rics national quantity surveying and construction conference, 22 may 2012 benchmarking rics national...

RICS National Quantity Surveying and Construction Conference, 22 May 2012

BenchmarkingRICS National Quantity Surveying and Construction Conference

J MARTINExecutive Director, BCIS

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


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


Benchmarking

What do we mean by benchmarking?


Benchmark


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)


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.


Benchmarking?

Benchmarking Process

BenchmarkMetrics

BenchmarkPractices

Benchmark Gap* How much* Where* When

How close to the gap* Improved knowledge* Improved practices* Improved processes

Superior Performance

Benchmarking Robert C Camp


RICS Guidance note

‘Benchmark is best in class…it does not mean the average’ (Cost analysis and benchmarking, RICS guidance note)


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


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…


Everyday benchmarking


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)


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


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!


Benchmarking


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


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


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



GCS target of reduction of construction costs

0%

20%

40%

60%

80%

100%

120%

2010/11 2011/12 2012/13 2013/14 2014/15

15% target 20% target


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


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


Sustainable cost reductions

BIS Tender Price Index of Public Sector Building Non-Housing(Base 1995 = 100)

60

80

100

120

140

160

180

200

220


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


Type 1 and Type 2 benchmarks

Primary Schools (Index Cost per floor area/Cost per place)

40

60

80

100

120

140

160

30 years 25 years 20 years 15 years 10 years 5 years

£/m2 £/place


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


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

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

Benchmark data


Cost Benchmark Charts

UNCLASSIFIED

DH ProCure21 Programme: 2009/2010 Baseline: Aggregate Scatter All Types (New Build)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0 5,000 10,000 15,000 20,000 25,000

GIFA m2

Co

st p

er m

2

Acute Mental health Community Other


Chart 5: Construction Cost Benchmarks for DEFRA / EA: Walls

UNCLASSIFIED

Cost Benchmark charts


Benchmark Data Tables

Department of Health (P21 Framework)

Project type Units 2009/10 (Baseline)

Singlepoint

average (mean)

20th

percentile8th

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


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


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


Future Benchmarks

Benchmarks to be published from the Regulated Sector

• London Underground• Network rail


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


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%

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

Chart 2: Department Cost Reduction Trajectories

Cost reduction trajectories


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



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



…to be continued


Government Benchmarks

Full details at:

http://www.cabinetoffice.gov.uk/resource-library/construction-cost-benchmarks


BenchmarkingRICS National Quantity Surveying and Construction Conference

J MARTINExecutive Director, BCIS

22 May 2012

rics national quantity surveying and construction conference, 22 may 2012 benchmarking rics national...

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