UNIT 1 Quantity Surveyors in Construction

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1 UNIT 1 Quantity Surveyors in Construction 1.1 Introduction The design and construction of buildings can be regarded as a complex undertaking. Ideas and concepts must be transmitted through a convoluted network of individuals associated with the building development, with the objective of ensuring that the client s requirements are satisfied. 1.2 The Construction Industry The design and construction of buildings The design and construction of any building consists of a complex intellectual, administrative and logistical exercise that underlies the visible site activities. The latter, unfortunately, constitutes the typical image of the industry. Turner (1990) suggests that Construction is undeniably an enterprise, an act of boldness even for the simplest of building. For modern, complex buildings it involves the commissioning, management, design and assembly of huge amounts of raw materials and the use of considerable labour resources over a long period of time. Day (1997) extends this theme further by noting that it is misleading to consider that most of the activity on a building project occurs on the construction site. Most of the effort has to do with the processing of information in order to ensure that a design intention becomes physical reality. Information flows back and forth between the various members of the design team, manufacturers and finally the construction team. There is a steady build up in the flow of information until it reaches a peak during the construction phase where details must be finalised, materials and fittings ordered and any ambiguities in the information resolved. The site operative assembling and fixing a component in a specific part of the building is the final, but most obvious, part of a complex information processing chain. Almost like a complex variation of a child s game of chinese whispers. This suggests that communication of information is a vital element in the design and construction process. This is confirmed by Osbourn and Greeno (1997) when they suggest that all operational and management activities associated with the design, construction and subsequent Quantity Surveyors in Construction Unit 1-1

2 performance of a building rely on quite complex information being transferred between the various participants of the building team. This complex information consists of ideas and technical data that must be dispersed to a wide range of people of varying ability, professional and non-professional, skilled and unskilled. It is suggested that not only must methods of communication be used to clarify issues, but also should attempt to bring harmony to work processes and foster co-operation to ensure the maximum contribution from all concerned with the development process Characteristics of the Construction Industry The construction industry has fuzzy boundaries. Many activities and inputs contribute to building a construction project, but do not obviously form part of the industry. The Standard Industrial Classification lists the diverse nature of construction industry activities. The construction industry is often described as unique. The bespoke nature of the product and its location, separation of design and construction, involvement of a wide variety of people in its production are a number of factors. Housing is an exception because of its uniform nature. The housing sector is often likened to the manufacturing industry. The significance of the industry can be seen by its contribution to the national economy. In any country it makes a significant contribution to its gross domestic product (GDP). There is a huge diversity of firms in terms of size and range of activities operating in the construction industry. There are a very large number of small firms and a small number of very large firms. Information and activities of the largest firms can be found on the Internet. Such huge diversity of size can be explained by the diversity of products of the industry. Large firms tend to concentrate on big projects e.g. schools, hospitals, roads, office blocks etc. Small firms concentrate on small projects e.g. single dwellings, garages, minor repairs, odd jobs etc. There are local, regional, national and international markets for construction. Smaller firms concentrate on local and regional markets whilst bigger firms concentrate on national and international markets, though there are some overlaps. Clients of the industry may be classified as public or private sector. Traditionally the public sector has been responsible for building the country s infrastructure (railways, power stations, roads etc.), but with more private sector involvement this role is dwindling. Quantity Surveyors in Construction Unit 1-2

3 Clients of the industry are as diverse as projects, ranging from individuals to blue chip companies and Governments. A construction project can describe anything from minor jobs worth a few hundred pounds to multi-billion pound projects lasting many years. Projects are classified as housing, industrial, commercial, infrastructure or repair and maintenance for the purposes of compiling statistics. Activity in each sector fluctuates from year to year depending on the market. Study Task Refer to appendix 1.1 for a quick review about the various roles of construction industry professionals. Time management 10 minutes 1.3 Role of Quantity Surveying Quantity surveyors are involved in most of the professional organisations in the construction industry including consultancies, contractors, developers, subcontractors. They can be involved in both public or private sector organisations and their work spans various sectors and subsectors within the industry such as buildings, infrastructure, railways, utilities, transport etc. Traditionally the work of a quantity surveyor was thought to be limited to measuring and valuing construction works. This process can start during project initiation stage to set a budget for the client. Later on other estimates would be required during design development until the production of the bills of quantities. Finally during the contract a QS would be carrying out regular valuations of the works on behalf of the client and/or the contractor The Duties of a Quantity Surveyor Previously the duties of a quantity surveyor were limited to preparing bills of quantities and measuring the work in progress. Quantity surveyors were engaged by the client to give an initial estimate of the cost of the works. Upon completion of the design they would again get involved in assessing project cost and preparing the bills of quantities. As the industry developed there was a need for cost planning during the design and quantity surveyors role evolved into cost planning. When standard forms of contracts defined a claims process for contractors quantity surveyors were the obvious candidate to put together and assess the validity of a contractor for additional costs. Their knowledge of the cost and the contract placed quantity surveyors at the forefront of dispute resolution. The training of a quantity surveyor therefore evolved from measurement and evaluation to include contract administration and legal studies. Quantity Surveyors in Construction Unit 1-3

