Construction Journal April-May 2016

Construction Journal

Taking the lead

CHANGE MANAGEMENT BROADBAND CONNECTIVITY

The value and importance of leadership on major construction projects 16

BIM LEVEL 2

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The bigger picture

Changing the world

Why project managers play a vital role in handling change through the project lifecycle

COP21 is an opportunity for surveyors to show inspired change management skills

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6

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10

Crossrail procurement How index-linked inflation clauses are applied in practice PG.

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April/May 2016

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C O NTENTS

RI CS CONST RU C TIO N JOUR NAL

Construction Journal

Taking the lead

CHANGE MANAGEMENT BROADBAND CONNECTIVITY

The value and importance of leadership on major construction projects 16

BIM LEVEL 2

PG.

The bigger picture

Changing the world

Why project managers play a vital role in handling change through the project lifecycle

COP21 is an opportunity for surveyors to show inspired change management skills

PG.

6

PG.

10

Crossrail procurement How index-linked inflation clauses are applied in practice PG.

April/May 2016

rics.org/journals

23

Front cover: @ iStock

CO N TACTS

contents 4 Chairman’s column

CO N STR UCTI O N J OU R NAL Editor: Les Pickford E journals@rics.org The Construction Journal is the journal of the Project Management and Quantity Surveying & Construction Professional Groups Advisory group: Emma-Kate Ryan (Faithful+Gould), Helen Brydson (Faithful+Gould), Martin Stubbington (RICS), Gerard Clohessy (EC Harris), Christopher Green (Capita Property and Infrastructure), David Cohen (Amicus), Andrew McSmythurs (Sweett Group), David Reynolds (Property & Construction Consultant), Tim Fry (Project Management Professional Group Chairman), Alan Muse (RICS) Construction Journal is available on annual subscription. All enquiries from non-RICS members for institutional or company subscriptions should be directed to: Proquest – Online Institutional Access E sales@proquest.co.uk T +44 (0)1223 215512 for online subscriptions or SWETS Print Institutional Access E info@uk.swets.com T +44 (0)1235 857500 for print subscriptions To take out a personal subscription, members and non-members should contact licensing manager Louise Weale E lweale@rics.org Published by: Royal Institution of Chartered Surveyors, Parliament Square, London SW1P 3AD T +44 (0)24 7686 8555 W www.rics.org ISSN: ISSN 1752-8720 (Print) ISSN 1759-3360 (Online) Editorial and production manager: Toni Gill Sub-editor: Matthew Griffiths Designer: Karen Warren Creative director: Mark Parry Advertising: Emma Kennedy T +44 (0)20 7871 5734 E emmak@wearesunday.com Design by: Redactive Media Group Printed by: Page Bros

5 Update 6 The bigger picture

Tim Fry considers the project manager’s role in dealing with change during the lifecycle of a project

8 Should we be afraid of change?

Seeing change positively is a matter of getting the timing right, writes Ben Tooley

10 A tool to change the world?

Peter Duignan explains how surveyors can play a major role in change management to safeguard the future of our planet

12 Taking BIM to the next levels

Alan Muse, Global Director of the RICS Built Environment Professional Groups, talks about the construction industry’s perception of BIM and preparation for the BIM Level 2 mandate in 2016

16 Taking the lead

Donnie MacNicol discusses the value and importance of leadership on major construction projects

19 Be sure of your connections Helen Garthwaite and Claire Haynes consider broadband challenges for the next generation of buildings

21 Just think about it

Milton Silverman draws attention to the hidden impact of EU regulations on consumers’ rights to cancel contracts

23 Clause and effect

Joe Martin looks at how index-linked inflation clauses are applied, offering a case study of Crossrail’s procurement strategy

While every reasonable effort has been made to ensure the accuracy of all content in the journal, RICS will have no responsibility for any errors or omissions in the content. The views expressed in the journal are not necessarily those of RICS. RICS cannot accept any liability for any loss or damage suffered by any person as a result of the content and the opinions expressed in the journal, or by any person acting or refraining to act as a result of the material included in the journal. All rights in the journal, including full copyright or publishing right, content and design, are owned by RICS, except where otherwise described. Any dispute arising out of the journal is subject to the law and jurisdiction of England and Wales. Crown copyright material is reproduced under the Open Government Licence v1.0 for public sector information: www.nationalarchives.gov.uk/ doc/open-government-licence

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CH A I R M A N ’S CO L U M N

CHAIRMAN'S COLUMN Change for the better

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Change is constant and project managers are crucial to ensuring its benefits, says Tim Fry

HSBC recently announced that it had decided to retain its worldwide headquarters in the UK, in London’s financial centre at Canary Wharf. How times change.

I started working at Canary Wharf 20 years ago, and walking out to buy a sandwich was like a trip into a post-apocalyptic wasteland.

Where was everybody? Now Canary Wharf is a very lively place, a home for newspapers, financial institutions, lawyers and leisure, as well as a shopping hub. London is moving eastwards. Who’d have thought it?

Canary Wharf is attracting firms that, in the old days, wouldn’t have dreamed of moving to the Isle of Dogs. Will the government’s proposed Northern Powerhouse do the same along the Mersey–Humber line? Time will tell.

We talk about change as if it were new and only applies now; in reality, there has always been change. Harold Wilson talked about the “white heat of technology” back in 4 A P R I L / M AY 2 0 1 6

1963, and 200 years ago in 1816 Luddites were already resisting the changes brought about by industry.

Change has always happened and always will; but as project managers we are in a great place to direct it and ensure it produces tangible benefits. This issue of Construction Journal contains a range of articles, three of which concern change: looking at change in its widest sense, at how it drives the property lifecycle, and at whether we should be afraid of it. Most people resist change when its impact on them hasn’t been explained.

Many football or rugby fans on their way home after their team has been defeated are keen to see the manager replaced. But it’s interesting to ask them: “Who would you choose instead?” This question is usually greeted with a long

We are in a great place to direct change and ensure that it produces tangible benefits

pause. If you are calling for change you need to make it clear what the benefits will be, as there is no point in doing it simply for change’s sake.

Explaining it properly is part of what is called stakeholder management.

This issue also looks at building information modelling (BIM), which I mentioned in my last chairman’s column (Construction Journal November/December 2015, p.4). As an informed and intelligent client, I need to be convinced of the benefits of BIM. I understand why building something twice, once in the virtual world and then in the real world, can help lower project risks by identifying and removing mistakes. I appreciate that anything that highlights clashes between engineering services and architectural lines is a good thing. I also understand the stakeholder management benefits of being able to take laypeople on ‘fly-throughs’ of modelled buildings. What I don’t understand is why clients should be expected to pay any extra for this. To me, this is simply proper client care, because it should be done anyway.

Leadership on major projects is something this country does rather well, such as the 2012 London Olympics and Crossrail, so the article on the value and importance of leadership of construction

projects will be very relevant to our readers. The NHS has recognised that it needs to prepare the leaders of tomorrow and this approach should be commended. But to encourage the leaders of tomorrow, we first need to get great people into our industry.

Index-linked inflation clauses are explored in another article. Although we are told wage inflation is generally low, it is certainly forcing prices and project costs upwards in London.

Finally, a plea: please don’t be passive readers. This is your journal and it’s only as good as the articles in it, so engage with it and offer your own ideas. Creative tension, differing opinions and cogent arguments are all healthy.

Onwards and upwards. b Tim Fry is Chairman of the RICS Project Management Board pm.professionalgroup@rics.org

UPDATE

UPDATE Government recognition for ICMS Following the establishment of the International Construction Measurement Standards (ICMS) standards-setting expert committee last year, the European Commission hosted the body in Brussels at the start of March. The UK Cabinet Office has also asked to receive a briefing on the evolving standards, so as to offer them full support.

These developments follow excellent progress, both in expanding the ICMS coalition to a total of 36

Construction and the law

“Construction, the Consumer and the Law: Time for Change?” is the name of a one-day conference on Thursday 9 June at King’s College London’s Strand Campus, organised by the Centre of Construction Law. Aiming to give residential construction issues greater exposure and ask whether consumers are adequately protected, speakers will include judges, lawyers, chartered surveyors, architects and insurers, and there will also be input from other EU member states and Australasia. n More details are available from http://bit.ly/1SU5v0O

professional bodies around the world and in developing the technical standards themselves. The latter will cover building and infrastructure cost definition, at both a project and a national level, enabling both benchmarking and reporting of construction projects and output to be harmonised globally.

A draft will be issued for public consultation later this year, with publication of the standards expected in spring 2017.

Have your say on international standards A new consultation platform is now online for international standards, allowing consultations to be carried out in a safe, transparent and auditable way. The International Ethics Standards consultation is the first to be available on the site.

