Built Environment Economist - Australia and New Zealand September 2023

SEPTEMBER – NOVEMBER 2023

04 Q&A: WHICH PROJECT HAS INSPIRED YOU THE 28 VISUAL FEATURE: BHP ADELAIDE MOST, AND WHY?

40 FROM JADED OFFICE TO RESIDENTIAL GEM

50 A LETTER TO THE HUMBLE HOMEOWNER CHASING THEIR DREAM HOME

CONTENTS

2 CEO Letter

36 The CCA Retention Regime

4 Q&A

40 From Jaded Office to Residential Gem

8 Vanguard: David Tilby FAIQS

44 Facility Management Standards

10 Early Contractor Involvement

48 Perverting the Course of Justice

12 Whakakāinga

50 A Letter to the Humble Homeowner Chasing Their

15 Mitigating Strategies for Transaction Costs 19 Effects of Disruption on Construction Materials 28 Visual Feature: BHP Adelaide

Dream Home 54 What’s the Difference? EPDs vs ISO 14067 Carbon Footprint 56 Building Cost Index

34 Managing Burnout

(Available in print edition only)

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 BILL OF QUANTITIES: REDUCING RISK AND UNCERTAINTY

INTRODUCTION Unless there is a fundamental shift away from current pre-construction tendering models, we may see the same deficiencies in reporting reductions in embodied carbon and other Greenhouse Gas Emissions, with governments being unable to provide reports with independently verifiable data.

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WHY A BILL OF QUANTITIES SHOULD BE USED FOR TENDERING A Bill of Quantities (BoQ) prepared by quantity surveying professionals provides a common basis for tenderers by being based on the nationally recognised Australian and New Zealand Standard Method of Measurement of Building Works. A BoQ breaks down the contract works in a formal structured manner into the detailed scope of

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

works to be tendered and reflect accurately the work required by the contract drawings and specifications.

They also provide a check of the contract works before tender and a continuation of the cost planning process as well as defining a financial structure for the administration of the contract. A BoQ offer positive means of eliminating and preventing waste thereby increasing industrial efficiency and economy.

CEO LETTER

ASSOCIATED BENEFITS Benefits that result from the use of a contracted BoQ include: ■

clients save money due to lower tender prices on projects where a guaranteed BoQ is used

■

tenderers compete on an equal basis of quality and quantity resulting in more competitive tendering

■

tenderers make fewer errors in tendering and ensure that all works are priced

■

tendering costs and risks for contractors and sub-contractors are reduced

■

the number of sub-contract prices received by contractors is increased and the range of those prices reduced

■

assessment of tenders received is simplified by the structured format

■

tendering time is reduced, particularly on larger projects

■

tenderers can spend more time on buildability, programme and approaches to problem areas

■

providing a quality control review, during preparation, to identify inaccuracies and inconsistencies in drawings and specifications before going to tender

■

assisting in reducing disputes during construction

■

calculation of progress claims is straightforward and reliable

■

prices for variation works are reduced by the use of BoQ rates

■

data from a BoQ is available for accurate calculation of depreciable items for taxation purposes

■

providing an absolute basis for the calculation of consultant's fees

■

providing a readily available basis for asset management of a completed building, cost-in-use studies, maintenance schedules, general insurance, and insurance replacement costs

■

improving standards of accountability, probity, equity, and overall efficiency in the tendering process

■

enabling the measurement and quantification of embodied carbon and other greenhouse gas emissions.

In comparison, a BoQ that is provided for information only is viewed by many contractors as presenting additional risk. A BoQ issued for information purposes only is less useful as a tender document and necessitates a greater need for each tenderer to obtain prices based on the specifications and drawings. This results in increased tender prices compared to a guaranteed BoQ. By acting as the funnel through which all project information is channelled and by processing the documentation the quantity surveyor preparing a BoQ is in the unique position of being able to view the contract documentation in a detached manner, unfettered by any preconceptions or vested interest.

GRANT WARNER CEO Australian Institute of Quantity Surveyors

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3

Q&A

WHICH PROJECT HAS INSPIRED YOU THE MOST, AND WHY? DULARI GUNASEKARA MAIQS, CQS Quantity Surveyor, WT

Working as a quantity surveyor on the refurbishment works of the Australian Parliament House was a profound privilege that left a lasting inspiration on me. The structural design, architectural style, history, and view from the rooftop align with the old parliament house, internal water pond, and boomerang shape of the buildings and finishes were captivating, and I was honoured to have contributed to some renovation works.

Australian Parliament House is one of the great places in Australia, situated in the Australian Capital Territory State.

The Parliament House covers a vast area of 7.5 hectares, total floor area of 240,000 square metres, spread across four levels, including one below ground level.

The building’s 81-metre-high flag mast, a significant national symbol, adds to its both functional and architectural.

The Parliament House uplifts public access and involvement while responding to the Australian climate, landscape, vegetation, and light quality.

The architectural firm Mitchell/Giurgola & Thorp’s vision of a Parliament House that symbolically rose out of the landscape won the design competition and has become an iconic landmark of the nation.

Among the building’s most impressive elements are the Marble Foyer, adorned with marble columns, and the Great Hall. Visitors to the Parliament House can also appreciate its seamless integration into Walter Burley Griffin’s original design for Canberra from the roof of the building.

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The Parliament House’s architectural design and landscaping of the project inspire the nation’s commitment to democracy and public engagement.

It was a privilege for me to work in a cost management role giving value for money in its refurbishment works.

Q&A

ADRIAN BUDIONO MAIQS

Associate, Genus Advisory

I have been spoilt with many choices picking a project that has been inspiring. However, the project that inspired me the most was my recent involvement being the cost manager for Queensland Health Capital Division for their Capital Expansion Programme involving twelve hospital projects. The role I undertook was slightly different from other cost management as I acted as the client-side cost manager, working across the whole program on their behalf.

I prepared Managing Contractors’ tenders including setting up returnable schedules and providing liquidated damages calculations with the pricequality method tool to assist with tender evaluation. I reviewed and provided tender recommendations for

contractors and key consultants on the programme level rather than on specific projects.

I enjoyed helping the client to eliminate commercial risks during what was a significant procurement process.

Post-tender period, I was privileged enough to fly to Brisbane and sit in the commercial meetings with Queensland Health Capital Division executives and MDs from the contractor’s side as a cover for our client’s Commercial Lead.

It was a great experience to take part in these meetings where billion-dollar projects were negotiated, even this early in my career and interstate where I had not worked before. The contracts for the twelve hospital projects were successfully awarded within the approved program budget. The complexity of such a significant public procurement process as well as its successful outcomes has inspired me.

I am grateful that Genus Advisory selected me for this project in which I gained valuable insight and inspired me with experience being a client-side cost manager.

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7

Q&A

STEPHEN PETERS MAIQS, CQS

Associate, Rider Levett Bucknall

The Randselva Bridge project in Norway stands as an exceptional source of inspiration. This 634-meter cantilever concrete bridge had been constructed entirely through the use of BIM models with not a single drawing being produced, marking a ground breaking approach to digital advancement. Whilst BIM adoption varies globally, BIM mandates are becoming more common, and as quantity surveyors (QSs) we should be aware of the imminent possibility of BIM becoming mandated in Australia and New Zealand.

Traditionally, BIM models often lack QSspecific considerations and inputs, this poses many challenges for the QS and render the BIM models less useful. The Randselva Bridge project underscores the immense benefits achievable with full BIM utilisation. By embracing paperless design and construction, this project reaps numerous advantages.

The integration of object modelling and clash detection ensures a buildable design. A comprehensive 3D model enhances on-site and off-site work comprehension. Reinforcement details, meticulously coordinated with pour phases (over two hundred), streamline bar bending list extraction, reducing errors, and saving time.

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The project excels in 4D (time) and 5D (cost) planning, facilitating flexibility through parametric design and enabling swift revisions.

Furthermore, cross-border collaboration thrives with the universality of BIM model information.

As QS professionals, active involvement in shaping modelling standards like ISO19650 is pivotal for ensuring models’ cost applicability. With the trend of fewer drawings, our readiness for this transformative shift lies in our ability to collaborate with designers to establish BIM protocols. Enhancing QS engagement with the design process and our ability to focus on keeping our projects on budget.

The appeal of digital transformation within the industry is multifaceted.

Beyond the obvious technological advancements, it also addresses the pressing issue of industry workers’ sustainability and wellbeing. Amidst increasing pressure on fees, costs and deliverables mixed in with shrinking timelines, the industry’s mental health crisis looms large. The construction sector presents distressing mental health statistics globally, with construction workers being at heightened risk.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

In closing, the Randselva Bridge’s pioneering use of BIM underscores its transformative potential. Yet, the project is more than technological innovation; it’s a testament to the industry’s ability to address profound challenges.

By engaging in digital initiatives and reshaping our approach, we stand a chance to make construction not only more innovative but also more humane.

After all, without a resilient workforce, there can be no monumental projects.

Q&A

FLORIN DIACONESCU NZIQS

VAN WRIGHT NZIQS

Senior Quantity Surveyor, Mike Greer Commercial The memory of my initial venture into the realm of the construction world is the design and build of a power plant which remains etched in my mind as an unparalleled source of inspiration.

This project holds a significance akin to the enduring memory of a first love, marking my inaugural strides into the professional domain.

Fresh out of university, I exuded unwavering self-assurance, convinced of my encompassing understanding.

However, the harsh realities of the practical world quickly humbled me, serving as a catalyst for my determination and growth.

Undaunted by challenges, I embarked on this expedition with sheer determination. Armed with nothing more than a simple hand sketch and a complete lack of knowledge about power plants, I confronted the intricate task of crafting a feasibility study within a tight timeframe. Through uncountable days of relentless effort, the team transformed the rudimentary sketch into an all-encompassing plan, navigating uncharted waters and mastering unfamiliar concepts.

Principal Consultant, Le Viks Consulting

The triumphant culmination of the project, from inception to realisation, stands as my most rewarding achievement. The transformation of abstract numbers and theories into tangible reality illustrated the enchantment of transmuting aspirations into solid accomplishments. This experience illuminated the resilience of perseverance, the importance of embracing humility, and the profound fulfilment of materialising the dreams of others.

In essence, the power plant endeavours in Western Sahara remain an unwavering fount of inspiration — a testament to the transformative potency of dedicated commitment and the profound influence that the realisation of ideals can wield over individuals and communities.

I am currently working on the refurbishment of The Church of Jesus Christ of Latter-day Saints Temple, in Apia, Samoa. This building is considered the House of the Lord here on earth, and so it is one of the iconic buildings on the island, and an honour for me to work on this building, as I am a member of the Faith. I have worked on numerous of the Church’s Chapels and meeting houses here in Samoa, but this is the first time I have been given the opportunity to work as a quantity surveyor on a Temple. My goal when I first started off with my career, was to one-day work on one of the Church’s Temples, and now I have in Samoa, where I was born and raised.

The project has a lot of constraints, one being our program, as we have only a three-month window, to carry out the renovations required before it re-opens.

To date, the weather has been great to us, and we have passed mid-way through our programme and have reached one of our major milestones.

All in all, I am grateful to the Church for entrusting me as one of their representatives to oversee this project.

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VANGUARD

VANGUARD: DAVID TILBY FAIQS (RET.) A STORY OF HARD WORK AND DETERMINATION DAVID TILBY FAIQS (RET.) CEO, Costplan Group

ENTRY INTO THE QUANTITY SURVEYING PROFESSION I came from a dysfunctional family where my grandparents, parents and seven of my siblings lived in the same house. We had one cold water tap in the house and a bucket at the end of the garden for our toilet. Our father was neither fatherly nor a good husband.

It was not a happy place, although the children stuck together and supported each other and Mum. I started to rebel, and I joined a group of “friends” who were steering me into petty crime.

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At age fifteen, I had no idea what my future would hold work-wise. I met regularly with an older cousin who was a quantity surveyor with a major construction company. He would talk to me and explain what a great career it could be. I set my target to become a quantity surveyor.

At age sixteen, I achieved passes in five ‘O’ level exams. I worked part-time at a fish and chip shop on the weekends.

My father spoke with the owners, encouraging them to employ me fulltime at GBP12 per week. I declined their offer as I wanted a career. There was one position for a cadet advertised in our region, which I applied for and was accepted, with a salary of GBP4 per week. My father kicked me out of the house, and I never went back.

At sixteen I was on the street, not knowing which way to turn — petty crime or career? Looking back, I’m glad I chose a career. I became very successful, and it saved me from taking the wrong road at such an early age.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

It was hard to live on low wages, but I survived — and even received a GBP1 raise due to my situation. I concentrated on working hard and taking on as many roles as possible in the office, to teach myself with help from other staff.

Six years later, I responded to an advertisement by Rider Hunt seeking a quantity surveyor for their Sydney office. I was accepted and in June 1971 arrived in Sydney.

MY WORK AT RIDER HUNT In 1976, I transferred to the Rider Hunt Townsville office, which covered a huge area from central Queensland to the Gulf and out to the Northern Territory. In 1983, I was offered a partnership in the Townsville office, which also included shares in the whole group.

This decision meant that I had to get a qualification. I took the AIQS “Direct Final”, passed all exams on my first attempt, and was awarded a certificate and prize for achieving the highest student standard in the examinations.

VANGUARD

As a Director of Rider Hunt, I considered how to retain new graduates who were often poached once their qualifications were obtained by giving them a career path that showed what they could achieve within the company. Rider Hunt had offices in many locations to be able to allow transfers within the company but initially, this idea was not accepted by all Directors.

Other overseas opportunities presented themselves to help with my agenda.

Once Papua New Guinea (PNG) opened, I met many travellers from the Pacific region who came as far south as PNG but not into Australia which led me to Guam. New clients I met on the island of Guam had no idea what cost planning was but embraced the technique when we showed them how to cost manage their design and construction. In Guam, I met consultants who suggested I take a trip to Hawaii.

I met with one of the biggest developers who had not heard of quantity surveying, and it became apparent to me that there was little cost planning going on in the American system at the time. I met with a small local cost engineer consultancy firm which Rider Hunt purchased, and we established ourselves in Hawaii. Hawaii led to mainland USA where Rider Hunt had two small offices.

