ISSUE 31
U.S. Healthcare
Reforms Impacting the built environment Also in this issue: Launching new Paris office Energy Audit Tool boosts efficiency Get the most from contingency budgets Kuwait & Saudi boost social infrastructure
CONTEnTS 4 Expecting the Unexpected Getting the most from contingency spending strategies
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Temasek Polytechnic College redevelopment in Singapore
Kuwait Ministry of Public Works 8 Government invests in improved project management systems
Energy Audit Tool 10
Signposting smarter energy efficiency strategies
OCTAL Oman 12
PET resin manufacturer expands manufacturing plant
U.S. Healthcare Reforms 14
Impacting the built environment
Faithful+Gould Launches New Paris Office 16
Taking our total number of offices to 52 worldwide
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South East Asia’s Construction Outlook Encouraging All countries in the region are investing in healthcare and education
Retro-commissioning 20
Getting the best return on investment in existing buildings
Improving Social Infrastructure in Saudi Arabia and Kuwait 22 Investing in housing, healthcare and education for young and growing populations
OCMS Change Management 24 No-surprises solutions for manufacturing programs/maintenance projects
Cost Modeling 26 More realistic project budgets, with informed decision-making prior to design
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Welcome to another edition of Solutions, where we share some of the interesting projects that Faithful+Gould is currently working on, and introduce innovative services that are making a difference to our clients. I very much hope you’ll find some of this relevant to your interests. I’d like to introduce our new Philadelphia office, launched in March 2012. Rapid expansion in the Philadelphia marketplace led to this choice of location. Our new base is strategically well positioned and allows for easy access from both the city center and the Philadelphia International Airport. We utilized our workplace strategy expertise to ensure that our new office environment meets all the agile working criteria that we are implementing for our clients in commissions such as GSK’s new Five Crescent Drive facility at The Navy Yard in Philadelphia. In other good news, we were delighted to pick up one of the most hotly contested industry awards, beating off competition to become Construction Consultant/ Surveyor of the Year in the recent Building Awards. Announced at a ceremony in the U.K., the awards are spearheaded by the international Building publication. Our success was underpinned by our strong financial performance across global markets. We’re also excited about the development of our project management service in North America. We will continue to provide clients with all the expertise they need, across the entire project lifecycle. But we now have a simplified offering, aligning all our provision under the twin imperatives of planning and development. Please check out our services on fgould.com As a leading project management organization, we know how important it is to control every aspect of cost, schedule and risk. We’re using our expertise to achieve this in many different sectors. Page 14 looks at the controversial healthcare reforms, how these will impact on the built environment, and the importance
of finding cost effective solutions. On page 4 we focus on how owners and other stakeholders in every sector can use contingency budget planning to protect their interests, strongly influencing project success. Our project management strength has been developed globally and we’re fortunate to have utilized our skills on projects in many different countries. Page 8 profiles the project management service we’re providing to Kuwait’s Ministry of Public Works, just one of the innovative commissions we’re undertaking in the Middle East. Our regional presence continues to prosper, and we’re very pleased to have recently secured new office premises in Doha. Further afield, I’d like to introduce our new Paris office, launched earlier this year and explored on page 16. We feel this is the ideal time to increase our mainland Europe visibility, so that we can better help clients with their local needs in France and throughout central Europe. Centrally located in the main business district in Paris, the office enables us to support clients in the pharmaceutical, industry and energy sectors, such as Michelin, and EDF on their nuclear new build program. Our fourth office in China has also newly opened, located in Suzhou. Thank you for your interest in Faithful+Gould and I hope you’ll enjoy this edition of Solutions. I’d be delighted to hear from you if you have any comments or if you’d like to know more about any of our services or initiatives. You can also follow us on Twitter, join our LinkedIn discussion group or sign up for our bimonthly email communications if you’d like to keep your finger on the pulse of constructive expertise.
Donald Lawson, CEO Worldwide Operations Issue thirty-one
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Contingency Spending Strategies
Expecting the
Unexpected All construction projects involve risk. Even the best-prepared plans will encounter unexpected challenges. How can owners and other stakeholders use contingency budget planning to protect their interests?
