Built Environment Economist - Australia and New Zealand - Sept 2022

SEPTEMBER - NOVEMBER 2022

The text pages of this publication have been printed on paper manufactured in Australia and produced from responsibly managed forests.

06 STRENGTH IN NUMBERS

32 PART TWO: EXPERT WITNESS

16 BALANCING RISK WITH A RISE AND FALL CLAUSE

36 THE IMPACT OF EMBODIED CARBON

CONTENTS 2 CEO Letter

28 All About Tendering

4 Visionaries

31 New Zealand Commercial Build Projects To Count The

6 Strength in Numbers

‘Cost’ Of Carbon

11 Building Momentum to Net Zero

32 Part Two: Expert Witness

16 Balancing Risk with a Rise and Fall Clause

36 The Impact of Embodied Carbon

20 Wellbeing in the New Zealand Construction Industry

39 Measure Once Build Once

24 What Are The Top Three Things That You Would Like

44 Building Cost Index

Asset Owners To Know About Quantity Surveying?

About Built Environment Economist is the flagship publication of Australian Institute of Quantity Surveyors (AIQS). Produced quarterly, Built Environment Economist seeks to provide information that is relevant for quantity surveying, cost management and construction professionals.

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ISSN 2652-4023

CEO LETTER

ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS Escalation, the requirement for Rise and Fall Clauses in Construction Contracts, and the role of the Certified Quantity Surveyor

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CEO LETTER

As witnessed over the past 12 months, the global building boom, coupled with material supply constraints has resulted in time and cost impacts on construction projects, which in turn has led to the collapse of some construction firms and calls for the re-introduction of rise and fall clauses in construction contracts.

In a recent AIQS survey, 78% of respondents thought the rise and fall clauses should be reintroduced as the norm in construction contracts, and a further 14% were unsure whether this was required.

Given this high inflationary climate and on-going material shortages, the inclusion of rise and fall clauses in commercial construction contracts is essential to ensure the ongoing viability of the construction sector.

Vincent | Young (May 2022) have described rise and fall clauses as allow(ing) the price of a fixed-price or lump sum construction contract to increase (or potentially decrease) in accordance with fluctuations in supply prices and wages growth, for specific materials and labour, in the geographical region where construction occurs.

While the most accurate way of assessing any rise or fall is to adjust the amount of the actual variation in the costs of materials or labour which occurred during the relevant period, an alternative method is for the price to be adjusted by reference to a formula set out in the contract.

However, in the current hyper-inflationary environment utilisation of a rise and fall formulae is more than likely to result in a non-transparent and highly inaccurate pricing adjustment, principally because accurate pricing indices that reflect reality do not exist, and Principals are unlikely to agree on a “risk buffer” which cannot be substantiated. Use of formulae

which incorporates ABS Construction Output indexes is particularly problematic in this high inflationary environment where buildings are regarded as a set of standardised homogenous components (which they are not). It is also worthwhile noting that siteworks such as demolition, land clearance, roads, and external services such as drainage, water and electricity connection are excluded from the indexes.

In a more typical inflationary environment (incremental escalation) use of a building cost index can often assist in calculating any escalation where there is a long lead time between the base data pricing used in a tender and the actual project commencement and completion dates.

Another consideration is introducing a dead band, where the contractor owns the movement up or down in the range.

An adjustment would be triggered when it falls outside this range and the contract is adjusted up or down.

The escalation issue has been highlighted by the Australian Constructors Association in a July 2022 paper which noted that: Without an adjustment mechanism, head contractors are left unable to pass significant and often unforeseen price increases back to the asset owner.

While larger, more sophisticated subcontractors will often have the ability to incorporate more escalation risk in their pricing, the greater risk is associated with smaller contractors and sub-contractors who do not have the capacity to account for market volatility (significant changes in time and cost) in their products and services. In addition, care will need to be taken to identify potential under-pricing to win contracts, with the intention of using a rise and fall clause to claim for cost differences. To assist with calculating any escalation that

could not have been foreseen, baseline pricing data will be required.

Some quantity surveying firms will have systems in place to project future construction costs through an understanding of supply markets, transport costs, exchange rates and other inflationary pressures.

While not being the remedy to all construction contract issues, the inclusion of rise and fall clauses with an independent verifiable check mechanism offers a win-win solution for contractors and principals alike. In this area, governments and government agencies are best positioned to lead the change to achieve an equitable outcome in circumstances where certainty of supply and cost of construction labour and materials cannot be achieved.

Here, the Certified Quantity Surveyor (CQS) has an important role to play in independently verifying project budgets and any adjustments to the cost of installed building components brought about by supply and/or costs issues which were outside the contractor’s ability either lock in or were forced upon them due to contributing factors which were outside its control.

GRANT WARNER CEO Australian Institute of Quantity Surveyors

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 03

VISIONARIES

VISIONARIES PHIL HEBDEN FNZIQS, Reg QS

When I was asked to write this piece, I thought it would be easy, but its not.

As we reflect on our visions for the future, we get torn between yearnings for the good old days. Where everything was scheduled, the drawings were coordinated, and projects all finished on time with minimal variations and, the industry that we have today, the technology available to us and the different focus of clients. More effective methods of procurement, more emphasis on the value of cost and time, how innovative design adds value and, the ever-increasing global capacity for sourcing capacity, components, and capability.

The challenges that our industry faces are well documented, and oft lamented pieces of precedence in law.

The Construction Accord and other organisations are attempting to resolve broad issues and our specialism is firmly in the epicenter of the debate.

The emergence of new elements of construction, whole life costs, sustainability, and carbon counting are all evidence of new opportunities for the Quantity Surveyor to add value.

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I see the Quantity Surveyor of the future as a more dynamic role, involved more in supply chains, partnering, strategic alliances and technology expertise. The adoption of BIM, the use of measuring software is going to be imperative to all.

Our involvement in the design, methodology and construction process both in the PQS realm and the main contractor realm will increase as developers, both private and in government, search best for project procurement rather than just the lowest price.

Where to next?

VISIONARIES

STEPHEN NGAI, MAIQS

Quantity Surveying has continued to thrive as a relevant profession and important contributor to the construction and asset development sector, despite being questioned on its future survival in the face of technologies and automation such as BIM. Comprehensive training in a systematic approach, the skillset and ability to break down elements of works, and the understanding and application of unit costing have enabled Quantity Surveyors to adapt and evolve to a wide variety of roles.

Over my professional life, I have seen fellow QSs venture into various careers, including project managers, builders, developers, asset managers, value management facilitators, etc.

At times, we are at a crossroads in finding identity. When I first entered the profession decades ago, there were debates in the UK on whether the name Quantity Surveyor best represented the profession. Unlike doctors, lawyers, and engineers, people do not automatically know what a QS is. In Australia, to my knowledge, only a few universities offer degree courses titled Quantity Surveying,

which has undoubtedly contributed to our anonymity.

Whether we are called cost managers, cost planners, estimators, or construction economists, the ability to provide meaningful advice to assist informed decision-making is the key to the continued recognition of the QS profession. Providing accurate cost estimation, feasibility analysis and projection, analytics based on benchmarking, design evaluation through to procurement and contract advice – we are key influencers at critical points in the development and construction lifecycle.

I have always felt that QSs penetrate the construction and property sector so widely that they are no less than the real general practitioners among all surveyors. No, I am not advocating a change of name, but rather that we can be confident and comfortable about our Quantity Surveyor title.

Over the recent years, there have been multiple acquisitions of successful QS firms by large multi-disciplinary practices and engineering corporations. This reinforces the view that there is immense value in the expertise of our profession.

I do hope that QSs can make the most from these opportunities to play a significant role in leading the way in an expanding, multi-facets industry rather than being seen as one of the many contributors to EBITDA. We talk a lot about BIM and digital technologies. I am surprised that we have not gained much progress in terms of application in our industry. If the designers have drawn a line or an object, the computers will have captured the measurement and data, even at the sketch planning stage. What’s missing is identifying the captured data in a meaningful way that we can all share. I strongly think that if machines can do it, we should leave it to the machines to do it faster and more accurately. Saying garbage in, garbage out is not helping.

The profession should not hesitate to take the lead and work together with other design counterparts to forge a path.

As a profession, we have done well in responding to the evolving needs of our clients. In the future, I hope we are more than just responding but rather defining our unique identity without limits or boundaries.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 05

SUSTAINABILITY

STRENGTH IN NUMBERS THE RACE TO REDUCE EMBODIED CARBON

By Stephen Ballesty FAIQS, CQS with Sarah Slattery MAIQS, Jeffery Robinson, Steven Peters and Stephen Mitchell

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SUSTAINABILITY

Embodied carbon refers to the greenhouse gas emissions arising from the manufacturing, transportation, installation, maintenance, and disposal of building materials.

Embodied carbon is a significant percentage of global emissions and requires urgent action to address it.

Overall, buildings accounted for 36% of global energy demand and 37% of energy-related CO2 emissions in 2020.

AIQS assembled a panel of industry leaders in Melbourne at the BE Summit on 13 May 2022. This article summarised the panel’s discussion in taking us beyond the rhetoric and highlighting how we can dramatically reduce embodied carbon in our built environment.

Should wish to contribute to this important and continuing discussion please contact AIQS.

ADOPTING A ‘RACE’ ANALOGY Our panel had a challenging topic and only limited time to achieve AIQS’s objective.

We addressed three questions: 1.

The starting line, how do we begin?

2. Is it a sprint or a marathon, or a steeplechase?

3. What’s the finish line look like?

Embodied carbon is greenhouse gas (GHG) emissions associated with materials and construction processes throughout the whole life cycle of a building or infrastructure being the sum of upfront embodied carbon, inuse embodied carbon, and end-of-life embodied carbon, measured by CO2-e.

The embodied carbon challenge impacts on the design, delivery, and management of the built environment. Our industry

needs to lead the widespread transformation that is required to achieve better decision-making and asset performance in terms of sustainability, resilience, affordability, and liveability in support of improved quality of life.

READY: WHERE TO START? Understanding the carbon footprint issue: operational vs embodied carbon.

