Register for our Life Sciences Capital Benchmarking Webinar here
Register for our Life Sciences Capital Benchmarking Webinar here
21 October 2022
In our ''Benchmarking fundamentals in an evolving industry’ article earlier in 2022, we noted that benchmarking involves the use of data to compare a company or a project’s performance against key industry indicators and metrics. When done accurately, benchmarking allows for more informed decision-making and a greater degree of predictability, especially with respect to cost, quality and time. In this article, Brian Coyle (Director) and Joseph Nakhle (Senior Estimator) share insights on best practices for conducting accurate, meaningful benchmarking on a construction project, as well as identifying the main areas of a project that will have a significant impact on costs and schedule.
Although general construction cost index and schedule averages may be readily available, they are often too generic, and will not necessarily provide a reliable basis for meaningful or reliable benchmarks (1). Rather than, or in addition to, using general construction metrics that apply across multiple projects, effective benchmarking means being able to identify projects that will allow for like with like comparison and ascertain which variables should be compared with one another (2).
In order for benchmarking to be valuable and statistically meaningful, data should be standardised across four stages to ensure that the outcome is not skewed by irrelevant data or extraneous factors.
Firstly, it is important to account for geographical variances, as there are costs and nuances specific to location, which need to be added, removed or adjusted based on the norms and technicalities of the new location. As an example, there are local taxes, local authority adjustments, processes, zoning ordinances and building codes, depending on the country, city or town where the project will be constructed. In this regard, the likes of the International Building Code (IBC) or the Australian Building Codes Board will be some of the top references.
Failure to make the necessary adjustments in terms of localisation can skew the accuracy of the benchmarking exercise – for example, different locations can pose increased risk factors, have varying health and safety measures that need to be implemented, set out different sustainability or emissions goals and many other factors and considerations that can impact cost and schedule. If location factors are not accounted/adjusted for, the benchmarking analysis will not be meaningful – there needs to be a degree of confidence that an apples-to-apples comparison is being used to provide robust information. While it is ideal to compare similar project types, levelling and adjustments will allow for other projects to be benchmarked effectively against one another.
Benchmarks are traditionally retrospective and are therefore developed using historical data. However, more advanced branches of analytics are also emerging, looking at what will happen before it occurs and analysing past data to forecast what will happen in the future – what happened (descriptive analytics) and why (diagnostic analytics), to what might happen (predictive analytics), and what can be done about it (advanced analytics and leveraging artificial intelligence (AI)). Particularly, in the current market landscape, where things are rapidly changing and evolving (e.g., inflation, FX rates, geopolitical factors), data needs to be routinely updated to reflect present-day market conditions and allow for meaningful comparisons.
Client requirements differ from one project to another, even those that are in the same sector, as companies have different sets of priorities and objectives, which drive how they want a project to be completed. For example, when it comes to the façade of buildings, some clients focus on the functional intent of the facility and thus, go with a simple design (such as concrete and paint) that meet minimum design specifications and functional intent. Conversely, others may put emphasis on other factors, such as sustainability or aesthetics, and move towards having a higher spec façade such as a green wall or more costly cladding. It is important to take into consideration the context of the benchmarking data, as well as the accuracy of record keeping, especially when the analysis involves the comparison of projects across different organisations. This is to ensure that any differences or nuances in client requirements, specifications, means of recording data and chosen procurement methods, are accounted for when benchmarking projects against one another.
The final stage in benchmarking considers site conditions, which are highly variable, depending on the size and scale of the project. Soil conditions, access to power and water, as well as surrounding infrastructure, amongst other considerations, will impact the design of the facility or building, which will subsequently also affect material selection and corresponding procurement methods. For instance, if a geotechnical investigation on a project site determines weak underlying soil, that would mean it is not suitable to build directly on the ground and thus, additional work such as piling would be required.
Therefore, it is important that these factors are carefully considered and accounted for when performing a benchmark analysis between projects, even with similar site conditions, but more so with dissimilar factors.
Benchmarking is a powerful and incredibly useful tool to assist in making data-driven business decisions and improving predictability, both of which are particularly crucial with the current market landscape and volatility being witnessed across the construction industry. However, it is important to note that there are a variety of factors and stages that are fundamental to ensuring that the benchmarking analysis is statistically meaningful. Linesight’s life sciences benchmarking initiative is a prime example of its effectiveness as a cost and schedule intelligence tool, if and when these stages are employed effectively.
Linesight’s team of Quantity Surveyors, Cost Managers and Estimators have been working with clients across a range of sectors to provide the most relevant benchmarking data for their projects. For more information about our construction cost management expertise, or how we can assist with your benchmarking requirements, please click here.
References:
Share