Hawaii then led me to the Philippines.

There were quantity surveying companies operating there and in the 1990s there was a lot of work.

After researching the industry, we purchased into a small local company and expanded from fifteen staff to onehundred-and-fifty staff within a year.

Today, Rider Hunt has nine offices there.

I would like to add that the President of the USA group came from Rider Hunt Sunshine Coast and one Vice President came from the Townsville office.

One other Townsville staff member went from Townsville to the Rider Hunt USA group and then became a manager of Gardiner & Theobald’s New York office. I am very proud of the achievements of these men and pleased to know that I helped them to progress their careers.

Rider Hunt had two offices in USA in the 1990s, now there are twenty-one in that region.

COSTPLAN GROUP INCEPTION AND GROWTH I started Costplan Services in 2006, now trading as part of the Costplan Group. I have been instrumental in generating and overseeing other offices in the group in Papua New Guinea, Ashford (UK) and Cambridge (UK).

These offices working collaboratively, have taken on projects in Iceland, Norway, Holland, Sierra Leone, Cape Verde, Nigeria and several Pacific Islands.

Costplan Group has grown to a company with now over thirty employees worldwide. Our focus is on developing local offices in all regions, investing in training and developing future leaders.

A LETTER TO QUANTITY SURVEYING EMERGING PROFESSIONALS

Keep learning, don’t be afraid of hard work and taking on something new.

You can work in almost every corner of the globe. It’s up to you.

Our industry is lacking in skills in some areas and needs our emerging quantity surveyors to develop their skills at each level. Take your time, learn properly, and don’t undervalue experience, and you will be a more well-rounded quantity surveyor with the potential to be a future leader.

From my point of view, it is a great profession, in which I have been active since 1964 and still enjoy the challenges it brings, from helping staff tackle project tasks, analysing construction methods, or just meeting new clients to discuss projects. I have clients that have stayed loyal for over thirty years.

Keep learning, don’t be afraid of hard work and taking on something new.

The skills your education has given you will come to the fore and get you through.

This article was written by David Tilby FAIQS (Ret.).

As the saying goes, “The world is your oyster”.

Quantity surveyor education provides a solid base for your career in an industry that covers every form of infrastructure and construction. The education is so broad that it does not govern you to just being a quantity surveyor. Other opportunities can be with entities such as developers, banks, financial institutions, and legal firms.

You can expand your skills into areas such as project management, programming, or education.

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ECI

EARLY CONTRACTOR INVOLVEMENT: A ROUTE TO GREATER CERTAINTY IN A VOLATILE MARKET

By Brian Coyle and Carl Lobato MAIQS

In this global insight piece, Brian Coyle and Carl Lobato MAIQS discuss the key benefits and how Early Contractor Involvement (ECI) delivers value in construction projects.

The Australian construction market is particularly challenging for general contractors and subcontractors at present. Inflation in material costs, labour shortages and rising interest rates have created a difficult situation for many companies, particularly those locked in fixed-price contracts and legacy projects won prior to or during the COVID-19 pandemic.

According to the Australian Securities and Investments Commission, 2,117 companies went into administration during the financial year 2022–231, with the construction industry accounting for more than a quarter of corporate insolvencies.

This situation has ramifications throughout the construction industry and significant implications at a project level. With the traditional competitive design-bid-build procurement model, which is still prevalent in the Australian market, clients may find that there are fewer firms prepared to tender, due to the associated risks as referenced. This leaves developers in a tough position, with limited options for negotiation.

KEY BENEFITS OF ECI

It is particularly problematic in the booming data centre sector, where they are racing to meet exponentially growing demand. In line with this, it has resulted in an increasing number of our clients with large, complex projects in industries such as data centres and life sciences to consider alternative procurement strategies, such as early contractor involvement (ECI).

During the design phase, their level of design responsibility and input can vary depending on the needs of the client, but the critical element is that they will be involved in the development of the scheme from an early stage and will therefore be able to inform aspects such as constructability, design optioneering, safety-in-design, cost assessments, and consideration of alternative materials.

With an ECI strategy, the general contractor is engaged prior to the design phase, at the same time as the design consultants. Their engagement will be based on the provision of professional services support during the design phase, followed by managing the project during the onsite/construction phase.

1 Australian Securities & Investments Commission n.d., Insolvency statistics (current), ASIC, <https://asic.gov.au/regulatory-resources/find-adocument/statistics/insolvency-statistics/insolvency-statistics-current/>.

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ECI

This offers numerous other benefits including: •

advice and support on council requirements and approval processes

•

placement of early orders of materials and equipment

•

greater certainty of the general contractor’s management team and resources

•

greater certainty on the selection of prime subcontractors

•

in-depth knowledge of the project among the on-site team, due to earlier involvement in the lifecycle of the project.

One of the most significant advantages of ECI is the ability to maximise the general contractor’s expertise to fasttrack the programme. With this key partner already engaged, the drawings for the civil and early works packages can be prioritised, and construction can begin while the rest of the design is still underway.

This strategy does require a highly cohesive team approach on the part of the stakeholders, but when managed correctly it can provide real programme benefits. It is particularly relevant on major data centre and life sciences projects, where speed to market is always a high priority.

From a pricing perspective, ECI delivers the benefits that are often assumed to derive from traditional competitive procurement.

In an ideal world, the design-bid-build model would involve several general contractors competing against each other to offer the lowest price. In reality, and especially in the current market, there are only a certain number of firms able to undertake larger, more complex projects, and even fewer that are willing

If run correctly, the ECI tender process and associated workings can safeguard against future issues... to engage in a tender process in which price and margins are the only or main consideration.

Crucially, this applies to specialist trade contractors too. The subcontractor pool in Australia is still quite shallow, particularly for large complex projects in the data centre and life sciences spaces, so many of the same firms will be bidding to each general contractor.

This often results in a situation where the only significant differentiator in a tender submission will be the general contractor’s preliminaries, margin, and project allowances.

HOW ECI DELIVERS VALUE IN A VOLATILE MARKET In contrast, ECI is a much more attractive prospect for general contractors. When the prize is earlier, longer involvement in a project (for example, a three-year programme of work instead of two), they are more likely to put their best foot forward to secure the work.

With a longer lead time and greater insight into the pipeline of work, the general contractor is better able to guarantee the desired management team. This is also an effective way to lock in prime subcontractors too, a key advantage when both labour and subcontractors are in short supply.

If run correctly, the ECI tender process and associated workings can safeguard against future issues with

the successful general contractor, both from a budgetary and technical perspective.

An ECI tender should involve a rigorous review process, in which competition is based on a broader range of criteria, weighted appropriately, including the experience of the proposed team, the firm’s track record on similar projects, their safety record, programme and proposed completion date, value engineering initiatives, project approach, and more.

Price is obviously still a very important element too. Bidding companies submit their proposed preliminaries, resource loader, margin, and hourly rates. Combined with an independent estimate for the subcontractor or trade portion of the works, based on the level of design available, this can be compiled into a forecast for the overall project cost to provide the developer with a greater level of certainty.

As the design progresses, the winning general contractor can also be required to provide periodic cost plans as part of their ECI scope, independent of the continuous involvement of a cost manager or quantity surveyor.

Moving forward, ECI is expected to account for a growing proportion of tenders as clients choose this approach to improve project outcomes. When conditions are challenging, it’s essential to take a clear-eyed view and to be realistic about the strategies that will deliver the desired result — and in the current market, the certainty that ECI can provide is perhaps one of the most valuable commodities of all.

This article was written by Brian Coyle and Carl Lobato and first published by Linesight at www.linesight.com/insights

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CULTURE

WHAKAKĀINGA PROJECT TEAM COLLABORATION INTEGRATES

AUTHENTIC MĀORI DESIGN PRINCIPLES AND AESTHETICS The Whakakāinga Aurecon Office Fitout in New Zealand stands out as an exceptional example of successful construction project delivery within specified delivery and budgetary constraints while embracing a vibrant Māori culture.

The entire project management team incorporated diversity, collaboration, guardianship, health and wellbeing, mentorship, courage, boldness, leadership, and future-focused thinking to achieve a truly outstanding project that was successfully finished on time.

Whakakāinga Aurecon Office Fitout is 3,121m2 of new office space at 110 Carlton Gore Road, Newmarket, Auckland, New Zealand. Mansons TCLM completed the new development base build, and Aurecon was responsible for the interior fit-out of the space. The project was a finalist in the NZIOB Building People Awards held in August 2023.

The project team nominated included Caleb Kennedy and Chris Harrison (Savoury Construction — main contractor), Faith Chimhundu, NZIQS Graduate (BBD NZ — quantity surveyors), Patricia Balbas (TSA Management — project managers) and Arron O’Hagan (Warren and Mahoney — design team).

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CARBON OFFSET Savory Construction worked with consultants throughout the project to impute and track what the carbon consumption would be using a carbon fitout calculator. They then offset the carbon tonnage using certified offset credits through Toitu Envirocare.

USE OF NATURAL TIMBERS The use of natural timbers in the project design was a significant aspect of incorporating New Zealand cultural elements.

CULTURE

The design team worked extensively with Whakakāinga Aurecon and Ngāti Whātua to tell the story of the curious traveller and its link to the local environment.

Pine and macrocarpa timbers were extensively utilised in various elements of the fitout, including flooring and a large amount of joinery. An impressive staircase beats as the heart of the office and adds warmth and richness.

The procurement, coordination and installation of the beautifully designed timber staircase took a high level of detail and precision to execute.

CULTURAL CONSULTATION AND EXPERTISE Kennedy and Harrison recognised the need for expert guidance in incorporating Māori culture into the construction project. They collaborated closely with Māori cultural consultants and local iwi (tribe) Ngāti Whātua who provided invaluable insights, cultural expertise, and guidance throughout the project’s lifecycle. The result is a fitout that tells the story of The Curious Traveller and its links to the local environment and ensured the project’s authenticity and respect for Māori customs and protocols.

Photos taken from inside Aurecon office

DESIGN INTEGRATION AND ARCHITECTURAL EXCELLENCE The Savory Construction team also worked in close partnership with designers Warren & Mahoney to integrate Māori design principles and aesthetics into the construction project.

Their collaborative efforts resulted in a seamless fusion of contemporary architecture and Māori design elements, creating a visually stunning and culturally significant outcome.

Whakakāinga means to make a home, and the team has gone above and beyond to create an environment that fosters a sense of belonging and pride for both the local community and visitors.

INTEGRATED SUSTAINABILITY AND INDIGENOUS KNOWLEDGE Savory Construction collaborated with consultants specialising in sustainable construction and indigenous knowledge systems.

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CULTURE

Whakakāinga Aurecon Office Fitout

This collaboration enabled the project to incorporate sustainable practices aligned with Māori principles of kaitiakitanga (guardianship) and fostered the integration of traditional knowledge regarding the use of materials, energy efficiency, and environmental stewardship.

STAKEHOLDER ENGAGEMENT AND COMMUNICATION Another notable aspect of this project is the team’s exceptional collaboration with consultants and the base build contractor, Mansons TCLM.

Whakakāinga means to make a home.

Understanding that successful projects rely on effective teamwork and synergy, the project team demonstrated exceptional leadership and coordination skills, resulting in a harmonious and efficient working environment.

Throughout the project, the team consistently fostered an atmosphere of open communication and mutual respect. By valuing the expertise and input of all stakeholders, they created a collaborative platform where ideas were freely shared and synergies explored.

This inclusive approach enhanced the overall project outcomes and facilitated a sense of ownership and pride among all team members.

...Facilitated a sense of ownership and pride...

The team’s commitment to transparent decision-making, fostering strong relationships, building trust among team members and efficient problemsolving further solidified their collaborative efforts. By prioritising clear communication channels, regular meetings, and constructive feedback loops, they were able to navigate challenges effectively and maintain positive project momentum.

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PROMOTING DIVERSITY AND INCLUSION The project management team firmly believes in the power of diversity and actively promotes inclusivity in their work and behaviour.

Their commitment to diversity is reflected in their decision-making processes, where they prioritised considering a wide range of viewpoints.

They actively encouraged participation from team members with diverse backgrounds and experiences, creating opportunities for personal and professional growth. By embracing diversity, they have elevated the quality of the project and enriched the overall team dynamics.

This article was based on Savory Construction’s entry into the NZIOB awards 2023.

TRANSACTION COSTS

MITIGATING STRATEGIES FOR TRANSACTION COSTS Based on a research paper by Sahani Fernando and Argaw Gurmu MAIQS

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TRANSACTION COSTS

ABSTRACT Construction projects involve transaction costs (TCs) both during the pre and post-contract phases. If these costs are not managed appropriately, they can lead to project cost overruns.

The purpose of this study is to explore the mitigation strategies for reducing transaction costs in the Australian construction industry. Qualitative data was collected by conducting semistructured interviews with professionals who have been working as contract administrators, project managers, quantity surveyors and construction managers. The data was then analysed using thematic and content analysis techniques. The research identified various strategies such as recruitment of qualified experts, building trust and relationships, and the use of digital technologies such as BIM, drones, and point cloud.

INTRODUCTION One of the success factors for construction projects is to complete them within budget. However, various researchers in Australia and other countries frequently reported project cost overruns. Terrill et al. identified that up to 52% of construction projects experience cost overruns.1 Similarly, Love et al. found that an average of 12.22% of projects had experienced cost overruns.2 The most prevalent causes of cost overruns as identified by previous researchers were design

changes, increases in the prices of construction materials, labour shortages, variations in scope, and force majeure.3 However, most of these causes are related to production costs.

Indirect costs, unforeseen costs, or costs related to the transactions between project parties are often overlooked.

According to Li et al., construction project cost includes not just the production costs, but also transaction costs (TCs) such as the cost of bidding, acquiring information, processing claims, contract administration and dispute resolution.4 Also, Guo et al. explored TCs and classified them into pre-contractual and post-contractual.5 Pre-contractual TCs are costs incurred before signing the contract such as costs related to information gathering, communication, tender documentation, bidding, feasibility studies, environmental impact assessments, and negotiations.6 Post-contractual TCs are costs incurred on activities such as set-up and running, enforcement, decision-making, and dispute resolution after signing the contract. However, mitigation strategies for reducing transaction costs in the context of Australia were not thoroughly investigated.