Currently 35-45% embodied, with the rest from operational carbon. According to our panel much of our market’s focus has to date on operational emissions, e.g., energy efficiency. Without collaborative action, embodied carbon is forecast to account for 85% of Australian buildings’ total carbon emissions by 2050. Hence, we are at the start of an important ‘race’ to embrace change.

AIQS is currently working with the Materials and Embodied Carbon Leaders Alliance (MECLA), the Green Building Council of Australia (GBCA), National Australian Built Environment Rating System (NABERS), and other organisations in support of a range of measurement methodologies and assessment tools.

Further AIQS’s Information Paper: Life Cycle Cost Analysis (1st edition, 2022) provides a valuable comparative and management tool that can influence the design, specification, construction, operations, and sustainability performance.

Quality information for improved decision-making. Increasingly we are seeing Environmental Product Declarations (EPDs) and climate declarations. These need to be independently verified and registered to communicate transparent and comparable data and other relevant

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 07

SUSTAINABILITY

EMBODIED CARBON

UPFRONT CARBON

CRADLE TO GRATE

B6

OPERATIONAL ENERGY

B7

OPERATIONAL WATER

C3

C4

D

BENEFITS & LOADS

DISPOSAL

C2

WASTE PROCESSING

C1

MATERIAL TRANSPORTATION

B5

DECONSTRUCTION/DEMOLISHION

B4

REFURBISHMENT

B3

REPLACEMENT

B2

REPAIR

B1

MAINTENANCE

A5

BEYOND BUILDING

END OF LIFE

IN USE

USE

A4

CONSTRUCTION & INSTALLATION

A3

MANUFACTURING

A2

MATERIAL TRANSPORT

RAW MATERIAL SUPPLY

A1

PRODUCT TRANSPORT

CONSTRUCTION

PRODUCT

REUSE RECOVERY RECYCLING

CIRCULAR ECONOMY WHOLE LIFE CYCLE CARBON

OPERATIONAL CARBON

CRADLE TO PRACTICAL COMPLETION CRADLE TO GRAVE CRADLE TO CRADLE

Figure 1: Embodied Carbon, MECLA Dictionary of Carbon (2022) per BS EN 15978:2011

environmental information about the life-cycle environmental impact of a wide range of products.

To date a great deal of industry emphasis, based on the owner’s focus, has been on operational carbon reporting, e.g., energy efficiency performance. In addition to expanding this effort as a priority to measuring embodied carbon of structures (concrete, steel, masonry, timber, etc.), there is increasing need to broaden our understanding on the greater contribution of improved building services.

SET: WHERE ARE WE UP TO? We are modifying and broadening our performance metrics for property assets and facilities.

“If concrete were a country, it would be the third largest emitter of greenhouse gases on earth, behind only China and the United States.”i It is clear that more needs to be done to address embodied carbon, and that our industry must take the lead in doing more.

This will include verification protocols and greater supply chain transparency than has been the case in the past.

i https://phys.org/news/2021-10-concrete-world-3rd-largest-co2.html ii https://www.worldgbc.org/sites/default/files/WorldGBC_Bringing_Embodied_Carbon_Upfront.pdf

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The World Green Building Council has provided a 2019 reportii on how we as an industry can reduce our embodied carbon footprint: • measure embodied carbon emissions across the entire construction life cycle • establish a baseline of current contributions and reduction targets • adopt best practices for material selection based on lowest embodied carbon impacts • design with a low carbon approach in mind, and a life cycle assessment (LCA) approach throughout

SUSTAINABILITY

• decision makers need to lead by example in requiring all projects to be net-zero embodied carbon.

Given the embodied carbon of building elements and materials for new construction projects, it is also worth thinking about the potential for avoiding these emissions by retaining existing buildings and redeveloping rather than knocking it down and starting again.

The use of EPD statements from material manufacturers should be used in the materials selection process. EPDs for specific products compliant with ISO14025 and EN15804 have been assessed as the highest level (preferred) of quality data.

For example this is reflected in the New Zealand Government's 2022 Whole-of-Life Embodied Carbon Assessment: Technical Methodologyiii for assessing the embodied carbon of new buildings.

The new Green Star tool also now provides a basis for rewarding embodied carbon reduction. By way of example, the 500 Bourke Street refurbishment experience, in the project feasibility ISPT faced this choice to demolish and start with a blank canvas, or to retain the building and refurbish preserving the existing embodied carbon. Opting for the latter, ISPT avoided the carbon generated through the construction and manufacturing of a new concrete and steel structure. In addition, ISPT also made a commitment to save and rehome furniture and other materials. Through the project we were able to save for reuse over 15,000 furniture items, and 42,000 ceiling tiles plus whitegoods and blinds. Of course, where possible the project’s preferenced the use low carbon materials for all new works involved in the refurbishment.

The preliminary life cycle assessment showed that the decision made resulted in the avoidance of approximately 57,000 tonnes of carbon equivalents (CO2e),

including 40,000 tonnes attributed to the structure alone. To put this into context – the total annual operational carbon emissions across ISPT portfolio is about 52,000 tonnes of CO2e. So, we were able to avoid more than the total annual emissions of our whole portfolio.

GO: LESSONS LEARNT, AND THE BUSINESS CASE FOR CHANGE? Until now, there was no published embodied carbon benchmarking data based on real projects available in the Australian marketplace. Without benchmarking embodied carbon, net zero emissions targets will remain elusive.

Slattery has developed our methodology, informed by international frameworks, to ensure data is consistent, comparable, reproducible, precise, and complete. The release of the ‘Slattery Upfront Embodied Carbon Benchmarks’ in May 2022, during the BE Summit, is in recognition of the importance of this issue as part of

retrospective reporting, and Whole Life Cost (WLC) considerations.

The calculation of embodied carbon needs to become standard practice. Currently the industry leaders have the opportunity to explore voluntary initiatives, but our panel felt that this would be increasingly, beyond investment mandates and ESG reporting, that embodied carbon disclosures would be regulated. Examples in Europe and the USA were cited.

In practical terms, it will be about taking a holistic approach and prioritising items with the most ‘bang for the buck’ in carbon contribution and considering the life extension of future assets and existing facilities. This will include abandoning short-term focused and wasteful practices, and embracing the circular economy, accountability and demarcation responsibility for all life cycle costs. Examples include extended service life expectations and more use of ‘coldshell’ fitouts. Such principles can readily be reflected now in Fitout Guides issued

LEVEL OF DATA QUALITY

MATERIAL OR PRODUCT SPECIFICATION AND QUANTITY DATA

MATERIAL OR PRODUCT EMBODIED CARBON DATA

HIGHEST (PREFERRED)

As-built informa�on for material/product specifica�ons and quan��es, that include allowances for site waste

Benchmarked material quan�ty data from similar building types

4

Detailed Schedule of Quan��es, reflec�ng amounts and specifica�ons of materials included in the building contract

New Zealand sector EN 15804 compliant EPD for product type

3

Quan��es take-off from a BIM model used in the design process

Global EN 15804 compliant EPD for product type

2

Rough es�mates of material quan��es and material types at early stage/concept design

Embodied carbon data for product type from non-EN 15804 compliant EPD, or other databases

Benchmarked material quan�ty data from similar building types

Default values

5

1

LOWEST (TO BE AVOIDED)

Figure 2: NZ Whole-of-Life Embodied Carbon Assessment: Technical Methodology (2022) iii https://www.building.govt.nz/assets/Uploads/getting-started/building-for-climate-change/whole-of-life-embodied-carbon-assessmenttechnical-methodology.pdf

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 09

SUSTAINABILITY

to managers and tenants on new and existing leases, to improve the selection of materials and to be mindful of any stripped out and makegood works at the end of the lease. Our industry can reduce waste and enhance its re-use / recycling practices, to meet embodied carbon targets as part of the circular economy.

Of course, all panelists agreed that there are considerable benefits of regulating disclosure, not the least of which is the standardisation of reporting requirements and as a basis for performance benchmarking. Interestingly, Green Star in Australia and New Zealand have recently upgraded with a greater focus on reducing embodied carbon.

Global warming potential (GWP) / CO2e metrics will be the common basis for reporting. However, this the growing number of criteria and metrics that our industry will need to embrace to describe future project and facility risks, the impact of the circular economy concept, various types of obsolescence and support of the UN’s 17 sustainable development goals (SDGs)iv.

STRENGTH IN NUMBERS Achieving net zero embodied carbon for the entire built environment will require widespread transformation and collaboration across the whole life cycle to support the decarbonisation of our industry’s practices and outputs embracing the circular economy and deploying more low embodied carbon alternatives. Such action should deliver a variety of environmental, social, and financial benefits of taking a leadership position within transition to a decarbonised the built environment.

This transition will involve all sectors and requires leadership and innovation from all stakeholders –investors, developers, designers, suppliers, constructors and managers of our built environment.

There will need to be stronger policy and regulatory support from governments and access to finance.

iv https://sdgs.un.org/goals

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In conclusion our Panelists were realistic and optimistic, underscoring the focus on a “whole of life” approach and the need to “just do it”. Our “strength in numbers” means that our industry can address the big issues and contribute to more sustainable developments and the “quality of life” for all.

This article has been written and Stephen Ballesty FAIQS, CQS, Director at In-Touch Advisory and was panel moderator for this event. Stephen is the AIQS’s representative to Standards Australia for FM standards.

Our expert panellists included Sarah Slattery MAIQS, Managing Director at Slattery Australia; Jeffery Robinson of Global Sustainable Design Expertise Leader at Aurecon; Steven Peters, Senior Manager, Sustainability at ISPT; and Stephen Mitchell is the Past Chair and Advocacy and Marketing Director of EPD Australasia.

NET ZERO

BUILDING MOMENTUM TO NET ZERO

By Kathy Verheyen

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NET ZERO

The building and construction industry’s journey to net zero emissions made a stopover in Sydney in May 2022. At one of Australia’s most historic buildings, the old ‘Rum Hospital’ turned gold coin minting facility, dozens of people came together to discuss how to address some of the sector’s most intractable problems.

