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A question of cost

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The bipolar effects of the drive for cost efficiencies throughout construction were examined at a one-day AJ conference, sponsored by Heywood Williams.

The phrase 'cost-cutting' has most architects reaching for their metaphorical revolvers; for them the phrase 'value engineering' is pretty much synonymous. And you can (sort of ) see why. Can't the client understand that shaving 10 per cent off the cost will mean losing all the best bits? Don't they realise that it will mean axing the landscaping? Why are they such philistines? I know they have a contingency budget, so why not spend it up-front? Usually when you look into this line of complaint it is profoundly unimpressive, resting on the unspoken assumption that it is somehow the client's fault that the design has gone beyond the budget. If you're not careful, the adjustments necessary mean giving the client a poor version of what the architect first thought of, rather than a first-rate version of what they could afford. Roger Zogolovitch describes this as providing third-rate lobster thermidor instead of a fabulous kipper.

On the other hand, as John Worthington pointed out at an AJ conference last week, the problem about budgets is that they all too often relate to a fuzzy idea of what is required, and inadequate analysis of the real nature of the problem. Of course, for most people concerned with construction, the idea of not building something is anathema.

But for thinking architects, assuming they are the client's first port of call, the nature of the client's real need is all-important. The biggest savings may be made through that analysis, and the creation of a brief that targets what the client really needs/wants.

An example from the DEGW catalogue: a learning centre for Shell, which was achieved not by building, but by adapting a Holiday Inn for corporate use at just the times when the hotel chain had little custom, leaving it for them at weekends and high season.

For Worthington, true cost savings were to be found by the best thinking at the outset of the project: get this right, and you are quids in. For new commercial space, the thinking has to be about the nature of the offer; no longer 'offices', but accommodation that combines space, tenure, amenity and services, both inside and outside the building. On construction itself, design time would save on duration and he sounded a clarion call for 'iterative briefing' so lessons learned would always feed back into the project supply chain; the relationship between the performance brief, achieved improvements, reduced costs and the prescriptive brief was all-important. This was heady stuff, combined with a lacerating analysis of the disbenefits of PFI compared with publicprivate partnerships.

But what of the client? Developer Julian Barwick got straight to the point, from the perspective of the supplier of commercial buildings. Take the following factors: rent inflation 4 per cent; building cost inflation 4.5 per cent; materials 35 per cent; labour 65 per cent - a formula for any developer to go bust on a project of any duration. 'Crudely put, we as an industry have to get rid of the human beings, ' said Barwick. In his case this meant more automation and standardisation where achievable, eg in WCs ('we have a simple rule, no mastic'). A nicely illustrated example of automation in action was the 'Strongform' pre-stressed post-tensioned frame, an Australian system that Barwick's company, Development Securities, has used to good effect.

Quantity surveyor Paul Morrell, the Davis Langdon & Everest guru (not a misnomer) was less worried about labour costs (this just being part of the sharp end of commercial viability, ie a building must cost less than you sell it for; cutting labour in one place means increasing it elsewhere) than the real significance of build cost over the lifetime of the project. DL&E's research suggests that this is so low that if a building can increase the productivity of its occupants by 10 per cent, you essentially get it free. This productivity factor should be the real driver of appropriate costs.

In the meantime, the slurs on construction in relation to increased costs, for example the new Scottish Parliament, should be the subject of proper analysis, in this case an increase in size from 11,000 to 33,000m 2.Any building always needed an irreducible number of processes in a set sequence. Get this right and you are home and dry, starting with cost modelling (if it isn't included in the budget it is going to be a problem) and cost planning (for goodness sake read it). Budgets were key (see Luke ch14 v28), and as for value engineering, forget about the sneers - it is about taking out unnecessary costs. He suggested an interesting test at the early stages of a project:

what is the cheapest way you could achieve the basic requirement, and how do you add value by doing something different thereafter?

Morrell delivered a series of useful bullet points, which included:

luse design quality indicators to refine the brief;

luse benchmarking at the start of a project, eg how much this sort of building typically costs (range of prices);

ldon't forget that cost, value and risk cannot be separated in any beneficial way;

lthink hard about contract forms - this is about risk allocation, not just money and time;

lintegrate the process;

lunderstand the difference between competition and partnering (do we as consumers partner with the car industry? );

lthink about negotiating a fixed price - on the basis of giving the supply chain the time to plan how to make it work;

lget trades involvement early - and be prepared to pay for it; and lthink about reducing construction time by devoting more time to pre-planning and design.