4 The RICS defines Quantity surveyors as the cost managers of construction. They define their role to span all project phases starting with the preparation of a project s capital expenditure until the operational maintenance and demolition of a facility. Today the RICS describes the role of the quantity surveyor as including the activities described below Project evaluation: preparing feasibility studies or development appraisals The quantity surveyor has the duty to advise the client on the feasibility and viability of a proposed development or project. This requires his involvement during the appraisal stage to assess the profitability of a scheme and give advice on financial aspects such as total cost, project funding sources, risks and whole life cycle costs. This might have to be done over a number of schemes to give the client options Pre contract cost planning During the precontract period the quantity surveyor has responsibility for setting the project budget and forecasting the project cost. This is one of the main tasks of the quantity surveyor. At this stage the QS would need to prepare a first estimate of the likely costs of a project and possibly various parts of a building. As the design develops the QS need to work alongside the design team to advise on the cost of various design options and solutions to help select the most cost effective. The aim is to control costs by monitoring the design process to ensure that the initially set project budget is not unnecessarily exceeded Post contract cost control - Commercial management of construction Post contract the quantity surveyor has overall responsibility for the financial management of a project during the construction phase. This can be for the client or contractor organisation. The main task is to continuously report on the financial performance of the project to make sure it remains inline with the budget. This task therefore involves quantification and costing of the works by preparing valuations to measure the work completed at defined intervals. This would necessitate involvement in the change management process to assess the likely cost of change. He also needs to monitor the expenditure of contingencies and prime sums to keep adjusting the contract sum if necessary. The quantity surveyor s other responsibilities at this stage include dealing with cost implication of extension of time, claims and preparing the final account Procurement advice Quantity surveyors have the responsibility of advising the client on structuring and delivering the project in terms of risk allocation and contractual relationships and use of tendering Quantity Surveyors in Construction Unit 1-4

5 processes to establish a contract price. This advise would naturally include the suitability of the various procurement routes to the proposed development citing the advantages and disadvantages of each Preparing contractual documentation One of the duties of the QS is to advise on the selection of the appropriate standard form of contract and prepare contract documentation for the project. They need to inform the client of their liabilities, obligations and duties under each form to enable selection of the most appropriate Tendering This most obvious involvement at this stage is preparation of the bill of quantities. The QS may also be involved in compiling the tender list through to contract award and appointment. This would involve preparing and issuing of the tender documentation and managing the negotiation and tender period. Throughout the tender period the QS is responsible for dealing with errors and answering queries of tenderers. He is also involved in the opening and evaluation of tenders through to the preparation of the final tender report Dealing with conflicts and disputes Conflicts in most cases are about money or can be settled by the exchange of money. The quantity surveyor as the cost manager of the construction process makes his involvement crucial in resolving any dispute. A quantity surveyor is also involved in the process of conflict avoidance and dispute. He needs a good knowledge of the various techniques of conflict management and dispute resolution to advise the client on the appropriate dispute resolution mechanism to the selected procurement route. He should also advise the client on procurement routes designed to avoid conflict such as partnering and provide him with information on the legal and statutory requirements for dispute resolution The Quantity Surveyors Skills and Competences Although the expertise of a quantity surveyor is mainly in cost management and contract administration to carry out these functions effectively he must possess other skills. They must understand all aspects of construction over the whole life of a building or facility. They must have the ability to manage cost effectively, equating quality and value with individual client needs. In order to carry out their main duties RICS defined certain skills and competencies that quantity surveyors must possess. Some of these are described below. Quantity Surveyors in Construction Unit 1-5

