SOLUTIoNS issue 37
The SMART CITY BUSINESS CASE Developing city projects for the future
also in this issue: Oil industry ripples Asia Pacific data centres Award-winning M&S store Qatar and Saudi Arabia hotels
CONTENTS 4 Industry 4.0
When the building becomes part of the machine‌
6 Next Generation Nuclear Energy
Smaller, cheaper and potentially safer small modular reactors (SMRs).
8 Decommissioning Pharma Facilities
Challenges of asset decommissioning and divestiture.
10 Asia Pacific Data Centres
Emerging trends as the shape of the industry changes.
12 Marks & Spencer Future-Proof Store
Award winning Cheshire Oaks store uses post-occupancy evaluation.
14 Room for Growth in Qatar and Saudi Arabia Hospitality Markets GCC region’s tourism and leisure focus expands.
16 Developing Smart Cities
Smart city projects hinge on robust business cases.
18 Oil Industry Ripples
Fall in crude oil prices alters financial dynamics of oil industries
20 Establishing a PMO Culture
Bringing best practice to Middle East clients.
22 Lessons Learned
Getting the best from Education Funding Agency baseline designs.
24 Unlocking the Door to More Housing
UK is not building enough new homes and action is needed to revitalise supply.
26 The Core, at Newcastle Science Central
Exciting collaboration between Newcastle City Council and Newcastle University.
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VIEWPOINT Welcome to this issue of Solutions, with its wide range of topics demonstrating our constructive expertise in many sectors. Firstly, I’d like to highlight the great news that Faithful+Gould won Consultant of the Year at the 2015 Building Awards in April. This is the second time we’ve secured this prestigious award in the last four years. We received messages of congratulations and good wishes from many clients across our social media network, and really appreciate this support. One of our projects was also honoured at the Building Awards, when Simons Group won the newly created Test of Time award for the highly praised M&S Cheshire Oaks store. We led post-occupancy evaluation services on this innovative sustainable retail development, and you can read more about this project on page 12. Our exceptionally strong and integrated leadership team continues to drive success for our global business. The team was recently strengthened by the appointment of Reza Amirkhalili as president and managing director of our Americas business. Reza has a solid track record of strong leadership, 30 years’ experience in the industry and long tenure as part of our team. I’m confident that he will work to take our Americas operations forward positively into the future. In Asia Pacific, our business is doing very well under Callum Bothwell’s leadership, and you’ll find a review
of the region’s data centre market on page 10. Campbell Gray directs our Middle East business, where we continue to penetrate all sectors – read about the hospitality industry in Qatar and Saudi Arabia on page 14, and the shift towards the Project Management Office model on page 20. Our UK and Europe business is led by Jon Sealy. Our success in this region is across many sectors, best illustrated by our specialist work in the nuclear energy industry (see page 6) through to innovative workplaces, exemplified by the Science Central project profiled on page 26. Our cover article focuses on the increasing global importance of smart cities, and our page 4 industry 4.0 article considers the conceptual shifts required to support these new ideas. Thank you for your interest in Faithful+Gould and please get in touch with us to find out more. Contact any contributor by using the details on each page or via our website, LinkedIn, Twitter or our blog.
Donald Lawson, CEO Worldwide Operations
For further information, contact Donald Lawson on +44 (0)20 7121 2121. Scan the QR code for full details.
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For further information, contact Mark Grayson on +44 (0)1133 066 600. Scan the QR code for full details.
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INDUSTRY
4.0
When the building becomes part of the machine… The constantly evolving world of manufacturing is entering another dynamic new phase, where technological advances are set to transform the field. The most successful players are rapidly adapting their physical and intellectual infrastructures to exploit technology-based opportunities. They’re looking for smarter processes, to become more responsive to changing global markets and to get closer to their customers. Industry 4.0, a fourth industrial revolution, has landed squarely on the mainstream agenda. The term was coined by German scientists and industrialists, and is now used to describe the next paradigm shift, distinct from the 1970s-onwards production automation leap. This brave new world of manufacturing will be built around digital transformation that will bring changes in development, production and the entire logistics chain – Industry 4.0 emphasises the linking of all productive units in the product supply chain. Data-rich, mechanised production processes will shift key competences away from traditional production engineering and operational management to information processing and digital control. The vision is one of factories and machines able to communicate with each other, and with the products they’re making. These connected and intelligent devices are predicted to be the biggest future user group of the internet. The internet of things (IOT) concept is now shifting from the consumer arena to the industrial. An industrial IOT is a key part of Industry 4.0, changing how production plants operate and permeating the supply chain. For the manufacturers’ built environment, there are big changes ahead. Spatial changes will be at the heart of future developments, with locations becoming increasingly diverse. Spatial distribution is likely to be influenced by technologies such as 3D printing/additive manufacturing which allow production close to the point of consumption. For complex products, some manufacturing activities could migrate to larger, more capital-intensive ‘super factories’, while others could become reconfigurable units co-located and integrated with associated supply chain partners. Smaller, centralised hubs will be the way forward for many.
