Headlines demand that we are facing over-supply, and that developers are pulling back on apartments, yet vacancy rates remain manageable and rents are holding up in most markets. What is happening is an increase in cost per apartment at the same time as demand, and sales prices reducing.

This is leading to some projects not stacking up and a tapering of growth and reduction in the number of projects forecast to come on the market. Many blame this on increases in construction cost and point towards EBA rates or specific examples of rises in core materials such as concrete. The reality is that material and labour prices have had marginal impact on the overall increases in cost per apartment.

Three impacts on construction costs relevant in the current market are: changes in product mix, changes in quality, and lastly labour and materials. The table below shows changes in costs per apartment over a number of periods.

The biggest impact on costs has been the shift from one bed/one bath/no car park stock, to two bed/two bath/one car park. Also significant in the cost mix has been the change in quality and increase in amenity provided by Developers as the race to differentiate their product and cater to a more discerning market heats up.

If your apartment doesn’t have high quality appliances, an elegant facade, and a ‘block’ style roof-top common area, then it isn’t going to sell.

Labour accounts for 35% of overall construction costs on a large project. A 5% increase across all trades on an EBA site would account for an approximate 1.75% increase in the overall construction cost. In many cases material costs are flat, if not negative. Increases in quality have been offset by lower product prices or offshoring.

The scenario in many markets is that mid-large size projects, of the style and quality demanded, cannot be delivered at a price point sufficient for the projects to go ahead. This is causing some projects to be shelved or re-worked, or on sold.

For the first time in a long while, Contractors and Sub-contractors in this space are starting to feel that they have more work currently on their books than they do in the pipeline and are more keenly competing for new work. This has downward pressure on profit margins and ensures tenders are competitive.

It is important to understand that while the apartment market gets a lot of attention, it is only a sub section of the whole. The overall residential market – picking up low rise and sub-divisions – is buoyant. A number of Developers are shifting their focus to these markets and land banking apartment projects for the next cycle.

One of the most active sectors across Brisbane, Sydney, and Melbourne, are low-rise and townhouse projects outside of the CBD. Owner Builders in particular are revelling in this space and are capitalising on the reduced layer of margin.

Forecast Escalation for the 6 month period 1 July 2016-31st December 2016 is as follows:

The construction industry continues to wait for the release of AS 11000 General Conditions of Contract which will replace the two current suites of Contracts AS 2124:1992 and AS 4000:1997. Public comment on the draft AS 11000 released in 2015 was overwhelming and as a result a new draft is expected to be open to public comment in the coming months in order to reconcile and account for the many proposed changes and comment received during the first round.

The current draft AS 11000 has been designed to improve contract administration and allow for an early warning procedure to better identify and balance the risk allocation. The intention is also to reduce the cost of management and administration of contracts.

The general premise of the changes also focuses on clarifying and simplifying the language and requirements i.e. business days calculations in relation to security of payment claims, and some general administrative changes allowing for changes in technology to benefit the process, i.e. service of notice by email.

As a result of the desire to simplify requirements and shift risk between the parties, the new Standard may however have inadvertently created another layer of uncertainty and tension within contract negotiations. The proposed Standards are adopting the Abrahamson Principles of risk allocation, which is effectively, ôA Principal should not ask a Contractor to price an unquantifiable risk which is within the control of the Principalö. It appears however that unquantifiable risks not within either the Principal or Contractors control can be forced on to the Contractor.

Express Obligation to Act in Good Faith:

The new good faith clause is an ôexpress obligationö and also an overriding obligation that has caused some concern in the industry in relation to its impact on the entire contract. This ôexpress obligationö, the lawyers say, is concerning because it hasn’t been clearly defined and to ôact in good faithö in the law of contract is still not yet conclusively defined by the courts. It is open to much broader interpretation. The concerns from the lawyers is that because to ôact in good faithö is not defined by the new Standard it could impact on the way commercial contracts are negotiated as the clause will shift the focus from commercial self-interest to imposing a standard of duty to consider the business interests of all parties to the contract.

Early Warning Provisions and Dispute Resolution:

In addition to the requirement to act in good faith, the new Standards make provisions for an early warning procedure, whereby parties or the Superintendent are obliged to advise of any change of circumstances that may impact on the Contract. This is designed to prompt early resolution of any issues and mitigate the risk of disputes under the Contract. In addition the new Standards make provision for greater flexibility in relation to dispute resolution options available and a proposed accompanying Standard, AS 11001, will deal with these alternative forms depending on the nature of the project or the more ôformalised forms of contract management proceduresö.

Security of Payments Compliance:

The new Standards will also seek to meet the compliance needs of the various state and territory Security of Payments legislation and more specifically in relation to a consistent application of business days as calculated in the various SOP legislations.

The current draft AS 11000 amends the payment clause in order to facilitate better administration of the contract and allows for the Superintendent to receive and issue documents on behalf of the Principal to comply with the relevant Security of Payments Act.