Among those gathered at The Mint were CEOs of several ASX-listed companies, government officials and other participants of the built environment’s ecosystem. The occasion was to mark the first anniversary of the Materials & Embodied Carbon Leaders’ Alliance, or MECLA, which aims to transform the sector to meet the decarbonisation targets laid out in the Paris Agreement.

We need to know how much embodied carbon goes into a residential tower or office building, a new major road project or rail infrastructure for the next generation of commuters The case for change is strong. The built environment sector is responsible for a quarter of Australia’s carbon emissions¹.

Construction materials alone make up 5-10% of Australia’s emissions². The

construction sector employs almost 1.2 million people³, illustrating its importance to the nation’s economy. It is what is called a “hard to abate” sector when it comes to reducing carbon emissions.

The impetus for founding MECLA stemmed from a realisation that it would need industry and government to work together to achieve the sector’s transition to net-zero carbon building materials.

The sector’s issues, however, are too complex and difficult to be overcome by individual organisations, let alone at the speed that is required. This was also one of the main conclusions of the report “The Time is Now – Tackling Embodied Carbon in the Building and Construction Sector”⁴, which was produced by WWF and Presync. And it coincided with a Lendlease report, which posed the question: what is (really) stopping us from using low embodied carbon materials⁵?

With the support of 42 founding partners, of which AIQS is one, from across the building and construction sector and funding from the NSW Government, MECLA set up working groups to address the key levers they had identified to drive change. And those groups have come up with a list of the most pressing questions, including: • How to convince the manufacturing industry that there is sufficient demand for low embodied carbon building materials? It’s critical for the industry to pivot towards those materials.

• What is the best way for the sector to learn from each other about how to manage the climate transition in a non-competitive environment?

• How do we measure embodied carbon and benchmark different products against each other?

• What language is suitable when asking about the right design and the right materials for the buildings of our future?

An estimated 60% of buildings by 2050 haven’t been built yet⁶.

• How can we support manufacturers of materials such as steel, aluminium, cement, and concrete to reduce carbon intensity? How can we make low carbon and innovative materials more visible?

There were, of course, many more questions. But let’s look at these in a little more detail.

If we want manufacturers to produce more low carbon building materials, we need to give them confidence that there will be enough demand in the market for these products. Some industries will find the transition easier than others. The cement and concrete industry, for example, has innovated in the last decade. It has developed cement alternatives and new products such as geopolymer concrete, which are widely available today. In other cases, the transition appears to be prohibitive, or the technology is not yet available at a large scale. But what they have in

¹ Source: https://theconversation.com/buildings-produce-25-of-australias-emissions-what-will-it-take-to-make-them-green-and-wholl-pay105652#:~:text=Consider%20the%20impact%20of%20one,more%20buildings%20will%20be%20needed. (on 4/8/2022) ² IS Impact Notes: Low Embodied Carbon Materials, p.2, Source: https://www.iscouncil.org/is-impact-notes-low-embodied-carbon-materials/ (downloaded on 4/8/2022) ³ Source: https://www.statista.com/topics/6374/construction-industry-in-australia/#topicHeader__wrapper (on 4/8/2022) ⁴ Source: https://wwfint.awsassets.panda.org/downloads/wwf_decarbonising_building_and_construction_materials_report.pdf (downloaded on 4/8/2022) ⁵ Lendlease report “low embodied carbon in construction materials what’s stopping us?”, Source: https://www.lendlease. com/au/-/media/llcom/better-places/2020/low-embodied-carbon-in-construction-materials-formatted-and-proof-read-v2. pdf?la=en&hash=D95F095928434062D7C5FF1BEA4D49D9EEBEC760 (downloaded on 4/8/2022) ⁶ Source: https://www.c40.org/what-we-do/scaling-up-climate-action/energy-and-buildings/#:~:text=Construction%20materials%20and%20 the%20building,haven't%20been%20built%20yet. (on 5/8/2022)

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NET ZERO

common is this: if manufacturers see constant, clearly defined demand for local, low embodied carbon building materials, they will act. So how can we demonstrate this demand? MECLA is currently exploring with the NSW and other state governments a publicly available target for reduced embodied carbon in building materials set by head contractors as a pre-requisite when tendering for government work.

This leads us to another question: How do we measure, disclose, and account for the embodied carbon in our buildings?

This is a crucial step. It needs to involve everybody in the system. That includes small innovative material developers, large manufacturers, individual home builders, large infrastructure developers, architects, engineers to head contractors, financial investors and government and standard setting agencies.

MECLA’s event: The Mint this May (above) and The Mint this May (below).

Working collaboratively across these topics is central to achieving the net zero carbon goals that governments and industry organisations are setting themselves.

We need to know how much embodied carbon goes into a residential tower or office building, a new major road project or rail infrastructure for the next generation of commuters. To do that, we need to know how much carbon goes into each part of these structures, such as the steel and cement foundations, the glass windows, the timber panelling, the aluminium façade, and all the other the systems that keep a building going.

And we need to find out how new and innovative, lower embodied carbon

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NET ZERO

products compare to established materials – not just from the point of view of production, but also from a performance.

MECLA will shortly release a discussion paper for feedback and information purposes that defines relevant embodied carbon benchmarking methods for materials, buildings, and infrastructure already available in Australia.

Developing a common language is another key element. Being able to specify what we want means using the right language. An example where a single word can have too many meanings attached to it is ‘green’. Definitions for what constitutes a ‘green’ building product are not as clearly defined and regulated as the square meterage for a chicken to have its eggs labelled free range. If you ask ten people what ‘green’ means to them, you will likely receive ten different answers ranging from, made with low to zero embodied carbon, made with some to 100% recycled or reused content, ethically sourced to responsibly made, from partially or fully offset or made with renewable energy or maybe even painted green. MECLA has released a Dictionary of Carbon⁷ which provides common language definitions for more than 60 popular carbon-related terms used in the built environment and related industries. Inclusions range from absolute zero carbon and adaptive reuse to upfront embodied and whole-life carbon.

While some working groups are assessing how we can best demonstrate demand for low embodied carbon materials, others are trying to figure out how best to provide these materials when they are required and at a competitive cost. Working

group members share – in a non/precompetitive environment – best practices and case studies, while educating themselves and others in the industry about current developments and methods.

MECLA’s website⁸ contains a growing library of case studies⁹, brochures on low embodied carbon building materials and other resources¹⁰. The working groups host regular knowledge sharing events, known as MECLA Spotlight events¹¹, that are freely available.

mechanisms. Concurrently, MECLA members will continue to work together to ask important questions about specifications of low carbon materials and future demand. These questions include how can we catapult these materials into the mainstream? How can embodied carbon become a factor in financial decision making and procurement terminology? And what else can we do to assist manufacturers in their transition to low embodied carbon materials?

All of these issues matter greatly – individually and as a whole. Any one solution won’t change the system if the others are not in place. Working collaboratively across these topics is central to achieving the net zero carbon goals that governments and industry organisations are setting themselves.

Increasingly, it also affects companies’ ability to attract investment, including from superannuation funds and government procurement agencies, which are putting much more scrutiny on the issues.

We knew when we began MECLA that we had a strong case. We knew we had to change the system in order to transition the building and construction sector towards decarbonisation. We knew it was the right time to move ahead and we had the research to back it up. With just more than a year having passed, we can see that there is far more that we can achieve than we originally envisioned. And there are many more people and organisations who think the same as we do and want to be the engines of change.

Open collaboration, a solid governance structure, knowledge sharing and transparency, along with robust discussions, have been successful for MECLA, which has more than tripled its partners to over 130 in just one year.

The alliance continues to grow and is moving to its next phase - with funding from several state governments and industry organisations – that will take the collaborative format to a national level.

As a CEO said at MECLA’s event at The Mint this May: “You’re either inside the tent talking about those real issues or outside the tent observing, and it’s better to be inside the tent.”

In this new phase, MECLA will build on the foundations it has already laid and hone in on cementing carbon targets into policies, regulations and standards, rating schemes and project financing

⁷ Source: https://mecla.org.au/wp-content/uploads/2022/07/MECLA-Glossary-Dictionary-ofEmbodied-Carbon-final-17052022.pdf (4/8/2022) ⁸ Source: https://mecla.org.au/ (4/8/2022) ⁹ Source: https://mecla.org.au/case-studies/ (4/8/2022) ¹⁰ Source: https://mecla.org.au/resources/ (4/8/2022) ¹¹ Source: https://mecla.org.au/spotlights/ (4/8/2022)

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ADDITIONAL LINKS: Link to video on 16 May event: https:// youtu.be/27b-fIx0ZBo Link to more information on 16 May event: https://mecla.org.au/governmentindustry-event/ Link to MECLA website: https://mecla. org.au/

This article has been written by Kathy Verheyen, Lead Innovation Project at Climate-KIC Australia and project manager for MECLA. AIQS is a proud to be a MECLA Partner.

Stay on top of the 2022 NCC changes with WoodSolutions Technical Design Guides The 2022 National Construction Code will be adopted no earlier than 1 October 2022 with transition periods being considered for some requirements Changes to the NCC include the introduction of the new livable housing requirements, new residential energy efficiency and condensation mitigation requirements.

WoodSolutions Technical Design Guides will be updated to include guidance on meeting all relevant new requirements.

Please note local state and territory variations may still apply.

Look for the update on the cover

Please ensure you update your reference library by downloading the latest editions using the QR code below or visiting www.woodsolutions.com.au/publications.

LEGAL

BALANCING RISK WITH A RISE AND FALL CLAUSE 16 : SEPTEMBER - NOVEMBER 2022: BUILT ENVIRONMENT ECONOMIST

LEGAL

The emergence of the COVID-19 virus pandemic and the war in Ukraine have led to disrupted global supply chains which inevitably impact costs and time in the construction industry.

Builders are suffering unprofitable contracts where they have adopted the usual lump sum model to price construction projects.

Accordingly, it appears time to reconsider the inclusion of the 'rise and fall clause' in building construction contracts as has been necessary in times of high inflation in the past.