Urban locations closer to the point of consumption may make more sense, with drone deliveries completing the final deployment of products to the customer. Demand for products at the point of consumption is expected to lead to new developments such as manufacturing at the bedside for the healthcare sector. Mobile factory sites that can move closer to target markets and remanufacturing sites are already operating in countries such as India. Reshoring (repatriation of production from low-cost locations) could be part of the picture, driven by changing labour availability, transport and energy costs, and a need to be close to the market. On-demand production of highly individualised products will require shorter supply chains in the markets where they are used. Future-proofing will remain a key concern. Continuing agility, and the need for responsiveness and flexibility, has already created the demand for reconfigurable facilities, and this is set to intensify. The factory of the future will be able to reconfigure itself rapidly to make a variety of products. Flexibility needs to be incorporated into design from the outset. BIM integration is an obvious step, enabling intelligent building management systems to be implemented, but there is the potential to go much further. Rather than the building simply adapting to changing production demands and controlling the production environment, what if the building worked with multiple data inputs to determine adaptations as demand cycles change and design the adaptations itself? This would mean a truly interconnected business, with implications for staffing requirements – more software engineers, video game designers and people with the creative vision to push the boundaries well beyond current thinking and into the 22nd century. Faithful+Gould has a detailed understanding of the way in which buildings, services and infrastructure work together to facilitate efficient manufacturing and distribution operations. While Industry 4.0 may be more evolution than revolution over the coming decade, we are already supporting manufacturing companies as they change their organisations, processes and capabilities.
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Next-gen nuclear The high capital cost of large nuclear power plants, together with the need to service small electricity grids, has resulted in a race to bring small modular reactors (SMRs) to market. After two decades of development, the last three to four years have seen acceleration in the pace of SMR technology progression by major vendors across the globe.
SMRs have a range of other potential benefits including industrial process heat, desalination or water purification, district heating and other cogeneration opportunities. Most are designed for a high level of passive or inherent safety in the event of malfunction, and many can be sited below ground level, giving higher resistance to terrorist threats.
technology to their home markets and license it for commercial operation, potentially using that as a springboard to the global market. Strategic partnerships between countries may emerge. The 2014 UK government, for example, identified this as its preferred approach, suggesting that the project would be almost impossible to finance without partnering to spread the risk1.
SMRs are defined as reactors sized at less than 300MWe, and are designed to be factory manufactured and brought to site as fully assembled modules. This avoids the need for high-quality fabrication in the field, allows fast installation and brings capital cost benefits.
Although SMRs are at least a decade away from commercialisation, governments and vendors are engaging with research, design, manufacturing and regulatory process, in the hope of gaining a competitive advantage. Many countries are backing programmes to accelerate the commercial deployment of SMRs, with the US, Russia and China expected to dominate.
The future of nuclear needs to be based in a format where nuclear developments can become project financeable over time. SMRs could play an important role, but commercial viability needs further exploration. The potential to finance in phases, and module-by-module, offers some financing flexibility, which reduces exposure to risk. However, detailed design data is as yet incomplete, limiting the cost data available and leading to uncertainty in terms of economic viability. Further technical
As SMRs can be built independently or as a number of modules in a larger complex, capacity can be added incrementally as required. In addition to power generation,
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Individual countries will aim to bring the
energy investigation and financial analysis is needed to confirm the business case for SMRs. There is still considerable investment required to develop SMR design and obtain regulatory approval to construct the first of a kind (FOAK) SMR. Project finance is unlikely to be available to fund this work and vendors are therefore looking to industry and governments to support development of SMR technologies and move towards commercialisation. The 2014 SMR feasibility study for the UK government2 demonstrated the potential, concluding that there is a significant market for SMRs where they fulfil a market need that cannot, in all circumstances, be met by large nuclear plants. Faithful+Gould and our parent company Atkins were part of the NNL-led team that produced the feasibility study.
New dimension for nuclear energy, with smaller, cheaper and potentially safer SMRs.
The UK government feasibility study is just one of our recent consultancy roles in this field. We have a detailed understanding of the commercial, technical and political pressures facing the nuclear power generation market – regulatory scrutiny, price volatility, consumer expectations and political sensitivities. Our integrated project management and commercial services leadership underpin our clients’ goals on challenging projects in Europe, the Americas, and the Middle East.
For further information, contact John Wood on +44 (0) 207 121 2121. Scan the QR code for full details.
Our client portfolio lists Exelon, British Nuclear Fuels, British Nuclear Group, United Kingdom Atomic Energy Authority (UKAEA), British Energy, Horizon Nuclear Power, K.A. CARE, ENEC, OPG, EDF Energy and NNB GenCo.
sector. We have successfully drawn on our global technical and commercial experience from the upstream oil and gas (read more on page 18), transmission and distribution, offshore and subsea sectors, and we increasingly apply these skills to the nuclear power generation and renewables markets.
