Transcript No Slide Title

Presentation to CIIA Conference
October 11, 2000
by
Mark Langdon
CII
Construction
Industry
Institute
Australia
The Present Environment
Business
Practices
Productivity
Commission
Reduced
Space
Requirements
Energy
Management
Building
Industry
Environmental
Sustainability
Aust.
Greenhouse
Office
Reduced New
Construction
Surplus
Building
Stock
CII
Construction
Industry
Institute
Australia
The Present Environment
Functional Requirements
Financial Influence
Building
Organisational Influence
Physical Characteristics
Adapted from “Facilities Management and the Business of Space” - McGregor
& Shiem-Shin Then
CII
Construction
Industry
Institute
Australia
Life Cycle Costs over 50 years
67%
Occupancy costs
15%
Operating costs
7%
Finance costs
11%
Capital costs
0%
50%
“Recurrent Costs - A Role for the Quantity Surveyor” - Hatzantonis
100%
CII
Construction
Industry
Institute
Australia
Current Situation
“The new gurus talk about vision or strategic
intent of companies, but usually architects and
suppliers of physical space are not given much
opportunity to link the process of designing office
space with such strategies”
CII
Construction
Industry
Institute
Australia
Current Situation
Given the general acknowledged link between
the workplace environment, employee
satisfaction and profitability, senior managers do
appear to be missing an opportunity to manage
the working environment for competitive
advantage
200 Financial Directors and Managing Directors - Gallup Poll , commissioned
by Workplace Management
CII
Construction
Industry
Institute
Australia
The Future
• Corporates are becoming more and more
obsessive about performance measurement
• Building owners and occupiers are becoming
aware of the actual physical work environment
on worker performance and the resultant effect
on business performance & profitability
• High performance building design can improve
business efficiency by 30 - 40%
G. De Valence - Senior Lecturer in Construction Economics - UTS
CII
Construction
Industry
Institute
Australia
The Future
• Buildings must allow maximum workplace
flexibility
• Be able to respond to changes in the shortest
time possible in response to the “technological
explosion”
• Add value to the business and increase
shareholder wealth and make the business more
competitive
Various speakers at PCA Corporate Real Estate Conference 2000 - Melbourne
CII
Construction
Industry
Institute
Australia
The Value Curve
Best Value for
Money
Cost
Life Costs
Capital Costs
Current
Industry
Focus
Operating Costs
Durability
CII
Construction
Industry
Institute
Australia
The Revised Value Curve
Cost
True Best
Best Value for Value for
Money
Money
Optimum
Corporate
Performance
Life Costs
Opportunity
Gap
Durability
CII
Construction
Industry
Institute
Australia
The Objective
To create and maintain intelligent facility
environments which allow the user organisations
to achieve their business objectives, while
maximising the effectiveness of the occupants
and minimising life-cycle costs.
CII
Construction
Industry
Institute
Australia
Good Performance Measurement Framework
Effectiveness
Efficiency
Organisational
Objectives
Design Inputs
Building
Performance
Organisational
Results
CII
Construction
Industry
Institute
Australia
Lockheed Missile and Space Company
6000 sq. metres
2700 Staff
Reduce Energy > 50%
CII
Construction
Industry
Institute
Australia
Lockheed Missile and Space Company
Energy costs halved
Lighting costs reduced by 75%
Energy efficient improvements
added $2M to $50M construction cost.
Energy savings were $0.5M pa.