Stakeholders can subscribe to keep themselves up to date with the site and make their voices heard as international standards develop. n More details are available from https://consultations.intstandards.org

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TRAINING RICS QS & Construction Conference, Scotland 28 April 2016, Grand Central Hotel, Glasgow Our annual QS and Construction Scotland conference assembles leading figures to debate, address and seek solutions to the biggest issues affecting the industry.

Topics include addressing the skills shortage, increasing diversity in the construction sector and meeting the demands of building information modelling (BIM) and infrastructure. The conference also offers technical sessions that will help you to meet the challenges that are affecting your business in today’s marketplace. n www.rics.org/scotlandqs

RICS QS and Construction Conference 25 May 2016, Cavendish Conference Centre, London This year’s annual QS and Construction conference will combine insights into the key challenges facing the industry with technical guidance on a range of practical concerns. Topics covered will include skills shortages, the evolving role of the quantity surveyor, essential soft skills, contractual considerations and more. n www.rics.org/qsconference

BIM become compulsory From 4 April 2016, BIM (Level 2) will be compulsory on centrally funded government construction projects.

It was evident at the RICS BIM Conference in February this year that BIM take-up is increasing among surveyors. However, this process must now be accelerated.

To get you started, RICS provides useful guidance material for BIM on its website as well as an RICS Certified BIM Manager accreditation scheme. n www.rics.org/uk/tag/bim/

Prepared for your APC?

Are you preparing for your APC? RICS provides a wealth of useful guidance and advice on all aspects of the APC, from how to prepare and present your submissions to tips on how to handle the interview. Material has been pulled together in a dedicated section on the RICS website with articles from assessors, past candidates and training advisors. n www.rics.org/uk/tag/other/ Image © iStock

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C H A N GE M A N AGE M E N T

The bigger picture Tim Fry considers the project manager’s role in dealing with change during a project’s lifecycle

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ll projects need firm ground, and getting some building blocks in place is best practice. So first of all, let’s be clear about the terminology we are using.

The most widely accepted definition of a project is: “a unique, transient endeavour undertaken to achieve a desired outcome” (APM Body of Knowledge, 5th edition). Some examples of particular projects are outlined in Table 1.

It follows that: “Project management is the process by which projects are defined, planned, monitored, controlled and delivered such that the agreed benefits are realised … Projects bring about change and project management is recognised as the most efficient way of managing such change” (APM Body of Knowledge, 5th edition).

If we really take things back to first principles, Newton’s third law of motion states that: “For every action, there is an equal and opposite reaction.” The same law applies to the commercial world.

Many organisations need to change in response to external influences or actions, such as legal reforms,

increasing competition, a changing economy, outgrowing premises or so on. In all cases, there is an action that causes a reaction or, to put it another way, a change. To make this change successfully, a project needs to be managed in a controlled manner.

If you begin a journey without knowing either your starting point or destination, you won’t end up in the right place. So at the very beginning of a project, a business should ask itself three simple questions to understand whether it really needs to change.

1. Where are we now? (the “As is”) 2. Where do we want to be? (the “To be”) 3. How do we get there? (the plan).

The project manager should be involved in all three steps.

Enabling business My current project is managing the design, building and operation of a research, education and clinical care centre. This will house two world-leading brands, Moorfields Eye Hospital and University College London’s Institute of Ophthalmology in one bespoke and integrated building of around 50,000m2 where, as Aristotle put it, “the whole is greater than the sum of its parts”. This also involves selling existing central

Table 1 Examples of projects Project

Outcome

Major works to construct a building

The building itself

Software development

Software product

Expansion of sales into a new geographic market

Expansion achieved according to agreed volume of sales

Restructuring and merger of two companies

A new company

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Image © iStock

London sites and buying a new one. The new building will act as a “wrapper” for the two organisations.

On appointment, I wanted to establish the need for the project, and so my first action was to ask “Why are we doing this?” There is no point in doing something well that doesn’t need to be done in the first place.

Both organisations had well-defined corporate strategies, and the need for a new building to help fulfil these was obvious. They had to change to retain their market leadership and improve the quality of their products. Their current buildings do not enable their businesses but constrain them, forcing people to work in inefficient ways, and therefore directly affecting the services and products they provide.

The clients also understood that change occurs in two ways.

1. Organisational change – i.e. changes to the way an organisation is structured, the goods or services it provides or the way it works. This can include improvements that are not always physically demonstrable but still bring positive results, such as changes in the way people work.

2. Capital projects – complex undertakings that have a significant impact on organisations before, during and after implementation.

These include infrastructure, building, engineering, information and communications technology – in fact, any project involving capital rather than revenue expenditure.

To obtain stakeholder support and funding for a project, the case for change must articulate the benefits and how they can be measured. This process uses investment appraisal techniques and is documented in the business case, so it must be compelling – that is, projects should only be approved if it can be shown that their benefits outweigh their costs. It must therefore answer the key questions “Where are we now?” and “Where do we want to be?”, as well as including a plan to get there.

We then had to determine what the project would entail – for instance, whether it would be a new build or a refurbishment, whether it involved staying on an existing site or moving to a new one – and agree the best option to pursue. It was then necessary to work out how big it needed to be, predicated on current and projected activity that was informed by demographic and medical need data.

This also entailed working out the new

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If you begin your journey without knowing your starting point or destination, you won’t end up in the right place

ways of working (clinical pathways); that is, more change.

This was used to understand how much it would cost to design and build (using benchmark data) and how much it would cost to operate – respectively, hard and soft facilities management over the building’s lifecycle. We had now described the “To be” position.

Both organisations are in existing premises with their staff, equipment and operational costs and constraints.

Therefore we could establish the “As is”. By calculating the value of one and subtracting the other, we could derive the net cost of the change.

Best practice suggests maintaining a separation of powers between those who hold the corporate budget and those who seek to spend it, which creates a healthy and constructive tension. We therefore got the finance departments to model how much the organisation could afford to pay for a new-build project and its operation over a specific term, for instance 30 or 60 years. We also had the model audited. When compared to the costings, this showed we had an affordable project, not only in capital terms but also in terms of revenue over its whole lifecycle.

This was tested using sensitivity analysis by running “What if …?” scenarios. These are very powerful when talking about change with users, enabling discussions along the lines of: “If you want x, you realise it will cost y, and as we have a finite budget someone else will have to go without if you get your variation. Which of your colleagues should shoulder this burden?”

The cost of change is therefore real and tangible, as it affects users in a way that they understand. The converse argument can also be used to enable value-adding change, which I’ve found is one way to short-circuit some ‘wants’ and let you focus on ‘needs’. Always check your assumptions and inputs, and whether the model’s answer is in the right ballpark.

Another seemingly obvious point is not to proceed until a project is shown to be affordable and the client has signed up to its scope, cost, budget, key assumptions, evaluation criteria and so on. You then have a baseline from which to measure the effects of change as you move from project inception into implementation.

As project managers, we manage both ‘soft’ projects – organisational

change – and ‘hard’ projects – capital ones. The former tend to drive the latter.

I am fortunate to be involved in both, and therefore the whole lifecycle of projects.

The biggest challenges to project managers on change projects such as this centre are gaining stakeholder buy-in, keeping the project sponsors enthused throughout a process that is, in the main, alien to them, and plotting a path through layers of governance that still allows for timely decision-making.

How do you manage these issues on your projects? b

Tim Fry is Director of Capital Investment & Development at Moorfields Eye Hospital and Chairman of the RICS Project Management Professional Group Board tim2605@sky.com

Related competencies include Project Evaluation

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Should we be afraid of change?

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Seeing change positively is a matter of getting the timing right, writes Ben Tooley ’m sure we have all listened to our parents or grandparents tell us that change is a bad thing and we should stick to what we know.

No doubt we have nodded without really giving the comment a second thought.

But what is change? It can be as simple as buying a different newspaper or sandwich, or as complex as altering the way an organisation uses its premises or requesting a revised layout for a building nearing completion. Change will always happen; what is important is how we react to it. Do you perceive change as a good thing?

Innovation is a critical part of our industry. Suppliers are constantly striving to improve their products, to make them more environmentally friendly and keep ahead of their competition. Controlling costs remains a critical factor on every project, but this needs to be balanced with maximising development potential and therefore value. We must be careful that concerns about costs do not stifle innovation and product development.

As well as suppliers, contractors are also looking to find ways of improving construction programmes, health and safety, and logistics. All of these are key considerations when selecting contractors, ones in which we almost automatically expect improvements. This is change we accept: it is measured, and we practically insist on it. We feel very little fear when a contractor declares that an improved delivery technique will shave weeks off a programme.

Architects and engineers often debate new technologies, but few clients are willing to be seen

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as pioneers. There are seldom prizes for being the first to adopt new products because of the risk that they will not perform to the correct specification.