Our expertise on these projects is informed by long-standing experience in the wider energy
2014, UK Government, Small modular reactors (SMR) feasibility study 1,2
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DECOMMISSIONING
pharma facilities Asset decommissioning and divestiture presents challenges for pharma companies. The shape of pharma companies’ real estate continues to change, driven by consolidation among the global players, and by the type and location of facilities they now require. Over the last 20 years, pharma companies’ capital programmes have focused on building manufacturing, research and development (R&D) facilities. More recently, mergers, workforce reductions and more efficient workspaces have changed the focus toward real estate consolidation, divestiture, and creating flexible spaces for bio-pharma processes. Patent expirations and the rise of contract manufacturing are also redefining real estate requirements. In rationalising their real estate portfolios, companies are undertaking consolidation programmes to reduce their real estate footprint, maximise the efficiency of buildings, improve workplace environments, and reduce operating costs. It may make sense to re-purpose and/or divest underutilised or unwanted manufacturing, R&D and office facilities. Decommissioning and divestiture are complex endeavours. However, the effective management of these transitioning assets is essential if their full value to the corporate portfolio is to be realised. Companies are typically faced with defining divestiture options, selecting the most appropriate option, and executing the plan in compliance with environmental health and safety regulations. As regulatory compliance is constantly changing, successful facility deactivation requires the co-ordinated efforts of a team of legal and technical experts. Divesting former manufacturing and R&D real estate assets can be more challenging than corporate office space. Manufacturing and R&D facilities are usually associated with long-term environmental, legal, and financial liabilities. Brownfield sites need expert environmental analysis, including soil, groundwater and surface water, testing for
hazardous compounds, and ensuring that risks and liabilities are identified and managed. Companies usually aim to release the land as safely and quickly as possible for productive re-use. In some cases, the original owner will have regulatory obligations to continue legacy monitoring and site remediation following the sale of real estate assets. Faithful+Gould provides integrated project and programme management support to clients who are rationalising their portfolios. We help develop strategies to reach cost-efficient and regulatory compliant closure. Decommissioning and divestiture commissions may comprise multiple facilities, and, where appropriate, we assimilate these into a single programme. We serve as third party representation for the client, providing support for programme governance and compliance, project management, cost management, and asset portfolio management from the earliest programme planning through to project closeout. We work closely with clients’ in-house teams, while respecting the sensitivities of closures and potential staffing reduction. Timely information is critical for decision making, so our reporting mechanisms are designed to give clients programme-level overview in real time to control all project scopes of work. The application of project controls and best practices allows full transparency and accountability for client and external audits. Our global pharmaceuticals and biotechnology group has long-standing experience, with operations in the Americas, UK and continental Europe, and Asia Pacific. We work closely with the world’s leading drug companies, helping them identify optimal portfolio strategies to meet their changing business needs. Our client portfolio includes Amgen, Bristol-Myers Squibb, GlaxoSmithKline, Hoffmann-La Roche, Johnson & Johnson, AstraZeneca, Merck, Novartis, Pfizer and Sanofi.
For further information, contact Roger Scott on +1 215 789 2040. Scan the QR code for full details.
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ASIA PACIFIC
emerging
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data centre treNds The data centre sector remains highly active and market growth continues in Southeast Asia. Data centres are now being driven by a mix of global and regional trends. Mobile, video, big data, content streaming and social media have added considerably to the sector’s needs. Demand has traditionally been led by two groups of clients: owner-occupiers such as financial institutions, and service providers who take space in co-location facilities. The build versus lease decision is a complex one, but there is a steady shift towards the leased co-location model. Building an in-house storage infrastructure represents a substantial capital spend, whereas leasing moves most of the expenditure to the operational budget. Faced with increasing city centre costs, both leased and owner-occupied data centres are moving out of constrained city spaces, locating at some distance from corporate offices. Site selection factors include political stability, geographical and geophysical location, the need for high-bandwidth network links, reliable and affordable power supply, data security and physical security. Land is now limited in Singapore and Hong Kong, opening up opportunities elsewhere in the region. Neighbouring countries remain keen to acquire the digital infrastructure that will attract inward investment. Their domestic needs will also have an influence – internet use continues to mature in China and India, with significant growth potential in countries such as Cambodia, Indonesia, Malaysia and Vietnam. The public sector is playing an important part in some south-east Asia locations. Malaysia is driving data centre growth in the Iskandar development region, under the guidance of the government’s Multimedia Development Corporation (MDeC). Singapore also has a governmentled initiative, the Singapore Data Centre Park that seeks to create a digital hub for the region.
For further information, contact Paul Johnson on +852 2972 1118. Scan the QR code for full details.
These facilities have always had relatively short lifecycles and this is set to become even shorter, with the demands of modern high-density computing platforms. Companies are looking to future-proof as much as possible. Data centre evolution will inevitably be changed by the rise of cloud technology, which potentially provides businesses with a more agile infrastructure.
Data centres are not expected to vanish, but the shape of the industry is likely to change, driven by the needs of corporate clients and by the data centres maintained by the cloud providers themselves. Two trends are emerging: large facilities that achieve scale, efficiency in power and cooling, and smaller facilities not requiring high levels of data analytics. Hybrid solutions are becoming commonplace, with companies using the cloud for less confidential data and the traditional data centre for business-critical applications. The buildings themselves are relatively simple, but the services installations are complex, with significant buildability and maintenance issues. Most providers in the region are aiming for Tier 3 or 4 levels of resilience on the Uptime Institute specification scale. Sustainability issues remain a challenge for these buildings, where the focus has been on the priority requirements for performance and security, against a background of heavy power and cooling requirements. The agenda is slowly changing and LEED, Green Mark and similar accreditations are being achieved. Innovations include advanced building management and control systems that optimise energy saving measures, such as night-time cooling, thermal energy storage, heat recovery strategies and control of the IT environment according to demand. Faithful+Gould leads a wide variety of projects in the highly specialised data centre market, working with developers, financial institutions, government bodies and telecoms organisations. We provide project management, cost management and sustainable certification advisory services on these projects. Our services typically encompass due diligence, strategic advice at inception, construction management and testing and commissioning. Key to our services is a detailed understanding of data centre clients’ needs, coupled with a sound knowledge of local building codes and construction practices. Our client portfolio includes Equinix, Pacnet and other major data centre providers.
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MARKS & SPENCER
Future proof M&S Cheshire Oaks wins Building’s 2015 Test of Time award. Post-occupancy evaluation helped the building continue to perform well. The 2015 Building Awards was an exciting occasion for Faithful+Gould. Not only did we win Consultant of the Year for the second time in four years, but one of our projects was also honoured in the newly created Test of Time award. Simons Group won Test of Time for their work on the much-lauded M&S Cheshire Oaks store. We were delighted that Simons Group and M&S shared this success, as it highlights the importance of a building that performs well in the occupancy phase. M&S Cheshire Oaks, where we led post-occupancy evaluation (POE) services, is an excellent example of sustainable retail development. M&S Cheshire Oaks is a flagship project, as the retailer’s environmental beacon and as the winner of 18 industry awards. The aim was to create a store that is 30 per cent more energy efficient and 35 per cent more carbon efficient than an equivalent M&S store. The building incorporates passive design features, such as earth ducts to keep it cool in summer and warm in winter, solar shading, natural lighting, rainwater harvesting and a living wall. The Building Test of Time award recognises buildings that have been operational for more than two years and exceed expectations. An efficient building performs as the design intends and contributes to return on investment. However, many new buildings do not perform as planned, affecting operational costs, staff performance, client satisfaction, and health and safety.
