Meet New Challenges for Cost Management - Ang Yu Qian (SISV)

Ang Yu Qian (SISV)

  Think Outside the Box: Meet New Challenges for Cost Management


While the core competencies of the quantity surveying field remain, its associated techniques and approaches to cost management require a paradigm shift in the present-day, fast-paced construction industry – however, with every new challenge presents new opportunities.

The dynamic construction industry has been ever-evolving in the rapidly changing economical, technological, socio-political environments characterizing the world as we see it. In the United Kingdom, the industry witnessed near-record upturn across all sub-sections (Williamson, 2014). In European countries, the Euro crisis is holding construction activity in check, with the contraction of the industry continuing to contribute to the rise in unemployment (Cortright, 2012) while Asia is poised to be the world's fastest growing construction region in the current and the next decade (The Nation, 2013).

In the face of the changing landscapes, organizations in the various disciplines of construction are facing increasing pressure to offer value-added services and innovate in order to survive the intense competition – quantity surveying being no exception. The profession has witnessed rapid (evolutionary and revolutionary) transformation over the years. A profession once considered to be facing extinction has been revitalized and faces increasing demand for its services in various countries (Cartlidge, 2006).

This paper examines, from a global perspective, the emerging challenges of modern cost management of the quantity surveying practice as well as the role of the quantity surveyor in the present-day multi-disciplinary construction industry. Out-of-the-box measures to tackle these challenges are also recommended.

Cost management is not an entirely new practice and ever since humans began constructing buildings, they have found it necessary to estimate the quantities of the materials required as well as the cost of the endeavor (Ofori & Toor, 2009). The practice underwent multiple transitional phases. Ashworth (2004) summarized the chronology of developments in building economics, in relation to cost management, over the past decades in Table 1.

Table 1: Chronology of Developments in Building Economics. (Source: Ashworth, 2004)

The evolutionary changes in cost management as part of the construction process cycle, as identified in Table 1, illustrate the evolving functional core competencies of the practice – from carrying out traditional estimating and bills of quantities in the pre-1960s, to conducting contractual claims/contract management in the 1980s and subsequently diversifying onto increasing varied functionalities and portfolios.

The present-day practice of cost management is further evolving due to factors such as globalization, client focus, development and application of information and communication technologies, research and its dissemination (Thayarapan et al,. 2011). In this paper, distinctive challenges of cost management are identified and classified into three (3) categories of technical, political and cultural, each encompassing different spectrums.

Technical Challenges

The traditional skills in "measurement" and "valuation" as the distinct technical competencies (RICS, 1971) necessary for cost management highlighted the most widely known 'technical' role of the quantity surveyor. Due to this nature, many believed that the functions performed by quantity surveyors can be easily replaced by any person or machine (Thayarapan, et al, 2004) capable of similar competencies. The advent of information technology and the potential it offers further pose new, emerging challenges for the practice.

Building Information Modeling (5D and Beyond)

Traditional estimating in cost management have been marked with peculiarities (Olatunji, et al., 2010). Building Information Modeling (BIM) based measurements and quantity take-off present an approach which result in a significant impact on the various processes of cost management. However, the adoption of BIM may redefine and pose major challenges to the services conventionally provided by quantity surveyors. While early adopters may have reaped the benefits of enhanced accuracy and efficiency, BIM-based cost management remains a nascent idea to most. Furthermore, BIM data generated from designed-oriented software like Autodesk Revit and Graphisoft ArchiCAD require filtering and processing to ensure compliance and conformation to rules prescribed in relevant Standard Methods of Measurements (SMM). The proliferation of SMMs throughout the world and the varying design templates from Architectural, Civil and Structural (C&S) as well as Mechanical, Electrical and Plumbing (MEP) design firms further exacerbate the challenges. Figure 1 and Figure 2 illustrate the differences between BIM data extracted from a design software (Autodesk Revit) utilized by model authors and BIM data processed and imported into a estimating software (Exactal CostX) programmed for the purpose of cost estimating and management. In the latter, the quantities are bi-directionally linked to families/elements with workbooks catering fields for input of item description and rates, for exporting to reports.

Figure 1: Wall quantities (BIM data) generated from Autodesk Revit (Source: Author)

Figure 2: Quantities (BIM data) processed in Exactal CostX (Source: Author)

Transcending Traditional Cost Management Boundaries

Within the traditional technical role of cost management, the primary activities were limited to a narrow scope. However, the nature of work performed for cost management evolved drastically due to the dynamism of the construction industry. The modern cost management approach is now expected to be applied throughout the entire lifespan of the construction project and beyond its contemporary role – with value-added services such as business strategizing, value-engineering/value-management, supply-chain management, financial risk management and appraisal and even environmental performance.  Furthermore, the lines of the traditional architecturally-led approach to projects have been blurred, leading to an increasing equilibrium balance-of-power between the different disciplines. These additional requirements transcend traditional boundaries of cost management and present challenges of a fundamental shift from a 'participatory' approach to a 'managerial' perspective for cost management practitioners – especially on cost-driven/design-to-cost building projects.

Political Challenges

With globalization and the proliferation of trans-national public-private partnership (PPP) projects, the competition for the recognition of the discipline most fitting and qualified of all to manage the cost management function is a tightly contested one – evident within and/or beyond geographical boundaries.

