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Achieving a balance between technical risk and financial rigour

August 2016

Considering the need for the industry to evolve quickly, combining business and legislative drivers to move towards nearly Zero Energy Buildings (nZEB) the first step on the journey is to understand how we can achieve a balance between technical risk and financial rigour.

 

The built environment industry is incredibly risk-averse, which is leading to under-performance in new development that is neither environmentally or economically sustainable.

This arises as a function of large, expensive and complex projects where investment is provided by (typically) one source and the output is delivered by numerous individual companies collaborating (for the most part) over a relatively short time-frame. There is a lot of uncertainty in the numbers at the start of a project, which are refined throughout the design process through a combination of increasingly detailed design and specification, and ‘value engineering’. Equally, there is no single party with ownership of the design; buildings are created by committee teams with limited focus, ring-fenced areas of responsibility and little room for compromise.

The conventional approaches of “we’ve always done it like this” and “we know this works” seriously impede our ability to evolve, as they inherently lead to the conclusion: why try a new (and probably better) approach or consider an alternative way when it will cost more and result in greater risk for those involved.

This problem is exacerbated at a time when we need to be looking to new approaches, technologies and ideas more than ever, in order to mitigate the built environment’s contribution to catastrophic climate change. You can’t change the game when those involved don’t even want to play.

 

To enable economic and environmental development to come to the fore we need to overcome the logjam presented by conventional approaches.

Outside of the built environment, other engineering industries take a much more pragmatic approach to evolution. Innovation, research, product development, performance guarantees and quality assurance all prevail in aerospace, automotive, design and manufacturing industries. Customer is key and you have to evolve to survive.

Obviously, our industry is fundamentally different to these, but there are lessons to be learnt. The focus on R&D, rigorous testing of concepts prior to market release, beta testing, offering up “trial” versions at low (or no) cost prevail. Innovation is not a dirty word and this allows companies to thrive!
Drawing parallels in the built environment is hard, because of the multi-company collaborative approach, whereby the ‘product’ doesn’t come from just one company and therefore over-arching business risk isn’t owned. If things are going to change we need to figure out how to link technical development and evolution to financial performance.

 

What would this look like?

A change in the funding model we use for buildings could be the key – using long-term contracts between client/occupier, architect, building services/environmental engineers and main construction contractor. This could facilitate early stage engagement from everyone; clear brief and understanding of operational requirements from the off; on-going discussion and review as the design and construction progress; buy-in to passive approaches, servicing strategies, control and monitoring; and support through the initial phases of handover, commissioning and operation. The Soft Landings Framework could facilitate, the Australian NABERS Rating System provides the contractual mechanisms; the buildings delivered would respond directly to the occupants’ needs and answer many of the shortfalls found by the Innovate UK Building Performance Evaluations.

On a more basic scale, an enhancement of the Private Finance model could facilitate joint ventures between design and construction teams that work alongside the intended occupiers from day one. Expansion of the areas covered by Energy Performance Contracting could create performance driven funding for new builds as well as refurbishment.

Something a little more avant-garde is lifetime engagement between a project team and the asset they created. Paralleling approaches from other engineering industries the building would be maintained and upgraded by the companies that designed and built it for the whole of its operating life. This could forge a strong relationship between design, build and operation teams; enabling continual optimisation, minimising the loss of knowledge and learning lessons directly from the subtleties of real world performance. There are already some precedents for this kind of approach where companies have been responsible for the design and construction management of their own offices.

Regardless of the approach, there is an underlying need to contractually link design and operational performance. This would offer some balance between technical development and financial risk by forming a single risk-bearing team that work together for the best performance outcome in both economic and environmental terms.

What do you think, do you agree with our conclusion or is there a better approach from other industries that could be replicated in the build environment context? Let us know your thoughts in the comments below.

 

Author: Lindsey Malcolm

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