Thus, this research is conducted to fill the aforesaid knowledge gap.

STRATEGIES TO MITIGATE TRANSACTION COSTS The data analysis yielded many strategies that may be used to minimise TCs. According to the findings, most experts strongly advised employing an experienced project team since technical competency and experience can minimise a significant amount of unnecessary TCs incurred during project transactions. The interviewees agreed that the most important element of a project is the project scope and contract.

As a result, having a well-defined scope, good documentation, and readily available information would reduce most TCs. Following that, most participants suggested strategies such as maintaining uniform procedures and policies, as well as allocating sufficient resources within the organisation.

Furthermore, it was suggested to implement transparent pricing techniques and competitive bidding procedures.

Maintaining a positive relationship between the contractor and the client, and developing trust with the consultant or contractor, was also suggested as a passive approach to reducing TCs. A summary of the strategies is presented in Table 1.

1 Terril, M., Coates, B. & Danks, L. 2016, ‘Cost overruns in Australian transport infrastructure projects’, Proceedings of the Australasian Transport Research Forum, vol. 16, Melbourne, Australia, p. 18.

2 Love, P.E., Wang, X., Sing, C.P. & Tiong, R.L. 2013, Determining the probability of project cost overruns, Journal of Construction Engineering Management, vol. 139, no. 3, pp. 321–330.

3 Abidin, N.Z. & Azizi, N.Z.M. 2020, Soft cost elements (SCE): Exploring management components of project costs in green building projects, Environmental Impact Assessment Review, vol. 87, pp. 106545.

4 Li, H., Arditi, D. & Wang, Z. 2013, Factors That Affect Transaction Costs in Construction Projects, Journal of Construction Engineering and Management, vol. 139, no. 1, pp. 60–68.

5 Guo, L., Li, G., Li, P. & Zhang, C. 2016, Transaction Costs in construction projects under uncertainty, Kybernetes, vol. 45, no. 6, pp. 868–883.

6 Rajeh, M., Tookey, J.E. & Rotimi, J.O.B. 2015, Estimating TCs in the New Zealand construction procurement, Engineering, Construction and Architectural Management, vol. 22, no. 2, pp. 242–267.

16: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

TRANSACTION COSTS

Table 1: Summary of Strategies to Mitigate Transaction Costs

Categories

Strategies to Mitigate Transaction Costs

Technical Competency

• • • •

Recruiting a qualified and expert project team Recruiting a project team who are diligent in decision making Recruiting employees who are competent in using new software and platforms Implementing a proper methodology before negotiating with clients.

Scope and Contract

•

Allowing appropriate time to go through contract documentation

•

Incorporating more time to plan and research

•

Having information readily available to use

•

Maintaining clear and proper documentation and records

•

Trying to maximise the detailing of the project.

•

Having a proper organisation structure with a key point of communication

•

Establishing standards procedures and templates

•

Installing efficient software/systems for compliance works

•

Implementing digital technologies such as BIM, drones and point cloud

•

Focus on procuring sufficient resources to cater to project needs.

•

Encouraging a more transparent bidding procedure

•

Advising on more competitive bidding than bidding low

•

Advising on an apple-to-apple bidding procedure

•

Conducting a advanced feasibility study before factoring.

Organisational Aspect

Bidding Behaviour

Trust and Relationships •

Entrusting the selected builder from the beginning

•

Use a single and double-pointed contractor base

•

Making good relationships with all parties with mutual trust.

•

Recruiting a consultant/superintendent if having less experience and knowledge in construction projects

•

Following a timely payment system

•

Having sufficient capital/funds in hand before entering a project

•

Indulge more time to decide the requirements and scope of the project

•

Taking decisions diligently and on time.

•

Installing efficient software/systems for procurement

•

Involving more collaborative procurement methods which increase early contractor involvement

•

Following selection criteria or a matrix to find the best-suited procurement method.

•

Increasing transparency during variations and claims

•

Following a more diligent approach with clients

•

Implementing more flexibility in project works.

•

Maintaining a strong leadership

•

Agreeing on a proper conflicts management process

•

Implementing a swift, smooth, and an efficient communication system

•

Planning on a sustainable vendor management procedure.

•

Proposing to add an extra percentage to cover up TCs at the planning stage

•

Incorporating more time to plan and research

•

Applying a proper feasibility.

•

Identifying project risks from an early stage

•

Implementing a fair risk allocation process.

Client’s Behaviour

Procurement Aspect

Contractor’s Behaviour

Leadership and Management

Proper Planning

Risk Allocation

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 17

TRANSACTION COSTS

CONCLUSIONS The mitigation strategies for reducing TCs in construction projects were explored in this study. This was investigated by conducting semistructured interviews with professionals in the Australian construction sector.

Several mitigation strategies for minimising TCs were identified and presented in tabular format. These include recruitment of qualified experts, building trust and relationships, and the use of advanced software or digital technologies such as BIM, drones and point cloud.

Moreover, it was revealed that the mitigation strategies are interrelated; therefore, one strategy alone may not mitigate the effect of TCs on total project cost. This research has both theoretical and practical implications.

The findings of the study are an important addition to the body of literature on TCs From the practice point of view, stakeholders involved in the construction of building projects can adopt the strategies identified in this research to minimise transaction costs or avoid unnecessary TCs in their projects.

This will eventually aid them to reduce project cost overruns. Although this study met its aim and objectives, it has some limitations. The data collection for the study was limited only to the opinions of professionals who work for main contractors and cost consultants.

Consequently, the views of the owners and other stakeholders were not considered. Moreover, the focus of this research was on TCs associated with building projects.

Therefore, it is suggested that future studies can explore the views of other stakeholders such as owners, material suppliers, and subcontractors on TCs in infrastructure projects.

18: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

To view the full research paper by Sahani Fernando and Argaw Gurmu MAIQS (School of Architecture and Built Environment, Deakin University, Australia) visit www.ciobwcs.com/papers

MATERIALS

EFFECTS OF DISRUPTION ON CONSTRUCTION MATERIALS

By Stanley Chang Hon Wah MAIQS, CQS, Chew Jin Jeak, Rachel Wong Chyn Lin, Chin Wei Sun & Chan Lei Onn

ABSTRACT The construction industry plays a crucial role in supporting Singapore’s economy and its growth. However, from the onset of 2020, this industry was crippled by the impact of COVID-19.

From labour crunch to supply chain disruptions, the industry struggled to keep up with the rapid changes caused

by COVID-19, resulting in lengthy delays on projects and new developments being put on hold or scrapped.

Information gathered through published articles shows that COVID-19 disrupted major supply chains, transportation (logistic), labour supply, and other related issues around the globe.

These changes have led to a shortage of imported construction materials and foreign labour in local manufacturing and construction, resulting in delays in new developments.

This paper aims to explore the impacts of construction materials shortage in Singapore’s construction industry caused by the COVID-19 pandemic.

A COVID-19 Temporary Measure Act 2020 (COTMA) was introduced by the Building Construction Authority (BCA) to the construction industry in June 2020 which relieved contract parties through the extension of the project timeline, co-sharing of qualifying cost and foreign manpower cost.

With the aid of COTMA and the improvement of the COVID-19 situation around the world, the supply chain of construction materials is gradually recovering.

However, contractual parties in a construction project still need to find ways to manage the project’s budget as material costs continue to fluctuate.

Planning with Building Information Modelling (BIM) and Design for Manufacturing and Assembly (DfMA) can be adopted to mitigate material cost increases.

The road to recovery for the industry remains a long and difficult one.

Industry players need to put continuous effort into adapting to the new obstacles and challenges to ensure resilience.

INTRODUCTION Since 2019, the global pandemic COVID-19 has greatly disrupted the world economy, affecting many industries including the construction industry. Many construction projects face disruptions to their project timeline due to supply chain disruption, increasing costs and uncertainty in the global economy.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 19

MATERIALS

Today, as the world slowly recovers from the effects of the pandemic, the construction industry is still plagued with challenges caused by rising construction costs.

Project costs may be directly affected by (but not limited to) the increased building material costs and delays caused by the current logistical situation, which affects the project timeline and the requirement of implementing Extension of Time and Liquidated Damages.

This paper will focus on the construction industry in Singapore, studying the recent TPI trends and construction material price fluctuations for concrete and steel.

Additionally, this paper will focus on studying how to more effectively manage or optimise construction materials to minimise the overall project costs by the following ideas:

One of the reasons why the construction industry was affected is due to increases in prices of building materials.¹

A method of quantifying the effects of COVID-19 towards the construction industry would be through the study of the Tender Price Index (TPI).

With a focus on the impact of COVID-19 on Singapore’s Construction Industry, it can be observed that Singapore’s Gross Domestic Product decreased from 3.7 (2019) to 2.7 (2020)2 and the construction industry’s contribution to the Singaporean GDP has greatly reduced from S$18.09B to S$11.5B which has an approximate 57.3% (Figure 1).

TENDER PRICE INDEX

According to Zhu, it was reported that the high cost of building materials would continue for the rest of 2022 and as the Linesight director quoted, the construction costs may only stabilise in 2023.4

TPI evaluate the changes in tender prices with consideration to most of the components. This typically includes the cost of producing the output of construction activities.5 TPI also helps clients and tenderers evaluate how the building tender prices are changing.

Additionally, it is important to note that TPI can help the industry determine the level of individual tenders, time adjustments, pricing, cost planning, predicting cost trends and general comparisons.6

1. Planning with Building Information Modelling (BIM) 2. Design for Manufacturing and Assembly (DfMA).

LITERATURE REVIEW IMPACT OF COVID-19 ON THE CONSTRUCTION INDUSTRY COVID-19 has affected many industries, from which the construction industry was not exempt, as the construction industry can be greatly influenced by the economic cycles.

Figure 1: Chart of Gross Domestic Product (GDP) of the construction industry of Singapore from 2012 to 2021 (in billion Singapore Dollars)3

1 GEP 2020, ‘The Impact of COVID-19 on Building Materials’, GEP, accessed 18 July 2023, <https://www.gep.com/blog/strategy/the-impact-ofcovid-19-on-building-materials>.

2 New Zealand High Commissioner in Singapore 2021, Singapore’s Construction Industry August 2021, New Zealand Foreign Affairs & Trade, <https://www.mfat.govt.nz/assets/Trade-General/Trade-Market-reports/Singapores-Construction-Industry-August-2021.pdf>.

3 Taylor, P. 2022, ‘Teradata Corporation’s global annual revenue from 2010 to 2021’, Statista, accessed 18 July 2023, <https://www.statista.com/ statistics/545622/worldwide-teradata-annual-revenue/>.

4 Zhu, M. 2022, ‘High material prices to remain a drag on Singapore construction this year: report’, Business Times, 14 February, <https://www. businesstimes.com.sg/companies-markets/energy-commodities/high-material-prices-remain-drag-singapore-construction-year>.

5 Goh, B.H. 2005, ‘The dynamic effects of the Asian financial crisis on construction demand and tender price levels in Singapore’, Building and Environment, vol. 40, no. 2, pp. 267–276.

6 Ernest, K., Adjei-Kumi, T. & Badu, E. 2016, ‘A Conceptual Framework Towards the Development of Tender Price Index’, The 40th Australasian Universities Building Education Association (AUBEA), v. 40.

20: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

MATERIALS

Table 1: Factors influencing tender prices of construction works7 Factors

References

Material availability

Liu et al. 2007

Labour productivity

Elhag, Boussabaine and Ballal 2005; Shash 1993

Level of profit

Park and Chapin 1992

Project financing

Han and Diekmann 2001

Cost of manpower

Shash 1993

Location and control of site

Akintoye 2000

Zonal rates

Zou 2007

Category of contractor

Shen et al. 2004

Management ability

Hatush and Skitmore 1997

Contract type

Drew and Skitmore 1997

Method of tender selection and degree of competition

Oo, Drew and Lo 2008

Government policy

Shen et al. 2004

Project definition/size

Drew and Skitmore 1992

Type of development

Fu, Drew and Lo 2003

Construction plan

Watt, Kayis and Willey 2009

According to Table 1, there are indications of several factors which will affect the tender price index.

It can be observed that TPI is affected by many factors apart from material costs. Macegroup recognises that the recent TPIs had significant changes due to the increase in material prices and labour costs.8 Furthermore, the Ukraine–Russia War also negatively influences the TPI in the construction sectors as energy prices soar leading to an increase in the cost of material fabrication.9 A method by which specific material price fluctuations can be observed would be through their producer price index, which will be investigated in the next section.

CONSTRUCTION MATERIALS: CONCRETE & STEEL This study will further focus on two major construction material (construction and steel) prices and their fluctuations between the years 2019 and 2021, but excluding 2022 which has been further affected by international conflicts.10 11 12

Figure 2: Producer Price Index9

Figure 2 shows a general introduction to PPI. We will observe building materials and supplies PPI from October 2019 to December 2021, before focusing on the fluctuation in prices for steel and through the Producer Price Index for concrete.

7 Ernest, K., Adjei-Kumi, T. & Badu, E. 2016, ‘A Conceptual Framework Towards the Development of Tender Price Index’, The 40th Australasian Universities Building Education Association (AUBEA), v. 40.

8 J. 2022, ‘The Russia–Ukraine Conflict’s Effect on Singapore’s Construction Sectors’, Renotalk, accessed 18 July 2023, <https://www.renotalk. com/article/russia-ukraine-effect-singapore-construction-sectors>.

9 Wallstreetmojo Editorial Team 2022, Producer Price Index, Wallstreetmojo, accessed 18 July 2023, <https://www.wallstreetmojo.com/ producer-price-index/>.

10 Zion, L. 2022, ‘Popular mistakes used in construction’, Construction Resources Blog, 26 March, accessed 18 July 2023, <https:// constructionresourcesblog.com/popular-materials-used-in-construction/>.

