The globetrotting QS

The IT revolution that has taken place over the last decade has changed the way business is conducted across international borders and time zones. In particular, the role of cost consultant has developed in terms of speed of communication – not least in the way global projects are managed. The role we take up for clients is a mixture of cost agency, auditing and project management. It’s about collating and processing the proper information for the client, who is based such a distance away from the actual project.

Northcroft’s recent experience in the high-end retail market serves as a good example of how cost management roles and responsibilities have developed on the international scene, facilitated by the e-revolution.

The firm recently completed a $14m (£8.1m) store for Ralph Lauren in Milan and is currently working in Tokyo on a $32m (£18.6m) store. For each project the client’s design house is based in New York and the client’s project manager in Paris.

The Italian Job

Preparation of the two-stage tender enquiry document proved interesting. Taking a UK document and turning this into the “Italian model” was not just a case of translation. The actual terms for preliminaries and how the price structures work in Milan had to be interpreted and re-tuned for the Italian market. There were also talks with the lawyers in Milan as the Italian standard form of contract was amended to take on the chosen procurement route.

In Milan a two-stage form of procurement with a single lump sum for the demolition and structural work was adopted to manage the fluid nature of a high-end retail fit out. This was unusual in Milan and only tends to be adopted with Anglo/American clients in that city.

Language never became an issue, with all participants chosen for their fluency in English on both a technical and non-technical level

Retention percentages and stage payments were dealt with in a similar way to the UK. The main issue in the Italian contract was that the lawyers had to amend it to ensure the two-stage process was clearly described in the contract. This, of course, had to be “back to back” with the sub-contract agreements. Overall, the Italian and UK standard forms are similar.

A second feature in the tender documentation was that definitions of profit, risk and overheads were dealt with in a different way. The main contractor applied a standard mark up to the construction works, a second percentage uplift was then applied for attendance (or assistances) which served as a type of overhead percentage on each of the sub-contractors. This included specific items such as health and safety attendance, scaffold towers and so on. The first-stage main contract preliminaries figure primarily included for management and supervision and key items of major plant and equipment. The attendance figures are standard in Italian construction and do vary from trade to trade (on the Milan project it was 11% on services, 5.5% on general trades). Regarding specific trades such as masonry, plasterboard, builder’s work, there is a standard Italian rate book for these and no attendance figures were applied.

Interestingly with this project the second-stage figure was never agreed until the final account, as the nature of a creative retail project involves many changes. This risk was managed by the client, rather than transferred to the contractor. It required a rigorous cost control regime, but also meant the client did not pay significant risk premiums agreeing a second-stage lump sum. There is risk attached to this approach but it worked because the contractor did not pass domestic costs to the client and managed the issues internally.

Problems on site in Milan (and Tokyo) were solved at local level as sorting out the issues, both technically and commercially, requires an understanding of the business nuances, both in culture and language. There is also no doubt that discussions on site in Italy can become highly animated.

The key to keeping the issues open was in Northcroft continually preaching the message for best communication with many flights back and forth to Italy to give presence and a more human element to the process.

Problems on site in Milan were solved at local level... there is no doubt that discussions on site in Italy can become highly animated

Having a local office at the workface and a bi-lingual architect, design team and contractor meant the up-front reporting was well managed.

Meanwhile, in Japan…

Recent experience with retail clients has shown that preparing cost plans tends to be an iterative process. In Japan this has certainly been the case.

Using an office overseas to prepare B of Qs is not a new way for a QS to operate. Providing the brief is clear and the work packages are well defined, the system works effectively (the cost base for fees also being lower). Naturally the choice of projects is important; refurbishments, for example, are not always appropriate. One also needs to be wary of the fact that a “remote” worker in the Far East might only take what they see on the drawings and not anticipate the gaps. This aspect requires close attention UK-side to ensure the pricing schedules are comprehensive.

In general, final account negotiations are best left in the language on the ground and again Japan, as was the case in Italy, will be no different in this respect.

Developing a relationship between international teams is rewarding and provides a broadening of experience

Currency is a straightforward issue on these projects.

The key to making the system work is the bi-lingual workforce in Tokyo and an awareness in London of the cultural sensitivities involved.

The B of Q preparation worked well as Kuala Lumpur is in the same time zone for easy access to Japan and for face-to-face liaison with the design team at certain key meetings.

Developing a relationship between international teams is rewarding and provides a broadening of experience if conducted with the right level of communication and awareness. It does place the cost consultant/management role into its strongest context. The lessons learned can develop the profession in the UK too – simply by understanding the wider issues of international commerce and improving communication skills.

Amazingly, with these projects, language has never become an issue, with all participants chosen for their fluency in English on both a technical and non-technical level.