Where relevant under any SOP Act, the Superintendent can receive payment claims and issue payment schedules on behalf of the Principal, acting as their agent. AS4000’s dual certificate has been abandoned in the new Standard which means that the Superintendent only issues one certificate for the amount payable which complies as a payment schedule under the SOP Act.

Other Contractor Conditions:

The new Standards propose that all Bills of Quantities submitted will be required to be priced, whether or not they are to form part of the contract. This will be a benefit to the Superintendent when the contract requires that a valuation is to be made particularly where the BOQ is not a contract document.

Major changes to pre-payment of unfixed items offers two alternatives for Contractors, the first not allowing for Contractors to be pre-paid and the second allowing pre-payment subject to the Contractor satisfying conditions set out in the new Standards. Financiers and Developers need to be aware that this change is likely to be in conflict with the finance conditions of offer and that the Developer may have to fund these early payments until the work is fixed in position.

There is a requirement on the Main Contractor to apply the AS 11002 subcontract conditions without amendments except where necessary and any non-compliance is expected to be a substantial breach by the Contractor.

We see that many Contractors will struggle with this requirement as it takes control away from them as to their conditions and relationships with their subcontractors. The majority of Contractors have in house subcontracts and/or major amendments and special conditions that they have developed over time and that they include in all their Subcontracts.

Superintendent’s Role:

The new Standards are said to revert back to the AS 2124 requirements in relation to the Principal’s obligations to the role of the Superintendent and this specifically clarifies the Superintendent’s need to act impartially where they are required to certify, assess, price, measure or value works under the Contract.

The contractor will also be under a specific obligation to rectify work when it becomes aware that the standard of work does not meet the requirements of the contract and without the need for the Superintendent to advise them to rectify the works. Not only does this require the Contractor to identify the defect but also effects the time to rectify the defect, it may be the case that it is to be rectified as soon as it’s discovered which could be inefficient.

Extension of Time:

Extension of Time will be measured in working days which will be a defined term under the new Standards. ôGiving of noticesö will continue to be calculated in business days. This is of benefit in that it alleviates previous ambiguities that arose in the calculation of days under the various contract conditions.

The new Standards propose substantial changes to the programming provisions and the Superintendent will have the power to accelerate the works. It will include a specific obligation to notify any delay of works promptly and at the very least within 5 business days. It is unknown at this stage if the five (5) days is from when the delay commences, or when the delay becomes apparent, or within five (5) days of the end of the delay. The Contractor will be required to include in its written notification whether an extension of time claim is likely as a consequence of the delay. This infers that the Contractor must advise of Contractor caused delays and may have some interesting consequences, especially with the right of the Superintendent to direct acceleration due to a Contractor caused delay. The new Standards are expected to clarify causes of delay and the grounds for which a Contractor can claim an extension of time as a result of the delay.

There are substantial changes proposed for the assessment of extension of time claims and the Superintendent has the option to assess and agree the extension of time within 20 business days or request further information from the Contractor within that time. Upon receipt of the further information the Superintendent has a further 20 business days available to assess the extension of time. Failure to do so will result in the Contractor being granted the extension of time. The Superintendent will now have to ensure they complete such tasks within set time frames.

The changes also include that where there are concurrent delays, and where one delay the Contractor is entitled to a delay (including Principal caused delays) and another where they aren’t entitled to an extension of time, then the Contractor will be entitled to an extension of time but not for delay damages.

Variations:

A new regime is proposed in relation to a direction being considered a variation. The Contractor has 5 business days upon receiving the direction to submit a notice that the direction is in fact a variation. The Superintendent then has 5 business days to respond and can invoke the early warning procedure if it does not accept that the direction is a variation under the Contract.

Interestingly there are no changes proposed to the Variation Valuation clause other than to say that profit and overheads are generally included within rates and prices unless otherwise advised and the new Standard proposes including a specific right to cover delay costs caused by a variation if not already included in the price. This doesn’t deal with the issue of what the percentage is for items where profit and overhead are not included other than to rely upon the percentage for provisional sums where the work is subcontracted.

The new Standards also provide for a differentiation between ôdelay damagesö and ôdelay costsö.

Recognition of Digital Data and Building Information Modeling (BIM) û A missed opportunity?

While the proposed AS 11000 makes a small step in the direction of technology by acknowledging email as a communication method it does not recognise any forms of digital data, online document management or web collaboration and communication methods.

Coincidently on Tuesday, 15 March 2016, the House of Representatives Standing Committee on Infrastructure, Transport and Cities tabled the Smart ICT Report on the inquiry into the role of smart ICT in the design and planning of infrastructure. The Standing Committee ôrecognised the possibilities inherent in new technologies and systems. These technologies, if used effectively, have the capacity to transform the design, construction and management of infrastructure assets; the management and use of existing assets; and the operation of transport, communications, energy and utility systems. These technologies are transformational, with the capacity to increase the productivity of the Australian economy. In order to achieve this, however, governments and industry must be aware of the potential of smart ICT, and must invest in the technologies, skills and systems to make the transformation a reality.ö

In an environment that does not acknowledge modern forms of information it is difficult for innovation to exist because one party can deny access to digital data on the basis that the General Conditions are silent about it and its use versus paper.

