Notes from a Seminar on Building Economics held at NRC Ottawa, September 24 and 25, 1981

READ THESE TERMS AND CONDITIONS CAREFULLY BEFORE USING THIS WEBSITE. https://nrc-publications.canada.ca/eng/copyright

Vous avez des questions? Nous pouvons vous aider. Pour communiquer directement avec un auteur, consultez la première page de la revue dans laquelle son article a été publié afin de trouver ses coordonnées. Si vous n’arrivez pas à les repérer, communiquez avec nous à [email protected].

Questions? Contact the NRC Publications Archive team at

[email protected]. If you wish to email the authors directly, please see the first page of the publication for their contact information.

NRC Publications Archive

Archives des publications du CNRC

This publication could be one of several versions: author’s original, accepted manuscript or the publisher’s version. / La version de cette publication peut être l’une des suivantes : la version prépublication de l’auteur, la version acceptée du manuscrit ou la version de l’éditeur.

Access and use of this website and the material on it are subject to the Terms and Conditions set forth at

Notes from a Seminar on Building Economics held at NRC Ottawa,

September 24 and 25, 1981

Wilson, A. H.; Rakhra, A. S.; Jones, B. K.

https://publications-cnrc.canada.ca/fra/droits

L’accès à ce site Web et l’utilisation de son contenu sont assujettis aux conditions présentées dans le site LISEZ CES CONDITIONS ATTENTIVEMENT AVANT D’UTILISER CE SITE WEB.

NRC Publications Record / Notice d'Archives des publications de CNRC:

https://nrc-publications.canada.ca/eng/view/object/?id=98c2db19-0185-48f4-a6a6-6243ed3374ac https://publications-cnrc.canada.ca/fra/voir/objet/?id=98c2db19-0185-48f4-a6a6-6243ed3374ac

NATIONAL RESEARCH COUNCIL OF CANADA DIVISION OF BUILDING RESEARCH

NOTES FROM

A

SEMINAR ON BUILDING ECONOMICS

(Held at NRC, Ottawa, September

24

and 25, 1981)

Compiled by

A.H. Wilson, A. S. Rakhra and B.K. Jones

Introduction

Session 1: The Links between Technical, Economic and Social Research and Building Practice Session 2: The Economics of Building Rehabilitation Session 3: The Economic Evaluation of Building

Design

Session

4:

The Building Market in the Next Ten Years Summary

Postscript

Acknowledgements

Appendix A

-

List of Participants Appendix B

-

Program

Appendix C

-

Building Economics Journals

Page 1 2

T h i s seminar was o r g a n i z e d by t h e B u i l d i n g Performance S e c t i o n of

N R C ' s D i v i s i o n of B u i l d i n g R e s e a r c h a n d h e l d i n Ottawa o n September 2 4 a n d

25, 1981. Its p r i n c i p a l o b j e c t i v e was t o b r i n g t o g e t h e r a number of

n a t i o n a l and i n t e r n a t i o n a l e x p e r t s i n b u i l d i n g economics f o r t h e d i s c u s s i o n of f o u r s u b j e c t a r e a s of c u r r e n t i m p o r t a n c e , namely:

-

t h e l i n k s between t e c h n i c a l , economic and s o c i a l r e s e a r c h and b u i l d i n g p r a c t i c e ;

-

t h e economics of b u i l d i n g r e h a b i l i t a t i o n ;

-

t h e economic e v a l u a t i o n of b u i l d i n g d e s i g n s ; and

-

t h e b u i l d i n g m a r k e t i n t h e n e x t t e n y e a r s .

A s e p a r a t e s e s s i o n was d e v o t e d t o e a c h of t h e s e s u b j e c t a r e a s . Each s e s s i o n had one o r more l e a d i n g s p e a k e r s , who made s h o r t p r e s e n t a t i o n s . These were f o l l o w e d by open d i s c u s s i o n s . The t o n e and i n t e n t of t h e seminar were q u i t e i n f o r m a l , and t h e number of a t t e n d e e s was k e p t t o a minimum t o encourage f u l l p a r t i c i p a t i o n i n t h e d i s c u s s i o n s . The l i s t of p a r t i c i p a n t s h a s been i n c l u d e d i n t h e s e NOTES a s Appendix A , a n d t h e d e t a i l s of t h e f o u r s e s s i o n s a s Appendix B.

B u i l d i n g economics i s a r e l a t i v e l y new, and n o t always a c c e p t e d , e l e m e n t i n t h e mainstream of economic t h e o r y and t h o u g h t , b u t o n e t h a t i s g r a d u a l l y b e i n g r e c o g n i z e d by b o t h p r o f e s s i o n a l s and laymen i n t h e f i e l d . S e r i o u s i n t e r e s t i n i t w i t h i n NRC's D i v i s i o n of B u i l d i n g R e s e a r c h began s e v e r a l y e a r s ago. The f i r s t f u l l - t i m e economist j o i n e d t h e D i v i s i o n ' s s t a f f i n t h e s p r i n g of 1978.

M r . C.B. Crawford, t h e D i v i s i o n D i r e c t o r , s a i d i n h i s remarks a t t h e b e g i n n i n g of t h e s e m i n a r t h a t d e s i g n e n g i n e e r s i n t h e p a s t h a v e a p p l i e d s i m p l e economics t o t h e i r d e s i g n s , w i t h t h e i n t e r e s t s of t h e i r c l i e n t s i n mind. Nowadays, d e s i g n e r s have become

-

u n d e r e n v i r o n m e n t a l , s o c i a l and o t h e r p r e s s u r e s

-

more s o p h i s t i c a t e d i n t h e i r a p p l i c a t i o n of economics. Indeed, "socio-economics" h a s become i n c r e a s i n g l y i m p o r t a n t t o more

e n g i n e e r i n g p r o f e s s i o n a l s . I n t h e same way, whereas b u i l d i n g s used t o be l o o k e d upon a s " i n a n i m a t e " , i t h a s r e c e n t l y become c l e a r t h a t t h e

environment w i t h i n b u i l d i n g s i s i m p o r t a n t n o t o n l y f o r t h e w e l f a r e of t h e p e o p l e u s i n g them b u t a l s o f o r t h e i r p r o d u c t i v i t y . I n o t h e r words, a n o t h e r economic dimension h a s been imposed on t h e d e s i g n , c o n s t r u c t i o n and

o p e r a t i o n of b u i l d i n g s , which i s v e r y i m p o r t a n t . A s a D i v i s i o n , B u i l d i n g Research h a s become e n t h u s i a s t i c a b o u t t h i s s h i f t i n emphasis and i s a n x i o u s t o d e v e l o p s u p p o r t f o r i t . U n f o r t u n a t e l y , n o t a l l t h o s e who p r o v i d e t h i s s u p p o r t a r e y e t a s convinced a s t h e D i v i s i o n a b o u t t h e m a t t e r .

SESSIOB

1: 'IBE LINKS BETWEIIU TJKEHICAL, ECOMOElIC AHD SOCIAL USEARCH AHD BUILMW PRACTICE

I n h i s i n t r o d u c t i o n , Chairman Wilson s a i d t h a t one o b j e c t i v e of t h i s s e s s i o n would be t o e x p l o r e t h e r e l a t i o n s h i p

-

i f any

-

between

i n s t i t u t i o n s i n government, u n i v e r s i t i e s and i n d u s t r y , and between them and t h e i n d u s t r y i t s e l f " o u t t h e r e " . Anocher o b j e c t i v e would be t o examine t h e l i n k a g e s between t e c h n i c a l r e s e a r c h and socio-economic r e s e a r c h

-

between t h e "hard" and t h e " s o f t " s c i e n c e s

-

i n t h e c o n t e x t of b u i l d i n g . These p a r t i c u l a r l i n k a g e s have a l r e a d y become important, and a r e becoming more so.

The f i r s t l e a d i n g speaker was Allan Russell. He s a i d he w a s going t o develop what he c a l l e d a n engineer' 6 o r a " d a b b l e r ' s " view of t h e s u b j e c t a r e a

-

a very simple model

-

i n o r d e r t o p u t t h e p i e c e s t o g e t h e r and t o h e l p i d e n t i f y some of t h e i s s u e s involved. ( T h i s model h a s been sketched o u t i n Figure 1 .) ( D Y N A M I C ) USERS A N D O W N E R S E C O N O M I C ( D Y N A M I C ) E C O N O M I C A N A L Y S T

I

( S T A T I C )

1

D E S I G N E R F I G U R E 1 THREE ASPECTS O F B U I L D I N G P E R F O R M A N C E M E A S U R E M E N T

There a r e s e v e r a l key words, and they a r e l i n k e d t o g e t h e r i n a complex fashion. But t h e f i r s t t h i n g t o be recognized i s t h a t t h e b u i l d i n g engineer i s r e q u i r e d t o come up with a s t a t i c s o l u t i o n t o a problem

i n v o l v i n g dynamic s o c i a l needs and a dynamic economic environment. What i s put i n place i s v e r y l a r g e l y immobile, and t h i s may be a b u i l d i n g o r a t o t a l b u i l t environment. The s t a t i c - d y n a m i c s i t u a t i o n c a u s e s some major problems.

