Sector players are ensuring construction industry uses same cost measurements worldwide.
Despite rapid globalisation with investment funds flowing across borders and money pouring into constructed assets, the construction profession has, until now, lacked a common language and framework for classifying and reporting construction costs.
Launched this week, the new International Construction Measurement Standards (ICMS) – a universal system which enables global comparison of construction projects – will revolutionise the global construction industry by improving cost prediction in infrastructure projects.
TC Chetty, Royal Institution of Chartered Surveyors country manager for South Africa, says: “Financing desperately needed buildings and infrastructure, including energy systems, railways, bridges, schools and hospitals, can often be risky as infrastructure projects across the globe categorise and forecast the construction costs differently.
“Until now it has been almost impossible for governments and investors to compare construction costs. It is hard to know if public infrastructure projects are good value and this can waste taxpayer money.
“When estimating construction costs, this causes problems for cost consultants, quantity surveyors, construction economists and cost engineers around the world as research has shown approaches to presenting construction costs can vary significantly due to inconsistent methodology and standards.”
Tackling the problems head on, influential sector players formed the ICMS Coalition during a meeting of the International Monetary Fund in 2015.
For the first time at a global collaborative level, ICMS introduces a standard structure and format that will lead to greater consistency in classifying and reporting capital costs for construction projects.
Construction is a large contributor to national economies. To keep cities functioning, governments worldwide spend vast sums of public money on essential infrastructure. Inconsistent information causes poor cost prediction which impedes investment and can cause nine out of 10 mega projects to run over budget.
Overall, close to $78 trillion needs to be spent globally on infrastructure between 2014 and 2025, and the ICMS Coalition saw the need to de-risk the projects for public and private sector investors. The World Economic Forum has also called for professional collaboration to standardise cost definitions and classification.
The new ICMS standard enables better comparison to improve investor confidence and attract more private sector funding. Arup, Arcadis, Gardiner and Theobold, Faithful+Gould, Turner & Townsend and Gleeds are among leading organisations registered as ICMS “partners”.
See Lian Ong, chair of the ICMS Standards Setting Committee and chair of Commission 10 (Construction Economics and Management) and the International Federation of Surveyors, says: “With increasing levels of public-private, cross-border financing and construction investment funds underpinning our pension schemes, it is vital to make sure costs can be assessed in a transparent way. The ICMS framework will improve ways of working and this collaborative project is an example of the global construction profession uniting to improve ways of working for the public interest.”
The new standard harmonises cost, classification and benchmarking definitions to enhance comparability and consistency of capital projects. A report by McKinsey Global Institute, Reinventing Construction: A route to higher productivity (February 2017), finds the ICMS “will help clarify the costs of projects”.
Different approaches to presenting construction costs can lead to inconsistent methodology and cause significant variations and spurious cost comparisons. In some countries there are no standards creating barriers to foreign direct investment. The coalition believes financially constrained governments should be able to better understand information to make the right construction investment decisions and attract more private funding to help improve return on investment.
Chetty says: “ICMS will benefit all stakeholders with an interest in buildings and civil engineering construction, including developers, owners, occupiers, managers and investors by creating a common language for construction investment and enabling better benchmarking.”
See www.rics.org or call TC Chetty on 031 764 4645 or 083 264 3134 or email firstname.lastname@example.org
Independent on Saturday Property