Benchmarking RICS National Quantity Surveying and Construction Conference

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BenchmarkingRICS National Quantity Surveying
and Construction Conference

• J MARTIN
• Executive Director, BCIS
• 22 May 2012

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Benchmarking

• BCIS Executive Director
• Member of Treasurys Infrastructure UK (IUK)
  Infrastructure Data Group
• Member of Cabinet Office/IUK Joint Data and
  Benchmarking Group

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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

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Benchmarking

• What do we mean by benchmarking?

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Benchmark
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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)

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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.

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Benchmarking?
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RICS Guidance note

• Benchmark is best in classit does not mean the
  average (Cost analysis and benchmarking, RICS
  guidance note)

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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

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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

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Everyday benchmarking
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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)

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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

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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!

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Benchmarking
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Primary Schools /m2, 2Q2012, UK Mean Location
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Primary Schools /m2, 2Q2012, UK Mean Location

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Government Construction Strategy

• Government Construction Strategy
• Cost Reduction Validation Method
• 10 February 2012
• Construction Cost Benchmarks, Cost Reduction
  Trajectories Indicative Cost Reductions April
  2011 to March 2012
• 23 April 2012

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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

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Government Construction Strategy
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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

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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

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Sustainable cost reductions
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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

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Type 1 and Type 2 benchmarks
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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 TB, 80th minus 20th/ mean as a percentage

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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

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Benchmark data
UNCLASSIFIED
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Cost Benchmark Charts
UNCLASSIFIED
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Chart 5 Construction Cost Benchmarks for DEFRA /
EA Walls
Cost Benchmark charts
UNCLASSIFIED
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Benchmark Data Tables
Department of Health (P21 Framework) Department of Health (P21 Framework) Department of Health (P21 Framework) Department of Health (P21 Framework) Department of Health (P21 Framework)
Project type Units 2009/10 (Baseline) 2009/10 (Baseline) 2009/10 (Baseline)
    Single point average (mean) 20th percentile 8th 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 Type 1 benchmark. Includes Contractor's design fees, other development/project costs, Risk, Fittings furnishing and equipment Type 1 benchmark. Includes Contractor's design fees, other development/project costs, Risk, Fittings furnishing and equipment Type 1 benchmark. Includes Contractor's design fees, other development/project costs, Risk, Fittings furnishing and equipment Type 1 benchmark. Includes Contractor's design fees, other development/project costs, Risk, Fittings furnishing and equipment
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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

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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

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Future Benchmarks

• Benchmarks to be published from the Regulated
  Sector
• London Underground
• Network rail

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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

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Cost reduction trajectories
Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories Table 16 Department Cost Reduction Trajectories
Department 2009/10 (Baseline) 2010/11 2011/12 2012/13 2013/14 2014/15
MoD 0.00 2.50 5.00 7.50 10.00 12.50
MoJ 0.00 3.00 7.00 12.00 15.00 20.00
DfE/EFA 0.00 3.30 7.00 17.80 18.90 20.00
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Cost reduction trajectories
UNCLASSIFIED
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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

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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

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Achieving reductions

• to be continued

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Government Benchmarks

• Full details at
• http//www.cabinetoffice.gov.uk/resource-library/c
  onstruction-cost-benchmarks

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BenchmarkingRICS National Quantity Surveying
and Construction Conference

• J MARTIN
• Executive Director, BCIS
• 22 May 2012