Planning, scheduling and effective management of contingencies are crucial for the successful management of construction projects. Changes and risks are inevitable in construction contracts, with cost and time overruns frequently occurring in this inherently uncertain industry. How much is enough? Contingency calculation and allocation is all too often an unscientific process. One of the more common methods is ‘rule of thumb’, a percentage allowance based on past experience of comparable projects. Another method is simulation, using software to predict the possible range of outcomes for the project. This is more accurate than rule of thumb, although the two may be combined when accurate benchmarking data is unavailable for the simulation. The project manager’s expertise plays an important part in developing appropriate contingency strategies. 4
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The most common approach is for the contingency budget to be managed as a single bulk allowance. This has several disadvantages. The sum can be drawn down early in the construction works, based on first instances of need and without a holistic view of the project and the risks to come. This has the potential to exhaust funds well in advance of project completion. A false sense of project financial stability is given, with early overruns covered, delaying awareness of the need to plan corrective actions. Ideally the contingency budget is managed as a distribution of funds across established risks. The distribution breakdown therefore reflects strategic planning and the funds are allocated proportionally to areas of work identified via careful risk planning. Where contingency expenditure is required, it is assessed against the strategy
before any funds are released. Where funds are required beyond planned distribution, this creates awareness and promotes reassessment of the strategic plan. There is greater understanding of the project’s financial stability and the methodology provides real-time awareness of required corrective actions and financial controls. The construction contingency budget is now traditionally understood within the industry, but less prominence has been given to design and owner contingencies. Where there is acknowledgement of the need for design and owner contingencies, the tendency is to roll this into the construction sum. However, separate contingency accounts for the design and the owner will allow more financially risk averse planning. Design contingency will allow for the design to shift intent over the course of the development, and for elements not inferable in the design that are yet to be documented. Owner contingency provides for the owner’s modifications during construction as required, due to changing business needs over the extended lifecycle of many projects. Project uncertainties can affect project schedule/ program as well as cost. Schedule contingency management is therefore an important factor. This can be approached as a single bulk allowance of time at the end of the project, but ideally would be distributed across the project schedule to areas identified as key risks. Re-evaluation at each project
milestone will promote a more realistic understanding of schedule performance over the life of the project. Within the industry we find that risk appetite/ adversity varies, influenced by corporate culture, project objectives, stakeholder objectives, financial climate, funding sources, and perceived risks. Naturally owners are not keen to tie up valuable funds that can be used for other activities, and often the assumption is that if a contingency budget exists it will be used. However, in being ill-prepared for contingencies, some organizations allow themselves to be uncomfortably exposed to risk. The effectiveness of contingency management can strongly influence project success. As part of our project management services, we help owners develop and properly manage robust contingency budgets. Our project managers rigorously analyze and quantify risk before and during a project, enabling our clients to devise effective contingency planning appropriate to the needs of their project and their organization’s business goals. Clients from many sectors have benefited from our project management expertise. This is complemented by our in-house cost management, risk management and project controls capabilities, providing a robust skill set for optimum contingency planning advice. For further information contact Tim Hannaway at +1 703 684 6550 timothy.hannaway@fgould.com Issue thirty-one
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Temasek Polytechnic
Campus
redevelopment in
Temasek Polytechnic is expanding and improving its campus facilities, to cater for new courses such as aviation and aerospace engineering. Singapore places strong emphasis on its education system to provide its people with the skills needed for a rapidly changing global economy. Over 70,000 students are currently attending one of Singapore’s five polytechnics, set up to train middle-level
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professionals to support the country’s technological and economic development. Starting with just four courses when it was first established in 1990, Temasek Polytechnic (TP) has matured as one of Singapore’s leading educational institutions. The polytechnic now offers 53 full-time diploma courses across applied sciences, business, design, engineering, humanities and social sciences, and informatics and IT. Situated in the east of the island, the campus sits on a
Faithful+Gould is also working with Singapore’s Ministry of Education on several projects, as both primary and secondary education facilities undergo renewal throughout the country.
74-acre plot of land fronting the Bedok Reservoir, catering for a student body of around 15,000. A Campus Masterplan serves as a guide to strategize TP’s future campus development. Upgrading plans were developed to meet the polytechnic’s short and long term goals. This also addresses the urgent need to provide new teaching facilities, to keep up with an expanding student population and anticipated enrollment increases in the future. The Masterplan clarifies and aims to build upon the strengths of the campus. Key features such as the signature views and spaces have been identified and are protected from further development. Other potential areas have been earmarked for future growth and re-development to improve connectivity in and around campus and to create more buzz. Faithful+Gould was appointed in 2009 as cost managers, to fulfill the Campus Masterplan vision. We are working on several new building developments, together with a range of refurbishment projects and
planned maintenance of existing facilities. Services include feasibility studies, pre-contract and postcontract administration, procurement support, project management and cost management. We have worked alongside multiple stakeholders on these projects, liaising with the polytechnic’s estates and facilities management team, as well as the directors of the individual faculties, the Principal and the Board of Governors. There are multiple expectations, with each faculty having their own set of requirements. In addition, the buildings are designed with the aim of achieving Singapore’s Green Mark sustainability accreditation status. In addition to TP, Faithful+Gould is also working with Singapore’s Ministry of Education on new primary and secondary school developments, together with upgrading programs on existing schools; National Technological Universities (NTU) on term contracts, and Singapore Institute of Technology (SIT) campus within TP. Our wider global educational experience encompasses schools, colleges and universities across the U.K. and U.S.
