COVID-19, Brexit, Carillion & the market / inflation

Question 1

Why did Carillion go into liquidation?

Answer 1

• Took unacceptable risk on PFI projects
• Very large debt pile which was unmanageable
• Very high liabilities (FM projects)

Question 2

What is the RICS doing about Covid19?

Answer 2

• COVID-19 recovery business plan
• Section on the RICS website
• Assessments by MS Teams
• Free training and CPD
• Advice for professions to return to work
• Providing research on Covid-19 (for eg. rethinking city centre living and reopening for businesses)

Question 3

How has Covid 19 affected the construction industry?

Answer 3

Market:

Project Specific:

• Increase on prelims due to requirement for Covid-19
• Contractors more risk adverse to F P L S projects due to unknown on inflation
• New clauses in contracts

Day to Day:

• Valuations at home
• APC assessments at home
• Disputes held online
• Meeting held at home

Question 4

What does it mention in the latest Modus?

Answer 4

• the impacts of steel production on the environment
• material price increases
• how the surveying industry can be more inclusive

Question 5

How do you think procurement routes may change due to Covid-19?

Answer 5

Contract amendments to include risk transfer due to Covid-19

Contractors may be more risk adverse and opt for 2 stage routes or construction management

As contractors are struggling, more simple works may be bid for a low cost due to contractors becoming desperate.

Question 6

What is happening in the industry right now?

Answer 6

Investment in infrastructure
Increase in residential builds
New restrictions and rules following covid-19
Brexit tariffs
Material Fluctuations
Lack of labour
MMC

Question 7

Can you tell me about what forms of modern methods of construction you are aware of?

Answer 7

Modular construction
Bathroom Pods
3D Printing
Modular grids (internal walls)
Precast stairs
Utility cupboards

Question 8

Whats your view on inflation?

Answer 8

MATERIALS

Timber is seeing an increase by 20% due to the demand in China and the US leading to a lack of supply, in turn increasing costs
Scandinavian timber shortage due to a warmer winter
Steel material costs has increased by 35% in some cases, and British Steel has now closed their order books, meaning the supply will be very short in the near future

LABOUR
With the impact of covid / brexit, a lot of overseas labour have returned home, leading to more demand for labour, which has led to a cost increase, especially in London

PRELIMINARIES
BCIS
MACE

Question 9

What is the RICS Cost Prediction?

Answer 9

New Pro Statement aiming to:

Implement the ICMS
Clear and consistent terminology
Enable the use of digital technologies (BIM)
Recognised importance on the quality of QS

Question 10

What is BIM? and the levels?

Answer 10

Building Information Modelling - Produces a digital representation of a built asset to assist the process for creating and managing the design / project throughout its lifecycle

BIM L0 - No collaborated 2D
BIM L1 - 3D model
BIM L2 - 3D collaborated
BIM L3 - not yet defined

Question 11

What are the challenges of BIM?

Answer 11

Clashes between disciplines
Model not scaled
Comes at a premium
Size of the files
Training

Question 12

What are the advantages of BIM?

Answer 12

.

Question 13

What impacts has COVID-19 had in the industry?

Answer 13

Impact on materials

• Delays in manufacturing
• Delays in procurement overseas (lockdown)

Impact on labour

• Furlough scheme
• Isolating / infected with virus
• Social distancing on site
• Some cant get to work safely

New ways of working

• Online meetings / working from home
• Virtual valuations

Market conditions

• Increased risk priced in tenders
• Cancelled or postponed projects
• Furlough
• Redundancies / unemployment

Ambiguity in contracts

• Force majeure
• Contract amendments

Question 14

What challenges have firms faced with COVID-19?

Answer 14

Cash flow difficulties / insolvency (long-term uncertainty)

• Manage cash outflows / forecast cash flows
• Seek professional advice
• Access government backed resource

Change in working conditions

• Appropriate IT infrastructure / resources for employees
• Ensure insurance policies cover new ways of working and risks of sensitive data at home
• Manage welfare and performance of staff
• Procedures to monitor workstream

Elevated Client Money Risks

• Increased fraud risk with new ways of working
• Reduced ability to maintain systems
• Less vigilance around risk
• Higher risk of misappropriation

Less record keeping

Question 15

How did the government provide support throughout COVID-19?

Answer 15

• Furlough scheme
• Statutory sick pay claim back
• VAT deferral
• Recovery Loan Scheme / Restart Grant

Question 16

How can a firm reduce the risks COVID-19 poses to Client Money Handling?

Answer 16

• Carry out 3-way reconciliations (client ledger / cash book / client account) and maintain evidence these have been carried out
• Focus on key risks
• Enhanced vigilance implied by senior management
• Priorities record keeping
• Re-visit policies / procedures

Question 17

How has Mace responded to COVID-19?

Answer 17

• Crisis response teams (bronze / silver / gold)
• Working from home
• Furlough scheme
• Redundancies / pay cuts
• Temporarily shut down sites to deal with social distancing
• Offices have social distancing / one way systems / 2m distancing / screens in canteen / signage

Question 18

How has COVID-19 affected the contracts you’ve worked on?

Answer 18

• Increased contractual amendments
• Increased ambiguity
• Force Majeure entitles to EOT but not L&E
• Contractor who seeks an EOT must constantly prove they are preventing delay to progress with the works on site
• Shortage of labour / materials does not give rise to an EOT, delay is contractors responsibility

Question 19

How has the RICS responded to COVID-19?

Answer 19

.

Question 20

How has the RICS responded to COVID-19?

Answer 20

• Research papers / information papers
• Final assessment interviews to be held online
• Free CPD and access to guidance
• RICS issued a number of re-opening guides (Beyond COVID-19 - the reopening of commercial buildings)
• Support through Lion Heart / RICS Matrics

Question 21

What impacts has Brexit had on the construction industry?

Answer 21

Materials 
- Materials shortage 
- Import tariffs 
- Increased material cost 
- Customs checks / delays = longer procurement 
= Solution - locally sourced materials 

Labour / Skills Shortage

• Industry relies on foreign labour
• Higher labour costs

Question 22

What is the Inclusive Employer Quality Mark?

Answer 22

Focuses on leadership, recruitment, culture and development

Provides an assessment of a firms inclusivity

Question 23

Inflation

Answer 23

BCIS TPI - 5% by end of year

Mace TPI - 8% end of year

the supply market will catch up with itself by early 2022 and that the premium that is now being seen will die down and tender prices will moderate.

Question 24

What is the RICS Business Plan 2018-2021?

Answer 24

Goals focus on:

• Being an industry leader
• Sustainability
• Influential thought leader
• Continue to award professional qualifications

Question 25

What is Defining our Futures?

Answer 25

A review of the key pillars of the RICS Business Plan

Consultation of RICS members