Balkanization of Cost Management Functions

Cost management is seen as the heart of any project delivery, with the latent intention to appropriate all of its functions of the construction/building, infrastructure, engineering projects delivery to the quantity surveying field. However, the balkanization of cost management functions along various types of projects including, but not limited to building, highway, mechanical/electrical installations, oil/gas installations and petro-chemicals etc, witnessed the quantity surveyor maintaining a tight grip only in the specialization of building projects, while engineers dominate other engineering/infrastructure fields (Balogun, 2014).

New Hybrid Procurement Strategies

In addition, trans-national projects require strategic planning for the appropriate cost management processes, procurement systems, contractual arrangements and dispute resolution mechanisms – which are constantly changing. The myriad of (international and local) contracts and agreements utilized across various countries and firms as well as the hybridization of these standards pose significant challenges to cost management. Examples of popular international standard forms of contract are presented in Table 2.

Standard Form of Contract
1. Conditions of Contract for Construction, The Red Book

2. Conditions of Contract for Plant and Design-Build, The Yellow Book

3. Conditions of Contract for EPC/Turnkey Projects, The Silver Book

4. Short Form of Contract, The Green Book
Fédération Internationale des Ingénieurs-Conseils (FIDIC)
1. ICE Conditions of Contract Measurement Version 7th Edition

2. ICE Conditions of Contract Design and Construct 2nd Edition

3. ICE Conditions of Contract Minor Works 3rd Edition

4. ICE Conditions of Contract Term Version

5. ICE Conditions of Contract Ground Investigation 2nd Edition
Institution of Civil Engineers (ICE)
1. Major Project Form

2. PCC 2005 Standard Form of Prime Cost Contract

3. WCD 2005 Standard Form of Building Contract With Contractor's Design

4. 2005 Standard Form of Building Contract

5. MC 2005 Standard Form of Management Contract
The Joint Contracts Tribunal (JCT)
1. PPC2000 - ACA Standard Form of Contract for Project Partnering

2. SPC2000 - ACA Standard Form of Specialist Contract for Project Partnering

3. ACA Form of Building Agreement 1982

4. ACA98 The Appointment of a Consultant Architect For Small Works, Works of Simple Content and Specialist Services
The Association of Consultant Architects (ACA)
1.  ICC Model Turnkey Supply of an Industrial Plant Contract

2. ICC Model Major Project Turnkey Contract
International Chamber of Commerce (ICC)
Table 2: Examples of International Standard Forms of Contract (Source: Author)

Cultural Challenges

Behind every building project exists a rich cultural tapestry that assembles every time a project kicks-off or a tender is awarded – comprising of project team members woven from different nationalities, language backgrounds and technical competencies.

Professional Multi-Disciplinary Communication

Thus, the importance of communication aimed at achieving results as one negotiates for client and contractor satisfaction in an industry characterized by claims, disputes and conflicts (Verster, 2005) is evident. This aspect poses an increasing challenge as more cross-borders, multi-disciplinary projects emerge.

Despite the threat of the erosion of conventional boundaries of cost management in the built environment, there are distinct opportunities for practitioners of cost management to capitalize in order to add-value to the project cycle and clients. The challenges identified call for evolutionary transformations in the way cost management for building projects is conducted. In the movement for professional sustainability, the author proposes five (5) measures for adoption by cost management practitioners.

Maintain Currency of Knowledge

It is imperative to maintain capability to deliver professional service to clients. This requires the ability to innovate and adapt to appropriate (and often new) technology, legislations, safety and/or environmental requirements. The industry movement to increased automation (including BIM) requires a paramount redefinition and upgrading of hardware and technical skill-sets required. Figure 3 showcases an out-of-the-box 5D cost model integrating 4D BIM with 5D cost parameters – an innovative modern cost management solution.

Figure 3: Screenshot of an Integrated 5D Cost Model (Source: Author)

Expand Expertise and Develop New Niches

Apart from traditional scopes, the modern cost management is expected to include increasingly evolving roles with emphasis on meeting clients' needs. Thus, the onus is on the practitioners to diversify and expand the spectrums of expertise and develop new niches in order to remain relevant and competitive. This may include fields of facilities management, construction law, value management, arbitration, advisory, life-cycle and replacement cost management – all of which intricately linked to cost management.

Acquire Necessary Skills for Multi-Disciplinary Collaboration

In addition to technical competencies, soft-skills, especially multi-disciplinary communication and collaboration, are essential to enable cost management practitioners to play a proactive and effective role in modern project processes.

Uphold Professional Integrity and Ethics

While cost management is a knowledge-intensive practice, upholding high ethical standards with devotion to professional integrity is fundamental to ensure that the profession is characterized as trustworthy and competent. Cost management should be conducted with an endeavor to maintain high levels of accountability to employers, associates, self, clients, subordinates, employees and even the public.

Strategic, Sustainable Positioning within the Industry

Finally, it is essential to recognize that this profession works as part of a knowledge society and should be strategically positioned within the construction industry and built environment with identifiable niches and expertise, to ensure constant relevancy and sustainability amidst the ever-evolving environments.

Kites rise highest against the wind – not with it
– Winston Churchill

This paper identified emerging challenges of cost management and presented ideas to rise above the tides. The author believes that the solutions presented, coupled with passion and dedication, will enable practitioners to overcome challenges and scale greater heights.


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*Extracted from YQSG PAQS Newsletter 2014: Think Outside the Box. Download here.