Who should be doing your Replacement Cost Assessments (formally known as Insurance Valuation Reports)?
A Quantity Surveyor is also known as a Cost Manager or Construction Economist making them an important consultant to the construction industry. From conception to completion, Quantity Surveyors are involved in all stages of a project. This gives them the knowledge and experience to generate accurate and detailed reports.
Quantity surveyors are considered construction cost experts. This differs from a Valuer as they are considered experts in the market value of land and property. Valuers are usually engaged in the post-occupancy stage, with little knowledge and exposure to the ever evolving construction processes and costs, generating estimations based on surrounding property data to conclude the value of a property.
Let’s take a look at a simple snapshot of what their training involves:
- Affiliations with the Australian Institute of Quantity Surveyors (AIQS)
- Degree in Construction Economics or same as endorsed by the AIQS
- Trained to access construction costs of a project
- Affiliations with the Australian Property Institute (API)
- Degree in Property Economics or same as endorsed by the API
- Trained to assess the market value of a property
Based on this information alone, there is a clear distinction on the speciality of both professions. To further illustrate this, consider the following scenario: A residential apartment block (A) is built in the most expensive street in Vaucluse with impressive harbour views, while the second residential apartment block (B) is built on the parallel street surrounded by other apartment blocks. Let us assume that they are identically built, down to the bricks, roof tiles, level of finishes, built at the same time, etc.
A Valuer may consider the following criteria:
- Position or location e.g., proximity to public transport, shops, and schools
- Aspect and views e.g., one may have favourable Northern aspect in comparison to the other Southern aspect, and one is harbour facing in comparison to behind large trees and surrounding apartment blocks
- Size and shape of the land e.g., one could be larger than the other and have further development opportunity, and the other may be an irregularly shaped lot of land with less potential
- The market value of each property and the building itself
After factoring these calculations, a Valuer would conclude that the replacement cost assessment figure of Building A would be higher than Building B due to its impressive location and surrounds.
In direct comparison, a Quantity Surveyor will consider the following:
- The measurements and billing of quantities
- The rate and the cost per square meter, considering factors such as material supply, material handling, labour, access and the likes. This figure is also based upon years of experience and shifting trends in the construction market. When materials and methods of construction change, so do their associated values. It is a Quantity Surveyors obligation to ensure they remain up to date with the latest costings to ensure the reports they provide are accurate and true
- Method of procurement i.e., the contracts chosen for a project e.g., design and construct contracts, construction management contracts, lump sum contracts and the likes
- Construction program i.e., the construction period and methodology associated with the construction. This includes any site accessibility issues, flat or sloping land, having or not having a tower crane can impact the speed of construction etc.
All the above factors are considered by a Quantity Surveyor when putting together the construction cost for the building. Although the aspect and access to various amenities vary, these two buildings were built at the same time, within the same suburb, and the same materials and handling. Therefore, essentially their construction cost would be approximately the same.
So, who is the best person to engage for Replacement Cost Assessments?
In the event of a natural disaster or fire it is not only important but mandated that a strata building is accurately insured to be able to cover all costs involved in reconstruction or part-reconstruction. To adequately insure a building, Replacement Cost Assessments (formally known as Insurance Valuation Reports) are generated. While the cost of the building is the main component, there are other important costs to consider. These include the cost of professional fees, inflation, authorities’ fees, demolition, removal of debris and the cost of all work external to the building. With the expertise of a Quantity Surveyor, all aspects are considered and meticulously costed, delivering the most reliable Replacement Cost Assessments.