Readers react to our recent feature on QSs failure to price projects accurately
Time to go back to basics
In response to your article “Foresight saga” (12 June 2015, pages 20-22), the contractor pricing started to rise as early as 2013 when we saw a sudden pick-up in demand. This was helped by low interest rates, Help to Buy, improving employment and the consumer price index falling to more normal levels. This seemed to take the industry by surprise and then the focus was on managing the recovery. The first part of this “recovery” was felt in projects priced and let in 2013, or shortly thereafter, and we witnessed a number of subcontractors rebel against the once more powerful main contractor and push up prices for the first time.
Moving forward as a sector we have to become more flexible when allowing for inflation in contracts and devise more innovative methods of managing it
Sharlene Roderique, John Rowan and partners
This push reduced margins and introduced the risk of delay to some schemes. A key challenge for QSs has been forecasting inflation due to differing views on its direction. Since early 2014 we have been advising clients that the Building Cost Information Service (BCIS) forecasts are likely to be increased.
The forecast figures on BCIS are national and therefore don’t take into account regional variations. At present they are around 4-6% which is very low in comparison to our experience in regions such as London where it has climbed nearer to 20% within the last 12 months. Moving forward as a sector we have to become more flexible when allowing for inflation in contracts and devise more innovative methods of managing it (for example, more open book accounting). This includes understanding main contractor attitudes to subcontractors, more collaboration and forming closer relations with supply chains to keep our “ears to the ground”. In terms of practical advice for clients and managing the impact of a “wrong price” it’s really about going back to basics – a hard lesson learnt for the QS firms who have been getting it wrong for the past few years. This is something we’ve been advising the affordable housing industry on for some time, most recently at the Chartered Institute of Housing conference in March.
Sharlene Roderique, head of the inflationary risk team at John Rowan and Partners,via email
A defence, in poetry
I am not usually moved to print, but felt duty-bound to respond to the mass attack made on QSs in Building magazine (“Foresight saga”, 12 June 2015, page 20-22). Firstly, the 10% “error” in professional quantity surveyor (PQS) forecasts referred to seems centred on the London market where it has been apparent that greater volatility exists; the rest of the country is more consistently and slowly gaining back ground lost in the recession.
I cannot recall any articles from your writers in Building magazine 12 months ago predicting a 10% increase over and above the predicted tender inflation at that time. Hindsight is a wonderful thing. It is also a safe bet in my book that if a PQS is 10% out, then non-PQSs (article writers, etc.) would have been at least 20% out.
Most cost plans are written at least 12 months before tenders are sought – has anyone successfully predicted the markets (with a 100% success rate) a year in advance? I am including the chancellor, renowned economists, etc., in this category. We would all be billionaires if we could. PQSs don’t make the market – we follow it. Yes, we have to interpret it and then forecast it, but if we made it, that would suggest a degree of manipulation (which is usually illegal).
Decisions were made by contractors during the crash to cost site staff at zero and apply negative profit margins to tenders. We, as PQSs, cannot make such speculative forecasts in putting together cost plans. And, if an unexpected windfall came the client’s way by this process, how can they now complain when the system comes back to bite them now?
How many projects would have been consigned to the scrapheap if the PQS had added 10% to his cost plan 12 months ago? Then we would have been blamed for the demise of the job by adding too much “fat” into our estimates (again by the so-called “experts”).
We are advised by editor Sarah Richardson to rely more on anecdotal evidence. Perhaps we should nip round to the pub to talk to any local subcontractors and adjust our cost plans accordingly based on their advice? As long as there is a degree of uncertainty about the future, mankind will thrive. Take uncertainty away and what will there be left to hope for or fear?
Finally a poem written at least 12 months ago:
The Poor Quantity Surveyor
The creativity of an architect
Is never questioned or pondered,
The calculations of a structural engineer
Are never drifted away from or wandered,
The mechanical engineer
Pronounces assuredly with scientific fanfare,
Nobody challenges the number of changes per hour
That he has applied to the air;
The electrical engineer
Gives us ohm, volt and watt
Nobody stands up and shouts
That there is something he must have forgot,
These disciplines and others
With this singular advantage are blessed
But as soon as a quantity surveyor mentions a figure
Everybody else suddenly knows best
Paul Reed, senior quantity surveyor, Thornton-Firkin, via email
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