Bringing cost over-runs on projects under control

Published:  02 August, 2017

Metsec, cost overruns, cost over-runs
Closing the cost gap — Ryan Simmonds.

Why is there so often a significant difference between projected costs versus final costs? Ryan Simmonds of voestalpine Metsec examines the reasons and reviews how changing the approach to planning the project can bring inbound and outbound project costs closer together.

It is a truth universally acknowledged that the budgetary costs on major construction projects rarely match up with the final cost at handover of the project. In fact, one study (1) estimated that as many as nine out of 10 high-profile projects go over budget.

The Olympic Stadium in London is a famous example. Originally budgeted at £280 million, the final project came in at a staggering £701 million — more than two and half times the original plan. Other well-documented examples include the Scottish Parliament building, costing 10 times its original budget and delivered more than three years late, and London’s Shard, costing a rumoured £1.5 billion and coming in at more than 240% over budget.

There can be a number of reasons why a project exceeds its budget. Project delays, issues with land, materials or financing problems. However, it is often the case that the original budget is set too low by the client or that the solution is selected by a commercial team basing decisions on cost rather than a full integrated review. The irony here is that selecting a solution based on price rather than how closely it fits the vision by the end client invariably means that elements are changed as the project progresses, which alters the cost of the project each time.

The ‘Farmer review of the UK construction labour model’, published last autumn [2016], explores poor predictability as a major industry failing, but more worrying is the fact that this failure and under performance is accepted by both the industry and, begrudgingly, by clients as well.

The design phase of any project, big or small, is vital. However this is often the stage that, in retrospect, the parties involved accept that they did not spend enough time on or engage with the right stakeholders.

So, communication is clearly the weak link in the chain. It’s at the initial strategic and briefing stages that end clients and those appointed to deliver the project should engage with groups such as installers and manufacturers to collectively review and critique the design. This lack of collaboration, according to the Farmer report, is at the root of the industry’s change inertia.

One Smithfield Square in Manchester is a project which benefitted from the use of BIM.

With all parties working on the project plan together and adopting digitisation through media such as Building Information Modelling (BIM), any issues that are recognised can be resolved whilst still in the design stages.

Without this engagement, projects often progress to the technical design or even the construction stages before stumbling blocks are identified; by this stage, they are already time-consuming and expensive to rectify.

Additionally, engaging with experts such as structural engineers, fabricators and manufacturers enables the end client is able to take account of the advice of specialists at the point where their input is of most value. Like Metsec, many of these stakeholders will have their own design capabilities that they can utilise, and BIM allows for this work to be done collaboratively.

Building Information Modelling (BIM) is the management of information through the whole life cycle of a built asset, from initial design all the way through to construction, maintaining and finally de-commissioning, through the use of digital modelling.

Metsec, for example, is accredited to BIM Level 2 and can offer design services to clients in the concept design stage. In practice, this means that a building, infrastructure or landscape can be designed and built using data sets and images digitally, even before the first spade goes in the ground.

BIM is all about collaboration between engineers, owners, architects and contractors — allowing design and construction teams to communicate about design and co-ordinate information across different levels that have been unseen before. It also helps to analyse any potential impacts that previously may have been overlooked or unforeseen.

The objective of BIM is to satisfy the three components of a successful project — namely time, cost and quality, by managing the project using a more efficient and reliable method of work.

With project costs an ongoing concern, particularly with public projects, the UK Government has recognised the invaluable role that BIM can play in controlling costs and timescales. Since April 2016, the UK Government has required construction suppliers tendering for centrally-procured Government projects, including buildings and infrastructure, to be working at BIM Level 2. What was industry best practice has now become a compulsory part of major projects.

A key issue that contributes to these budgetary and, often, timescale issues is the fact that a limited number of parties is engaged in the early design stages of the project. The end client, the architect and, often, a commercial team will work on the initial phase, but ultimately those who can advise and guide — namely the manufacturers and installers —are not consulted in this stage and are often appointed much further down the line of the project.

BIM play a key role in this building at 66b Queen Square in Bristol.

With major projects, early engagement of all delivery partners can have a significant impact on the project and ensure that the designs and construction methods are fit for purpose.

But it is more than just that. Whilst early engagement is key, it is early commitment to the design that is vital in keeping costs down and a project on-track. All parties need to finalise the materials, methods and timescales on the project in the early stages and commit to adhering to these elements throughout the delivery of the project.

Whilst BIM has been introduced as a compulsory measure for many public projects, it’s important for the industry not to view it as red tape or a restrictive burden, but rather see BIM as an enabler to streamline processes and work collaboratively in order to bring down costs for the overall project.

Ryan Simmonds is sales director for framing at voestalpine Metsec Plc.

Reference

(1) http://www.mckinsey.com/ industries/capital-projects-and-infrastructure/our-insights/ megaprojects-the-good-the-bad-and-the-better



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