That recognition need only consider redrafting of Clause 8 Discrepancies or a simple change like the introduction of a definition for information to the effect of ôInformation: a reference to æinformation’ includes information, representations, statements, data, samples, calculations, assumptions, deductions, determinations, drawings, design, specifications, models, plans and other documents in all forms.ö

The incorporation of Building Information Modeling (BIM) is a more consuming task but nevertheless is needed because there is currently no statutory or common law framework around the use of BIM in Australia. If Australia is to follow the UK’s lead in accordance with Recommendation 7 of The Standing Committee, the simplest way to define and protect a party’s rights and obligations when participating in a BIM project is to develop a bespoke BIM protocol and annex it to an existing Australian Standard Contract.

If AS 11000 does not consider BIM there is a risk that the new standard will provide a platform for the development of a series of protocols by Principal’s and clients. This will exacerbate the onus on contractors and consultants in having to satisfy a range of different protocols when working on multiple projects at any one time.

You can view information on the current draft AS11000 here and we await the release of the final draft Standards anticipated mid-year.

For more information contact Gary Thompson (Partner at Mitchell Brandtman) on +61 407 964 435 or email gthompson@mitbrand.com.

The Opposition outlining its platform for changes to negative gearing, and the Government refusing to rule them out, does this signal an end to tax depreciation on investment properties?

With debate raging on the implications of proposed changes to negative gearing and Capital Gains exemptions, there is a further consideration for property investors and their ability to offset the ônon-cashö loss of income generating assets via depreciation.

Depreciation of capital and plant and equipment associated with an investment property is very much wedded to the benefits of negatively gearing a property, allowing an owner to offset ônon-cashö losses against other taxable income. Over the shorter term it reduces an individual’s personal tax liability, while over the longer term, reducing the cost base and allowing the Government to gain a greater take of tax on the sale of the asset. This delayed approach had the impact of encouraging investment in low yielding asset classes.

Why claim depreciation on an investment property if you cannot offset the loss?

Any proposed changed by either the Government or the opposition which impact negative gearing may have a flow on impact to the overall benefit of Depreciation.

Investors are asking, ôwhy would I want to claim depreciation on properties that are negatively geared in the current year when it won’t reduce my income but will have the impact of reducing my cost base when I sell?ö This view is that investors will only want to claim depreciation on properties that are cash flow positive – to a point where they are breaking even.

Sian Sinclair of Grant Thornton explains that claiming depreciation is an incentive that is available, but isn’t a choice û if you don’t claim it in full you may miss out. The adjustment to the cost base of an asset has to be made regardless of whether you have chosen to claim depreciation in the past or not, so why miss out on claiming the entire deductions that are, at least partially, going to reduce your cost base anyway.

The current government is remaining coy about negative gearing, however has ruled out changes to CGT exemptions (at least outside of superannuation). It appears that their preference is for a cap on deductions, perhaps up to a percentage of their income.

Taking the assumptions made as part of Labor’s proposed reforms currently under scrutiny, we can look at a worked example of a new negatively geared property purchased for the median BCC House Sale price (as at January 2016), of $610,000 to demonstrate the impact. Assuming the property was neutrally geared prior to depreciation being applied and remained so for the 5 year holding period.

If we assume a 5 year holding period on the investment the current capital allowance depreciation deductions under Div 43 is $27,500 over the 5 years. Under the new proposals there would be no direct benefit from claiming depreciation year on year as there is no direct effect on the property investor’s cash flow and no ability to offset any ôlossesö against personal income.

When the investment runs its course over the 5 years under the current rules, the net effect of the cumulative depreciation offset is likely to be as high as $15,939 based on a marginal tax rate of 37%.

The real loss directly impacts the net tax position of the property investment when the property Investor sells the asset as it results in a typical Investor paying approximately 84% more in tax on their investment property over a 5 year holding period.

When directly considering the effects of the proposed changes on depreciation relating to negatively geared existing properties purchased post 1 July 2017, the effect could be dramatic. Depending on how deducting the cumulative losses on the property is handled within the CGT calculation, depreciation will still need to be known at the CGT event to reduce the capital gain. However the difference depreciation makes on CGT is diminished by the decrease in the exemption. Also, the cumulative losses are deducted from the Capital Gain but the Investor has received no tax benefit from those losses throughout the holding period which also reduces the positive effect depreciation has on an Investor’s cash flow.

Who wins and who loses?

