Construction Project Management Principles B
UBCM7A-15-M/02
Application of Measured Contract Practices to Archaeological Contracting: Clients’ Needs
Michael Heaton MIFA IHBC
January 2007
Executive Summary
Planning Policy Guidance 16: Archaeology and Planning, has made archaeology a ‘material consideration’ in the planning system and an increasingly common mandatory component of development and construction projects. The costs, though small in comparison with project budgets, can run to millions of pounds, are opaque to non-archaeologists and are borne entirely by the Developer.
There are relatively few archaeological contractors and their costs are neither transparent nor predictable. Most costs are based on two-part lump sums or day work rates split between site works and off-site analyses, with the latter invariably re-estimated upwards once site works are complete, for contracts that might run for five years after completion of site works. Profit margins in archaeological contracting are generally 3x the 1% margins quoted by Latham (1994) for general contracting.
Application of ‘measured’ contract practices used incivil engineering groundworks and building maintenance ‘term’ contracts, in which contractors are paid on the basis of a measured comparison of works completed and works priced for in a bill of quantities or schedule of rates, would provide financial transparency and predictability of outcome for Developer and Contractor alike. It would ultimately be in the Clients’ interests.
Implementation would have to be lead by clients and their professional advisors. Promotion in the construction and archaeological presses, together with joint drafting of an archaeological standard method of measurement will help, but archaeological contractors, left to their own devices, will not adopt the practice unilaterally.
1Introduction
1.1Promulgation, in 1991, of Planning Policy Guidance 16: Archaeology and Planning by the Department of the Environment, created, overnight, a market for archaeological services and a major headache for the construction and property development industries. Archaeological works on construction and development projects, hitherto an occasional if unplanned occurrence, became a material consideration in the planning system of England and a mandatory component of an increasing number of construction and development projects. Not only were there not enough archaeological contractors or consultants to supply the demand, those that did exist had no experience of the contractual practices and little understanding of the legal and economic contexts in which they found themselves operating.
1.2Fifteen years on, the situation has not changed significantly.Archaeological contractors are not enjoying the benefits that ought to flow from a rapid increase in the volume of work, with pay rates generally half those of construction, and construction clients and their contractors are being ill-served by commercial, academic and governmental organizations that are arguably not competent to provide the services required of them by PPG16.
1.3This paper proposes an innovation in archaeological working practice that would benefit archaeologist and client alike.The author suggests that application of ‘Measured’ contract practices from the analogous fields of civil engineering groundworks and site investigation would provide clients with financial transparency in what is currently a ‘black art’, whilst providing archaeological contractors with a measure of risk protection in what is often an unpredictable undertaking.
1.4The analysis is hampered, however, by a lack of public disclosure by archaeological contractors and consultants. There is no equivalent of the Building Cost Information Service, the price books published by Spons et al or the Building Analyses published the Architects Journal. The only published analysis of archaeological costs was published in - the author believes - Construction Manager in 1990 by the late Tony Gregory. Despite the author publishing two articles on these subjects (Heaton, 2006a; 2006b), the ‘profession’ is reluctant to publish ‘contract sums’ or other financial details of even public funded projects. Accordingly, the contract values and contract forms cited below are based on legal reports, the author’s professional experience, personal communications and published accounts at Companies House and the Charities Commission.
2The Nature of Archaeological Contracting
2.1Prior to 1986, all archaeological work in the UK was sponsored by academic or government organisations in pursuit of academic or social goals, the latter exemplified by the Manpower Services Commission schemes of the late 1970s and 1980s. The government organizations included a Central Excavation Unit of the Department of the Environment (formerly PSA) and a number of regional or municipal ‘units’ maintained entirely by government grant aid. These latter organizations were responsible for the ’Rescue’ archaeology of the 1970s and 1980s – hastily arranged excavations of development sites by unpaid ‘volunteers’ supervised by inexperienced graduates, commonly initiated by chance finds made during construction projects – that set in stone the construction industry’s experience and expectation of archaeology.
2.2In 1986 Berkshire County Council applied, for the first time, its structure plan policy EN6 on the protection of archaeological sites, derived from the 1979 Ancient Monuments and Archaeological Areas Act, to minerals extraction sites in the Kennet and Thames valleys. With the construction boom of the late 1980s underway, minerals companies complied and within a year the policy had been applied to all extraction and development sites of plausible archaeological potential within Berkshire. The precedent was adopted by neighbouring counties and the European Parliament in promulgating its Environmental Impact Assessment directives, which found legal expression in Englandin PPG16 and the later (1994) PPG15: Planning and the Historic Environment that extended the remit of the law to work affecting historic buildings and their settings.
2.3The increase in work for the relatively small number of organizations capable of mounting archaeological excavations at short notice, was immense and unforeseen.Organisations employing half a dozen professional staff in 1986, such as The Trust for Wessex Archaeology at Salisbury, had moved to larger offices within three years to accommodate salaried payrolls of hundreds (TWA, 1990). Since 1991, every English local authority has applied PPG16 to an increasing number of planning applications and construction projects. Darvill and Russell (2002) suggests there were a minimum of c. 2500 full scale excavations in England, plus c. 2000 site investigations and other forms of work in 2002 alone, some encompassing hundreds of hectares. The number has increased every year since.