11 Kumar, E.M. 2022, ‘Materials used in construction — list of 72 basic items’, Pro Civil Engineer, accessed 15 August 2022, <https:// procivilengineer.com/materials-used-in-construction/>.

12 Krishna, V. 2020, ‘14 Important building materials used in construction’, Civil Read, 29 February, accessed 15 August 2022, <https://civilread. com/building-materials/>.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 21

MATERIALS

PRODUCER PRICE INDEX (PPI)

Producer Price Index by Industry: Building Material and Supplies Dealers Vintage: 2023-03-15 Producer Price Index by Industry: Building Material and Supplies Dealers Vintage: 2023-04-13

The PPI can be used to measure the rate of changes in product costs sold by producers over a period (see Figure 2).

In October 2019 (pre-pandemic impact), the PPI for Building Materials and Supplies was only 152.400. In December 2021, it was shown that the PPI had increased to 199.890.

In two years, the PPI has increased by approximately 31.16%.

240

200

Index Dec 2003=100

Refer to Figure 3 for information regarding the fluctuation of PPI for Building Materials and Supplies.

280

160

120

80

40

0 Jan 2020

Jul 2020

Jan 2021

Source: U.S. Bureau of Labor Statistics

Jul 2021

Jan 2022

Jul 2022

Jan 2023

alfred.stlouisfed.org

Figure 3: Chart of Producer Price Index by Industry: Building Material and Supplies (Oct 2019–Dec 2021)13

Figure 4: Graph of Steel Rebar Average Price (2018–2022)14

13 U.S. Bureau of Labor Statistics 2022, Producer Price Index by Industry: Building Material and Supplies Dealers, retrieved from FRED, Federal Reserve Bank of St. Louis, accessed 18 July 2023, <https://fred.stlouisfed.org/series/PCU44414441>.

14 Investing.com 2023, Steel Rebar Futures Historical Data, accessed 18 July 2023, <https://www.investing.com/commodities/steel-rebarhistorical-data>.

22: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

Index Dec 2007=100

MATERIALS

Figure 5: Chart of PPI by Industry: Concrete Contractors, Nonresidential Building Work (Oct 2019–Dec 2021)17

STEEL According to Figure 4, the price for Steel Rebar in October 2019 was USD 440.57 and USD 697.81 in December 2021. Based on this information, it can be observed that there was an increase of approximately 58.39% in price.

CONCRETE According to Figure 5, in October 2019 (pre-pandemic impact), the PPI for Building Materials and Supplies was only 136.300.

In December 2021, it was shown that the PPI had increased to 161.966. In two years, the PPI had increased by approximately 19%.

METHODS TO BETTER OPTIMISE AND MANAGE PROJECT COSTS PLANNING WITH BIM BIM is a collaborative process that allows all parties of a construction team to be able to plan, design and construct a building or structure based on one platform.15 16

Information stored within BIM is actionable which can be useful in improving accuracy, expressing design intent and most importantly (within the context of cost management), reducing change orders and field coordination problems.

BIM can be used to track progress accurately and monitor the financial performance of the project.18 19 Estimated costs are more accurate and allow better planning in the management of orders and supply chains.

15 Lorek, S. 2022, ‘What is BIM (Building Information Modeling)?’, Trimble.com, accessed 18 July 2023, <https://constructible.trimble.com/ construction-industry/what-is-bim-building-information-modeling>.

16 The Architecture Designs 2021, ‘The benefits of and barriers to BIM adoption: A detailed study’, TAD, 24 May, accessed 20 July 2022, <https://thearchitecturedesigns.com/benefits-of-and-barriers-to-bim-adoption>.

17 U.S. Bureau of Labor Statistics 2022, Producer Price Index by Industry: Concrete Contractors, Nonresidential Building Work, retrieved from FRED, Federal Reserve Bank of St. Louis, accessed 18 July 2023, <https://fred.stlouisfed.org/series/PCU23811X23811X>.

18 Moura, B. n.d., ‘7 Reasons to use BIM on your future construction projects’, Hexagon, accessed 26 July 2022, <https://aliresources.hexagon. com/articles-blogs/7-reasons-to-use-bim-on-your-future-construction-projects>.

19 Ireland, R. 2020, ‘BIM and existing buildings’, RICS Built Environment Journal, 10 December, accessed 18 July 2022, <https://ww3.rics.org/uk/ en/journals/built-environment-journal/bim-and-existing-buildings.html>.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 23

MATERIALS

Table 2: The difference in project life cycle time in conventional and BIM methods25 Activity

Duration (month) 1

2

3

4

5

6

7

8

9

10

11

12

Preparation Survey

DESIGN FOR MANUFACTURING AND ASSEMBLY (DFMA) DfMA is a construction methodology that aims to increase construction productivity by taking a holistic approach to a project focusing on prefabricating components.20 This method is adopted to lower costs, making assembly easier, reducing labour requirements, improving workmanship and reducing construction periods.21 22 23

Architectural design Structure Mechanical, electrical, plumbing (MEP) Scheduling & budgeting Preparing tender

Time difference

documents

Table 3: Cost of conventional methods workers25 Position

People

Time (month)

People time

Unit price (million IDR)

Cost (million IDR)

(1)

(2)

(3)

(4)

(3)x(4)

(5)

(6)

A

Expert worker

1

Team leader

1

12

12

24.250

291.000

2

Geotechnical engineering

1

2

2

16.750

33.500

No

Refer to Tables 2–4 for the savings that BIM can provide in project duration and concurrent project costs.

3

Surveyor

1

2

2

13.750

27.500

4

Architect

1

8

8

16.750

134.000

5

Cost estimator

1

1

1

13.750

13.750

The Singaporean government has recently encouraged the adoption of this methodology in 2020, with the focus of achieving a 70% adoption rate in the Built Environment by 2025.24 The Singapore government has invested S$120 million into Singapore’s Public Sector Construction Productivity Fund (PSCPF) to promote DfMA techniques.

Thereafter, it was confirmed in 2021 that the Singaporean Built Environment has been steadily adopting this methodology, keeping on track to achieve the goal of 70% in 2025.

Among the technologies that are in line with DfMA are the following:

6

Structure

1

4

4

16.750

67.000

7

MEP

1

4

4

16.750

67.000

B

Assistant expert workers

1

Assistant surveyor

1

2

2

2.523

5.046

2

Architect expert assistant

2

8

16

2.523

40.368

2

4

8

2.523

20.184

c. Prefabricated Prefinished Volumetric Construction d. Prefabricated Bathroom Units

3

MEP expert assistant

C

Supporting workers

1

Administration

1

12

12

1.500

18.000

2

Drafter

2

11

22

1.500

33.000

Total cost

750.348

a. Advanced Precast Concrete System b. Mass Engineered Timber

e. Prefabricated Mechanical Electrical and Plumbing (MEP) System f. Structural Steel.

20 BuildTech Asia 2021, ‘Singapore Government makes a big push towards DfMA’, BTA, 7 April, accessed 18 July 2023, <https://buildtechasia. com/singapore-government-makes-a-big-push-towards-dfma/>.

21 Building and Construction Authority Singapore n.d., Design for Manufacturing and Assembly (DfMA), accessed 18 July 2023, <https://www1. bca.gov.sg/buildsg/productivity/design-for-manufacturing-and-assembly-dfma>.

22 Guan, T.S. 2021, ‘How DfMA changes the building game’, RSP, 1 July, accessed 18 July 2023, <https://rsp.sg/perspective/how-dfmachanges-the-building-game/>.

23 Leong, G. 2020, ‘Parliament: construction sector to digitalise building processes to boost productivity’, The Straits Times, 4 March, accessed 18 July 2023, <https://www.straitstimes.com/politics/parliament-construction-sector-to-digitalise-building-processes-to-boost-productivity>.

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MATERIALS

Table 4: Costs of BIM methods workers25 No

Position

People

Time (month)

People time

Unit price (in million IDR)

Cost (in million IDR)

(1)

(2)

(3)

(4)

(3)x(4)

(5)

(6)

A

Expert worker

1

BIM experts

1

6

6

24.250

145.500

2

Geotechnical engineering

1

2

2

16.750

33.500

3

Surveyor

1

2

2

13.750

27.500

4

Cost estimator

1

1

1

13.750

13.750

5

Structure

1

3

3

16.750

50.250

6

MEP

1

3

3

16.750

50.250

B

Assistant expert workers 5.046

1

Assistant surveyor

1

2

2

2.523

2

Architect expert assistant

1

3

3

2.523

7.569

3

MEP expert assistant

1

3

3

2.523

7.569

C

Supporting workers

CIRCULAR SINGAPORE CONSTRUCTION TENDER PRICE 1 ON Administration 1 6 INDEX 6

1.500

9.000

Total cost

357.434

This circular is issued by the Singapore Institute of Surveyors and Valuers (SISV) to members of the Construction Industry Joint Drafter 1 5 5 1.500 Committee2as a service to disseminate general tender price trend.

FINDINGS SINGAPORE TPI Figure 6 is an extract of TPI Compilation by the Singapore Institute of Surveyors and Valuers, exclusive of unpredictable costs such as the following from each firm/group. The considerations taken to compile this data are as follows: BCA: Excludes piling, substructure works, external works and mechanical and electrical services. For building works which include public residential, private non-landed residential and commercial office.

7.500

HDB: Includes building works, piling, external works and mechanical and electrical services. It is compiled based on the tender prices received for HDB’s construction works.

Construction Tender Price Index Compilation 150.0 145.0 140.0 135.0

The index reflects the price movements in construction materials, equipment, manpower and elements of competition, risk and profit allowance by contractors.

Tender Price Index (TPI)

130.0 125.0 120.0 115.0 110.0

The index excludes project-specific design features and provisions to achieve a like-to-like comparison across different quarters and reflects the movement of tender prices due to external factors.

100 Base Year: 2010

105.0 100.0 95.0 90.0 85.0 80.0 BCA All Buildings HDB AECOM RLB AIS

Currently, no information has been published that directly discusses the savings DfMA can provide in the Singaporean Construction Industry.

2008 119.9 124.2 119.8 123.2 124.0

2009 101.3 107.2 107.0 100.2 96.6

2010 100.0 100.0 100.0 100.0 100.0

2011 99.7 93.0 100.5 103.1 102.0

2012 99.8 92.0 101.8 105.7 102.0

2013 104.6 97.8 110.2 110.5 108.1

2014 106.8 99.8 112.5 112.0 108.1

2015 104.0 96.0 110.6 110.2 104.3

2016 98.0 85.8 105.5 105.3 101.2

2017 96.7 83.2 102.3 101.5 98.7

2018 98.6 86.9 103.5 103.3 99.7

2019 99.9 90.9 102.5 103.2 100.2

2020 102.8 97.9 106.1 110.5 103.2

2021 117.1 111.1 117.0 121.6 121.6

2022 130.7 126.0 124.5 134.2 131.5

1Q23 135.8 133.2 124.4 141.6 134.1

2Q23 136.2 134.3 124.4 142.4 134.1

Figure 6: Construction Tender Price Index Compilation26

Note:

Base year 2010 = 100 BCA new TPI series with base year 2010 = 100 is implemented with effect from the first quarter of 2015. To facilitate comparison of TPI changes over time, the historical TPI data series were linked to the 2010-based TPI data series at the new reference period (year 2010).

With effect from 28 November 2022, "Arcadis Singapore Pte Ltd" has changed its name to "Asia Infrastructure Solutions Singapore Pte. Ltd.".

With effect from 18 February 2019, "Davis Langdon KPK (Singapore) Pte Ltd" has changed its name to "AECOM Cost Consulting and Project Management (Singapore) Pte. Ltd.".

The tender price indices are based on yearly average, with the exception for AIS whose TPI from Year 2009 onwards is based on 4th Quarter index.

Basket of Items: BCA: HDB:

Excludes piling, substructure works, external works and mechanical and electrical services. For building works which include public residential, private non-landed residential and 24 Sweet, R. 2020, ‘Singapore to spend $139m promoting modular and digital construction’, Global Construction Review, 6 March, accessed 18 commercial office.

July 2023, Includes<https://www.globalconstructionreview.com/singapore-spend-139m-promoting-modular-and-digital/>. building works, piling, external works and mechanical and electrical services. It is compiled based on the tender prices received for HDB’s construction works. The index reflects the price movements in construction materials, equipment, manpower and elements of competition, risk and profit allowance by contractors. The index excludes project

specific design features and provisions in order to achieve a like-to-like comparison across different quarters and reflects movement of tender prices due to external factors.

25 Sholeh, M.N., Fauziyah, S. & Khasani, R.R. 2020, ‘Effect of Building Information Modeling (BIM) on reduced construction time-costs: a case E3S Web Conferences, vol. services.

202, This no.TPI3.

AECOM study’, Excludes any price of for piling and mechanical and electrical commences from Year 2007 and reflects the movement of Main Contract prices in tenders on selected Residential Private NonLanded: RLB:

AECOM's residential projects for the respective period.

26 Singapore Institute of Surveyors and Valuers 2023, Singapore Construction Tender Price Index 2023 — Q2, SISV, accessed 30 August, <https://www.sisv.org.sg/admin/efinder/files/SISV%20TPI_2Q2023.pdf>.

Excludes piling and mechanical and electrical services. It is compiled based on tender returns on projects handled by the company.

AIS:

Excludes piling, substructure works and external works. It is based on private sector projects handled by the company.

Disclaimer:

The tender price indices are compiled by the Singapore Institute of Surveyors and Valuers (“SISV”) based on data from the Building and Construction Authority ("BCA"), Housing & Development Board ("HDB"), AECOM Cost Consulting and Project Management (Singapore) Pte. Ltd. ("AECOM"), Rider Levett Bucknall LLP ("RLB") and Asia Infrastructure Solutions Singapore Pte Ltd ("AIS"). While SISV, BCA, HDB, AECOM, RLB and AIS have endeavoured to ensure the accuracy of the information and materials in this circular (the “Materials”), it does not warrant its accuracy, adequacy, completeness or reasonableness and expressly disclaims liability for any errors in, or omissions therefrom. SISV, BCA, HDB, AECOM, RLB and AIS shall not be liable for any damage, loss or expense whatsoever arising out of or in connection with the use or reliance on the Materials. The Materials are provided for general information only. Professional advice should be obtained for your particular factual situation before making any decision. The Materials may not, in any medium, be reproduced, published, adapted, altered or otherwise used in whole or in part in any manner without the prior written consent of SISV, BCA, HDB, AECOM, RLB and AIS.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 25

MATERIALS

AECOM Residential Private NonLanded: Excludes any price for piling and mechanical and electrical services. This TPI commenced in 2007 and reflected the movement of main contract prices in tenders on selected AECOM residential projects for the respective period.