Professional indemnity insurers are equally keen to avoid this. These burdens have a tendency to steer design solutions down well-trodden paths and away from change. But how much does this attitude stifle progress?

‘Traditional’ solutions are being challenged, and we should support such an approach. As Building Regulations and environmental targets are tightened, there is little option but to investigate new technologies. Our role is to plot the right path between being pioneers and conservatives. We’re unlikely to buy technology that remains static, and we look favourably on those who help projects by finding ways to improve efficiency. We should bear in mind that the adoption of these changes only encourages innovation and drives subcontractors and suppliers to find further ways to improve.

Finding the right moment It is usually the timing of change that causes the greatest problem. Change is more easily accommodated in the early stages of a project, when decisions are being made before construction starts.

Once works begin, however, any change is usually deemed to be disruptive.

We have all debated the need to make a change while construction works are in progress. On larger projects, design fashions may change during construction, incoming tenants may demand amendments, or a new requirement develops. We all know we should not instruct changes during this period, but we often have little choice: make the change or potentially constrain the client’s options for a building. The implications of making the change are inevitably increased cost and time, yet in the longer term the building will probably be more valuable. Does this make change bad?

Once the dust has settled and we reflect on a project, how many of the changes made during construction – even those made towards the end – do we really think were poor decisions? Very few, I would suggest. We probably just wish we could have made them earlier, preferably during the design stage.

The reality is that measured change is required. We may not all like it, and our tolerance levels are different at different times, but in the main we should see change as positive. Perhaps older generations are more cautious and may avoid change, having already witnessed significant advances in their lifetimes.

We should welcome measured change, however, and the innovation, benefits and new options it brings. Let’s just try to incorporate change into our projects at the right time and not when the short-term impact will be at its greatest. b

Ben Tooley is a project manager at Marick ben@marickps.com

Related competencies include Project Administration, Contract Administration

Image © Shutterstock

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Peter Duignan explains how surveyors have a major role in change management to safeguard the future of our planet

A tool to change the world?

C Change management can be a dry subject when discussed in an academic way. But it comes alive when applied to the real issues confronting countries, businesses and professional organisations.

Archimedes said: “Give me a lever long enough and a fulcrum on which to place it and I will move the world.”

The principles of change management provide us with a powerful tool to do so.

Change management in fact owes its existence to grief studies; a correlation was identified between change and grieving, particularly when employees had lost their jobs.

Early research in change management also showed dissatisfaction with failures resulting from changes that were seen as being top-down.

One early model of change management was Lewin’s unfreeze–change–refreeze theory. This looks at how to destabilise organisational inertia by unlocking existing behaviours, and then moving to a new level of performance that adjusts the attitudes, beliefs and structures that shape behaviour, the ‘change’ part of the model. ‘Refreezing’ then involves reinforcing new 1 0 A P R I L / M AY 2 0 1 6

behaviours to maintain higher levels of performance.

Change management pioneer John Kotter detailed an eight-step process to achieve successful change.

1. Create a sense of urgency.

2. Build a guiding coalition.

3. Devise a strategic vision and initiatives.

4. Enlist a volunteer army.

5. Enable action by removing any barriers.

6. Generate short-term wins.

7. Sustain acceleration.

8. Institute change.

Urgency and readiness The recent COP21 Climate Change Conference in Paris produced a historic agreement, signed by 195 nations, “to combat climate change and unleash actions and investment towards a low-carbon, resilient and sustainable future”. While thinking about how to frame this article, I was struck by how the outcomes from COP21 could be implemented on a global scale.

Following Kotter’s yardstick, we are already on the road to a solution. We have the first

Change management goes hand in hand with the struggle for a sustainable planet

elements in place – urgency and a readiness to change.

We may even have the bones of a guiding coalition.

In 2006, Kotter co-wrote Our Iceberg is Melting, a book about penguins battling to change as their home melted that expressed his thoughts on the fear of change, and how to motivate people to face the future and take action.

It shows the way that change management goes hand in hand with the struggle for a sustainable planet.

While politicians were ecstatic about reaching agreement at the Paris summit, environmental campaigners, academics and sceptics were less impressed by the goals, but accepted that they represented a positive first step. The US Secretary of State John Kerry said the agreement was not perfect but praised it as a “critical step forwards”.

Yet while all parties had agreed that there was an urgent need for change, this came with a caveat from many: it was going to have to come from the bottom up if this giant change management programme was going to be successful.

With surveyors involved in every aspect of moulding our environment – from financial analysis and construction to mining and agriculture – our fate is inextricably linked with this huge undertaking.

The COP21 targets will trigger change on a scale that Image ©

surveyors cannot ignore. But how should we manage change in our profession to respond to the greatest crisis faced by humankind?

Vision and communication We now have a worldwide constituency waiting for action, and it is incumbent on all major players to articulate a vision and communicate it to that constituency.

The RICS’ greatest strength is that its international multidisciplinary membership is involved in all aspects of the built environment. We are therefore major players in the changes needed to safeguard our future.

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We have to be visionary leaders at every stage of the project lifecycle, that an environmentally friendly approach will pay dividends for our clients and for the earth itself. Our general practice and quantity surveyors will perhaps place emphasis on lifecycle costs.

Our project management and building surveyors will rise to the challenge of implementing environmentally friendly construction methods and influencing the manufacture of low-carbon building materials. Our facilities management surveyors will seek to run buildings with minimal carbon footprints.

We pride ourselves on our communication and engagement with all parties in the built environment sector.

Having adopted a vision, then, it will be necessary to communicate it so that our members, clients and government are in no doubt about our resolve.

We have to be visionary leaders if we are to perform this role. We must persuade our members of their crucial part in providing a solution; the environment must be at the forefront of all our actions.

We must also persuade our clients that environmental awareness and action make good sense.

It is difficult to argue against eliminating waste, reducing energy bills and protecting property from flooding and other environmental catastrophes. But we must also persuade the government that its built environment policies should be consistent with the objectives, recommendations and targets that emerged from COP21.

RICS’ multi-disciplinary membership must prove, Image © Shutterstock

Empowerment and short-term wins A well-articulated vision can inspire and empower our members, who must become environmental champions.

Training will play a key part in achieving this.

This training must include analysis as well as the practical aspects of surveying. As planning regulations increasingly focus on sustainability, so critical analysis of all projects and the environmental benefits they yield will be necessary if they are to be allowed to proceed. CPD will ensure that our members keep up to date with best practice and reinforce the message that sustainability is at the centre of our profession.

While there is little we can do to remedy past mistakes, we can enable short-term wins with our future actions.

For example, state-of-the-art building services combined with rigorous insulation standards and low-carbon building materials can result in impressive performances.

We must challenge our clients to adopt these approaches while developing the tools to demonstrate to them that such measures make sense in all areas, including cost.

Recycling is another important component of environmental policies that can offer considerable short-term gains. Recycling facilities can be provided in buildings, while buildings themselves – that is, all the materials used in their construction – should ultimately be recyclable.

Landfill will soon become hugely expensive so it is important to prepare alternatives to this method of disposal.

Consolidating and generating further change Once these easy gains have been made, the real work will begin. Whatever changes we can generate from now on will be dwarfed by the challenges that the existing built environment poses.

The COP21 target is very exacting: limiting global warming to an increase of less than 2°C at an estimated cost of US$16.5tr. The goal is effectively to eliminate carbon emissions in the second half of this century.

Retrofitting our buildings for better environmental performance will require skills from across the surveying disciplines and beyond. How will we persuade people to upgrade their homes, which are responsible for an enormous amount of carbon emissions? How will we stop the use of fossil fuels to heat old housing stock?

It is likely that incentives will be required to generate

this type of bottom-up change. What form will these take? What carrots and sticks will they use? Will the oil-fired boiler go the way of the filament lamp?

Our historic building stock will present particular problems if people are to continue to use it. Will it be possible to retain regulatory exemptions for our listed buildings, for instance?

There will also be a significant impact on our agricultural sector, with attention focusing on the emissions generated by animal husbandry, while in land management increased afforestation will help reduce the carbon in our atmosphere. All of these issues fall in the remit of chartered surveyors.

Trying to change the world is clearly a much larger undertaking than restructuring companies and organisations.

As both COP21 and change management gurus point out, change must be delivered from the bottom up: the role of the RICS must be to lead its members and inspire and facilitate that change.