I f we s t a r t with t h e s o c i a l a s p e c t , t h e c a s t of " a c t o r s " i s q u i t e d i v e r s e . There a r e owners, and they may be e i t h e r p u b l i c o r p r i v a t e owners, t h e one kind being d i s t i n c t l y d i f f e r e n t from t h e o t h e r . Users can be

owners, who may be i n d i v i d u a l people, o r groups of people, c o r p o r a t i o n s , o r whole communities. Each may have a d i s t i n c t s e t of m o t i v a t i o n s , which can

be " t r a n s l a t e d " i n t o some k i n d of performance measure and which

-

f o r t h e purposes of t h e d i s c u s s i o n

-

may be s o c i a l o r economic o r simply l i n k e d t o t h e u s e r a s an i n d i v i d u a l . A p r i v a t e owner, f o r example, may put up a

b u i l d i n g a s a hedge a g a i n s t i n f l a t i o n . Another may simply r e q u i r e s p a c e f o r h i s own use. Looking a t t h e community a t l a r g e , t h e r e may be t h e m o t i v a t i o n t o conserve s c a r c e r e s o u r c e s , and s o on. The problem becomes

-

when we want t o l i n k t h e s e m o t i v a t i o n s t o g e t h e r

-

one of t r a n s l a t i n g vague s t a t e m e n t s i n t o a c t i o n . I n t h e c a s e of r e s o u r c e c o n s e r v a t i o n , f o r example, t h i s may mean t h a t , i n economic terms, c a p i t a l needs t o be conserved i f c a p i t a l c o s t s a r e t o be minimized. I n t h e c a s e of energy c o n s e r v a t i o n , energy c o n s m p t i o n must be minimized. I n t h e same way, t h e r e a r e c r i t e r i a t h a t w i l l be a p p l i e d by t h e owners of a b u i l d i n g . But n o t n e c e s s a r i l y t h e same o n e s w i l l be a p p l i e d by non-owner u s e r s . They might, f o r example, be more i n t e r e s t e d i n maximizing workers' p r o d u c t i v i t y t h a n i n c o n s e r v i n g energy. Even f o r t h e

owner-user, s i t u a t i o n s i n v o l v i n g t r a d e - o f f s between o p e r a t i n g c o s t

minimization and workers' p r o d u c t i v i t y maximization may develop. I n a l l c a s e s , however, m o t i v a t i o n s have t o be t r a n s l a t e d i n t o u s a b l e c r i t e r i a f o r performance measurement.

N e v e r t h e l e s s , we a r e faced w i t h t h e f a c t t h a t m o t i v a t i o n s

-

and t h e weighting of them

-

change c o n s t a n t l y w i t h time. But we have needs which, h o p e f u l l y , can be expressed i n t o something t h e d e s i g n e r can use. I n t h i s c a s e , one of t h e b i g g e s t t a s k s i s t o make a s t a t i c s o l u t i o n a s dynamic a s p o s s i b l e by making i t a d a p t a b l e i n such a way t h a t i t w i l l meet f u t u r e needs. The p r o d u c t must t h e r e f o r e b e r e f l e c t i v e of needs and t h i s i s t h e bottom l i n e .

Another key problem i s t h a t needs may be i n c o n f l i c t . There i s n o t a n e c e s s a r y commonality of o b j e c t i v e s o r of c r i t e r i a t h a t w i l l be used.

Technical s o l u t i o n s need t o be s u i t a b l e f o r u s e i n a dynamic economic environment. One r e a s o n i t i s dynamic i s t h a t government i s changing t h e r e g u l a t i o n s a l l t h e time. Also, t h e t a x system i s changing, market f a c t o r s a r e changing. The problem h e r e i s t o b e a b l e t o measure b e n e f i t s and c o s t s a s f u n c t i o n s of t h e d e s i g n s o l u t i o n . T h i s c a n be looked a t o n t h e b a s i s of an i n d i v i d u a l b u i l d i n g o r on a n a t i o n a l b a s i s . The key problem i s measurement. But i n t h e e n d , even i f t h e r e i s a b e n e f i t , t h e l o o p h a s t o be c l o s e d by a s k i n g t h e q u e s t i o n

-

who w i l l pay? Someone h a s t o Pay

For example, i n t h e c a s e of energy c o n s e r v a t i o n , t h e t y p i c a l b u i l d i n g owner's r e s p o n s e i s t o s o l v e t h e problem u s i n g a t r i p l e n e t l e a s e and, e f f e c t i v e l y , p a s s i n g t h e problem on t o t h e u s e r i n o r d e r t o maximize h i s

-

t h e owner's

-

c r i t e r i a . On t h e o t h e r hand, t h e u s e r of t h e b u i l d i n g

-

e i t h e r an i n d i v i d u a l o r a group

-

w i l l want t h e b u i l d i n g designed t o provide p r o t e c t i o n a g a i n s t c o n t i n u a l l y e s c a l a t i n g o p e r a t i n g c o s t s . The q u e s t i o n , t h e r e f o r e , becomes one of f i n d i n g t h e k i n d of s o l u t i o n t h a t w i l l p r o t e c t a g a i n s t t h e o b s o l e s c e n c e of t h e b u i l d i n g i n energy terms. Can t h e b e n e f i t s of c o n s e r v a t i o n be p r i c e d o u t i n t h e c o s t s ? Even w i t h a t r i p l e n e t l e a s e , should t h e owner n o t p u t more money i n t o t h e b u i l d i n g and c h a r g e more r e n t now i n o r d e r t h a t t h e t o t a l envelope of expenses f o r t h e u s e r o v e r time w i l l b e t o h i s b e n e f i t and t h e owner's c a p i t a l c o s t w i l l b e r e c a p t u r e d i n a

needs and m o t i v a t i o n s on t h e one hand and t h e development o f t e c h n i c a l s o l u t i o n s

-

o r r e s o l u t i o n s

-

o n t h e o t h e r , f i r s t q u a n t i f y i n g t h e b e n e f i t s and c o s t s i n v o l v e d , and t h e n making t r a d e - o f f s and t h e c a s e t h a t someone h a s t o pay f o r t h e s o l u t i o n s .

Another example might i n v o l v e t h e d e s i g n of a n i n t e r n a l b u i l t environment s o t h a t t h e p r o d u c t ~ v r r y o l c r v f i s e r v a n t s

-

s a y

-

might b e i n c r e a s e d . T h i s i n v o l v e s u n d e r s t a n d i n g b e h a v i o u r a s a f u n c t i o n of t h e b u i l t environment. It a l s o i n v o l v e s t h e p r e d i c t i o n of b e h a v i o u r a s a f u n c t i o n of t h e p h y s i c a l v a r i a b l e s which c a n b e m a n i p u l a t e d u s i n g t h e hardware s e r v i c e s o f t h e b u i l d i n g i n q u e s t i o n . l h e n o n t h e economic s i d e , t h e s o l u t i o n c h o s e n must i n c r e a s e p r o d u c t i v i t y . But c a n t h i s i n c r e a s e i n p r o d u c t i v i t y be p r i c e d o u t i n terms of d e s i g n c o s t s ? How c a n p r o d u c t i v i t y and d e s i g n b e l i n k e d and t h e owner persuaded t o p u t up t h e a d d i t i o n a l c a p i t a l t o meet t h i s main

o b j e c t i v e ?

me

c h o s e n s o l u t i o n must t h e r e f o r e maximize t h e performance of b e h a v i o u r a l and t e c h n i c a l v a r i a b l e s and p r i c e them o u t i n t e r m s of a c t u a l c o s t and e x p e c t e d b e n e f i t s .

