Slashing infrastructure investment risk, a new global coalition aims to transform construction cost system
The International Construction Measurement Standards (ICMS), a new high-level benchmarking and reporting framework for international cost classification, reporting, and comparison, was launched yesterday, July 24, 2017. ICMS aims to provide greater global consistency in classifying, defining, measuring, analyzing, and presenting construction costs at a project, regional, state, national, or international level.
Financing buildings and infrastructure projects, such as energy systems, railways, bridges, schools, and hospitals, is often risky because construction costs are categorized and forecasted differently across the globe. Until now, it has been almost impossible to compare international construction costs for projects in a “like-for-like” comparison and know whether the projects are feasible or a good value. The new ICSM standard enables better comparisons that help improve investor confidence and attract more private sector funding.
During a meeting at the International Monetary Fund in June 2015, a group of influential sector players came together and formed the International Construction Measurement Standards (ICMS) Coalition to tackle these problems by establishing the ICMS. Arup, Arcadis, Gardiner and Theobold, Faithful+Gould, Turner & Townsend, and Gleeds are some of the organizations who have publicly announced their support for ICMS by registering as ICMS Partners and committing to its future use.
Construction is a large contributor to national economies. 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 nine out of ten mega projects to run over budget.*
Overall, close to $78 trillion needs to be spent globally between 2014 and 2025** on infrastructure. The ICMS Coalition sees the need to reduce the risk of these projects for public and private sector investors. The World Economic Forum has also called for professional collaboration to standardize cost definitions and classification.***
Download the new International Construction Measurement Standards:
See Lian Ong, Chair of the ICMS Standards Setting Committee and Chair of Commission 10 (Construction Economics and Management) the International Federation of Surveyors, explains, “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 synchronizes cost, classification, and benchmarking 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 Standards will help “clarify the costs of projects.”
Different approaches to presenting construction costs can lead to inconsistent methodology, causing significant variations and false cost comparisons. In some countries, there are no standards at all, which creates barriers to FDI. The ICMS Coalition believes that financially constrained governments should be able to access and understand the information needed to make construction investment decisions and attract more private funding to help improve return on investment.
“ICMS will benefit all stakeholders in buildings and facilities, industrial and infrastructure, and energy construction market sectors, including government agencies, owners, investors, designers, and contractors. It will create a common language for construction investment and enabling better benchmarking.
Eos Group is proud to launch Cortex, our upcoming next-generation Big Data benchmarking solution that supports and extends the ICMS standard. Cortex can be tailored to meet our client’s specific needs while conforming to the ICMS guidelines.”
- Nick Papadopoulos, CEO, Eos Group, Inc.
To learn more about the ICMS Coalition, be sure to visit their website.
* Bent Flyvbjerg, is a Danish economic geographer. He is Professor of Major Programme Management at Oxford University's Saïd Business School. He estimates that nine out of ten mega projects (infrastructure developments over US$ 1 billion) go over budget. http://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/megaprojects-the-good-the-bad-and-the-better. Reference-class forecasting is cited as a solution for this issue. An alternative name for this is construction cost prediction and cost benchmarking, which is central to the benefits of the new International Construction Measurement Standards which will help provide the right data in the right standardized form.
*** “Shaping the Future of Construction” report, World Economic Forum and Boston Consulting Group, page 40, February 2016: http://www3.weforum.org/docs/WEF_Shaping_the_Future_of_Construction_full_report__.pdf