Table 5: Cost distribution of a construction project Level 1

Level 2

Level 3

Level 4

Amount (S$)

Preliminaries

$10,000,000.00 Labour (30%)

Rider Levett Bucknall: Excludes piling and mechanical and electrical services.

It is compiled based on tender returns on projects handled by the company.

Builders Work (42%)

Material (70%)

$12,600,000.00

Structural (50%)

Concrete (90%)

$1,323,000.00

Reinforcement (36%)

$5,292,000.00

Formwork (15%)

$2,205,000.00

Structural Steel (40%)

$5,880,000.00

Architectural (50%)

Arcadis: Excludes piling, substructure works and external works. It is based on private-sector projects handled by the company.

Mechanical & Electrical (48%)

Based on Table 4, it can be observed that there was an increase in average TPI of 19% from 2019 to 2021 and 7% from 2021 to Q1 2022.

$14,700,000.00

Labour (30%) Material (70%)

$14,400,000.00

Copper (30%)

$10,080,000.00

Other Materials (70%)

$23,520,000.00 TOTAL

$100,000,000.00

Table 6: Element price increase

...The use of BIM can shorten the project duration by approximately S$2 million in savings...

Description

Price increase (%)

Additional Cost (S$)

Percentage increase over total project value (%)

Builders Work Labour

30%

$3,780,000.00

3.8%

Concrete

19%

$251,370.00

0.3%

Structural Steel

58%

$3,410,400.00

3.4%

Mechanical & Electrical

However, it is important to note that the increase from 2021 to 2022 may not be indicative of the effects solely caused by the pandemic as the Ukraine War has also affected construction material costs.

Labour

30%

$4,320,000.00

4.3%

Copper

65%

$6,552,000.00

6.6%

$18,313,770.00

18.3%

TOTAL

Table 7: Average fluctuation of concrete and steel prices Material Years/Months

Concrete Jan–Mar

Apr–Jun

Steel

Jul–Sep

2019 Price Fluctuation (%)

Oct–Dec

Jan–Mar

Apr–Jun

Jul–Sep

0.00

Oct–Dec 0.00

2020 Price Fluctuation (%)

-0.22

-0.30

-0.30

-0.41

-0.71

-0.50

-0.53

4.71

2021 Price Fluctuation (%)

0.00

2.65

9.86

10.00

27.63

45.72

53.74

54.23

26: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

MATERIALS

...It is rather unlikely that the material prices have reached their peak...

As discussed before, TPI cannot reflect completely the increase in construction material costs as it considers other items indicated in Table 1.

Therefore, key materials such as concrete and steel need to be further investigated in the next section.

CONCRETE & STEEL PRICE FLUCTUATIONS Based on a S$100 million project, the costs in Table 7 are indicative of the average fluctuation of average concrete and steel prices from Oct–Dec 2019 to Dec 2021.

In both building materials, it can be observed that there was a slight decrease in material prices during the peak of the pandemic in 2020 — when most of the world had entered a lockdown. However, it can be seen in 2021, there was a sharp increase in prices over a short period.

It was indicative that there has been a price increase of approximately 10% for concrete and 54.23% for steel in the past two years from pre-pandemic prices.

Based on the findings, there were price increases on the following components from 2019 to 2021.

measure to help in cost savings of around 2–5%, yet construction progress can be accelerated.

Table 6 outlines the price increases of the various elements and their impact on the case study.

DfMA can be another method to help expedite construction activities so that the project can start to generate income as soon as the construction is completed.

Based on the case study, the percentage increase of 17.6% is consistent with the TPI increase of an average of 19% from 2019 to 2021 as shown in the findings in section Singapore TPI. The difference of 1.4% could be attributed to other factors such as the ordinary inflation of other building materials not studied in the example above.

CONCLUSION In conclusion, it is rather unlikely that the material prices have reached their peak, nor will they stabilise or drop for at least another two to three years. Not forgetting that the world is facing more uncertainty today than ever before; we are not only dealing with the ongoing effects of the pandemic but there are international conflicts that continue to shake the globe.

It can be demonstrated from Figure 6: Construction Tender Price Index Compilation that there is a rise of 7% even for a short period from 2021 to Q1 2022.

CASE STUDY

Notwithstanding that there is a continual increase in construction material prices, it would be very injudicious to cease all construction activities until the prices have been stabilised, as this would be detrimental to the GDP for all countries and the global economies will be disrupted further.

Applying the above findings to a case study of a standard construction project, with the assumption that the project value is S$100 million.

Given the above, it is sensible to explore some potential ways to help in cost savings and expedite construction progress. BIM can be a possible

Based on the information found, the price increase for concrete (18.83%) is higher than RLB’s findings (10%).

However, steel rebar information was found to be 58.39% which is close to RLB’s findings of 54.23%.

According to the case study, the use of BIM can shorten the project duration by approximately 20%, which translates to approximately S$2 million in savings in preliminary costs. The use of DfMA can also shorten the project duration by about 10% which can result in savings of approximately S$1 million.

Although the world is struggling with inflation and material fluctuation, the demand for properties, i.e., residential and office, is still growing as people are looking for such spaces to accommodate the needs of working from home which businesses are exploring reducing office spaces in the CBD area to make ways for more foreign investors but to create hubs elsewhere to better connect with employees.

Prefabricated Prefinished Volumetric Construction (PPVC) can be another possible method, which has proven to be a success in countries or regions such as Singapore and Hong Kong Special Administrative Region where they can rely on places nearby, i.e., Malaysia and Mainland China to fabricate materials offsite and ship to the endpoints. With that, the labour cost can be reduced and can help achieve cost savings of 3–5% for the overall construction costs.

This article was written by Stanley Chang Hon Wah MAIQS, CQS, Chew Jin Jeak, Rachel Wong Chyn Lin, Chin Wei Sun and Chan Lei Onn from Rider Levett Bucknall, Singapore, and was presented at the PAQS 2022 in Singapore.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 27

VISUAL FEATURE

MINING FRESH PERSPECTIVES TO CREATE A FUTURE-FOCUSED WORKPLACE

Project: BHP Adelaide Team: Rider Levett Bucknall Client: BHP Sector: Commercial Location: Adelaide, Australia

28: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

VISUAL FEATURE

The brief for BHP Adelaide was crystal clear: create a bold, welcoming and connected new home for a proud and professional organisation.

Spread over eight storeys at Charter Hall’s 20-storey tower at 10 Franklin Street, BHP Adelaide echoes the distinctive landscapes of the company’s mining sites.

The earth-red colour scheme and natural materials pay homage to BHP’s heritage. With light, airy spaces and a range of work settings, it is a place that encourages people to breathe and do their best work.

Designed by Woods Bagot and delivered by Built, BHP Adelaide has garnered accolades and admiration around the world. In 2020, it was named the world’s best workplace by the Leesman Index, which benchmarks workplace experience and enjoyment.

In 2023, BHP Adelaide took home the Property Council of Australia’s prestigious State Development of the Year Award.

DEEP EXPERIENCE AND DATA-DRIVEN ADVICE RLB’s deep experience in the Adelaide market and our independent thinking proved a winning combination for the state’s largest company. RLB provided cost management services throughout the project from inception to occupation. With the help of our in-house cost benchmarking dataverse, RLB developed detailed cost plans that informed the project team’s decisionmaking process.

RLB Managing Director, John Drillis FAIQS, CQS says every element of BHP Adelaide was carefully designed to spark collaboration and connection, and a multi-disciplinary team looked at the cost implications from every angle.

“The result is a flexible and futurefocused environment that allows BHP’s people to adapt their space to each task today, and their work and ambitions tomorrow, as technology and thinking evolve,” John says.

“BHP Adelaide combines spectacular amenities, state-ofthe-art technology and inspiring aesthetics. A commitment to collaboration and creative thinking supported the delivery of an exceptional, future-fit workplace that will help BHP attract and retain top talent, innovate and unearth new value.”

— John Drillis FAIQS, CQS, Managing Director, RLB

COLLABORATION, CONNECTION AND CREATIVITY UNDER ONE ROOF The copper-clad steel staircase, made with materials taken from BHP’s Olympic Dam mine 560 kilometres north of Adelaide, runs through the building’s spine to foster connection and facilitate the ‘social bump’.

The exposed ceilings — with their earthy-brown tones — turn the mechanical services into a feature, celebrating BHP’s industrial heritage and eliminating unnecessary materials.

A commitment to collaboration and creative thinking supported the delivery of an exceptional future-fit workplace...

10,000M2 OF SPACE 8 STOREYS 1,500 EMPLOYEES

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 29

VISUAL FEATURE

30: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

VISUAL FEATURE

FOCUSED, FUTURE-FIT, FLEXIBLE AND FUN The best workplaces offer a range of settings to suit each person’s mood, task and preferred work style. At BHP Adelaide, appealing open-plan floors are flooded with natural light, while a series of soundproof booths offer privacy. Each floor is fitted with 100%

sit-to-stand workstations that can be raised or lowered electronically, moving to the right height each time a new staff member sits down. A large terrace, overflowing with greenery and with expansive views of the city, offers fresh air and fresh perspectives.

On level three, the Integrated Remote Operating Centre allows staff to control Olympic Dam’s machinery and systems remotely. This centre is sealed off from the rest of the office; a viewing gallery gives school groups a rare insight into the 24/7 operations.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 31

VISUAL FEATURE

The best workplaces offer a range of settings to suit each person’s mood, task and preferred work style.

32: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

VISUAL FEATURE

A NEW CHAPTER IN A CELEBRATED STORY Home to more than 1,500 people, the workplace experience is set from the moment BHP’s employees walk through the door. The foyer, with a design inspired by an airline lounge, features 60 workplaces and seating areas, as well as a 4.5-metre-high digital screen. Beyond the lobby, twometre-high dividers turn communal desks into oases of calm; the level five

library is another place of quiet respite that supports research and reflection.

Rooms for contemplation, prayer, wellness and fitness were carefully considered and costed. Other rooms offer space for employees’ children to chill out after school, while a games room with table tennis and e-sports offers another relaxation zone.

BHP is a fitout that is future-ready — a welcoming place that connects a diverse workforce, fosters well-being and belonging, and signals a new chapter for an organisation with a long and storied history.

This feature was written and all images provided by Rider Levett Bucknall.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 33

WELLBEING

MANAGING BURNOUT 34: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

WELLBEING

The World Health Organisation defines burnout as a syndrome resulting from chronic workplace stress that has not been properly managed. It is characterised by three key dimensions: 1.

feelings of energy depletion or exhaustion;

2.

increased mental distance from one’s job or negative feelings towards it; and,

3.

reduced professional efficacy.

Burnout is a state of complete mental, physical, and emotional exhaustion.

Those experiencing burnout may struggle to engage in activities that once brought them joy and meaning.

They may also lose interest in things that once mattered to them and feel a growing sense of hopelessness.

Recognising the signs of burnout is critical to taking action to manage and prevent it.

Physical symptoms of burnout include headaches, stomach or intestinal issues, fatigue, frequent illness, high blood pressure, and changes in appetite or sleep. Emotional symptoms of burnout include feelings of helplessness, cynicism, self-doubt, anger and frustration, decreased satisfaction, detachment, and loss of motivation. Behavioural signs of burnout include difficulty concentrating, reduced performance in everyday tasks, reluctance to get out of bed, withdrawal or isolation, procrastination, outbursts, and loss of interest or pleasure.

HOW TO PREVENT BURNOUT 1. EARLY RECOGNITION It is crucial to be honest with yourself and recognise the symptoms as soon as possible. Identify your stressors and pay attention to what causes you the most stress and cultivate the ability to self-reflect. Attend to your own needs and reduce or eliminate unnecessary stressors.

2. MANAGE TIME EFFECTIVELY Effective time management helps reduce stress and increases productivity. Prioritise tasks, delegate work where possible, and learn to say no to non-essential commitments.

This will reduce workload and prevent burnout.

3. PRACTISE MINDFULNESS AND SELFCARE Take care of your mental health and wellbeing by practising mindfulness and self-care. This can include activities like meditation, deep breathing exercises or journalling. These activities help to reduce stress, increase awareness and improve overall health.

4. DEVELOP HEALTHY RESPONSES TO STRESS Nervous system regulation is crucial to managing stress and heavy emotions.

By building a strong nervous system and recognising our responses to stress, we increase our resilience to cope with anything that life brings to our doorstep.

5. EXERCISE Physical activity reduces levels of the body’s stress hormones, such as adrenaline and cortisol. It also stimulates the production of endorphins, chemicals in the brain that are the body’s natural painkillers and mood elevators.

They are critical because they protect us from being mistreated. At work, boundaries are a way to assert our needs and rights. These include a need for fair compensation, time off, and to be given credit for our work. They also include our right to work in safe conditions, to be treated with respect, and paid for time worked.

7. SEEK SUPPORT If you are feeling overwhelmed, seek support from a trusted friend, family member or professional. Talking about your feelings and experiences can be a significant relief and help you to find new ways to manage stress.

8. CREATE A POSITIVE WORK ENVIRONMENT Finally, reach out to your employer/ manager. By doing so, you are allowing them to appropriately support you; ultimately, they can only help with issues they know about. Creating a positive work environment can also help prevent burnout. Encourage open communication, provide opportunities for personal and professional growth, and foster a supportive and inclusive culture.

In conclusion, it is vital for individuals and organisations to be proactive in preventing burnout. By recognising the symptoms early, reducing stressors and practising self-care and stress management techniques, you can prevent burnout and improve overall health and wellbeing.

