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Construction Journal Major player or micro manager? The changing identity of commercial management PG.

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Elusive goals

High flyers

Comparable solution

How can construction be modern, ethically managed and commercially viable?

What commercial processes and strategies are involved in managing major airport works?

Why the introduction of the ICMS will enable cost saving in the construction industry

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PG.

10

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February/March 2017

rics.org/journals


RICS c on st r uc t i o n JOU RN A L

A dv e rti s i n g

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From 1st July 2017 there will be a mandatory requirement to attend a two day CISRS CPD training course prior to Scaffolder or Advanced Scaffolder card renewal

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www.cisrs.org.uk

For further information go to:

To ad ve rtise con t a c t Em m a Ke n n e dy +4 4( 0 ) 20 7 8 7 1 5 7 3 4 or emmak@wearesu nday. c om 2   F E B R U A R Y/ M A R C H 2 0 1 7


c o ntents

RI CS const ructio n JOUR NAL

Construction Journal Major player or micro manager? The changing identity of commercial management PG.

12

Elusive goals

High flyers

Comparable solution

How can construction be modern, ethically managed and commercially viable?

What commercial processes and strategies are involved in managing major airport works?

Why the introduction of the ICMS will enable cost saving in the construction industry

PG.

7

PG.

10

PG.

February/March 2017

rics.org/journals

17

Front cover: ©Istock

CO N TACTS

contents 4 Jack of all trades

CO N STR UCTI O N J OU R NAL Editor: Hannah Matthews-Jones   T +44 (0)20 7334 3757 E hmatthews-jones@rics.org The Construction Journal is the journal of the Project Management and Quantity Surveying & Construction Professional Groups Advisory group: Helen Brydson (Faithful+Gould), Gerard Clohessy (Arcadis), Christopher Green (Capita Property and Infrastructure), David Cohen (Amicus), Andrew McSmythurs (Schofield Lothian), David Reynolds (Property & Construction Consultant), Tim Fry (Project Management Professional Group Chairman), Alan Muse (RICS), Rachel Titley (Arcadis), Steven Thompson (RICS)

Construction Journal is available on annual subscription. All enquiries from non-RICS members for institutional or company subscriptions should be directed to: Proquest – Online Institutional Access E sales@proquest.co.uk T +44 (0)1223 215512 for online subscriptions or SWETS Print Institutional Access E info@uk.swets.com T +44 (0)1235 857500 for print subscriptions To take out a personal subscription, members and non-members should contact licensing manager Louise Weale E lweale@rics.org Published by: Royal Institution of Chartered Surveyors, Parliament Square, London SW1P 3AD T +44 (0)24 7686 8555 W www.rics.org ISSN: ISSN 1752-8720 (Print) ISSN 1759-3360 (Online) Editorial and production manager: Toni Gill Sub-editor: Matthew Griffiths Designer: Nicola Skowronek Advertising: Emma Kennedy T +44 (0)20 7871 5734 E emmak@wearesunday.com Design by: Redactive Media Group   Printed by: Page Bros

The job description for quantity surveyors may be changing – but we must move with the times, argues Justin Sullivan

5 Update 7 Elusive goals

What can we do to ensure that the construction industry is modern, ethically managed and commercially viable? Charles Mills reflects

8 By design not accident

Paul Bussey talks through the rationale behind doing CDM Differently

10 High flyers

Tim Walder outlines the strategies required in managing major works at airports

12 Commercial breakdown

Nick Curran looks at the new Commercial management of construction guidance note to highlight how the practice draws on core quantity surveying skills

15 Diversify and thrive

17 Apples & oranges

The International Construction Measurement Standards will enable comparability and cost saving, explains Julie Christie Marquez Dela Cruz

18 Sentenced to health

Subcontractor management has never been more important, maintains Rhian Greaves

19 Compass points

RICS’ new online training platform for APC candidates is previewed by Irena Andrisevic

20 Measure for measure

Diversity and inclusivity can help ready construction for the future, writes Lucile Kamar

Susan Hanley outlines the skills you must demonstrate for the competency Quantification and costing of construction works

16 Pay attention

22 In the firing line

Phil Hardy-Bishop argues that it is necessary to establish a standard for payments

Helen Crossland offers advice on dealing with difficulties when dismissing employees

25 Innovation incentives

Shy Jackson highlights the importance of commercial management to innovation

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

F E B R U A R Y/ M A R C H 2 0 1 7   3


RICS c on st r uc t i o n JOU RN A L

Ch a i r m a n ’s c o l u m n

CHAIRMAN'S COLUMN The job description for quantity surveyors may be changing – but we must move with the times, argues Justin Sullivan

I

Jack of all trades

I began my career in the quantity surveying group of a large contractor; my team was responsible for producing bills of quantities for projects all over the world, which were passed on to the estimators for pricing. We had a team who added up our dim pages – the standard stationery of quantity surveyors – on mechanical calculators called comptometers, and the results were then abstracted into the bills of quantities. Moving on 30 years, things have changed a lot – but perhaps not significantly, and certainly not as much as in other professions. There are still teams dedicated to producing bills of quantities, even though the comptometers were long ago replaced by spreadsheets. Although we have changed, we have only done so slowly.

Global glue With these changes come differing expectations of the profession. Around the world, quantity surveyors perform 4   F E B R U A R Y/ M A R C H 2 0 1 7

a range of slightly different tasks according to their specific job title. During our recent Global Professional Group meeting, we discussed these titles, of which there are a number: as well as quantity surveyors, we are referred to variously as cost engineers, construction economists and commercial managers. One particular perception that took me by surprise was from our Asia region, where a quantity surveyor’s role is at a lower pay grade than that of a commercial manager. We found the market is asking for more general, rounded surveyors than specialist quantity surveyors. Clients expect that we should be able to advise and assist on many aspects of the land, property and construction processes in addition to quantity surveying

At the moment property and construction data are not standardised, but this would enable them to be shared and used more readily

– I have heard us described as the glue for the built environment. We are the jacks of all trades but the masters of none. So perhaps we should be thinking about training a new generation of all-round construction surveyors, with an optional specialisation as quantity surveyors? We may be moving in this direction already: I have recently served as an external examiner for a master’s degree in quantity surveying, which involved little actual quantity surveying. How many of the larger quantity surveying practices even still use the term in their branding? Not many, I bet. Who actually now surveys quantities? When technology starts to disrupt our sector, how will the quantity surveyor’s role develop? Will we still be needed?

Digital disruption At last year’s RICS World Built Environment Forum in Washington DC, Jilliene Helman, the CEO of crowdfunding website RealtyMogul.com, was asked what our organisation should do about property data. She advised producing standards – at the moment property and construction data are not standardised, but doing so would enable them to be shared and used more readily. But would such standardisation of

construction data lead to the comprehensive disruption of our sector? If building information modelling does everything, will we no longer need the quantity surveyor? We have been discussing this topic on our board for a number of years. However, with no standards for construction costs on the horizon, we will still need quantity surveyors, as will the clients and technology. But will this situation change with the advent of International Property Measurement Standards and International Construction Measurement Standards later this year? I have many more questions than answers. But it is good to see that as a profession RICS is outward-facing. We are considering how we can add more value for our clients, listening to the market, and taking a lead in the production of standards that the likes of Helman are seeking. b

Justin Sullivan is Chair of the RICS Quantity Surveying and Construction Professional Group Board and a member of RICS International Governing Council qsandc.professionalgroup@ rics.org


update

UPDATE Women of the Future Awards

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standards Forthcoming

Role of the commercial manager in infrastructure guidance note Due late January 2017.

The annual Women of the Future Awards ceremony took place on 18 November at the London Hilton on Park Lane. The winner of the Real Estate, Infrastructure and Construction category was Bryony Day of Arcadis, who was last year appointed Associate in the company’s UK education team.

Value management and value engineering guidance note Due late January 2017.

Employer’s agent design and build guidance note Due 2017.

Whole Lifecycle Carbon in Building professional statement Due 2017.

