RICS professional guidance, UK Commercial management …

1 rics professional guidance , UKCommercial management of construction1st edition, March guidance noteCommercialmanagement ofconstructionRICS guidance note, UK1st edition, March 2016 Published by the royal Institution of chartered Surveyors ( rics )Parliament SquareLondonSW1P responsibility for loss or damage caused to any person acting or refraining fromaction as a result of the material included in this publication can be accepted by theauthors or by the QS and Construction working group of the royal Institution ofChartered 978 1 78321 131 9 royal Institution of chartered Surveyors ( rics ) March 2016. Copyright in all or part ofthis publication rests with rics . Save where and to the extent expressly permittedwithin this document, no part of this work may be reproduced or used in any form or byany means including graphic, electronic, or mechanical, including photocopying,recording, taping or web distribution, without the written permission of rics or in linewith the rules of an existing worked examples in this guidance note are for illustrative purposes only and do notconstitute technical advice or in Great Britain by Columns Design XML Ltd, Reading, would like to thank the following for their contribution tothis guidance note:Technical author:Nick Curran FRICS (Fusion- Commercial Associates Ltd)Working group:Chair.

2 Andrew Smith FRICS (Laing O Rourke)Stuart Earl FRICS (Gleeds)Roland Finch FRICS (NBS)James Funge FRICS (Lendlease)Christopher Green FRICS (Capita Property and Infrastructure)John Littler MRICS (Q-Consult)Roy Morledge FRICS (Nottingham Trent University)Michelle Murray MRICS (DBK)Alan Muse FRICS ( rics )Michael T O Connor FRICS (Carillion Construction Ltd) Commercial management of constructioniiRICS guidance note, UKContentsAcknowledgments .. iiRICS professional guidance .. 11 Introduction .. What is a Commercial manager?.. What defines a successful constructionproject?.. Context of this guidance Taking an Alternative forms of constructionprocurement and payment mechanisms .. Standard terminology used in thisguidance note .. 72 General principles (Level 1: knowing) .. Understanding Value engineering .. Supply chain Valuing Understanding Cost/value Cash and cost flow Commercial decision making.

3 163 Practical application (Level 2: doing) .. Using a detailed Value engineering: implications of adesign Supply chain management : Valuing work: further Understanding cost: Cost/value analysis: Cash and cost flow analysis: dealing withcash Commercial decision making: 30iiiRICS guidance note, Practical considerations (Level 3: doing/advising).. Understanding estimates .. Value Supply chain management .. Valuing work: further Understanding cost: capture andallocation .. Cost/value Cash and cost flow analysis .. Commercial decision 41 AppendicesAppendix A: Practical guide to contractadministration for a cost/value reconciliation 43 Appendix B: Example list of common analysis levelsfor construction works .. 50 Appendix C: Template risks and 51ivRICS guidance note, UKCommercial management of constructionRICS professional guidanceInternational standardsRICS is at the forefront of developing internationalstandards, working in coalitions with organisations aroundthe world, acting in the public interest to raise standardsand increase transparency within markets.

4 InternationalProperty Measurement Standards (IPMS ), International Construction MeasurementStandards (ICMS), International Ethics Standards (IES) andothers will be published and will be mandatory for rics members. This guidance note links directly to thesestandards and underpins them. rics members areadvised to make themselves aware of the internationalstandards (see ) and the overarchingprinciples with which this guidance note of rics are uniquely placed in the market bybeing trained, qualified and regulated by working tointernational standards and complying with this guidance notesThis is a guidance note. Where recommendations aremade for specific professional tasks, these are intended torepresent best practice , recommendations that in theopinion of rics meet a high standard of members are not required to follow therecommendations contained in the guidance note, theyshould take into account the following an allegation of professional negligence is madeagainst a surveyor , a court or tribunal may take account ofthe contents of any relevant guidance notes published byRICS in deciding whether or not the member acted withreasonable the opinion of rics , a member conforming to thepractices recommended in this guidance note should haveat least a partial defence to an allegation of negligence ifthey have followed those practices.