2.4By the mid 1990s, archaeological contracting had become established as a material consideration in the planning systems of the UK and a regular experience in the working lives of the construction professionals and contractors.The CIOB issued guidance to its members in 1993 (Bluer, 1993); all Local Planning Authorities retained the services of a statutory archaeological advisor; and in 2004 the Institution of Civil Engineerspublished its Conditions of Contract for Archaeological Investigations as a “service to its members” (D. Vernon MICE, pers comm.).
2.5The costs, though small in proportion to the construction projects they accompany, are still considerable: The archaeological works at the Bath Spa Project cost half a million pounds at todays prices (author’s knowledge), those preceding the Birmingham Northern Relief Road cost 2.5 million pounds (Midlands Expressway v Carillion Construction Ltd and Ors, 2005), whilst those preceding construction of the Channel Tunnel Rail Link are estimated (by the author) to be in the order of c. 5 million pounds. Utilities companies such as Wessex Water and British Gas repeatedly incur archaeological costs of several tens of thousands of pounds, and all new road schemes are preceded or accompanied by archaeological works of similar value, the larger ones running to millions.
3Contract practices
3.1Despite a complete change in the volume and commercial context of archaeological contracting in Britain between 1986 and 2006, contract practices have remained unchanged. The only published guidance routinely used, and specified in all local planning authority briefs - Management of Archaeological Projects (English Heritage, 1991) – assumes a state agency as client. The overwhelming majority of archaeological contracts are tendered-for and managedas single item lump sum contracts or ‘cost re-imbursable’ day work contracts. This means that archaeological contracts such as that preceding the Bath Spa Projectwas awarded and managed on the basis of three lump sum items: (1) Site Operations, (2) interim ‘Assessment’ report and (3) full post-excavation Analysis and report;the £2.5 million of archaeological works accompanying construction of the Birmingham Northern Relied Road was managed on the basis of single lump sum items for approximately a dozen previously identified ‘sites’ – a population that increased as work proceeded; whilst the potentially £1.6 million of site works at Heathrow Terminal 5 was managed as a day works contract (Gill Andrews, pers comm.)on the basis of the contractors time sheets only. Whilst the rate and extent of site works can at least be observed by the clients’ representatives or main contractors, the off-site analysis works that invariably form 30%-50% of the contract values are managed as single lump sums, unseen. Furthermore, these post-excavation works will commonly last 2-5 years after completion of site works.
3.2Whilst making for relatively simple pre-contract procedures, certainly as far as the Quantity Surveyors are concerned, these practices mitigate against the clients’ interests and, ironically, those of the archaeological contractors. To the client or main contractor, the financial bases of these contracts are opaque, a serious handicap when larger than expected volumes of archaeological deposits are encountered, such as the Spitalfields or Hereford Mappa Mundi excavations where the numbers of human skeletons encountered were c.10x those expected, with commensurate variations of cost and completion dates. Furthermore, Management of Archaeological Projects (English Heritage, op cit) is explicit that tendered costs for off-site post-excavation analysis and report writing should be ‘re-estimated’ during the interim ‘Assessment’ stage after site operations. This effectively allows the archaeological contractor to re-negotiate the contract. Profit levels in archaeological contracting are, as a result, generally 3x that of ‘general contracting’ (information taken from company reports lodged with Companies House and Charities Commission), whilst that of the Bath Spa Project was running at c. 50% of the contract sum when the author relinquished management of the contract. Nonetheless, for archaeological contractors, lump sums carry disproportionate risk (Senior, 1990) forcing them to build-in hidden contingency costs; day works contracts discourage improved working practices; and both mitigate against the accumulation of surplus necessary for the training, research and professional development. Despite the higher than industry average profits, pay levels in archaeological contracting are generally 50% of the equivalent construction rates. This hampers recruitment, training and retention of experienced personnel. (Hinton 2002; Aitchison and Edwards, 2003)
4The Proposal
4.1There is another way. Despite the opacity of its working practices and the abstract nature of its end product, Archaeology has much in common with construction groundworks and site investigation. Indeed, it was the similarities between the two undertakings, manifest in the early drafting meetings of the Conditions of Contract Standing Joint Committee, that facilitated the ready adaptation of the ICE’s Ground Investigation conditions of contract to archaeological ends (ICE, 2004b). The principal difference is that archaeologists make extremely detailed records of everything they have revealed, investigated, sampled and processed, for archaeological purposes (cf. Barker, 1977). These detailed drawings, schedules, catalogues, written descriptions, photographs and carefully curated samples and artifacts constitute, inter alia, an exact quantitative record of the volumes and types of materials encountered by the archaeological contactor. Most are now digitized as a matter of course and all are publicly deposited with museums. These records are a Quantity Surveyor’s dream come true and lend themselves perfectly to the management of ‘Measured’ forms of contract.