WHY AND WHAT IS A RISE AND FALL CLAUSE? A 'rise and fall clause' in building construction contracts generally refers to an express clause which allows the builder to claim an increase in the contract sum where increases have occurred in the cost involved in a building's cost.

The attraction of a rise and fall clause to a builder is clear but there are sound reasons why a principal should include a suitable clause in any substantial contract.

A properly drafted rise and fall clause will usually allow a builder to recover from the principal the extra costs permitted under the rise and fall clause. The rise and fall clause does not always provide for a full

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 17

LEGAL

recovery of all costs and is an agreed sharing of the cost increase adopting a formula which should be certain in operation even if not particularly accurate.

An interesting decision for the builder is whether to agree to rise and fall clauses being included in its subcontracts.

Presently major subcontractors and suggesting appropriate clauses in their contracts and passing on increased costs whenever a change or variation is required.

The attraction of a rise and fall clause to a builder is clear but there are sound reasons why a principal should include a suitable clause in any substantial contract.

If a rise and fall clause is not included each tenderer will include a margin to provide a contingency for the risk. The variability in the estimates of the tenderers will obscure who is the most suitable and competitive tenderer. Additionally, many principals are finding if the contractor does not have the margin in the contract price to absorb the cost increases problems of performance and disputes occur rapidly.

Rise and fall clauses can be drafted as simply or as elaborately as required depending on the contracting parties’ preference. Often a contractor will be prepared to accept a clause which demonstrates that some adjustment will be made but others prefer the rigour of a clause which provides for precise calculation each month.

While the more general clause may be easier to negotiate at tender time the benefit of a rigorous clause is that the calculation is certain and on large projects can make a substantial contribution to the contractor’s profit and viability.

DRAFTING -THE DEVIL IS IN THE DETAIL Some examples of rise and fall clauses for lump sum contracts include the following but these should be more carefully drafted:

• “any increase in the cost of the labour and / or materials necessary for performance of part or whole of the Works shall cause a proportionate adjustment in the Contract Sum” • the Contract Sum shall be subject to adjustment for changes in the cost of the labour and / or materials supplied by the Contractor under this Contract in accordance with the following formula: Price = A x (B-C) where: A = the quantity of labour and/or materials supplied by the Contractor as measured by the progress claim calculated at the rates used to calculate the Contract Sum B = the price of such labour and/or materials on the day the same were included in the progress claim under the Contract as measured by the CPI index C = the price of such labour and/ or materials as indicated in the Contractor’s tender as measured by the CPI index at the date of the Contractor’s tender.”

The preparation of a rise and fall clause generally includes a few components like the materials or labour inputs which are to be subject to the rise and fall calculations.

Another component is the index or indexes that may be used to calculate the change in the whole or part of the contract’s schedule of rates or prices.

Various indices such as the Producer Price Indexes and Consumer Price Index published by the Australian Bureau of Statistics for the building industry, national award rates for labour costs and indexes published by other industry groups may be adopted in this regard.

In Leighton Contractors Pty Ltd -v- Public Transport Authority Of Western Australia

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[No 6] [2008] WASC 193, the identity of an index to be substituted when one index terminated required much careful consideration by the Court to select the closest index and repayment of monies paid under the assumption that an incorrect index applied. So careful drafting and provision for indexes being discontinued or adjusted is required.

In the case renowned for its view on frustration Codelfa Construction Pty. Ltd. v. State Rail Authority of N.S.W. (1982) 149 CLR 337, Aitken J was required to interpret a rise and fall clause and to decide if increases in allowances were to be included in the calculation of the “minimum rate of wages “. So, the clarity of expression in the drafting of a rise and fall clause may avoid bothering the High Court.

An important element to be considered in drafting the rise and fall clause is to nominate the correct reference date at which the value of the index will be compared to measure the increase. The start date is usually agreed to be either the builder’s tender date or the date of the contract.

Where the evaluation of tenders and the negotiations with the preferred tenderer take some months, the starting date can make a difference as if the builder’s tender date is adopted and a six-month period elapses before the contract is signed, the price may increase by 3% if inflation runs at 6% per annum.

… where a builder and owner do not include a rise and fall clause and come to dispute, the builder often threatens to stop work without the protection of any clause of the contract

LEGAL

LIMITATIONS UNDER DOMESTIC BUILDING LEGISLATION While few states such as New South Wales, Queensland, Northern Territory, Tasmania and Australian Capital Territory allow the use of the rise and fall clause, some states, however, restrict the operation of rise and fall clauses.

In Western Australia, for example, the Home Building Contracts Act (WA) , Section 13 (1) declares it illegal for contracts to have rise and fall clauses when valued at less than $500,000.

In Victoria, a rise and fall clause is only allowed where the contract price is over $500,000 and the contract encompasses a fair and reasonable estimate of the rise in costs due to inflation or wage escalation payment. Under the Domestic Building Contracts Act 1995 (VIC), the rise and fall clause is subject to the approval of the Director of Consumer Affairs Victoria, who has not approved any form of the clause.

In South Australia, the use of the rise and fall clause is restricted to avoid the issue of the builder’s delay increasing the cost.

Obviously, a sensitive approach must be taken to avoid contravening the legislative restrictions.

ILLUSTRATIVE CASES Under general contract law principles, parties are free to stipulate on price adjustments as part of their building contract.

"There is no principle of law preventing parties from adopting a fixed figure as the primary monetary expression of liability and then proceeding to effect a substantive variation of the liability by providing that more or less money must be paid accordingly as index numbers

evidence a variety of price levels.

That is only a method of measuring the actual liability contracted for. It is nothing but an indirect way of referring and the measurement of the obligation ‘to a sliding scale linked to price or other indices’.” (Stanwell Park Hotel Co Ltd v Leslie (1952) 85 CLR 189).

However, a rise and fall clause must satisfy a “pub test” in order to be to be enforceable. It must be conscionable (meaning reasonable and equitable) and avoid ambiguity.

The case of Lewis Construction (Engineering) Pty [1975] QSCF 23 illustrates the implications of a poorly drafted rise and fall clause where the agreed formula was expressed as follows: The contractor submitted that variation of the price index was to be made each month by comparing the monthly index value to the value of the index at the tender date. In opposition, the principal submitted the proper comparison was with the preceding month as otherwise the adjustment would be unreasonably inflated.

The Court noted that the contractor's interpretation would have inflated the Contract Sum disproportionally to the actual increase in the cost

”In my opinion, the authorities I have canvassed justify the finding on the facts of this case that the builder did exercise illegitimate pressure when it threatened to suspend the works further if the variations were not signed.”

In that case, the builder did not recover the sums expected under the variations covering the cost increases despite the fact that the variations were agreed, signed and paid.

CONCLUSION A price adjustment clause is crucial if a builder or principal wishes to properly manage its risk of price increases in the cost of materials, subcontractors, and labour.

A properly drafted rise and fall clause can spell the difference between a builder suffering a loss or making its expected profit from its building projects and provide a fair balancing of the inflationary risks between the parties to a construction contract.

This article has been written by the team at Doyles Construction Lawyers www.doylesconstructionlawyers.com

WHEN THE IRRESISTIBLE MEETS THE IMMOVEABLE Often in these circumstances where a builder and owner do not include a rise and fall clause and come to dispute, the builder often threatens to stop work without the protection of any clause of the contract. The tactic is not always successful.

In J-Corp Pty Ltd v Leadbitter [2009] WASAT 168 at 63, the Member Mr T Carey held:

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 19

MENTAL HEALTH

WELLBEING IN THE NEW ZEALAND CONSTRUCTION INDUSTRY 20 : SEPTEMBER - NOVEMBER 2022: BUILT ENVIRONMENT ECONOMIST

MENTAL HEALTH

The MATES programme became operational in New Zealand in late 2019 and was introduced to reduce the high levels of suicide among construction workers. The research-based programme does this by raising awareness, building strength on construction sites, and connecting people to appropriate support.

This September, MATES is asking industry to Fly the Flag for suicide prevention and on Friday the 9th, MATES is on a mission to encourage industry across New Zealand to put tools down for ten@ten – ten minutes at 10am to start the conversation.

UNACCEPTABLE STATISTICS – AN INDUSTRY IN CRISIS The construction industry loses more workers to suicide every year than any other industry in New Zealand. On average, one construction worker takes their own life every week. Our industry is vibrant, exciting, and integral to the New Zealand economy, but it can also be a challenging industry to work in with long hours, transient working conditions and masculine stoic beliefs that can impact on our people’s mental health and wellbeing.

The current context is exacerbating these pressures. CoreLogic recently reported that construction costs have risen at their fastest pace since 2012 and businesses across the industry are reporting that they are experiencing severe labour shortages according to the Ministry of Business and Innovation. Our people are also feeling the pressure at home with annual inflation hitting a 32-year high of 7.2%, the biggest financial squeeze for households seen in over three decades.

MATES in Construction are seeing the impacts of this in our mahi on the ground

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MENTAL HEALTH

In the last six months we have almost doubled our workforce so that we can make sure we are meeting the needs of our people.” – Victoria McArthur, CEO MATES. MATES is now operating out of Auckland, Christchurch, Wellington, and Dunedin with the ability to support our growing stakeholders.

WHAT CAN YOU DO TO SHOW YOUR COMMITMENT FOR THIS IMPORTANT WORK?

Image credit: MATES in Construction

and research carried out by MATES has also confirmed the impact that the global pandemic is having on our industry's mental wellbeing. In a recent survey of nearly 700 workers, 41% of respondents reported that the last 12 months have been the most difficult of their lives (up from 38% last year). This sentiment was observed across construction workers on the ground as well as those based in offices. The proportion of participants who reported seriously considering taking their own life in the last four months has also increased from 4% in 2021, to 5.5% in 2022.

