1.0 Executive Summary
The current global recession was influenced by a complicated combination factors, including historical, but one of the immediate triggers was events caused by, and which in turn would greatly influence, the construction industry. The collapse of the global housing bubble in 2007, the methods used in which consumers accumulated credit (through high interest accounts etc.) and debt (through sub-prime lending etc.), and the collapse of the banks that heavily promoted these methods, led to a condition of financial instability. An increasing proportion of consumers began to lose their homes as the gap between credit and debt increased, with a cascade effect rippling throughout the entire global economy (loss of jobs leading to lack of trade and lack of monetary circulation) (see Appendix 1).
The construction industry, which prospered during the period of the housing bubble, was now in a dire situation. Building was no longer a priority as businesses were too focused o n trying to stay solvent, let alone expand, and there was either a surplus of housing available on the market or people were unwilling to move because of falling property prices.
Of course, insolvency was now also a very real concern for all construction firms. If we examine some employment statistics, it has been reported that construction professionals are some of those that have been most affected in this recession. The Office for National Statistics recorded that between December 2007 and December 2008 there was a 490% increase in the number of unemployed quantity surveyors, the worst hit of the professions, with other construction and engineering professionals not far behind. And of course this information was based on data from two years ago – we know that the economy continued to destabilise after 2008 and unemployment still continues to rise today (see Appendix 3).
1.2 Report Objectives
The increase in unemployment figures for quantity surveyors at this time can suggest several possibilities – that there were either too many who were employed by the industry in the first place (which seems unlikely due to there being a reported shortage of Quantity Surveyors), or that many companies in the industry simply did not know how to use them efficiently. In either eventuality, what this suggests is that employers may not fully understand what it is that quantity surveyors do, or how they can actively contribute to the company.
This report aims to show how, out of all the professionals employed by a construction related firm, the quantity surveyor is actually the best suited and in a key position to be used for the survival and growth of the company, especially in times of economic hardship. The quantity surveyor already has the knowledge and skills in place to deal with and/or mitigate this eventuality, and is able to help the company on both latent and active terms.
2.0 Knowledge and Skills of the Quantity Surveyor
The role of the Quantity Surveyor has continued to develop through the years and, according to the RICS in 1992, a competent Quantity Surveyor must be able to demonstrate the knowledge and skills base as set out in Figure 1 below (see Ashworth and Hogg, 2007, pp. 15–16):
The skills and knowledge attributes listed in the above table have been refined further over the years, in order to take into account changing priorities and project roles, but for the purposes of this report this format illustrates the scope of abilities that a Quantity Surveyor is expected to possess, and how they are applied to all the areas of work. Furthermore, all of these attributes overlap, with each field of knowledge being utilised best when there is a synergy of skills. The next sections will examine some of the attributes in which the Quantity Surveyor can uniquely help the company.
2.2 Economic Expertise
It is usually the responsibility of the Quantity Surveyor to provide up- to- date cost advice throughout all stages of the construction. What makes the Quantity Surveyor role important here is that they already have a wealth of information to draw on in order to carry out all manner of cost initiated tasks. These could range from the Bill of Quantities, market data, House Price Indexes, and project information accumulated from previous jobs (seeAshworth, 2004, pp. 58– 66).
However, that would be the scenario under usual conditions, and as we have already discussed the current recession could not be classed as ‘usual’. One of the problems facing construction companies is that over the last few years the volume of construction projects has dropped enormously, and because of this a lot of existing cost data might be out of date. Amongst construction professionals the Quantity Surveyor will most likely be the person best equipped to collate and review current market trends, which at present are still in flux, in order to produce the best information to be used for estimation.
2.3 Quantity Surveyor Specific Skills
The ability to quantify, record and analyse items in bills of quantities (which are used as part of the core of contract documentation, cost plans and estimates, etc.) is considered to be one of the core skills developed by a quantity surveyor, and it is only really this profession that has the knowledge base to do so. This knowledge is primarily gained through study and/or use of the RICS Code of Measuring Practice and Standard Methods of Measurement of Building Works (or SMM7), coupled with a good understanding of construction technology. These methods of measurement were drafted in order to provide a common frame of reference when discussing quantities or pricing items (see Cartlidge, 2009, pp. 93 –95).
A copy of a take-off done for a previous assignment has been attached as Appendix 5.3. This was a relatively simple take-off, of the substructure element of a small building, and would usually take perhaps a working day at most to complete. Now imagine how long it would take a quantity surveyor to replicate this process for every other element as indicated on the cost analysis template. And then multiply that ‘x’ number of times depending on how complicated and detailed the design of the building is. In essence a Quantity Surveyor is able to translate the building process into take-offs and quantities, which illustrates a knowledge of how buildings are made and the financial reality of doing so.