EVENTS RICS Infrastructure for Growth Conference 14 February, Birmingham

Assessing the role of improved connectivity in boosting the West Midlands’ economy and the implications for the UK as a whole, this event will bring together key figures at local and national level. n www.rics.org/infrawestmids

RICS Infrastructure for Growth Conference 16 February, Manchester

This event will take a broad look at the future of the Northern Powerhouse, the importance of infrastructure renewal in the North West to both the local and national economy, and the vital role of the surveying profession. n www.rics.org/infranorthwest

UK Valuation Conference 29 March, London

n www.rics.org/ukvalconf

Commercial Management in Infrastructure Conference 26 April, London

n www.rics.org/ infrastructureconference

Quantity Surveying & Construction Conference May 2017, London

n www.rics.org/qsconference

Young Surveyor of the Year Awards 2016

In consultation

Matthew Fedigan, Director at Domec Ltd in Liverpool, took the overall top title as well as the award for the most talented surveyor in the Asset & Facilities Management category at last year’s Young Surveyor of the Year Awards, announced in November. For more details, please see n www.rics.org/ysy2016

Until 13 January. n https://icms-coalition.org/ consultation/

ICMS update Private consultation on the International Construction Measurement Standards ran for six weeks in September and October. This preliminary draft was sent to around 250 global construction stakeholders for feedback. The first public consultation runs until 13 January (https://icms-coalition.org/consultation/). Construction Journal will continue to cover developments, with the standard due to be published in the summer.

International Construction Measurement Standards

Small business surgeries RICS has set up a series of regional clinics to provide practical advice on a range of challenges that are faced by small businesses. Please visit the Training and Events section of the RICS website to register interest. n www.rics.org/uk/training-events RICS has also expanded its Small Business Hub resources to help with the development of such firms. n www.rics.org/uk/knowledge/ small-business-hub

ICE journal offer The Institution of Civil Engineers (ICE) is offering its Infrastructure Asset Management journal to RICS members at an exclusive discount of 85%. This multidisciplinary journal on asset management and construction publishes papers written and peer-reviewed by practising civil engineers. To take advantage of this offer and receive four digital issues for £54, email journals@ice.org.uk, quoting “RICS85” in the subject field. F E B R U A R Y/ M A R C H 2 0 1 7   5


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Leader

RI CS const ructio n JOUR NAL

Elusive goals How do we keep the construction industry modern, ethically managed and commercially viable, asks Charles Mills?

I

am writing this not long after the publication of Mark Farmer’s government-sponsored review of the labour model for UK construction (http://bit.ly/2dlXYoC). What gloomy reading it makes. It is more than 20 years since Sir Michael Latham published Constructing the Team (http://bit.ly/2cpKqJT), whose recommendations for reducing conflict and thereby improving productivity in construction were backed by the government, but we are still chasing these elusive goals. It is also now nearly four years since the government published its strategy Construction 2025 (http://bit.ly/KOS6Xm), which told us that we needed to be 50% faster and 33% cheaper by the middle of the next decade. I wonder how far we are along that planned trajectory? Judging by the tenor of Farmer’s report, subtitled Modernise or Die, not very. Farmer’s review focuses on the “recurrent skills pressures” that hamper improvements in productivity, but commercial practices in the industry also come under scrutiny. The way work is procured and the manner in which contracts are administered are roundly criticised. In essence, Farmer concludes that a lack of collaboration between Image © Shutterstock

buyer and supplier is at the heart of our inability to improve. So as you, the surveying professional, work with both the client and the contractor, I thought it might be constructive to reflect on how you could contribute to a healthier industry by improving collaboration. Some commentators observe that the supply side of the industry wastes too much time and effort chasing and trying to exploit change after the contract award. Speaking as a client, that is certainly my perspective. Here at Transport for London, we use the NEC form of contract widely, and we are deluged with compensation event notifications from our contractors. Across our construction programmes we have been receiving thousands of notifications a year. Claims range from the valid and realistic to the contentious and absurd, and enormous effort is spent by both sides in raising, processing and disputing these notices. In many cases, the processing cost outweighs the value of the change sought. How much of this behaviour is driven by commercial staff seeking to justify their existence? A more measured approach to change by the contractor’s commercial team could significantly improve collaboration. Competitive tendering is a characteristic feature of the market. How

could it not be? A client must select the ‘best’ option, but too many buyers fixate on the lowest cost and equate this with ‘cheapest’ rather than seeking more holistic measures. This situation contributes to the extraordinarily low margins that have been a feature of the industry for some considerable time. The latest available data suggests that operating margins for the top 200 construction companies were below 2%. Not only do these drive the contractor to the aggressive and wasteful commercial practices described above, they also hamper the potential for innovation in the industry. Where is the scope for expenditure on research and development if you are only clearing your costs by 2%? While the contractor and the client occupy these armed camps and glare at each other over their respective ramparts, there is no hope of the industry overcoming its inertia. The surveying profession acts for both protagonists in what is, so unfortunately for the industry, a commercial battle. It is therefore in a prime position to play a pivotal role in the collaboration that construction so desperately needs. b

Charles Mills is Head of Construction Development at London Underground charles.mills@tube.tfl.gov.uk

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RICS c on st r uc t i o n JOU RN A L

P r o j e c t m a n age m ent

By design not accident

T

Paul Bussey explains the rationale for doing CDM Differently

he most controversial and significant change made in the Construction (Design and Management) Regulations 2015, or CDM Regulations, was the creation of the new principal designer (PD) function, intended to match during pre-construction phases the role of the principal contractor, who is in control during project execution. The PD, unlike the now superseded construction, design and management coordinator (CDMC) function, is not generally an individual but a corporate role, which should ideally be executed by the “designer in control of the pre-construction phase”, according to the regulations. The Health and Safety Executive (HSE)’s long-term intention is to have active lead designers who already work on the project carrying out their own duties but also taking on the CDM integration of other designers. For highly engineered projects such as nuclear power stations, pharmaceutical factories or infrastructure, it makes sense to appoint a PD who has the required skills, knowledge and experience, as indeed it does on architectural projects, to discharge the complex mix of aesthetic and technical designer duties.

Overzealous misrepresentations However, largely as a result of overzealous misinterpretations of the 1994 and 2007 CDM Regulations by certain sectors, designers have been discouraged from taking on the responsibility of a health and safety role. The perception of a tick-box culture has subverted something intended to be embedded in the day-to-day architectural process into a risk-averse, bureaucratic and external role. The position of CDMC did not actually constitute a creative design role, because it largely involved challenging designers’ proposals and asking for designer risk assessment documents, which were then simply coordinated into larger spreadsheets. The design complexity of other significant factors was subsequently lost among myriad routine risks and the frenzy to identify the safest solution. This approach has been fuelled by misunderstandings of the General Principles of Prevention and the Working at Height hierarchy, whereby safety procedures intended for

“ Misconceived reduction of

risk where it cannot be eliminated has diminished the design intent of achieving the safest solution 8   F ebr u ary/ march 2 0 1 7

manufacturing and construction work have been misinterpreted in the architectural design process. Thus the need to eliminate risk has been assumed to mean the avoidance of unusual or new design concepts because they are deemed too unsafe. This misconceived reduction of risk where it cannot be eliminated has led to a continual diminution of the design intent to achieve the perceived safest solution.

Rigorous training This unintended consequence has been exacerbated by those who have painted designers as arrogant and disdainful of occupants’ and operatives’ health and safety on their projects. The fact that architects undergo rigorous academic, ethical and professional training for a minimum of seven years, including a proportionate amount of CDM and health and safety training, is totally missed by these critics. Professional architects have to achieve a very detailed understanding of design, including structural and services integration, as well as an awareness of sustainability, town planning and Building Regulations requirements and a huge array of other skills such as computer-aided design and building information modelling. Of even greater importance, though, is the field of aesthetics, which is generally a mystery to the other design team members, and includes the integration of all the above factors into a cohesive and visually appropriate composition. Architects cannot, of course, be experts on all these other design issues but need an overview of each as well as an understanding of their own limitations. These gaps can be filled by additional CPD or training, or proportionate advice from external experts.