6. BOUNDARIES If your needs are consistently unmet or your rights are violated, you are likely to experience burnout. It is imperative to establish healthy boundaries and be aware of when enough is enough.

Boundaries are limits that we set to communicate how we want to be treated and what we’re willing to do.

This article was written by EAP Assist, www.eapassist.com.au

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 35

LEGISLATION

THE CCA RETENTION REGIME: RETENTIONS ARE NOW TRUST MONEY

By Peter Degerholm, Fellow and Life Member NZIQS

36: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

LEGISLATION

A significant amendment to the Construction Contracts Act 2002 (CCA) firmly establishes the trust status of retention money withheld on commercial construction contracts.

The Construction Contracts (Retention Money) Amendment Act 2023 passed twenty years after the CCA came into force and five years after an abortive retention regime was established in 2017, and means that retention money withheld under new commercial contracts from 5 October 2023 is automatically held on trust.

BACKGROUND The CCA came into force on 1 April 2003 and transformed payment practices in the construction industry.

It cherry-picked elements of recent overseas legislation, particularly the Housing Grants, Construction and Regeneration Act 1996 (UK) and the Security of Payment Act NSW 1999.

It aimed to improve cash flow by outlawing pay when paid clauses, and establishing statutory processes that cannot be contracted out for payment claim/payment schedule, fast-track adjudication and enforcement applicable to all construction contracts.

It had restricted application to residential contracts, and retentions were not addressed.

An Amendment Act that eventually came into effect in 2015 removed the restrictions on residential contracts and tidied up aspects of the adjudication process. The failure of Mainzeal Construction during the passage of that legislation prompted a late amendment to address retentions (the 2017 regime).

THE 2017 REGIME The 2017 regime, subpart 2A of the CCA, applies to new commercial construction contracts from 31 March 2017 and remains in force. It requires a party (referred to as “Party A”) holding money (retention money) from a party performing the work (“Party B”) as surety for the performance by Party B of its contract obligations to set that money aside as trust money.

Party A may “commingle” the retentions with other money, and Party A must keep proper accounting records and make them available to Party B available upon request.

Certain “prohibited provisions” outlaw contractual terms such as those making the payment of retentions conditional on anything other than the completion of Party B’s contractual obligations.

The Amendment Act significantly expands the 2017 regime, and automatically applies... From 5 October 2023.

When Ebert Construction failed in October 2018 the subcontractor retention money set aside was Ebert’s only significant asset and was significantly less than the required amount. The receivers applied to the court to establish their authority to disburse the retentions, how to be paid for that work, and how to address the shortfall.

The Court interpreted the 2017 regime as creating an obligation on the contractor to hold retention monies on trust rather than, as Parliament had seemingly intended, deeming retention money to be held in trust.1 The Government undertook to address the shortcomings.

THE 2023 REGIME The Amendment Act significantly expands the 2017 regime, and automatically applies to every new commercial construction contract from 5 October 2023.2 Its key features include (added features of the 2023 regime are in italics): •

Retentions automatically become trust property when money is withheld from amounts otherwise payable as surety for the performance of a Party B’s obligations, and Party A becomes trustee.

•

Retentions can only be withheld where a contract provides, but money withheld as surety for performance of contract obligations other than in accordance with the contract is also deemed retention money.

•

Party A must keep proper accounting records of the retentions.

•

Retentions must be kept in a separate bank account(s), identified as “retention money trust account” and the bank must be informed of the nature of that account. The interest earned on that money belongs to Party A.

1 Lara Maree Bennett & Ors v Ebert Construction Limited (in receivership and liquidation) & Ors CIV-2018-485-792 [2018] NZHC 2934.

2 The parties cannot contract out of the CCA (s.12), but the regime provides for future regulations to set a de minimis amount below which the regime will not apply.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 37

LEGISLATION

Copyright: Ministry of Business, Innovation and Employment 2023. This graphic is protected by Crown copyright and reproduced from building.govt.nz under the Creative Commons Attribution (cc-BY) 4.0 International Licence.

Figure 1: Sample retention money transaction report. The shaded area indicates the additional information that may be included in a payment schedule to comply as a transaction report. This would not meet the requirements for a quarterly retention report.

•

Instead of holding retentions in a bank account, Party A may arrange a “complying instrument” through a bank or insurer, and Party A must comply with reporting obligations.

•

Party A must give detailed reports to each Party B on their retentions as soon as possible after each transaction, and at least quarterly.

The required details include the retention transactions and amounts

withheld for each contract, together with the bank account name and number, and a statement that the payee may inspect the payer’s accounts and records.

It may be possible to include transaction reports in payment schedules (see sample retention money transaction report), but separate quarterly reports will be required.

38: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

•

Party A may only use retention money for the purposes set out in the contract, after giving ten working days detailed written notice.

•

Party B is entitled to interest on the late release of retentions at the rate in the contract, or where there is no rate at a rate specified in future regulations.

•

Prohibited provisions include terms that: •

make payment of retentions, or the due date for payment, conditional on anything other than the performance

by Party B of its contract obligations; or

•

seek to recover Party A’s costs in administering the retention trust.

•

Where Party A becomes insolvent the retention money is protected for Party B; the receiver or liquidator becomes trustee for distributing retentions to Party Bs, and fees are payable from the retention bank account.

•

Offences and severe fines apply to directors of organisations for each offence where they fail to keep retentions in a separate account (up to $200k), fail to keep proper accounting records ($50k), fail to provide quarterly reports to payees ($50k), or make false or misleading statements ($50k); and the chief executive of Ministry of Business Innovation and Employment (MBIE) is empowered to take enforcement action.

LEGISLATION

The most significant changes affecting parties to construction contracts are the requirement for Party A to proactively report to each Party B and give advance notice before using retentions, and new severe penalties for non-compliance. MBIE industry guidance material explaining the rights and obligations of the parties will be available at mbie.govt.nz mid-August.

THE IMPACT ON THE INDUSTRY Despite the key objective being protecting subcontractor retentions, the retention applies to all parties that withhold retentions, so it will affect all Party A organisations.

...Few principals and owners that presently withhold retentions comply with or are aware of their obligations under the 2017 regime.

Anecdotal evidence suggests that few principals and owners that presently withhold retentions comply with or are aware of their obligations under the 2017 regime. They have a lot of work to do, including establishing proper retention accounting and compliant bank accounts and implementing reporting to each Party A. Construction contractors whose retention accounting substantially complies with the 2017 regime will need to establish compliant bank accounts and implement regular retention reporting to their subcontractors.

The Amendment Act provides security for those who have had retentions held from their payments...

Accountants and quantity surveyors need to assist their Party A clients and/or employers in complying with retention accounting and reporting requirements. Forms of contract and subcontract will also need updating to ensure they are consistent with the new requirements and do not contain any “prohibited provisions”.

THE EXPECTED IMPACT ON THE INDUSTRY According to Graham Burke, Transformation Lead (People), Construction Sector Accord: “The Retention Money Amendment Act will have a significant impact on the commercial behaviour of clients, contractors, and the supply chain in the construction industry through the requirement to hold retentions in trust which stops insolvent clients or contractors using retentions as unsecured working capital. The [Amendment] Act provides security for those who have had retentions held from their payments and will strengthen the industry by forcing businesses who have used retentions for working capital to invest in their own balance sheet.”3

MBIE has recently published guidance to assist Party As in understanding and complying with the regime, which may be downloaded at: Construction Contracts (Retentions Money) Amendment Act 2023 | Building Performance or Retention Money Guidance for the Construction Contracts Act 2002

This article was written by Peter Degerholm MM (Disp. Res.) | Reg QS | Fellow & Life Member NZIQS | FAMINZ (Arb, Med) | MRICS | Member DRBF

It remains to be seen how effective the reform will be, and how industry behaviours change.

3 “The Construction Sector Accord (the accord) is a shared commitment from the government and the construction industry to work together to meet some of the key challenges facing the construction sector, including skills and labour shortages, unclear regulations, a lack of coordinator leadership, an uncertain pipeline of work and a culture of shifting risk.” www.constructionaccord.nz

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 39

ADAPTIVE REUSE

FROM JADED OFFICE TO RESIDENTIAL GEM: WHAT’S AUSTRALIA’S SECRET TO SUCCESSFUL ADAPTIVE REUSE?

By Niall McSweeney

HIGHLIGHTS •

Australia’s office vacancy rates are at their highest levels since the mid-1990s, while housing shortages across most capital cities have reached a crisis point. Could a disconnect between the oversupply of offices and undersupply of homes be solved with adaptive reuse?

•

Lessons from other markets ­­— notably the United States — suggest just 30% of old office stock can be converted to residential dwellings.

•

But as financial values fall and a new source of value, embodied carbon, gains traction, “conversion could become the conversation around boardrooms and building sites around Australia,” says Altus Group’s President Niall McSweeney.

The story is the same around the world.

As white-collar workers shift from the five-day-a-week commute to a hybrid of work-from-home and office-hopping, demand for commercial office space is shrinking.

In Australia, office vacancy in January 2023 reached 13.3%, edging up from 12.9% the previous six months to hit its highest level since the mid-1990s.

Vacancy rates across all CBD markets, according to the Property Council of Australia’s office market report, was 12.5% compared with 15.1% for non-CBDs.1 Only two CBD markets — Hobart and Canberra — recorded vacancies below 10%.

Office vacancy rates tell us about corporate demand for office space. But office occupancy tells us how many people were sitting at their desks on any given day.

The most recent Property Council Office Occupancy Survey was conducted back in November 2022.

Perth offices were at 80% of prepandemic levels, Adelaide at 74%, Brisbane at 67%, Sydney at 59%, Melbourne at 57% and Canberra at 52%.2 These statistics translate into a lot of empty desks.

Owners and investors are looking at the problem from multiple angles.

Take Investa — which owns around $16 billion of high-quality assets under management — and developer Built, which have formed a $400 million partnership to upgrade old offices.3 This brown-to-green venture aims to attract tenants on the hunt for premium quality office space with high-rating sustainability credentials.

1 Property Council Research 2023, Office Market Report: July 2023, Property Council of Australia, Sydney.

2 Property Council of Australia 2022, Perth’s office occupancy hits 80 per cent and Melbourne reached record high as workers return to offices, media release, <https://www.propertycouncil.com.au/media-releases/perths-office-occupancy-hits-80-per-cent-and-melbourne-reachesrecord-high-as-workers-return-to-offices>.

3 Lenaghan, N. 2023, ‘How a builder and investor plan to transform ageing office blocks’, The Australian Financial Review, 1 June.

40: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

ADAPTIVE REUSE

Another increasingly popular suggestion among property pundits is to redevelop poorly performing office stock into residential or multi-family assets. The rationale is clear, says Niall McSweeney, Altus Group’s President, Cost & Project Management, Asia Pacific.

“...The big question becomes obvious: is an office still the highest and best use?”

“Vacant B and C grade stock is unlikely to attract high quality, long leaser tenants without a substantial upgrade and life. In this context, the big question becomes obvious: is an office still the highest and best use?”

STATESIDE SHAKEUP: LESSONS FROM A GLOBAL LEADER The United States has arguably the world’s most sophisticated office market, making it an instructive comparison for Australia.4 Towards the end of 2022, 16.83% of US office space was vacant, according to Altus Group data. This was up from 12.77% at the end of 2019. There are signs that this increase in vacancy is just the start of a slow and steady decline as long-term leases wind up later this decade, and tenants opt for less space, shorter-term leases, or jump ship to brand new space.

The average in-office work-week in the US has shrunk dramatically from prepandemic levels too. Kastle Systems, which tracks office utilisation through office security key card use in major US

metro markets, puts the average at just over 50% as of March 20235, compared to the pre-pandemic levels. That is healthier than two years ago when the average hovered between 20% and 30%. But, as we’ve seen in Australia, that means a sea of empty desks in offices around the country.

The long-term impact of hybrid working on the office market is still anyone’s educated guess. Most studies agree that there is a supply-demand mismatch and that a significant portion of office space may become obsolete in the coming years. One recent analysis

by Cushman & Wakefield estimated a surplus of nearly 31 million square metres — a massive 330 million square feet — of office space across the US by the end of the decade.6 In addition to the magnitude of the change, the speed and timing of this transition remain unknown.

4 Wong, R. 2023, ‘How office landlords can be flexible in the face of new market realities’, Altus Group, 16 May. 5 Kastle 2023, Getting America Back to Work, <https://www.kastle.com/safety-wellness/getting-america-back-to-work/>.

6 Corbett, A., Thorpe, K. & Smith, D. 2023, ‘Obsolescence equals opportunity’, Cushman & Wakefield, <https://www.cushmanwakefield.com/ en/united-states/insights/obsolescence-equals-opportunity>.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 41

ADAPTIVE REUSE

At year-end 2022, Altus Group data showed that nearly 25% of all in-place office leases in the US were set to expire over the next 36 months. How much of this space will be renewed, released or refurbished is unclear.

What we do know is that major corporates are putting their own office developments on hold. Amazon halted construction of its second headquarters in Virginia in March 20237, for instance, while Microsoft pressed an indefinite pause on a large campus in Georgia the previous month.8

OLD OFFICE OR RESIDENTIAL OASIS? Some of today’s obsolete office buildings will find a higher and better use without being torn down — and developers are already at work.

In New York, some of the floors of the historic McGraw-Hill Building are being converted from offices to apartments in a US$100 million upgrade.9 In Los Angeles, work is underway to convert a low-rise office building on Wilshire Boulevard into a mixed-used marvel with a large residential component.10

In Atlanta, an 1898 office tower in one of the city’s “most talked about neighbourhoods,” has been sold to a company with plans for residential redevelopment.11 Governments are also responding to the growing housing shortage. In New York, the Office Adaptive Reuse Task Force is investigating charges to regulations to permit the conversion of office buildings constructed before 1990 which could support the delivery of new homes for 40,000 New Yorkers over the next ten years.12 In California, where at least 2.5 million new units are needed by the end of the decade to meet demand, a new housing act passed in 2022 allows underused commercial sites to be rezoned.13 Conversions can be financially feasible depending on the market, building type and use14, but Niall offers a word of caution. “Converting an old office building is often easier said than done.