2.4 Contracts and Administration
There are many standard forms of construction contract, which are being updated all the time, and each with their own subtle (or not so subtle) differences, sometimes made all the more different by the addition of extra employer/client requirements. The company could be exposing itself to possible financial loss, in effect haemorrhaging money because of ignorance of contract terms if it does not have a Quantity Surveyor in place who is experienced in dealing with contracts and how to follow them.
As can be seen from the few examples provided, an experienced Quantity Surveyor has knowledge and experience that spans the entire construction process, and is therefore able to advise on all types of commercial decisions the company will find itself having to make. In this respect the Quantity Surveyor is perhaps one of the most valuable and key members to have on a project team.
3.0 Whole Life Costing
The previous section dealt with areas where the core knowledge and skills of a Quantity Surveyor are beneficial to the construction process, but this is the application of a narrow view, and there is now an increasing awareness of how the overall lifespan of a building can have ramifications not only for the end user, or client, but also for the company, regarding efficiency and future development potential. Hence the advantages of looking at costs with regard to the ‘whole life’ of the building. A quantity surveyor is able to look at a number of factors throughout the entire life cycle of a building with a view to taking a long-term estimate of these costs, in order to formulate a Whole Life Cost Plan (see Ashworth, 2004, p. 380).
3.2 Building Life Cycles
The sample cost plan above is primarily a ‘costs-in-use’ model. In order to obtain the data required for developing such a model we need to examine the various stages that constitute the total life cycle of the building. These can be broken down into:
Data on the first three of these cycles are empirical in nature, and can be obtained via comparison with existing buildings. For example, we can obtain decoration data from similar projects and apply that information to a ‘costs-in-use’ schedule that would in turn support our Whole Life Cost Plan (see Ashworth, 2004, p. 380).
The Legacy cycle is far more difficult to interpret, as it refers the perceived historical importance of a building that may not have even been developed yet. An easier comparison to make would be with projects such as the Millennium Dome, Portcullis House or Wembley, all of which drastically overran in budget but were considered prestigious undertakings that were to have a rather permanent role. Mistakes were obviously made somewhere along the line between design and construction of these projects, but in undertaking a Whole Life Cost plan they provide valuable data if similar type prestige projects were ever considered again.
3.3 Deterioration vs. Obsolescence
These terms relate to the general aging process of a building. Deterioration is an objective mode of label and usually refers to gradual wear and tear. When we look at component parts of a building we can usually ascertain how long they will last and/or when they will need to be replaced. Obsolescence is a more subjective term, much like the Legacy cycle discussed above, and can refer to when a building may no longer be fashionable, and (perhaps unfortunately ) future fashions are not something that can be quantified or foreseen.
Deterioration is a somewhat static decline, given our knowledge about the physical components of a building. Obsolescence is far more random, with various possibilities either increasing or decreasing the functionality of the building. These possibilities could include social migration, where data on previous developments of the same type might indicate a pattern as to how the building functionally performed over a certain time period, and what influenced that performance. By monitoring these patterns a Quantity Surveyor is in a position to estimate when a building will require maintenance and refurbishment, or if it is no longer cost effective to maintain. Gaining a better perspective on these issues could save money in the short term (see Ashworth, 2004, pp. 360 –361).
Trying to forecast all of the factors that are used to calculate a Whole Life Cost Plan is a difficult task to do, but one which the Quantity Surveyor is equipped for. Doing so would enable construction companies to use their resources more efficiently, deciding if a building is suitable for maintenance or redevelopment or, in the worst case scenario, demolition.
4.0 Dispute Resolution
The fallout from the current recession includes a greater amount of conflict within the construction industry, especially as more people are being made redundant or entire businesses cease trading, and parties are worried about their cash flow. The PLC Construction firm reports that there is indeed a vastly increased level of litigation in the industry, with many cases heading for costly court battles, and that in fact it is this current period of economic instability which is going to really test the construction dispute resolution facilities as outlined by The Housing Grants and Regeneration Act 1996 (see http://construction.practicallaw.com/blog/construction/plc/?p=68). As has been alluded to previously, the Quantity Surveyor is in the best position to review any contractual problems, which is in their professional remit, but the last thing any company needs at times like these is the loss of money through litigation. Fortunately more cost effective alternatives are available.
Whereas litigation is referred to under standard forms of building contract, recommendations from both the Latham Report and The Housing Grants and Regeneration Act 1996 saw the introduction of several additional clauses in ‘Section 9 – Settlement of Disputes’ that deal with Alternative Dispute Resolution (see Cartlidge, 2009, pp. 378 –382).