D r . R u s s e l l l e f t two i s s u e s f o r d i s c u s s i o n d u r i n g t h e s e s s i o n . F i r s t , a common l a n g u a g e of comrmnication between t h e t e c h n i c a l , economic and s o c i a l a s p e c t s of t h e q u e s t i o n must be found. There Is a tendency t o t a l k a t c r o s s - p u r p o s e s e v e n when h e a d i n g i n t h e same d i r e c t i o n . Second, t h e r e i s t h e q u e s t i o n of m o d e l l i n g , i n t e r m s of t h e r e q u i r e d p r o d u c t . Can some way b e found t o e x p r e s s m o t i v a t i o n s , b e h a v i o u r and s o on i n terms of t e c h n i c a l d e c i s i o n v a r i a b l e s , and c a n a way be found t o e x p r e s s c o s t s and b e n e f i t s i n terms of t h e s e same v a r i a b l e s ?

The second l e a d i n g s p e a k e r i n t h e f i r s t s e s s i o n was B r i a n Bowen. He t o o k t h e p o i n t of view o f t h e b u i l d i n g economist "down t h e r e i n t h e t r e n c h e s " a t t e m p t i n g e v e r y day t o o p t i m i z e h i s c l i e n t ' s i n v e s t m e n t s , t o b u i l d f a s t e r ( s i n c e t h e time component s h o u l d n o t b e l o s t s i g h t o f ) , and t o make s u r e t h e y a r e f u n c t i o n a l l y a d e q u a t e when completed. I n Mr. Bowen's view, t h e r e l a t i o n s h i p of r e s e a r c h i n t h e t h r e e a r e a s u n d e r s t u d y

-

t e c h n i c a l , economic and s o c i a l

-

seems t o be n o n - e x i s t e n t a t w o r s t and r a t h e r t e n u o u s a t b e s t .

A s f a r a s t e c h n i c a l r e s e a r c h i s c o n c e r n e d , t h e b u i l d i n g economist t e n d s t o r e l y o n t h e d e s i g n p r o f e s s i o n s t o b e t h e f i l t e r s o f c u r r e n t d e s i g n and t o p o s s e s s a good, sound knowledge of c u r r e n t t e c h n i c a l r e s e a r c h o n b u i l d i n g p r o d u c t s , d e s i g n a p p r o a c h e s , and s o on. But t h e i n d e p e n d e n t b u i l d i n g e c o n o m i s t , i n t h e " f r o n t l i n e " , o f t e n f i n d s h i m s e l f i n a p o s i t i o n o f h a v i n g t o c h a l l e n g e a c c e p t e d p r a c t i c e i n o r d e r t o r e d u c e c o s t s and o p t i m i z e b e n e f i t s . He i s c o n s t a n t l y c o n f r o n t i n g t h e c o n f l i c t between q u a l i t a t i v e and economic i s s u e s , and v e r y o f t e n i s r e q u i r e d t o check t h a t t h e i n f o r m a t i o n on which c o s t s a r e b a s e d i s i n d e e d up-to-date and

t e c h n i c a l l y sound. The a s s u m p t i o n , t h e s e d a y s , t h a t a n a r c h i t e c t o r e n g i n e e r i s i n p o s s e s s i o n of e v e r y t h i n g h e ought t o know i s b e i n g c h a l l e n g e d . C l i e n t s a r e a l s o c h a l l e n g i n g t h e c o r r e c t n e s s o f t e c h n i c a l

i n f o r m a t i o n . But w i t h o u t h e l p from t h e d e s i g n p e o p l e , t e c h n i c a l i n f o r m a t i o n i s h a r d t o come by f o r t h e small o r g a n i z a t i o n . A t t h e same t i m e , t h e r e seems t o be a gap between t h e r e s e a r c h b e i n g done i n t h e t e c h n i c a l a r e a and t h e f r o n t l i n e . l h e f r o n t l i n e i s c o n s t a n t l y hampered by a l a c k o f time and a l a c k of f e e s f o r f i r m s o p e r a t i n g i n t h e economics/management a r e a .

The f r o n t l i n e f i r m ' s g r e a t e s t needs a r e i n t h e economics a r e a , where t h e r e i s a n a l m o s t t o t a l vacuum of r e s e a r c h . Needs a r e p a r t i c u l a r l y a c u t e a t t h e i n d i v i d u a l p r o j e c t l e v e l . There h a s been no r e s e a r c h c a r r i e d o u t i n Canada, o t h e r t h a n s u p e r f i c i a l s t u d i e s o r work we have done

o u r s e l v e s , t h a t h a s been of b e n e f i t ( t o u s ) i n doing o u r j o b b e t t e r . Every day t h e r e i s w a s t e of r e s o u r c e s , i n e f f i c i e n c y and bad d e c i s i o w m a k i n g , a l l of which combine t o make b u i l d i n g s c o s t more than t h e y should. Every s i n g l e b u i l d i n g ( i n Bowen's e x p e r i e n c e ) c o u l d have c o s t l e s s i f t h e r e had been more time, b e t t e r knowledge and u n d e r s t a n d i n g t o a c h i e v e o p t i m a l c o s t s . And w h i l e some c o s t s r e s u l t from t h e s t a t e and c h a r a c t e r i s t i c s of t h e b u i l d i n g i n d u s t r y i t s e l f , a l o t of them come from t h e l a c k of s i m p l e economic

knowledge and t h e l a c k of a b i l i t y t o u s e i t even when a v a i l a b l e . The b e n e f i t s t o be g a i n e d from economic r e s e a r c h f a r outweigh t h o s e i n o t h e r s e c t o r s because of t h e wastage of r e s o u r c e s a t t h e p r e s e n t time. The needs a r e very simple. They a r e :

-

d a t a , d a t a and more d a t a ; i t i s h a r d l y b e l i e v a b l e t h a t an i n d u s t r y a s b i g a s c o n s t r u c t i o n o p e r a t e s i n an atmosphere of almost t o t a l l a c k of economic i n f o r m a t i o n , of c o s t s and p r i c e s , t h a t i s r e a d i l y a v a i l a b l e , q u a n t i t a t i v e l y a d e q u a t e , and c u r r e n t ;

-

t h e s k i l l s t o i n t e r p r e t economic i n f o r m a t i o n i n t e l l i g e n t l y and c o n s t r u c t i v e l y ; and

-

t h e procedures t o b r i n g i t t o b e a r i n t h e market p l a c e , i n a s i m p l e , e f f e c t i v e and p r o d u c t i v e manner. To t a k e an example, l i f e - c y c l e c o s t a n a l y s i s i s a g r e a t i d e a and a powerful t o o l f o r p r o v i d i n g a s e n s i b l e b a s i s f o r b r o a d e r d e c i s i o w m a k i n g . Most a p p l i c a t i o n s of i t a r e simply t r a n s p o s i t i o n s of t h e procedure used i n t h e manufacturing s e c t o r . But t h e r e i s s t i l l n o t enough d a t a t o apply i t

i n t e l l i g e n t l y t o c o n s t r u c t i o n . C a p i t a l c o s t d a t a e x i s t , b u t t h e r e i s a l m o s t n o t h i n g a v a i l a b l e o n o p e r a t i o n a l and maintenance c o s t s , t h e d u r a b i l i t y of m a t e r i a l s , and replacement c y c l e s . N e v e r t h e l e s s , p r a c t i t i o n e r s a r e t r a i n e d t o c a l c u l a t e p r e s e n t v a l u e s , r a t e s of r e t u r n , and s o on, b u t t h e y a r e o f t e n unable t o d e l i v e r t h i s i n f o r m a t i o n a t t h e l e v e l of t h e i n d i v i d u a l p r o j e c t . S o c i a l r e s e a r c h i n v o l v e s t h e u s e of b u i l d i n g s , t h e a n a l y s i s of h a z a r d s and r i s k s , and s o on.

m i s

i s f i n e s i n c e b u i l d i n g s a r e f o r people. But a l l t h a t seems t o happen a s a r e s u l t of t h i s r e s e a r c h i s t h a t b u i l d i n g s become more c o s t l y . They a r e s a f e r and s a f e r , perform b e t t e r and b e t t e r

-

b u t they w i l l c o s t more next year t h a n t h i s y e a r because new r e g u l a t i o n s f l a w i n g from s o c i a l r e s e a r c h w i l l be p u t i n p l a c e by then. But a r e t h e s e a d d i t i o n a l f e a t u r e s worth t h e c o s t ? They may b e , b u t i t w i l l h e l p

enormously i f c o s t - b e n e f i t s t u d i e s a r e c a r r i e d o u t i n p a r a l l e l w i t h s o c i a l r e s e a r c h .

