Presentation to CIIA Conference October 11, 2000 by Mark Langdon

The Present Environment Productivity Commission Reduced Space Requirements Business Practices Energy Management Reduced New Construction Aust. Greenhouse Office Environmental Sustainability Surplus Building Stock Building Industry

The Present Environment Financial Influence Functional Requirements Organisational InfluencePhysical Characteristics Space Performance People Process Building Adapted from “Facilities Management and the Business of Space” - McGregor & Shiem-Shin Then

Life Cycle Costs over 50 years Occupancy costs Operating costs Finance costs Capital costs 67% 15% 7% 11% 0%50% 100% “Recurrent Costs - A Role for the Quantity Surveyor” - Hatzantonis

Current Situation “The new gurus talk about vision or strategic intent of companies, but usually architects and suppliers of physical space are not given much opportunity to link the process of designing office space with such strategies”

Current Situation Given the general acknowledged link between the workplace environment, employee satisfaction and profitability, senior managers do appear to be missing an opportunity to manage the working environment for competitive advantage 200 Financial Directors and Managing Directors - Gallup Poll, commissioned by Workplace Management

The Future Corporates are becoming more and more obsessive about performance measurement Building owners and occupiers are becoming aware of the actual physical work environment on worker performance and the resultant effect on business performance & profitability High performance building design can improve business efficiency by % G. De Valence - Senior Lecturer in Construction Economics - UTS

The Future Buildings must allow maximum workplace flexibility Be able to respond to changes in the shortest time possible in response to the “technological explosion” Add value to the business and increase shareholder wealth and make the business more competitive Various speakers at PCA Corporate Real Estate Conference Melbourne

The Value Curve Operating Costs Capital Costs Best Value for Money Current Industry Focus Cost Durability Life Costs

The Revised Value Curve Cost Durability Corporate Performance Life Costs Best Value for Money Optimum Corporate Performance True Best Value for Money Opportunity Gap

The Objective To create and maintain intelligent facility environments which allow the user organisations to achieve their business objectives, while maximising the effectiveness of the occupants and minimising life-cycle costs.

Good Performance Measurement Framework Effectiveness Efficiency

Lockheed Missile and Space Company 6000 sq. metres 2700 Staff Reduce Energy > 50%

Lockheed Missile and Space Company Energy costs halved Lighting costs reduced by 75% Energy efficient improvements added $2M to $50M construction cost. Energy savings were $0.5M pa. Payback period 4 years Absenteeism reduced by 15% & productivity increased

Lockheed Missile and Space Company The reduction in the absenteeism rate paid for the extra energy efficient construction in less than 1 year Lockheed management claim that the improved productivity gave them the competitive edge that helped them win a $1.5 billion contract The profit made from this contract more than paid for the entire construction cost of the building

Albury Hospital Capital, maintenance, energy & other operational costs comprised only 12% of the total life costs Staff salaries & other labour services accounted for over 70% of the total life costs The greatest scope for reducing costs lay in the actual functional operation of the facilities

Albury Hospital The design team included: Hospital administrators Health planners Architects Engineers Services consultants Contractors Cost experts

Albury Hospital Focus on staff hours per patient Focus on life costs rather than initial capital costs Changing engineering standards to emphasise performance during design life Shift from high rise to low rise construction

Albury Hospital Substantial reduction in hospital floor area Reduction in operating and capital costs Capital cost 40% below budget Dramatically reduced recurrent costs Significant productivity increases

ING Bank - Netherlands The brief: integrate art, natural materials, sunlight, energy conservation, low noise levels and water usage be functional, efficient and flexible be human in scale have low running costs

ING Bank - Netherlands The design team consisted of: Architect Construction engineer Landscape architect Energy expert Artists Bank’s Project Manager

ING Bank - Netherlands The results: energy consumption is less than one tenth of the bank’s previous headquarters savings in maintenance costs of US$2.4 M p.a. absenteeism reduced by 25% enhanced corporate image

ING Bank - Netherlands The results: based on reduced running costs alone the payback period for the extra money spent on design and construction was only 4 months The value of the building to the bank has been greatly increased: –employees voluntarily work longer hours –productivity has improved –business has increased

Present Research Most organisations still consider buildings as an operational overhead rather than having a strategic value There is a deficiency in the understanding of the relationship between buildings and the operational performance of the people who use them There is an increasing gap between building environments and the needs of the organisations which use them Prof. D. Mc.George & Dr. M. Loosemore - UNSW

The Problem “Higher priced designs that enhance productivity may make more economic sense. Yet without an economic method for systematically including productivity benefits in building Life Cycle Cost analysis, these designs cannot be justified.” “Productivity Impacts on Building Life-Cycle Cost Analysis” - Lippiat and Weber

The Research Objectives Building Environment Better Communications Lower Operating Costs Improved Productivity Enhanced Organisational Effectiveness Environmental Sustainability

The New Market Opportunity Building Environment Business Performance Increased Market Opportunities “If existing facility owners and users can be shown that retrofit designs based on accurate occupancy cost analysis can produce considerable benefits with short payback periods and increased profit levels, the construction industry may well see a boom in retrofit work” Peter Smith - Senior Lecturer Construction Economics UTS

Who Needs To Involved? Facility Owners Architects Engineers Government Bodies Services Authorities Environmental Experts Energy Experts Construction Cost Experts Facilities Managers End Users Organisational Behaviour Experts A multi - disciplinary approach is required

The Project Delivery Approach Determine Client “Value” Develop Commonality of Purpose and Joint Ownership of Project Use Target Costing, Risk Management & Value Management Integrate Design, Construction & FM Manage Costs Collaboratively Develop Continuous Improvement within the Supply Chain