For further information contact Salman Younus at +65 6227 6144 salman.younus@fgould.com Issue thirty-one
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Kuwait
Government invests in improved project management systems
Kuwait’s drive to diversify its economy, through a combination of government investment and increased private sector participation, has placed infrastructure at the forefront of the country’s development plans. Like many of its GCC neighbors, the Kuwaiti government has outlined plans for significant state investment in transport, energy and social services infrastructure, also intended to stimulate activity in the wider private sector. Although government spending plans in recent years have been affected by political and parliamentary uncertainties, the public sector accounts for over 70 percent of GDP. Much of Kuwait’s existing infrastructure is in need of renovation and replacement. The Ministry of Public Works (MPW) is responsible for managing the planning, design and construction of a large percentage of public sector capital projects throughout Kuwait. The Ministry aims to provide high quality standards, innovative construction solutions and cost effective projects which are delivered on time. The MPW has appointed Faithful+Gould (in conjunction with a local partner, Kuwait United Development and specialist sub-consultant CMCS) to undertake a review of its existing organization and the methods used to manage its projects. The aim is to develop a tailor-made Project Control System (PCS), underpinning a more centralized and standardized approach to planning, design, procurement, construction and operation of built environment assets. The ensuing Project Management Office (PMO) capability will enable MPW to undertake ongoing control throughout the project lifecycle as well as enhance their ability to manage the maintenance of the facilities beyond completion of the project phase. 8
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Using a team of up to 45 project management specialists, we’ll begin the two and a half year project by undertaking a full gap analysis of the current situation. This will focus on perceived problem areas and shortfalls, together with potential solutions. Aligning the PMO service to MPW’s strategic business objectives will enable embedding of robust, transferable processes and procedures. These will maximize the capabilities of the existing organization and will demonstrate international best practice. As part of the second phase, we will train 180 MPW staff to operate and manage projects using the new system. Finally, a comprehensive auditing and continued training phase will ensure that the newly-embedded system is understood and fully functional. MPW will then take control of their new PMO system, based on Primavera professional project management software. The training of local professionals is vital to the success of this project and highlights MPW’s determination to embed the new system and practices into their construction industry. This is part of a wider initiative in Kuwait, where incoming consultancies are required to contribute to the country’s investment in training and professional development. On this project the training will comprise 39 days of formal tuition, followed by 39 days of project-based training. Faithful+Gould offers PMO services globally in a wide variety of public and private sector commissions, encompassing real estate, construction, IT platform, facilities management, communication and change management and space management.
For further information contact Paul Woutersen at +965 2295 8585 paul.woutersen@fgould.com Issue thirty-one
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Energy
Audit Tool
SIGNPOSTING SMARTER ENERGY EFFICIENCY STRATEGIES Rising energy costs, coupled with new legislation in a growing number of states, are driving property owners and operators to actively seek greater energy efficiencies. An energy audit of the building is an excellent starting point, enabling performance analysis and exploration of energy efficiency improvements. To facilitate industry-standard building energy audits, Faithful+Gould has developed a new software tool for identifying and quantifying building energy efficiency measures. The tool provides a concise and repeatable mechanism to implement our established energy audit engineering solutions. 1
American Society of Heating, Refrigeration and Air Conditioning Engineers.
2
Energy service company.
10
The unique tool has been developed alongside delivery of a project requiring industry standard ASHRAE1 Level 2 Energy Audits and it allows owners to identify how the
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facility is using energy and where waste is occurring – giving clarity on which energy efficiency improvements to prioritize. It enables smarter and more streamlined decision making, allowing an energy savings program that pays for itself through cost savings. Many organizations find this solution an appealing alternative to a typical ESCO2 method which consumes a portion of the client’s savings derived from energy conservation. These are savings that would otherwise reduce operating costs and/or pay for other conservation measures. The software tool enables gathering of specific field data during a review of building systems such as lighting, heating, cooling, hot water, roof, building envelope and other components. The field data is imported into the main application where current and prior utility consumption and costs are quantified. These findings are synthesized into Energy Conservation Measures (ECMs).
Navigating state-specific requirements has become part of the sustainability challenge for many owners.
The ECMs are a central part of the energy analysis, identifying implementation costs, energy savings and pay back periods. These are prioritized by the highest payback per dollar spent and by savings over a given period. Some ECMs can have little or no initial cost, yet yield considerable savings. 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. Owners can decide which are most practical, feasible and cost effective for their facility’s specific needs. A building-specific energy dashboard is built into the application, showing summary findings and graphical representation of energy saving options. A range of reporting options are available to suit corporate preferences. The tool ensures consistency and accuracy of data and provides clients with visibility into energy conservation opportunities, along with the ability to disseminate viable and feasible options. Energy audits often form part of our strategic facility consulting services, but are also offered as a standalone service. Most clients, even those convinced that they are operating as efficiently as possible, find that the audit cost is covered by the savings generated. It therefore becomes a practical investment, not a cost. The audit will also document performance improvement over time, providing benchmarks for improvements. For larger corporations, it provides consistent evaluation
across the portfolio. Once an energy audit is completed and ECMs are evaluated, clients can prioritize expenditures to maximize their goals. Some states have implemented new laws and programs to improve building efficiency, promote alternative energy and cut greenhouse gas emissions. New York City’s building energy efficiency program, for instance, requires eligible property owners to benchmark their buildings’ annual energy and water usage. Navigating the different state-specific requirements has therefore become part of the sustainability challenge for many owners. Our specialists can advise on compliance with a variety of local legislation. Additionally, in some circumstances the audit may qualify the property for tax credits, grants, subsidized financing or incentives. Client response to our energy audit tool has been very encouraging. The tool played a vital part in the Washington DC Department of General Services portfolio-wide energy audit project, covering more than 60 buildings. Other recent applications include an FDA building in Maryland and a range of projects in the hospitality and higher education sectors. Faithful+Gould has global experience in cost-effective sustainability for the built environment. Our energy auditing expertise can assist all clients nationwide and we are strongly positioned to support energy usage improvements in every sector.
