In the dynamic field of construction, precise planning, financial management and efficient execution are paramount to the success of any project. Enter the quantity surveyor (QS), a pivotal figure whose expertise ensures that construction projects are designed, evaluated and completed within budget and on time. This article delves into the multifaceted role of quantity surveyors, highlighting their importance within the construction industry.
QS are registered professionals with specialised training who play a critical role in the construction industry by managing and controlling costs for a wide variety of building and construction projects. They also possess the ability to accurately read and interpret construction documents, including architectural and engineering plans, drawings and specifications. Leveraging their deep understanding of construction methods and materials, a QS is essential in estimating and monitoring construction costs from the initial concept design phase through to project completion.
In the early stages of a project, known as the pre-construction or design phase, a QS is involved in preparing cost planning, design development and producing documentation required for construction tenders. They assist in creating tender documentation, such as Bills of Quantities or schedules of rates, and play a key role in the builder selection process by evaluating tender submissions.
During the actual construction phase, a QS continues to monitor project expenditures to ensure they remain on budget and assess the impact of any project cost variations. Their responsibilities also include preparing monthly cash flow forecasts and approving progress payments to ensure that the financial aspects of the project are properly managed.
Upon the completion of a construction project, the role of a QS extends to producing tax depreciation schedules and calculating replacement cost estimations for insurance purposes. Additionally, they may be involved in supporting mediation and arbitration processes if disputes arise concerning construction costs or contractual issues.
Overall, the QS is indispensable for maintaining financial control over construction projects, ensuring cost-effectiveness and mitigating financial risks from project inception to completion.
The responsibilities of a QS can be broadly categorised into the following areas:
1. Cost Planning and Management
A QS plays a crucial role in planning the costs associated with a project from the very start. They prepare detailed estimates that form the financial blueprint for the construction process. By continuously monitoring the project costs, they ensure that the budget is adhered to and identify and address potential overruns before they escalate.
2. Value Engineering
Value engineering involves optimising project outcomes by evaluating alternative construction methods and materials to maximise productivity while minimising costs. A QS applies their expertise to suggest cost-effective solutions without compromising on quality.
3. Contract Administration
Contract management is another critical responsibility, with a QS is involved in drafting, negotiating and overseeing contracts between the parties involved in a project. They ensure that all contractual terms are adhered to and manage any financial implications of changes to the construction plan.
4. Risk Management
Identifying potential risks and developing strategies to mitigate them is an essential part of a quantity surveyor's role. They assess the financial implications of risks and advise on management strategies to protect the project's budget.
5. Dispute Resolution
In the event of disputes, a QS possesses the technical and legal expertise to act as mediators between parties. They provide clear, unbiased reports and can serve as expert witnesses if disputes escalate to legal proceedings.
According to the Victorian Building Authority, to qualify as a registered QS, candidates must have sound theoretical knowledge and attain significant practical experience. Specifically, they are required to have a minimum of two years of supervised practical experience in the core functions of quantity surveying. This experience is crucial for ensuring that prospective quantity surveyors have hands-on knowledge and skills in managing a project across all stages.
Applicants must provide comprehensive documentation of their experience, including:
• A detailed list of all projects where they have performed QS responsibilities. This list should not only outline the projects but also summarise the experience gained under the guidance of a registered QS or a member of the Australian Institute of Quantity Surveyors (AIQS). This ensures that the candidate's experience is verified and relevant to the profession's standards.
• A portfolio of at least three building projects of different purposes where they undertook quantity surveying work under the supervision of a registered QS or a member of the AIQS. The diversity in project types is essential, as it demonstrates the candidate's ability to apply their skills across various construction environments and challenges.
The requirement for the three buildings to be of different purposes emphasizes the need for a broad range of experience. The specified types of buildings include:
• Aged care facilities
• Commercial office buildings
• Educational facilities
• Health-care buildings or hospitals
• Hotels and hospitality
• Industrial buildings
• Residential
• Retail spaces
This diverse experience showcases the candidate's versatility and depth of understanding in different construction contexts, from planning and cost estimation to project completion. Such comprehensive experience is pivotal for a quantity surveyor's success in navigating the complexities of the construction industry.
Banks and non-bank lenders hire quantity surveyors to conduct due diligence and monitor ongoing construction projects they are financing to ensure that funds are appropriately allocated and spent. Usually, an initial QS report is provided at the beginning of the construction phrase and ongoing progress claim reports are provided on a regular basis.