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Our POE service assesses the performance of occupied buildings and suggests ways of remedying deficiencies. At M&S, we measured energy performance, water use, waste, biodiversity, customer and staff opinion, and community feedback. The 12-month POE project yielded encouraging results. The store is performing 21 per cent better than the energy predictions (and 40 per cent better than comparable stores) without compromising the environment quality. Compared to other stores, the building has a more comfortable environment, with 22 per cent increase in staff satisfaction and 18 per cent increase in customer satisfaction. POE is an area of growing interest, and the understanding of how occupants perceive and use buildings is becoming more important in determining a building’s success. POE is now a requirement in the 2013 RIBA Plan of Work, and is also part of the BSRIA Soft Landings protocol for building handover. Research now clearly demonstrates that green buildings enhance the experiences of their occupants. Among the most influential evidence is a 2014 report from the World Green Building Council (GBC)1, which shows that office design significantly impacts the health, wellbeing, satisfaction and productivity of staff. The World GBC report finds that a range of factors – from air quality and lighting, to interior layout and views of nature – have an effect.
For example, improved air quality resulted in improved productivity of 8 to 11 per cent. In office workers, lack of access to a window was shown to be the greatest risk to satisfaction with their environment. Future challenges include extending the understanding of these business benefits so that they permeate the built environment industries and become a standard element at design inception stage. Since completing the M&S commission in 2014, Faithful+Gould has continued to move forward with POE
For further information, contact Sean Lockie on +44 (0)20 7121 2121. Scan the QR code for full details.
services, both commercially and in partnership with academia. Our collaboration with University College London’s global faculty for the built environment (The Bartlett schools), was an important factor on the M&S project, where we explored ways of bringing the faculty’s innovations to the commercial market. We are also welcoming Bartlett alumni onto the Faithful+Gould graduate training scheme, (two are now part of our London team) and delivering guest lectures on their study programme.
Universities are also looking at ways of incorporating these initiatives into their own capital development programmes. Our recent POE commissions include Estates & Facilities Management at the University of Sheffield, where occupancy-related performance is evaluated alongside stringent energy efficiency and the findings used to enhance their extensive capital building programme. We are also working with the University of Cambridge to review similar issues.
that help our clients provide their staff with healthy, productive spaces. Given that a typical business spends up to 90 per cent of its costs on salaries, it’s no surprise that POE is attracting more attention and joining the mainstream agenda. Our POE provision forms an important part of our strategic asset management service, integrating with the whole life costing principles our clients increasingly seek to meet. Read about POE in schools on page 22. World Green Building Council, 2014, Health, Wellbeing & Productivity in Offices: The next chapter for green building
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POE is one of many cost-efficient services
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THERE’S ROOM
FOR GROWTH
Qatar and Saudi Arabia hospitality markets need rapid expansion. Dubai has long been the hotel hotspot in the Gulf Cooperation Council (GCC) region, maturing into a complex and varied hospitality and tourism market. The emirate continues to expand its provision, but the focus for much of the region’s new development is shifting to nearby Qatar and the Kingdom of Saudi Arabia. Qatar aims to increase tourism demand by growing and diversifying its leisure and cultural offering. The Qatar Tourism Authority (QTA) has announced its target to attract seven million visitors per year by 2030, as part of the Qatar National Vision 20301. Hosting global sports events is an important part of Qatar’s economy diversification, and supply targets for the 2022 FIFA World Cup are currently driving the hotel pipeline. Some 40,000 further hotel rooms are reported to be required, with 21 hotels planned for construction by 2017. Activity is centred in and around Doha. Saudi Arabia is also placing more emphasis on tourism and hospitality. The model is less mature here, but the Kingdom is exploring its potential to develop as a destination outside of its already buoyant religious tourism. Its heritage of natural and archaeological sites could attract more visitors if travel and hospitality infrastructure were appropriately developed alongside tourist visa improvements. Religious tourism is well-established, with the haj pilgrimage bringing around three per cent of Saudi GDP. The holy cities of Makkah and Madinah are currently undergoing heavy expansion and development, with Jeddah also benefiting from religious stop-over tourists in addition to its corporate visitors. Jeddah’s growth includes the expansion of the King Abdulaziz International Airport and the King Abdullah Economic City.
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The capital Riyadh is the geographic and cultural hub of the country and its largest city. The government is investing in large-scale railway developments to make Riyadh a leading global transport and logistics hub, which is likely to boost the city’s tourism industry. Domestic tourism is also a significant opportunity for Saudi Arabia. The government is committed to increasing this market to capture some of the capital spent by the large number of Saudi residents travelling abroad each year.
The upmarket hotel segment dominates the Middle East hotel landscape, and Saudi Arabia has been no exception. Diversification is now under way throughout the region, with increased interest in mid-range products. These new offerings are needed for domestic, international and business markets, with medical and religious tourism also ripe for more price-conscious accommodation. The mid-range segment therefore looks set to provide profitable long-term investment.
Ritz Carlton, Dubai
For further information, contact Mark Shea on +971 4405 9100. Scan the QR code for full details.