“CDM Differently” CDM Differently is an initiative based on the thinking of Australian academic Sidney Dekker. It has been developed in collaboration between senior designers and practitioners from the Royal Institute of British Architects (RIBA), the Institution of Civil Engineers, designers and practitioners, including Tony Putsman, Vice-Chair of the Construction Industry Council, and the author, all of whom have considerable health and safety expertise, experience and training. It is intended to be a common-sense, intuitive and collaborative process to integrate CDM into architectural projects, and can be carried out practically by professionally qualified architects with sufficient skills, knowledge and experience, as recognised by the RIBA, with additional PD training if considered necessary. In the context of an architectural project, CDM Differently encourages the lead, active designer to incorporate the significant, project-specific health and safety and CDM issues into the creative design concept right from the start. Hazards need to be identified early and recorded on site drawings, where they should be clearly highlighted among all other details. There should also be strategic briefing input on these hazards from relevant parties, including the client, statutory authorities and other consultants. With an


RI CS const ructio n JOUR NAL

understanding of both the site infrastructure and the team, a conceptual, architectural design can start to evolve, and the significant design issues can be identified and overlaid. The combination of site knowledge, client brief and architectural aspirations are synthesised by the team into a design that integrates all these factors and CDM issues, to ensure that the risk level for the project is tolerable. This process should be proportionate to the scale and complexity of what are perceived to be the significant health and safety risks, not counting commonplace construction risks. It is recognised that some large projects have relatively simple risk profiles, whereas certain smaller projects face more complex issues. The reverse is of course possible as well, but it is for the project team to spend a proportionate amount of time and effort avoiding, minimising or controlling significant risks and recording the key issues in an appropriate manner. To ensure clear information and enable collaboration, CDM Differently discourages too much narrative detail in favour of a combination of annotated drawings, sketches, images, photographs and diagrams, which together clearly explain the significant CDM issues and their context to all project and third-party personnel. The tolerability of each significant risk is established and noted for future reference during redesign, revisions and value engineering, maintenance or refurbishment phases, or for third-party use in the event of a CDM review, audit or HSE inquiry. This procedure and the document together encapsulate the legal processes of “reasonable foreseeability and

practicability” required by the regulations and, if these are properly followed and recorded, are acceptable to the HSE and the courts in the event of an accident or potential prosecution. The HSE recognises that while designers can help to avoid and minimise risks, these cannot ever be entirely eliminated and accidents can still happen. Proof that the team has gone “as far as reasonably practicable”, is, however, sufficient. This creative process is documented in Healthy design, creative safety, a report from the HSE, RIBA and the University of Sheffield published in 2012 (http://bit.ly/2duQXYB) and CDM 2015: A Practical Guide for Architects and Designers, (http://bit.ly/1DIitXc) written by the author and published last year. Both of these encourage excellent design with proportionate provision for health and safety. C

“When I joined my new company in April 2015 they did not have access to BCIS. For a couple of months I had to manage without access which made it very difficult accessing cost data. Now, having a subscription to BCIS gives me easy access to a large amount of building cost data, saving me valuable time. BCIS is invaluable, as it helps me provide realistic early cost advice to our customers from a widely recognised source.” Paul Yandall, Project Manager and Quantity Surveyor, Torbay Development Agency

Paul Bussey is an architect and technical consultant at Alford Hall Monaghan Morris pbussey@ahmm.co.uk

Related competencies include Health and safety

BCIS provides essential data to carry out early cost advice A reliable source of independent data

To find out more about BCIS visit rics.org/paulsstory or phone +44 (0)24 7686 8433 To a d ve rtise con t a c t Em m a Ke n n e dy +4 4( 0 ) 20 7 8 7 1 5 7 3 4 or emmak@wearesu nday. c om F ebr u ary/ march 2 0 1 7   9


RICS Con st r uc t i o n JOU RN A L

C o m m e r c i a l m a n ag ement

High flyers

T

Tim Walder considers the strategies required in managing major works at airports he planning and implementation of major airport programmes such as Terminals 2 and 5 at Heathrow, Pier 6 at Gatwick and terminal extensions and new satellite buildings at Stansted can be highly complex, and requires a breadth of planning expertise, environmental and legal knowledge, business acumen, good design and an appreciation for operational readiness. Increasingly topical debates about new runway capacity can take as much time to untangle as an intense 48-month capital investment programme affecting 14 regional airports in Greece, for example, so it is crucial to get the commercial management processes right. Commercial management for aviation programmes may vary with scale. However, all projects require commercial acumen, strategy, insight and an understanding of process if they are to succeed. An airport needs to align the main motivations for its development programme with the commercial strategy. The key factors prompting airport developments are: bb traffic and capacity demand projections bb key considerations in business planning, including: • capital, revenue and operating expenditures • aeronautical (landing fees) and non-aeronautical revenues such as retail, catering and car parking bb regulatory requirements bb maximising return for investors or shareholders bb meeting demand and capacity planning bb sustainable development for planned growth bb planning for aviation innovation, for instance in security, check-in and IT bb capital investment planning: balancing capacity development with maintaining existing assets and facilities

1 0   F ebr u ary/ march 2 0 1 7

bb masterplanning: • airfield layout, allowing for potential changes to aircraft • terminal facilities development, considering space requirements based on peak demands and International Air Transport Association standards bb environmental impacts, for example noise, air quality, effect on watercourses, carbon footprint. Understanding these factors comes down to making allowances when estimating costs and in business planning for a range of relationships between various parties and aviation process and procedures; for instance, weighing airlines’ and customers’ needs and regulatory engagement against shareholder returns.

Masterplanning and design There are three key commercial processes to consider in the masterplanning stage: 1. cost estimating and planning 2. risk and opportunity management 3. commercial and contract management. Cost estimating and planning Depending on the nature of the programme, facility-level or “top-down” estimation of costs – that is, considering the cost per square metre of gross floor areas – will be used during the masterplanning stage. Cost must be aligned with the schedule and scope of the programme as well, in order to minimise risk and the occurrence of gaps in the overall masterplan. The process of estimation will then proceed to the systemic level, with consideration of the elements in the RICS and BCIS templates – often termed “bottom-up” analysis – as the design, scope and schedule become defined. Various cost planning and estimating tools and process can be applied, depending on the scale and complexity of the programme. Three-point estimating, which looks at three values − the most optimistic, the most likely and pessimistic estimates – and associated Monte Carlo analysis – which uses repeat Image © Shutterstock

random samples to understand risk and uncertainty when preparing models – is becoming increasingly popular in major aviation programmes to allow articulation of the degree of cost certainty. This is a more intelligent client approach than using optimism bias. Risk and opportunity management This will involve the creation and implementation of risk and opportunity management processes and procedures, including development of a risk and opportunity register, as well as devising mitigation measures and identifying where the risk lies and therefore who is responsible for it, whether at project or programme level. Commercial and contract management At the start of the masterplanning process, it is important that the commercial strategy is developed and implemented. Major programmes will be spending large sums on consultant fees and client team costs; in addition, environmental impact studies and development consent order processes may be required alongside land purchases and legal fees. These all entail processes and procedures for measurement, benchmarking, control, contracting strategy, management and reporting. As the masterplan progresses into the design stages, procurement and contracting strategies need to be developed alongside one another. A number of procurement routes are commonly chosen in aviation programmes, namely:


RI CS CONSTRUC TION Journal

Where there are potentially significant operational constraints – for example in major complex programmes at Heathrow Terminal 2, or when there is the potential for client-driven design changes – then two-stage tendering would be more appropriate. The commercial team needs to be integral in the choice of appropriate procurement route as this will inform both the risk and the expenditure profiling.

Programme & project delivery

Terminal 5 at Heathrow required an average of £80m per month to meet tight programme deadlines bb traditional detailed design and tender bb engineer procure and construct (EPC or ‘turnkey’) bb design and build (D&B) bb two-stage tendering with a managing contractor bb two-stage tendering with construction management bb combination of any the above with contractor finance options. The above options all have their benefits and disadvantages. It is important to test which will be the most suitable for a particular programme as soon as possible, preferably during the masterplanning stage, and multiple routes may be appropriate across a programme of work as some projects lend themselves to differing procurement processes. The key factor running through all stages is ascertaining risk. If it is possible to ensure a high level of certainty in the client brief and the design, then EPC or D&B may well be the most appropriate route as these mean that there will be a limited requirement for change.

Commercial management during the programme and project delivery stage will move from being driven by the design and business case to focusing on the production stages. During the design stage, both procurement and contracting strategies will have been planned and executed; therefore, the baton has now been passed to the delivery team. Thus, commercially speaking, the focus will now be on contract administration, risk management, cost reporting and proactive change management. Work at airports often takes place in operational environments, and changes to the design and operational constraints are common while projects are in progress. The following are two examples of challenges facing the commercial management teams when they are working at operational airports. Site logistics Our major UK airports have in the past had to spend exceptional amounts on a monthly basis to meet tight programme deadlines; for instance, an average of £80m per month was spent on Heathrow Terminal 5. This work requires substantial logistical support, at an overall programme level, to enable high levels of productivity on site. Examples of such logistical support at Terminal 5 included off-site operational facilities for: storing and processing materials; security processing, welfare and health and safety for site staff; waste removal; and common mobile equipment. Airline moves Airports develop alongside the airlines that use them, and changes and relocations to the former may be required to accommodate the latter, including decanting and temporary facilities, to ensure that their operations remain as efficient as possible. Such moves are complex logistical undertakings because people, equipment and facilities all have to be coordinated

and adjustments made to very tight timescales. Both Gatwick and Heathrow Airports have recently undertaken major airline moves as a preliminary to their own major programmes, with EasyJet’s move to North Terminal at Gatwick and the closure of Terminal 1 and the old Terminal 2 before the new Terminal 2 opened at Heathrow. These airline moves were substantial programmes, with budgets of more than £100m each.