Contemporary expectations around ceiling heights and large floorplates, for instance, can make it hard for the numbers to stack up.”

RETHINKING A RESIDENTIAL REVIVAL Cost is often a major obstacle, especially when compared with razing a structure and starting anew. Location, building form, floor-plate size, the size and location of a building’s core, as well as other aspects of the physical structure, are also in play. There’s planning permission, local zoning and code compliance to navigate, which can impose insurmountable barriers to redevelopment, especially when there is push-back against conversion from community groups.

“Converting a building is so much more complex than just a change in use...”

Analysis by architectural firm Gensler in 2022 of 300-plus offices across North America found just 30% were suitable for conversion.15 Although, importantly, Gensler also found, “the features that result in an unpleasant office make for a superlative multi-family product”.

7 Zahn, M. 2023, ‘Amazon pauses construction of 2nd headquarters in Virginia, dubbed “HQ2”’, ABC News USA, <https://abcnews.go.com/ Business/amazon-pauses-construction-2nd-headquarters-virginia-dubbed-hq2/story?id=97610656>.

8 Darnell, T. 2023, ‘Microsoft halting development on massive westside Atlanta project’, Atlanta News First, 4 February, <https://www. atlantanewsfirst.com/2023/02/03/microsoft-halting-development-massive-westside-atlanta-project/>.

9 Nazar, J. 2023, ‘$100M office-to-residential conversion planned for landmark Midtown building’, New York Business Journal, 13 March, <https://www.bizjournals.com/newyork/news/2023/03/13/office-to-residential-conversion-landmark-midtown.html>.

10 Barragan, B. 2023, ‘New investors sign on to CIM’s office conversion in Mid-Wilshire’, Bisnow, 7 March, <https://www.bisnow.com/losangeles/news/office/office-to-mixed-use-residential-conversion-4750-wilshire-boulevard-117976>.

11 Green, J. 2023, ‘Mixed-use conversion planned for historic downtown office building’, Urbanize, 2 January, <https://atlanta.urbanize.city/post/ historic-downtown-office-grant-building-residential-conversion-sonder>.

12 NYC Planning 2023, Office Adaptive Reuse Task Force, <https://www.nyc.gov/site/planning/plans/office-reuse-task-force/office-reuse-taskforce.page>.

13 Gold, J. 2022, ‘California passes adaptive reuse legislation to address housing crisis’, Forbes Magazine, 30 September, <https://www.forbes. com/sites/jamiegold/2022/09/30/california-passes-adaptive-reuse-legislation-to-address-housing-crisis/?sh=7694759b4648>.

14 Eltorai, O. & Rehman, F. 2023, ‘Remaking obsolete office space: an opportunity for a select few properties’, Altus Group, 24 March, <https:// www.altusgroup.com/insights/remaking-obsolete-office-space/>.

15 Paynter, S. 2022, ‘What we’ve learned by assessing more than 300 potential office-to-residential conversions’, Gensler, 16 June, <https:// www.gensler.com/blog/what-we-learned-assessing-office-to-residential-conversions>.

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ADAPTIVE REUSE

“You don’t really know what you’re getting into until you take off the façade, walls, bring it down to the concrete.”

The message here is clear: conversions can be complex and costly and should always begin with expert advice and a detailed feasibility study.

Research undertaken in 2023 by the National Multifamily Housing Council in collaboration with the Urban Land Institute confirms “there’s no one-sizefits-all approach”.16 As one developer of a late 1960s building noted in the report: “Converting a building is so much more complex than just a change in use... Floor plate, column grid, floor-to-floor height, window systems, HVAC [heating, ventilation, and air conditioning], sewer outfall, and so much more needs to be studied. You don’t really know what you’re getting into until you take off the façade, walls, and bring it down to the concrete.

“Then there are the costs of planning fees and charges, meeting safety and disability codes, the removal of asbestos and other harmful materials, and the conundrum of providing extra residential car parking”, Niall adds.

“Ultimately, the liveability of the final product will have a big impact on feasibility. Office buildings typically have large and open floor plates but people don’t like living in long, thin apartments with limited access to fresh air and natural light. They don’t like windowless bedrooms either, and this is what office conversions can sometimes serve up. This is why some of the smaller floorplates are suitable.”

Niall suggests the example of the UK is instructive. Since 2013, the UK government has been expanding definitions of permitted development to incorporate the conversion of a range of commercial buildings — including offices — to residential use. “This has, in some cases, meant large numbers of apartments squeezed into each scheme with significant health and wellbeing consequences for future generations of residents.”

...Another source of value is lying hidden in our ageing assets.

ADAPTATION AND THE CARBON ADVANTAGE Successful property development always balances risks and returns. To achieve the maximum potential and best possible return — the highest

and best use — of any development, a feasibility study is the best place to start.17 But Niall suggests another source of value is lying hidden in our ageing assets: embodied carbon.18 As much as 80% of a building’s total carbon footprint comes from the materials used during construction.19 This includes the carbon generated as raw materials are grown, extracted and transported, as building products are manufactured on the factory floor and then shipped around the world, and as materials are transported and installed onsite.

The Green Building Council of Australia estimates that embodied carbon will be responsible for 85% of Australia’s built environment emissions in 2050.20 “As we address embodied carbon in construction, regulation and standards will evolve and carbon content will influence asset valuations,” Niall says.

“Building owners will become far more focused on solutions that optimise existing buildings and the materials already locked in. When this occurs, we’ll have a solid business case for repurposing rather than razing old office stock.” Then many of our jaded offices can sparkle once more.

This article was written by Niall McSweeney from Altus Group.

16 Urban Land Institute 2023, Behind the Facade: The Feasibility of Converting Commercial Real Estate to Multifamily, National Multifamily Housing Council, <https://knowledge.uli.org/-/media/files/research-reports/2023/behind-the-facade_conversion-report.pdf>.

17 Newcombe, L. 2021, ‘Property development feasibility guide — part 1’, Altus Group, 9 May, <https://www.altusgroup.com/insights/propertydevelopment-feasibility-guide-part-1/>.

18 McSweeney, N. & Ong, Y. 2022, ‘Australia starts counting the cost of embodied carbon’, Altus Group, 15 September, <https://www. altusgroup.com/insights/australia-starts-counting-the-cost-of-embodied-carbon/>.

19 ArchDaily 2021, ‘How to approach embodied carbon reduction within an architectural project’, 27 April, <https://www.archdaily. com/960388/how-to-approach-embodied-carbon-reduction-within-an-architectural-project>.

20 GBCA & thinkstep-anz 2021, Embodied Carbon and Embodied Energy in Australia’s Buildings, Sydney, <https://gbca-web.s3.amazonaws. com/media/documents/embodied-carbon--embodied-energy-in-australias-buildings-2021-07-22-final-public.pdf>.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 43

FACILITY MANAGEMENT

FACILITY MANAGEMENT STANDARDS ISO/TC 267 UPDATE & SUSTAINABLE FM

By Stephen Ballesty FAIQS, CQS

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FACILITY MANAGEMENT

AIQS is actively supporting the development of Facility Management (FM) standards in recognition of the importance of managing our built environment. Stephen Ballesty has been a member of Standards Australia’s MB-022 Committee for FM standards for over a decade and has represented Australia at ISO/TC 267 since its inception in 2012.

ISO/TC 267 is responsible for the ISO 41000 series of FM standards, with fiftythree countries participating, including Australia. To date, ISO/TC 267 has produced seven publications and has seven more under development.

ISO/TC 267 UPDATE, NORWAY For the first time since November 2019 (due to COVID-19) ISO/TC 267 held in-person meetings (8–12 May) and celebrated World FM Day 2023 (10 May) in Trondheim, Norway.

Many international delegates also participated in the CIB W070 Congress, held concurrently in Trondheim, Norway.

Adopting the ISO 41000 series will better prepare organisations for the uncertainties of our challenging times.

Of course, during the past three and a half years of ISO restrictions on faceto-face meetings, our plenary, advisory group (AG) and working group (WG) meetings have continued virtually, but it’s not quite the same. At the plenary and various AG/WG meetings, we explored a wide range of issues confronting current and planned FM standards and technical reports.

We also planned for the upcoming publication of ISO 41011 (rev), ISO/ TR 41016, ISO/TR 41017 and ISO/TR 41019 identified new work items for development and commenced the process for the ISO 41001 and ISO 41012 revisions.

The ISO 41000 series provides a common language and framework for FM worldwide and contributes directly to the future of the FM profession and its value proposition. Adopting the ISO 41000 series will better prepare organisations for the uncertainties of our challenging times. Standards Australia has progressively adopted these FM standards, including AS ISO 41001:2019, a management systems standard against which FM systems can be certified.

SUSTAINABLE FM 2023 One of the ISO publications under development is ISO/TR 41019, “Facility Management’s Role in Sustainability, Resilience and Adaptability”. This technical report, under Australian leadership, is due for publication later this year and shall be an informative document providing a broader societal context for FM in terms of: •

establishing and improving integrated FM systems

•

embracing the wide-ranging and positive contribution of managing the built environment

•

supporting the UN Sustainable Development Goals (SDGs) along with ESG principles.

This report was conceived with the backdrop of the global significance of the building and infrastructure industries in terms of contributions to economies, social services, and carbon emissions.

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FACILITY MANAGEMENT

The document provides a concise nonexhaustive contextual introduction to relevant terms, concepts, and initiatives (climate change, net-zero emissions and the circular economy, etc.).

...There is a recognition that an unsustainable, poorly planned, delivered and maintained built environment can have disastrous effects...

The report submits that FM is central to sustainable development. FM underpins aspects of economic growth and delivers the services that support the productivity of core business activities and the quality of life of people. At the same time, there is a recognition that an unsustainable, poorly planned, delivered, and maintained built environment can have disastrous effects on organisations, communities, and individuals.

As the ISO/TR 41019 title suggests, responses to challenges and changes that face the built environment can be broadly categorised in three waves:

1. SUSTAINABILITY Simply put, sustainability is meeting the needs of the present without compromising the ability of future generations to meet their own needs.

Sustainability is familiar to most and generally reflects current good practices. There are numerous sustainability standards, guides, rating tools and certifications available to organisations, and a growing number of performance rating agencies.

46: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

2. RESILIENCE Resilience is the adaptive capacity in a complex and changing environment.

This can involve coping with a hazardous event, trend or disturbance, responding or reorganising in ways that maintain essential functionality.

Resilience has entered our vocabulary in recent years, commonly in response to the growing physical risks associated with climate change; identifying and developing mitigation plans; to reduce the direct and indirect impacts on assets, people and services compromising quality of life issues.

3. ADAPTATION Adaptation is a process of adjustment that implies activities of a retroactive nature. In essence, a “resilient facility” could be designed for sustainability in the face of anticipated hazards, while an “adaptable facility” may be one that could be modified to meet a range of actual or expected challenges.

...Sustainable FM can contribute...

To mitigating risks, increasing resilience, integrating technologies...

Adaptation could involve embracing a range of design, construction and management initiatives to reduce or eliminate potential hazards that may not have been considered a priority in the past. Simplistically, such initiatives may include improving environmental performance, refurbishment/capacity upgrades, life cycle extension or change of use.

FACILITY MANAGEMENT

...FM could, in conjunction with a range of other initiatives, contribute to significant carbon dioxide emissions savings...

WRAP-UP Sustainable FM supports demand organisations in pursuing sustainability and is justifiable for a range of reasons (listed alphabetically): •

Compliance with industry guides and best practice

•

Compliance with regulatory or statutory requirements

However, building on resilience, presumably new adaptive engineering, technological and operational solutions will emerge. Such adaptive solutions will likely require innovative policy, planning, management, and maintenance approaches to improve the performance of our built environment for both new developments and existing facilities.

•

Demonstration of industry leadership and enhanced reputation

•

Increased end-user amenity and return on investment (ability to charge)

•

Increased productivity and profitability (changes to processes or access to resources)

The author contends that the scope, impact and cost of emerging resilience and future adaptation strategies are yet to be fully appreciated. Hence, this may lie ahead for our industry, presumably at the point when “business as usual” is no longer an option.

•

Reduced capital costs during the design and construction phases

•

Reduced life cycle costs during the operational phases

•

Social responsibility.

In SDG terms, sustainable FM can contribute, directly and indirectly, to mitigating risks, increasing resilience, integrating technologies, generating decent jobs, addressing inequalities, and delivering on broader sustainability objectives. For example, SDG 13 climate change: FM could, in conjunction with a range of other initiatives, contribute to significant carbon dioxide (CO2) emissions savings by: •

improving facility design and construction

•

increasing reuse and recycling rates

•

extending the life cycle of facilities.

Some tools are currently available, such as life cycle cost (LCC) analysis and embracing the SDGs and ESG frameworks.

The role of the design and construction sector, including quantity surveyors, is undeniable in enabling sustainable FM and our property industry performance. Many have already commenced on this journey, but such challenges require us all to be involved — in practical terms, our advice is “do something”. This represents our industry’s collective pursuit of a more productive, sustainable, and liveable built environment worldwide.

For more information on FM standards, visit: committee.iso.org/home/tc267, follow #ISO41000 on LinkedIn, or contact: stephen.ballesty@in-touchadvisory.com

This article was written by Stephen Ballesty FAIQS, CQS.

...It is necessary to embed sustainability, resilience, and adaptability into managing our built environment.

To better equip governments, businesses and communities facing an uncertain future, it is necessary to embed sustainability, resilience, and adaptability into managing our built environment. In whole-life cost (WLC) terms, this extends to our industry’s design, delivery and operational systems and services.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 47

LEGAL

PERVERTING THE COURSE OF JUSTICE Doyles Construction Lawyers

48: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

LEGAL

Professionals, no matter the occupation, are generally held to a code of conduct to carry out their duties ethically and to a high standard and to exhibit the qualities of a model citizen. However, overenthusiastic attempts to resolve problems can lead one astray.

A not uncommon problem is to attempt to resolve a disciplinary or criminal complaint as part of a civil settlement. To persuade or induce a person to withdraw a disciplinary or criminal complaint by way of threat or benefit offends against the old common law offence of perverting the course of justice.