When a QS is tasked with preparing an initial QS report for a construction project, they are provided with a comprehensive suite of documents and instructions to ensure thorough analysis and accurate forecasting. This preparation is critical for assessing the project's financial viability, legal compliance, risk management and overall feasibility. When the QS is instructed to proceed with the progress claim reports, the focus is to provide regular updates of the construction site and how the project is tracking based on the construction timeline.
Described below are actions that banks and non-bank lenders may request from quantity surveyors for the initial QS report:
• Review the Building Contract: Examine the executed building contract to understand the scope, obligations and expectations set forth for all parties involved.
• Provide a Cost Estimate: Based on the endorsed plans, offer a detailed cost estimate that aligns with the project's scope and specifications.
• Conduct Due Diligence: Investigate the builder and developer's background, focusing on their experience and reputation in the industry, to gauge their capability to deliver the project successfully.
• Review Contractual Documents: Analyse the building contract (draft or fully executed) to identify any exclusions, unfair conditions or discrepancies in the cost estimate and recommend necessary amendments.
• Assess Presale Contracts: Examine any presale agreements for conditions that might affect the building contract or overall project delivery.
• Review Insurance Policies: Ensure that all insurance policies (Contract Works, Building Warranty, Public Liability) meet the lender's requirements and offer adequate coverage.
• Maintain a Stakeholder Register: Keep an up-to-date list of all key stakeholders, including key subcontractors, involved in the project.
• Advise on Construction Timeline: Offer insights on the expected timeframe for project completion, considering the available documentation and project scope.
• Recommend Additional Safeguards: Suggest any covenants or conditions that the lender should consider incorporating into the contractual agreements to mitigate specific risks associated with the construction site.
The list below outlines examples of documentation required by a quantity surveyor when producing the initial report. While not every item is required, it is generally best practice that the quantity surveyor collects as much information as possible.
Permits and Plans:
• Demolition Permit: Required if existing structures need to be demolished before new construction can begin. It ensures that the demolition is carried out safely and in compliance with regulations.
• Planning Permit: Necessary for the development or use of land in a way that requires permission under local planning regulations. It focuses on the impact of the development on the local environment, community and surrounding infrastructure.
• Endorsed Planning Permit Plans: These are the detailed plans that have been officially approved along with the planning permit, outlining the approved development or use.
• Building Permit: Issued to ensure that proposed building work meets building codes and standards for health, safety and structural integrity.
• Endorsed Building Permit Plans: The detailed construction plans that have received official approval as part of the building permit process.
Drawings and Specifications:
• Architectural Drawings: Visual representations of the building design, including floor plans, elevations and details of the construction.
• Structural Drawings: Detailed drawings that specify the structural elements of the building, such as beams, columns and foundations, ensuring the building's strength and stability.
• Electrical, Hydraulic, Stormwater and Mechanical Services Drawings: Plans that outline the design and layout of the building's electrical systems, plumbing, stormwater management and HVAC systems.
• Energy Certification: Documents that certify the building's energy efficiency levels, often required by regulations to ensure sustainability standards are met.
• Architectural and Finishes Specifications: Detailed descriptions of the materials, finishes and techniques to be used in the construction, providing a guide for builders and ensuring quality control.
Reports and Insurance:
• Geotechnical Report: A study of the soil and ground conditions of a site, which informs the design of the foundation and structural elements.
• Contract Works Insurance: Provides cover for damage or destruction to construction works, materials and equipment during the construction period.
• Building Warranty Insurance: Offers protection against defects in workmanship or materials once the construction is completed.
• Public Liability Insurance: Protects against claims for bodily injury or property damage that third parties may suffer due to construction activities.
Contracts and Agreements:
• List of Key Stakeholders and Subcontractors: A comprehensive list of all parties involved in the project, including subcontractors and key stakeholders.
• Agreement on Construction Commencement Date: A formal agreement between the borrower and builder specifying when the construction work is scheduled to begin.
• Copy of Builder's Registration: Documentation that verifies the builder is officially registered and qualified to undertake construction work.
• Tripartite Agreement: A legal agreement between three parties, often involving the owner, the builder and the lender, outlining the rights and responsibilities of each party regarding the construction and financing.