The incentive to produce income generating assets rather than focusing on the tax liability incentives is likely to change an investor’s portfolio mix which is also likely to have an impact on demand for certain types of property. This may also change the dynamics of financing these investments if the incentive to negatively gear a property is removed. Over time it may give rise to a greater need for depreciation as a result of cash flow positive properties needing to offset non-cash losses against the profits generated on a positively geared property.

So who wins under these proposals? Is it purely an opportunity to raise revenue for the government as an alternative to a change in the GST or a safer bet then taking on superannuation? Are there bigger winners and losers falling out of the longer term impacts to the property and finance sectors?

One thing is clear, Depreciation is here to stay. Investors need to talk to their Quantity Surveyor and their Accountant to make sure that they are keeping the correct records and making the most of the entitlements offered now and moving forward.

The Building and Construction industry globally continues to struggle to find clarity around the usefulness and correct application of Level of Development (LOD).

LOD is a measure of confidence and reliability of information at the various stages. When initially introduced, LOD filled a void and allowed project teams and particularly those downstream to understand the content and reliability of the model data they could expect to receive. Since its acceptance as a standard of reliability and integration within Building Information Modeling (BIM) and 3D models, it has been largely exposed to broader interpretation in relation to its application and what it is expected to deliver.

The LOD Specification document, published by the BIM Forum, http://bimforum.org/lod/ which is derived from the AIA G202-2013 Building Information Modeling Protocol Form document, helps to clarify the LOD concepts by objects and their attributes. It has now been adopted by many as a default industry standard and used as a basis for contracts. This may be pushing the LOD Specification too far. The LOD Specification is designed as a reference guide to assist the industry to specify the reliability of the information at each stage of projects.

Misinterpretation of the role and use of LOD, perhaps masks the bigger issue associated with building model data exchanges. For example, models are often now ill-defined as LOD 200 or LOD 300 rather than containing objects of a particular LOD level. Industry needs to agree on how to exchange data effectively and consistently throughout the project phases on a discipline to discipline basis – both geometric and non-geometric.

Information Delivery Manuals and Data Exchanges:

The building industry globally needs a robust and reliable means of exchanging digital information that is machine readable and easy to check and validate at each stage of development.

buildingSMART, formerly the International Alliance for Interoperability (IAI), has since 1994, aimed to improve engagement and knowledge sharing amongst members and to take the lead in defining user needs and determining open BIM solutions for all, through internationally recognised standards, tools and training.

buildingSMART developed Industry Foundation Classes (IFC) to enable project teams to share information across the variety of software applications used for design, construction, procurement and ongoing operation of a building. At present it is considered the standard in rich data exchange. buildingSMART certifies applications that comply with IFC which provides a platform of industry wide acceptance and use in relation to how data is entered, used and extracted within the model.

buildingSMART developed the ISO 29481-1:2010 ôBuilding information modelling – Information delivery manual – Part 1: Methodology and formatö standard to capture and specify processes and information flow during the lifecycle of a building. The standard provides a methodology for the accurate exchange of data between parties, known as the Information Delivery Manual (IDM). This process helps to create the technical specifications of the project known as the Model View Definition (MVD). The beauty of MVD is that it allows different consultants and contractors to easily access the information relevant to their part of the build.

The Future is Data Exchanges:

buildingSMART has a working group developing IDMs: http://iug.buildingsmart.org/idms/roadmap.

This roadmap covers the full range of project phases and seeks to identify discipline to discipline exchanges. These data exchanges are then more fully defined in MVDs that detail the objects and their properties (or attributes) that should be present. By defining these requirements, it is then possible to automate the exchange and checking of the embodied data. This helps to build confidence and reliability.

Examples are found on the buildingSMART IFC Solutions Factory site: http://www.blis-project.org/IA… . These exchanges are also put in the context of æProcess Maps’ that have æExchange Requirements’.

This is the level of detail in defining building data exchanges on a discipline to discipline basis at different project phases that I think we need in the industry.

Some examples:

The Concept Design BIM 2010 MVD, developed by GSA and CSI from USA, Statsbygg from Norway, and Senate from Finland, is a good place to look for further development of data exchanges. It covers Spatial Program Validation, Circulation/Security Analysis, Energy Performance Analysis and Quantity Takeoff, which enable four types of analyses early in the process to optimise the design and helps to see the application of MVDs.

A more focused IDM is the Information Delivery Manual for Structural Steel by AISC and Georgia Tech. It addresses the exchanges required by the structural steel industry with Exchange Models created by the architect, structural engineer or steel detailing engineer. Table 3 shows exchanges by project stages and the people who will create or receive them. The final table shows the attribute detail expected. https://www.aisc.org/WorkArea/…

Where to from here?:

The IDM Roadmap shows the work still yet to be done to define and refine the full range of exchanges for industry, and buildingSMART welcomes assistance to make this happen.

The need to better define, produce and deliver building and construction data is an urgent issue. LOD has helped to identify the issue but we need to structure data exchan bges more simply for people and more precisely for software.

