Despite rapid globalisation with investment funds flowing across borders and money pouring into constructed assets, the construction profession has until now, lacked a common language and framework for classifying and reporting construction costs.
Launched on the 24th of July 2017, the new International Construction Measurement Standards (ICMS) – a universal system that enables global comparison of construction projects – will revolutionise the global construction industry by improving cost prediction in infrastructure projects.
Says TC Chetty, Royal Institution of Chartered Surveyors (RICS) Country Manager for South Africa: “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”.
“When estimating construction costs, this causes huge problems for cost consultants, quantity surveyors, construction economists and cost engineers around the world as research has shown that different approaches to presenting the costs of construction can vary significantly due to inconsistent methodology and standards. This is why an international standard such as ICMS is required to ensure global consistency.”
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.
For the first time at a global collaborative level, ICMS introduces a standard structure and format that will lead to greater consistency in classifying and reporting of capital costs for construction projects.
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 publicly announce their support for ICMS by registering as ICMS “Partners” committing to its future use.
Explains See Lian Ong, Chair of the ICMS Standards Setting Committee and Chair of Commission 10 (Construction Economics and Management) the International Federation of Surveyors: “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 bench marking 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 (foreign direct investment). 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.
Adds Chetty: “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 bench marking.”