Barr Al Jissah Hotel and Spa, Oman
The serviced apartment business model looks especially poised for growth, with its key benefit of the flexibility to change the target market profile between the long-stay and short-stay guests to suit market conditions and achieve revenue maximisation2. Serviced apartments also provide accommodation more suited to families staying together within a single unit rather than multiple hotel rooms. Although the development potential looks healthy, hospitality investors in Qatar and Saudi Arabia share challenges in developing their
business cases. Occupancy rates will fluctuate, both seasonally and according to event schedules. Growth of the leisure offer will therefore be required for long-term sustainability.
supply chain involvement. The greatest impact will be gained from a change in culture to one of best value rather than the traditional lowest price scenario.
Bringing new projects to market will also pose challenges. Qatar has limited time available to construct the required hotel volume by 2022, and both countries are constrained in their capacity to deliver. Land prices are high, a problem for the mid-range segment in particular, and there are significant construction and consultancy skills shortages.
We have a varied portfolio in the Middle East hospitality sector, including the Burj al Arab, Yas Viceroy, Ritz Carton in Dubai, Four Seasons in Abu Dhabi, Shaza hotels in Qatar and Oman, the Ramada hotel in Qatar, Park Inn hotel in Abu Dhabi, and the Ibis and Novotel hotels in Dubai. We’re currently working on the new Royal Atlantis hotel in Dubai, Vida hotel, Jeddah Gate and Doha Oasis in Qatar.
Alternative and optimised procurement strategies will help overcome challenges, through different models of consultant and contractor engagement together with early
2 014, Deloitte, Middle East Hotel Market Intelligence Report 2 2015, Colliers International 1
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DEVELOPING
SMART CITIES Developing and delivering smart city projects will hinge on the ability to create robust business cases.
The concept of smart cities has emerged as a focus of global research and debate in recent years, engaging governments, city authorities and businesses in the quest for improved city living. Whatever their level of maturity or priorities for development, cities face common challenges around maintaining economic growth, and meeting the needs of increasing and/or aging populations while reducing use of resources. Although there’s no universal definition, the ‘smart’ city has become the recognised term for the future city1, displacing the sustainable city and the digital city. It describes ICT-led urban innovation, and new modes of governance and urban citizenship. Typical themes include integrated urban planning, diversifying the urban economy away from climate sensitive sectors, sustainable transport, management of water and waste, alternative energy and new building design. The challenge is to turn these aspirations into robust plans, and this typically means collaboration between government, city authorities, businesses, academia, users and other stakeholders. The funding of smart city initiatives, products and services requires new ways of working and new financial and governance models. Funding is needed to test new products and initiatives, but determining who pays is problematic.
For further information, contact Rupert Booth on +974 4465 1170 Scan the QR code for full details.
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Cities will have to devise strategies for attracting capital to their smart projects, with most investment likely to combine private and public funds. Successful initiatives will depend on creating shared goals between all stakeholders. The appraisal of investments in smart cities is unusually complex, however, as the public and private sectors evaluate proposed schemes differently. In the private
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sector, the preferred approach is based on discounted cash flow; in the public sector, cost benefit analysis is used to consider a wide range of factors, including social, environmental and many other non-monetary effects. The traditional operating model for a city has been based around functionally-oriented service providers working within unconnected vertical silos. The smart city model hinges on cross-functionality and the development of new collaborative operating models, with joint working between departments and across boundaries. This requires strategic planning and a culture change, and both should be explicitly addressed through a change management programme. Quantification of success is essential and key performance indicators have been published both in international standards, e.g. ISO37120, and in dashboards for individual future city programmes, e.g. Abu Dhabi 2021 Vision.
Financial appraisal is an important part of any change programme and this must also account for the wide array of implementation risks, which include those associated with public IT implementation, the social and behavioural changes needed and the misalignment of multiple stakeholders. The appraisal must therefore explore, evaluate and account for the risks of these uncertainties and their potential impact on costs, benefits and revenues. Faithful+Gould leads business case appraisals on a variety of smart and sustainable city initiatives, including energy, transport and assisted living. We advise finance and planning ministries across the globe on the most appropriate infrastructure investments to support the growth of knowledge based economies.
for capital projects based on Public Private Partnerships. Our technical expertise is also relevant, in the development of Building Information Modelling (BIM) systems that support clients with lifecycle analyses of investments, looking at both carbon and cost performance, and the subsequent optimal management of the facilities. At project level, we are advising on the effective operations and maintenance of infrastructure networks, based on whole life costing and value based contracting principles. Our property sector portfolio includes building control systems commissions, ensuring that buildings respond to a changing environment and user requirements. 2014, UK Government Office for Science, What are future cities? Origins, meaning & uses. Figs 1.3 & 1.5 1
We additionally advise on innovative financial solutions
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OIL INDUST R The oil price collapse has resulted in a high level of uncertainty, reflected in company balance sheets. After years of relative price stability, investor confidence in the oil and gas sector has dropped, and it’s unclear whether this is a long-term downward structural adjustment in the price of oil or a short-term temporary correction. The next year will certainly be challenging for oil companies, oil-producing countries and global policymakers. Oil and gas companies are prudently responding by cutting budgets in an effort to reduce spending within sharply diminished cash flow. Although the largest players are better able to withstand oil-price volatility when planning their investments, a significant number of exploration and production projects have inevitably been shelved or put on hold.
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The continued fall in crude oil prices has altered the financial dynamics of the oil industries. Smaller companies and marginal producers are clearly more vulnerable. Not only does a low oil price put pressure on oil companies, it also creates a ripple effect through the supply chain and beyond. Maintaining a state of readiness, while trying to do more with less money, are likely to be the watchwords for oil-dependent companies at this time. As the industry moves into a rationalisation phase to weather the present situation, Faithful+Gould can lead cost optimisation strategies that centre on leaner processes and higher commercial agility in supply chain and contracts.