TURNING THE TIDE – MATES IN CONSTRUCTION MATES in Construction is an NGO working to support our industry to turn the tide on the unacceptably high rates of suicide that we currently see in construction. MATES is a community development programme

that invests in the construction workforce to lift the knowledge, tools, and confidence of our people so they can reach out to a mate if they can see they are struggling, or to reach out for help themselves if they know they aren’t travelling well. MATES also runs a 24/7 help line and employs case managers that can connect someone who is struggling into the right support. This model has been shown to produce positive and statistically significant changes in workers’ suicide prevention awareness, knowledge, and attitudes - including willingness to seek help themselves and provide help to workmates (AISRAP, 2017; King et al., 2018).

In 2021, MATES provided mental health and suicide awareness training to over 11,000 construction workers in New Zealand and that was a year with four months taken up in lockdown. “Now more than ever, we need to make sure we are showing up to support our industry and our most important asset, our people.

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Fly the Flag for suicide prevention and join us to Take 10 at 10 on the 9th of September For the last three years, our industry has flown the MATES in Construction Flag to show their commitment to reducing the unacceptably high number of suicides in our industry. Fly the flag is an opportunity to: • remember those in our industry and our communities that we have lost to suicide • check in with a mate and make sure they’re doing okay • take a beat and check in with ourselves – “how am I doing, am I okay?”

• recognise the incredible work of MATES Connector and ASIST volunteers across our sites • recognise World Suicide Prevention Day. This year, we are also introducing a new initiative and asking the industry to take part in 10@10.

We want to see our industry down tools for 10 minutes at 10 o’clock on the 9th

MENTAL HEALTH

September to help start the conversation.

Take 10 minutes at smoko time to put hammers, drills, pens, and electronic devices down to check how we are all going. We are hoping that this simple gesture of shared action will bring us closer and see our industry become stronger together. In our busy lives let’s highlight the importance of taking time to talk about mental health and checking in with our mates.

“Flying the Flag to recognise World Suicide Prevention Day demonstrates not only to our industry that we are on a journey to turn the tide on those we lose to suicide, but also has a greater impact across the communities in which we build, live, work and play.

We all need to work collectively, to not only start the conversations about mental health and suicide prevention, but also to know what to do if a mate is struggling,” – CEO, MATES in Construction, Victoria McArthur says.

If you’re interested in learning more about Fly the Flag, Take 10 at 10 or MATES in Construction, visit our website: www.mates.net.nz Join the conversation and grab a MATES flag today by scanning the QR Code below.

If you or someone you know in the industry is struggling or needs help, call 0800 111 315.

This article has been provided by NZIQS.

Image credit: MATES in Construction

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 23

Q&A

WHAT ARE THE TOP THREE THINGS THAT YOU WOULD LIKE ASSET OWNERS TO KNOW ABOUT QUANTITY SURVEYING? 24 : SEPTEMBER - NOVEMBER 2022: BUILT ENVIRONMENT ECONOMIST

Q&A

CHANTAL ZHANG MAIQS Quantity Surveyors work in various aspects and represents different interests in the construction industry. We perform many functions from cost planning, procurement and tendering, contractual claims, cost control etc. Working as a consultant Quantity Surveyor, represent the client most of the time. In my opinion, the top three things about quantity surveying that the owners sometimes neglect would be: 1.

First, at an early stage, the Quantity Surveyor is the best person to help the owner with establishing the requirements and undertaking feasibility studies. It will be easy for

owners to track the costs update due to design and scope changes with the help of the Quantity Surveyor. It would be a key step for the owner to achieve better value for money by engaging a Quantity Surveyor to carry out the value engineering exercise at this stage. With full knowledge of their financial implications to the client, the cost advice enables design decision making.

2. Second, before the owner enters the contract, it would be beneficial to harness the expertise of a Quantity Surveyor to negotiate with contractors, review, and structure the

contract from a cost perspective to the owner’s benefit.

3. Third, managing the risk in the whole process is a key to project success, which can be carried out well by a Quantity Surveyor. The commercial risks will be identified, analysed, and reported immediately to the owner following a discussion of possible solutions.

Overall, a Quantity Surveyor is to help the owner keep the financials of the project in perfect shape through efficient cost management while implementing the owners’ idea.

VIVIAN PACHOUD MNZIQS 1.

Design for the lifespan of your building, rather the initial budget. Quality materials, materials that can be reused later, and futureproofing – can all be well worth the initial premium, so keep that in mind during value engineering.

Only a small percentage of the lifespan cost is the initial budget; a much larger sum is paid for maintenance, upkeep, and refurbishment.

2. A money saving tip – don’t design in detail before getting a cost

estimate, then don’t build anything before adding detail. An experienced Quantity Surveyor can do a concept estimate using a floor plan and elevations (ask them to note their assumptions!) before you have paid too much for a design that is not financially feasible. Once you have a budget, design as thoroughly as possible to avoid variations.

3. Read your contract, your specifications and study your plans

before construction commences. If you can’t interpret them, it is well worth investing in a consultant who can on your behalf. The documents are there for both the building team and the owner alike. Know your terms, express your top two or three nonnegotiable terms (e.g., time, quality, cleanliness, sustainability etc.) and communicate your expectations from the beginning to avoid misunderstandings.

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Q&A

JACQUELINE LEE O'DONNELL MNZIQS Quantity surveying has changed fundamentally over the years and progressed from traditional measure and value to a broad and varying range of skills across the construction industry.

For asset owners, understanding the full scope and capability of quantity surveying will benefit the industry as a Quantity Surveyor can provide expert cost management and forecasting on all aspects over the lifespan of an asset.

Due to having experience in all aspects of building, a Quantity Surveyor can provide effective cost management advice around future spend profiles including maintenance, repairs, and end of life

replacement of plant and materials. This could also be providing budget estimates to a client for effective capital expenditure whether that may be maintenance, seismic upgrading, remediation, or construction works or advice about retaining an asset.

The industry is also moving to be more environmentally sustainable. Having a Quantity Surveyor on board can allow a client to better understand the impact of the build to determine the carbon footprint of the asset. For existing assets, a Quantity Surveyor can provide budget options for different scenarios of what a client may be considering for future

forecasting to retain an asset to ensure sustainability.

The virtual world is also an effective part of the construction process. Quantity Surveyors can utilise good BIM Models to provide more concise quantities, provide advice and better risk management around design concerns, buildability, HSE and co-ordination. The information in a BIM Model can also help to produce information for cost estimates on the ongoing maintenance requirements for the lifespan of an asset.

For asset owners, quantity surveying provides a fundamental aspect for effective cost management.

SINEAD O'HARE MNZIQS 1.

Asset owners should know that if they are embarking on a project, then early engagement of a Quantity Surveyor is money well spent, value engineering exercises will take into consideration not only construction costs but also the life span maintenance costs to help you decide the most cost effective options.

2. A detailed budget from a Quantity Surveyor before you start works is

a must- we have all seen the Grand Designs episodes where clients are self-managing the project, budgets are low and they are confident they will be in their new homes by Christmas, cut to the end and they have borrowed from their parents, are on the brink of divorce and have lived in a caravan for three years – a detailed budget lets clients know exactly what they are in for and while sometimes it may reveal the project isn’t currently feasible this

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is best known before projects begin to avoid project delays due to cashflow issues.

3. In the current market of constant cost fluctuations and ever extending lead times the procurement of trades is complex and the engagement of a Quantity Surveyor to manage risk and maximize opportunities will save money and stress and ensure project flow.

Q&A

KIRSTY HOPEWELL MNZIQS, REG QS 1.

A Quantity Surveyor is a skilled professional who specialises in building construction measurement and cost estimation. Quantity Surveyors are able to use their expertise to estimate the cost of building works on any civil, infrastructure project, residential or commercial property project, throughout the various stages of construction. They will often specialise in providing their expertise at a particular stage in the construction process.

2. Quantity Surveyors can minimise the asset owners exposure to risk through: •

due diligence reporting

•

procurement advice

•

risk and opportunity analysis based on: • conditions of contract • design variations • competency of contractors and subcontractors • price inflation for building materials • time, cost, quality • quantity take-offs and cost estimation • knowledge of the going rate for various margins (on-site and offsite overheads & profit) and they will know if a contractor is under-

pricing or over-pricing those parts of the price.

3. Whilst Quantity Surveyors are involved in numerous construction projects over the course of their careers, some asset owners may only go through the construction process once. An experienced Quantity Surveyor provides an extra pair of eyes to help keep the project moving, to assist in identifying items that have been overlooked, call out people when they over-promise, scrutinise quotations and proposals, evaluate concerns and seek resolutions. A good Quantity Surveyor provide a wide range of skills to make the construction process a positive experience for all parties.

CHLOE NERISSA GORDON MNZIQS, REG QS 1.

Having a knowledgeable Quantity Surveyor engaged right from the beginning of a project can make a huge difference to the project. A Quantity Surveyor can provide the most value at the beginning of the project as they are able to set the project up, so it runs smoothly as well as providing cost advise before it is too difficult to make changes.

2. Even though there is cost in engaging a Quantity Surveyor, the benefit a client receives outweighs the investment. A Quantity Surveyor can ensure the client receives the best value for money, they can minimise and manage the risk associated with the construction project as well as ensuring the contractor doesn’t take advantage of the client.

3. To help manage the budget, it is advantageous for a Quantity Surveyor to provide an estimate of the construction costs during several stages of the design process to ensure there is cost control over the design and any value engineering opportunities can be explored.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER - NOVEMBER 2022: 27

TENDERING

ALL ABOUT TENDERING HOW CAN CONSTRUCTION COMPANIES WIN WORK AND MAKE A PROFIT IN THE PROCESS?

By Trevor Moseley MAIQS

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TENDERING

Tendering today generally has a workflow from the client to the building contractors. However, before arriving at an invitation to tender, there are a few things the prospective client must address to get to the tendering stage.

He should have prepared a feasibility study for the intended project, in regard to the following: • land costs • holding cost • headworks costs • any special conditions to be identified and allowed for • sales cost • advertising costs • preliminary design cost, and of course • building costs.

Having said that, some clients go ahead and purchase the land and then do the feasibility. This can become risky if they haven’t done a pre-purchase feasibility (prior to purchasing the land) so they can work back through this feasibility to determine what they should actually be paying for the land to make the project work.