For further information contact Tom Bart at +1 857 400 2208 tom.bart@fgould.com
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PET OCTAL, the Middle East’s largest PET resin manufacturer and the world’s largest sheet manufacturer, is expanding its Oman-based manufacturing plant. Oman’s oil and gas reserves – though currently plentiful – are expected to deplete more quickly than those of its neighbors, and diversification of the economy is therefore a priority for the Sultanate’s government. Oman’s governmental policies and incentives have fostered an export culture and aided the private sector in developing export strategy. Given the GCC’s rich oil reserves, the region has been quick to develop the PET industry as part of a wider push to increase petrochemicals output. PET (polyethylene terephthalate) plastic is widely used for beverage bottles, food containers and product packaging, and most of the plastic is produced from petroleum.
MANUFACTURING PLANT The Middle East’s largest PET resin manufacturer is OCTAL Petrochemicals, located in the port city of Salalah on the southern coast of Oman. The world’s largest PET sheet manufacturer, OCTAL already contributes around 10 percent of Oman’s annual non-oil exports. OCTAL was formed in 2006 by a group of U.S. and Omani investors. Since then OCTAL has migrated from a conventional manufacturing base to one that can handle the most advanced technologies in clear rigid packaging. The company is now further investing in its facilities by completing a U.S. $200 million expansion of its manufacturing plant. Its largest production facility to date, the new plant will increase the company’s capabilities for the European, American and Asian food and consumer packaging markets. Scheduled for overall completion in July 2012, the plant will add an additional 527,000 tons per year of PET bottle grade resin to OCTAL’s current production capacity to reach 927,000 tons per year – making it the largest in the world on one site. Through the application of pioneering technologies, OCTAL has already set new global benchmarks for both product and environmental excellence and currently uses 67 percent less electricity to manufacture DPET™ (Direct-to-PET) sheet and 38 percent less energy for resin. In addition, 80 percent of water used in the purpose-designed production facility is reused and all of Octal’s energy needs are derived
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38
%
The electricity used to manufacture DPET™ sheet
% 67 LESS
LESS
energy for resin
80%
of water used in the purposedesigned production facility is reused
from clean burning natural gas with its on-site high efficiency burners consuming up to 20 percent less gas than traditional PET plants. The PET produced is 100 percent recyclable. Faithful+Gould’s team in Oman is providing program management services throughout the project life cycle. We joined forces with our Faithful+Gould Singapore colleagues to reinforce the process engineering expertise needed on the project. One of the key challenges of this project is the extremely tight timeframe, which means our 20-strong team is delivering the facility twice as fast as the previous phase. This will ensure successful delivery to meet the critical milestone dates for mechanical completion and testing of the systems, in order that production can start in May 2012. Safety and quality issues are also extremely important. To date, a total
20% 100% LESS
recyclable PET produced
gas consumed than traditional PET plants due to high efficiency burners.
of 550,000 man-hours have been successfully completed without any lost-time-injury, thanks to stringent health, safety and environment practices. The project has also presented logistical challenges. The port of Salalah, Oman’s largest port, is playing an increasingly important role in the region, but is relatively isolated. OCTAL’s manufacturing process requires very heavy equipment, with the associated difficulties in transferring into the building. Faithful+Gould provides an integrated range of project management and cost management solutions to clients across many manufacturing sectors. We have a detailed understanding of the interface between the manufacturing process, incoming raw materials and finished product distribution. In the refining, chemicals and petrochemical industries, our client portfolio includes many major players both upstream and downstream, in the Middle East, U.S. and U.K.
For further information contact Martin Hunt at +971 4405 9100 martin.hunt@fgould.com
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HealthcarE
Reform Impacting the built environment
The controversial healthcare reforms are the major issue dominating the social, political and economic landscapes in 2012. Delays, obstacles and appeals have reinforced anxiety and uncertainty in the healthcare sector as the nation awaits the outcome.