Activation It is important to remember that the commercial process does not end at the point of handover to the operations team. Operational readiness and transfer need to be understood as early as possible in the programme, and the commercial strategy should be directed towards providing a working asset, sharing knowledge and recording requirements for operation and maintenance. Incorporating new facilities into ageing assets can present compatibility challenges, and commercially speaking, the impact of additional costs can be extensive – not only in terms of replacing plant and equipment but also the outlay needed for integration, commissioning and testing. Airports are massively complex in terms of the IT that keeps the flight information, baggage-handling equipment, security and life-support systems operational. These systems are a significant expense in any airport development, and are often underestimated in terms of their cost and the impact they have on the schedule. It is vital that all these are considered during the commercial management process. C

Tim Walder is a partner at Arcadis and a board member of the British Aviation Group tim.walder@arcadis.com

Related competencies include Business planning, Commercial management of construction, Contract administration, Design economics and cost planning, Procurement and tendering, Programming and planning, Risk management, Sustainability

F ebr u ary/ march 2 0 1 7   1 1


RICS Con st r uc t i o n JOU RN A L

C o m m e r c i a l m a n ag ement

Nick Curran looks at the Commercial management of construction guidance note to highlight how the practice draws on core quantity surveying skills

Commercial breakdown

T

he Commercial management of construction guidance note, published in March last year (www.rics.org/ commercialmanagement), has been written specifically for commercial managers working for contracting organisations, outlining their involvement in the key stages of a project or contract. Many of the disciplines are also relevant to those representing a client in private practice or employed directly by a client. The note defines the role of a commercial manager, their overarching duties and their responsibilities, which involve bringing together and managing several key activities traditionally carried out by quantity surveyors. Tracking the commercial manager’s

input through a project’s life – from estimates and budgets to forecasts, value engineering, procurement, valuing of work, cost management, reconciliation and analysis, cash flow and commercial decisions, as shown in Figure 1 – the note covers the traditional responsibilities of the role across all sectors. Depending on the sector and the scale of the project, however, the commercial manager’s emphasis and focus may vary. The guidance note is not intended to be a quantity surveying handbook because many of the core skills are covered in other RICS guidance. However, where there was no relevant guidance at the time the note was being prepared, more detail is included.

In the introduction to the guidance note, the role of a commercial manager is defined as someone who “monitors, or controls internal processes such as production, and manages external relationships with customers, clients and trading partners. At the same time, the commercial manager monitors financial performance, both forecast and achieved, and manages any risks there may be to achieving forecasts, whether these are known from the outset or introduced through changing circumstances.” To elaborate on this, one of the commercial manager’s main responsibilities is to ensure that the final outturn result of the project – considering, for instance, not only the cost but the revenue and margin – is as close to

the initial estimates as possible by developing a budget and tracking any changes and their impacts as they become apparent. This enables a clear line of sight between the first record of estimates and the final cost at project closure, analysing all estimates, budget, procurement, cost, value and cash flow data against common heading levels, using the project structure described below. By using such heading levels, the process becomes clearer and anomalies are more easily identified, thereby enabling commercial decisions to be made based on timely, accurate information and improving the certainty of forecasts.

Figure 1 Flow of processes and associated data from an estimate through to cost–value analysis and commercial decision-making

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RI CS CONSTRUC TION Journal

7. maintaining cash flow 8. commercial decisions.

A key theme in the guidance note is the need for definition and adoption of common analysis levels as early as possible to structure the project. These levels must be both readily recognisable as a logical breakdown of the project, and easily adopted by planners as well as by the delivery team to record costs further down the line. For this reason, the project and work breakdown structures are the ideal place to start. These common analysis levels are usually set by taking the lowest common denominator of the estimate, the project plan and the optimum level for recording costs. Adopting these through all stages and tasks simplifies forecasting and analysis of estimates, preparation of budgets, commitments, valuation of works, costs, change management, cash flow and contingency plans. If we do not group the levels at which these tasks

are analysed into common levels then comparison is either not possible or will take up vital time, not to mention exacerbating the risk of error from repeat analysis. Effective commercial management, and more specifically forecasting and decision-making based on perceived risks and opportunities, relies on harnessing data from the central processes of estimating, procurement, cost recording and earned value. The commercial processes can be discussed as eight distinct operations that not only align with the key competencies in the APC process but also relate to the role and overall composition of commercial management: 1. estimate and budget 2. value engineering 3. supply chain 4. valuation 5. cost management 6. cost and value reconciliations Images Š Shutterstock

Estimate and budget Commercial managers should be able to use the details of the estimate readily when developing and maintaining the construction budget. The budget should then be used to develop and subsequently maintain a forecast outturn cost and value. The guidance note covers the production of an estimate and how that develops into forecast cost, revenue and margin; the types of estimate at different stages in a project lifecycle are defined in the New Rules of Measurement. If the common analysis is used for the estimate and resource coding allowances, then the estimate detail can be used for the budget and forecast as well, so that it can then be adopted consistently in the later stages of the project, thereby enabling ready comparison. Even at the initial stage, it is important to have designed and adopted a common analysis using the project and work breakdown structure; this is particularly important in providing analysis and ongoing comparison for the stakeholders if a cost plan has been used. The guidance note continues with an outline of how an estimate is developed in terms of bill items and rate build-ups. It explains the importance of a standard method of measurement and why a detailed estimate can be difficult to produce without a detailed design; in some circumstances it may not even be possible to produce a detailed estimate before work has commenced. Value engineering The commercial implications here should either result in auditable amendments to the estimate and the budget or they should be recorded

against the same headings as the common levels. The key principles of value engineering are discussed, together with some key examples from different construction sectors. The impact of value engineering on the budget must be remembered, as should the way in which commercial risks or opportunities fall on different parties, depending on the procurement process that has been chosen. How early or late in the design process any changes are implemented, and the risks and opportunities they present, are completely the responsibility of the client: for example, under a traditional remeasurable arrangement for procuring and administering works, the risks and opportunities of changes are assumed by the client. Under other arrangements, however, these risks may fall on the contracting organisation or, in some circumstances, even on the consultants. Supply chain Budget allowances must be visible when engaging with the supply chain, in order to inform negotiations and also to enable updates to the forecast as commitments are made. Engagement with the supply chain to procure and manage packages of work is a key commercial management task. The chain includes all suppliers and consultants as well as subcontractors; depending on the risk and complexity, the commercial manager may get involved with all three on these packages, or may leave to other members of the team. The guidance note explains how the procurement process defines the scope of packages and the use of a supply chain database to establish suitable vendors, followed by issuing enquiries, evaluation of quotations, negotiations, and then the formal engagement. n F ebr u ary/ march 2 0 1 7   1 3


RICS p r op e rt y JOU RN A L

Co m m e r c i a l m a n ag ement

n As each package progresses through its own lifecycle, it is then commercially managed in its own right. Valuation The interim valuation and assessment of work in progress is dealt with in the guidance note. The measurement and evaluation of construction works is a core quantity surveying skill covered in some depth; however, it is the alignment of the estimate and budget with the common levels that is vital, so that the resulting earned value can be readily compared with the costs. To support the cost and value reconciliation and ongoing forecasts, the commercial management process must let valuations or other earned value calculations use the estimate and budget allowances in calculating the earned value at a level comparable with the way that the actual, accrued and committed costs should be reported. Cost management The levels at which costs are recorded must align with the common levels against which the estimate, budget and forecast are analysed, to allow a ready reconciliation of costs. The sections of the note relating to management of costs initially discuss the different types incurred in construction, compared with the key cost headings of labour, plant, materials, subcontracting and others, along with an outline of the processes that are generally required in the business context. A contracting organisation requires costs to be monitored and allocated consistently in a way aligned with the common levels discussed above. It is essential that a contracting organisation has effective processes for recording costs on projects against the common levels. 1 4   F ebr u ary/ march 2 0 1 7