B r i a n Bowen concluded by s a y i n g t h a t b u i l d i n g economic r e s e a r c h i s v i t a l l y important. m e r e i s a d e s p e r a t e need f o r r a t i o n a l , w e l l - d i r e c t e d and p r a c t i c a l r e s e a r c h e f f o r t s i n t h i s f i e l d t h a t w i l l r e t u r n r e s o u r c e s a v i n g s t o t h e c o u n t r y a s a whole and, f o r t h e i n d i v i d u a l b u i l d i n g owner, w i l l f a r outweigh t h e e f f o r t and c o s t of doing i t .

I n s t a r t i n g o f f t h e d i s c u s s i o n , Chairman Wilson s a i d t h a t i n government r e s e a r c h p o l i c y t h e c o n s t r u c t i o n i n d u s t r y t e n d s t o b e overlooked o r given a t h i r d f i d d l e r o l e i n t h e economy a f t e r manufacturing and r e s o u r c e i n d u s t r i e s s u c h a s a g r i c u l t u r e . T h i s i s , i n p a r t , due t o t h e i n d u s t r y

i t s e l f , t o t h e l a r g e number of s m a l l p a r t i c i p a t i n g companies which cannot a f f o r d t o d o r e s e a r c h themselves o r t o go l o o k i n g f o r new t e c h n i c a l i n f o r m a t i o n . It i s due i n p a r t t o t h e many t r a d e s i n v o l v e d .

The f o l l o w i n g a r e summaries of t h e v a r i o u s p o i n t s made d u r i n g t h e d i s c u s s i o n . There h a s been no a t t r i b u t i o n s i n c e , i n most c a s e s , more t h a n one d i s c u s s a n t was involved.

*The i d e a t h a t owners w i l l n o t spend more money on b u i l d i n g s a f e t y seems t o b e a n e g a t i v e approach t o b e t t e r b u i l d i n g . I n p r a c t i c e , i t i s t h e p r o d u c t i v i t y of t h e people who u s e t h e ( o f f i c e ) b u i l d i n g t h a t may l e a d t o d i r e c t s a v i n g s f o r t h e u s e r . So why s h o u l d i t b e d i f f i c u l t t o o b t a i n

funding f o r t h i s t y p e of r e s e a r c h ? One answer may l i e i n t h e f e e s t r u c t u r e f o r t h e c o n s u l t a n t o r d e s i g n p r o f e s s i o n a l . T i m e ( t o d o t h e r e s e a r c h ) i s money, and u n l e s s t h e c l i e n t pays f o r t h e e x t r a work, i t w i l l n o t be done.

On _{t h e o t h e r hand, i t i s t h e r e s p o n s i b i l i t y of t h e c o n s u l t a n t t o d o t h e b e s t}

j o b h e can f o r t h e c l i e n t even though t h e c l i e n t may n o t be i n t e r e s t e d i n t h e methods used. (He d o e s n o t c a r e , f o r example, i f t h e c o n s u l t a n t u s e s a computer o r n o t . ) It may simply be t h e c o n s u l t a n t who d o e s n o t b e l i e v e i n t h e v a l u e of socio-economic r e s e a r c h . Experience s u g g e s t s , however, t h a t i t r e q u i r e s a d i s a s t e r of some s o r t

-

a bad f i r e o r e a r t h q u a k e

-

t o change c l i e n t s ' minds a b o u t s a f e t y and t h e need t o spend more money t o p r e v e n t f u r t h e r d i s a s t e r s .

*There always seems t o be enough money a v a i l a b l e f o r r e s e a r c h i n t o b u i l d i n g m a t e r i a l s , s t r u c t u r e s , and s o on. And i t i s obvious t h a t t h e c o s t of f i r e s , e a r t h q u a k e s and b u i l d i n g f a i l u r e s c a n be ( r e l a t i v e l y e a s i l y ) added up t o open t h e p u r s e s t r i n g s f o r a n t i - d i s a s t e r r e s e a r c h . Why t h e n i s i t s o d i f f i c u l t t o g e t s u p p o r t f o r economic o r b e h a v i o u r a l r e s e a r c h ? The answer

t o t h i s q u e s t i o n seems t o l i e i n p o l i t i c s r a t h e r t h a n i n economics.

Economic and s o c i a l r e s e a r c h need t o f i n d p o l i t i c a l backers. But i n t h e meantime t h e v a l u e of t h i s k i n d of r e s e a r c h must s t i l l b e demonstrated. One way t o do t h i s i s t o "bootleg" i t

-

u n a u t h o r i z e d and unfunded

-

t o

v i s i b i l i t y and c r e d i b i l i t y , a s p a r t of a c o n v e n t i o n a l r e s e a r c h program, t o t h e p o i n t where t h e f u r t h e r work c a n be j u s t i f i e d i n t h e e y e s of t h e

p o l i t i c i a n s who h o l d t h e p u r s e s t r i n g s on behalf of t h e l a r g e r public. *The i d e a of t h e s t a t i c b u i l d i n g product a s t h e s o l u t i o n t o a dynamic b u i l d i n g problem

-

p u t forward earlier by R u s s e l l

-

may n o t be q u i t e r i g h t . T e c h n i c a l people can always p r o v i d e dynamic s o l u t i o n s . There i s no t e c h n i c a l d i f f i c u l t y i n p r o v i d i n g a b u i l d i n g t h a t w i l l n o t become o b s o l e t e o r cannot m a i n t a i n i t s e l f f o r t h e n e x t f i f t y y e a r s . The e n g i n e e r i n g , t h e m a t e r i a l s , a r e simply upgraded. Y e t t h e r e a r e s t i l l t h e s e b a s i c p r e s s u r e s from c l i e n t s and from p r a c t i t i o n e r s t o c u t c o s t s o r t o t i e e f f o r t s t o f e e l e v e l s . How can t h i s c i r c l e b e broken? One way i s t o g e t t h e p r a c t i t i o n e r t o s i t down w i t h h i s c l i e n t r i g h t a t t h e s t a r t of a p r o j e c t and t o a s k him t o d e f i n e h i s v a l u e and i n v e s t m e n t o b j e c t i v e s . Sometimes t h e c l i e n t simply cannot do t h i s . Other t i m e s , t h e r e s u l t s may be amazing. But once t h i s

s t e p has been taken and an answer g i v e n , t h e d e s i g n p r o c e s s i s no l o n g e r i n d i s c r i m i n a t e .

*One d i f f i c u l t y t h a t h a s t o be f a c e d i s t h e l a c k of a common

language t o j o i n economics w i t h s o c i o l o g y and technology. How o t h e r w i s e can an answer be g i v e n t o t h e q u e s t i o n : Should w e d e s i g n t h i s b u i l d i n g t o l a s t 100 y e a r s o r 5 y e a r s ? In p r a c t i c e , t h e r e i s u s u a l l y p r e s s u r e a p p l i e d t o t e c h n i c a l people t o become knowledgeable i n , o r c o n v e r s a n t w i t h , t h e s o c i a l s c i e n c e s . S o c i a l s c i e n t i s t s u s u a l l y remain unconversant w i t h technology. So i t i s t h e y r a t h e r than t h e t e c h n i c a l people who must make t h e p r i n c i p a l e f f o r t t o l e a r n t h e o t h e r language. How t h e n d o you t e a c h them b u i l d i n g s c i e n c e ? You u s e t h e systems approach. But i n p r a c t i c e , t h e s e c o u r s e s a r e u s u a l l y e l e c t i v e and t h e s t u d e n t may n o t choose t o s t u d y t h e " o t h e r "

d i s c i p l i n e .

*At t h e l e v e l of t h e i n d i v i d u a l b u i l d i n g p r o j e c t , i t i s e a s y t o understand why t h e c l i e n t i s u n w i l l i n g t o pay f o r d a t a t h a t have n o t y e t been c o l l e c t e d . Two t h i n g s appear t o be m i s s i n g , t h e r e f o r e . One i s t h e d a t a , and t h e o t h e r i s t h e development of methodology f o r a p p l y i n g i t . Who should by paying f o r t h e s e ? These c o s t s should n o t be a s s i g n e d t o any one p r o j e c t . Some means need t o b e e s t a b l i s h e d , w i t h i n a broad p r o f e s s i o n a l a r e a , f o r t h e e x t r a c t i o n of d a t a f o r p r o j e c t s and f o r making them a v a i l a b l e . I n t h i s way, t h e d a t a b a s e c a n b e c o n s t a n t l y broadened and t h e r e s e a r c h i t s e l f can provide backing f o r t h e whole d e s i g n and c o n s t r u c t i o n a c t i v i t y . But should t h e s e t a s k s n o t b e t h e r e s p o n s i b i l i t y of p r o f e s s i o n a l i n s t i t u t e s o r s o c i e t i e s , o r of t h e f o u n d a t i o n s ? Experience would tend t o s u g g e s t t h a t , i n t h e U.K. and t h e U.S. t h e r e a r e i n s t i t u t e s ( f o r example, ASHRAE) t h a t a r e s t r o n g enough t o undertake them b u t , w i t h t h e p o s s i b l e e x c e p t i o n of t h e G e o t e c h n i c a l S o c i e t y , t h e r e a r e none i n Canada. S i m i l a r l y , i n Canada, t h e r e a r e no f o u n d a t i o n s t h a t a r e o b v i o u s l y l a r g e enough f o r t h i s work. Canada h a s problems of s c a l e .

