How beneficial are cost consultants in the GCC?
Regional cost consultants tell Martin Cooper why project success is intricately linked to the decisions made during the feasibility and concept stages
All construction projects – big and small – use them, but the role of cost consultants has typically been underplayed compared to other project team participants.
The cost consultant provides estimates and advice regarding the cost of construction works. This role covers an array of duties, making the job one of the key positions in a successful project.
Ordinarily these duties might include such tasks as helping to determine the client’s requirements and undertaking feasibility studies, assessing and comparing options, helping to define the project budget, checking that designs meet legal and quality standards, and estimating the cost of variations. The list goes on.
With such a broad range of duties and skills, it’s little wonder that many construction professionals consider the early involvement of cost consultants key to a project’s success. Delaying their involvement, as sometimes happens, can have dire consequences further down the line.
Historically, construction budgets are vulnerable to the conflicting objectives of their key stakeholdershis can influence expectations and behaviours for project or programme lifespans. All too often, schemes are commenced with little or no cost advice, as Faithful+Gould’s director for commercial services Middle East, Donal O’Leary, explains.
“Early involvement of cost consultants allows us to properly assess client priorities and scope definition, and how these can influence procurement and contracting strategies to set realistic, considered, and reliable budgets within which to manage project delivery,” he says.
It is not just procurement and contracting strategies that benefit from early cost management. The benefit of sound and early cost advice to any client is financial predictability. Creating a sound model for the asset before the design is developed beyond a conceptual idea provides a target for what the development should cost, as opposed to what it could cost.
Arcadis’ head of Middle East markets, Christopher Seymour, explains: “The cost consultant’s role begins with the design management team in preparing the business case for the scheme. The development cost thus becomes a measurable success factor for the project.”
A project team will most likely need cost consultants who boast specialist asset-class knowledge that they can combine with the latest global best practice for any particular type of development. The regional shift towards mixed-use developments means this has become even more prevalent, with multiple possibilities available for asset-class mix and the development’s financial viability.
But does having a cost consultancy on board for a project at the outset require additional investment? And if so, how much?
Steve Gee, Aecom’s programme cost consultancy director for the UAE and Oman, says: “We fully believe that any additional monies spent at the early point [are] completely overshadowed by the potential for significant additional expenditure if the project fundamentals are changed later within the development lifecycle.”
Early costs at the budget preparation stage can be offset by the costs of carrying out a budget verification stage, which is generally labour intensive. Early involvement means costs are spread, whereas if cost consultants are brought in later, the budget verification costs would be taken in one hit.
Hill International’s vice president and country manager, David McOmish, says it is “impossible to put a monetary value to” the role of cost consultants joining the team at the outset, since at “least one element of the calculation would be theoretical”.
“That said, early involvement provides employers with an achievable and auditable budget, credible value engineering, a risk analysis, reasonable cash flow forecasts, and easy-to-follow contract administration procedures,” McOmish adds.
Early engagement also helps to avoid delays considering the practice of changing of project fundamentals after the concept stage is one of the largest contributors to delays.
Quite often in the Middle East, fast-tracked and pre-contract stages turn out to be anything but speedy. This is due to the project’s basics being changed after the early gateways. As well as additional expenditure, this contributes significant pressure to finish the detailed design as quickly as possible to catch up with schedules.
“This is a complete false economy,” Aecom’s Gee says.
“It is much better to spend the time upfront making the decisions that matter, and then maximising the remaining time available [to detail] out the design thoroughly. Disputes can arise from numerous sources, but by adopting this approach, you will obtain a set of design documentation that has been thought through in greater detail.
“Therefore, a clearer picture will have been established for what the contractor is responsible for building. That in itself will significantly reduce the opportunity for disputes as the ambiguity will be greatly removed,” he adds.
Programmes that commence without a considered financial footing can also become subject to delays and disputes.
Even as design progresses to match a client’s aspirations, it must remain affordable. Historically, regional projects have faltered because cost consultants have been enlisted to provide cost reports at certain intervals, rather than to proactively manage costs throughout the development’s total life cycle.
This approach can result in ineffective cost control from the outset.
Because cost consultants are multi-taskers, Hill International’s McOmish says that the term ‘contract administrator’ best describes his role.
“Contract administrators are able to identify risks and potential delays before they become critical to the completion date or the budget. Thereafter, they are able to administer and follow contract obligations protecting contractor entitlements to time and cost where applicable, and allowing mitigation measures to be implemented, [thus] potentially reducing costs and effects on the completion date,” he says.
Clearly, then, the success of any project can be directly linked back to the decisions that were made during the feasibility and concept stage. Project teams need to move on from the conceptual stage with a clear roadmap that allows them to focus on providing the very best design instead of a document that hampers project progress.
Gee concludes: “The benefits are simple. Time costs money and the later a change is implemented within a development’s life cycle, the more it will cost.
“The message is always simple to our clients: spend the time at the feasibility and concept stage, make all the key decisions at this early point. If you do that then the chances of achieving a successful project increase dramatically.”