RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
• BCIS Executive Director• Member of Treasury’s Infrastructure UK (IUK)
Infrastructure Data Group• Member of Cabinet Office/IUK Joint Data and
Benchmarking Group
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Benchmarking
What do we mean by benchmarking?
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Benchmark
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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)
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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.
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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 National Quantity Surveying and Construction Conference, 22 May 2012
RICS Guidance note
‘Benchmark is best in class…it does not mean the average’ (Cost analysis and benchmarking, RICS guidance note)
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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…
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Everyday benchmarking
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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)
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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!
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Benchmarking
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Primary Schools £/m2, 2Q2012, UK Mean Location
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Primary Schools £/m2, 2Q2012, UK Mean Location
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Government Construction Strategy
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Chart 5: Construction Cost Benchmarks for DEFRA / EA: Walls
UNCLASSIFIED
Cost Benchmark charts
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Future Benchmarks
Benchmarks to be published from the Regulated Sector
• London Underground• Network rail
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
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
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Achieving reductions
…to be continued
RICS National Quantity Surveying and Construction Conference, 22 May 2012
Government Benchmarks
Full details at:
http://www.cabinetoffice.gov.uk/resource-library/construction-cost-benchmarks
RICS National Quantity Surveying and Construction Conference, 22 May 2012
BenchmarkingRICS National Quantity Surveying and Construction Conference
J MARTINExecutive Director, BCIS
22 May 2012