5 However, membershave the responsibility of deciding when it is inappropriateto follow the is for each member to decide on the appropriateprocedure to follow in any professional task. However,where members do not comply with the practicerecommended in this guidance note, they should do soonly for good reason. In the event of a legal dispute, acourt or tribunal may require them to explain why theydecided not to adopt the recommended , if members have not followed this guidance , and theiractions are questioned in an rics disciplinary case, theywill be asked to explain the actions they did take and thismay be taken into account by the some cases there may be existing national standardsthat may take precedence over this guidance standards can be defined as professionalstandards that are either prescribed in law or federal/locallegislation, or developed in collaboration with other addition, guidance notes are relevant to professionalcompetence in that each member should be up to dateand should have knowledge of guidance notes within areasonable time of their coming into guidance note is believed to reflect case law andlegislation applicable at its date of publication.

6 It is themember s responsibility to establish if any changes in caselaw or legislation after the publication date have an impacton the guidance or information in this from 21 June 2016 rics guidance note, status definedRICS produces a range of professional standards, guidance and information documents. These have been defined in thetable below. This document is a guidance of documentDefinitionStatusStandardInternat ional standardAn international high-level principle-based standarddeveloped in collaboration with other relevant rics has adoptedthese and they apply to statementProfessional statementA document that provides the profession withmandatory requirements in the form of technicalrequirements or conduct rules that members and firmsare expected to adhere to. An rics professionalstatement sets out the expectations of the professionals must comply with theprofessional statement applicable to their area ofpractice or be able to explain any departure from it.

7 Therelevant professional statement will be used by rics andother legal and regulatory authorities in judgingcomplaints and claims against category may include documents approved by RICSbut created by another professional body/stakeholder,such as industry codes of on the basis of comply or explain . professional statements setout how the profession isexpected to meet therequirements of theinternational and informationRICS guidance note (GN)Document that provides users with recommendations orapproaches for accepted good practice as followed bycompetent and conscientious best practicebut not deemed by rics to bein category of mandatory forall protocolInformation and best practice framework, whichstakeholders may sign up to and comply with, to assistthe operation of the market in the public and/orrecommended best information paper (IP) Practice-based information that provides users with thelatest technical information, knowledge or commonfindings from regulatory insightsIssues-based input that provides users with the latestinformation.

8 This term encompasses ThoughtLeadership papers, market updates, topical items ofinterest, reports and news economic/marketreportsA document usually based on a survey of members, or adocument highlighting economic consumer guidesA document designed solely for use by consumers,providing some limited technical independent peer-reviewed arm s-length researchdocument designed to inform members, marketprofessionals, end users and other guidance note, UKEffective from 21 June 2016 Commercial management of What is a commercialmanager?The role of a Commercial manager, and the commercialmanagement functions performed, play a critical part in thecommercial and financial success of a construction projector of any other any industry, the role of a Commercial manager is tomaximise the potential of a business in terms ofprofitability. The Commercial manager monitors, or controls,internal processes such as production, and managesexternal relationships with customers, clients and tradingpartners.

9 At the same time, the Commercial managermonitors financial performance (both forecast andachieved) and manages any risks there may be toachieving forecasts, whether these are known from theoutset or introduced through changing evolution of Commercial management withinconstruction is in line with all of the above. However, dueto the complexity of valuing and costing constructionworks, Commercial management within construction hasevolved into more of a technical discipline, largely carriedout by a quantity guidance note outlines the role of commercialmanagement in construction, providing a framework ofguidance covering the most common tasks that acommercial manager will perform on a constructionproject. It brings together the quantity surveying skills anddisciplines covered in many of the other rics competencies. One of the key things that differentiatescommercial management from general quantity surveyingskills is the ability to take an overview of a project orcontract.

10 To do this, it is crucial to understand how all theindividual quantity surveying skills are pieced together, tocommercially manage construction guidance note is aimed at Commercial managersworking within contracting organisations and has beenwritten in the context of a project. However, it couldequally apply to the overall Commercial management of aframework contract within infrastructure or facilitiesmanagement, as well as to a construction business ordivisional unit. In addition, many of the commercialconsiderations are equally relevant for commercialmanagers representing clients or What defines a successfulconstruction project?In simple terms, a successful construction project is onethat is delivered on time , on budget and on quality : forexample, to quality standards defined within the contractdocuments. These project goals must be balancedagainst the client s relationship status and reputation,which will affect the longer-term goals of a a contracting organisation, a successful constructionproject will usually be one that produces or exceeds theanticipated return for that business, with the clientrelationship maintained or improved as a result.