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Every decision you make, every action you take has a carbon footprint

Posted on October 28, 2023 by | Leave a comment

I’ve been involved in three events recently, each having a focus on reducing the carbon footprint created by the construction industry:

  1. The RMIT University PCPM Industry and Research Awards Night 2023, where I presented the CIOB Certificate of Excellence to a student CIOB member in their final year with the highest GPA in Construction Management.  A significant proportion of the student projects on show at this event had a focus on sustainability and carbon reduction.
     
  2. ZERO is an industry group focused on embodied emissions from construction. Our latest discussion was on tools to measure embedded carbon in buildings.  For more on Zero see: https://zeroconstruct.com/  
     
  3. Representing the Chartered Institute of Building (CIOB)[1] at the Chartered Institute of Building Services Engineers (CIBSE) awards night for young engineers where the focus was again on reducing carbon from construction activities, with at least some of the award winners looking at the full lifecycle of a building.

Given construction activity accounts for 12% of all human carbon emissions, reducing the industries emissions makes sense. But to be effective, this needs a wholistic view of the carbon lifecycle in the built environment.

At the moment, the trend seems to be focused on measuring the carbon embedded in a structure during the building process. The tools discussed in the recent ZERO Zoom meeting need improving, but they are designed to plug into a BIM model[2] and calculate the embedded carbon.

While this is useful, and the technology is exciting, I have a feeling this focus is missing 90% of the problem. Just focusing on ‘the building’ creates the impression low carbon buildings are relatively expensive and designing for minimum carbon in the structure can cause overall emissions to rise significantly.  This is a lose-lose outcome.

From my perspective, some of the easiest ways to reduce carbon overall and reduce building costs lay in other areas. The cost of a building through its life is expressed by the ratio 1:5:200 where:
  –  1 is the cost of construction
  –  5 is the cost of facilities maintenance and refurbishment through
         the life of the structure
  –  200 is the cost of the operations undertaken within the structure.

While this is a financial ratio, spending money involves doing work which generally creates carbon, probably in similar proportions. Therefore, a small saving in construction that causes an increase in the ownership/operating costs is going to be highly counterproductive.

A few random ideas on ways to reduce carbon within a whole of life perspective include:

Passive Design to reduce operating/ownership costs. One example is eaves on domestic houses.  

Traditional houses had relatively wide eaves (particularly in warmer climates such as most of Australia). These provided shading to the walls and windows. Modern design eschews eaves, which means the walls and windows are hit with the full blast of summer sun.  The cost of the extra air-conditioning over the next 50+ years will far outweigh the cost of the eaves.  Add in the colour – dark colour absorb heat, the house pictured may be a good design for the northern half of Sweeden, but it is not very carbon friendly in Sydney. Other design considerations include natural lighting, passive ventilation, etc.

Design for a long life a well-constructed house or other building should have a life of 100+ years. The way the structure is used will change but if the basic frame is designed for a long life, it can be reused and redefined for far less cost than demolishing it and building something else.  One really daft trend has been to clad buildings with timber (driven by various ‘star-rating’ schemes). Timber rates very well if you focus just on the carbon embedded during building.  It is a disaster if you allow for repainting many times, then ripping off the rotting façade in 20 to 30 years’ time, sending the decomposing timbers to a tip and replacing the cladding with something else.  A brick wall may be more carbon-intensive than a wood wall, but a well-built brick wall will still be standing and doing its job in 200 years’ time.

Design to reduce construction waste every skip load of rubbish shipped off site is wasted carbon (and money).  There are many ways to reduce construction waste including: modularisation, off-site manufacture, intelligent packaging, etc. This is probably the easiest of the ‘low hanging fruit’ – saving costs and reducing carbon at the same time. Unfortunately at the moment, the tools used to measure embedded carbon don’t really have any way to measure the carbon in waste.

Design for maintenance and repurposing rather than demolition. Making building maintenance and repurposing easy, should increase the value of the structure while reducing its overall carbon footprint.  But achieving this also needs a change in mindset from building owners.  The Victorian government has announced the replacement of 100s of social housing units. There is no argument they are old and do need replacing.  However, their default approach is to demolish everything and re-build from scratch.  But the buildings have solid concrete frames with another 100+ years of life – a carbon sensible approach would be to strip the frames and design new cladding, interiors, and services. Done well this would be a lower cost and lower carbon option.   

Conclusion

The need to reduce the carbon footprint of the built environment is a given, and new materials and improved measuring tools are both important. But, just focusing on one aspect, the carbon embedded in the construction process is a recipe for failure. The important missing elements are:

  1. Changing thinking and attitudes of asset owners. Governments are responsible for a very large percentage of the overall built environment and their innate conservatism is creating thousands of tones of carbon: Local Authorities are largely ignoring recycled and low carbon alternatives for road surfacing. The Victorina Government immediately defaults to ‘knock everything down and rebuild’ in its social housing renewal. Etc.

