Presentation to CIIA Conference October 11, 2000 by Mark Langdon

1. High Performance Buildings Presentation to CIIA Conference October 11, 2000 by Mark Langdon

2. The Present Environment Business Practices Productivity Commission Reduced Space Requirements Energy Management Building Industry Environmental Sustainability Reduced New Construction Aust. Greenhouse Office Surplus Building Stock

3. The Present Environment Functional Requirements Financial Influence Space Performance Building People Process Organisational Influence Physical Characteristics Adapted from “Facilities Management and the Business of Space” - McGregor & Shiem-Shin Then

4. Life Cycle Costs over 50 years 67% Occupancy costs 15% Operating costs 7% Finance costs 11% Capital costs 100% 0% 50% “Recurrent Costs - A Role for the Quantity Surveyor” - Hatzantonis

5. Current Situation “The new gurus talk about vision or strategic intent of companies, but usually architects and suppliers of physical space are not given much opportunity to link the process of designing office space with such strategies”

6. Current Situation Given the general acknowledged link between the workplace environment, employee satisfaction and profitability, senior managers do appear to be missing an opportunity to manage the working environment for competitive advantage 200 Financial Directors and Managing Directors - Gallup Poll , commissioned by Workplace Management

7. The Future • Corporates are becoming more and more obsessive about performance measurement • Building owners and occupiers are becoming aware of the actual physical work environment on worker performance and the resultant effect on business performance & profitability • High performance building design can improve business efficiency by 30 - 40% G. De Valence - Senior Lecturer in Construction Economics - UTS

8. The Future • Buildings must allow maximum workplace flexibility • Be able to respond to changes in the shortest time possible in response to the “technological explosion” • Add value to the business and increase shareholder wealth and make the business more competitive Various speakers at PCA Corporate Real Estate Conference 2000 - Melbourne

9. Best Value for Money Cost The Value Curve Life Costs Capital Costs Current Industry Focus Operating Costs Durability

10. True Best Value for Money Best Value for Money Cost The Revised Value Curve Optimum Corporate Performance Life Costs Corporate Performance Opportunity Gap Durability

11. The Objective To create and maintain intelligent facility environments which allow the user organisations to achieve their business objectives, while maximising the effectiveness of the occupants and minimising life-cycle costs.

12. Good Performance Measurement Framework Effectiveness Efficiency

13. Lockheed Missile and Space Company 6000 sq. metres 2700 Staff Reduce Energy > 50%

14. Lockheed Missile and Space Company Lighting costs reduced by 75% Energy costs halved Energy efficient improvements added $2M to $50M construction cost. Energy savings were $0.5M pa. Payback period 4 years Absenteeism reduced by 15% & productivity increased

15. Lockheed Missile and Space Company • The reduction in the absenteeism rate paid for the extra energy efficient construction in less than 1 year • Lockheed management claim that the improved productivity gave them the competitive edge that helped them win a $1.5 billion contract • The profit made from this contract more than paid for the entire construction cost of the building

16. Albury Hospital Capital, maintenance, energy & other operational costs comprised only 12% of the total life costs Staff salaries & other labour services accounted for over 70% of the total life costs The greatest scope for reducing costs lay in the actual functional operation of the facilities

17. Albury Hospital The design team included: • Hospital administrators • Health planners • Architects • Engineers • Services consultants • Contractors • Cost experts

18. Albury Hospital • Focus on staff hours per patient • Focus on life costs rather than initial capital costs • Changing engineering standards to emphasise performance during design life • Shift from high rise to low rise construction

19. Albury Hospital • Substantial reduction in hospital floor area • Reduction in operating and capital costs • Capital cost 40% below budget • Dramatically reduced recurrent costs • Significant productivity increases

20. ING Bank - Netherlands The brief: • integrate art, natural materials, sunlight, energy conservation, low noise levels and water usage • be functional, efficient and flexible • be human in scale • have low running costs

21. ING Bank - Netherlands The design team consisted of: • Architect • Construction engineer • Landscape architect • Energy expert • Artists • Bank’s Project Manager

22. ING Bank - Netherlands The results: • energy consumption is less than one tenth of the bank’s previous headquarters • savings in maintenance costs of US$2.4 M p.a. • absenteeism reduced by 25% • enhanced corporate image

23. ING Bank - Netherlands The results: • based on reduced running costs alone the payback period for the extra money spent on design and construction was only 4 months • The value of the building to the bank has been greatly increased: • employees voluntarily work longer hours • productivity has improved • business has increased

24. Present Research • Most organisations still consider buildings as an operational overhead rather than having a strategic value • There is a deficiency in the understanding of the relationship between buildings and the operational performance of the people who use them • There is an increasing gap between building environments and the needs of the organisations which use them Prof. D. Mc.George & Dr. M. Loosemore - UNSW

25. The Problem “ Higher priced designs that enhance productivity may make more economic sense. Yet without an economic method for systematically including productivity benefits in building Life Cycle Cost analysis, these designs cannot be justified.” “Productivity Impacts on Building Life-Cycle Cost Analysis” - Lippiat and Weber

26. Lower Operating Costs The Research Objectives Environmental Sustainability Improved Productivity Building Environment Better Communications Enhanced Organisational Effectiveness

27. The New Market Opportunity “If existing facility owners and users can be shown that retrofit designs based on accurate occupancy cost analysis can produce considerable benefits with short payback periods and increased profit levels, the construction industry may well see a boom in retrofit work” Business Performance Building Environment Increased Market Opportunities Peter Smith - Senior Lecturer Construction Economics UTS

28. Facility Owners Architects Engineers Government Bodies Services Authorities Environmental Experts Energy Experts Construction Cost Experts Facilities Managers End Users Organisational Behaviour Experts Who Needs To Involved? A multi - disciplinary approach is required

29. The Project Delivery Approach Determine Client “Value” Develop Commonality of Purpose and Joint Ownership of Project Develop Continuous Improvement within the Supply Chain Integrate Design, Construction & FM Manage Costs Collaboratively Use Target Costing, Risk Management & Value Management