Comparing Apples To Apples

The construction industry today is increasingly global, with investments and international expertise crossing national boundaries. For example, a power plant project in the United Kingdom could be a huge collaborative effort involving a British owner, a French designer and a contractor from China.

As investors, consultants and contractors invest and operate in projects across the world, the differences in approaches and inconsistent methodologies in measuring and presenting construction costs give rise to cost overruns, increased risks and corresponding disputes.

Research shows that people are not capturing costs as it should be, with nine out of 10 mega projects experiencing cost overruns. For example, the Channel Tunnel was over budget by USD21.1 billion and the 3 Gorges Dam by USD16.1 billion. 

Disputes in completion time and costs also result in adverse effects on the industry as a whole. According to a 2017 Arcadis report, Asia has the highest value of construction disputes in the world at USD84 million, compared with the global average of USD42.8 million, with disputes stretching for an average of 14.6 months.

There is a crucial need, therefore, for a standard and common vocabulary to discuss, compare and benchmark construction costing, budget and design on an apple-to-apple basis. An international cost measurement standard would help the industry to ensure construction costs are consistently and transparently benchmarked.

After all, investors need certainty in costs to weigh against yield and revenue, while organisations such as the World Bank and EU Commission need to know how to budget funding for development in developing countries.

A COALITION OF EQUALS
With this in mind, professionals in the construction industry decided to rise to the challenge to find a solution to the high risks and challenges associated with disparities in measuring construction costs internationally.

The International Construction Measurement Standard (ICMS) Coalition was launched in June 2015, at the International Monetary Fund (IMF) in Washington DC, United States. From an initial 17 participating non-profit professional organisations, the coalition now comprises 46 organisations from across the globe.

The guiding principle of the ICMS Coalition is that it has to be equal and collaborative, with each organisation having one representative each on the trustee board to elect its own officers. It is a voluntary, self-funded effort that is not too structured—intended for everyone to take ownership of the standard, so that it can be sustainable and all embracing.

The trustee board then appointed the Standard Setting Committee (SSC), a separate, independent entity comprising industry experts—academics, construction cost managers and consultants, project managers, engineers, quantity surveyors and even a Building Information Modelling (BIM) expert—who discussed and drafted the technical details for the ICMS.


A COMMON STANDARD

The ICMS was completed and published on 24 July 2017. It is available on the ICMS website (icms-coalition.org/the-standard/).

This practical high-level cost benchmarking and reporting framework sets out universal rules that provide consistency in classifying, defining, measuring, analysing and presenting project costs—such as labour, land acquisition, professional fees, client costs, as well as project attributes (greenfield/ brownfield).

It is not a detailed method of measuring construction works—each coalition member organisation will develop its own guidance for implementation within its own local rules and standards. For example, the Royal Institution of Chartered Surveyors plans to amend the existing measurement guidelines, the New Rules of Measurement, to accommodate changes from the ICMS. The Royal Institution of Surveyors Malaysia and Hong Kong Institute of Surveyors are also working on aligning their Standard Method of Measurements with the ICMS and BIM guidelines.

Apart from cost reporting and benchmarking, the ICMS can be used in investment and risk analysis, procurement evaluation, auditing and dispute resolution. This consistent, transparent benchmark will improve investor confidence and attract more private sector funding, benefitting clients, governments, funding agencies such as the IMF and World Bank, and, in turn, taxpayers, end users and software developers.

ICMS partners who have announced their intention to implement the new standard include commercial organisations, government and academic bodies, such as Turner & Townsend, Faithful+Gould, Arup, G20 Global Infrastructure Hub, EY and Arcadis. These partners and other industry players will assist in leading market adoption and implementation, as well as in giving feedback, suggestions and solutions for future revisions and improvements.


SR DR ONG SEE LIAN, KMN
Dr Ong is the chairman of the SSC for the ICMS, and also chairman of the Commission for Construction Economics and Management (Commission 10) of the International Federation of Surveyors.

Ong served as president of the Royal Institution of Surveyors Malaysia (2003–2004); chairman of Pacific Association of Quantity Surveyors (2003–2005); and board member of the Board of Quantity Surveyors Malaysia.

He was the 130th Global President of the Royal Institution of Chartered Surveyors (RICS) from 2011 to 2012, the first non-British citizen to be elected to the post in RICS’ 143-year history.

Graduating from the University of Reading, he served in the Public Works Department from 1974 to 1982, before joining JUBM Sdn Bhd as executive director until his retirement in 2010. Currently he is the chairman of Benchrisda Associates Sdn Bhd, a company devoted to dispute resolution and consultancy. He is also president of the Damansara Jaya Residents and Owners Association. 

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