Ang Yu Qian (SISV)
Think Outside the Box: Meet New
Challenges for Cost Management
INTRODUCTION
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.
EVOLUTION
OF COST MANAGEMENT – THE PARADIGM SHIFTS
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.
NEW
CHALLENGES
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.
S/N
|
Standard Form of
Contract
|
Source
|
1
|
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)
|
2
|
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)
|
3
|
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)
|
4
|
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)
|
5
|
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.
MEETING
CHALLENGES
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.
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.
CONCLUSION
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.
Bibliography
Ashworth,
A. (2004). Cost Studies of Building, 4th Edition. Pearson Education
Limited.
Balogun, O. (2014).
Challenges and Imperatives of Skill Specialization by the Registered Quantity
Surveyor. Annual Conference of Registered Quantity Surveyors, 1-12.
Cartlidge, D.
(2006). New aspects of quantity surveying practice (2nd Edition).
London: Butterworth-Heinemann.
Cortright, M.
(2012, June 11). Construction Industry Dampens Europe's Hope for Renewed
Growth. Retrieved from The International:
http://www.theinternational.org/articles/204-construction-industry-dampens-europes
Olatunji, O., Sher,
W., & Gu, N. (2010). Building Information Modeling and Quantity Surveying
Practice. Emirates Journal for Engineering Research, 67-70.
RICS. (1971). The
Future Role of the Chartered Quantity Surveyor. London: Royal Institute
of Chartered Surveyors.
Thayaparan, M.,
Siriwardena, M., Amaratunga, D., Malalgoda, C., & Keraminiyage, K.
(2011). Lifelong Learning and the Changing Role of Quantity Surveying
Profession. 15th Pacific Association of Quantity Surveyors Congress, (pp.
351-360). Colombo, Sir Lanka.
The Nation. (2013,
August 2). Indonesia Leads as Asia becomes Fastest-Growing Construction
Market. Retrieved from The Nation:
http://www.nationmultimedia.com/business/Indonesia-leads-as-Asia-becomes-fastest-growing-co-30211668.html
Verster, J. (.
(2005). Managing Cost, Contracts, Communication and Claims: A Quantity
Surveyor Perspective on Future Opportunities.
Williamson, C.
(2014). Construction Sector Sees Near-Record upturn across all
sub-sectors. Markit.
