We talk a lot about sustainable and smart buildings, but do we have the right models to succeed? We see time and again that buildings don't work, use unnecessary energy and need to be renovated after a short time. To meet our climate targets, we need to put the foundation of our challenge in place. I believe we need to change the business models to get a step closer to sustainable buildings!
Most often when we build or renovate commercial buildings, this is done on traditional contracts. There are generally four of these that are best known:
Divided contract: The building owner personally engages an architect, consultants and enters into separate contracts with several contractors. One of the contractors most often gets responsibility as the managing subcontractor.
Main contract: The building owner personally engages an architect and consultants. One contractor handles the substantial part of the building, but the building owner engages, for example, technical contractors themselves.
General contract: The building owner personally engages an architect and consultants, but only one contractor, who in turn has contracts with all the other contractors.
Design and build contract: The building owner has a contract with one contractor, who in turn has contracts with the architect, consultants and all other contractors – if the task extends all the way to complete fit-out.
The latter has tended to become the most common today.
And this is precisely why we very often end up with buildings that don't work, are outdated before they are taken into use, and are not flexible enough to be changed afterwards.
What makes me believe these models are not sustainable for the future involves several factors, but an important starting point is to look at the costs of building a commercial building. The technical portion of buildings has gone from 15% to 50% in recent years. But design-and-build contractors are still companies that typically come from the concrete and construction side, while technical disciplines are largely purchased from whoever has the cheapest price – which can often also be a mix of many companies that each had their particular part cheapest.
And this is precisely why we very often end up with buildings that don't work, are outdated before they are taken into use, and are not flexible enough to be changed afterwards.
When the tender competition is won and awarded to the technical disciplines, it is essentially hardware costs and hours that make up a one-off cost. Technical components with an "assumed lifespan" of 12–20 years are typically delivered here, but the warranty is often only 3–5 years. So the building owner is left alone with the risk after 5 years. Most costs are incurred virtually immediately, even though the building is expected to last for many years.
Why aren't technical disciplines delivered "as a service"?
If we look to the IT industry, there used to always be a large server room in the basement, and often smaller server rooms on each floor – these are now being removed as most companies work in the cloud with an "as a service" pricing model. This means that instead of incurring a cost of 1,000,000 kr for a large server park that must work for the company right now, you can instead pay a monthly or annual sum that replaces the one-off cost, and you can easily scale up or down as needed.
This has become the norm and not the exception – so why doesn't the construction industry do the same?
I think the reason we "do as we always have" is a combination of inadequate updating around technology from the design-and-build contractor, outdated standards and challenges around changes to contractual arrangements. But all of this will change when building owners set requirements, or want to achieve a more equitable distribution of risk over the building's lifecycle.
So what could this mean for our buildings? Let's think freely about some of the most important things in a building, for both the people and the building itself.
The ventilation system is a vital component in any commercial building. Without it we get poor indoor climate, and the building can suffer major damage. Ventilation systems can be delivered in many ways, and if several companies compete to deliver "1 ventilation system" at the lowest price, this is often not aligned with what is best for the building's lifecycle. There are also an extremely large number of components that can fail along the way.
Imagine instead that this was delivered as a service, a monthly or annual price in the same way as our data server. Then it would perhaps be easier to plan for a long and sustainable lifespan, since the supplier shares the risk. In addition this would include service, so the supplier would then have an actual incentive to become data-driven in their decisions, to deliver more sensor technology than the minimum so that it pays off over the whole lifecycle.
If a component fails and we have it as a service, it is naturally the supplier who bears the cost. If we also add the energy perspective to the service, then we might also get whatever is cheapest to operate at the same time.
ITB stands for Integrated Technical Building Installations, and in recent years there has been considerable growth in companies and people wanting to sell this service into projects. When we see buildings becoming ever more complex and we have problems with far too many buildings, it is clear that this is important today. But here we are trying to solve the challenge of buildings not being "finished" and the lack of ownership of functions when there are often many technical disciplines involved. But if this were delivered as a service, there would clearly be more incentive for the technology to work so that the building actually functions, uses the right amount of energy and components last as long as possible.
I am clear that this is a very unpopular opinion, but I have always felt that the ITB role is not the solution to the challenge, only a short-term fix.
A small aside: when the travel service Expedia found that 58% of all customers called them after booking a trip, instead of making the customer centre more efficient, they tried to find the underlying problem – which was mainly that customers didn't receive a booking confirmation due to wrong email addresses or it ending up in their spam folder. After solving the problem, they went from 58% to 15%.
It's a bit like using a bucket to deal with a sinking boat, instead of plugging the hole.
Is it better for the building owner and tenant to receive it as a service? If you have a building today, you probably have tenants or expectations around the price per square metre. Are you then making the best decisions for a smart renovation? As long as financial officers are involved in this decision, the most sustainable long-term options are usually not taken, as the models are not designed for thinking sustainably in the long term.
The paradox is that if you make large investments in energy-efficient systems, it is the landlord who must pay, and the tenant who reaps the benefit.
If the smart part of the systems could be included in the common service charge, more of the right choices would probably be made.
Just think, for example, of a pump for a water circuit in a building. If the cheapest one costs 10,000 kr and the most expensive costs 20,000 kr, you would probably choose the 10,000 one. But what if it costs 3,000 kr more in energy costs than the most expensive over the course of a year? After 3 years this would have been recouped and the pump should stand there for 12 years. But as long as the landlord must invest and the tenant alone reaps the benefit, this often plays out this way.
But what if the pump cost 100 kr per month for the cheapest and 120 kr per month for the most expensive? The monthly energy saving for the 120 kr one would be 25 kr per month, so the total calculation would then be 100 kr for the cheapest and 95 kr for the most expensive after deducting the energy savings.
Then it would probably make sense for the cost to be included in the common service charge, as long as it is delivered as a service?
It is also reassuring for a property manager to know that the budget is easier to maintain when we have a building as a service. The worst thing I myself experienced as a property manager was when a 6-year-old pump suddenly stopped working, out of warranty, and I had to explain to the landlord why an unforeseen expense of several hundred thousand kroner had suddenly appeared – impossible to budget for, since the assumed lifespan was 12 years. If it had been provided as a service, the property manager would not have been "made to look bad" in such situations and it is easier to budget for sustainable operations.
Sustainable solutions need sustainable business models.
Fill in some info and we’ll get in touch by email or phone.
You can also call us on +47 516 10 170
Fyll ut litt info, så tar vi kontakt på epost
eller telefon.
Du kan også ringe oss på telefon
+47 516 10 170