Budget allowances must be visible when engaging with the supply chain, in order to inform negotiations and enable updates to the forecast Cost and value reconciliations All commercial management processes should lead to reconciliation of costs and values. As defined above, the estimate, budget, forecast, earned value and cost recording should all be analysed against common levels, allowing reconciliations and revised forecasts. The reconciliation of cost and value collates the assessment of work in progress with the cost management analysis. The initial stages of cost and value reconciliation are more effective and efficient if the earned value and costs are aligned with the common levels, thereby allowing the commercial manager to identify variances more quickly and concentrate efforts on explaining and mitigating them. It is also important that the forecasts are in an identical format so that they can be updated at the same time and tracked; many contracting organisations’ cost and value reconciliations are integral to their forecasts. Maintaining cash flow It is advisable for the cash flow forecast to be generated from the data underpinning the overall project forecast. In addition, an updated forecast should result in an updated cash flow. Cash flow is a critical part of commercial management: unless cash is available to make purchases and pay labour and staff then projects Images ©

cannot be completed. The note does not go into the cash flow process in great depth because there is another specific guidance note on this subject. However, it does offer a practical explanation of why cash flow is important and what to consider when developing a forecast for it. Commercial decisions The ability to make commercial decisions based on up-to-date evidence is crucial to the commercial success or failure of a construction project or contract. Change management and risk and opportunity registers should be aligned with the same common levels as the estimate, budget, forecast, earned value and costs to enable relevant adjustments to be made to the forecast. Commercial decisions can be made in response to events that have already happened. They are also made in relation to risks and opportunities that have been identified as potentially foreseeable events. It is essential that decisions made at all stages of a project or contract are recorded and their impact tracked through the life of that project or contract. Contracting organisations that manage their commercial decisions in a risk and opportunity register are the most successful at tracking their decisions. Management of risk and opportunity registers is a key commercial process that

should be given appropriate time and attention by the project or contract team and not only by the commercial staff. If risks and opportunities are identified at an early stage, commercial decisions can be made to mitigate the former or maximise the latter, should an identified event come about.

Lessons to learn What should be clear from the above is that commercial management involves taking an holistic view of a project budget and forecast cost and value, together with the undertaking and management of traditional quantity surveying activities – the detailed processes that underpin commercial management and on which commercial management in construction relies. Offering assurance that the activities have been carried out to a specific standard and with due diligence is vital. But providing outputs in terms of commercial and financial figures that are used to update the current and forecast positions of a construction project is essential as well. C

Nick Curran is Director at Fusion-Commercial Associates nick@fusion-commercial.co.uk

Related competencies include Commercial management of construction, Communication and negotiation, Contract practice, Data management, Design economics and cost planning, Procurement and tendering, Quantification and costing of construction works, Risk management


Div ersity

RI CS const ructio n JOUR NAL

Diversify and thrive Diversity and inclusivity can help ready construction for the future, writes Lucile Kamar

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n its report Our Changing World: Let’s be ready, RICS highlighted that one of the key areas employers want it to address is the so-called war for talent. It is fair to say that the workforce of the UK’s land, property and built environment sectors has not historically been very diverse or inclusive. Coupled with the fact that the surveying profession currently faces a skills shortage and an ageing demographic, this means the need for further change and diversity in the sector has never been greater. Attracting the right talent inevitably means recruiting from a wide range of varying backgrounds.

Marking our mark Among the many ways in which RICS is supporting workplace diversity and inclusion is the Inclusive Employer Quality Mark (IEQM). Launched in 2015, the IEQM is based on six principles: leadership and vision; recruitment; staff retention; staff development; staff engagement; and continuous improvement. The IEQM aims to encourage firms of all sizes to look carefully at their employment practices and prioritise inclusivity. More than 120 companies have already signed up to the IEQM, allowing us to reach more than 150,000 people in total. A diverse and inclusive workforce is a competitive one, better reflecting its own clients, its employees and the wider community. The report Diversity Matters (http://bit.ly/mckdiversity) from McKinsey & Company looked at the relationship between gender diversity levels and companies’ financial performance, and the numbers speak for themselves. Image © iStock

Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. Not only does creating and maintaining a diverse and inclusive environment make business sense, it is also in line with the Equality Act 2010. But our statistics show there is a long way to go in achieving diversity across chartered surveying. It will likely be another 40 years before the number of female chartered surveyors comes close to equalling the number of men who are in the profession. Current RICS-qualified membership statistics reveal: bb that only 13% of surveyors in the UK are female, with 13% of them in quantity surveying and construction and 13% in project management bb that 1.2% of surveyors are from Black, Asian or minority ethnic backgrounds bb that those with disabilities make up fewer than 1% of the profession bb we do not yet have data for lesbian, gay, bisexual or transgender surveyors.

We therefore created the profession’s first Diversity Hub – an online portal that enables members and external bodies to share case studies, best practice and research on diversity and inclusion. This has been described by our members as the “missing piece of the puzzle”, proving that putting policies and measures in place does not have to be time-consuming or resource-intensive. The move is very much in line with RICS’ ambition to support members and their firms. It continues to lead the way by promoting the diversity and inclusion agenda. If you have an innovative approach to share, please join the conversation on the hub. You can also attend a networking session in your region at one of our series of free lunches, Driving for Diversity, each of which will feature a panel of industry representatives discussing one of the principles of the IEQM. To find an event near you, please visit rics.org/diversity. C

Shared resource So how are we going to attract and retain diverse talent and ensure we have a thriving property sector for the future? While RICS was developing the IEQM, it began to see huge demand for a resource for our members to share best practice and to learn from each other how best to embed diversity and inclusion in their workplace.

Lucile Kamar is Equalities Manager at RICS lkamar@rics.org

Related competencies include

Business planning, Teamworking

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Pay m e n t

Pay attention Phil Hardy-Bishop explains the need for a payment standard

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ife is becoming increasingly busy. With the constantly evolving demands of work, how do workers ensure they are paid on time – or at all? This is where the concept of a payment standard can come into play. If the supply chain can demonstrate compliance with a standard while ensuring that construction operates ethically, it can make a significant difference to the provision of infrastructure, the wider construction industry and society in general.

Recognising in this way that problems with payment are not isolated to the work of cashiers but part of the whole process of application, certification and clearing, a payment standard needs to cover the entire process.

The need for a standard

In January 2016, the Constructing Excellence Member Forum’s workshop on the Payment Minefield brought together a number of professionals to discuss fast payment. It explored project bank accounts (PBAs), the value of fair payment charters and how electronic Payment process problems payment processes need to provide Financial set-ups for infrastructure transparency. The idea for a payment projects involve a complex network standard was born. of companies, The idea consists shareholders, in applying a quality frameworks, I was looking into fair payment standard to the lenders and holding payment process: strategy for HS2, and if there organisations; organisations would had been a payment standard need to adopt the unfortunately, these enable the supply payment standard to in existence at that time then chain to profit from be certified for their we would have adopted it cash flow by holding compliance. Once Andy Cross, Director of Commercial on to working capital. Strategy and Agreements at High a sufficient number They do so partly of suppliers and Speed Two Ltd as a result of an sub-suppliers are individual’s desire certified, it is hoped to maximise profit for their organisation that large clients will demand certification and partly because of the nature of the as a matter of course. industry, with its cycles of boom and Once this process matures, a metric bust and general underinvestment. Other could be added to the certification to possible reasons may include the fact confirm that a company is paying a that margins are very slim, separate minimum percentage of its bills on time. ongoing projects require financing or Smart clients can vary this parameter there are problems with payments from between projects to allow less mature another client. suppliers who might miss the occasional While a large number of initiatives deadline the chance to tender. – from building information modelling Discussion between RICS and the (BIM) through conventional forms of British Standards Institution (BSI) has collaboration to the establishment of since concentrated on researching other alliances – are in progress to try to similar standards and on working out improve the industry and remedy these how a Publicly Available Specification issues, no single taskforce will address could be created and implemented so behaviours that are so deeply ingrained. that suppliers’ compliance with contract In addressing the problem, we should and legislative requirements could be also differentiate between delayed certified. They have also considered how payments and late payments. Where written accounting for electronic systems priorities change and issues with quality and PBAs and client bank accounts can of the work mean payment cannot be be incorporated. made on application, this counts as a delay; in other cases, payment is not Alternative approaches made by cashiers in a timely manner, and Combined with other applications, BIM so this is considered late. certainly offers payment opportunities: 1 6   F ebr u ary/ march 2 0 1 7

imagine making a claim for payment or processing a cheque via smartphone, or having contractors submit timesheets electronically and approving payment on a tablet. But the payment process has to be ready to modernise before it can go beyond BIM Level 2 equivalent, so while BIM is part of the answer, it is not the whole answer. Promoters of PBAs as a means of payment to the supply chain have in the past neglected to mention that on smaller projects, these represent an administrative burden. Senior lawyers are also not convinced of the status of the Deeds of Trust, which are made between those parties to set out the joint ownership of the PBA: the client still requires the main or lead contractor to administer the PBA, creating opportunity for the delay in other projects where the main and subcontractor are working together on a wholly unrelated project, for example. As far as the current fair payment charter goes, this too is a laudable statement of intent. Unfortunately, it still lacks teeth when it comes to the procurement process. Non-compliance may go undetected, and it might not be possible to take effective action against those who flout the charter either.