*There i s a l s o a l a c k of a d r i v i n g f o r c e i n Canada. Owners, and e s p e c i a l l y d e v e l o p e r s , c o u l d p r o v i d e t h i s f o r c e , and become b e n e f a c t o r s i n t h e i n i t i a t i o n of change i n t h e way t h i n g s a r e done. Canada i s unique i n t h a t t h e major d e v e l o p e r s have s o much power, and t h e r e a r e s o few of them. And n o t o n l y a r e t h e y b u i l d i n g f o r o t h e r owners, t h e y a r e b u i l d i n g f o r

themselves. They a r e t h e u s e r s of some of t h e i r own p r o d u c t s , s o t o speak. Sometimes t h e y must be encouraged through s e l f i n t e r e s t

-

t h e i r s and t h e c o u n t r y ' s

-

t o l o o k i n t o t h e l i n k a g e s between s o c i a l , economic and t e c h n i c a l r e s e a r c h and t o p l a y t h e c a t a l y t i c r o l e i n g e t t i n g t h e s e l i n k a g e s understood and used. The d e s i g n and t h e p r o d u c t w i l l be d i f f e r e n t

-

and b e t t e r . The knowledge b a s e a p p l i e d t o i t w i l l be broader. There i s a need f o r

d e m o n s t r a t i o n c a s e s t h a t prove t h i s p o i n t and t h a t expose t h e t a n g i b l e b e n e f i t s

-

t o t h e bottom l i n e .

*While t h e r e have been some u s e f u l examples of p u b l i c and p r i v a t e c o o p e r a t i o n i n v o l v i n g government a g e n c i e s and i n d u s t r y a s s o c i a t i o n s i n t h e c o n s t r u c t i o n b u s i n e s s , t h e s e a s s o c i a t i o n s u s u a l l y f u n c t i o n a s lobby groups and have a narrow range of a c t i v i t i e s and no a c t i v e r e s e a r c h i n t h e f i e l d s under d i s c u s s i o n . (HUDAC i s t h e e x c e p t i o n . ) Lobby groups s e l l memberships!

A g r e a t d e a l of e f f o r t w i l l b e r e q u i r e d t o persuade them t o d o some of t h i s r e s e a r c h , o r t o s u p p o r t i t . N e v e r t h e l e s s , t h i s e f f o r t should be made.

*Perhaps t h e c o n s t r u c t i o n i n d u s t r y h a s n e v e r made up i t s mind t o s e l l a " p r o d u c t " , a l t h o u g h i t may have done t h i s t o some e x t e n t i n t h e e a r l i e r , m a s t e r b u i l d e r e r a . The r e s u l t h a s been t h a t j o b c o s t i n g h a s become t h e main c o n c e r n of t h e i n d u s t r y , e v e n i n t h e l a r g e s t companies. These companies have no c a p a c i t y whatsoever f o r r e s e a r c h . Consequently, owners r e s p o n d t o what t h e c o n t r a c t o r i s o f f e r i n g . Owners t e n d t o l o o k o n i n i t i a l c a p i t a l c o s t s as l a r g e i t e m s and f a i l t o r e c o g n i z e t h a t s m a l l i n c r e a s e s i n t h e s e c o s t s now may l e a d t o s u b s t a n t i a l s a v i n g s l a t e r on. However, i n e f f i c i e n c i e s of t h i s k i n d i n t h e s y s t e m a r e g r a d u a l l y b e i n g

i d e n t i f i e d . But t h e c o u n t r y a p p e a r s t o have a c a p a c i t y t o u n d e r t a k e o n l y s o much c o n s t r u c t i o n i n any one y e a r . T h i s means t h a t t h e proposed e n e r g y m e g a p r o j e c t s , f o r example, w i l l b e b u i l t a t t h e e x p e n s e of o t h e r p r o j e c t s i n o t h e r f i e l d s u n l e s s t h e whole p r o c e s s becomes much more p r o d u c t i v e and

e f f i c i e n t .

*One i m p o r t a n t a s p e c t of t h e e f f i c i e n c y problem may be t h e f a c t t h a t i n d i v i d u a l owners a r e n o t n o r m a l l y i n t h e m a r k e t f o r new b u i l d i n g s c o n t i n u o u s l y . A s a r e s u l t , t h e i r i n v e s t m e n t d e c i s i o n - m a k i n g i s i n t e r m i t t e n t w i t h r e g a r d t o b u i l d i n g s . On _{t h e n a t i o n a l l e v e l , t o t a l i n v e s t m e n t i n t h i s}

f i e l d may grow from y e a r t o y e a r , b u t i t i s b e i n g c a r r i e d o u t ( l a r g e l y ) by d i f f e r e n t g r o u p s of owners a t any o n e p o i n t i n time. T h i s d o e s n o t a p p l y , however, t o t h e l a r g e developer-owners who a r e c o n s t a n t l y i n t h e market and s h o u l d , i n t h e o r y a t l e a s t , h a v e a n a d v a n t a g e of p o t e n t i a l l y b e t t e r p r o d u c t s and of t h e feedback of i n f o r m a t i o n t o t h e d e s i g n e r and c o n t r a c t o r which may l e a d t o t h e a v o i d a n c e of m i s t a k e s a n d b e t t e r r e s o u r c e u s e i n t h e f u t u r e . They a l s o m a i n t a i n c l o s e r r e l a t i o n s h i p s w i t h o t h e r p a r t s o f t h e i n d u s t r y .

On t h e o t h e r hand, i f t h e bottom l i n e i s s t i l l r e t u r n o n i n v e s t m e n t , t h e r e h a s t o be a c l i e n t f o r t h e d e v e l o p e r ' s p r o d u c t and a knowledge of what w i l l s e l l o r r e n t a t what p r i c e . And i t s h o u l d b e remembered t h a t p r o d u c t s s u c h a s b u i l d i n g s w i l l n o t n e c e s s a r i l y be t h e same, even when e r e c t e d one a f t e r t h e o t h e r f o r t h e same d e v e l o p e r .

*To what e x t e n t c a n t h e a r c h i t e c t i n f l u e n c e t h e b u i l d i n g p r o c e s s ? How w e l l d o e s t h e a r c h i t e c t s e l l h i s p r o d u c t ? Should h e n o t b e more

c o n s c i o u s of s o c i a l , economic and t e c h n i c a l l i n k a g e s ? What i s t h e i n t e r f a c e between a r c h i t e c t u r e and e n g i n e e r i n g ? P e r h a p s t h e main problem i s t h e

l i m i t a t i o n s on f e e s . B u i l d i n g s must a l s o b e d e s i g n e d and b u i l t as f a s t a s p o s s i b l e , whether by t h e e n g i n e e r o r by t h e a r c h i t e c t . The e x e r c i s e of i m a g i n a t i o n on t h e p a r t of t h e s e p r o f e s s i o n a l s p l a y s no p a r t i n t h e f e e s t r u c t u r e . Moreover, t h e s e p r o f e s s i o n a l s do n o t r e c e i v e enough feedback and t h u s c o n t i n u e t o make t h e same m i s t a k e s .

