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News & opinion

21 OCT 2018

The vital function of construction commercial management

Following the release of the Global Cost and Commercial Management of Construction: Australia guidance note, we talk to its author James Funge FRICS about commercial management in the region.

The commercial function in Australia ebbs and flows between being valued and important, and being considered a "nice to have".

The quantity surveying (QS) profession is not understood to any great degree by the Australian market. It’s considered more of a general administrative role with a significant portion of employees in contract or commercial positions not having any professional QS training or qualifications.

There are several reasons for this, but one is that the operational function in Australia (ie engineers, senior project engineers, project managers) has far greater responsibility, autonomy and accountability than in any other Commonwealth country utilising quantity surveyors. This function prefers to manage the budget, costs and to a varying degree, change management.

The importance of commercial managers

Commercial management is a vital function for any construction project. It’s a profession focused on revenue and cost control, both up-stream (head contract) and down-stream (subcontract and supply chain).

The function assists in reporting revenue and costs accurately, which provides management with key performance indicators in real-time. This enables decisions to be made in a timely manner throughout the project’s lifecycle.

All too often, construction projects react to cost overruns or the recovery of head contract revenue too late, rather than take a pro-active approach to contract administration, when decisions can actually make a significant difference.

The key to good commercial management practice in this space is accurate, real-time reporting, ensuring that management has timely and accurate data. It doesn’t guarantee profit but allows decisions to be made quickly and effectively to either maximise opportunities or minimise losses, whichever may be the case.

Part of this role includes ensuring timely and well written notices where there is entitlement, to ensure that the contractor’s rights under the head contract are preserved. All too often, we find that contractors who have over-spent on costs are exposed as they have not provided timely notices as required under their head contracts.

The guidance note

Because the QS profession is not well-understood in Australia, it was important for RICS to set out what a commercial manager could and should be responsible and accountable for on any construction project. This varies depending on the size and complexity of the project.

Many of the areas covered by the guidance note are undertaken by other functions or are not undertaken at all.

The guidance note sets out the key responsibilities and accountabilities that a commercial manager should be charged with managing. It provides a baseline for all commercial managers to work from, enabling conversations with operational functions, agreeing or disagreeing about what it is they will prioritise and manage.

It provides the commercial manager with the tools to advise management of the advantages and disadvantages of certain elements of the role. Currently, these are not adequately captured in very general position descriptions, or not at all in some cases that I’ve experienced.

About James Funge FRICS

James Funge is an executive director at Aston Consult, a company providing expert consultancy services and project resourcing specialists who pride themselves in providing professional, commercial, contract management and project-controls services to both public and private sectors, across multiple industries including construction, infrastructure, rail, transport, marine, mining, oil and gas and aviation.

James has over 22 years of blue-chip contracting experience delivering major building, civil and engineering projects globally including the Singapore Metro and Dubai Metro; more recently, he has been advising the D&C Contractor on Sydney Light Rail. He is a certified adjudicator in New South Wales and Queensland, an RICS-certified expert determiner and a Fellow of RICS.