In March 2012, the U.S. Supreme Court began hearing arguments over President Obama’s healthcare reforms, in a case that will have major implications for America. The three days of hearings explored the constitutionality of the hugely divisive Affordable Care Act – known derisively as ‘Obamacare’ by its opponents – which grants health insurance to 30 million Americans for the first time. The country remains almost equally divided over the legislation, with polls showing around 40 percent of people approving and 40 percent disapproving of the law, which has been the subject of rallies and petitions from both camps. Although the future of the Affordable Care Act remains in the balance, some form of overhaul to the $2.6 trillion healthcare system is inevitable. Uncertainty around the impact of the reforms, 14
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combined with continued downward market pressure on hospital endowments and donor contributions, suggest that the challenges of funding and cost will remain for the foreseeable future. Driven by this increasingly competitive environment, changing reimbursement models, and rising costs, healthcare providers around the country continue to take a cautious approach to the future and their budgets. Over the last two years we have seen flat or decreased budgets allocated to new construction, while hospitals and medical service providers turn their focus toward facility modernization, renovation, and maximizing the return on their facility investments. Renovation strategies are placing increasing emphasis on infrastructure and I.T. While squeezing the most out of every facility and every dollar is not a new trend in healthcare, providers are now
obliged to take optimization to the next level. Many hospitals and medical centers are looking toward ‘lean’ process and design as a way to do more with less. Faithful+Gould believes that an efficient built environment can play a vital role in better health outcomes and reducing the cost of care. Within this constrained environment, we continue to deliver cost effective solutions to a range of healthcare providers. At a leading New York healthcare institution, we are currently working with key facility directors to turn their traditional infrastructure re-investment master plan into a project prioritization plan. This effort seeks not only to identify future capital re-investment programs, but to challenge the priority and cost of each project, optimizing the effect of every dollar invested in infrastructure. Another example is our work at the Children’s Hospital of Philadelphia (CHOP), where we have seen facilities project managers increase their use of cost estimating/ cost management services to validate costs. We have assisted CHOP as they work through Guaranteed Maximum Price proposals and push back on change order requests. We deliver an independent unbiased opinion of the market and the value of proposed construction, seeking best value for our client. In the public sector the Veteran’s Administration (VA) has tasked Faithful+Gould to develop quarterly market
reports. These reports serve as tools that allow VA’s internal managers to evaluate the market and how it will impact the cost of their active and planned projects. Despite the current conservative and cautious tendencies in the healthcare real estate marketplace, there are longterm glimpses of optimism. As the global market recovers, endowments will also recover and donations will improve. Market recovery will also loosen constraints on credit and make borrowing for improvements less constrained for healthcare institutions. As the financial side of the equation improves, history suggests that the demand side will improve as well. If national healthcare reform has a similar effect on the industry that state healthcare reform did in Massachusetts, we can expect to see an increase in new medical real estate as providers seek to develop community focused facilities that will be optimized to provide lower cost services. We may also see a decline in large-scale hospital projects and a move toward smaller, more efficient buildings. There may be industry consolidation as single hospitals seek to join larger organizations to have access to capital in a tighter financial era. Hospitals are likely to engage with their communities more than ever, with a proactive focus on health education, healthy living, and disease prevention.
For further information contact Chris Eattock at +1 215 789 2028 christopher.eattock@fgould.com Issue thirty-one
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Faithful+Gould
launches new office
Paris Faithful+Gould’s newest office opened in Paris in January 2012, close to the city’s opera district.
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A key step towards expanding our presence in France and central Europe, the new addition takes our total number of offices to 51 worldwide. The decision has followed an influx of opportunities, particularly within the pharmaceutical, energy and manufacturing sectors working with high profile clients such as ITER, Michelin and EDF. Energy is a key strategic sector for Faithful+Gould and we are working alongside one of its major players, EDF Energy. Our Paris office will underpin our relationship with EDF Energy in their home location. Faithful+Gould has been working with NNB Genco Ltd for the past two years. This joint venture company is owned 80 per cent by EDF and 20 per cent by Centrica and is the prospective license holder to build and operate the U.K.’s new nuclear power stations. Twin nuclear power stations are planned for each of the two sites at Hinkley Point in Somerset and Sizewell in Suffolk. Our French portfolio also includes the ITER International
Thermonuclear Experimental Reactor project currently under construction in Provence. On this project we are working alongside Atkins, as part of the Engage consortium. Additionally we are supporting Michelin with their international program of new tire production facilities in China, India and Brazil. Our wider European client base includes several global biopharmaceutical companies. We are experiencing healthy demand for our project controls services in this arena and also in the chemicals and electronics sectors. In these industries we are appointed on a diverse range of commissions in Germany, Belgium, Switzerland, Portugal and Poland. In addition, we are supporting n.triple.a, a joint venture company established between Atkins Nuclear and Assystem to provide consultancy and engineering services to countries developing nuclear power as part of their energy mix. Our Paris office is housed in the same building as our parent company Atkins, which will offer further collaborative opportunities in the future.
