and collaborative solution for managing the flow of information from planning and designing, through construction to operation. Quickly configured for each client, the ePM system can focus a spotlight onto the darkest corners of any project while providing tailored dashboards, customized to individual needs. Built on the Skire Unifier™ software platform, the ePM system enables clients to leverage Faithful+Gould’s constructive expertise, embodying our best practices. These practices, combined with the client’s standard procedures, produce automated business processes carrying information between project participants with no data duplication. This saves time and cost, and eliminates errors. Even in complex programs with a large multi-stakeholder team, adherence to agreed procedures is assured. Client feedback has been extremely positive. The best outcomes have been experienced when clients are most involved in 22
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molding the system to suit their corporate ethos, which in turn engenders collaboration with other members of the team, as all share the same data. Upfront attention and teamwork avoids later misunderstandings and potential conflict.
For further information contact George Aucamp on 602-445-3570 george.aucamp@fgould.com
The system aligns to standard Project Management Institute functional groupings, but these can be realigned to PRINCE II or any client-specific groupings. The origin of Faithful+Gould’s ePM can be traced to John Wayne Airport, Orange County, CA, when we implemented this solution for a $500million capital program several years ago. Major issues for this client were transparency of approval chains (architectural submittals, contracts, change orders, invoices) and the ability to aggregate data across multiple projects, generated by disparate project teams, based on consistent and verifiable processes. The system operates as ‘software-as-a-service’, allowing clients to access and use the system via any Internet connection, including mobile devices. The shared infrastructure provides economies of scale and has many advantages over the traditional on-premise business applications. On-premise is typically complicated and costly to install, configure, test, run and secure, with further expense associated with the ongoing maintenance. ePM is now helping us achieve excellent results for clients on a wide range of project management commissions across the U.S. Sectors include energy, food and beverage, government, biopharma, aviation, higher education and healthcare. Issue twenty-nine
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north america
Georgia tech
The Georgia Institute of Technology is one of the top U.S. research universities, educating 20,000 students on a 400-acre campus in the heart of the city of Atlanta, GA. To help prioritize Georgia Tech’s capital and maintenance needs, Faithful+Gould is providing a comprehensive facility condition assessment and energy consulting services for 112 academic buildings, spanning more than 6.5 million square feet over the next five years. In our first contract year, 15 buildings totaling 1.2 million square feet were assessed. These included laboratories, classrooms and the campus recreation center. One of the buildings is the Aquatic Center, originally built for the Atlanta 1996 Olympic Games. Our scope of work includes assessment of each building’s structure, envelope, interior and systems, together with assessment of the on-campus gas utility distribution infrastructure and central plants. Another 22 buildings totaling 1.3 million square feet have been assigned in the second contract year along with the central steam distribution system and central plants.
All information will be entered into our iPlanTM software delivery platform. Integrating this with Georgia Tech’s current management software platform, we are enhancing and updating Georgia Tech’s portfolio information. Capital needs are identified, categorized, prioritized and accurately estimated, allowing the total cost of ownership to be determined. On completion of the assignment, Georgia Tech’s asset management system will be transformed into a much more useful and powerful tool, to program facility operations with certainty and confidence.
For further information contact Ben Dutton on 703-684-6550 benjamin.dutton@fgould.com
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