The urgency for change has been identified and world leaders have set goals and targets. So what are we waiting for? It is time for chartered surveyors to look at how they can adapt to the new reality in their daily practices. Change management is a powerful tool to help us succeed. b

Peter Duignan MRICS MSCSI is Capital Projects Consultant at Bank of Ireland Group Property peter.duignan@boi.com

Related competencies include Sustainability and Construction Technology and Environmental Services

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BIM

Taking BIM to the next levels Alan Muse, Global Director of the RICS Built Environment Professional Groups, talks about the construction industry’s perception of BIM and preparation for the BIM Level 2 mandate in 2016

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t the Digital Construction Week event last October, there was a theme of collaboration and making technology work for people.

Do you think there are a lot of misconceptions about building information modelling (BIM) that are putting people off from realising its true potential?

Yes, I think there are three major misconceptions regarding BIM at the moment. First, that BIM is expensive; second, that BIM is disruptive; and third, that BIM is for clients.

I think the ‘BIM is expensive’ issue is particularly acute with SMEs, and engaging with them and providing more evidence to the industry that there is a return on the investment made in BIM is pretty key. Some of that evidence is starting to come through now in terms of the research being done because of the push to get to Level 2. The more this is disseminated and awareness is obtained of the benefits of that expenditure accruing through the industry, the more that SMEs will engage in a positive way.

Engagement from SMEs in terms of a supply chain working down construction is key with BIM. I think that is putting people off but it is getting better.

As for ‘BIM is disruptive’, I think all the genuine objective research that’s been done in this area does show that in the long term BIM improves productivity, but a lot of private-sector businesses feel that initially it is disruptive.

But all change is disruptive; we’ve been through this before with computers, with CAD systems, and then the benefits have accrued and people have caught up and embraced that technology in their business. The issue that it is disruptive is not something that you can immediately say is untrue, but I think the fact is that most investments are worthwhile in the long run in terms of technology and that has proven to be the case in the past.

Third, ‘BIM is for clients’: I think the reason a lot of professionals are saying that is because it’s to some degree passing the buck to clients in terms of insisting on the 1 2 A P R I L / M AY 2 0 1 6

investment that’s necessary for them to be involved in the construction project.

It’s important that clients do understand BIM and do push change in the industry. But from the client’s point of view, it’s very much a supply-side issue – if they want a more efficient and productive service to give them better profit margins then clearly clients are going to expect industry to perform in that way. So ‘BIM is for clients’ is to me a bit of a red herring.

It’s up to professionals to improve their way of working, their margins and business efficiencies. This is what clients are working for and it’s important for clients to support and understand BIM, but BIM is not just for clients in my view.

Is reluctance to change the biggest barrier to BIM? I think it’s certainly one of the big barriers. The reason that it is so important of course is that it presupposes a change in culture, which is always difficult.

One thing that is often not talked about in relation to BIM is all the other things that have to change to maximise BIM adoption.

Those things have been discussed extensively in terms of the UK government construction strategy. I’m talking about early contractor involvement, early supply chain engagement, integrated project insurance, and processes for interdisciplinary working to maximise the effect of BIM in terms of collaborative work among the design team. All these other issues have to be worked on by the industry in order to maximise BIM’s adoption and advantages.

You can use one without all the others, but you won’t get the full effect until the industry changes in that sense as well. I think the government has realised this, in terms of its strategy. The private sector struggles with that to some degree in certain areas, but it needs to understand all these other facets are really part of the same problem and that is the industry getting better at delivering for clients.

There seems to be a fear of people’s jobs being under threat from technology in some quarters. What can be done to change that mindset?

There’s always been a fear of new technology ever since the Luddites; it’s a fact of human existence. The key point here is if Image © iStock

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RICS is the only professional institution in the UK to launch a certificate in BIM management

you look at history, technology has never displaced labour to any great degree. So actually those fears are unfounded in most cases.

You can see it with computers and CAD systems, and going further back you see it with other examples from history. What happens is new service streams are developed that allow analysis and use of the technology, so it’s an unfounded fear.

That’s the first thing for the industry to realise.

Second, I think it’s a very exciting change that the industry is looking to deliver better project performance. Most professionals should support that if they understand the fear of their job being replaced. Some automated processes do allow potential for new service streams to develop, and it’s the new service streams that people should be looking at. They’re the frontiers of our profession.

At Digital Construction Week, Enterprise Ireland was very enthusiastic about the example being set by the UK in terms of government and industry working together to mandate BIM. Do you anticipate that other countries will be following this example?

I went to a conference in Hong Kong in January where this very subject was debated because I think a lot of people were interested in the mandate in the UK. It’s been seen as something of a success in terms of change for the industry and really useful in nudging the market, as it were.

This idea of having an industrial strategy and improving the industry is one that a lot of other countries are very interested in, in terms of a better construction industry, but also in terms of the fact that governments are usually substantial industry clients. So of course the efficiencies in the industry are going to benefit the public purse, which is the important consideration for all governments around the world, particularly in the prolonged age of austerity.

With the Level 2 mandate coming up, do you think in terms of training enough is being done to make sure people have the skill sets to deal with it?

We are the only professional institution in the UK to launch a certificate in BIM management and so I’d very much say

the answer is yes. We’re also looking at a thorough review of all our professional pathways to qualification to ensure that technologies such as BIM are represented in those competencies and pathways. In fact, speaking to higher education in that regard, it is already introducing BIM into degrees that lead to professional qualifications. It’s important we’re aligned with that thinking.

I think there are two almost separate issues here; one is short-term and one is long-term. Certainly in terms of professional qualifications and higher education, we need to be looking at those issues but that’s really a longer-term change that the industry and certainly the professional institutions need to adapt to. I also think there are short-term issues as well in terms of people wanting a cure for BIM on their projects.

Larger clients tend to want a solution for invoking BIM, so we therefore feel it is important to train existing professionals who have industry experience in the use of BIM on projects, as we do with our Certificate in BIM management. We feel the other reason – which is as important because lots of people are using terms like BIM manager, but nobody has any certainty in the marketplace what that means and what the benchmark is for competence – is that there needs to be more badging in the marketplace to ensure that clients know what they are buying.

A number of people involved in BIM training have called for a recognised, government-backed training scheme. Is this something you would like to see?

Yes it is, but we’ve already tried to develop that ourselves and what we are desperate for is people to recognise and endorse our RICS-certified BIM management qualification.

Why reinvent the wheel? We’ve gone to a lot of trouble and effort to develop that certification. It’s based on the government’s learning outcomes from the BIM task group and really people should be getting behind that qualification and looking at it. We don’t mind refining it and adapting it but we do want to see some real industry participation in developing it.

You wrote a comment piece for UK Construction Online in March 2015 where you talked of a two-tier system developing between those actively looking to adopt BIM and those that aren’t, with the larger companies more inclined to be BIM-ready. Is this still the case?

Well I think it is the case, but that’s typical for the industry in that the early adopters want competitive advantage and obviously they’re further up the change curve; I think that’s a natural market phenomenon.

There have been strenuous efforts in the last 18 months, certainly from others and ourselves, through the BIM for SMEs group. We, for example, have a knowledge transfer partnership in place with Henry Riley, a medium-sized quantity surveying practice, to try to push change in that sector of the market. n A P R I L / M AY 2 0 1 6 1 3

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BIM

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It’s a fact that most of our members are actually in SMEs, and therefore SME engagement with BIM is key. We’ve also developed quite a bit of guidance such as BIM for Cost Managers, which most large practices would already know quite frankly, but from an SME point of view it’s very important for them to get their learning from the global practices that they can feed down into theirs.

Dissemination among our members of best practice learning in BIM is extremely important and we can do this through case studies and conferences, and we can do it through guidance and insight papers.

Something that would go hand in hand with BIM is the International Property Measurement Standards (IPMS), which RICS has been working hard to develop. What kind of reaction are you getting to this?

Measurement is essential to surveying and therefore to all surveyors, whether they work in the UK or internationally.

Because it is obviously an international standard, they are interested in measurement particularly where it relates to benchmarking measurement like floor areas, which IPMS covers.

I think the reaction has been very good.

It obviously links to BIM in terms of a classification for floor area measurement and should be thought of as such. And I think actually it’s a key level in terms of standards around BIM because first of all there are very few international standards that you can apply to BIM. Second, open data standards at a technical end need to be supported with process and classification standards from the professionals themselves, so actually these are an important piece of the jigsaw puzzle in developing classification systems for BIM around the world.

We are reviewing International Construction Measurement Standards (ICMS) now, which are looking for classification on the cost side. So if we can compare costs in a standard way across the world, as well as through ICMS, then this will be another facet to allow BIM to be used on a global basis by global practitioners.

Again, with global investors in construction, there are global flows of money around the world and this is becoming an increasing issue, as we can see for example with Chinese investment in the UK. It’s no good saying my local market is not relevant to international standards because we do things in our own way, because the flow of money around the world dictates that we all have to be international these days.