*Should t h e owner n o t c a r e f u l l y s p e c i f y what he wants? I n s t e a d o f a s k i n g t o have a b u i l d i n g p u t up t h a t l o o k s l i k e o n e a l r e a d y b u i l t , h e s h o u l d a s k f o r one t h a t does what he wants. The a p p r o a c h would t h e n be "performance" r a t h e r t h a n " p r e s c r i p t i o n " . The d e s i g n e r s h o u l d have a b e t t e r i d e a of how t o p r o v i d e f o r performance t h a n e i t h e r t h e owner o r d e v e l o p e r . However, t h e key seems t o b e t o h a v e a v e r y s o p h i s t i c a t e d c l i e n t "who h a s been t h i s way b e f o r e " and who knows how t o p u t down h i s r e q u i r e m e n t s i n a p r e c i s e and o r d e r l y f a s h i o n . The c h a n c e s f o r s u c c e s s i n s u c h c a s e s a r e l i k e l y t o be high. Other ways t o a c h i e v e t h e same b e t t e r - p r o d u c t o b j e c t i v e might i n c l u d e g i v i n g a d e s i g n - b u i l d team a c o s t limit a n d s p e c i f y i n g t h a t t h e b e s t q u a l i t y and v a l u e of b u i l d i n g b e p r o v i d e d f o r t h i s sum ( n o t more,

n o t l e s s ) . I n t h i s way, t h e comparative p r i c e component c a n be removed from t h e s e l e c t i o n p r o c e s s . Another way

-

t r i e d by t h e G e n e r a l S e r v i c e s

A s s o c i a t i o n (GSA) i n t h e United S t a t e s a t l e a s t once

-

i s t o have b i d d i n g done on a l i f e - c y c l e c o s t b a s i s . Y e t a n o t h e r i s t h e " t w o - s t e p procurement"

technique. I n t h e f i r s t s t e p , a p r o s p e c t u s w i t h performance s p e c i f i c a t i o n s i s s e n t o u t . The r e s p o n s e s a r e t h e n judged from t h e a e s t h e t i c p o i n t of view by a board of a r c h i t e c t s . Those t h a t s u r v i v e t h i s f i r s t s t a g e a r e t h e n t e n d e r e d a p r i c e and t h e l o w b i d a c c e p t e d . The f i r s t s t e p , t h e r e f o r e , i s accomplished a t no c o s t t o t h e c l i e n t s i n c e i t i s e f f e c t i v e l y a d e s i g n c o n t e s t .

*It would be of g r e a t v a l u e i f someone were t o convene a c o n g r e s s o f b u i l d i n g owners, u s e r s and t e n a n t s and t o a s k e a c h of them i f h e i s happy w i t h t h e b u i l d i n g he o c c u p i e s . An enormous amount of s o c i a l , economic and t e c h n i c a l i n f o r m a t i o n

-

a l a r g e p a r t of which i s n o t now a v a i l a b l e i n r e p o r t e d form

-

could t h e n be f e d back t o d e s i g n e r s and b u i l d e r s . What i s happening now i s t h a t no o n e seems w i l l i n g t o b e b o t h e r e d c a r r y i n g o u t post- mortems on b u i l d i n g p r o j e c t s . It i s time-consuming and p o t e n t i a l l y

troublesome. On _{a s m a l l e r s c a l e , t h i s t e c h n i q u e c a n b e used t o f i n d o u t how}

e f f e c t i v e a p a r t i c u l a r p r o j e c t management f i r m ' s a c t i v i t i e s have been. I n Canada, t h e f e d e r a l P u b l i c Works Department h a s a p r o c e s s of post-

c o n s t r u c t i o n e v a l u a t i o n which f o l l o w s t h e l i n e s d e s c r i b e d , a s does t h e GSA i n t h e United S t a t e s . On _{t h e o t h e r hand, i n Canada t h e r e i s no r e a l l y good}

f o c a l p o i n t f o r a l l f a c e t s of c o n s t r u c t i o n where socio-economic and

t e c h n i c a l c o n c e r n s c a n b e drawn t o g e t h e r . Could NRC/DBR do t h i s ? Could i t

d i s s e m i n a t e t h e c o l l e c t e d i n f o r m a t i o n e f f e c t i v e l y , and s h o u l d t h e f e d e r a l government c o n t i n u e p a y i n g f o r i t ?

*It should be remembered, however, t h a t i t i s q u i t e d i f f i c u l t t o c o n v i n c e Canadian d e v e l o p e r s t h a t t h e y a r e n o t d o i n g t h i n g s r i g h t 1 ' I h e i r f i n a n c i a l well-being can be i n f l u e n c e d by

-

f o r example

-

buying p r o p e r t y i n New York a t t h e r i g h t t i m e . They simply d o n o t worry a b o u t l i t t l e t h i n g s . Developers t e n d t o be c o s t , market and p r o f i t - c o n s c i o u s and v e r y f a s t a t "back pocket" economic c a l c u l a t i o n s

-

computing pay-back p e r i o d s , f o r example. They t e n d t o have l i t t l e i n t e r e s t i n t h e l a r g e r q u e s t i o n s which a r e t h e s u b j e c t s o f t h i s seminar. Rut some of them c a n sometimes b e persuaded t o j o i n b o d i e s s u c h a s t h e Canadian Committee on B u i l d i n g

Research

-

which i n c l u d e s a v a r i e t y of p e o p l e w i t h b u i l d i n g - r e l a t e d s k i l l s and e x p e r i e n c e

-

and t o t a k e p a r t i n d i s c u s s i o n s of l a r g e r i s s u e s .

*Should t h e b u i l d i n g economist n o t a l s o be concerned w i t h

p o l i t i c a l q u e s t i o n s a f f e c t i n g h i s c l i e n t s ? Should h e b e concerned w i t h t h e consequences of d e r e g u l a t i o n , on t h e one hand, and i n c r e a s e d r e g u l a t i o n ( f o r example, by means of b u i l d i n g codes) o n t h e o t h e r ? Should h e b e concerned w i t h a c h i e v i n g a b a l a n c e between d e v e l o p e r s , on t h e one hand, and owners on t h e o t h e r ? W i l l energy

-

and e s p e c i a l l y energy t h a t g o e s i n t o t h e

c o n s t r u c t i o n of a b u i l d i n g

-

be t h e s t i m u l u s through which t h e p o l i t i c i a n comes t o s p e a k t o t h e economist and t h e e n g i n e e r and t h e d e v e l o p e r and a t t e m p t s t o p u l l t h e whole s i t u a t i o n t o g e t h e r ?

*With r e g a r d t o t h e a p p a r e n t l a c k of economics-related and o t h e r d a t a , i t would seem t h a t a good d e a l of r e s e a r c h i s a c t u a l l y g o i n g o n i n Canada, a l t h o u g h much of i t i s n o t f o r m a l l y i d e n t i f i e d a s such. T h i s

r e s e a r c h i s b e i n g done i n companies and o r g a n i z a t i o n s whose o p e r a t i o n s a r e s u f f i c i e n t l y l a r g e and c o n t i n u o u s f o r i t t o pay o f f . The r e s u l t i n g

i n f o r m a t i o n may n o t g e t o u t i n t o t h e p u b l i c domain, and t h e r e a r e o f t e n good r e a s o n s f o r t h i s . But t h e e x i s t e n c e of t h i s r e s e a r c h s u g g e s t s t h a t t h e r e q u i r e d methodologies a r e i n p l a c e , s o t h a t t h e companies t h a t have t h e d a t a c a n p u t i t t o work and c a n d e v e l o p e f f e c t i v e feedback mechanisms. For o t h e r companies, t h e d a t a

-

i f t h e y e x i s t a t a l l

-

a r e r e t a i n e d " u p s t a i r s " . T h e r e i s no r e c o r d e d d a t a base. And b e c a u s e of t h e l a r g e number of s m a l l companies i n t h e c o n s t r u c t i o n i n d u s t r y ( i n b o t h Canada and t h e

U n i t e d S t a t e s ) , a s i g n i f i c a n t number of which go o u t o f b u s i n e s s a f t e r o n l y a few y e a r s o f o p e r a t i o n , t h e r e i s l i t t l e i n c e n t i v e t o p u t d a t a t o g e t h e r o r t o p r e s e r v e i t f o r p u b l i c u s e when b a n k r u p t c y comes. P e r h a p s government's c o n t r i b u t i o n s t o a l l t h i s

-

i n Canada

-

would be t o c o l l e c t and make

a v a i l a b l e t h e d a t a p r e s e n t l y h e l d " u p s t a i r s " . There a r e b o t h f e d e r a l and p r o v i n c i a l a g e n c i e s w i t h s i g n i f i c a n t d a t a b a s e e x p e r i e n c e t o do t h i s . I f n o t a government a g e n c y , t h e n a U.K.-style "Quangow* might d o t h e job. I d e a l l y , t h e s o l u t i o n would be t o s e t up an o r g a n i z a t i o n t o c o l l e c t and d i s s e m i n a t e d a t a t h a t p e o p l e w i l l pay f o r b e c a u s e t h e y r e a l i z e t h e b e n e f i t s of u s i n g it. But t h e l a s t time t h i s t e c h n i q u e w a s t r i e d

-

i n a c e n t r a l i n f o r m a t i o n s y s t e m c o v e r i n g c o n s t r u c t i o n p r o d u c t s

-

i t c o l l a p s e d b e c a u s e i n d u s t r y would n o t s u p p o r t i t .

