Lifecycle value versus capital value

How an integrated solution can create real value for clients, addressing owners' critical issues, and why getting the right advice at an early stage results in a sustainable lifecycle solution.

The Challenges:

Choosing the right delivery method for a development is fundamental and a crucial decision in project management. Companies have to balance quality and speed of delivery with an increasing pressure to cut the price of capital costs. Nowhere is this more apparent than in the construction industry during a recession and companies are increasingly focusing on reducing the price of capital projects.

Hyder focuses on an integrated design approach to meet the objectives of cost, schedule and quality. Balancing quality and speed of delivery with an increasing pressure to cut the price of capital projects is a major factor. Selecting the 'cheapest' option can, and often does, result in high lifecycle costs including replacement and disruptions (see figure 1).

Figure 1: Correlation between quality and cost.

Creating real value to clients' projects and addressing owners' critical issues

Timing is often critical with many projects on an accelerated schedule. Many developments also require considerable flexibility. For example, some fast-track projects  are not fully defined by the owner and designer prior to the start of construction and there is potential for substantial change during the detailed design and construction phases of the project, to suit changed market demands

Hyder provide its clients with advisory services during the pre-construction services to help with planning so they can meet their objectives of quality, safety, balance of cost, scope and programme. Involving a professional consultancy service during this critical phase can help make a project smooth and trouble-free, resulting in a facility that meets clients' strategic business goals; Hyder's expert and professional design services team provides exceptional solutions to clients' problems.

Many projects are subject to financial constraints with respect to the type of contract, risk allocation, market demand and other issues. On such projects affected by these issues, Hyder adds value by representing the owner of a development in the following areas;

• Optimal project / programme scheduling options;
• Enhanced control of scope;
• Optimum use of Hyder's talent and resources;
• Avoidance of delays, changes, disputes and overruns;
• Optimum flexibility in contracting and procurement;
• Assurance that the project is built to specification;
• Effective site logistics and installation sequencing planning; and
• Selecting a delivery method and design that suits the project in respect of available skills and commercial constraints.

Good planning at the preconstruction stage saves time and money. One of the most important phases in the success of a development is the pre-construction / planning phase. A well planned effort at this stage is the best way to save money and keep a project on schedule in the pre-construction phase. In the pre-construction phase, Hyder typically performs and supports the following activity;

• Estimating;
• Constructability reviews and value engineering / management;
• Development of project schedule;
• Plans for equipment and subcontract procurement;
• Project management systems;
• Establishment of site-specific safety and quality plan;
• Development of project execution plans and project procedures manual;
• Development of integrated commissioning and hand-over plan; and
• Planning for long lead items. 
  

When companies come under pressure to minimise capital expenditure, it can be tempting to focus on price as the primary driver when selecting professionals to design and execute projects. Unfortunately, this exclusive focus on price has often resulted in delays and quality compromises. However, achieving good value for money need not compromise quality or time to market. This reiterates the 'lowest price' option is not always the cheapest option.

Integrating sustainable design practices into the project at the outset is a key consideration to each development. Sustainable design takes many forms but essentially, it is a combination of understanding the 'science of design' and applying this understanding in a 'pragmatic' way to create fully integrated and functional solutions.

Highly sustainable buildings are frequently packed with over sophisticated technology that requires a high degree of maintenance and hence are prone to failure. This approach often creates an unreliable solution, which is expensive to maintain and hence over time the sustainable solutions fall in to disuse making the building even less sustainable than a more conventional approach. An alternative approach is to create low maintenance durable solutions by means that are more passive i.e. through the application of simple technology backed up by good design philosophy for a more long-term beneficial sustainable technique.

Buildings require energy to function, which can be provided in many ways with a great variety of technology. Different energy strategies produce different levels of Carbon Dioxide as an example a 100 kW gas fired boiler produces considerably less CO² than a 100 kW electric heater. Similarly, a 100 kW biomass boiler is considered carbon neutral i.e. does not produce any CO². Low carbon design is therefore essential to produce an overall development with a low carbon footprint; there are many choices in this essential area of carbon efficiency.

Designing sustainably to reduce maintenance requirements, is not only one of the main challenges, it is also a critical success factor in achieving maximum performance across an assets' lifecycle. Attention should focus on 'operability and maintainability' to realise an assets' true cost and value.

Constructability, commissioning and operability must be aligned to achieve optimum use of an asset. Constructability reviews and value engineering seeks maximum value for money and companies need to maximise project value through this approach, rather than traditional cost cutting practises.

For example; a communication network system that facilitates future changes, may not necessarily have the lowest initial cost, but its future value i.e. lifecycle cost in terms of its expansion and technology upgrade capabilities are worth exploring. Lack of or poor maintenance will result in loss of value of an asset, therefore, the choice of material and equipment must take account of the lifecycle cost.

Hyder has long understood sustainability is not the exclusive reserve of dedicated sustainability professionals. Our approach is to identify and develop sustainability champions across our business, to shape and inform the sustainability of our solutions. We see this integrated design approach based on lifecycle value as the future of design consultancy.