For further information contact Ian Metcalfe at +44 (0)20 7121 2121 ian.metcalfe@fgould.com
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South East
Asia
Construction outlook encouraging
The effects of the global financial crisis have been felt less in South East Asia than in many other parts of the world. Countries such as Singapore, Indonesia, Malaysia and South Korea have all registered growth in the range of three to six percent in 2011. The prospects for economic growth in 2012 are good, although a return to the very high levels seen in the past is not expected. Indonesia, by far the most populous country in the region, is expected to grow by around 6 percent in 2012, Malaysia by 4 percent, South Korea by 3.4 percent and Singapore by 3 percent. The prospect of a Eurozone meltdown seems to be receding and a mild recession in Europe will have limited impact on the economies in South East Asia, which increasingly look to China as the main engine of growth. So what does this mean for the construction industries in these markets? First let’s look at demand for goods 18
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and services, and then at the way in which this demand is going to be met. Having benefited from many years of sustained growth, dating back almost uninterrupted to the 1996 Asian financial crisis, and from the growth of an increasingly affluent middle class, many countries in the region are experiencing an increase in domestic demand which is helping to drive up demand for services and goods. Strong examples of this are education and healthcare. Asians are well known to place great emphasis on the value of education and the resources that are expended on this sector are therefore very significant. All countries in the region are looking to upgrade their educational systems. Higher education is attracting investment locally, and Singapore is among the countries which are funding improvements in higher education facilities (see page 6, article on Temasek Polytechnic). In response to the demand for improved standards and facilities, an increasing number of overseas educational establishments are appearing in the region, such as in the
Iskandar Development zone in southern Johor, Malaysia. The Philippines government meanwhile is looking to use the PPP model of procurement to upgrade a large number of its public sector schools. Similarly, healthcare demand is growing. This is being driven by growth in disposable incomes and also demographic changes. Countries such as Singapore, for instance, are now experiencing an increasingly aging population, where economic advancement has led to an increase in life expectancy. The market is responding to this demand both in the private sector, where private hospitals are being set up in many countries, and in the public sector, where different forms of procurement strategies are being explored as a way of meeting the growing needs. On the supply side, the construction industries in the region are faced with a reasonably strong and consistent demand for their services, although this is of course subject to the changes in demand as market sectors experience different cycles. One of the major challenges facing governments in the region is the
provision of infrastructure to support economic growth and to meet the aspirations of their citizens. There is growing awareness that infrastructure needs cannot be met solely from government revenue and many countries, such as Indonesia, the Philippines and Vietnam, are looking to utilize private investment. They are supported in this by institutions such as the World Bank and Asian Development Bank which are funding studies into how projects can be brought to market in such a way as to attract private funds. However, there are a number of obstacles in the way of this process which will have to be cleared before private funding can make a significant difference to the infrastructure gap in the region. Faithful+Gould has had an office in Singapore for over 20 years, supporting a wide variety of public and private sector projects in the region. We are involved with a variety of procurement models in the education sector including PPP projects, using both our local experience and our wider global PPP expertise to facilitate the growth of this model.
For further information contact Martin Riddett at +65 6227 6144 martin.riddett@fgould.com Issue thirty-one
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Retro-
commissioning For best return on building investment
Most commercial buildings share the same basic goals: to meet the unique needs of their owners and occupants, to operate efficiently, to provide a safe, comfortable environment, and to be well maintained. No matter how well building operators and service contractors maintain the building and its equipment, if it operates inefficiently, energy waste almost always occurs. Also, over time, building usage alters – operational and occupancy changes challenge the mechanical, electrical and controls systems, standing in the way of the building’s optimal performance. New construction projects have the advantage here. They often undergo building commissioning, a systematic process of ensuring that new buildings and their systems are optimally installed and performing as designed. The commissioning is integrated into the original construction process to ensure that owners and investors get a fully-functioning building and best value for their investment. Unfortunately, most buildings have never gone through any type of systematic commissioning or quality assurance process and are therefore performing well below their potential. Even if building staff have figured out most of the irregularities in the building
systems, they are often forced to solve problems under severe time constraints and without the benefit of proper documentation. This usually leads to makeshift solutions and on to further building problems that often are invisible yet costly. To address these problems, it is now possible to carry out commissioning of existing buildings and this practice is known as retro-commissioning. This is a simple process, customized for each project, which allows owners to plan for maintenance, replacement, and energy conservation. Retrocommissioning helps make sure the building systems are working together and not in conflict with each other, to avoid inefficiency and wasted energy. The first step in retro-commissioning is to develop a scope of work, taking into consideration the client’s budget and the extent of operations and maintenance remediation required. A site visit will include testing of equipment and assessment of operations. A report of the findings is then compiled, showing prioritized action items with associated costs. The report’s recommendations can then form the basis of a plan for implementation. Everyone benefits from this process. For owners, retro-commissioning reduces building operating and maintenance costs that can lead to an increase in net operating income. Building managers notice fewer occupant complaints and increased ability to manage systems. Building staff receive training and improved documentation, and building occupants are more comfortable and confident in their environment’s reliability. The scope of work, the size and age of the building, and the complexity of the building systems are some factors that can affect the project costs. We have