Perhaps the IDM and MVD work can help here.

For more information contact Scott Beazley, Mitchell Brandtman, +61 2 9541 8000 or email sbeazley@mitbrand.com.

In Part 1Part 2 of our series on Return on Investment (ROI) and BIM, we reviewed the success of large scale institutional owners and stakeholders, contractors and sub-contractors and how BIM is creating metrics that demonstrate savings achieved on many projects. In our third and final instalment we look specifically at the Architects and Consultants and how immersed we need to be in BIM in the longer term to get a return on our investment.

We know that BIM and the technologies supporting it allow all of the supply chain to benefit from the information and provide known quantities and costs at all stages from developed design to tender.

More than ever, BIM’s collaborative nature provides the greatest opportunities for design and construction teams to innovate and instigate process improvements that can resonate quickly across project teams. Industry reports including SmartMarket demonstrate strong engagement in BIM from architectural and consultancy firms and suggests a stronger, faster take up in the short term including improving their team’s understanding of BIM to a high competency level.

Design and consultancy firms adopting BIM and its associated technologies wholesale are now creating the points of difference in the market and realising the savings internally through improved workflows and market reputation knowing that collaboration and data sharing directly result in reductions in revisions, clashes and RFIs.

The call from architects however is for there to be a greater focus on the quality rather than the quantity of reduction in errors. The reliability of the information built from a collaborative project team allows designers to robustly defend the scope. It adds integrity to the design process early on and allows their clients to make real savings decisions based on accurate information and not perceived ôexpensiveö design statements. The benefits of BIM are in the knowledge gained and how it’s applied to create intelligent design. It’s not enough just to implement the software and think it will resolve modelling issues.

Here is a collection of benefits seen by architects, engineers and project consultants, arising from their investment in BIM and the ROI it brings to their companies.

Designers and Consultants

Professional services company Worley Parsons whilst addressing the Mining Club in July 2014 suggested that the potential benefits in the digital assets concept on project delivery included a capital costs reduction of up to 5% through data integrity, increased speed to market through reduced project cycle time by up to 20% and a reduced design costs by up to 70% through reuse of data and design.

The purpose built Leeds Arena, designed by Populous Architects and completed in 2013 by principal contractors BAM Construction, is an excellent example of reduced design costs. The project team attributes BIM to streamlining early design stages which reduced wastage by an estimated 9,000 drawings. BIM’s collaborative process is also reported to have saved 15,000 collective man-hours throughout the design development stage of the project. Expected design clashes of 100 materialised to just 2, saving the project an estimated $350,000.

The award winning Collaborative Life Sciences Building (CLSB) a joint university project in Portland, Oregon opened in 2014 and is …

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For more information please email me direct at

dmitchell@mitbrand.com

For projects, the missing piece to this puzzle has always been that you cannot build the same project twice in order to quantify what the savings would be in direct comparison to having it built traditionally.

Technology vendors say that BIM tools are the enabler to improved production of a project through a return to best practice project management. They are tools for companies to create efficiencies within their workflows and business operations. They allow project teams to economise and leverage their resources through upskilling and have more immediate access to information in a way that has never been possible before on a project.

By way of example, the Dutch company, Vabi, has just released the Vabi Financial SimulatorÖ which is a plugin for Autodesk Revit«. It has been specifically designed to bring together and display financial performance data across BIM design teams to demonstrate P&L, Balance Sheet, Discounted Cash Flow and ROI impacts of design decisions. We are likely to see more of this type of technology as we focus as an industry on how to determine savings during early stages of design seek greater assurance on the longer term viability of a project.

The Stanford University Centre for Integrated Facility Engineering is well referenced in relation to its 2007 report on a study of 32 projects from across the US, Europe and Asia. The study is reported to have shown that when used on a project BIM could eliminate up to 40% of unbudgeted changes, increase cost estimation accuracy to within 3% and reduced the time taken to generate a cost estimate by 80%.

In 2010 Allen Consulting Group published the results of its industry sponsored study into the impacts of BIM on productivity. The study’s findings reported that the accelerated and widespread adoption of BIM on the Australian economy was likely to increase GDP by 0.2 basis points in 2011. Whilst this may not seem much, the study also noted the likelihood of a cumulative effect given the likely increase in the pace of adoption by 2025. This would mean an increase of 5 basis points in comparison to what they describe as a ôbusiness as usualö scenario.

Real Return on Investment û Is the Secret Already Out?

In this first article of a 3 part series on ROI and BIM, we have compiled a number of stories from owners and stakeholders who have accepted the early evidence and are forging ahead with BIM adoption to hold the construction industry and supply chain to account. These organisations are already establishing the metrics and benchmarking against the data to realise project savings and returns for the life of an asset.