Payback period 4 years
Absenteeism reduced by
$
15% & productivity
increased
$
CII
Construction
Industry
Institute
Australia
Lockheed Missile and Space Company
• The reduction in the absenteeism rate paid for the
extra energy efficient construction in less than 1
year
• Lockheed management claim that the improved
productivity gave them the competitive edge that
helped them win a $1.5 billion contract
• The profit made from this contract more than paid
for the entire construction cost of the building
CII
Construction
Industry
Institute
Australia
Albury Hospital
Capital, maintenance, energy
& other operational costs
comprised only 12% of the
total life costs
Staff salaries & other labour
services accounted for over
70% of the total life costs
The greatest scope for reducing costs lay in the
actual functional operation of the facilities
CII
Construction
Industry
Institute
Australia
Albury Hospital
The design team included:
• Hospital administrators
• Health planners
• Architects
• Engineers
• Services consultants
• Contractors
• Cost experts
CII
Construction
Industry
Institute
Australia
Albury Hospital
• Focus on staff hours per patient
• Focus on life costs rather than initial capital
costs
• Changing engineering standards to emphasise
performance during design life
• Shift from high rise to low rise construction
CII
Construction
Industry
Institute
Australia
Albury Hospital
•
•
•
•
•
Substantial reduction in hospital floor area
Reduction in operating and capital costs
Capital cost 40% below budget
Dramatically reduced recurrent costs
Significant productivity increases
CII
Construction
Industry
Institute
Australia
ING Bank - Netherlands
The brief:
• integrate art, natural materials, sunlight, energy
conservation, low noise levels and water usage
• be functional, efficient and flexible
• be human in scale
• have low running costs
CII
Construction
Industry
Institute
Australia
ING Bank - Netherlands
The design team consisted of:
• Architect
• Construction engineer
• Landscape architect
• Energy expert
• Artists
• Bank’s Project Manager
CII
Construction
Industry
Institute
Australia
ING Bank - Netherlands
The results:
• energy consumption is less than one tenth of the
bank’s previous headquarters
• savings in maintenance costs of US$2.4 M p.a.
• absenteeism reduced by 25%
• enhanced corporate image
CII
Construction
Industry
Institute
Australia
ING Bank - Netherlands
The results:
• based on reduced running costs alone the
payback period for the extra money spent on
design and construction was only 4 months
• The value of the building to the bank has been
greatly increased:
– employees voluntarily work longer hours
– productivity has improved
– business has increased
CII
Construction
Industry
Institute
Australia
Present Research
• Most organisations still consider buildings as an
operational overhead rather than having a
strategic value
• There is a deficiency in the understanding of the
relationship between buildings and the
operational performance of the people who use
them
• There is an increasing gap between building
environments and the needs of the organisations
which use them
Prof. D. Mc.George & Dr. M. Loosemore - UNSW
CII
Construction
Industry
Institute
Australia
The Problem
“ Higher priced designs that enhance productivity
may make more economic sense. Yet without
an economic method for systematically including
productivity benefits in building Life Cycle Cost
analysis, these designs cannot be justified.”
“Productivity Impacts on Building Life-Cycle Cost Analysis” - Lippiat and Weber
CII
Construction
Industry
Institute
Australia
The Research Objectives
CII
Construction
Industry
Institute
Australia
The New Market Opportunity
“If existing facility owners
and users can be
Business
Building
shown that retrofit
Performance
Environment
designs based on
accurate occupancy cost
analysis can produce
Increased
considerable benefits with
Market
short payback periods
Opportunities
and increased profit levels, the
construction industry may well
see a boom in retrofit work”
Peter Smith - Senior Lecturer Construction Economics UTS
CII
Construction
Industry
Institute
Australia
Who Needs To Involved?
A multi - disciplinary approach is required
•
•
•
•
•
•
Facility Owners
Architects
Engineers
Government Bodies
Services Authorities
Environmental Experts
•
•
•
•
•
Energy Experts
Construction Cost Experts
Facilities Managers
End Users
Organisational Behaviour
Experts
CII
Construction
Industry
Institute
Australia
The Project Delivery Approach
Develop
Commonality
of Purpose
and Joint Ownership
of Project
Integrate
Design,
Construction
& FM
Determine
Client “Value”
Develop Continuous
Improvement within the
Supply Chain
Better & More
Valuable
Facilities
Use Target Costing,
Risk Management &
Value Management
Manage Costs
Collaboratively
CII
Construction
Industry
Institute
Australia