These costs should be factored into the original feasibility study. However, before doing any design work, it is always advisable to get the relevant consultants engaged early to confirm that the intended project will indeed be viable.

… the quantity surveyor is the one that most likely finishes up doing what other consultants should have been doing from the start.

Some developers have purchased land (in the past), only to discover that they have paid too much for it. Their only option then is to either hold on to it, in the hope that as market prices increase their development will become viable or dispose of it and get what they can.

There has to be an understanding that sometimes the viability of the project can rest on something as simple as the efficiency of the building, or what the client would like as a building and what the market will pay for the product.

How many times have we seen that, in the early stages, the feasibility supports the client’s feasibility outcome; only later to find that as the design advances, it is no longer feasible in its current state?

This is where early intervention between the following consultants will prove to be invaluable: • architects • structural engineers • mechanical, electrical, and other specialist services

reduced, the amount of work these consultants still have to do, does not, and eventually it gets passed down the line with less detail and coordination until it finally arrives at the subcontractors and suppliers door.

Getting back to the question: How can construction companies win work and make a profit in the process, if the process from the client is flawed to start with?

From the client’s point of view, there are always things to consider when tendering for new projects.

• does the company already have the necessary 'in house' skills and resources to deliver the project?

• can it deliver the project on time and within budget?

• can it provide a good quality finish higher than the client’s expectations?

• can it add value to the project by innovation?

• can it still make a profit at the end of the day?

• quantity surveyors for cost planning

Currently some building contractors have to deal with issues like:

• quantity surveyors for providing a measured Bill of Quantities (BoQ) to tenderers.

• insufficient detail on the architectural, structural and services drawings

What appears to happen in this respect (in some instances) is that as fees are getting squeezed in these areas, the documentation and coordination of the consultants becomes less and less. The saving grace is that the quantity surveyor is the one more likely to coordinate this shortfall, due to measuring and addressing issues early between consultants.

• pages and pages of specifications that are not always relevant to the project in question.

So, the quantity surveyor is the one that most likely finishes up doing what other consultants should have been doing from the start.

Let’s not blame the consultants entirely.

As mentioned earlier, as fees get

• structural drawings not coordinated between the architectural, structural and services drawings

And, what ever happened to the specification writer who meticulously used to write a detailed and meaningful specification for the project that builders, subcontractors, and suppliers could understand.

I think it’s worth mentioning, getting each building contractor to measure and produce their own BoQ only increases

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TENDERING

costs to each tender and these costs will be a cost included in their tender price anyway.

The client’s quantity surveyor is more apt at producing the BoQ on behalf of the client and can nominate (if required) any PC and/or provision sums within the BoQ where insufficient detail has not been provided at tender stage due to design issues. It makes sense therefore that all the tenderers should be using the same documents including the BoQ produced by the client’s quantity surveyor.

These are but a few questions that need to be answered before moving forward to the tendering phase.

Some companies will attempt to tender everything that comes their way, whilst others target specific markets that they feel comfortable with. At the end of the day, the outcome must be to provide a good result for all parties, i.e., clients, consultants, builder, subcontractors, and suppliers.

Clients have high expectations that the more 'construction companies' that are invited to tender on a specific project, the better the price they will receive. This is 'in most cases' a misconception and can be viewed as a two-edged sword. An old adage that 'less is more' when it comes to tendering is likely to apply. Generally, if subcontractors and suppliers see a flood of pricing requests for the same project coming in from ten or more builders (all with their own version of a BoQ), they are more likely either not to price at all, or if they do price, increase their prices on the basis that it is highly unlikely they would get the job anyway.

If invitations were limited to between four and six tenderers per project, I believe the client would receive better pricing. Whilst this is probably yet to be tested, having anywhere from eight to twelve tenderers, each measuring their own BoQ’s for every trade or supplier only creates more

confusion when most of these BoQ’s are different from each other, depending on how the BoQ’s were measured. It’s false economy on the client side, just because ‘they think’ they won’t have to pay the fees to a quantity surveyor, as each builder should provide this anyway.

At the end of the day, it much more difficult to get a true comparison of tendered prices when each BoQ may be different, especially for the subcontractors and suppliers.

SELECTING BUILDING CONTRACTORS – CLIENT SIDE So how can these problems be overcome?

Well, firstly, clients should do their own research and select building contractors based on past performance and other factors like: • do they have current capacity to undertake the works?

• do they carry the necessary insurances and are they up to date and adequate for the project being tendered?

• do they have any existing projects running that appear to be in trouble financially?

• are subcontractors and suppliers being paid on time?

• are they currently having 'union problems' that’s likely to cause them delay?

Some of the above items will also apply to subcontractors and suppliers alike.

Again, this just a small list, but is worth checking out.

If the client wants, less delays, less variations, and a good quality building he needs to be part of the overall team, not a bystander. Squeezing lower fees from the consultants is not the answer, because at the end of the day, someone is still going

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to pay the cost. Builders, subcontractors, and suppliers will inevitably be passing these back to the client.

The only way it can become a win, win situation is if everyone in the team (including the client) each play their part to deliver a successful project. Ultimately this process should start at the top, and work down the chain to resolve problems as quickly and as efficiently as possible.

So, assuming that the client decides that there will be no more than, say four to possibly six tenders invited to submit a price for the project at hand, and that builders equally apply the same logic in the selection of their subcontractors and suppliers, the more likelihood they will get better tender pricing. One can only hope!

I might add, that creating a team where all team players are willing to participate in the overall successful result of the project, would be a positive step forward, instead of the ‘them and us’ attitude which seems to apply on some projects.

Then and only then, will all stakeholders realise that if this structure breaks down, someone is eventually going to pay. That might be the clients, builders, subcontractors and/or suppliers. I have worked on projects that have been delivered on time, on budget and a credit to everyone that took part. I have also worked on projects that have been a complete disaster with everyone blaming everyone else. Let’s hopefully apply the first option rather than the latter.

The views expressed by the writer are based on his own experiences and are provided on an ‘as is basis’.

Trevor Moseley MAIQS, Director at QS Project Services. Trevor is a Mentor, Trainer, Estimator, Quantity Surveyor and Software Solutions Facilitator. If you have any questions for Trevor, you may email him: tmoseley@3keys.com.au.

EMISSIONS

NEW ZEALAND COMMERCIAL BUILD PROJECTS TO COUNT THE ‘COST’ OF CARBON

By Ivana Brown

Construction projects in New Zealand will soon come with both a financial budget and a projected carbon estimate as quantity surveyors increasingly include carbon emissions in their advice to clients.

The New Zealand Institute of Quantity Surveyors (NZIQS) has established a Carbon Accounting Working Group to upskill quantity surveyors in this climate initiative – how to estimate the amount of carbon that will be ‘released’ as part of the overall build process, and, in due course, the amount to be released over the life of the building.

Chair of the Institute’s working group, Michael Crutchley, says the sector’s increased focus on carbon emissions is being driven by new climate change legislation and moves by government agencies, the construction sector’s biggest client-type.

Crutchley says carbon estimates will include the amount of carbon likely to be released in the manufacture of the raw building materials, the building’s construction stage, its operation, and its end of life.

“Quantity surveyors have an important role to play through value engineering, whereby they can recommend alternative specifications, or methods that achieve better outcomes for both carbon emissions and build cost,” he said.

“There are also clear parallels between capital cost estimating and whole of life costing, and the estimating of carbon emissions.”

Common building materials already come with an Environmental Product Declaration (EPD) which measures the carbon impact of their production.

Quantity surveyors have an important role to play through value engineering...

And while low carbon building materials are already available, Crutchley says they will become more commonly used as emissions budgets gain traction within the construction industry.

“To some extent quantity surveyors and clients will have to balance the build’s financial costs with its carbon impact, however there are good opportunities to reduce both, and strike the right balance.”

Crutchley says reducing carbon emissions will be an important factor in ensuring the wider construction sector plays its part in helping New Zealand reduce overall carbon output to the targets set in the national Emissions Reduction Plan.

“NZIQS is keen to get more formalised training and CPD programmes in place to upskill quantity surveyors in what is going to be an increasingly important component of the construction sector build process.”

This article has been provided by NZIQS.

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EXPERT WITNESS

PART TWO: EXPERT WITNESS

By Joel Glover MAIQS and Yelda Nip MAIQS, CQS

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EXPERT WITNESS

INTRODUCTION This is the second article of the expert witness series and will provide a general understanding of the roles and duties of an expert witness and what assistance a tribunal (e.g., arbitrator or judge) expects from the expert witness when determining formal disputes between parties.

As with the first, that featured in the March 2022 edition of the Built Environment Economist, this article is limited to Australia and does not cover international arbitration or security for payment legislation in jurisdictions outside Australia.

In this article, the authors will explain the process from engagement of the expert to the publication of the expert’s report, under the following headings: • instructions • evidence • report format and content • conclaves/conferences and joint reports.

INSTRUCTIONS Expert witnesses are, in most instances, appointed by, and receive their instructions from lawyers representing one of the parties to a dispute. The expert will be responding to questions put forward on behalf of one party, therefore in instances where the respective party appointed experts exchange reports simultaneously, this may result in the respective reports answering different questions. This can be overcome either by the parties’ respective solicitors jointly agreeing the questions to put the experts or by the tribunal’s involvement before instructions are provided to the experts’ and reports are exchanged.

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EXPERT WITNESS

Despite the size and complexities of the dispute and expert report, it is important for the expert to provide the tribunal with a concise and well supported report which is easy to navigate, well referenced and signposted.

The other, less common, ways in which expert witnesses are appointed and instructed are as a ‘single joint expert’ (SJE) or as a ‘tribunal appointed expert’ (TAE). The SJE is appointed and instructed by both parties’ respective solicitors. The TAE is appointed and instructed by the tribunal.

The use of SJE’s and TAE’s has become more common to ensure impartiality and independence of the expert and to remove the perception that experts may be what is sometimes referred to as ‘hired guns’. A ‘hired gun’ being an expert who, it is perceived, advocates for the party on behalf of whom he is appointed¹.