We believe from a surveying point of view that internationally accepted best practice standards are the way forward, but Image © Shuttersock

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we also believe there’s no point in a UK professional institution saying to the rest of the world “This is the way to do things,” because that doesn’t work. What we need to do is have collaborative coalitions of professional bodies around the world to develop these standards. That’s how IPMS were developed, that’s how ICMS will be developed and that’s how other measurement standards will be developed through this best-practice collaborative procedure that was successfully used for international financial reporting standards initially and is now being used in terms of these standards in land, property and construction.

Finally, what are your predictions for the construction industry in 2016?

I think steady as she goes. I say that because it’s well known we are reaching capacity constraints in the industry. The next challenge is investment and productivity; these are key areas to improve and that’s based on a lot of what we have talked about in terms of BIM and other industry changes. So I don’t think the industry wants a lot more work but I do think it just needs to get better at what it does, and therefore productivity – as aligned with George Osborne’s thinking – is where we should be looking as an industry to improve. b

Alan Muse is Global Director of the RICS Built Environment Professional Groups

Originally published by UK Construction Media, the online construction community www.ukconstructionmedia.co.uk

Related competencies include

BIM management

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L E A D E RS H I P

Taking the lead Donnie MacNicol discusses the value and importance of capable leadership on major construction projects

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ew would argue that outstanding leaders are needed to deliver major projects successfully. As projects become bigger, leaders must be capable of managing complex temporary organisations, which often mirror complex businesses. This requires a diverse range of experiences and competencies; as a result, there are not many people who have the pedigree to be entrusted with driving often colossal undertakings towards success.

The leader affects many elements of a major project, and vice versa. This article will identify these factors and discuss how to develop leaders who are capable of handling these challenges.

Competencies that make the difference There are three core competencies that successful project leaders should exhibit and exemplify for other team members.

Without these, there is less chance of collaboration and the collective energies, expertise and knowledge of the team can be squandered. Besides technical abilities and experience, these competencies make the difference. They rely strongly on business acumen, interpersonal skills and organisational intelligence.

The competencies are: bb vision and the big picture: understanding how the project fits the strategic direction of the organisation, developing the vision for the project and aligning key players and stakeholders with it bb building key relationships: identifying and building relationships with important stakeholders, in particular the project sponsor, client and project team bb communication and engagement: looking at the different facets of communication, including branding and 1 6 A P R I L / M AY 2 0 1 6

marketing, that help to build engagement with, and commitment to, the project during its lifecycle.

Developing these competencies, as distinct from the more technical skills such as planning, requires more than simply imparting knowledge.

The Eight Lookings The complexity and multiple expectations of the leader’s role on major projects can be captured in a model. The idea is that a leader must look in eight directions to identify and understand the whole picture: upwards, outwards, internally, externally, backwards, forwards, inwards and downwards.

These directions can be paired because they focus primarily on stakeholders, vision, keeping on the ball and focusing on results (see Table 1). Where does your focus lie, and is it appropriate for the context in which you are delivering?

I’m often asked that if I could recommend only one thing to secure more success in major projects, what would it be? My answer is to hire a project leader who has done it before, that is, who has a documented track record of being able to deliver major projects successfully. At Oxford we call such leaders Master Builders.

Bent Flyvbjerg, Chair of Major Programme Management at Oxford University’s Saïd Business School

Image © Alamy

I have used the Eight Lookings in different ways; for instance, to check how well project leaders’ focus is aligned (or not) with that of the project sponsor, and to help project teams in trying to understand whether their collective focus was creating blind spots. The Eight Lookings can also be used to assist leaders or teams where things are going well but they want to improve their performance further.

Impact of culture To have meaningful conversations with organisations, I developed a project culture matrix (see Figure 1). This identifies the type of project leader and the leadership style that will thrive in an organisation’s culture, distinguished by the level of centralisation and collaboration. It applies to the organisation for which the leader works or their client. It has led to interesting observations, such as: bb the culture of the client or supplier is different, presenting challenges for working across boundaries bb the current culture is not what they would like it to be – they would typically wish to increase collaboration bb there are multiple cultures across an organisation, which have an impact on its overall effectiveness and change the project leader’s experiences bb whether leaders can be found who have demonstrable experience of successfully delivering projects in a certain type of culture.

This raises the question of what actions are needed when a project leader is not best suited to the culture in which they

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Table 1 At CH2M, the outstanding project leaders all exhibit three characteristics: they exemplify the firm’s values, they instil loyalty and courage into our team and they develop trusting but challenging relationships with the client. It’s being able to do all of these things every day that makes them what they are.

The Eight Lookings: where a project leader must look to understand the full context of a major project Wiring into stakeholders

Looking upwards – the sponsor Managing the sponsor and governance team to achieve organisational commitment and engagement

Looking outwards – the client Managing the client, end user and stakeholders (e.g. suppliers, subcontractors) to meet their expectations

Achieving the vision

Looking internally – the organisation’s vision Understanding and aligning to the vision and strategy for the organisation and its stakeholders

Looking externally – the client’s vision Understanding and aligning to the vision and strategy for the client and their stakeholders

Keeping on the ball

Looking backwards – the past Monitoring progress with appropriate control systems so the project meets targets and the team learns from mistakes

Looking forwards – the future Ensuring the team sets realistic targets and resourcing them accordingly

Focusing on results

Looking inwards – my performance Reviewing your performance to ensure your leadership contributes positively to the project

Looking downwards – the team’s performance Managing the team to maximise individual and collective performance, across disciplines, divisions and cultures

Mark Thurston, Regional Managing Director, Europe, CH2M

A major project goes through multiple stages over time, and its leadership needs can also change. Initially, it requires someone who can take an idea and shape a project. Then project approval requires a shrewd political and business-orientated leader.

The early stages of implementation mean bringing together an even larger, disparate team to collaborate on design and procurement. Implementation itself entails a move into performance and then operation. As the project progresses, maintaining momentum and keeping on track become more important.

Eventually, the focus shifts to project closure, ensuring business readiness and handing over to the client. At this point, it often moves from being a project to an operating asset, but a leader is still required to ensure that its overall benefits are delivered.

Individuals have different experiences, skillsets and motivations; what is boring to someone at the early stages of a project may excite another person. These personal drivers and project needs have clearly prompted leadership changes on major projects such as the Channel Tunnel, Heathrow Airport’s Terminal 5 and Crossrail.

Figure 1 Project Culture Matrix: identifying the type of project leader and style of leadership that thrives in an organisation’s culture

High

Leadership changes over time

Level of centralisation

find themselves. Should they adapt their style to suit the organisation? Or should the organisation adapt to suit the style of the project leader?

It is often assumed that anointing an individual with the title “project leader” automatically confers on them the ability to fulfil that role. Clearly, the reality might be different, so consideration is needed of how to develop that ability and the many other issues affecting the leader’s chance of success. n

Low

Developing leaders

Process rules

Community rules

Limited collaboration and extensive centralisation Organisation has: ∫D efined structure and decision-making hierarchy ∫F ew cross-functional or networking opportunities Successful leader: ∫ Highly organised and process-driven ∫S ees governance team and sponsor as key to success ∫K eeps senior level briefed and accepts its decisions ∫K nows their own power relates to status of project ∫W orks well with influence and power ∫N etworking/relationships less vital than formal authority

Extensive collaboration and centralisation Organisation has: ∫D efined structure and decision-making hierarchy ∫P lenty of cross-functional or networking opportunities Successful leader: ∫W orks well in established structures and processes ∫ Flexible and adaptable ∫ Organisationally intelligent ∫ Understands power bases and influencers ∫B uilds strong relationships for themselves and the project

Individual rules

Relationships rules

Limited collaboration and centralisation Organisation has: ∫D elegated authority and decision-making ∫F ew cross-functional or networking opportunities Successful leader: ∫ Highly self-reliant ∫B uilds strong relationships for themselves, the team and the project ∫C opes with ambiguity and uncertainty

Extensive collaboration and limited centralisation Organisation has: ∫D elegated authority and decision-making ∫P lenty of cross-functional or networking opportunities Successful leader: ∫ Organisationally intelligent ∫ Understands power bases and influencers ∫B uilds strong relationships for themselves and the project

Low

Level of collaboration

Table and diagram © Donnie MacNicol and Sarah Coleman

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I agree with leadership experts Kouzes and Posner, who said that “leadership is a set of skills and abilities”. They found that leaders who devote more time and energy to learning then perform better than those who do not. They said there are many ways to learn to be more able, but the most important was to learn more often. Their data was also clear that learning comes before leading. Project leaders should ask themselves “Am I devoting sufficient time and energy to learning to get better at leading?” and “Am I making use of all the opportunities offered to me?”

Ultimately, organisations use leadership development programmes to improve the capabilities they require of their leaders. An ideal programme should map the multiple elements involved, and intersperse experiential learning modules with local implementation groups and community investment, sharing and collaboration. Support should come through mentoring and coaching, with different things done by different people.