6 Construction technology and environmental services A QS should have the knowledge and understanding of the principles of design and construction. He should be able to liaise with other construction specialists to develop project specific design and construction solutions. He should have an understanding of the relevant legislation and regulations and how they apply to specific projects. He should also have an understanding of how construction process and different elements of the building work. This means he should be able to understand various elements of construction design and the relationship between construction details and the buildings functional elements. He should have an appreciation of the operational and maintenance phases of the project and provide solutions to respond to their complexity and problems. He should be able to report on the impact of various design solutions on cost and programme Programming and planning A QS would need to utilise pre contract planning and project programmes to deal with the implementation of change, forecast materials, manpower, machinery and money. In administering the contract he needs to determine the role of and contractual standing of a programme under different contract forms, advise the client on the financial planning of a project. He should be able to use planning and programming to forecast expenditure and assess the impact on the possible outcomes of change. He should also be able to asses the effectiveness of a project plan and the impact of procurement on the project programme. A QS should have a thorough understanding of the various principles, techniques and issues that relate to the programming and planning of projects Quantification and costing of construction works Key to the Quantity Surveyors responsibilities is the ability to measure and define construction works with aim of valuing and controlling costs. He should be fully conversant with the various prevailing methods of quantifying and pricing construction works in a project. He should be able to apply the appropriate standard method of measurement and forms of cost analysis to carry out the measurement and costing of works at all stages of construction. For this he needs to be able to assess the suitability of an appropriate pricing document and or method of measurement. They therefore need to be able to measure building work items, compile unit rates and the final cost estimate report, which is presented to the client and members of the project team. They also need to be able to collect data from various sources and manage subcontractors and suppliers. They must have a thorough understanding of the financial processes used to achieve profitability and how these integrate with the overall delivery of the project Quantity Surveyors in Construction Unit 1-6

7 Health and safety Like all the participants in construction industry quantity surveyors have a responsibility towards health and safety in any project they are involved with. They therefore need to be aware of legal, practical and regulatory requirements of health and safety. They need to be familiar with the health and safety processes and guidelines. A QS should have the knowledge and understanding of the principles and responsibilities imposed by the relevant law, codes of practice and other regulations Insurance A QS should have a good knowledge and understanding of the principles and practices governing the insurance of construction or property and understand the ways in which insurance is used to deal with risk in development. They should have a detailed understanding of the contractual requirements under the various standard forms of contract. Demonstrate knowledge and understanding of the principles and practices of insurance in relation to your area of practice. specific insurance mechanisms such as joint names, subrogation, net contribution clauses, specialist insurances such as performance bonds, professional indemnity and retention bonds. They are also responsible for compiling cost data for insurance claims Risk management A Quantity surveyor should have a detailed understanding of the nature, sources and types of risk in particular sectors. He should be capable of carrying out risk assessments applying the various methods and techniques to identify, analyse and measure risk. He should be able to advise on the relationship between procurement routes and risk allocation and the allocation of risk to the various project parties. He should also be able to assess the impact of risk on project programme and cost. Finally he must be able to devise the appropriate strategies to mitigate risk. He might have responsibility for compiling and reporting the project s risk register. He should be able to advise the client on the appropriate level of contingency Value management and value engineering A quantity surveyor might need to be involved in value management studies to advise a VM team on the cost implication of various decisions. His expertise might also be needed in a value engineering study where various value adding technical options need to be considered. Quantity Surveyors in Construction Unit 1-7

8 Negotiation The responsibility of a quantity surveyor towards managing and controlling cost puts in a position where he often needs to negotiate with other parties. This can include negotiation with suppliers and subcontractors to agree on the cost of items or negotiations to agree on an overall price or price mechanism for the works during tender. He is also involved during project administration to agree on measurements and certificates which involves negotiation with the other party s quantity surveyor. Finally in the event of a dispute the quantity surveyor may have to negotiate to agree on an adequate settlement to satisfy all parties. The quantity surveyor therefore has to have good negotiation skills. Study Task Students are strongly recommended to read the paper in Appendix 1.2 to understand different views on the quantity surveying profession. Time management 30 minutes The Quantity Surveyor as a Project Manager During the 1980s various procurement options were introduced in the construction industry. This meant that tendering no longer had to rely on the use of bills of quantities. There was concern among the quantity surveying profession due to the perception that the need for bills of quantities was in decline. The profession led by the RICS then started to explore new potential roles for their expertise. This was at a time when the industry itself was undergoing a process of development and reform in the management of projects. The profession in seeking to redefine itself found many parallels between the skills of a professional quantity surveyor and the competence of a project manager. Areas such as cost control, the need to understand the impact of the programme on cost, the use of risk management and value management to enhance project performance were seen as areas where a QS can have significant input. The profession therefore called to quantity surveyors to act as project managers. Many quantity surveying firms started to add project management to their list of services. If a QS acts in the capacity of a project manager then he needs to follow not only his professional duties as a surveyor but also the code of practice describing the duties of a project manager. Some of the competences identified by the Association of Project Management UK that match those of a quantity surveyor include: legal awareness, project sponsorship, project finance, negotiation, teamwork, communication and change control among others. Quantity Surveyors in Construction Unit 1-8