What next? Early discussions with the government’s Infrastructure Projects Authority have directed us to the Department for Business, Energy & Industrial Strategy. David Hancock, Chief Construction Advisor has also referred us to the Construction Leadership Council. But now we need to have some voices from industry to support this initiative, so we can begin to exert an influence. Once government and industry endorsement has been received, we hope to begin work with BSI and start the process for creating the standard. C

Phil Hardy-Bishop is RICS UK Infrastructure Director and a board member of the RICS Infrastructure Forum phardy-bishop@rics.org

Related competencies include Project administration


IC MS

Apples & oranges Julie Christie Marquez Dela Cruz explains how the International Construction Measurement Standards will enable comparability and cost saving

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ollowing the launch of the International Construction Measurement Standards (ICMS) coalition at the International Monetary Fund in Washington DC in June 2015, there has been an overwhelming response from various professional organisations around the globe that wish to be involved. To date, the ICMS coalition has 46 members that are engaging industry partners and discussing unified global standards for construction costs. The next challenge is to ensure that all involved in construction adopt the standard.

Construction consequences The global construction industry is vast. As more enter the profession, the greater the risks and uncertainty arising from inconsistency in construction cost, classification and reporting become. The ICMS aim to harmonise cost, classification and measurement definitions to achieve comparability and consistency in cost and provide meaningful benchmarking data for construction projects. The initiative includes adoption of a worldwide definition for construction costs, a single classification format for building and civil engineering projects, a standard platform for digital cost management tools – in particular building information modelling (BIM) – and a recommended standard reporting format so that construction professionals and investors can compare cost on a like-for-like basis. The ICMS have considerable potential to increase public trust, reduce cost and benefit the construction industry globally.

Issues addressed by ICMS For global companies, having no universal standard is extremely difficult. They train staff using different standards for each project undertaken in every different region in which they operate, increasing their expenditure. Having numerous measurement standards can create problems and in some cases render a project inefficient, particularly where various professionals such as quantity surveyors, cost and

commercial managers, project managers, developers and architects from different parts of the world have their own interpretations on how to measure. If one runs a global business serving various regions with different standards, a common approach such as the ICMS is vital, with consistency fundamental to achieve proper benchmarking; inconsistent information will affect the cost planning, procurement and delivery of the project with an impact on the source of funding, insurances, bonds and the like. Where global companies adopt ICMS, however, the process will be more efficient. Projects undertaken in various regions will be comparable, ensuring meaningful benchmarking.

Comparable challenges Comparability is one of the key parameters for construction cost information. A construction cost is comparable when standards are applied consistently regardless of the region in which you operate. Investments are compared across countries, and investors need a unified standard for use in evaluating their options. If the projects are evaluated through different standards, we could not carry out a like-for-like assessment, and even the audit standards would be a challenge. Neither could we say that one investment would provide better returns than another because you cannot compare apples with oranges. This is where ICMS play an important role.

RI CS const ructio n JOUR NAL Inconsistencies between standards make it difficult to achieve good benchmarking. Service providers start with a model of what a construction project in a particular sector should typically cost and apply numerous factors to align this to one standard. A lot of cost data conversions must be made, for instance from the standard Principles Of Measurement (International) format to the New Rules of Measurement elemental format. This is inefficient, and will often result in expensive mistakes that affect the entire procurement of the project as well, leading to potential cost overrun. When this happens, clients will not realise the intended value of the project, resulting in a failed business plan. The ICMS will help resolve this inconsistency as construction professionals and developers need not spend time analysing cost from benchmarking data because they use the same language anywhere in the world.

Who benefits? ICMS will certainly benefit not only global companies but small firms as well, in particular service providers. ICMS will also benefit software providers, the professionals, the developers, the users, the government and financial institutions. In this day and age, digital cost management is a priority for global companies. The importance of engaging software providers to use ICMS will have a significant impact on the spread of BIM. While the ICMS offer a high-level framework standard, the ICMS coalition envisions that a universal standard must be created even at Level 4. One day, we will only refer to one universal standard. This may be an audacious goal, but with a willingness to adapt, it will not be impossible to achieve this. b

Benchmarking benefits One of the important services offered by cost consultants and required by developers is to benchmark projects undertaken in various regions. This is important because it enables comparison of cost and scope to determine the likely cost of a development, informing investors’ decisions. This gives the client the chance to revisit the design and devise one that is financially viable, allowing designers to carry out value engineering and the client to analyse costs and secure funding from banks and other financial institutions.

Julie Christie Marquez Dela Cruz is Technical Director of Arcadis GEC in the Philippines, and the Chair and Founder of both the Philippine Institute of Certified Quantity Surveyors and the Philippine Institute of Built Environment julie.delacruz@arcadis.com

Related competencies include Data management, Design economics and cost planning, Quantification and costing of construction works

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H e a lth a n d Saf e ty

Sentenced to health

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Subcontractor management has never been more important, says Rhian Greaves

ince the Sentencing Council’s reform of the penalties courts may impose in health and safety cases, which came into effect in February 2016, the new sentencing regime has been biting hard in construction. Already subject to heavy enforcement, the sector saw fines rise by 89% in the six months following the guideline’s implementation, when compared to the same period in 2015. For large companies, the new guideline makes potentially frightening reading. Courts are now primarily working on the basis of offenders’ turnover, arriving at fines in prescribed ranges that can exceed £10m in the worst cases.

Out of proportion The Health & Safety Executive (HSE) acknowledges that large contractors are generally good at managing safety. Yet with an estimated 89% of construction businesses consisting of fewer than 10 employees, the approach to safety among the wider industry is concerning. 1 8   F E B R U A R Y/ M A R C H 2 0 1 7

Sites where fewer than 15 people work also account for more than two-thirds of fatal accidents in the industry – a disproportionate figure by any assessment. The Construction (Design and Management) Regulations 2015 seek to address this trend. But how can you secure your own position when working on projects that involve the management of smaller businesses? Reliance on subcontractors is common in the industry and, if carried out properly, is perfectly acceptable; after all, no business can possibly resource every aspect of a project. The key consideration, then, is the way in which those subcontractors are chosen and managed. Failure to comply with safety legislation in this respect is just as likely to lead to prosecution as is an incident that involves your own employees: a worrying prospect.

Managing the risk bb Vet potential subcontractors: evaluate their credentials, both those related to their specialism and those specific to health and safety. You need Image © Shutterstock

to know how they will approach the job, where they see the risks, how they will manage them, and how the work will be carried out. You should validate individuals and ask questions about who will actually be undertaking the work. What training, experience and certification do they have? bb Check their competency: this is essential as far as the HSE is concerned; you can only rely on subcontractors if they are competent. Competence is a combination of experience, qualifications, training, knowledge of the task, the ability to prevent risky situations arising, the acknowledgment of limitations, and organisational capability. bb Give them time: be realistic about what is required and estimate how long this will take. This means balancing the commercial pressures of scheduling with maintaining a safe method of working. Little aggravates a health and safety prosecution as much as the perception that corners were cut for financial gain. bb Keep talking: communication before, during and after a project is vital. Your subcontractor needs to know precisely what is expected at each stage, how their


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Sentencing guidelines must recognise that health and safety offences are criminal acts that should be treated no differently to other crimes involving violence. Sentencing Council’s consultation exercise on reforming penalties for offenders work fits into the overall project, and what the wider risk profile of the site is as well as their part in it. At the end of a project, consider what worked well and what did not. How will you change things next time? Learn from each job and apply that wisdom on future projects. bb Monitor throughout: you cannot simply award a works package and then take a hands-off approach. Although it may be tempting to do so, legal duties cannot be discharged in this way. You do not have to supervise, but you must actively monitor the work. At a very basic level, how else will you know

your subcontractor is doing what they promised to do in the manner they agreed to execute it?