• Valuation Report: An assessment of the property's market value provided by an independent valuer, often required by lenders before financing a project, to ensure the loan amount is appropriate relative to the property's value.
This detailed approach ensures that the QS has a holistic view of the project, encompassing technical, financial, legal and risk-related aspects. By leveraging this information, the QS can formulate a report that accurately reflects the project's cost implications, timelines and potential challenges, offering invaluable insights for decision-makers to navigate the complexities of construction project management effectively.
The role of a QS in ongoing construction site monitoring is pivotal for ensuring that the project remains on schedule, within budget and conforms to the specified standards and regulations. Their expertise provides a critical link between the construction activities on the ground and the financial and contractual commitments made to lenders and stakeholders. These inspections are comprehensive, focusing on several key areas to provide a detailed progress report to the lender. The following list features examples of the expected duties of a quantity surveyor during the ongoing monitoring phase:
• Status of the Construction Program: The QS evaluates whether the project is progressing according to the planned schedule. This involves assessing the completion of milestones against the construction timeline.
• Variances / Changes to Endorsed Plans: Any deviations from the originally endorsed plans are noted. This could include alterations to the design or specifications that were not part of the initial agreement.
• Certificates Issued: The QS provides copies of relevant certificates issued during the inspection period. These could include compliance certificates, safety inspections or other regulatory documents.
• Monitoring Expiry Dates: It's crucial to ensure that the contractor's license, insurance, permits and the building contract are all current. The QS checks these documents for any upcoming expiry dates that could affect the project's legality or insurance coverage.
• Budget Variances: Any discrepancies between the budgeted and actual costs are reported. This could involve both overruns and savings compared to the planned budget.
• Additional Information Impacting Construction: This could include unforeseen challenges such as supply chain issues, changes in regulatory requirements or other external factors that could affect the construction process.
• Risk Factors on Site: The QS identifies any issues likely to delay the project's completion or the issuance of a Certificate of Occupancy. Common risk factors might include inadequate staffing on site, substandard workmanship or overstated progress claims by the contractor.
Banks and non-bank lenders typically request the QS to provide their recommendations and advise on how much the builder and sub-contractors should be paid for the work completed on site. By summarising the key issues that need to be resolved and the amount recommended for payment, the QS ensures that the bank and non-bank lenders can mitigate construction risks.
Lenders will utilise the quantity surveyor's ongoing monitoring and initial report and will pay particular attention to the following aspects of their reporting and inputs as it impacts the viability of the project and associated risks:
• Adoption of the Contract Sum: The lender will want to know if the QS has accepted the contract sum as the construction budget.
• Experience with the Builder: The quantity surveyor's prior experience with the builder and its impact on the project's risk assessment.
• Compliance and Licensing: Verification that the builder possesses the required licenses and that all necessary permits and approvals have been obtained.
• Contractual Adequacy: The suitability of the building contract for the project, including provisions for liquidated damages, deposits, retention sums, contingency (typically 5% of the contract sum but can be more depending on the nature of the project) and the adequacy of insurance coverage.
• Timeframe and Delays: The quantity surveyor's opinion on the achievability of the construction timeframe, potential delays and whether the loan terms accommodate such eventualities.
• Technical Report Concerns: Insights into any issues raised by environmental, geotechnical or other technical reports that could impact the project.
• Contractual and Consultant Team Suitability: Evaluation of the project consultant team and the contract superintendent's potential biases.
• Boundary and Land Surveys: Confirmation that the construction works are designed within the property boundaries.
Through diligent monitoring and detailed reporting, the QS plays a critical role in safeguarding the interests of the lender, ensuring that the construction project meets all agreed-upon standards, stays within budget and adheres to the timeline. This ongoing oversight is crucial for identifying potential issues early and implementing corrective measures to keep the project on track.
The indispensable role of quantity surveyor in construction projects is highlighted by their comprehensive involvement from the initial planning stages through to project completion. This article highlights the critical importance of a QS in ensuring financial viability, project efficiency and smooth operational management. Their expert contributions not only facilitate the successful execution of construction projects but also safeguard the interests of all stakeholders involved, demonstrating the quintessential nature of their role in navigating the complexities of construction project management.
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Andy Wong is a co-founder at PropertySensor and has more than a decade of experience diving into Finance and Construction Lending while working at Payton Capital and Australian Securities Limited.