REUTERS | John Kolesidis

The new RICS measurement rules

I was pleasantly surprised to see a few fellow lawyers at the RICS recently, for the launch of its New Rules of Measurement (NRM) and the accompanying QS & Construction Standards (the Black Book). I had thought this was classic “QS’ing for QSs” territory and that I was the only lawyer sad enough to be remotely interested. Maybe others were tempted by the (as it happens, rather good) free breakfast on offer. Or perhaps the prospect of another rallying call from the Chief Construction Adviser (Paul Morrell) was the big draw.

In any event, I found myself listening to a range of speakers lyricising about how the new rules and standards will change how quantity surveyors operate. It seemed that Nirvana was being revealed to us; a new world of accurate cost estimates, clear and transparent cost data and measurable whole life value. The range of benefits seemed endless: from the basic (updating of SMM7) to the aspirational (alignment with building information modelling, the OGC Gateway process, modern methods of construction, new procurement routes and international reach). Even the token developer was supportive, if only because it allowed him to ask what his QSs really do to justify their fee.

But enough of this cynicism. What is the reality behind the hype? And how might it impact on the lawyer’s role in the construction process?

The new rules and standards

NRM2 (detailed rules of measurement for building works) is probably the least revolutionary element of the new suite. Essentially it is an enhanced update of SMM7, covering not only individual work elements but also the various other price components of a typical building project, such as preliminaries, overheads and profit, design fees, risks and inflation. Unlike SMM7, it also allows scope to create composite descriptions of work items, thus removing the need for the contractor to price large numbers of low value tasks that add little to the overall pricing exercise.

Of more potential value are NRM1 and NRM3. They seek to provide a robust framework for the preparation of cost estimates and cost plans for, respectively, building and maintenance works. Cost estimating has always been something of a black art and the NRM in effect recognises this, by mandating “finger in the air” methods such as floor area (cost per square metre), unit price (for example, cost per bedroom for hotels) or the use of elemental cost plans – with, inevitably, large contingencies built in.

Of course, NRM does not itself provide cost data. It is merely a tool allowing data to be captured and measured in a (more or less) consistent way. However, it at least introduces a degree of discipline and should over time allow a database of historic cost information to be collected, which will then inform future cost plans.

The Black Book is a different creature. It contains guidance on a range of subjects relating to the construction process of which the QS should be aware, from e-tendering and valuing changes to liquidated damages, insurance and dispute resolution. There are currently 11 guidance notes in issue and the RICS envisages that some 50 will ultimately be published. They provide useful checklists for all construction professionals (including lawyers) who are required to advise on these issues, as well as defining the level of knowledge and competence that a client is entitled to expect from his QS.

Relevance to lawyers

Aside from the obvious fact that the JCT Standard Building Contract, 2011 edition (SBC11) With Quantities form will need updating to refer to NRM2 rather than SMM7, I imagine the main interest for lawyers in the new publications will lie in the terms on which QSs are appointed in future.

Going forward, it may well be appropriate to oblige the QS to prepare cost estimates and cost plans in accordance with NRM1 and bills of quantities (BQs) (where required – see below) in accordance with NRM2. I would also suggest that, where advice is to be given on aspects covered by the Black Book, the QS should be obliged to follow the Black Book guidance. This should help to provide consistency in areas where, in my experience, poor advice has too often been the norm. I suspect that we will begin to see these obligations appearing in bespoke professional appointments before long.

Will clients use NRM2?

The big question is, will clients (and their advisers) choose to use NRM2? In my experience, the use of BQs has fallen seriously out of fashion over the last few years. This may in part be due to the rise of design and build, with contractors preparing quantities to suit their systems (or, in some cases, their pricing strategies) rather than with a view to the systematic collection of pricing data for the benefit of the industry as a whole. However, even on traditionally procured projects, the vast majority of clients these days tend to use the SBC Without Quantities version. Presumably this is because they (or their team) prefer the flexibility of specifications and drawings to the straitjacket of a BQ. It remains to be seen whether NRM2 will succeed in re-converting those preparing tender documents to the benefits of a BQ approach.

Price v (real) cost

My other main issue with the NRM suite is that it does not properly address the third limb of the cost manager’s role, namely cost monitoring during construction. The processes described in NRM1 and NRM2 are all about price estimating and tendering; namely, what a contractor will charge for the task at hand. But price and cost are not the same thing.

To illustrate the point, look at the NEC3 Schedule of Cost Components, which breaks down the cost of a project into its constituent parts (labour, materials, plant, design and so on). In so doing, it attempts to get beyond price to find out what a piece of work really costs. By not explicitly connecting to this “bottom up” approach, NRM has effectively distanced itself from the NEC3-led world of infrastructure and limited its usefulness to building projects. In so doing, it is in danger of perpetuating the old joke that a QS is someone who knows the price of everything and the value (or, in this case, the real cost) of nothing.

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