For some companies, this will be a good time to carry out internal assessments, reviewing project management office functions, to determine whether these are working effectively with the limited resources available. Uniformity of processes, clarity of roles and transparency and efficiency can be usefully assessed. It’s also a good time to review contracting strategies, ensuring that these are optimal and sufficiently robust to withstand a more adversarial climate that inevitably attracts claims. Certain compliance-based operations, such as maintenance shutdowns, have to continue regardless of oil price variance. There is a focus on safety, maintenance and turnaround
For further information, contact Duncan MacKenzieWilliams on +1 832 476 3300. Scan the QR code for full details.
RY RIPPLES projects, to ensure that effective practices are used to control the overall cost of these. Robust turnaround management needs clear project scope, effective project management, contractor engagement, and strong project controls. Many of the same project management reviews are relevant here, along with a specific readiness review for the turnaround, incorporating careful preparatory work. This will ensure that over-runs are prevented and costs minimised. We are currently helping companies manage their existing workloads by categorising their work, developing priority and viability matrices. We have seen the rigour in the Stage Gate processes getting tougher as teams have to improve their business cases to get funding. Risk reviews are part of this process.
Performing comprehensive holistic or specific cost and schedule risk analyses, and using value engineering techniques to retain essential functions while reducing any unnecessary costs, are seen as key indicators that the teams are well prepared. We find that our clients want to identify where they can add value in their processes and make these more effective. They are looking for more creative ways to streamline the process of undertaking engineering and construction works. The financial constraints for many companies involved in the oil industry are creating a strong environment for innovation. Those companies using their talent to innovate are bringing about real change in the way they undertake projects, though continuing to prioritise safety and responsibility. There is no doubt that cashflow reduction
is making bidding margins tight. Contractors may have to resort to claims to make up their margins, previously covered in their overhead pricing. We are therefore also seeing more distressed projects appearing and we are supporting our clients in making cost effective plans for addressing these. The support provided to major oil companies is just one area of our expertise in the rapidly changing energy landscape. Drawing on extensive experience with some of the world’s most challenging energy projects, we assist clients in meeting time, cost, quality and strategic project objectives. Our international energy sector portfolio includes clients in downstream refining and chemicals, nuclear energy (see page 6), renewable energy technologies, power generation, transmission, and infrastructure.
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Establishing a PMO brings global best practice to Middle East clients. Project management office (PMO) has become the mainstream organisational structure for standardising the practices of companies delivering large capital projects and programmes. Middle East government entities increasingly want to embed these global best practices into their delivery. The PMO is a group or department within an organisation, responsible for defining and maintaining the organisation’s project management standards. The PMO aims to standardise and introduce economies of repetition in project execution, and is the source of project management documentation, guidance and metrics. Maturity levels vary for PMO implementation in the Middle East region. In the UAE, Dubai clearly leads the field, having begun its PMO journey over ten years ago. Kuwait, too, has made good inroads. Qatar has identified and implemented a strong PMO-led delivery solution due to the volume of construction activity around the 2022 FIFA World Cup and the country’s 2030 National Vision. We are working with our parent company Atkins to support Ashghal (Public Works Authority of Qatar) on the Central Planning Office (CPO) to co-ordinate major multi-billion dollar transport and infrastructure projects. Saudi Arabia also has a huge volume of work, and acknowledges the part PMO and PgMO (Programme Management Office) will play in its stated aim of developing a programme management culture for megaprojects. Effective PMO harnesses the application of integrated software management across the supply chain. As the drive for best practice continues, we can expect to see the region adopt Building Information Modelling (BIM) to streamline the delivery process. Dubai Municipality, for example, is mandating the use of BIM for Mechanical, Electrical and Plumbing (MEP) submissions on projects in the near term. Saudi Arabia is also keen to move towards widespread BIM adoption, to enhance clash detection and gain better surety on time and cost parameters. Establishing a PMO culture can transform the in-house workforce and its systems. However, empowerment and engagement of stakeholders are needed to transition the organisation to new working ways. To institutionalise the necessary skills, commitment is needed from the organisation’s highest level. Our experience is that mid-range management commitment is the most challenging to secure, as new systems can be perceived as a threat. Good communication and training will achieve buy-in,
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PMO Culture although it takes time for new methods to be understood, accepted and implemented. Other challenges include lack of defined project scope, lack of stakeholder management and lack of realistic schedules. The PMO approach tackles these issues, but needs senior governmental or board level support and, in some cases, legislative changes to make long-term improvements to procurement strategies. In-house teams may not be fully equipped for PMO development and implementation, and consultancy input can provide the necessary leadership. Faithful+Gould is driving several initiatives that bring PMO culture to the Middle East, setting new benchmarks for world-class delivery. One of our most mature examples is our work with Kuwait’s Ministry of Public Works (MPW). We have trained a team of 250 MPW professionals to manage and operate projects, as part of a PMO initiative that brings culture change and greater efficiency to the Ministry. The resulting PMO capability will enable MPW to exercise ongoing control throughout the project lifecycle, including efficient whole life operation and maintenance of completed projects. We are also working in an industry advisory board with Saudi Arabia’s Ministry of Economy & Planning, to develop a PMO brief and provide initial parameters to enable successful programme and project delivery. Saudi Arabia is keen to improve its project and programme performance, in a context of updated construction practices – moving towards a model of best value, not best price, for example. There is growing emphasis on the legacy aspect of PMO services. The organisation needs to have ownership of the completed solution at the end of the implementation commission, to ensure successful change management and continuous improvement. PMO design must therefore be adaptable, enabling the organisation to be consultative, directive or controlling; facilitating growth and maturity, to deliver maximum value to the organisation. The improved skills base should support a globally attuned business culture and address succession planning. Faithful+Gould provides PMO services globally in a wide variety of public and private sector commissions. As well as training and professional development support, our PMO service encompasses communication and change management, and space management, in government, real estate, construction, IT platforms and facilities management.
