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RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking RICS National Quantity Surveying and Construction Conference J MARTIN.

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Presentation on theme: "RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking RICS National Quantity Surveying and Construction Conference J MARTIN."— Presentation transcript:

1 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking RICS National Quantity Surveying and Construction Conference J MARTIN Executive Director, BCIS 22 May 2012

2 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking BCIS Executive Director Member of Treasury’s Infrastructure UK (IUK) Infrastructure Data Group Member of Cabinet Office/IUK Joint Data and Benchmarking Group

3 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking The right building and the right price Benchmarking definition Benchmarking Benchmarking in construction The government's construction strategy and the need for data Cost reduction validation Government Benchmarks Tracking improvement

4 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking What do we mean by benchmarking?

5 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark

6 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark a permanent physical mark of known elevation used to provide a point of beginning for determining elevations of other points in a survey. (Surveying Moffit & Bossler)

7 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Management Benchmarking the continuous process of measuring products, services and practices against the toughest competitors or those recognised as industry leader i.e learn from best in class.

8 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking?

9 RICS National Quantity Surveying and Construction Conference, 22 May 2012 RICS Guidance note ‘Benchmark is best in class…it does not mean the average’ (Cost analysis and benchmarking, RICS guidance note)

10 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking? We are looking at one dimension. Cheapest is not best in class. But you cannot judge the value without knowing the cost e.g.. –This solution will provide you with added X –But it will cost you £Y more than an average solution –Is the X worth the Y? –Let the Client decide But they cannot make this judgement without knowing both X and Y

11 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking? Below average cost may be all we can afford. So we need knowledge of costs in the market to set our target. This is an everyday activity in a capitalist society We do it with products we buy every day…

12 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Everyday benchmarking

13 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking? 1) a point of reference from which measurements can be made 2) something that serves as a standard by which others may be measured (Longmans Dictionary)

14 RICS National Quantity Surveying and Construction Conference, 22 May 2012 What do we use benchmarks for? Estimating cost of new projects: What do we expect our project to cost relative to the cost of previous projects? Checking the cost of new projects

15 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark estimates Order of cost estimate as defined in NRM1 is a benchmark estimate It is based on knowledge of what building costs rather that the cost of building a specific design This is the data that BCIS collects: –Building £/m2 gross internal floor area –Building costs/functional unit –Element £/m2 gross internal floor area –Element £/element unit quantity … and the knowledge that exists in an experienced surveyors head!

16 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking

17 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Primary Schools £/m2, 2Q2012, UK Mean Location

18 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Primary Schools £/m2, 2Q2012, UK Mean Location

19 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Government Construction Strategy Cost Reduction Validation Method 10 February 2012 Construction Cost Benchmarks, Cost Reduction Trajectories & Indicative Cost Reductions April 2011 to March April 2012

20 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Government Construction strategy Target of ‘a sustainable reduction in construction costs of 15%-20% by end of this parliament’ (May 2015) Must be sustainable ‘To be achieved without impacting either whole life value or the long term financial health of the construction industry’ £1,200m - £1,600m on a budget of £8 billion Not intended to reduce expenditure but get more buildings for the same money

21 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Government Construction Strategy

22 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Cost Reduction Validation Method Cost reduction validation - calculation method Publication of baseline benchmarks by departments e.g. –Cost of school by £/m2 –Cost of a road by £/kilometre Costs reduction reported by comparing current benchmarks with baseline benchmarks Generally benchmarks based on –contract award (commitment) data. –Or where this is not available, otturn (throughput) data

23 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Counterfactuals The cost reduction validation will take account of ‘counterfactuals’ i.e. the circumstances that would have prevailed had the: –Government Strategy not been introduced –External factors, such as building regulations, not been introduced Therefore benchmarks will be adjusted for inflation with due recognition that: –Market pressures lead to improved efficiency and therefore become sustainable –Global commodity prices suppress the restoration of construction inflation

24 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Sustainable cost reductions