9 1.4 Ethics and professionalism Ethics is derived from the Greek term ethos, and has its roots in the word customs. It is the study and understanding of morality, moral principles, and the moral decision-making process. As such ethics deals with an individual s standards of what is right and wrong, or good and evil. It is related to moral norms and values which can be expressed using statements such as Always tell the truth or Honesty is good and Injustice is bad. The aim is always to ensure the benefit of humanity. We achieve ethical behaviour by constantly referring to our set of principles and applying them to particular situations thereby making choices in our lives. Ethical behaviour is not limited to our personal lives but also applies to our business or professional lives. Businesses and organisations in business are made up of individuals whose collective moral standards and ethical behaviour set the ethics of their business. Business ethics therefore is about how moral standards apply to business policies, institutions and behaviour (Velasquez, 1996). Business activities, like any other human activities, cannot exist unless the people involved in the business and its surrounding community adhere to some minimal standards of ethics. Any business decision needs to refer to the personal ethics of the person making the decision and the ethics of the business overall. Profession is can be defined as a job that needs training and a formal qualification of a vocation in which professed knowledge of some branch of learning is used in its application to the affairs of others or in the practice of an art based upon it. This definition clarifies that professions do not exist in vacuum. The existing of professions and professionals is considered vital in the provision of services to larger society. In providing a service to others the behaviour of a professional has a direct impact on others and on society. One of the key characteristics of a profession is that it is regulated by an ethical standard. One distinguishing feature of any profession is that membership in that profession entails an ethical obligation to temper one s selfish pursuit of economic success by adhering to standards of conduct that could not be enforced either by legal fiat or through the discipline of the market. Both the special privileges incident to membership in the profession and the advantages of those privileges give in the necessary accumulation of wealth. That of public service. Quote from Supreme Court Judge Sandra Day O Conner (Source: National Society for Professional ethics). Quantity Surveyors in Construction Unit 1-9

10 Most professions existing today are regulated by some form of professional institutions that defines and regulates the profession. As such professional institutions link the professionals to the public. Most professional institutions to ensure the well being of their profession need to set certain rules of conduct to which their members must adhere. Generally these codes relate to issues such as: integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour. All these issues indicate the need for a professional to act ethically Conflicts of interest A major part of the quantity surveyor s role is giving advice to the client. This advice needs to be based on their skill and expertise in assessing financial and commercial aspects of a project. The client needs to trust them to give him the best advice possible. The most part of a quantity surveyor s role in construction is consultancy. We describe their involvement as advisers to the client on cost, procurement, commercial managers and so on. According to Peter Drucker (1999) a true professional cannot be controlled supervised or directed by the client. Decisions have to be entrusted to their knowledge and judgement. As such quantity surveyors in their role as consultants need to act in accordance with their professional judgement unbiased by the overriding needs to their employer even if the employer is the one who is paying for their service. A situation that raises these issues for quantity surveyor is their role in contract administration where quantity surveyors act as employer s agent. In this role a quantity surveyor in the project puts him in a situation where he often has to give his professional opinion with regards to the standing of the parties. This opinion might contradict with the client s interests. However as professionals quantity surveyors need to bring integrity and competence to their work giving their unbiased view on the standing of the parties. 1.5 Quantity surveyor s contractual duties and liabilities The processes of measurement, valuation and contract administration are present in some form in any construction contract. Whether it is for the client, contractor, contract administrator or engineer a quantity surveyor will be employed to carry out these functions and would need to enter into a contract for employment. This may be a letter or a standard form of agreement for the appointment of a quantity surveyor published by RICS for example. His obligations are therefore governed by the terms of his employment contract. These contract terms maybe express or implied. Additionally a quantity surveyor is bound by the codes of practice of the profession he belongs to. If the standard of his work is below these codes then he might be seen by the courts as negligent in his duties to his employer. Quantity Surveyors in Construction Unit 1-10

11 Finally the quantity surveyor is liable to third parties even in the absence of a direct contract with them. An example is a situation where the quantity surveyor has given advice to his client and a third party used this advice and consequently suffered a loss. If a third party has made a decision based on a quantity surveyors advice to another party then he might be liable. This liability can be incurred through the law of tort particularly the law of negligence. If a surveyor negligently provides statements that other parties rely upon then he may be sued for economic loss as a result of making negligent misstatement. Finally with relation to a contract and as a professional the quantity surveyor often has to give an opinion about certain aspects of the works for example in assessing contractor s claims. His obligation under the contract is to give his true opinion and not that which would put the client, his employer, in a favourable position. As contract administrator he should act in fairness to all parties within the terms of the contract. His actions should be based on the contract to which both parties agreed even if these terms are not fair. The quantity surveyor of the contractor on the other hand is under no such obligation since his duties are limited to looking after his employer. Self Assessment Questions 1. Refer to the website of the Royal Institute of Chartered Surveyors and write down the role of the institute towards the profession 2. Think about the duties of a project manager and discuss how the capabilities and skills of a quantity surveyor can help him/her fulfil these duties. 3. Think about 3 situations where the quantity surveyor s ethical standards might be tested. Quantity Surveyors in Construction Unit 1-11