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found that a small investment can go a long way because the process can be targeted to achieve optimum results. Working with the client, we are able to home in on the most critical areas of concern to provide the greatest return on investment. Within our client base, owners and managers in several different sectors have successfully used retro-commissioning as a cost-effective method to reduce expenses and increase revenue through improved building operations. In one instance, a client was able to realize a $100,000 saving for one HVAC item alone. For this multi-building project, the emphasis was on HVAC systems because it allowed the largest areas of return through optimizing performance. The estimated total savings for this client has been calculated at $1 million. These savings were achieved in part through the identification and implementation of low/no cost Facility Improvement Measures (FIMs). In many
instances, the FIMs could be accomplished using current maintenance staff and service vendors. For a client in the higher-education sector, we developed a retro-commissioning program which provided a roadmap for implementing a series of projects and maintenance procedures to reduce overall energy consumption in selected buildings. As the economy continues to be constrained, few corporations are in a position to build new. Instead there is impetus to achieve the very best value from existing buildings. Part of Faithful+Gould’s wider Strategic Facility Consulting services, retrocommissioning is available to clients in all sectors, to achieve efficiency through reduced energy consumption, operating costs, and carbon footprint. For further information contact Jonathan Bailey at +1 404 874 3638 jonathan.bailey@fgould.com Issue thirty-one
21
Saudi Arabia and Kuwait
Improving
Social
Infrastructure
Governments in the Middle East are stepping up to the challenge of delivering much needed social infrastructure. In a departure from the predominantly real estate focus of previous years, the GCC countries are currently investing in housing, healthcare and education for their young and growing populations. Saudi Arabia and Kuwait are actively exploring ways of improving and investing in their social infrastructure. Both countries are experiencing a shortage of housing for their expanding young populations. Market focus is therefore shifting away from high-end residential development toward affordable housing, with demand primarily concentrated in the metropolitan areas. The long awaited enactment of Saudi’s mortgage
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law is also expected to act as a catalyst for the domestic real estate sector, widening funding options for middle and low-middle income groups. Saudi’s Ministry of Housing, established in 2011, intends to work alongside the private sector to meet the shortfall. Healthcare facilities have also come under the spotlight for both countries. Increasing life expectancy, together with the Middle East’s high prevalence of noncommunicable diseases such as cardiovascular disease, diabetes and obesity, are putting considerable pressure on existing systems of care. Preventative and primary care are therefore seen as priority areas for the future. In Saudi, the Ministry of Health covers more than 60 percent of healthcare expenditures and is encouraging more private sector involvement. In Kuwait the
healthcare sector is undergoing rapid expansion, with the government currently spending an additional U.S. $178 million to upgrade existing hospitals. Another key focus area is education. The private-school market is growing rapidly, presenting opportunities for investors and school operators. A combination of demographic factors, a desire for higher quality education to international standards, and GCC parents’ increased willingness to pay for education, are driving this market. In higher education, the Saudi universities are collaborating with various international universities, aiming to promote world-class standards in the Kingdom. The Middle East governments are now placing more emphasis on planning of cohesive community facilities. In the past developers have often failed to ensure adequate public transportation to jobs, schools and shopping or to develop local amenities. This is gradually changing through the use of masterplanning techniques to allow integration of social infrastructure into city and community planning. Governments in the Middle East are increasingly turning to the private sector for support in developing and delivering large scale projects. There is huge potential and growing appetite for Public Private Partnership (PPP), which has to date been popular in the services and utilities sectors. Both Kuwait and Saudi are now exploring ways of mobilizing PPP to develop their social infrastructure.
A range of economic, social and political motivations exist for the development of PPPs, including the sharing or apportionment of risk, the integration of specialist skill sets, culminating in improved efficiency, as well as the provision of a recognized investment vehicle conducive to the attraction of private sector investment. The Middle East impetus is less funding related and more focused on PPP’s key role in delivering projects more efficiently. PPP also promotes knowledge transfer to the local economy and Kuwait in particular is actively keen on this (see page 8, article on Kuwait’s Ministry of Public Works). The long-term commitment from international and local companies is critical to development of PPP facilities and their successful operation. Like other countries that have achieved success with PPP, the Middle East will need to build its own specific PPP models based on local requirements. Faithful+Gould is active in both Kuwait and Saudi Arabia, where we anticipate growing demand from government ministries for support in their capital investments programs. In Saudi, we are based in Riyadh, Jeddah and Al Khobar. For further information contact Campbell Gray at +971 (0)4 405 9100 campbell.gray@fgould.com
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CHANGE Management NO-SURPRISES SOLUTION Most major manufacturing organizations have significant facilities portfolios to manage and maintain. Many experience challenges in the effective and proactive cost management of their capital programs and maintenance projects. In this sector, governance and control are vitally important but typically problematic. Clients are seeking a no-surprises methodology – with the emphasis on transparency, predictability of cost and schedule, and uninterrupted business operation. Over the last ten years, Faithful+Gould has supported industrial clients via our best practice industrial cost and performance management system, Epoch. Epoch
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was developed in-house and has successfully enabled clients to efficiently improve cost predictability and control throughout the project lifecycle. The system has been continually refined, adding innovations based on client feedback and the latest technology. When our client base highlighted a gap between the core project controls tools dealing with estimating, scheduling and cost management,
Courtesy of: BP, PLC.