One of the other perceived benefits of using SJE’s and TAE’s is to reduce the costs and increase the efficiency of expert evidence. However, the outcome is often that such appointments result in additional costs because the parties will often engage their own experts to review and comment on the SJE’s opinion.

The expert’s instructions usually take the form of a written letter, or series of letters, from the instructing solicitor.

These instructions typically provide a background to the dispute, the relevant rules with which the expert must comply and the specific question(s) which the expert must answer, usually with a stated deadline.

EVIDENCE The first article, featured in the March 2022 edition of the Built Environment Economist, focused on that the expert’s duty is to assist the tribunal. Accordingly, the expert is responsible to ensure the opinion provided gives priority to the tribunal over everything else, including the interests of the instructing solicitors’ client.

The expert satisfies this obligation to the

tribunal by considering all the information provided (the ‘evidence’) in an objective manner, in order to form an independent opinion on the relevant issues in dispute.

This is the primary function of the expert witness because, by definition, the expert is providing an opinion in respect of a technical nature which is likely to be outside the expertise of the tribunal, and possibly even that of the parties.

Based on the above, one might ask, if two equally experienced experts in the same technical field both provide their independent and unbiased opinion in respect of the same evidence, wouldn’t they both agree and come to the same answer?

The answer is no, not necessarily, because although the experts may have the same opinion in respect of some matters and issues in dispute, they may not necessarily agree on everything. For example, one expert may not be able to undertake the comprehensive investigations their counterpart was able to complete due to the timing of their instructions. Secondly, each expert may be instructed to assume particular facts by their respective instruction solicitor (e.g., two AIQS members who are Quantum experts may be instructed to assume different outputs per hour achieved by an item of earthmoving equipment).

Furthermore, because each respective expert applies their own professional judgement concerning things for which there may be some subjectivity, the experts might, with good reason, come to different conclusions.

Once the expert has signed and published expert report, the report itself becomes part of the evidence which, subject to the relative weight assigned to it by the tribunal, will be used by the tribunal in finally determining the outcome of the dispute.

¹ Lord Woolf MR, Access to Justice, Interim Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, London, 1995), p183

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EXPERT WITNESS

REPORT FORMAT AND CONTENT The general rule² is that witnesses may not give evidence of opinion, as their evidence must be limited to providing an opinion in respect of fact only. Namely, giving evidence of something the witness observed, or of a particular state of past or present affairs³.

Expert evidence, and its acceptance, is an exception to the general rule because tribunals will allow, and more importantly, expect expert witnesses to provide their opinion on matters other than in respect of facts.

In providing an opinion, although each expert has their own writing and formatting style, to comply with the instructions and relevant tribunal requirements, the report must, as a minimum.

• comply with the relevant rules governing the dispute in question (see ‘Codes, rules and practice statements’ in the first article in this series) • include all statements and affirmations required by the governing rules • answer the questions put to the expert in the instruction letter(s), based on those instructions (e.g. assuming any facts so instructed).

Depending on variables such as the time provided to the expert between being instructed and the date by which the report is due, the size and nature of the dispute, the volume and complexity of evidence the expert has considered, reports will often be voluminous and contain appendices. Despite the size and complexities of the dispute and expert report, it is important for the expert to provide the tribunal with a concise and well supported report which is easy to navigate, well referenced and signposted.

Some experts prefer to show all or most

of their calculations and workings in the body of the report text, whereas others prefer to include all or most of their calculations and workings in appendices to the report. This is not typically something the expert is instructed on and is therefore usually a matter of the expert’s personal choice or preference.

Finally, expert reports, especially those on larger, more complicated matters where there can be tens of thousands of documents, will contain numerous cross references to individual documents which are in evidence. Where each individual document has a unique document reference or identification number for use in one of the various document management and search platforms, to assist the tribunal, each document should ideally be referred to either within the body of the report text and/or by way of footnotes.

reach agreements and identify conflicting assumptions, instructions or documents provided to them.

Once the meetings are concluded, the experts jointly prepare a written report or statement, usually referred to as Joint Expert Report, signed by both experts.

This report sets out where the experts agree and, more importantly, where they disagree and why. This allows the parties and the tribunal to understand where the experts disagree and the reasons for such disagreement, therefore enabling the parties and the tribunal to focus on the areas of disagreement.

CONCLAVES/CONFERENCES AND JOINT REPORTS It is now common practice for most disputes, both in arbitration and litigation, for the tribunal to order the experts of like discipline to meet in conclave/conference, identify the areas of agreement and disagreement and produce a joint expert report.

This process takes place after the experts have exchanged reports and is usually in the form of a meeting between the experts, either in person, or increasingly by way of video conference.

These meetings, during which the experts are precluded from contacting their respective instructing solicitors, are typically referred to as either expert conclaves or expert conferences. The main purposes of these meetings being to encourage the experts to attempt to

Joel Glover MAIQS is the Director at Secretariat Advisors and Yelda Nip MAIQS, CQS is a Senior Associate at Secretariat Advisors.

² For example, Evidence Act 1977, QLD ³ Bodney v Bennell (2008) 167 FCR 84.

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EMBODIED CARBON

THE IMPACT OF EMBODIED CARBON

By Jorge Chapa

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EMBODIED CARBON

Imagine removing 13.8 million cars from Australia’s roads for an entire year.

Cutting embodied carbon in buildings by just 10% between now and 2050 would have that level of impact, eliminating 63.5 megatonnes of emissions.

This statistic points to the possibilities – but also tells us that we have a huge problem to tackle. The size and scale of our embodied carbon problem is enormous. There is no question about it.

In 2019, embodied carbon accounted for 16% of built environment emissions.

Without action, this share will balloon to 85%. This is the headline figure from the GBCA’s report, Embodied Carbon and Embodied Energy in Australia’s Building (https://gbca-web.s3.amazonaws. com/media/documents/embodiedcarbon--embodied-energy-in-australiasbuildings-2021-07-22-final-public.pdf), developed in partnership with thinkstepanz and the support of the Australian Government.

Materials supply chains may be moving towards sustainability, but they move slowly.

The work comes as the IPCC sounds the global alarm (https://www.ipcc. ch/2021/08/09/ar6-wg1-20210809-pr/) that temperatures are likely to rise by more than 1.5°C above pre-industrial levels within just two decades.

We’ve been really focused on operational emissions but until now we haven’t quantified the built environment’s embodied emissions. These have been hidden emissions but will become a huge problem because they are locked

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EMBODIED CARBON

in as soon as the building comes out of the ground.

Embodied carbon accounts for around 20-25% of a typical building’s total carbon footprint over its lifetime. But embodied emissions are hard to eliminate because some of our most common building materials, notably concrete and steel, require process heat and chemical reactions that can’t be easily decarbonised.

In a lot of people’s minds, decarbonising the grid goes a long way to solving the problem of climate change. But it’s not the case for product manufacturing which has many other requirements, such as the need for high heat sources.

MATERIALS MAKEOVER There is a reason why concrete and steel are our go-to building materials: they are robust, fire resistant and reliable. But both also carry large carbon footprints, contributing around 8% of global greenhouse gas emissions.

There are few alternatives to concrete and steel. Both sectors have been busy innovating with low-carbon products, transparent reporting and environmental product declarations. While some hail hydrogen as the solution, we need significant investments to create true green hydrogen.

Materials supply chains may be moving towards sustainability, but they move slowly. If you are investing in a steel mill or a quarry, you take a 30-year horizon.

Asking for a quick pivot is a big ask – and it is to the credit of sector leaders that they are absolutely committed to this.

These industries really do understand their impact and are working hard to find solutions. It’s important we all work together, rather than pointing the finger, because we will continue to use concrete and steel for the foreseeable future. We just need to be smarter about how and when to use it, and to continue encouraging industry to decarbonise.

PROPERTY PICKS UP THE PACE Embodied emissions, once in the “too hard basket”, is now on the board agenda of the industry’s leading property companies as the race to net zero shifts gears.

Lendlease’s Head of Sustainability, Ann Austin, recently noted that around 80% of Lendlease's emissions (https://new.gbca. org.au/news/gbca-news/time-confrontelephant-net-zero-room-together) come from embodied carbon. “You can offset your flights, but no one offers you the chance to offset the concrete slabs and columns, or the steel framing of your commercial high-rise,” Ann says.

The development industry is turning to alternative materials – notably, mass timber – to reduce the amount of concrete and steel in buildings.

Atlassian’s 40-storey office at Sydney Central will be among the world’s tallest hybrid timber towers. A concrete superstructure every few floors will be interspersed with cross-laminated timber.

It’s a really exciting project that will encourage innovation.

Other project teams are looking to hold onto the embodied carbon in existing structures. By retaining around two-thirds of the original core of Quay Quarter,

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AMP Capital saved 6.1 million kilograms of carbon – equivalent to around 35,000 flights between Sydney to Melbourne.

These are both great examples, but we need a lot more of them.

CARBON CERTAINTY The challenges facing materials manufacturers – from concrete to carpet – is that they need policy structure.

Everyone wants to understand the policy environment they’ll be operating within for the next three decades.

Some policy signals are starting to emerge from beyond our shores. From 2026, the European Union will hit all export goods with a tax that is equivalent to around $90 per tonne of emissions created during production.

Most Australian manufacturers don’t export to the EU, so they think it does not apply to them. But everything that the EU won’t accept will be directed our way – so we may find ourselves the dumping ground for higher-emissions, low quality products with even lower prices.

This report is a call to action. Tackling embodied carbon will help us drive down emissions in our building stock, future-proof Australia’s energy-intensive industries and ensure we can compete in a low-carbon marketplace.

This article has been written by Jorge Chapa, Head of Market Transformation Green Building Council of Australia.

INFRASTRUCTURE

MEASURE ONCE; BUILD ONCE THE IMPORTANCE OF USING BILLS OF QUANTITIES ON INFRASTRUCTURE PROJECTS

By Mike O’Shea FAIQS, CQS

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INFRASTRUCTURE

SUMMARY The cost of tendering on infrastructure projects, has been described by some contractors, as horrendous and the lack of Bills of Quantities (BoQ) is adding to this cost.