Eventually, this must be aligned with project execution, where the leader is able to apply their learning, the project is helping them to develop and the project itself is benefitting. It is critical that success criteria for an effective development programme are identified and suitable resources allocated, so it is no different from any other project.

Academies Sadly, leadership development nearly always concentrates on training – it is easy to buy and makes senior management feel as though they have taken positive action. Yet in many cases it is impotent and may even be worthless.

McKinsey & Company highlighted the importance of taking a broader perspective in its report The construction productivity imperative – How to build megaprojects better, in which it proposed 15 practices to help improve productivity.

It said: “One way to devise and institute these capabilities on a company-wide scale is to set up an in-house project management academy, as a number of companies with large project portfolios are doing. Good project managers are a rare breed. It is no easy task to manage the contractors, engineers, lawyers, procurement specialists, and public relations experts any big project needs. The best approach is to combine structured training, including certification in specific modules, with on-the-job coaching, so that people can apply the skills they learn.”

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As a major projects director, with experience in the infrastructure and technology sectors, I believe the skills critical to success are three-fold: the ability to drive decision-making in the ‘fog’ of project complexity; high emotional intelligence and cognitive aptitude; and to have fun. If any are missing, it is time to call a taxi!

Paul Mansell, Major Projects Advisor, Impaqt Consulting Academies acting as a hub for individual and collective development are an increasingly popular approach.

In collaboration with Aspire Europe, I developed the Academy Framework.

This has three primary and five support elements; the typical organisational functions responsible for each element highlight the need for a concerted approach to ensure success.

Each organisation is unique and has different needs, but the elements that need consideration and investment when developing capability are broadly the same. The Career, Competence and Development elements of the framework are the building blocks of any academy and are typically what are developed first. I have found that organisations gain value from training, a key part of the Development element, provided they support professionals by investing in the other elements at the same time, as described earlier.

Organisations such as Shell, Amec and NASA invest in academies for a variety of reasons, including providing a brand for organisational development efforts and hoping for synergies from disparate initiatives. Driving the development of a particular capability (for instance “programmification”, where an academy offers a mechanism to introduce the new ways of working) is becoming increasingly common as organisations are more involved in programmes or major projects.

The future project leader role So what of the future for the major project leader? Competent and experienced project leaders who can demonstrate their success will become even more sought-after and scarce. The following list came from my research and from Simon Pratt, a leading executive search expert at Grosvenor Clive & Stokes. He is often charged with finding

these elusive major construction project leaders who have to move: bb from being constrained by existing delivery models and mindsets to seeking disruptive technologies, delivery models and relationships that can improve the effectiveness and efficiency of the construction process bb from delivering outputs and outcomes to delivering value, both explicit (such as defined benefits) but also implicit (such as enhanced relationships and trust) identifying the range of ‘hard’ and ‘soft’ criteria for success and recognising the lifetime value of the asset created bb from rigorously applying standardised project and programme management approaches to working in a flexible way to deal with an increasingly fast-moving world where customer requirements are expected or encouraged to change, to ensure that value is realised bb from being permanently busy and with never enough time to being a reflective practitioner with the resilience, discipline and emotional intelligence to learn continuously from experience and those around them, and those outside of construction, to deliver success.

Demand for those with leadership capabilities and potential will grow. As an existing or prospective project leader, you should ask yourself the key questions of whether you are you well placed to benefit from the opportunities presented, and how you can maximise your chances of being the inspiration for a future major project case study. b

Donnie MacNicol is Director at Team Animation donnie@teamanimation.co.uk

This article is largely based on the materials contained in Project Leadership by Donnie MacNicol and Sarah Coleman, published by Gower, 2015 The construction productivity imperative - How to build megaprojects better, McKinsey, 2015, http://bit.ly/1I7rEhc

Related competencies include Leadership

TEC HNO LO G Y INF R ASTR UC TUR E

Be sure of your connections

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Helen Garthwaite and Claire Haynes consider broadband challenges for the next generation of buildings

When carrying out a construction or refurbishment project, the property industry now recognises the importance of considering broadband connectivity at the outset. Marketability, value and rental income are likely to decline for both residential and commercial buildings if there is limited connectivity.

This is a concern both for landlords and for occupiers who need premises that can be used by businesses.

Funders are sinking debt into buildings so capital value and rental income must be

protected to ensure a return on investment; meanwhile, developers must provide buildings that are fit for purpose and comply with all requisite standards. Modern and flexible electronic communications cabling and infrastructure is thus needed to meet the long-term needs of building owners and users.

Legislative framework It is widely acknowledged that the Electronic Communications Code (the code) needs a substantial overhaul. It is struggling to support the efficient roll-out of superfast broadband infrastructure and the sophisticated relationship between electronic communications network operators and site providers.

The coalition government took initial steps to reform

the code by launching a consultation, a response to which is awaited. There was further good news in July 2015 when the government published its productivity plan, Fixing the foundations: creating a more prosperous nation (http://bit.ly/1eM0SUd), in which it commits to: bb introduce legislation to reform the code during the first session of this parliament bb roll out superfast broadband of at least 24 Mbps to 95% of UK households and businesses by 2017 in line with the European Commission’s Digital Agenda, which sets targets for broadband speeds and coverage.

The EU Broadband Cost Reduction Directive Directive 2014/61/EU sets out measures to enable and

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reduce the costs of deploying high-speed electronic communications networks, as well as to improve buildings’ internal infrastructure.

Legislation implementing the directive’s measures must be in place this year, and at the end of November 2015, the government issued two separate consultations: the first on implementation, and the second specifically addressing use of Building Regulations to include minimum requirements for the internal broadband infrastructure of buildings.

Where building permits are submitted after 31 December 2016, the directive provides for all new buildings or those subject to major renovation to be equipped with infrastructure that allows users to connect to high-speed electronic communications networks.

New multi-occupancy buildings or those subject to major works are to be equipped with an access point, by which a telecommunications provider may access the building’s internal infrastructure.

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n costs of installing high-speed infrastructure and ducting are incrementally lower during construction than retrofitting.

The directive permits EU member states to develop a voluntary ‘broadband-ready’ label to promote the high-speed readiness of buildings, which has considerable cost-saving potential for owners and occupiers. The label can be given both to buildings equipped with infrastructure and access points complying with the directive’s standards.

After implementation in the UK, we anticipate that the standards for compliance with the label will be set out in construction documentation. In time, they will become a warranted standard on completion of construction projects. It will be interesting to see how this situation develops, and whether different standards are adopted for buildings with varying user needs.

The code Overall, the new draft code probably favours network operators; however, there are benefits for landowners. bb Under the existing code, problems can arise if a landowner requires removal of equipment and the operator does not cooperate.

The new draft code gives landowners termination rights in circumstances that include redevelopment, and shifts the onus to the operator to serve a counter-notice, and to commence court proceedings within a fixed timeframe where removal of equipment is contested. bb There is currently a lack of clarity as to the protection operators acquire by way of code rights and, for commercial premises, security of tenure under the Landlord and Tenant Act 1954. Under the new draft code, the 1954 act does not apply to a tenancy where the primary purpose is to grant code rights or vice versa. This 2 0 A P R I L / M AY 2 0 1 6

should also make it easier for landowners and developers to procure removal of equipment for redevelopment. bb It allows assignment of code rights by site operators, which could help occupiers who wish to change their broadband supplier.

Crucially, the code increases the opportunities for operators to share and upgrade equipment without seeking landlord consent.

Landowners will need to document the nature of rights granted in licences and wayleaves carefully if they wish to control who can operate at their premises, because the code favours operators in this respect.

Considerations for developers Currently, the issue of electronic communications infrastructure is not always considered at heads of terms stage of a construction or refurbishment project. We expect this to change as the market responds to consumer demand and the new legislation takes effect.

Technological infrastructure should be considered at the outset of a construction project to ensure that the legal documents dovetail. The draft code offers increased opportunities for operators to share equipment, and legislation transposing the EU directive will further enhance the position of operators.

As a result, it will become essential for landlords to have a strategy relating to communications, especially for multi-occupancy buildings, and owners will need to ensure that they do not grant generic rights to install electronic communications ducting and equipment, because these will be exercised by tenants and operators. Care must be taken in licences and wayleave documentation to locate equipment in specific areas – for instance, in a plant room identified on a plan – as imprecise wording may allow the apparatus to be moved to an undesirable location.

We are seeing changes in specification requirements for buildings, driven by the need to avoid high retrofitting costs, disruption, impacts on sustainability and a limited choice of network supplier.