*The b a s i c c h a l l e n g e , t h e r e f o r e , i s t o i d e n t i f y t h e d a t a b a s e t h a t i s needed and t o make s u r e i t c a n b e made a c c e s s i b l e . A second problem i s c o n f i d e n t i a l i t y . An i n d u s t r i a l l p r i v a t e s o u r c e might d e c i d e , f o r example, t h a t i t s b e s t i n t e r e s t s would n o t b e s e r v e d by g i v i n g a c c u r a t e c o s t o r o t h e r i n f o r m a t i o n i t h a s t o a government o r a p r i v a t e d i s s e m i n a t i o n agency. Cost i n f o r m a t i o n a t t h e p r o j e c t l e v e l i s t r a c k e d c l o s e l y by many p r i v a t e

c o n t r a c t o r s , b u t t h e y a r e u s u a l l y q u i t e r e l u c t a n t t o g i v e i t up. T h i s i s o n e of t h e m a j o r c o m p e t i t i v e weaknesses of t h e i n d u s t r y i n t h a t t h e r e i s l i t t l e p r i c e o r c o s t i n f o r m a t i o n a v a i l a b l e . There i s , i n e f f e c t , a v e s t e d i n t e r e s t i n t h e l a c k of s u c h i n f o r m a t i o n . On t h e o t h e r hand, b o t h t h e i n f o r m a t i o n s o u r c e and t h e collection/dissemination agency c o u l d b e i n t h e p u b l i c s e c t o r . I n t h i s r e g a r d , B r i t a i n may have an a d v a n t a g e o v e r Canada because of t h e h i g h l e v e l of p u b l i c ownership of b u i l d i n g s t h e r e . Y e t b o t h t h e f e d e r a l and some p r o v i n c i a l governments i n Canada own and o p e r a t e

s i z e a b l e b u i l d i n g s t o c k s .

*It would a l s o a p p e a r t h a t m a n u f a c t u r e r s of b u i l d i n g p r o d u c t s are t e n d i n g more and more t o p u t a s much d i s t a n c e between t h e m s e l v e s and

b u i l d i n g c o n t r a c t o r s as p o s s i b l e . I n between a r e d i s t r i b u t o r s and w h o l e s a l e r s , who s e l l t o t h e c o n t r a c t o r s . They may b e d o i n g t h i s t o i n s u l a t e themselves from t h e c o m p e t i t i v e market environment and p r i c e f l u c t u a t i o n s . One d i s a d v a n t a g e of t h i s i s t h a t t h e m a n u f a c t u r e r s c a n miss o p p o r t u n i t i e s

-

based on need

-

t o do R&D t h a t w i l l l e a d t o new and improved b u i l d i n g m a t e r i a l s , and s o on. They a r e u s u a l l y u n w i l l i n g o r u n a b l e t o i d e n t i f y t h e p o r t i o n of t h e R&D t h e y a c t u a l l y do t h a t i s c o n s t r u c t i o n - r e l a t e d . A t t h e s a m e t i m e , some of t h e t e c h n o l o g i c a l i n n o v a t i o n s t h a t a r e e x p l o i t e d i n t h e c o n s t r u c t i o n p r o c e s s may have begun l i f e d e s t i n e d f o r a n o t h e r i n d u s t r y .

* I f t h e s i z e of t h e a v e r a g e c o n t r a c t i n g f i r m i n Canada ( s e v e n p e o p l e ) , and i t s ownership by a tradesman r a t h e r t h a n a n e n g i n e e r , m i t i g a t e a g a i n s t i t s doing r e s e a r c h and development, t h e much l a r g e r f i r m s do n o t n e c e s s a r i l y perform a l o t o f

R&D.

There a r e no f i r m s s i m i l a r t o J o h n L a i n g i n B r i t a i n , which h a s i t s own e x t e n s i v e

RCD

and t e s t i n g l a b o r a t o r i e s . The h i g h l y c o m p e t i t i v e market s i t u a t i o n i n Canada r e q u i r e s t h a t overhead expenses be c u t back a s f a r a s p o s s i b l e . Yet i t may n o t always have been t h i s way. The c o n s t r u c t i o n and d e s i g n s i d e s o f t h e b u s i n e s s were n o t always s e p a r a t e d t o t h e e x t e n t t h e y a r e today. Nor w a s t h e r e s o much p r e s s u r e f o r s p e c i a l i z a t i o n a t t h e s u b - c o n t r a c t o r l e v e l , o r f o r t h e main c o n t r a c t o r t o s p e c i a l i z e i n managing t h e work.

*What k i n d s of economic s t u d i e s s h o u l d be u n d e r t a k e n i n Canada? These were s u g g e s t e d :

-

Why do b u i l d i n g s c o s t what t h e y do?

-

Where c a n c o s t s a v i n g s b e made?

-

New t e c h n i q u e s ( f o r example, a s s e s s i n g r i s k w h i l e e s t i m a t i n g c o s t s ) ; new p r o c e d u r e s f o r t h e b e t t e r management o f c o s t s and p r o j e c t s , and t h e a p p l i c a t i o n of v a l u e e n g i n e e r i n g t o

c o n s t r u c t i o n .

( I n B r i t a i n t h e most v a l u a b l e b u i l d i n g economics r e s e a r c h h a s been done i n u n i v e r s i t i e s and i n t h e B u i l d i n g R e s e a r c h E s t a b l i s h m e n t . )

*Data s o u r c e s and c o n f i d e n t i a l i t y a r e two o f t h e b a s i c e l e m e n t s i n i n f o r m a t i o n systems. It a l s o h e l p s i f a s y s t e m c a n b e o p e r a t e d a s a c l o s e d l o o p , whereby i n f o r m a t i o n i s provided by t h e p a r t i c i p a t i n g f i r m s / a g e n c i e s t o a c e n t r a l s o u r c e . Only t h o s e who p u t some i n f o r m a t i o n i n c a n have a c c e s s t o t h e r e s u l t i n g pool. I n B r i t a i n , a g a i n , s u c h a p o o l i s r u n by t h e

p r o f e s s i o n a l q u a n t i t y s u r v e y o r s and h a s been i n o p e r a t i o n f o r a b o u t twenty y e a r s and h a s been q u i t e s u c c e s s f u l . Such p o o l s can have h i g h development and o p e r a t i n g c o s t s , however, and t h i s may c a u s e p r o p o s a l s f o r t h e i r e s t a b l i s h m e n t t o c o l l a p s e . (A s y s t e m based on t h e B r i t i s h model was

developed some y e a r s ago f o r Canada Mortgage and Housing C o r p o r a t i o n (CMHC) t o be used i n i t i a l l y t o e v a l u a t e t h e v i a b i l i t y of p r o p o s a l s f o r mortgage i n s u r a n c e under t h e N a t i o n a l Housing Act. It was implemented i n two b r a n c h o f f i c e s of t h e C o r p o r a t i o n w i t h some s u c c e s s b u t , b e c a u s e of t h e downturn i n

CMHC's market s h a r e i n t h e r e s i d e n t i a l f i e l d , i t n e v e r went any f u r t h e r . It

was i n t e n d e d f o r e v e n t u a l a p p l i c a t i o n s o u t s i d e t h e C o r p o r a t i o n and, i n f a c t , i s s t i l l a v a i l a b l e . The s o u r c e - o f - i n f o r m a t i o n problem was overcome by

b a s i n g t h e s y s t e m on i n f o r m a t i o n provided a s p a r t of mortgage i n s u r a n c e a p p l i c a t i o n s . )

In his introduction, Chairman Wilson quoted from the book published by the leading speaker, Gordon Bagby (Housing Rehabilitation Costs D.C. Heath and Company,

1973):

-9

"Housing rehabilitation means different things to different

people. To a homeowner, it encompasses everything from repairing the roof to changing a lightbulb. To a contractor, it is the gutting and reconstruction of a home's interior. To an apartment owner, it is any improvement which allows him to increase the rents he receives. And to an economist, it is any reinvestment designed to forestall the capital depreciation of a

structure.

.

.".

Dr. Bagby said that his past research on housing rehabilitation attempted to answer five questions:

-

What is rehabilitation?

-

How does it occur?

-

Why does it occur?

-

Why is it so expensive?

-

What is its long-term prognosis?

He then set out to find the policy implications of the answers to these questions.