Owners and Stakeholders:

The UK Government has published cost data since 2012 in relation to achieving its overarching target of a sustainable reduction in the cost of construction by 15-20% by 2016. Their July 2014 data report, ôUK Departmental Cost Benchmarks Cost Reduction Trajectories and Cost Reductionsö demonstrates a continued decline in costs and further evidences that the target ôremains practicableö. Trial procurement projects with set cost reduction targets and publicly documented are:

• ú212m New Prison, Wrexham, North Wales, where construction began in May 2015 and is expected to be completed in 2017, has a 26% cost reduction target.
• Cookham Wood Young Offenders New Build valued at ú20m hit its cost saving target of 20%. This is a good example of project specific ROI. The reported findings are quantified in relation to ôtaking into account value indicators of similar projects, cost savings achieved (as analysed by the client and cost consultant Sweett Group)ö in order for them to show a cost saving of 20% on the square metre rate anticipated for a comparable project at the time of establishing the agreed maximum price.
• ú119m Property Services Cluster of Primary Schools involving new buildings, extensions and refurbishments for 22 projects, has a 14% cost reduction target set and has already reported a 7% reduction.
• Project Horizon, ú100m highway repair and improvement program with a cost reduction target of 17.5% averaged over 5 years achieved 15% against spend in 2013.

The UK’s Crossrail is a whole of industry commitment led by the Transport for London and Department of Transport. The aim is for Crossrail to be the first major infrastructure project in Europe to fully realise the BIM lifecycle concept. The company is focused on achieving long-term savings through the application of BIM and its accuracy of information to handover to the rail operators, an opportunity to realise the longer term benefits of the asset. Crossrail’s current success measures focus on key information elements including:

• 1 centralised set of linked databases
• 25 design contracts
• 30 main works contracts
• 60 logistics main works contracts
• 1,000,000 (1 million) CAD files created, approved and integrated within centralised information model

Along with its sustainability strategy, Crossrail wants to create a skills legacy and sites the creation of over 2900 new jobs of which 94% have been filled by local people to April 2014. Crossrail #2 is now the focus of realising the savings from the Crossrail project and industry commentators are considering savings achievable in the region of 10-15% against an estimated construction budget ú25bn.

US General Services Administration’s (GSA) commitment for more than a decade to a National 3D-4D-BIM Program is realising consistent and measurable sustainability savings across a public sector building portfolio of more than 9000 assets. Its initial 10 pilot projects have reported cost savings that covered the cost of the first year’s pilot program. It’s now reporting regular savings in early detection of errors and omissions, reduced construction times, fast and accurate space measurements with less than 5% variance and better transparency and reliability of energy performance measures.

The University of Colorado, Health Sciences Center is one of the few projects able to measure the success of BIM implementation against a similar project using conventional processes. R1 ($216m) was successfully completed on time and within budget using a traditional delivery approach. R2 ($201m) was built a few years later using an integrated virtual design and construction process (VDC) and resulted in ôoutstandingö results for the project with improved productivity, increased prefabrication, less rework, reduced RFIs and change orders and was completed 2 months ahead of schedule and under budget.

The award winning Collaborative Life Sciences Building (CLSB) a joint university project in Portland, Oregon, opened in 2014 and was awarded LEED Platinum certification status. In 2015 it was one of the winners of the COTE Top Ten Awards program recognized for its sustainable architecture and ecological design. The $295m project involved the collaboration of 28 different design teams and directly attributes BIM technologies to a $10m saving on construction costs.

Sutter Health Care over the last 10 years has invested more than $4.7 billion in the improvement of its facilities through construction, renovation and replacement for less than the conventional health construction costs and without public funding. Its $320m Eden Medical Centre, completed in 2012, was delivered on time and within budget and was a landmark in BIM collaboration bringing together an 11 party Integrated Project Delivery Contract.

In 2008, UNITEC, New Zealand’s largest institute of technology, undertook a 4 year whole of campus BIM integrated information system to dramatically change the management of its facilities for the whole of their life cycle. The development of the information is now being used to accurately plan and manage the facilities and operations of teams and contractors and the institution is reporting an annual return on investment from the project of approximately 23%.

So what’s in BIM for me?

For many projects the longer term ROI is yet to be realised for building owners as the buildings themselves are still in their infancy and many projects not yet out of the ground yet.

However, we are now seeing strong evidence of progressive governments, health care and educational institutions, particularly, those who are managing large asset portfolios and have embraced BIM to garner the efficiencies needed to manage these facilities better within tight budgets. This success is being attributed to the commitment to BIM upfront which is considered the determining factor on whether the ROI of the whole project in relation to budget, time and the building’s expected useful life is achieved.

As an industry we now need to move discussions on from ôwhat are the expected BIM returnsö and back to best practice for construction projects. The longer term ROI will become evident as the industry best practice establishes itself over the coming years and the discussions around whether to BIM or not to BIM will become obsolete.

Keep an eye out for my Part 2 of ROI on BIM where we look at the contractors and sub-contractors and how innovative technologies and upskilling of their teams is quantifying their return on investment in BIM.