Other observations included the warning that 'failure to look ahead may destroy value', ie don't think that cheap building costs are the big answer; that companies who build for themselves 'do something different to what developers provide - why?'; and that 'hygiene factors', such as thermal efficiency, light and fresh air, had a big effect on occupier satisfaction. 'Nothing is more important in a service economy than the efficiency of the working environment, 'Morrell added.

The practical consequences of supply chain management in reducing costs were outlined by Don Ward, chief executive of the organisation Be, a confederation of clients, contractors, consultants, specialists and manufacturers. He frightened the audience with statistics on the consequences of poor supply teamwork - 30 per cent increased costs. More figures followed on days on site where no value was added (88 per cent in relation to an exteriors contract researched by Marshalls), which contractors 'walk the talk' on supply chain management (Taylor Woodrow is top firm), and the benefits of long-term ordering (up to 80 per cent cost reductions). Be has just launched a new building contract, which must be worth a look. Ward made the case for inverted appointment chains, where for example you might begin with the facilities director and a known capital price, and work back down the team, appointing the designer last. A few ashen faces in the audience.

Bob White, boss of project management group Mace, and deputy chairman of the new pan-industry organisation Constructing Excellence, brought additional fire to aspects of this argument. Demonstration projects from the Movement for Innovation programme had shown substantial cost savings, and had proved the importance of, for example, installation sequencing as against transport costs. The key to their success had been new supply relationships at the front end of contracts rather than design, which had then become a continuous element for the rest of the design and construction process. He believed this would evolve into an integrated supply chain where roles and responsibilities would be merged from the start, operating at different levels of balance as appropriate through the life of the contract and beyond.

White was forthright about our current failings. Relevant international comparisons suggested UK materials costs were twothirds of the way down the league table, and labour costs were halfway. So why do complete buildings cost more here than anywhere else? 'We are doing things the wrong way, ' said White - there just had to be more emphasis on customer/supplier relationships, off-site fabrication, greater exploitation of 3D modelling and use of hand-held technology, and more 'respect for people' in terms of the conditions for building workers (management and labour alike).

Case studies from Defence Estates (Tony Whitehead) and NHS Estates (Cliff Jones) showed how client organisations are pushing for greater value, partly through cheaper delivery, but partly through a greater emphasis on research and development into design, materials and installation processes.

They all have codes for this approach: Deep, Slam, Procure 21, and so on.More case studies from Kajima stressed the importance of process thinking, partnering, off-site manufacture and so on. The results in terms of speed looked impressive.

All these studies were essentially about massive clients, repeat orders and consistency of production, but what of actual teams of people making buildings? Another facet of the industry, another acronym - in this case Clip (Construction Lean Improvement programme, actually), nicely presented by Martin Watson of the Clip programme (it is part of Constructing Excellence), and Bill Munn of contractor Thomas Vale. Key points were to achieve improvements onsite without having to change the entire industry or cut costs to the bone in a mindless fashion; to map processes and individual 'steps' that could be improved. Clip experts work with teams of up to 15 people on site, eliminating wasteful parts of the process.

Munn explained how visual boards were used to record all operations so everyone could see where something was going wrong and do something about it. Key to the significant successes the company had experienced were concentration on adequate information flow, eliminating downtime on a job, and sorting out tooling/stores management.

This all sounded sensible, useful and achievable - analysing the problem and dealing with it as simply as possible. This approach was evident in the presentation from Andrew Rabeneck, assistant estates director at Imperial College. How did he manage his multimillion budget to best effect? The rector at Imperial, on being told that facilities management 'isn't rocket science', responded: 'Pity. We've got plenty of people who know about that.'What is needed is people who can think their way round an estate full of '60s buildings (70 per cent of the stock), the conflicting needs of different academic departments, and the basics of estate management.

Among other things, this involved simple disciplines (understanding exactly what buildings' costs are and why, how maintenance is delivered, who talks to the users and who sets the priorities); getting maintenance on to the management agenda; cost managing on the basis of financial modelling, cash flow analysis and user feedback; and understanding how components affect efficiency.

This last point should be taken up by all managers with multi-building responsibilities; in Imperial's case it meant using, for example, standard fume extract kit - same manufacturer, same model, same location within a facility, and so on. Highly impressive, and rounded off with a quote from 2001 that might have applied to the can-do attitudes on display throughout the day: 'The system is operational, Dave, but it will fail' 'I understand, Hal.We'll take care of it'

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