4.2Measured contracts are one of three basic forms used in construction, the others being ‘cost reimbursement’ and ‘lump sum’. It is the oldest form of contract valuation - all medieval and later building works in England being valued ‘by the measure’ until the advent of the professional architect in the early 19th century (Salzmann, 1952) – and is applicable to all procurement routes, particularly ‘Partnership’ working (cf. Latham, 1994). In building construction and maintenance it is particularly suited to ‘term’ contracts entered into before the value of works can be ascertained accurately (Carillion, 2001; JCT, 2006), and it is the basis of most civil engineering and groundworks contracts (Seeley, 1993). A Bill of Quantities or Schedule of Rates is prepared, normally by a quantity surveyor employed by the client, which breaks ‘the works’ down into definable items distinguished by element, position, materials or method of construction etc. The bills for even modest projects will run to several pages. For civil engineering projects, the units of measurement and the methods and tolerances of measurement used are codified in the Civil Engineering Standard Method of Measurement published by the ICE (McCaffrey et al, 1982). The itemised quantities or rates are normally accompanied by ‘Preliminaries’ such as insurances, site protection, welfare facilities etc., the costs of which are not directly related to the construction design; and ‘Method related’ charges for tasks such as plant delivery or day works that cannot be measured.
4.3This form of contract valuation is particularly suited to civil engineering because of the inherent unpredictability of all groundworks. Ground conditions cannot be predicted with 100% accuracy and, on brownfield sites, obstructions such as old foundations are commonly encountered (McCaffrey et al,op cit). It is explicit in the ICE conditions of contract that the quantities excavated, built or demolished by the contractor may differ from those contained within the ‘bills’. The completed works are literally measured by a quantity surveyor or engineer and the ‘as built’ quantities compared against those the contractor tendered for (Seeley, 1993).
4.4There is no reason why archaeological works could not be costed and managed on the same basis. Instead of simply inviting – or accepting – a single lump sum tender for archaeological works, a client’s design team should assist an archaeological consultant in drawing up a bill of quantities that reflects the quantity, quality and diversity of archaeological deposits likely to be encountered on a given site, and the methods needed to investigate and analyse them. Excavation volumes can be itemised and quantified by type and the methods to be used in their investigation (bulk excavation, manual excavation or sieved extraction, for instance); artifacts and samples can be itemised and quantified by well-understood types; analysis and report writing costs can be itemised as % of the Site Operations costs, the percentage varyingwith site type and theefficiency of the contractor.Preliminaries and method-related costs would be exactly the same as in construction contracts. With experience, access to a library of published archaeological reports and a well-designed site investigation, any competent archaeological consultant could do this. Indeed, archaeological contractors do it implicitly when estimating their lump sum prices.
4.5Smaller than anticipated quantities (as happens more often than not) would result in lower charges for site operations and, thereby, lower analysis and report costs. Similarly, the archaeological contractor is protected against the consequences of unforeseeable discoveries, so would not have to build in hidden contingencies. Final ‘out turn’ costs would be predictable as soon as site operations were complete and the relationship between final outturn costs and results could be easily verified by recourse to the archaeological records. The process and costs base are transparent and predictable and the risks equitably shared, with all the benefits that confers to both parties.
5Implementation
5.1All cultures are, by definition, conservative. Archaeological contracting is a young discipline, clinging to inherited working and employment practices in the face of unfamiliar – and often adversarial - commercial challenges. Existing practices work, just, and many will prefer the devil they know to the one they don’t. Two articles published by the author on this subject (Heaton, 2006a: 2006b) have drawn no response from fellow professional archaeologists, but there is anecdotal evidence of reluctance to embrace contract practices that would restrict the contractors’ ability to renegotiate the contract once site operations are finished.
5.2Innovation will therefore have to be lead by clients(cf. Egan, 1998) and their professional advisors. As current practices stems largely from mutual ignorance , it could be initiated by informal and formal education starting with a survey of construction professionals to assess their experiences of archaeological provision and practice. The results would support informative articles in the construction press, drawing attention to the applicability of Measured contract practices to archaeological contracting and the benefits to clients. Short training courses in each parties working practices, at the behest of client groups,would then dispel remaining prejudices.
5.3Major clients – such as government agencies – and the professional institutions could then be invited to adopt and, or promote the practice in the spirit of the Egan Report. To ease the transition for archaeological contractors, an archaeological version of the CESMM would have to be drafted, together with a guidance note, in consultation with other construction professionals. This would make a fitting accompaniment to the ICE’s Conditions of Contract for Archaeological Investigations. Maintenance of a cross-sector review cycle over the lifetime of two or three large (infrastructure) projects would be necessary, to record feedback and assure participants.
5.4The author has unilaterally implemented Measured practices on three projects under his consultancy – two for a county council and one for an Arts Council funded client – all of which have proved successful from client and contractor perspectives. A fourth will go out to tender in the New Year.
REFERENCES
Aitchison, K., and Edwards, R., 2003. Labour market intelligence: Profiling the Profession 2002/3. (Institute of Field Archaeologists on behalf of Cultural Heritage National Training Organisation)
Barker, P., 1977, The Techniques of Archaeological Excavation. Batsford
Bluer, R., 1993, ‘Archaeology and Development’, Construction Papers No. 28. (CIOB)