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International Cost & Project Managers

BRUCE SHAW PARTNERSHIP

Government Construction Conference 2010, Dublin.

Mark Wearen

Value for Money and Cost

Government Construction Conference - February 2010

Cost and Project Management

ISO 9001 & 14001 – International Accreditation

Offices in Ireland, UK, Central Europe, Caribbean, UAE, Saudi Arabia, Bahrain

Projects all over the World including the USA, Africa and Japan

Total Resource Base of 300 Staff

Dedicated Specialist Divisions Include:

- Civils / Healthcare / Education / Commercial / Retail / Residential / MEP / PPP & PFI

Services Provided include- Risk and Value Management / Procurement & Supply Chain Management / Insurance

Assessment / Legal Support / Bank Reports

Bruce Shaw - Who We Are….

Bruce Shaw Clients Include…..Government Construction Conference - February 2010

Trinity College

Bruce Shaw Presentation February 2010

Presentation StructureCWMF and Value for MoneyCost and Value for Money


CWMF and VfM – CWMF Objectives

Department of Finance Capital Works Management Framework (CWMF) -

Objectives :

Better efficiency in project delivery

Greater Cost Certainty….at contract award (applies to all stages)

Better Value for Money at all stages….particularly at hand-over


CWMF and VfM - Definitions

CWMF Definitions – Glossary of Terms

Value = Benefit

Value Management (VM) = Structured approach to maximising benefit

Value Engineering (VE) = Identifying opportunities to enhance value ‘without increasing the cost’

Key Value Drivers = Client preferences & prioritised benefits

Value for Money (VfM) = Optimum balance between benefits and investment

Key Value Drivers dictate how achieving VfM can be confirmed


CWMF and VfM – Defining Key Value Drivers

Project objectives typically defined by

– Functionality (performance/scope)

– Quality (technical/aesthetic)

– Programme (delivery by a specific date)

– Cost (budget constraint/target cost/benchmark)

Success also measured using these criteria

One or all of these objectives can be ‘Key Value Drivers’


CWMF and VfM – Defining VfM

VfM is ‘in the eye of the beholder’

Key value driver(s) can be one or a combination of different factors

VfM achievement can therefore be difficult to confirm so…

Critical to define requirements / benefits sought at appraisal stage to

facilitate later confirmation that VfM has been achieved


CWMF and VfM – CWMF Key Value Driver

VE = Identifying opportunities to enhance value ‘without increasing the cost’

PWC – Cl. 4.8.1 confirms that VE proposals must not increase the Contract Sum

UK approach contemplates ‘value enhancement’ by increasing function ‘with a lesser degree of cost increase’

CWMF Key Value Driver appears to be Cost but other Key Drivers must also be addressed during VM/VE exercises

Other Drivers are also critical to VfM – the Sanctioning Authority and Sponsoring Agent have key roles from Appraisal Stage


CWMF and VfM – Timing & Focus of VM

Potential to Change

Resistance to Change

Cost of Change

Appraisal

Time

CWMF Stages 1 to 4


CWMF and VfM – Measures to Achieve VfM

Policy and Procedures (e.g. CWMF/NRA Cost Management Manual) Aggregation Organisational Learning Implement Value Management from Appraisal to Review Implement Risk Management from Appraisal to Review Focus on All Objectives (including cost) Realistic Budgeting Consider Whole Life Costs at all stages Considered Risk Allocation (to party best placed to manage) Detailed Design/SI complete prior to tender process Incentivise the Contractor Timing


Cost and VfM – Current Market

Cost Indicators Vs Tender Levels - Annual Changes

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

CSO WPI CGI W&M -Annual

Tender Index -Based on SCS -Annual

CSO - All Const Prod% Change

CSO - Civils Prod %Change

CSO - Building Prod% Change

DOF PWC Introduction


Cost and VfM – Current Market


Cost Indicators Vs Tender Levels - Cumulative Changes

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

CSO WPI CGI W&M - Cumul

CSO Const Lab - ManualOps - Cumulative

CSO WPI Materials Only -Cumulative

Tender Index - Based onSCS - Cumulative



Costs and VfM – Historical Markets and VfM

Source – www.wikinvest.com

Low Demand = Low Prices


Cost and VfM – Current Market Conditions

Costs are at a 10 year low

Discounts of up to 25% off peak values are available

Are Contractors pricing inflation ? – Indicator of market view on recovery

Factors in differential between cost and tender level increases

– Industry has built up Management and Construction skillbase/efficiencies/Investment in Technologies/Innovative Solutions/New Tech etc

– Underlying costs do not fall as quickly as Contractors prices – risk allocation and strategic decisions

Loss of industry capacity will see loss in skill base etc = likely price increases

PWC Introduction – no apparent impact on trends

ESRI/International view – growth will return…at some stage – 2011/12/13/14 or beyond ?

Economic Cycle will turn - Avail of current market conditions to maximise VfM

Civils Vs Building Costs – onwards and upwards….eventually


Enduring Lessons of History….

“A thing is worth what it can do for you, not what you choose to pay for it.”

John Ruskin


International Cost & Project Managers

BRUCE SHAW PARTNERSHIP

Government Construction Conference 2010, Dublin.

Mark Wearen

Value for Money and Cost

Thank You

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