A universal system that enables global comparison of construction project costs launches today.
Financing desperately-needed buildings and infrastructure including energy systems, railways, bridges, schools and hospitals can often be risky because 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 like with like. It is hard for them to know if public infrastructure projects are good value and this can waste taxpayer money.
Tackling these problems head on, a group of influential sector players got together and formed the International Construction Measurement Standards (ICMS) Coalition during a meeting at the International Monetary Fund in June 2015.
“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.” says Simon Longstaffe, Faithful+Gould Regional Director
“ICMS will benefit all stakeholders with an interest in buildings and civil engineering construction...”
Simon Longstaffe, Faithful+Gould Regional Director
Construction is a large contributor to national economies and to keep cities functioning, governments worldwide need to spend vast sums of public money on essential infrastructure. Inconsistent information causes poor cost prediction which impedes investment and can cause 9 out of 10 mega projects to run over budget.* Overall, close to $78 trillion needs to be spent globally between 2014 and 2025** on infrastructure and the ICMS Coalition saw the need to de-risk these projects for public and private sector investors. The World Economic Forum has also called for professional collaboration to standardize cost definitions and classification.***
The new ICMS standard enables, for the first time, better comparison in order 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 who publically announce their support for ICMS by registering as ICMS “Partners” committing to its future use.
See Lian Ong, Chair of the ICMS Standards Setting Committee and Chair of Commission 10 (Construction Economics and Management) the International Federation of Surveyors, explains: “We are delighted to launch this new standard. 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’ (Feb 2017), finds that the International Construction Measurement Standard ‘will help clarify the costs of projects.’
Different approaches to presenting construction costs can lead to inconsistent methodology which causes significant variations and spurious cost comparisons. In some countries, there are no standards at all creating barriers to FDI. The ICMS Coalition believes that 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.
Simon Longstaffe, Regional Director, Faithful+Gould, UK, said “The lack of a uniform approach can lead to confusion and the inability to compare schemes and assets within schemes on a like-for-like basis. ICMS achieves uniformity by standardising the high level presentation of costs on projects by providing global consistency in classifying, defining, analysing and presenting construction costs at a project, regional, state, national or international level.”
Ken Creighton, UK, Chair of the ICMS Coalition and Director of Professional Standards at RICS: “It is the duty of professional bodies and associations to lead advances in standards which improve our ability to manage risk. As a new international standard ICMS provides an enabling framework which promises to inspire our profession and add direct value to the public.”
* Bent Flyvbjerg, is a Danish economic geographer. He is Professor of Major Programme Management at Oxford University's Saïd Business School. He has estimated that 9 out of 10 mega projects (infrastructure developments over US$ 1 billion) go over budget. http://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/megaprojects-the-good-the-bad-and-the-better. ‘Reference-class forecasting’ is cited as a solution for this issue. An alternative name for this is construction cost prediction and cost benchmarking which is central to the benefits of the new International Construction Measurement Standards which will help provide the right data in the right standardised form. ** Oxford Economics and PwC, research: http://press.pwc.com/News-releases/infrastructure-spending-to-more-than-double-to-9-trillion-annually-by-2025/s/e4ea4334-fdfc-4504-9273-c2e545faeb8e *** ‘Shaping the Future of Construction’ report, World Economic Forum and Boston Consulting Group, page 40, February 2016: http://www3.weforum.org/docs/WEF_Shaping_the_Future_of_Construction_full_report__.pdf