25 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark data Cost Benchmark data Type 1 benchmark; Spatial measures - £/m2, £/m, £/km, £/m3 Type 2 benchmark: Functional measures – business outcomes £/place in schools, £ of flood damage avoided/£ invested Type 3 benchmark: department specific – ego MoJ ratio of production cost/total construction cost Type 4 benchmark: Type 1 at the elemental level

26 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Type 1 and Type 2 benchmarks

27 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark data Benchmarks show single point average (mean) and 20th and 80th percentiles Defined ranges Range T (top), 80th minus mean/mean as a percentage Range B (bottom), 20th minus mean/mean as a percentage Range T+B, 80th minus 20th/ mean as a percentage

28 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking Objectives Objectives: to incentivise higher levels of integrated team working, continuous improvement and effective innovation challenge to ‘beat the benchmark’ benchmarks will fall overtime and cost will increasingly cluster at the lower end of the range of costs currently paid for similar products. Point of reference for wider public sector – Health trusts and local authorities

29 RICS National Quantity Surveying and Construction Conference, 22 May 2012 UNCLASSIFIED Benchmark data

30 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Cost Benchmark Charts UNCLASSIFIED

31 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Chart 5: Construction Cost Benchmarks for DEFRA / EA: Walls UNCLASSIFIED Cost Benchmark charts

32 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark Data Tables Department of Health (P21 Framework) Project typeUnits2009/10 (Baseline) Single point average (mean) 20 th percentile 8 th percentile Acute - New Build£/m2 GIFA£3,730£2,400£4,400 Acute - Refurbishment£/m2 GIFA£2,090£1,140£2,520 Mental Health - New Build£/m2 GIFA£1,140£2,620£3,160 Mental Health - Refurb.£/m2 GIFA£2,520£1,650£2,640 Type 1 benchmark. Includes: Contractor's design fees, other development/project costs, Risk, Fittings furnishing and equipment

33 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarks Type 1 benchmark metrics are all cost per unit. All the building benchmarks are cost per m2 gross internal floor area but they are not directly comparable, e.g. –schools include external works and professional fees, –hospitals include contractor's design fees; other development/project costs; risk; fittings furnishing and equipment. The scope for buildings is defines by reference to the NRM1/SFCA list of costs for cost planning Scope of other construction entities are also defined

34 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarks Department of Health (Procure 21) Department for Environment, Food and Rural Affairs/Environmental Agency Department for Transport/Highways Agency Department for Communities and Local Government/Homes and Communities Agency Ministry of Defence Ministry of Justice Department for Education/Education Funding Agency

35 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Future Benchmarks Benchmarks to be published from the Regulated Sector London Underground Network rail

36 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmark details Details of what is included: What the data represents Statistical population represented What is included/excluded. The building based benchmarks are given mapped against NRM1 Cost breakdown structure. Where the data comes from How it has been calculated Departments to state proportion of expenditure covered by benchmarks

37 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Cost reduction trajectories Table 16: Department Cost Reduction Trajectories Department2009/10 (Baseline) 2010/112011/122012/132013/142014/15 MoD0.00%2.50%5.00%7.50%10.00%12.50% MoJ0.00%3.00%7.00%12.00%15.00%20.00% DfE/EFA0.00%3.30%7.00%17.80%18.90%20.00%

38 RICS National Quantity Surveying and Construction Conference, 22 May 2012 UNCLASSIFIED Cost reduction trajectories

39 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Achieving reductions How will reductions be achieved –Better control of scope –Challenging/reducing scale and quality of projects –Amended output specifications and floor areas –Increased standardisation/bulk purchasing –Reduce non-production cost –BIM –Avoiding redesign

40 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Achieving reductions How will reductions be achieved –Project team collaboration/integration –Early stage involvement supply chain –Lean systems of project management –Programme management –Better collaboration with supply chain –Setting challenging benchmarks –Publication of Benchmark data –Using available elemental benchmarks to challenge allocation of resources

41 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Achieving reductions …to be continued

42 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Government Benchmarks Full details at:

43 RICS National Quantity Surveying and Construction Conference, 22 May 2012 Benchmarking RICS National Quantity Surveying and Construction Conference J MARTIN Executive Director, BCIS 22 May 2012


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