These ‘alternatives’ include;
It is no surprise that many quantity surveyors develop a specialisation in either of these Alternative Dispute Resolution methods, with schools such as the College of Estate Management offering courses specifically tailored to the profession (see http://www.cem.ac.uk/studyingwithus/ourcourses/pgdiparbitration.asp).
With their greater understanding of how construction contracts work Quantity Surveyors are in a better position to submit and consider claims or disputes, making their knowledge and skill invaluable in this type of scenario. It is obviously better for construction companies to pursue these avenues when it comes to resolving disputes, instead of the traditional expensive and lengthy court process.
Of course, the global economy has not been the only factor in recent years that has been forcing the construction industry into rethinking its processes and practices. Global warming has been an issue that has dominated the international political scene for decades, and reluctance to deal with the matter in the past has led to it becoming a huge concern. The Stern Review of 2006 indicated that in the UK alone 50% of carbon emissions came from buildings and that this was contributing to climate change. Over the last decade a raft of European and UK legislation has come into place, such as The Housing Act 2004, Section 134, to address the issue directly and review what can be done (see Cartlidge 2009, pp. 25–28).
5.2 Why Sustainability is Important
Construction in general has always been regarded as an industry that produces an excessive degree of waste in almost all of its processes. By itself, the industry is responsible for producing over 90 million tonnes of construction and demolition waste, and pays up to £200 million on land fill tax per year (Cartlidge, 2009, pp. 25– 27).
What examining sustainability does is allow the Quantity Surveyor to compare the cost of construction against long- term projections, with a view to offering economic and social benefits to the client. Take for example a relatively insignificant component of the construction process, a simple light bulb. The decision between a standard brand and a more expensive but efficient brand can make all the difference to the overall costs involved in building. A standard light bulb is cheaper to buy, but throughout its expected lifespan is more expensive to operate than a fluorescent counterpart. The client therefore has the benefit of being provided with options. Other benefits arise from more social considerations. As more legislation comes into effect it will be likely that taxes will increase as a way of punishing waste, and therefore taking an active role in sustainable construction can reduce liability in that respect. There are also social benefits for the client, in that it has been proven that taking less pollution and wastage into account leads to a happier occupant, which can enhance productivity in business premises (see Halliday, 2008, pp. 76 –77).
Therefore it is vitally important that the quantity surveyor is present as soon as possible during the construction process. As early as the procurement stage, the Quantity Surveyor can suggest courses of action that could lead to decisions regarding the overall development of the project. Some questions that could be asked are:
Given a usual construction portfolio of projects, the company could benefit greatly from adopting a sustainable view of construction. In the current global climate, affordable sustainable solutions are highly desirable, and governmental frameworks have been put in place to not only facilitate this line of thinking but, through measures such as assessing green performance through BREEAM (Building Research Establishment Environmental Assessment Method), to reward it as well. The knowledge of a competent Quantity Surveyor can be of great value when it comes to adopting this approach. It is the complex analysis of this construction waste, and a review of more efficient methods of doing things, that can offset the perceived initial higher costs of construction in sustainable developments.
6.0 Report Conclusion
The evidence shows that quantity surveying is one of the most versatile yet undervalued professions within the construction industry, and when redundancies are announced surveyors are usually the first to go. Construction companies can err in thinking that the Quantity Surveyor simply ‘handles the money,’ almost as if the perception is that they are nothing more than brokers, whilst the more important construction professionals actually build things. However, the Quantity Surveyor is equipped to be highly active throughout all stages of the construction process, including the periods before and after when site staff are not even involved in the process any more, and rethinking development strategies that differ from the conventional norms of construction. To not have a quantity surveyor or, even worse, to make the quantity surveyor redundant at the expense of other building staff, at a time of economic hardship, is commercial folly.
Ashworth, A. (2004) Cost Studies of Buildings, 4th Ed., Pearson Education Ltd
Ashworth, A. and Hogg, K. (2007) Willis’s Practice and Procedure for the Quantity Surveyor, Blackwell Publishing
Cartlidge, D. (2009) Quantity Surveyor’s Pocket Book, Elsevier Ltd
Ferry, D.J. and Brandon, P.S. Cost Planning of Buildings, 7th Ed., Blackwell Science Ltd
Halliday, S. (2008) Sustainable Construction, Butterworth-Heinemann
Appendix 1, Financial Crisis of 2007-2010 article,
Appendix 2, Job Loss Statistics, http://extras.timesonline.co.uk/jobs.htm
Appendix 3, Internet article, ‘Struggling city builder owes £5m’,