There are distinctions between residential and office space, and increasingly technology-orientated businesses will have specific requirements. Occupiers need more equipment, so developers and landlords must increase cable and plant areas while maintaining as much useable space as possible; they should consider designating space to enable the installation of further equipment in future.

Futureproofing There are inevitably time lags between developments Illustrations © iStock

in technology and the enactment of legislation that creates a framework in which it can operate.

Futureproofing buildings for cabling and technology infrastructure is becoming an ever more important consideration, so a long-term view should be taken on any construction or refurbishment project to enable it to meet the connectivity needs of tomorrow’s users.

Landlords should develop a strategy, perhaps in consultation with key occupiers, to ensure that their buildings keep pace with technology. Failure to do so may impair buildings’ flexibility, use and value in the future. b The information in this article was correct at the time of writing (January 2016).

Helen Garthwaite is Partner in the Construction team at Wedlake Bell hgarthwaite@wedlakebell.com Claire Haynes is Professional Support Lawyer in the Commercial Property team at Wedlake Bell chaynes@wedlakebell.com

Related competencies include Construction Technology and Environmental Services

C O NSUMER R EG ULATIO NS

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Just think about it

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Milton Silverman draws attention to the hidden impact of EU regulations

U directives have had a bad press in the UK over the years. They direct EU member states to implement specific, workable national legislation in line with generalised proposals; but sometimes these directives and the subsequent legislation have effects beyond those envisaged. This is arguably the case with Council Directive 2011/88/EU and similar directives, which aim to protect consumers in respect of contracts negotiated somewhere away from the provider’s business premises, and distance contracts negotiated by email or phone.

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the regulations) came into force in June 2014 and apply to valuers, estate agents, surveyors, including approved inspectors and many others. They aim to protect vulnerable consumers from pressurised selling where they have no chance to reflect or compare prices. The actual effects are more wide-ranging, however. The regulations do not apply to councils’ building control bodies, who do not have the same contractual relationship with their customers.

The importance of the regulations is that sellers of goods or services to consumers, but not businesses, must provide certain information and documentation and a 14-day cooling-off period from the time of purchase, failing which consumers are entitled to their money back for more than a year afterwards.

The regulations: bb apply only where businesses are selling goods or services to a consumer who is acting in an individual, personal capacity bb require consumers who enter into most distance or off-premises contracts to be provided with a 14-day cooling-off period following their agreement to sign up for or purchase the goods or services bb require provision of information and documentation (detailed in the regulations) that sets out rights to cancellation for the consumer before they are bound by the contract.

Failure to provide the requisite information and cancellation documentation can be a criminal offence, and there are fines and provisions for enforcement. Most importantly, if the service provider does not give such information, the client has the right to cancel an off-premises or distance contract, and reimbursement of any sums paid for one year and 14 days after the time when the cancellation period would otherwise have

Email to clients Dear (client) If, when you have read the information below, you would like me to commence work immediately (specify the work if not already clear from the context), please email me as follows: “I have read the information below, and attached Request for Immediate Commencement (the request). I now ask you to commence work immediately in accordance with the provisions of the request.”

Information for clients Cancellation provisions Where we are acting for you as an individual in your personal affairs (and not in a business capacity) the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 will apply to your engagement of our services. These require us to provide you with certain information when the contract is made.

In this regard, your attention

is drawn to the Consumer Provisions and other information below.

You have the right to cancel your engagement of our services (the Agreement) within 14 days of the date hereof. You can do so without giving any reason: your attention is drawn to the attached Notice of the Right to Cancel and the Request for Immediate Commencement of Work.

Consumer provisions Our details: bb (name, address and phone number of service provider); our contact email address is the same as that from which this email is sent bb the services we intend to provide are surveyor/valuation services (as applicable) bb the manner in which our fees are calculated and arrangements for payment are set out in the documents enclosed/previously supplied bb the agreement is of indeterminate

duration and it is not possible to set out the exact time by which the services will be fully performed. We shall keep you informed of progress but please contact us if you have any questions relating to the completion of our work. The conditions for termination are set out in our letter of engagement enclosed/previously supplied bb we are RICS members (www.rics.org) and adhere to its code of conduct and complaint-handling service bb you acknowledge that you are aware that we are prevented from starting work on your instruction until after the cancellation period without your consent (see attached Request for Immediate Commencement).

Should you have any complaint concerning our engagement (to include the advice you have been given/fees you have been charged) please contact (name).

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Request for immediate commencement For return to Super Surveyors Co. Ltd If you require us to commence work immediately (specify the work), please email confirming such request or sign and date the form below.

Instructions to commence work immediately To Super Surveyors and Co. Ltd (address and contact details) I hereby instruct you to commence work with immediate effect.

Notice of right to cancel You, the client, have a right to cancel the agreement referred to in the accompanying email within 14 days of the date hereof (the cancellation period). You can do so without giving any reason. To exercise that right, you must inform us (name of organisation, registered, address, phone and email details) in a clear, written statement of your decision to cancel.

You may use the cancellation form below, but this is not obligatory. A dated letter or email to the above address setting out your clear decision to cancel will also suffice. To meet the deadline, your communication must be sent before the cancellation period has expired.

Effects of cancellation If you exercise your right to cancel, we will not undertake any services on your behalf and you will not incur any charges. However, if you request work to begin on your instruction during the cancellation period, and subsequently cancel the agreement after work has started as requested but before the expiry of the cancellation period, we may charge you any fees, disbursements and applicable VAT reasonably incurred during that period.

✂

I am aware of the following: bb I have the right to ask that you do not start work on my behalf until after the 14-day cancellation period; however, I wish you to commence work immediately bb as I have requested work to begin on my instruction during the cancellation period, I will be liable for any fees, disbursements and applicable VAT you may charge me for work reasonably incurred during that period bb in the event that the work is completed by you during the 14-day cancellation period, I will lose my right to cancel.

(Signed and dated by customer)

n commenced (i.e. normally 14 days, although only if all is done properly from the beginning). A customer who has not been supplied with the relevant information will not have to pay.

In relation to service providers, there is provision to enable the customer to request that a provider commence work during the cancellation period (effectively waiving the regulations), provided that the requisite information and documentation has been properly supplied. As long as the customer has received the paperwork on their rights relating to the 14-day cooling-off period, they can waive those rights and request immediate commencement.

In 2014, the Supreme Court considered the case of Robertson v Swift [2014] UKSC50. The owner of a removal business failed to supply the relevant information to the customer.

Their Lordships ruled that the owner was not entitled to his outstanding fees and he had to repay the deposit.

It is far better and simpler to get the paperwork organised beforehand, send it to the client and, having received their signed instructions, to commence work.

The statutory information can be set out on two sides of A4; how best to integrate it into your business practice and PR will require more thought.

Suggested sample forms are shown (on the previous page, left and above), but please note they are drafts only, and you should take legal advice prior to using them. b

Cancellation form This is only to be returned if you do not wish us to continue to act for you in respect of your instruction before the end of the cancellation period To Super Surveyors and Co. Ltd I (client name) hereby give notice that I wish to cancel the Agreement (dated ‌) for the provision of valuation/survey services (as applicable).

(Signed, dated, printed name and address of signatory)

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Milton Silverman is a senior partner at Streathers Solicitors LLP mcsilverman@streathers.co.uk

Related competencies include Client care, Business planning

INF LATIO N INDIC ES

Clause and effect Joe Martin looks at how index-linked inflation clauses are applied, offering a case study of Crossrail’s procurement strategy

I

ndex-linked inflation adjustment clauses provide a simple and transparent method for calculating and reimbursing fluctuations in the underlying costs on a project. They allow contractors to price and manage a contract knowing that they do not need to price in the risk of inflation.

Such clauses can be used on all types of procurement but will be applied differently depending on the contract. bb On design and build and traditional lump-sum contracts, the agreed tender price will be adjusted for inflation in valuations for stage payments. bb On target cost contracts, the target cost itself is adjusted for inflation. bb On framework and term contracts, it is the value of the individual contracts that is adjusted.

When index-linked contracts were first introduced in the 1970s, lump-sum contracts based on bills of quantities were the norm, and the practice was to allocate all the bill items to an index so that the inflation adjustment in each stage payment reflected the mix of work carried out in that period.

From the start, however, some clients adopted an alternative method, where a mix of indices were used to calculate a single index based on predetermined weightings. This latter method has since become the standard approach, with the contract identifying the indices to be used and their weighting. These are then applied in each valuation.

Other clients have adopted the unfortunate practice of applying single, non-construction, indices such as the Retail Prices Index (RPI). However, this creates a double risk for the contractor: the risk of retail price inflation and the Image © Crossrail Ltd

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risk resulting from inflation in their own costs. The introduction of these will lead to either a risk premium being built into the initial price or to pressures on the contractor as a result of insufficient provision for inflation. The practice of using single, non-construction indices usually results from funders or regulators reimbursing contractors based on RPI or something similar, and passing this inflation straight down the supply chain.