The rehabilitation process can best be seen as a method of restoring the quality of buildings that have deteriorated as a result of age. For example, we can talk in terms of the age of a particular structure and its quality state. At age zero, it starts off in Class

A

condition. But with the passage of time and use

-

as it grows older

-

it deteriorates in quality so that after forty or fifty years, say, we find the building in low Class E condition. Some kind of subsequent reinvestment process is

therefore required to move the structure from its lower quality state back to an accepted state.

This process can occur for a number of reasons. One is the profit-maximizing activities of an entrepreneur. We can envision an entrepreneur, at any point in time, faced with a number of decisions. He can either sell or keep his property.

If

he decides to keep it, then he has the option of changing its structural condition or removing it and replacing it with something different. I£ he chooses to alter the state of the

property because he envisions revenue benefits to be obtained which can more than compensate him for the expense of doing it, then the question becomes: What methods should be used to change the state of the property, to improve its quality? He has a number of options available to him. He can

of t h e q u a l i t y beyond i t s i n i t i a l s t a t e . R e h a b i l i t a t i o n means r e t u r n i n g t h e s t r u c t u r e t o i t s o r i g i n a l q u a l i t y s t a t e . )

I n r e h a b i l i t a t i o n , t h e p r o c e s s a l l o w s t h e e n t r e p r e n e u r a t l e a s t two o p t i o n s . He can t a k e a "wreck-out" approach, which i s t o g u t t h e i n t e r i o r of t h e s t r u c t u r e t o t a l l y and t o r e b u i l d i t , m a i n t a i n i n g only t h e s t r u c t u r a l s h e l l . O r h e c a n "renovate" i t , s a v i n g c e r t a i n components of t h e b u i l d i n g which a r e s t i l l i n adequate c o n d i t i o n and r e p l a c i n g o t h e r s . I n r e c e n t y e a r s , a t h i r d o p t i o n h a s emerged. It i s t h e " f u r r i n g " approach, which i s simply t h e p l a c i n g of f u r r i n g s t r i p s over t h e i n t e r i o r w a l l s , n a i l i n g them t o t h e l a t h and p l a s t e r o r wallboard o v e r t h e f i r s t . The e n t r e p r e n e u r must t h e n d e c i d e whether t o do t h e work w i t h t h e occupants s t i l l t h e r e o r moved o u t , and what k i n d of q u a l i t y s t a n d a r d s h o u l d be achieved i n t h e work. Associated w i t h each o p t i o n i s a c o s t . The p r o f i t - maximizing e n t r e p r e n e u r ( o r t h e homeowner) w i l l a t t e m p t t o choose t h a t combination which i s t h e most c o s t - e f f e c t i v e , o r h a s t h e g r e a t e s t r e t u r n on investment.

There i s a second way t h i s p r o c e s s can t a k e place. I f , f o r whatever r e a s o n , a p u b l i c a u t h o r i t y mandates t h a t c e r t a i n r e g u l a t i o n s w i l l n o t a l l o w a s t r u c t u r e t o go below a c e r t a i n q u a l i t y s t a t e , t h e n t h e

homeowner w i l l be r e q u i r e d t o b r i n g t h e s t r u c t u r e up t o t h e minimm q u a l i t y s t a n d a r d .

The q u e s t i o n becomes: What i s t h e expense of such a p r o c e s s ? Everyone t h i n k s he knows! The c o n v e n t i o n a l wisdom i s t h a t i t i s a v e r y

cheap process. E s t i m a t e s v a r y anywhere from twenty-five p e r c e n t t o h a l f of t h e c o s t of t h e s t r u c t u r e when new.

To i n v e s t i g a t e t h e v a l i d i t y of t h e s e f i g u r e s , Bagby s a i d h e

undertook a s t u d y i n P h i l a d e l p h i a where, d u r i n g t h e p e r i o d 1966-69, a l a r g e number of c o n s t r u c t i o n p r o j e c t s were being undertaken i n which b o t h

r e h a b i l i t a t i o n and new housing c o n s t r u c t i o n , s p e c i f i c a l l y f o r low-income f a m i l i e s , were included. He encountered a n o t h e r happy c o i n c i d e n c e , i n p a r t because P h i l a d e l p h i a c o n s i s t s mainly of row houses. He found a p a r t of t h e c i t y where some row houses were b e i n g r e h a b i l i t a t e d a t t h e same time a s brand new h o u s e s were b e i n g b u i l t t o a l m o s t i d e n t i c a l d e s i g n s .

The p r o c e s s a c t u a l l y used t o examine t h e r e l a t i v e c o s t s of t h e s e two b u i l d i n g a c t i v i t i e s i n v o l v e d m u l t i v a r i a t e r e g r e s s i o n . Bagby o b t a i n e d c o n f i d e n t i a l c o s t i n f o r m a t i o n on 89 r e h a b i l i t a t e d s t r u c t u r e s and analyzed t h e s e c o s t s a s a f u n c t i o n of t h e c h a r a c t e r i s t i c s of t h e s t r u c t u r e s

themselves

-

f o r example, t o t a l f l o o r a r e a , number of bedrooms, s i t e p l a n c o n f i g u r a t i o n , l o c a t i o n of t h e f a c i l i t y i t s e l f ( i n t h e end o r middle of a row, o r a c o r n e r l o t ) , and t h e c h a r a c t e r i s t i c s of t h e c o n t r a c t o r s .

There were t h r e e c o n t r a c t o r s who were w i l l i n g t o provide

information. The r e g r e s s i o n l i n e which b e s t e x p l a i n e d t h e d a t a was a l i n e a r r e g r e s s i o n , w i t h t h e f o l l o w i n g c h a r a c t e r i s t i c s :

The c o s t of r e h a b i l i t a t i n g a house was =

$1.45 f o r e v e r y $1,191 f o r a house between $366 and $6574

+

s q u a r e f o o t of

+

a t t h e end of a

+

$5,181 depending on f l o o r a r e a row o r $1,370 t h e number of f o r a c o r n e r h o u s e bedrooms (3 t o 6 ) $1,019 f o r a $1,011 i n t h e c a s e between $410 and $468

-

t h r e e - s t o r e y

-

of t h e most

-

depending on t h e y e a r s t r u c t u r e e f f i c i e n t c o n t r a c t o r of c o n s t r u c t i o n (of t h e t h r e e ) ( b e s t y e a r a 1967) The f i t t e d r e g r e s s i o n t h e r e f o r e s u g g e s t s t h a t r e h a b i l i t a t i o n c o s t i n c r e a s e w i t h t h e f l o o r a r e a and a r e dependent on l o c a t i o n and on t h e number of bedrooms but d e c r e a s e f o r t h r e e - s t o r e y houses and f o r t h e most e f f i c i e n t c o n t r a c t o r and by a f u r t h e r amount depending on t h e y e a r of c o n s t r u c t i o n .

The b u i l d e r s of 170 new row h o u s e s a l s o p r o v i d e d c o n f i d e n t i a l i n f o r m a t i o n on t h e i r c o s t s . Bagby took t h e c h a r a c t e r i s t i c s of t h e s e h o u s e s and a p p l i e d them t o t h e above e q u a t i o n i n o r d e r t o a r r i v e a t e s t i m a t e s of t h e c o s t s of r e h a b i l i t a t i n g them i n s t e a d of b u i l d i n g them new. T a b l e 1 shows t h e r e s u l t i n g c o s t comparisons. The f i g u r e s show t h a t r e h a b i l i t a t i o n c o s t s were a p p r o x i m a t e l y 90 p e r c e n t of new-build c o s t s .

T a b l e 1

Comparisons of R e h a b i l i t a t i o n and New Housing C o s t s

( 1 ) (2 ) ( 3 ) (4 (5)

E s t i m a t e d

B u i l d i n g R e h a b i l i t a t i o n Cost D i f f e r e n c e Dimensions S t o r e y s Co s t New Cost (Co1.3

-

Co1.4)

18 x 35 2 $ 8,843 $8,407 1 8 x 35 2 8,198 8,407 18 x 35 2 8,474 8,407 24 x 25 2 10,505 8,319 20 x 40 1 9,107 7,738 20 x 45 1 9,725 7,883 20 x 50 1 11,892 8,029 Average D i f f e r e n c e

Average Modified D i f f e r e n c e ( e l i m i n a t i n g h i g h and low o b s e r v a t i o n s )

Median D i f f e r e n c e

Bagby, D. Gordon. Housing R e h a b i l i t a t i o n C o s t s , Lexington, Mass.: Lexington Books, 1973, p. 24.