BY SENTHIL ARUMUGAM, CHARTERED QUANTITY SURVEYOR
The role of a quantity surveyor is evolving and being extended to keep pace with changing market forces. The traditional role of quantity surveying, seen as measurement and bill of quantities, has been waning due to the dynamic nature of the industry and growing demands of the client. The focus of the quantity surveyor is strongly on the commercial management side yet there has been a gradual change in the scope of services offered by the consultants.
The advancement of information technology (e.g. BIM), privatisation and global business challenges further foster and propel this change. A quantity surveyor’s diversified role includes procurement, benchmarking, value and risk management, auditing and whole life costing.
Increasingly, clients require a “one stop solution” – an integrated multi-disciplinary suite of management and consultancy services – which involves working alongside clients, developers, consultants, contractors and subcontractors.
The construction industry encompasses a variety of projects that include residential, commercial, retail, educational and infrastructure projects. Developers usually own the land, manage the process of development, build it according to the end user’s requirement and sell or lease the property thereafter. A business owner, on the other hand, will lease the base-build property from the developer and build the interior fit out according to their business requirements.
It is important to understand what is involved in the development process of a typical project, as it will affect the skills/services required from a quantity surveyor. These include:
> Market research
> Investment appraisal
> Choice of location
> Identification of site and detailed site survey
> Outline scheme and development appraisal
> Negotiation for site acquisition
> Site acquisition
> Planning consent
> Detailed plans and specification
> Tender documentation
> Tender process
> Occupation by owner or tenant
> Property management and maintenance
> Demolition and re-development
BRIEF AND DESIGN
A quantity surveyor may be required to act as a cost consultant, providing feasibility analysis, financial evaluation and market intelligence at both the strategic and initial stages of the project. Having a quantity surveyor involved in these stages can help to ensure that the principle of ‘driving design by cost’ – without compromising the functional requirement can be managed effectively for the client.
Cost planning provides some degree of comfort to clients in terms of cost certainty. I have worked with clients who would rather perform a cost planning and reconciliation exercise at the end of the design stage. This requires that the PQS be proactive, participate in every design meeting, and challenge the architect’s design, particularly if the design exceeds the cost limit. In some situations, it may be difficult to challenge the architect if the PQS fails to indicate an alternative design solution, however, this feedback is integral to the design process and can help avoid redesigning at a later stage.
Developers generally consider the whole life cost (in lieu of just capital cost) as they tend to benefit from long-term maintenance and increased rental/lease income.
In a recent project, the developer wanted to analyse the benefits of a four-basement carpark with a mechanical stacked system compared to those of a five-basement ‘conventional’ carpark. Another developer was interested in evaluating the alternative building services for chillers i.e. hybrid chiller vs. air-cooled/water-cooled chiller, for uninterrupted power systems and under floor heating. These projects demonstrate the potential benefit derived when a quantity surveyor has up to date knowledge of the latest construction technology and building service practices.
Procurement normally involves:
> the appointment of a consultant or a contractor for design;
> competitive tendering or negotiation;
> the establishment of pricing methodology;
> the use of traditional or alternative procurement; and
> what form of contract to adopt.
The quantity surveyor’s close co-ordination with the project manager leads to a benefit for the client and a successful procurement solution.
Most construction contracts used in New Zealand are based on a lump sum pricing method, whereas in many other countries re-measurement contracts are adopted. Both methods have advantages and disadvantages.
I believe that in some lump sum contracts, contractors may load a premium into the price for a portion of ‘risk’, whereas re-measurement contracts allow for fair and reasonable tender price returns. However, re-measurement contracts may result in increased resource requirements in preparing the bill of quantities and additional post contract management.
In a recent Christchurch project, we appraised the pros and cons of cost reimbursement contracts and recommended a Guaranteed Maximum Price (GMP) Contract model. This indicated the risks associated with the cost-plus-procurement route to the project stakeholders. As a result, the comprehensive procurement strategy report was adopted in part and became pivotal in ensuring a successful project outcome.
VALUE AND RISK MANAGEMENT
Quantity Surveyors can implement value and risk management in consultation with project managers. Given that contingency is calculated as a percentage of the overall project cost, an understanding of the risk management process can be critical to the outcome of a project. In most cases, the risk register is obtained by the quantity surveyor from the project manager, then costs are allocated for each risk based on priority. The sum of risk allowance is included as contingency in the cost plan and financial statement.
During the post-contract stage, the quantity surveyor’s involvement includes:
> preparing the payment valuation;
> assessment of variations;
> provision of cash flow and anticipated final project costs; and
> agreement of the final account.
Most developers and investors pay more attention to cash flow because they use this statement as a budget control mechanism, as well as to monitor progress and performance. In large, multinational companies, incentives are often provided to client representatives based on cash flow commitment versus the actual cash flow achieved.
Quantity surveyors must generate a database based on the completed project cost data and index it appropriately. If there are a series of phased developments in a framework project, clients are interested in where the cost has been booked and how much it has cost to build functional spaces such as offices, data centres, gyms, child care facilities etc. This enables clients to compare specific project costs with other projects in their portfolio. Benchmarking analysis helps clients to revisit their spending and improves spatial planning.
The quantity surveyor’s role is vital to the success of any development project. Because of the analytical approach taken by the quantity surveyor, the client can rely on assessments that may influence their decision at every stage of the project. In order to provide a ‘best cost solution’ within this everchanging environment, quantity surveyors must upgrade their skills, including those of current construction technology and market price levels, and be ready to diversify their services in order to achieve an excellent outcome for their clients.