For more information please email me direct atdmitchell@mitbrand.com

In Part 1 of our series on Return on Investment (ROI) and BIM, we reviewed the success of large scale institutional owners and stakeholders and how BIM is creating metrics that demonstrate savings achieved particularly for public projects. In Part 2 we look specifically at the Contractors and Sub-Contractors and how well BIM is returning on their investment.

At the heart of it, BIM improves communication in an industry that’s famous for dispute rather than effective communication.

For construction contractors and sub-contractors performance improvements can be measured in the form of a reduction in variations or change orders and contingency expenditure, but the question will remain in the case of:

• an improvement; was it due to BIM or simply a high performing team?
• a decline; was it due to a learning curve?

For individual businesses that are providing construction goods and services, efficiencies in applying a new internal process can be quantified by measuring changes in the cost it incurs over time in the form of reduced hours, resources, waste and difficulties.

Many now agree that the technology is a tool to create efficiencies within their workflows and business operation. It allows project teams to leverage their resources better and utilise the whole project information for their own benefits in delivering a project well.

Real Return on Investment û What’s in it for me?

Like any new process, product improvement or technology, there are early adopters (and innovators) that take the leap of faith at the beginning of an innovation cycle and have the greatest opportunity to gain (and to lose).

So what do the early adopters have to say and will they share their secrets on ROI?

The following is a collection of project examples and…

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For more information please email me direct at dmitchell@mitbrand.com

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Being a 5D Quantity Surveyor I have been actively following the discussions around Lean Construction for many years now. To me it just seems to sensible to reduce the amount of waste that takes place during the build of a construction project.

Even so, it can be difficult to identify precisely the amount of waste on a project, so it also makes good sense to physically measure waste to understand what is being wasted and how to mitigate it in the future. I recently came across the document “Recommended Practices for the Application of LEAN Construction Methods to Building New Australian LNG Capacity” by Engineers Australia (Western Australia Division) which is one of the clearest documents that I have read in regard to categorising construction waste.

They describe waste as; “… anything which does not add value to the customer“, further breaking down the term into 7 subsections, as follows;

ò Waiting û for materials or specifications 

ò Over Production û producing more than is required by the customer 

ò Rework û rectification of incorrect or defective work 

ò Motion û movement of people around site

 ò Processing (over) û doing too much to a job or producing too high a specification when it is not necessary 

ò Inventory û too much or too little inventory 

 ò Transportation û moving equipment, tools or materials around the site and double handling

BIM plays a pivotal role in holding all project data securely in order to deliver cost certainty across the designs, variations and final build. Through this BIM dramatically improves field performance by ensuring compatibilities between trades and areas, minimising clashes, and allowing fabrication issues to surface before construction commences, therefore eliminating multiple areas of the aforementioned wastes and improving construction efficiency.

Owners will ultimately benefit from the efficiencies that come out of BIM but the value of these efficiencies won’t be realised until the market adjusts and we see reductions in allowances by subcontractors for various types of wastes (delay, disruption and rework) currently due to poor documentation and site management. While it will be some years, perhaps five to ten, before market prices show downward pressure there are still a number of savings strategies that can be put into action.

Historically, the way construction projects are priced is to allow high contingencies at the outset and to expect redesign, delays, disruption, rework and variation claims – all adding to project waste. BIM is about being able to reduce the need for contingencies as the gap between project development, modeling and the build narrows.

For those who implement standard methodologies to ensure project teams are involved in the BIM at the right stages of design and development, it will bring about leaner building design and construction that will ensure subcontractor costs are more predictable, negotiations are transparent and various wastes are reduced. Ultimately markets will adjust and we will realise reductions in contingencies, wastes and savings at the outset of projects and collectively achieve greater savings and cost certainty for the industry as whole.

There is no denying that the construction industry is rapidly advancing in the area of BIM. However for BIM to be truly effective in the field it must move away from being just a design tool and act on also reducing waste. Everyone within the industry faces the challenge of bringing technological best practice together to benchmark standards in project delivery for leaner, better buildings.

Taiichi Ohno explained that the market (or bid team!) sets the price

which can be charged; therefore the only sure way to make a profit is to reduce costs. However, you have to first understand real costs and how they change. Caitlin Shields, Associate & 5D Quantity Surveyor at
Mitchell Brandtman, explains how MB go about this through the use of 5D.
Watch below: https://youtu.be/vgkYbr904yI

The $1.8 billion Sunshine Coast Public University Hospital (SCPUH) project is a State Government initiative to address the growing health service needs of the Sunshine Coast community. The public hospital will open with approximately 450 beds in 2016, growing to a 738 bed facility by 2021. At construction peak it is expected to have created 1800 jobs created across all facets of the building and construction industry.

Out of a project of this magnitude, opportunity to innovate and instigate process improvements can resonate quickly within project teams and when taken a step further can have a significant impact not just industry wide but globally.