For further information, contact David Clifton on +971 (0)4405 9100. Scan the QR code for full details.
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Lessons learned Getting the best results from Education Funding Agency baseline designs.
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The drive to build UK schools efficiently continues. Many local authorities report a significant shortfall in the ‘basic needs’ budget provided by the Department for Education (DfE) for new school places. Primary places especially are under pressure, with many schools adding extra classes to keep pace with a fast-rising birth rate. Alongside the reduction in capital programme, the previous government instigated a more standardised design approach as recommended by the James Review1. In 2012, the Education Funding Agency (EFA) published 14 baseline designs, intending that new primary and secondary schools would be built more efficiently, sustainably and more affordably too. The guides illustrate how the reduced space standards could be configured, leaving it up to individual design teams and contractors to develop their own detail. Sustainability is an important factor. The major driver is to provide naturally ventilated, energy-efficient teaching spaces which perform well acoustically, are healthy and have good natural daylight. The baselines provide a starting point for achieving the best outcomes for schools (air quality, comfort, ventilation), but they will need adapting for any site. Although the EFA aims to streamline procurement processes, cutting costs and time, critics including RIBA2 have highlighted concerns about the quality of future school buildings. Certainly the budgets are challenging, but new ways of working are beginning to emerge. While local authorities and schools are working hard to maximise existing building space in the short term, many are forging strategic partnerships to build resilience in the growing demand for places. Some are working with neighbouring local authorities to use their collective purchasing power.
For further information, contact Paul Eaton on +44 (0) 1892 510500. Scan the QR code for full details.
In our experience, identifying the best procurement route is absolutely key to delivering within the current funding envelope, especially given the lively contracting market. We have found that contractors procured on a single stage competitive basis have provided the greatest opportunity to achieve this, whereas those procured using two-stage negotiated tenders have proved more challenging. The key is to have the flexibility to tailor the procurement route to suit the project and our proactive commercial management helps our clients achieve this. We are leading a range of schools projects, including a programme of work for Kent County Council (KCC), England’s largest Local Education Authority. We were appointed through our Scape National Asset
Management, Surveying and Design Services Framework as the lead consultant, to provide project and cost management services as well as multidisciplinary design services for KCC. The programme comprises five new build primary schools, 1 Form of Entry (1FE) expansion to six others as well as new build and expansions of five special educational needs (SEN) schools. Our earlier experience as lead advisor to the EFA in the development of the baseline designs and the development of their post-occupancy evaluation (POE) system enabled us to mobilise KCC’s programme quickly. KCC’s environmental design standardisation strategy was led by our sustainability team, again bringing the benefits of experience gained through advising the EFA. Project timescales inevitably bring challenges. As school buildings typically need to be delivered by the start of the new academic year, there’s little room for flexibility in the schedule. Local authority procurement processes can be lengthy, and timescales for design, preparation and evaluation of tender documents may be squeezed as a result. Our SCAPE framework has enabled KCC to engage us and immediately mobilise a fully integrated programme management and design team, allowing more time for a considered design and procurement stage. Part of our role on any education project is to manage stakeholders’ expectations, ensuring these are realistic. Local authorities, parents and head teachers all want the best possible building, and we facilitate decisionmaking processes that shape aspirations into achievable realities. As EFA baseline design usage continues to mature, we expect to see the benefits of lessons learned across the sector. KCC’s programme, for example, includes post-occupancy evaluation (POE) within the Soft Landings framework. This is being piloted on a new build primary school and an SEN school, enabling essential feedback to be captured and used for ongoing improvement (see also page 12 for more on POE). Our experience in pre-19 education extends through nursery, primary and secondary schools, academies and free schools. We have many years’ experience of different funding mechanisms and procurement routes, and we are expert at helping authorities and schools get best value for their facilities. 1 2
James, S, 2013, Review of Education Capital: progress update RIBA, 2014, Building a Better Britain: schools
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UNLOCKING THE DOOR TO
more housing The UK is not building enough new homes, and action is needed to revitalise supply. The UK housing market was one of the biggest casualties of the 2008 global credit crunch, but failure to keep up with demand has been a decades-long issue. House prices have soared compared to income, partly due to a shortage of new affordable homes, along with a growing population. At least 243,000 homes a year are needed to keep up with the number of new households being formed, but in 2013 only 109,000 were built. Unless prompt measures are taken, the country could be short of up to two million homes by 2020.1 The pressure for new homes is particularly acute in London and the South East, but all regions face challenges. An increasing proportion of disposable household income is consumed by housing costs. Young people seeking to access the housing ladder face significant barriers, and there are long social housing waiting lists.
greater direct investment in the building of new homes, particularly social housing, together with rent reforms and putting a cap on tenants’ outgoings. Both Labour and the Liberal Democrats argued for a state return to directly commissioning and building homes. We now await the outcome of the new government’s proposed strategy. The construction industry will expect a clear commitment that housing forms a central part of the new national political mission, and a credible plan. Building new homes is a powerful source of growth, creating jobs across the country and supporting large numbers of businesses and their supply chains. For a sustainable way forward, there is a need to reduce volatility of prices and supply, improve affordability and increase liquidity and efficiency in the market.
Housing has not traditionally held the same electoral weight as economic policy, education or the health service, but many MPs in urban constituencies have argued that housing is the priority issue. Pre-election, all political parties pledged to tackle the housing crisis, agreeing that it is critical for the country to build more homes.