OCMS
we set out to address this by introducing centralized standards in change management. As a result, our first OCMS (Online Change Management System), an Epoch module, went into production three years ago. Historically, change management had been conducted via Excel- or Word-based methods, typically backed by a bundle of printouts of design documents, estimates, notes and sketches. Clients had experienced the disadvantages of these bundles of documents, which could take many days or even weeks to make the trip around Operations, Engineering, Planning/Scheduling and Project Management. This unsatisfactory process also meant that the cost engineer using Epoch had only a partial view of the cost impact of change. In such an environment, surprises in the form of late forecast overruns were inevitable. Our OCMS system was added to Epoch to facilitate centralized standards in change management. This removes delays, offering greater efficiency, cost accuracy and a higher degree of predictability. OCMS is a browser-based Change Request (CR) submission and workflow tool which allows project stakeholders to submit change requests online. These are automatically routed to stakeholders assigned to pre-defined roles based on the client’s individual business rules. As OCMS is fully integrated with Epoch, the cost impact of changes can be automatically reflected in cost forecasts. Our team of IT consultants – all project managers and cost engineers – begin the process by facilitating the completion of the OCMS configuration workbook. Supporting a high degree of configurability, this workbook is built in Excel for ultimate portability among stakeholders. Client benefits include: a highly intuitive swim lane format that clearly communicates the flow of an electronic change request a table of project roles and role assignments for each project
a delegation of authority (DOA) matrix to allow clients to specify financial and other approval levels searchable lists for change categories and types, based on clients’ own standard lists notification matrix, enabling notifications based on the client’s extended project organization
Next, our technical team enables OCMS configuration and deployment, completing a delivery process that typically takes four to six weeks, including training and roll out. Bottleneck avoidance is a key issue and we have designed the system to cope, via these features: unlimited number of role-based delegates on a project-by-project basis individual delegates to allow stakeholders to assign approval rights for all of their projects to one individual out-of-office feature that automatically invokes CR re-routing to delegates ‘Ball-in-Court’ view that allows all project stakeholders to see each pending CR in the work flow and who has the current action automated email notifications and reminders when tasks remain pending after a client-defined waiting period one-click access to your personal queue of outstanding actions which features prominently on the OCMS home page
Client feedback for OCMS has been extremely positive. Those who have adopted OCMS for all projects in their organization have described significantly elevated transparency across the portfolio and an end to cost surprises. As one key OCMS client commented, ‘The main benefit of OCMS to Michelin is being transparent across the globe in the management of change, with all changes being routed to France for review and approval in one common system.’ Bruno Batisse, Michelin Global PMO Program Manager.
For further information contact Mark White at +1 832 476 3300 mark.white@fgould.com Issue thirty-one
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Cost
Modeling Informed decision-making prior to design
Often the greatest challenge for an owner at the start of a major construction project is answering the question, “How much will the project cost?” The savvy building owner will look to be engaged in the cost modeling process, making cost critical decisions and, later, communicating the ‘designto-budget’ culture to all project stakeholders. Cost modeling is the development of anticipated costs with very little project-specific information. 26
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This shortage of information is typical at the onset of most projects. However with a few key parameters defined, an experienced cost consultant can provide information in as much detail as is usually seen in later stages. The process starts with a basic understanding of the owner’s needs, in terms of purpose, capacity, and sustainability goals. Put simply, what is the vision for the facility? Next, strategic use of historical project data produces benchmarking information that allows development of accurate quantities and cost for the project.
Cost modeling is the development of anticipated costs with very little projectspecific information.
The benchmarking data is based on specific projects, containing the most similar systematic components to the envisioned scheme. This enables realistic cost models to be provided, allowing particular elements to be estimated more accurately. Ideally these should be recent comparables, at an advanced level of design, complete or under construction, to maximize the level of detail available. Using our unique project cost database CATO, we are able to access cost data by building classification, sector, location, etc. A specific example might include calculating the exterior enclosure total surface area of the most similar projects in aggregate. This provides a logical conclusion as to the expected ratio of skin to floor of the building. In turn this would provide approximate quantification for the yet-to-be designed facility. Similar calculations are used from various data based on the team’s assessment of where the greatest perceived similarities exist. This process is used for the majority of building systems, leaving only the site as a stand-alone differentiator. The benchmark data may include types of structural and mechanical systems, quality of interior finishes or the ratio of glass to solid wall in the exterior enclosure. By distributing known parameters into the different major building systems (foundation, superstructure, partition density, etc.) using the known distributions from sample projects, a cost model is developed. Assessment of various options like site and facility configuration can be evaluated early, by holding the other aspects of the cost model as constants and assessing cost implications. This cost model
then becomes a tool to be used by the project team in establishing target budgets for each building system element. Early engagement of a cost consultant in a project facilitates a more smooth transition into the design process. Having a cost model in hand, the team is allowed more focus on specifics and details rather than re-working their thoughts to achieve budget. It raises accountability of the various consultants and design team leads, and provides for informed decision-making. When an initial vision is converted to dollars, compromises and sacrifices often need to be made in order for the project to continue. With an effective cost model, vital decisions can be made early. This results in less expenditure throughout the course of the design. It is also vital to know the most economical solutions to project delivery. Our breadth and diversity of experience equips us with the knowledge to provide the strategic advice our clients seek. Faithful+Gould recently worked with several Fortune 100 companies to establish cost models in the commercial, industrial, energy and hospitality sectors, allowing clients to evaluate options and establish program level budgets. This approach has proven invaluable in the design and construction of major projects that align with the owner’s vision while maintaining a target budget. Using cost modeling techniques, we are providing assistance in early budgeting, alleviating costly re-design commissions, and equipping owners with a tool for making informed decisions much earlier in the process.
For further information contact Chad Chapman at +1 612 338 3120 chad.chapman@fgould.com or Ed Bullwinkel at +1 832 476 3315 edward.bullwinkel@fgould.com Issue thirty-one
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north america
We also ‘build’ relationships. Faithful+Gould is one of the world’s leading project management consultancies. Together with our team of dedicated project managers, we specialize in protecting and maximizing our clients’ interests in the planning and delivery of projects. Our PM’s are industry experts in Program Management, Project Controls, Cost Estimating, Risk Management and Strategic Facility Consulting. But while we are proud of these core skills, it’s the passion for looking after their clients that really sets them apart. We call it ‘Constructive Expertise’. If your construction project needs a little passion, visit fgould.com
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