The cost Comprising 6% of the national workforce but accountable for 33% of work-related deaths, the construction industry remains a key enforcement target for the HSE. As if to accentuate the point, the HSE’s inspection charges in construction have increased by 26% in the past year. And while enforcement notices appear to be declining in number, construction businesses cannot afford to ignore the courts’ new-found sentencing might. Sentencing on environmental matters has long adopted the approach taken in health and safety matters and vice versa due to the similar nature of the respective regulatory regimes. The words of Mr Justice Mitting in a recent water pollution case in the Court of Appeal have a particular resonance here. “Starting with turnover but having regard to all the financial circumstances, including profitability … the objectives of punishment, deterrence and the removal of gain must be achieved. …

This may well result in a fine equal to a substantial percentage, up to 100%, of the company’s pre-tax net profit … even if this results in fines of £100m. Fines of such magnitude are [already] imposed in the financial services market for breach of regulations.” A rather sobering thought. C Acknowledgement An earlier version of material in this article appeared on the Construction News site (http://bit.ly/2gFe6r8).

Rhian Greaves is Legal Director at Clyde & Co rhian.greaves@clydeco.com

Related competencies include Communication and negotiation, Health and safety, Procurement and tendering, Project administration

Compass points

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any candidates express concern about the different challenges they face when trying to complete their APC tasks, such as time management, how to demonstrate competencies and how to prepare effectively for the final assessment. In response, RICS has launched Compass, an online

platform that gives access to bite-sized learning and other training resources, which will help with your assessment activities and enable you to gain the knowledge and skills you need to be fully prepared for the final assessment. The main features of Compass include the following. bb My Resources: a tailor-made training package

with content targeted to your personal APC learning needs, to ensure you can access support quickly and easily. bb Messaging system: identifies relevant upcoming courses that will help with your APC progression. bb Competency encyclopaedia: providing an insight into what the RICS competencies mean in the context of your role, this resource will help you understand the expertise that you need to demonstrate in your assessments. bb Course browser: a dedicated section for you to manage your training, where you can track courses you are taking or have completed, and browse others to help you develop the skills you need in order to pass your APC. bb CPD tracker: the personal CPD record will help you to track the hours you

have completed and identify the skills that you need to develop further. bb Final assessment: RICS training materials are readily available to help enhance your knowledge so you can achieve MRICS status. bb Ethics course: this e-learning course has been designed to test your understanding of RICS’ ethical standards. Compass will enrol and track your progress automatically, all you need to do is complete it. As an APC candidate, you have automatic access to the website. You simply need to visit rics.org/compass and then log in as usual with your RICS account details. C Irena Andrisevic is an RICS digital marketing executive iandrisevic@rics.org

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APC

Measure for measure Susan Hanley outlines the skills you must demonstrate for the competency Quantification and costing of construction works

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easurement for the purpose of costing construction works is critical to the quantity surveyor’s role – yet the lack of measurement skills in the profession continually raises its head. Costing and defining construction works also need to be addressed to ensure you achieve the core competency of Quantification and costing of construction works to Level 3. Many candidates look at the measurement aspect of this competency and voice concern that they rarely measure or do not produce bills of quantities in their role.

How then can they become competent practitioners? Measurement is not just about the production of bills of quantities, however, and the competency does not require that you must have prepared such bills. What it does ask in relation to measurement is you can quantify construction works (at Level 2) and that you can do so throughout the various stages of a project, whether producing a feasibility cost, measuring additional works after the contract or agreeing a final account. For candidates who may not produce bills of quantities in their usual line of work, particularly those in contracting, the measurement and billing of variations in

accordance with a standard method would be sufficient to gain this experience. You also need to understand that what you quantify can vary at different stages of the project, according to the information available to you at that stage.

Measurement forms Any candidate who does not have measurement experience using a standard form needs to ensure they can readily demonstrate Level 1 knowledge of the various standard forms, in particular the one most relevant to their sector. You also need to be conscious of the different methods of measurement, in particular the New Rules of Measurement (NRM) 1–3 and the purposes for which each of these is used. As part of your revision for final assessment, you should think about the following:

bb how you would explain the NRM suite of documents bb examples of how NRM differs from the Standard Method of Measurement of Building Works, seventh edition (SMM7), in its measurement of a particular section of works bb the risks you see with a new measurement format bb what you see as the main benefit of NRM2 bb what the ultimate concern of NRM3 is.

Costing construction Looking more specifically at the costing of construction works, you need to demonstrate experience of the different methods available, whether building up rates from first principles or using dayworks or bill rates. You need to prove that you are a safe pair of hands, and this may be tested at final assessment in relation to the approach you take to costing, according to the specific level being assessed. Level 1 You should show knowledge of the various costing stages, what cost data sources are available and how to ensure that data is relevant. Level 2 If you state that you have experience of measuring or costing an element then you should be prepared to discuss it, including cost data sources, breakdown of measurement criteria and so on. When writing your summary of experience, you need to

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remember that this will form the basis of the questions asked at final assessment. The assessors are interested in finding out more about what you have done and why.

Assessors’ approach Assessors will use your summary of experience to identify your skills, and will then approach questioning in the following way. bb Talk me through why you deemed that the most suitable method of costing. bb What items made up the cost of the extra partitioning? bb How did you determine that the quote you received for the cost of additional flooring represented good value for money? bb Why did you decide that dayworks were the most suitable method of costing that variation? bb Why did you use a schedule of activities? Despite the clear advice in the candidate guide and also in the template for the summary of experience, candidates often fail to give examples that are project-specific. The following examples make this kind of omission. bb I provide lots of cost information on various projects at various stages of the contract. bb I have measured works at various stages of the project using different methods. Having provided such answers in their summary, candidates would then at assessment need to start thinking of the best project to support them. A lack of specific examples can force assessors to ask hypothetical questions, potentially making the process more difficult for the candidate. Such questions can take the following form. bb Tell me about cost information you have provided to support variation costs on

Measurement for the purpose of costing construction works is critical to the quantity surveyor’s role one of your projects. (You will need to think on your feet about the best project to cite to outline your experience.) bb Tell me about a measurement you have carried out at feasibility stage. (You may not have measured at this stage, however.) Keep it specific Project-specific examples in your summary of experience that detail your role and involvement allow assessors to talk through what you have done, as well as how and why. For instance, you could write: “On the Whitemarsh project, I produced a bill of quantities for the drainage works in accordance with NRM2. This involved taking off quantities from the drawings for all aspects of drainage and inserting these into our billing software package to generate the bill for tendering purposes.” Based on such a remark, assessors may choose to explore the considerable differences between SMM7 and NRM2, such as that the measurement of excavation, beds and surrounds is included in the drain-run length. Questions about the billing software used could also be asked. It is much easier to respond to a question if you can picture yourself carrying out a particular task on a specific

project and then talking through the stages. Answers that are project-specific are key to a successful interview. Level 3 At this level, you need to think about advice you have given and more importantly the reasoning behind it, to demonstrate and support various courses of action, whether that advice concerns the measurement, costing options or value of construction works. It helps if you think about examples with the following questions in mind. bb Why was it the best course of action? bb What other options did you consider? bb In hindsight, could anything have been done differently? For demonstration purposes, if you are asked to discuss why the Civil Engineering Standard Method of Measurement, third edition, was the most appropriate, then “Because it is what we always use in the office” is not an acceptable answer. If looking at the settlement of final accounts, you should be willing to discuss any form of negotiated settlement, demonstrating how it was achieved, the process involved, and how it represents a fair settlement or value for money for their client; splitting the difference does not instill confidence in your abilities. Assessors will prepare questions based on your document, focusing on your summary of experience. These questions are often a starting point, so be aware that your response may lead the assessors to ask further questions based on your answer, along the lines of the following examples. bb Why did you use a schedule of rates on the multistorey office block?

bb Why was this the most suitable option? What alternatives were considered? Assessors are trained to ask open questions, so it is unlikely you will be able to reply with a single-word answer. Questions starting with the following, for instance, require a more developed response. bb Tell me about … bb Why did you …? bb What options were considered for …?

Measured responses Assessors are experienced professionals who work in your field and are interested in your opinions and views. They will often ask questions in which your opinion is sought, both to assess that you are competent and because they are genuinely interested. Remember that there are no trick questions. If we ask what you think about the uptake on NRM or why the production of fully measured bills is declining, then we are seeking your opinion based on your experience. We may not necessarily agree, but as long as you can back up your opinion then we will note your views with interest. b

Susan Hanley FRICS is Director of APC Academy, APC Assessor and RICS Regional Training Advisor (Scotland) susan.hanley@ apc-academy.co.uk

Related competencies include Contract practice, Data management, Design economics and cost planning, Quantification and costing of construction works

F E B R U A R Y/ M A R C H 2 0 1 7   2 1


RICS Con st r uc t i o n JOU RN A L

L e g a l a n d E m p loy ment

In the firing line Helen Crossland offers advice on dealing with difficulties when dismissing employees

T

he law is replete with weird and wonderful scenarios in which a person’s employment is plainly untenable but cannot be categorised as misconduct, poor performance or redundancy. In such situations it is tempting for the employer to defer taking action – a temptation heightened by the perception held by many that the law has become increasingly favourable to employees. A dismissal is potentially fair if it is for one of the following reasons: bb misconduct bb poor performance or capability bb redundancy bb illegality or breach of a statutory restriction i.e. if an employee does not have the right to work in the UK bb some other substantial reason (SOSR).