Bringing schemes to market may continue to be problematic. There is a misconception that developers always benefit from increased housing costs, but their financial viability assessments are currently under pressure. Increased land and construction costs often erode their margins, with the planning system, shortages of land, materials and skilled labour, and local opposition to building frequently cited as additional barriers.
Recent government policy focused on encouraging builders, investors and local authorities to increase the supply of both new-builds and repurposed empty homes. Critics say this has not been enough, calling for
In response, the Confederation of British Industry (CBI) has called for measures that enable the market to deliver a pipeline of land for new homes to buy and rent, financed in innovative ways and built by a skilled workforce. The
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business lobbying organisation highlights the need to underpin this development activity with a flexible planning system and a simpler and more competitive tax regime.2 Faithful+Gould has a strong presence in the residential sector, with over 35 years’ experience of supporting stakeholders. We understand the different needs and drivers of private developers, Registered Social Landlords (RSLs), private rented sector (PRS) landlords, land owners and local authorities. Our focus is on helping our clients navigate a route through the funding challenges, and on achieving best value in capital and operational cost planning. In all sectors of the housebuilding market, early cost appraisal influences scheme efficiency, equipping stakeholders to make the best decisions. We are increasingly involved at masterplanning stage, where there is greatest opportunity to inform design and achieve best value. There are challenges in developing and managing mixed tenure schemes, and we are experienced in balancing the agendas of multiple stakeholders where required. Developers and local authorities will typically need to negotiate on the social housing elements of private schemes, and accurate cost appraisals will facilitate this. Our knowledge of the market and understanding of the supply chain ensures reliable information on construction costs and revenue forecasts, safeguarding financial appraisals during volatile market conditions.
ng
1
The Printworks, Amelia Street, London SE17 Mixed-use 9-storey residential-led scheme
2014, The Lyons Housing Review, Mobilising across the nation to build the homes our children need 2 2014, CBI, Housing Britain: building new homes for growth
For further information, contact David Blackburn on +44 (0)20 7121 2121. Scan the QR code for full details.
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The Core AT NEWCASTLE SCIENCE CENTRAL The first phase of an exciting collaboration between Newcastle City Council and Newcastle University is now open. Science and technology research parks are seen increasingly as a means to create dynamic clusters that stimulate economic growth and global competitiveness. Newcastle City Council and Newcastle University have partnered to develop the landmark Newcastle Science Central on a 24-acre city centre site. The development will form a research hub where academia, students, business and industry collaborate on new technologies and solutions. The Science Central masterplan is at the heart of a revamped vision for this area of Newcastle. Originally the Elswick Colliery, and later the home of the Scottish & Newcastle Brewery, the new city centre quarter combines the research and business initiative with public realm, residential and leisure facilities. The Core is the first phase of the Science Central development. It spans seven floors, creating 2,750m2 of serviced office space for high-growth technology and science-based businesses, with additional event space for business networking and activities. The Core’s ground floor is a place of collaboration, exchange and networking, providing a showcase
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for innovation. A large open events space hosts installations and presentations for up to 150 people, together with a lounge and reception area. This floor opens on to Blue Star Square, one of two new public spaces in the first phase of development, forming a gateway to the Science Central campus from the city centre. The Core aims to be an exemplar building for the future development of the site, embodying urban sustainability. The brief mandated a BREEAM Excellent rating for the building and a CEEQUAL Excellent rating for infrastructure and landscaping. A design stage BREEAM Excellent rating has been achieved, with final certification process ongoing, and the CEEQUAL goal has been successfully met. Features include one of the UK’s tallest living walls (six storeys), complete with wild strawberries, bee hotels and nesting boxes, as well as a planted sedum roof and rainwater harvesting. A site-wide energy centre will eventually provide heating and power for the entire Science Central site. Infrastructure was installed during the first phase
public realm to accommodate the district heating and power, and the Core’s building services are designed to be connected to the future network with no operational interruption. Part of the strategic brief for Science Central was strengthening Newcastle’s national and international status as a centre for technology, skills and innovation. Graduate retention and the development of initiatives that will attract investment and generate jobs is essential to the local economy. Many companies located in the Core have their roots in the University’s courses, benefiting from the business support and affordable accommodation offered to encourage new initiatives into the Core. Demand for the facilities has been very healthy, with more than 90 per cent of the space let before the building was complete. Faithful+Gould is providing cost consultancy for the wider Science Central masterplanning exercise, as well as the design and construction of the Core. We are also acting as employer’s agent and CDM coordinator for this first phase. In addition we were recently appointed by Newcastle University as project managers, cost managers and principal designers for their new Conference and Learning Centre, also located at Science Central.
The Science Central project illustrates our experience in supporting the development of large masterplans. We help both private and public sector organisations to develop business cases, exploring the risks and opportunities associated with each element of significant programmes of work. We are able to draw on our long experience of exploring funding mechanisms in urban regeneration projects. In addition to Science Central, we are supporting a range of projects in the science and technology research field. Our portfolio also notably includes North West Cambridge, the University of Cambridge’s largest single capital development project.
For further information, contact Andrew Horsman on +44 (0)191 272 5150 Scan the QR code for full details.
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INTEGRATION
IT’S IN OUR DNA
Faithful+Gould is a world-leading integrated project and programme management consultancy. We build long-term partnerships with our clients because we are trusted to deliver. We protect and maximise our clients’ interests through intellect, innovation, positive thinking and problem solving. We call this Constructive Expertise. Our people see the big picture and are driven by our clients’ goals. Our relationships are built on trust and understanding, and everyone in our team has the responsibility and authority to both find and deliver better ways to get things done. Our integrated approach delivers business improvements and efficiencies that maximise value and help to transform our clients’ visions into reality.
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