The project, like others of its scale and nature, contracts with more than one design team and often consultants to the project are required to be across the range of 3D authoring tools. Part of Mitchell Brandtman’s work on the project involved 5D quantities for the ceilings and partitions package authored by HDR Rice Daubney in joint venture with Architectus, known as Sunshine Coast Architects (SCA).

Reliability of IFC:

One of the key industry issues associated with BIM is the accurate data transfer relating to Industry Foundation Class (IFC) exports. This is a facility that allows information to transfer across software platforms so that designers, programmers, quantity surveyors, project managers and ultimately the sub-contractors can utilise the data for their part of the job.

A key focus of the collaborative work between Mitchell Brandtman’s 5D QS team and Lendlease’s cost planning team was to revision all of the quantities against the latest design. The reason for this was so that subcontract letting could be completed on the latest designs.

When CostX is the 5D platform this is a relatively simple task for Revit but it can be more difficult with ArchiCAD – simply because the interface between CostX and ArchiCAD is less common. The prototype workflow developed through the MB and Lendlease collaborative work was smooth for most objects with the exception of ceilings. Ceilings required special attention and a number of manual copy paste steps which were prone to errors if not manually checked and rechecked with every revision.

HDR Rice Daubney (part of the SCA joint venture) authored the ceilings and partitions package in ArchiCAD, Graphisoft’s globally utilised BIM software. Once exported to IFC, it became apparent that only a selection of the depth of information created in ArchiCAD was available within the exported IFC file and so was insufficient for transferring into CostX, the 5D authoring tool that facilitates estimating for the total trade package in its default form.

Scott Beazley, Mitchell Brandtman’s Digital Technologies Manager said that upon receiving the file the standard settings for the IFC export from ArchiCAD provided the right information but not the detail needed to support a fully measured, accurate estimate that could be revised quickly as the design models developed. ôThe information was visible within the IFC file and could be accessed for estimating use but was in a form that it could be retrieved only in a very manual and tedious way that would certainly also slow down revisioningö said Scott.

Due to the nature of the way this project in particular is managed and the collaborative culture across the project consultants, Mitchell Brandtman and HDR Rice Daubney (part of the SCA joint venture) teams met to discuss the data transfer issue and demonstrate the importance of having access to all the necessary data created within the native ArchiCAD file in the exported IFC file

Paul Brodala – Project BIM Model Manager, agreed that there was an immediate need to discuss enlarging the data export directly with the software developers, Graphisoft and ask their help to alter the way ArchiCAD exports data.

ôThe SCPUH project is the largest ArchiCAD project underway in Australia at the moment. It was very clear to us the importance of exposing all of the data and the benefits this would have on time and cost not just for the ceilings and partitions but more widely across other project packages and potentially other ArchiCAD modelled projectsö said Paul.

Ahead of the curve:

The HDR Rice Daubney (part of the SCA joint venture) team met with Graphisoft in Hungary to demonstrate the requirements of the software change to better support the collaboration workflow with quantity surveyors (watch video here). Whilst often software developers are not immediately in touch with what the users require due to the lag from project issues to user group discussions and proposals to the software developers, the immediacy applied to this data shortfall was very apparent. Graphisoft readily agreed to change the way ArchiCAD exports data to help.

Graphisoft software development Vice President, Mr Laszlo Vertesi, quickly welcomed the opportunity to innovate the product in relation to real project requirements, especially of such scale. “It required a simple change to the mapping of the parameters in ArchiCAD to expose more of the data regardless of the object being exported. This now puts the interrogation of the data in the hands of consultants with the experience to utilise it at a very detailed level” he said.

The software change was tested and implemented within two weeks. The collaboration with HDR Rice Daubney (part of the SCA joint venture) and Graphisoft meant that the manual steps relating to the ceilings were removed because the MB and Lendlease team had access to more information within the .ifc export and could write maps directly from the .ifc model. The complete ceiling and partition BoQ could then be revisioned quickly and the quantities could be dissected by location into much greater detail ie zone, department or even room by room. For Lendlease this meant increased speed but also much more flexibility in the way the quantities are presented.

The change implemented within ArchiCAD has already proved beneficial to other projects and where the quantities can be delivered in a way that the 5D QS can control the data required for CostX. This process improvement has a significant impact on revisioning time, an area that relies on the detail and accuracy of the data and the skills of the 5D QS to build on the new information and update the cost estimate quickly. On a project such as SCPUH this can be necessary sometimes daily and often weekly.

An additional important outcome of this initiative is that the software change will go on to benefit all designers and estimators working with ArchiCAD globally. It will ensure that other projects aren’t stuck with the time consuming work of having to manually import data at each model stage through to construction. This is a significant but often unrecognised saving as a direct result of a project environment built around a culture of whole team collaboration.

For more information please email me direct at dmitchell@mitbrand.com