Each contractor needs to allow for the cost of a BoQ within their tender and report that the cost of tendering to a contracting organisation on infrastructure projects is horrendous.

The New South Wales (NSW) Government is committed to reducing the cost of bidding and standardising contracts and procurement methods.

The need for quantity surveyors to produce BoQ, on certain projects depending on the procurement has become evident as infrastructure projects have increased in volume and complexity.

Clients have become dissatisfied with the method adopted for settling the cost of the work and variations. A BoQ is also a very useful basis to assess the cost of any variations or claims.

Traditionally BoQs, prepared by the client, where a quality check on the design and avoided the time and cost of many contractors, subcontractors and suppliers all measuring their own quantities.

This is a huge factor and the need and the importance of BoQ has been forgotten.

Each contractor needs to allow for the cost of a BoQ within their tender and report that the cost of tendering to a contracting organisation on infrastructure projects is horrendous.

NSW GOVERNMENT 10 POINT COMMITMENT The NSW Government is committed to achieving value for money in construction procurement and has developed a 10 Point Commitment. Relevant points from the plan, include: • Point No 3 – Standardise contracts and procurement methods • Point No 5 – Reduce the cost of bidding.

NSW PREMIER’S MEMORANDUM Premier’s Memorandum – M2021 Procurement for Large, Complex Infrastructure Projects (Gladys Berejiklian), sets out expectations for the procurement, to enable sustainable delivery of the infrastructure pipeline.

The relevant expectations, include:

BACKGROUND It is estimated that on a typical construction project, quantities are measured numerous times by the client producing estimates, contractors, subcontractors, and suppliers tendering.

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• Procurement Approach g) Contract consistency • Reducing Costs and Improving Timelines k) Tender Timetables n) Tender Requirements and Costs.

INFRASTRUCTURE

WHAT IS A BILL OF QUANTITIES? A BoQ is a document used in tendering in the construction industry in which labour and materials are itemised and can be costed. A BoQ is also known as a schedule of quantities.

It is very important that BoQ are prepared according to a standard, widely recognised methodology.

QUANTITY SURVEYING IN INFRASTRUCTURE Several people providing quantity surveying services on infrastructure projects are not necessarily called quantity surveyors. Terms include estimator, contract administrator and commercial manager. AIQS refers to this group as quantity surveying professionals, however, for this article, they have been referred to as quantity surveyors.

Larger-scale infrastructure projects will naturally have higher cost risks and using a quantity surveyor, preferably a certified quantity surveyor (CQS) is a sensible approach, to provide the complex knowledge required and professional management of the cost estimating, tender and construction process, through to the finalisation of delivery.

HISTORY OF BILLS OF QUANTITIES Historically, it increasingly became the practice of clients to have work executed under contract and to call for tenders

before any work was undertaken. A procedure, therefore, developed whereby clients would approach an architect and / or engineer to design an asset. Drawings and specifications were distributed to contractors, who would then submit tenders for the total price.

The task of arriving at an accurate estimate of cost or tender can be carried out in only one way - that of measuring the quantities of all materials and labour necessary to complete the work, i.e., preparing a BoQ. As each contractor had to prepare their own BoQ for each project, they realised that it would be more economical for them as a group to employ one quantity surveyor to measure quantities for them all. They would thus share the cost of the quantity surveyor, obtain an identical BoQ which ensured that all contractors would be tendering on the same basis.

The client subsequently realised that it would be to their advantage to appoint and pay the fees of the quantity surveyor.

Thus, the independent professional quantity surveyor gained consultant status.

WHO PREPARES A BILL OF QUANTITIES Generally, the BoQ is drawn-up by the quantity surveyor, engaged by the client with construction information provided by the design team. A quantity surveyor has usually had a university education specialising in the construction industry and should be an AIQS CQS. Usually, the quantity surveyor, uses specialised computer software to measure various aspects of the construction drawings. Once these are measured, material and labour items can be compiled, to develop the total BoQ.

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INFRASTRUCTURE

CLASSIFICATION SYSTEM The infrastructure sector refers to the maturity level of design using differing terminology, although there is some alignment that a Class 3 Estimate is used in some business cases for funding. As this classification is based on and similar to the AACE International Recommended Practice this classification is often used on infrastructure projects.

Descriptions are based on common terminology, as described in Table 1.

HOW IMPORTANT IS THE PREPARATION OF A BILL OF QUANTITIES ON AN INFRASTRUCTURE PROJECT TO A STANDARD METHOD OF MEASUREMENT? It is very important that BoQ are prepared according to a standard, widely recognised methodology.

This helps avoid any ambiguities or misunderstandings and helps avoid disputes arising through different interpretations of what has been priced.

METHOD OF MEASUREMENT Measurement covers the physical measurement of quantities i.e., numbers, lengths, areas, volumes, and weights.

From research, the AIQS Infrastructure (Transport) Committee has established that for Australia the most relevant standard method of measurement for infrastructure projects is the Civil Engineering Standard Method of Measurement (CESMM4). In addition, many government agencies have their own work breakdown structure (WBS) and associated cost breakdown structure (CBS) and units of measurement.

ESTIMATE CLASS

MATURITY LEVEL OF PROJECT DEFINITION AND DESIGN

END USAGE

TYPICAL MEASUREMENT METHOD

Class 5

0% - 2%

Concept / Benchmark

Item, m2 & m3 measure

Class 4

1% - 15%

Strategic Op�ons

Item, m2 & m3 / Unit rates

Class 3

10% - 40%

Business Case – Funding, Budget, Authorisa�on or Control

Unit rates / first principles – o�en for tendering

Class 2

30% - 75%

Pre-tender / Tender Es�mate

Unit rates / first principles

Class 1

65% - 100%

Bid / Tender / Forecast (generally firm)

Unit rates / first principles

Table 1

Method of Measurement - Fourth Edition, is published by ICE Publishing and approved by the sponsors – the Institution of Civil Engineers and Civil Engineering Contractors Association – for use in works of civil engineering construction.

The CESMM4 has been well-established for over 35 years as the standard for the preparation of quantities in civil engineering work.

CESMM4: • incorporates regular updates to reflect advances in technology and measurement practice • is contract neutral – so it can be used across a variety of contracts • as there is no reference to a country’s standards CESMM4 can be used on construction projects in Australia • includes a completely updated rail section.

The Civil Engineering Standard

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INTERNATIONAL CONSTRUCTION MEASUREMENT STANDARDS (ICMS) ICMS has been developed through a global standard-setting process to establish consistent practice in presenting construction costs globally to facilitate benchmarking. AIQS has been a part of the development of ICMS and supports its use as it facilitates benchmarking. Mapping quantities to ICMS is not essential, however in the longer term it may provide the opportunity to benchmark costs against other international projects.

These standards are a framework against which costs can be classified, measured, recorded, analysed, and presented. They also provide definitions, scope, attributes and values, units of measurement and explanatory notes for each type of project.

The initial section on buildings has been extended to include infrastructure as detailed in Table 2:

INFRASTRUCTURE

for any errors in a BoQ. So, often a BoQ is provided for information only and does not form part of the contract

Roads and Motorways

Railways

Bridges

Tunnels

Wastewater Treatment Works

Water Treatment Works

• it is mostly suitable for traditional procurement, such as construct only

Pipelines

Wells and Boreholes

Power-Genera�ng Plants

• BoQ preparation lengthens the documentation process, which may increase the project cost.

Chemical Plants

Refineries Table 2

Although the use of ICMS may facilitate benchmarking, it may not suit the way that contractors in Australia price their tenders. Therefore, there may be some reluctance from contractors to structure the pricing in their tenders to align with ICMS.

PURPOSE OF A BILL OF QUANTITIES The prime purpose of a BoQ is to enable all contractors tendering for a contract to be provided with a standardised document to price and submit a fair and accurate tender price based on the same information. After this, it is widely used for post-tender work such as material scheduling, construction planning, cost analysis and cost planning.

ADVANTAGES OF A BILL OF QUANTITIES A BoQ, prepared by the client, is a quality check on the design and avoids the time and cost of many contractors and subcontractors all measuring their own quantities.

The BoQ assists tenderers in the calculation of construction costs for their tender, and, as it means all

tendering contractors will be pricing the same quantities (rather than taking off quantities from the drawings and specifications themselves), it also provides a fair and accurate system for evaluation of tenders.

This article has been written by Mike O’Shea FAIQS, CQS, Associate Director at MBMpl Pty Ltd, AIQS Director, and Chair of the AIQS Infrastructure (Transport) Committee.

Providing a BoQ to tenderers will generate more interest from both contractors and subcontractors and provide an accurate measure of the drawings and specification that has several benefits to the client. It may also reduce tender periods and result in more competitive tenders.

A BoQ is also a very useful basis to assess the cost of any variations or claims.

DISADVANTAGES OF A BILL OF QUANTITIES Disadvantages of a BoQ, include: • if the quantity surveyor is inexperienced, it may be misleading • the way that the BoQ is structured may not suit the way that contractors price their tenders which might be by package or trade • the BoQ must be prepared correctly; otherwise, errors may prevail. Some clients perceive that they will be liable

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BCI

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BCI

BUILDING COST INDEX

SEPTEMBER 2022

THE BUILDING COST INDEX IS PUBLISHED IN THE PRINT VERSION OF THE BUILDING ENVIRONMENT ECONOMIST. IT CONTAINS DATA THAT CAN BE USED AS A PREDICTOR FOR THE ESTIMATED TIMES FOR DESIGN AND CONSTRUCTION AND INCLUDES A SUMMARY OF THE PAST, PRESENT AND ESTIMATED FUTURE CONSTRUCTION COSTS.

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ADVANCING BUILT ENVIRONMENT COST PROFESSIONALS

Level 3, 70 Pitt Street, Sydney, New South Wales, Australia 2000 +61 2 8234 4000 www.aiqs.com.au