BCIS basics: six reasons to benchmark in construction

Benchmarking, in the context of construction, is about fine-tuning and improving project outcomes.

When done right, it’s not a one-stop process but should rather comprise a multi-part cycle to be repeated several times throughout a project in the interest of continuous improvement.

The reasons for benchmarking are just as numerous, from proving a project’s value for money to optimising its cost-efficiency. Let’s explore some of these in more detail.

Meeting the budget

Setting and controlling your project to a budget is probably the most important reason for benchmarking. Construction projects, especially large infrastructure schemes, are often complex, and the risk of cost overruns is high. 

Benchmarking in this context is a lessons learned approach. When done correctly, a comparison of cost performance between planned and historic projects can show whether the former is higher or lower than expected, location and time factors considered.  

Specifically, benchmarking against past projects can highlight differences between actual and estimated costs, as well as the impact of different cost types (i.e. fixed, variable and sunk costs).  

For instance, to what extent did overheads drive up costs in project B? What do overhead trends in similar, historic projects mean for focus project A? Fundamentally, this insight can be used to set or adjust more realistic budgets – aka designing to a cost and avoiding ‘scope creep’ or uncontrolled cost spikes.  

Predicting future costs

Although a part of setting a realistic budget, using benchmarking to predict future project costs deserves its own shoutout. Well-executed benchmarking allows costs in comparable projects to be analysed and used to make projections about the focus scheme.

For example, a sample of historical projects from an architect might show a similar pattern of cost overruns caused by design changes. Early focus on these types of risks could help to plan suitable contingency or ensure the project team consider the root causes and how to mitigate them.

Benchmarking to predict future costs is good practice beyond specific project planning. Linking project contracts to BCIS cost indices (i.e. BCIS price adjustment formulae indices) can give a good indication of potential cost increases and help businesses to better manage portfolios and resources.

Informing value engineering

Even in scenarios where there is more wiggle room in the budget, optimising cost performance and balancing this with project quality and delivery times is strategically important.

Such value engineering activities can bring commercial and economic benefits to contractors and customers respectively, while also providing a buffer against external factors, such as inflation, that could increase costs over the project’s lifespan.

Benchmarking is critical to securing these benefits. To optimise or reduce costs, it’s useful to understand trends and gaps in historic project performance data. These shed light on past mistakes and cost drivers and can be used to realise opportunities and mitigate risks in a project’s future.

Evidencing value for money

As quantity surveyors and cost consultants will know, benchmarking provides evidence to develop a strong project business case –one that accounts for risks and proves a project’s worth.  

Stakeholder benchmark reports in particular are designed to show client funders how they are getting value for money from their projects by comparing their cost performance against that of similar schemes.  

In turn, this supports stakeholders to make a range of informed decisions including on investment, resource allocation, design, budgeting and governance. 

As a real-world example, continued construction cost benchmarking will be instrumental to the delivery of the new Infrastructure Pipeline. Benchmarking will afford stakeholders more understanding and control over the factors that affect project performance and delivery (i.e. labour productivity, overhead costs) while limiting risks seen in the legacy infrastructure of recent past.  

A new pipeline of work, and with it a large amount of project performance data, is also a huge opportunity to improve infrastructure benchmarking in future. The greater the scope of projects to benchmark against, the more specific strategic decision-making will become.

Improving industry standards

Benchmarking affords quality control and is an opportunity to elevate project standards across the construction sector. Data sharing between construction businesses is limited, often driven by fears of commercial sensitivity or unfavourable comparisons coming to light.

That said, benchmarking, as a process of continuous improvement, is a near-guaranteed way of bringing the quality and delivery of projects up to scratch across the board. It keeps businesses competitive by providing a gold standard to chase.

Further, the more that stakeholders share project performance data, the greater the opportunities to benchmark more often and more specifically. The hope is this will naturally lend itself to addressing common sector challenges, such as time and cost overruns.

Cutting carbon emissions 

At this stage in decarbonisation efforts, committing to greener building practices is no longer enough. Benchmarking upfront, embodied, operational or whole life carbon emissions in the focus project against comparable, historic data is one of the only ways to guarantee a project will be more sustainable than its predecessors.  

The Built Environment Carbon Database is a great resource for achieving this, providing embodied carbon metrics for a wide scope of building products with more being developed for assets. Primarily, emissions can be broken down and compared at a material level to facilitate specific design adjustments.  

What can construction do to support benchmarking? 

While the reasons for benchmarking are pretty clear, actions to support this process generally are still in the works. It’s evident on delivery and carbon fronts that the construction sector has a lot to gain from benchmarking more readily, but data sharing, and the absence of data, remain big challenges.  

One solution is for construction professionals and businesses to make a bigger commitment to harvesting their own project data. It shouldn’t cost the Earth and naturally increases the amount of benchmarking opportunities on offer across the sector.  

BCIS CapX hosts a library of over 21,000 real-world projects that encompass more than 300 different building types and can be used to benchmark costs. If you’re interested in finding out more, click here.

Benchmarking is only as good as the data available. One way to make a direct impact is to submit project data for use in the BCIS service. 

For guidance on how to share your project data with BCIS, please contact our team. 

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More BCIS Basics

Understanding project preliminaries

Six principles of benchmarking in construction

Using location factors in construction