Where can SOSR apply? Other substantial reasons can include the following. bb Breakdown in trust and confidence: the working relationship has reached a point of no return. For instance, an employee may declare their distrust of management, harbour conspiracy theories, refuse to attend meetings, make unreasonable demands – such as wanting external witnesses to be present at informal meetings or to have no contact with colleagues – absorb a disproportionate amount of HR or management time, or repeat complaints that have already been addressed. bb Difficult personality: an employee’s style or manner conflicts with the organisation and substantially disrupts business; there is considerable HR or management involvement, or other employees are making complaints or threatening to leave. bb Personality clashes: an individual affects other workers or causes major disruption to the business such as increased staff turnover or absences. bb Pressure from third parties to let the employee go: the employer would need to weigh up the importance of that third party’s continued interest as well as 2 2   F E B R U A R Y/ M A R C H 2 0 1 7

the seriousness of any threat they make to withdraw business or funding if their demand is not met. bb Withdrawal of certain permissions: this applies if the employee’s role or the natural continuation of business is affected by the removal of clearances or accreditations that are integral to their role or a condition of their contract. bb Reputational risk: an internal incident or something outside the workplace may induce an employer to question their retention of an employee, such as criminal proceedings, radical political Image © iStock

or religious beliefs, press interest, bad associations or employee behaviour that is incompatible with the company’s principles or brand. bb Stress/ill health: if an employee suffers from work-related stress, the employer may need to consider whether termination is the best option if the alleged source of stress cannot be removed or there is no evidence to substantiate its effect. bb Conflicts of interest: an employee has access to confidential information or close personal or professional


RI CS CONSTRUC TION Journal

measures such as redeployment, a change of management or work patterns, workplace mediation or management coaching are worthwhile considerations before settling on termination. The formal SOSR process gives employees the opportunity to promote any viable resolutions the employer may not have contemplated, or veto proposed conciliatory measures, such as those given above, on the basis they do not accept that the problem lies with them.

Gathering evidence Employers should be satisfied they have all the necessary evidence to support their decision to dismiss an employee. Where the issue involves third-party pressure, a conflict of interest, the withdrawal of relevant permissions or a breakdown in relations, a balance will need to be achieved between maintaining fairness towards the individual concerned and gathering evidence from others in a sensitive manner.

Implementation and the law SOSR is a seldom used but valuable way for employers to dismiss an employee in more unusual situations. However, employees may be more suspicious and inclined to challenge a dismissal in such instances. In the event of a claim, a judge may need further convincing of the seriousness of the situation and that termination was the only option. Employers should not shy away from addressing any of the scenarios detailed above and be confident that they have the backing of the law if they articulate and implement them properly. The potential for improving the working environment for the rest of your employees should not be overlooked but dealt with sensitively. b

connections that could be detrimental to the business, so the employer must determine whether continuing to employ them would constitute a commercial risk.

Procedure Where the employee has two or more years’ service, there is a considerable risk that they will bring a claim for unfair dismissal. Prospects of successfully defending claims will be much improved if a fair procedure is followed, in accordance with the Code of Practice from the Advisory, Conciliation and

Arbitration Service (ACAS) before any decision is taken to dismiss. Unlike disciplinary and capability dismissals, there is no statutory procedure that governs SOSR terminations. Applying a procedure akin to a disciplinary process is best practice, although it is vital not to label it as such to avoid confusion, and instead refer to it simply as a “formal procedure”.

Alternatives It is essential to consider any viable alternatives to dismissal. Practical

Helen Crossland is a partner in the Employment team at Seddons. helen.crossland@seddons.co.uk

Related competencies include Managing people

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LEGA L

RI CS const ructio n JOUR NAL

Innovation incentives Shy Jackson underlines the importance of commercial management to enabling innovation

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ast year, the government held a consultation seeking ideas for a proposed national innovation plan. Innovation is a key issue for ministers – especially in the construction industry, where new ideas are essential to staying competitive and providing better value. Projects such as Crossrail and the upgrade of Bank station on the London Underground network have demonstrated the benefits of innovation for construction. However, it also needs to be managed commercially so that there is a clear understanding of how these benefits are shared, as well as of who ends up owning any innovative ideas or bears the risk if the innovation does not turn out as planned. The commercial treatment of innovation was one of the areas explored in a recent research project supported by Innovate UK and carried out by Costain, the University of Cambridge and Pinsent Masons LLP. The report was published in September 2016 and is available online at http://bit.ly/2gr0Xmy.

The current approach Innovation is not currently addressed in standard form contracts. A simple lump-sum contract does not align interests in such a way that both parties benefit if an innovative proposal is adopted, although the parties can agree to do so under any terms they negotiate. There is also a perception that legal issues such as procurement legislation and protection of intellectual property rights act as a barrier to innovation. The promise to share potential savings is in contrast an incentive, and this is commonly ensured through value engineering clauses and target cost contracts such as NEC3 Option C. Mechanisms of this kind, however, are not always suitable for innovation that offers benefits through the whole life of the project, especially when it means a cost increase in the short term. In addition, proposals are treated under the appropriate contractual change mechanism, which fails to take account of the fact that innovation will often involve additional costs and risks that need to be shared as well as gains.

capable of fostering close cooperation between the parties, based on dialogue and risk-sharing.

Commercial management of innovation The report identifies general measures for encouraging innovation, such as the use of innovation champions, but it also highlighted the need for certainty as to how innovation may be treated under construction contracts. In that regard, it was felt that having a specific innovation clause would allow parties to agree a framework under which it was clear how the benefits of innovation would be shared, but also how any costs and risks would be treated. The clause could also set out the position on related issues such as ownership of any intellectual property rights generated by the innovation. Just having such a clause will not guarantee innovative proposals; but it was felt that it will help to reinforce the message that an employer considers innovation as a positive measure, and it will also offer certainty on the way proposals for innovation will be treated. The report includes two such sample clauses, one drafted as a short flexible option and the other a more detailed provision. Such clauses should not be regarded unusual, and to an extent they are similar to supplemental provision 7 in the Joint Contracts Tribunal’s Design & Build 2016 form, which deals with cost savings and value improvements as well as highlighting the importance of innovation. The report identified other alternatives, such as incentives to reward innovation as well as the use of a protocol where specific clauses were felt inappropriate. The overall conclusion was that a clear contractual framework, based on collaboration, would help to promote innovation by offering certainty as to the commercial outcome. The report also explains how procurement legislation or intellectual property rights can be managed so they are not a barrier to innovation.

Conclusion Innovation allows businesses to develop and remain competitive. This is true for all industries, but in construction there is an increasing drive to offer better value through innovation. Innovation and what it means will vary depending on the nature of each project and there are no standard solutions; the research undertaken and the recommendations in the report made should, however, provide a useful starting point for further development of routes to encouraging innovation. b

Evidence Most of the empirical research for the project drew on analysis of a survey of around 120 industry practitioners, along with interviews and a number of focus groups. The detailed findings are set out in the report, but one in particular was that industry practitioners still value formal contracts and prefer legally binding agreements that can be strictly enforced rather than loose, non-binding arrangements. The research also identified a strong association between innovation and flexibility and dialogue as well as sharing information, risks and costs. This suggests that innovative projects more than others require a contractual framework

Shy Jackson is a partner at Pinsent Masons shy.jackson@pinsentmasons.com

Related competencies include

Contract practice

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RICS c on st r uc t i o n JOU RN A L

A dv e rti s i n g

Overview of infrastructure Dispute resolution

1

10

Taxation and capital allowances

Technical requirements

2

9 Environment and sustainability

isurv

8

Contracts management and administration

3

infrastructure channel

7 6 Procurement

4

Cost planning and management

Planning and consents

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5 Programme and project management

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Construction Journal February–March 2017  

We kick off 2017 by exploring the changing identity of commercial management. Is the commercial manager of the 21st century different to the...

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