The perception is that this does not subject funders and regulators to any risk, regardless of the fact that each link in the supply chain also incorporates an element of risk into their rates.

Considerations when implementing indexation 1. Define clearly the work that is subject to review, in line with the index.

2. Ensure that the mix of indices represents the work being undertaken.

The indices chosen will affect the price changes recorded and should be selected carefully to best represent both the work subject to indexation and the parties’ intentions.

3. Ensure that the reference to the chosen indices is clear and unambiguous.

The indexation clause of a contract should identify the indices selected by their complete titles, index numbers and any identifying codes. n A P R I L / M AY 2 0 1 6 2 3

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n 4. Check the availability and frequency of the index.

5. Declare the base date to be used when updating.

6. State the frequency of price adjustment. The indexation clause should specify whether price adjustments are to be made at fixed intervals – such as monthly, quarterly, half-yearly or annually – at stages or at the beginning or end of the contract.

7. Specify the date on which the price adjustment calculations are to be made and what index is to be used; normally, this will be the latest version of the index available on the date specified.

8. Be clear about how to deal with the changing status of the indices e.g. whether they are provisional, firm etc.

Some contracts allow for inflation to be recalculated in later periods when provisional indices become firm. For simplicity, others do not.

9. State how to implement revisions to the index, changes to the index base date, discontinuation etc. With price adjustment formulae indices (PAFIs), revisions are uncommon and the indices will continue to be calculated on superseded series. When a series is discontinued, BCIS will provide advice on how to proceed until the end of the existing contract.

10. Define the method for calculating the inflation adjustment. The normal approach is to calculate the percentage change from the base date for each index and then to multiply it by the weighting in the contract to arrive at an overall percentage change.

11. Define the number of decimal places to be used in the calculation.

Case study: Crossrail BCIS and Crossrail Ltd have produced a case study on the latter’s procurement strategy to award a number of delivery contracts where the employer took on the risk associated with inflation by letting NEC3 contracts, including the Secondary

Option X1. These NEC3 contracts use PAFIs to identify the impact of inflation, measured against the contract base date, and to change the contract “Total of the Prices” periodically by way of price adjustment.

Crossrail’s procurement strategy for contracts of a certain construction duration and commodity mix was to request that contractors did not price for the risk of inflation but instead confirm that the employer would be allocated the risk. This procurement strategy had two effects: 1. initial tender returns that excluded contractors’ inflation allowances based on broad assumptions over long periods of time 2. an agreed, contractual and accurate method to measure the impact of inflation during the contract and amend the “Total of the Prices” accordingly.

With the widely reported trend for decreasing and flatlining inflation in recent years, it could be argued that this procurement strategy and risk allocation have saved Crossrail in terms of the initial contract award values.

The Crossrail project Costing £14.8bn, Crossrail is one of the biggest transportation projects in Europe, and will provide high-frequency, convenient and accessible rail services for London and the South East. From 2018, Crossrail trains will travel from Maidenhead and Heathrow in the west to Shenfield and Abbey Wood in the east, via 21km of new tunnels under central London. The service will link Heathrow Airport, the West End, the City of London and Canary Wharf.

The project will involve the upgrading of 28 surface stations – 11 of which are major reconstructions – constructing 21km of new sub-surface twin-bore railway and upgrading 90km of surface network, as well as building nine sub-surface stations.

At Crossrail we have administered NEC3 Contracts with Secondary Option X1 clauses using the BCIS price adjustment formulae indices (PAFIs). By using these, we have been able to procure contracts where inflation is identified as an employer’s risk that could otherwise have been priced by our tier 1 contractors at a potentially high risk premium. The biggest benefit of using the BCIS PAFIs is that they promote a collaborative commercial arrangement between the project manager and contractor by setting out in the contract tender process exactly how the impact of inflation will be measured and how the contractor will recover costs through the administration of a periodic price adjustment.

Robert Stockwell, Crossrail Ltd

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Image © Crossrail Ltd

Contracting arrangements Crossrail adopted the NEC3 suite of contracts, amended as appropriate, to be the standard form of contract for fulfilling its requirements. The choice was largely determined by the scope of work, the maturity of the design and the nature of the risks. Most contracts were let on either Option A or B (lump sum) or Option C (target price).

For NEC3 Option C contracts, the incentive mechanism provides an equitable share of savings and a real incentive to control costs so that the project can be completed within the target price.

Crossrail’s procurement strategy recognised that the best affordable value would be achieved by a sensible and fair allocation of risks between the parties to the contracts. Requiring contractors to take responsibility for risks that they cannot assess or manage would be likely to result in either high risk premiums or in commercial pressures caused by insufficient provisions.

Inflation risk management The procurement strategy stipulates that the NEC3 contracts with Secondary Option X1 (Price adjustment for inflation) are let on lump-sum Options A and B and target Option C. The calculation of the price adjustment formula varies depending on which form of contract is applied (A, B, C, D or E). The NEC3 contract provides the calculation to be

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applied using the indices, proportions and base date information set out in the data of each Option X1 contract. With all data and calculations being clearly defined in the contract data and agreed between the parties as part of the contract negotiation process, this leaves limited opportunity for the inflationary measure (price adjustment) to be open to interpretation, and promotes a collaborative commercial arrangement between the project manager and contractor.

The Secondary Option X1 was applied to a number of stations, systems and civil engineering contracts, where the commodity mix and contract duration were deemed to represent the best opportunities for Crossrail to take on the cost risk associated with inflation.

Crossrail has used the PAFIs published

by BCIS. Each contract has a different mix and weightings of indices, modelled according to the works that are to be undertaken. The index series that are used have been selected from: bb PAFI Building Series 3 bb PAFI Civil Engineering 1990 Series bb PAFI Specialist Engineering Series 3.

Choosing the indices and weightings Each contract was procured with its own unique set of data used to measure the impact of inflation and ensure that accurate price adjustment is applied. This means the contractor recovers the full entitlement of budget to match the cost of the inflation incurred. The indices to be

used in the measurement, the proportions that those indices would represent, any non-adjustable percentage and the base date were allocated according to the type of activities to be carried out in scope of the works, and the proportion of the whole works that these activities represent. The indices were then agreed between the parties as part of the contract negotiation and document execution.

Implementation in contract administration So that each of the 14 contracts that Crossrail procured with Secondary Option X1 were administered consistently across the programme, it specified, designed and developed an online contract management application where all data and calculations are stored and reports generated. The application limited the individual user to entering data and ensured that there was no opportunity for differing interpretations of the contractual requirements. It was also designed to interface directly with the existing cost management system, ensuring accurate and consistent reporting of budgets and performance throughout the business.

The indices are downloaded from the BCIS online service as a csv file and imported into the application directly, although they can also be downloaded as xml files. The software then applies the necessary calculations, taking into consideration the form of contract – A, B or C – and provides

the relevant inflationary measure, that is, price adjustment formula, for each.

This is then applied to the “Price of the Work Done to Date”, taken from the periodic assessment of the contractor’s application, to calculate the periodic price adjustment.

This in turn provides an accurate adjustment of the contractor’s “Total of the Prices” for the impact of inflation.

It is therefore paramount that when “Implementing a Compensation Event” that it is assessed at base date values.

This means that any aspect of the agreed quotation making up the event that is not already priced at the contract base date must be deflated back to the base date set out in the contract data. If compensation events are not implemented at base date values, there is the potential for the contractor to receive an assessment of inflation twice – once with the compensation event and again when the periodic price adjustment is applied. The application developed by Crossrail provides this calculation for the user in accordance with the details set out in the NEC3 suite.

Conclusions On a project of the size and complexity of Crossrail, a centrally administered application controlling the assessment and processing of any budgetary requirement has proved invaluable. b With thanks to Robert Stockwell, Programme Cost Manager of Crossrail Limited, and Sue White, BCIS Head of Indices, for their help preparing this article.

Joe Martin is BCIS Executive Director jmartin@bcis.co.uk

A full version of the Crossrail case study is available at: http://bit.ly/249TeJd PAFIs are available on subscription from BCIS at http://bit.ly/1PFdzyu

Related competencies include Contract Practice and Project Financial Control and Reporting

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A DV E RTI S I N G

QUANTITY SURVEYING – EXPERT WITNESS CONSULTANCY Levels from Consultant to Associate Director. Salaries typically up to £100k+benefits+bonus, or above for exceptional candidates.

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The successful candidates will join a highly regarded expert team and have the opportunity to work on some of the largest national and international projects currently in arbitration or litigation. Black Rock PM invests in its staff and provides a unique environment for the development of future experts.

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