MODERN APPLICATION A recent case in the area of domestic violence has demonstrated the modern application of the ancient principle.

In the recent decision of Legal Profession Board of Tasmania v Glynn Williams1, the facts found the offence in contention were committed by both the husband accused of the offence and his solicitor.

The ex-husband had sent a letter to the ex-wife offering a settlement with a request that the ex-wife withdraw the assault charges which the police had laid against him and stop cooperating with the prosecution. While the ex-husband may have been motivated by the purest of intentions to bring as much peace as possible to his family, he was charged with one count of attempting to pervert the course of justice.

It was regarded that his conduct wrongly interfered with the appropriate legal process where his alleged assaults were to be brought before the Court by the prosecuting authorities and then dealt with according to law. It is obvious that if there was no such offence, stand over tactics might be wrongly employed against any witness or complainant.

A quantity surveyor must be vigilant to ensure he counsels his client and others against any inappropriate conduct...

DOUBLE OR NOTHING Despite being aware of the charges against the ex-husband, Mr Glynn wrote to the ex-wife’s solicitors proposing a similar settlement of the property which included the same request to either withdraw the assault complaints made to the Tasmanian Police or stop cooperating with the prosecution. The ex-wife’s solicitor reported the letter to the authorities.

After the matter was investigated by the Legal Profession Board of Tasmania (the LPBT), proceedings were commenced by the LPBT seeking a declaration from the Court that Mr Glynn was guilty of professional misconduct.

The Court found that Mr Glynn was guilty of misconduct and ordered that he undertake and complete a course in legal ethics and professional responsibilities.

In coming to its determination, the Court highlighted the fact that while solicitors generally act on the instructions of their clients, their paramount duty is to the Court and his instructions to make the offer were no defence.

APPLICATION IN THE INDUSTRY

The decision to involve the authorities in a complaint is often made during hottempered exchanges when assessments of the motivation and character of the opponent are highly critical.

Later, as tempers cool and matters of financial adjustment can be worked out, there will be a temptation to seek to have the complaint made withdrawn or abandoned.

However, it is not appropriate or proper to mix the two concepts and the complaint must be left to run its course, otherwise one may be open to the charge of attempting or assisting in the perversion of the course of justice.

A quantity surveyor must be vigilant to ensure he counsels his client and others against any inappropriate conduct and ensures that he or she is not personally involved in suggesting such a course of action.

CONCLUSION The administration of justice requires that each citizen and particularly its professionals avoid conduct that interferes with the prosecution of complaints whether to police or other regulatory authorities.

What seems like a simple request in light of the amount to be paid to let bygones be bygones may land one in hot water.

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

The opportunity to complain to the variety of authorities which regulate the construction industry is widespread and covers everything from safety to wage payment to stealing materials or inappropriate equipment.

¹ [2022] TASSC 46

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 49

RESIDENTIAL

A LETTER TO THE HUMBLE HOMEOWNER CHASING THEIR DREAM HOME

By Samuel Star FAIQS, CQS

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RESIDENTIAL

INTRODUCTION As a quantity surveyor (QS) who has been in the industry for over thirty years, I wish I could send this letter to anyone who has ever contemplated renovating or extending their home.

They are often the most vulnerable clients, ill-equipped to navigate the complexities of the construction process. They are the ones who have so much to lose and lose big, they often do.

What’s more, is that a QS is rarely on their radar. In fact, does the average person even know what we can do?

I think it’s time to advocate for the profession, one that is both exciting and under-appreciated.

A letter to the humble homeowner chasing their dream home: No need to fear, your QS is here.

Do not underestimate the gamechanger that a QS can be for your project. In fact, they are the ultimate key to unlocking success for your dream home transformation!

As a seasoned QS, having undertaken projects of diverse scales and complexities, I can attest that the renovation of a humble home is a thrilling challenge, but one fraught with intricacies and potential disputes.

Picture this: You’re investing your hard-earned life savings into this family project, not for mere commercial gain, but to elevate your life and create a haven of your dreams. However, the reality can be harsh, leaving you grappling with disappointment and scrambling for additional funds to cope with unexpected costs and time overruns throughout the construction process.

But fret not! There is a solution that can save you from such woes. Enter the unsung hero, the QS. Unfortunately, many are unaware of the immense value we can bring to the table. We possess the knowledge to foresee potential pitfalls and the prowess to steer your project clear of unnecessary complications. Here’s how…

TIMELY INTERVENTIONS, GUIDED TRIUMPHS Why tread the perilous path alone, when a QS can guide you to triumph from the very outset? Embrace our timely intervention during early design stages, and our wise counsel will accompany you throughout the journey.

Too often we are called in when the project has hit tumultuous waters, long after the contract is signed, and construction is underway. Sadly, this is when it is too late. Intervention must then be swift, often dramatic and not as effective, as the owner is exposed to risky contract conditions that cannot serve as a project safeguard.

Think of it this way: to get a derailed train back on its tracks and operational would require a lot of effort, extra hands and machinery, repairs, delays and associated extra over costs that could have been avoided if it stayed on track and continued along its charted journey. Construction is much the same.

If QSs were involved from the train depot then the tracks are laid, course charted, and potential derailing risks mitigated.

The hidden complexities of altering elements often go undocumented.

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RESIDENTIAL

During the journey should a risk emerge, a timely minor intervention can get it back on course with little to no downtime and associated costs.

By creating a shield of meticulous analysis, they defend you against the storm of unexpected expenses and maddening delays.

It is also worth pointing out that councils require us to provide the project budget for development approval, so why would you not retain us as part of the project team from the outset?

UNVEILING PROJECT SECRETS

We provide you with an understanding of your project feasibility before you have invested too much into an endeavour that may not reach fruition.

SHIELDING YOUR DREAMS FROM RISK TEMPESTS In the tumultuous seas of renovations and extensions, hazards lurk beneath the surface, threatening to disrupt your vision. The hidden complexities of altering elements often go undocumented. For example, if you were to upsize a window, all the elements to the full extent of the wall and the wall’s adjoining elements and services are affected.

The required resources may not be readily available when the need arises on-site due to a lack of planning, arising from the pitfalls in documentation. This causes unnecessary delays and could impede the project’s critical path, raise more costs for the new work and also for the delays.

As an owner, you may find yourself perplexed by the proliferation of variations and end up at odds with your builder who has the keys to your new home, as the site is his until practical completion is achieved.

Like seasoned navigators, QSs identify the unseen challenges that lie ahead.

Documenting them, pricing them and ensuring they are included as part of the contract documents.

Unravelling the project’s intricacies is our specialty, beyond hidden works, we meticulously review all project documents prior to contract signing and throughout construction.

Our keen eye ensures adequate project documentation is in place such as vetting for adequate consultant

...We create a shield of protection, allowing you to embark smoothly and successfully on your project journey with confidence... insurances, project insurances, authority requirements, statutory requirements, specifications, fixed and detailed schedules of finishes, adequate builder licences, consultant reports, compliance certifications at each milestone, and more.

By understanding what it takes to deliver construction projects and anticipating potential surprises, we create a shield of protection, allowing you to embark smoothly and successfully on your project journey with confidence and peace of mind.

Remember this, the biggest companies (banks and financial Institutions) demand the use of QSs whenever construction loans are approved.

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THE BACKBONE OF COMPREHENSIVE CONTRACT DOCUMENTATION Once the right documentation is in place, your project is poised to soar with the sturdy backbone of a meticulously crafted building contract, expertly curated by QSs. Each detail is meticulously captured, and every element is accounted for, while special conditions are drafted to mitigate risks.

These conditions include mechanisms for tests pertaining to extension of time claims, variation claims, security payments, and their release. Adequate provisions for liquidated damages, defects liability period, exclusions, delay costs, construction period, and management of prime cost items and provisional sums are also incorporated, among other crucial aspects.

With our expert touch, we etch unparalleled clarity and strength into the very core of your project.

By establishing a robust contractual foundation, we effectively quell potential disputes, providing you with the peace of mind needed to embark on your project journey with confidence and certainty.

THE ART OF TENDER GENIUS Now with the right documentation in place, it’s time to unlock the true essence of tendering with the mastery of the QS. We orchestrate a formal tender process and compose a harmonious bill of quantities that is issued to each tenderer.

Every tenderer can only then quote accurately the same document for the same scope of work. With our deft touch, discrepancies fade, and cost comparisons emerge crystal clear.

RESIDENTIAL

MASTERFUL PROGRESS COST CONTROL Now that the contract is signed, documents are in order, and everyone is on the same page, the power of precision in cost control by the prowess of the QS throughout construction will ensure progress claims are made on a cost-to-complete basis and in line with the contract conditions.

Unfortunately, inadequate project documentation can lead to overclaiming, front-loading, and claims for works completed to date that are not yet installed or merely ordered. Such practices expose you to a paragon of financial risk. However, as QSs, we delve deep into project costs, skilfully navigating the construction labyrinth and safeguarding your financial fortress by preventing the builder from running away with your hard-earned money due to unforeseen and excessive variations.

CONSTRUCTION PROGRAMME MASTERY To accompany cost control, unleash the power of a well-vetted builder’s construction programme to guide builders with precision. Throughout construction, our vigilant oversight keeps a watchful eye on any potential causes for delay, prompting parties to stay ahead of them. QSs assess extension of time claims, ensuring they are tested against the contract conditions and the project tracking in line with the forecast construction period.

YOUR UNYIELDING CHAMPION OF INDEPENDENCE

With our deft touch, discrepancies fade, and cost comparisons emerge crystal clear.

Detached from the construction and design factions, our impartial assessments ensure fairness and ward off the spectre of overcharging and avoidable tensions.

EMPOWERING EVERY HOMEOWNER’S VISION Gone are the days when QSs were reserved for grand ventures alone.

Today, we stand ready to empower every homeowner’s dream. We ignite a beacon of knowledge, illuminating your path towards informed decisions and safeguarding your investment.

Imagine a project where you embark on your home renovation journey with unwavering confidence, with personal wellbeing and peace of mind at the forefront, as the QS ensures your aspirations are translated into reality with your budget and timeline intact.

So, before you embark on your home upgrade endeavour, remember this pivotal piece of advice: do not overlook the significance of a quantity surveyor.

Signing off, your trusty QS and project champion.

This article was written by Samuel Star FAIQS, CQS and co-authored by Sarah Bozionelos RAIA.

Crafting your dream home can be an emotional journey, which is why forging a powerful alliance with an independent QS makes us an unyielding champion of your interests.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 53

SUSTAINABILITY

WHAT’S THE DIFFERENCE? EPDS VS ISO 14067 CARBON FOOTPRINT

By Andrew Moore

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SUSTAINABILITY

WHAT ARE THE MAIN DIFFERENCES BETWEEN AN EPD AND AN ISO 14067 PRODUCT CARBON FOOTPRINT STUDY? An Environmental Product Declaration (EPD) is a standardised way of communicating the environmental performance of a product over its life cycle, based on life cycle assessment (LCA) data. EPDs are standardised by ensuring they follow a specific set of Product Category Rules (PCR). PCRs are more specific guidelines for conducting an LCA an reporting the results in an EPD for a particular product category. EN 15804 is a common basis for PCRs for construction products, for example.

ISO 14067 is the international standard for developing a carbon footprint of a product, providing guidelines for the quantification and communication of the carbon footprint of a product throughout its life cycle, including the entire supply chain.

The key differences are in how these LCA phases are carried out.

An EPD provides a comprehensive report of a product’s environmental performance, including the carbon footprint, whereas an ISO 14067 carbon footprint study quantifies and reports only the carbon footprint of a product.

EPDs and ISO 14067 carbon footprint studies are based on the foundation standards of LCA ISO 14040 and ISO 14044 with the same four main phases of an LCA; Goal and scope definition, Life Cycle Inventory analysis (LCI), Impact assessment (LCIA) and interpretation.

EPDs include many more environmental performance indicators than just carbon footprint.

The key differences are in how these LCA phases are carried out.

EPDs follow a more prescriptive set of rules to ensure that the results are comparable for products within the same product category. These PCRs (such as those based on EN 15804) provide more detail on how the background LCA study should be conducted and what should be included in the EPD. If you take a construction product as an example, the study must meet the requirements of IS Products as published by The International EPD System which is based on EN 15804.

For many construction products, there are even more specific requirements that are outlined in Complimentary PCRs (c-PCRs). As you can see that is quite a set of detailed requirements that must be followed.

The requirements on EPDs are this strict to ensure that the results are comparable. To ensure EPDs meet this complex set of requirements they must be independently verified by an Approved EPD Verifier. When approving verifiers, we (the Programme Operators — EPD Australasia together with the International EPD System) ensure they have the relevant background and necessary experience to conduct the verification process in compliance with all requirements. Carbon footprint studies following ISO 14067 may or may not be independently reviewed to ensure compliance with that standard,

but the reviewer isn’t necessarily approved by any Programme Operator.

The most obvious difference between EPDs and ISO 14067 carbon footprint studies is that EPDs include many more environmental performance indicators than just carbon footprint (or GWP — global warming potential). EPDs of construction products include thirteen core environmental impact indicators, such as ozone depletion, acidification, and water use; ten indicators describing resource use; and a further seven indicators describing wastes and other output flows. This adds up to thirty mandatory indicators that must be reported. There are a further six optional indicators (e.g. particulate matter, ionising radiation, human toxicity, etc.) that may be included.

So, you can see an EPD is a lot more involved than focusing on carbon footprint alone.

In summary, EPDs provide a more complete snapshot of the environmental performance of products by including a more comprehensive set of environmental indicators. To ensure comparability, EPDs are produced in accordance with a strict set of rules, instructions and standards and are independently reviewed by approved verifiers within a robust governance framework by EPD Programme Operators.

This article was written by Andrew Moore, first published in EPD Australasia.

BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023: 55

BCI

BUILDING COST INDEX

SEPTEMBER 2023

THE BUILDING COST INDEX IS PUBLISHED IN THE PRINT VERSION OF THE BUILT 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.

56: BUILT ENVIRONMENT ECONOMIST: SEPTEMBER – NOVEMBER 2023

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