  2. As with other aspects of construction, remember the 1:5:200 ratio. Building cheap / low carbon is only good if you have no interest in the operation and maintenance of the facility. Nirvana is building cheap / low carbon structures that are easy to maintain, efficient to operate, and have a long life.

  3. Requiring a whole-of-life approach to carbon in the built environment. This should be through amendments to building regulations and to measurement systems. Think of the impact if developers had to provide certified information on the 10-year and 20-year cost of ownership to prospective buyers…….

The emerging tools and technologies are important tools in the process of reducing the carbon footprint of the construction industry, but real change needs a wider focus. And as per the title of this post, in the construction industry, the wider built environment, and every other aspect of commercial, professional, and personal life, every decision you make, every action you take leaves a carbon footprint – it needs to be included in your thinking.

See also:
‘Built to Last‘ for a discussion on sustainability: /2023/07/22/built-to-last/ and
‘Shining the light towards low-carbon construction‘: /2023/02/27/shining-the-light-towards-low-carbon-construction/

For more on carbon in the construction industry see: https://mosaicprojects.com.au/PMKI-TPI-005.php#GB

[1] The CIOB were early proponents for the reduction of carbon in the construction industry and a lot of the thought above are founded on my involvement with the CIOB Carbon Action 2050 campaign unfortunately this initiative seems to have faded in the last decade: https://www.ciob.org/industry/politics-government/campaigns/carbon-action

[2] For more on BIM Modelling see: https://mosaicprojects.com.au/PMKI-ITC-011.php#BIM

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The major news story everyone missed: KPMG hit with record fine for their role in the Carillion Collapse.

Posted on October 24, 2023 by | 2 comments

In 2018 the Carillion group of companies were bankrupt owing £1.5 Billion ($2.9 billion Australian), at the time, the largest bankruptcy ever in the UK.  The latest news is in October 2023, KPMG was fined a record £21 million (AU$40 million) for a ‘textbook failure’ in its audits of Carillion. This long running saga raises questions of ethics both within KPMG and the Carillion Board, and controls. Did the Board and Auditors not know (a management failure), or was it a case of not wanting to know the true situation (a governance failure)?  

A wider question for another time is the way the ‘big four’ accounting firms operate. String together Arthur Andersen and Enron in the USA (2001), KPMG and Carillion in the UK (2018), and PWC and the Australian Tax office (2022) suggests there are major structural issues with the ‘big four’ partnership model.

The Carillion Story

Carillion was created in July 1999, following a demerger from Tarmac Ltd., which had been founded in 1903. Following the demerger, Tarmac focused on its core heavy building materials business, while Carillion included the former Tarmac Construction contracting business and the Tarmac Professional Services group of businesses (I worked for Tarmac Construction in 1971/72 – it was a great company in those days).

As an independent company, Carillion undertook a series of acquisitions and expansions including:

  • 2001, expansion into the facilities management services sector
  • 2001, acquired the 51% of GT Rail Maintenance it did not already own
  • 2002, bought Citex Management Services
  • 2005, acquired Planned Maintenance Group
  • 2006, Mowlem support services business
  • 2008, Alfred McAlpine
  • 2008, Vanbots Construction in Canada
  • 2011, Eaga, an energy efficiency business rationalised later in the same year
  • 2012, 49% interest in The Bouchier Group, providing services in the Athabasca oil sands area
  • 2013, the facilities management business of John Laing
  • 2014, 60% stake in Rokstad Power Corporation, Canada
  • 2015, Outland Group, a specialist supplier of camps and catering at remote locations in Canada
  • 2022, Ask Real Estate, a Manchester-based developer

All of these acquisitions came at a cost, in March 2015 concerns about Carillion’s debt situation were raised and by October 2015, Carillion had become hedge funds’ most popular share to ‘sell short’ as analysts questioned the lack of growth and rising debt; the company’s share price fell 19% over the same period.

On 10 July 2017, a Carillion trading update highlighted a £845 million impairment charge in its construction services division, mainly relating to three loss-making UK PFI[1] projects and costs arising from Middle East projects. These and other write downs together exceeding £1 billion occurred only a few months after KPMG had given an unqualified audit opinion on the correctness of Carillion’s accounts.

However, despite these problems, in the five-and-half-year period from January 2012 to June 2017, Carillion had paid out £333 million more in dividends than it had generated in cash from its operations. But, net cash from operations was also needed to pay for investments, and interests on debt (Carillion’s interest charge was £30 million in 2016).

The Carillion Collapse

At the time of its implosion in January 2018, Carillion employed 43,000 people in defence, education, healthcare, transportation and construction and service activities. It had around 420 contracts with the British public sector and many other commercial contracts in the UK and overseas.

Reporting at the time highlighted the aggressive growth strategy, a complex internal management structure, a fuzzy governance structure, poor supervision of daily activities, and the loss of control on some of its flagship projects.  

Carillion had liabilities of £7 billion and just £29 million in cash when it went into liquidation. The primary cause of the Carillion collapse is undoubtedly the actions of its directors and managers and there are ongoing court actions against these people. However, the role of an auditor, is to provide an independent assessment of the organisation’s accounts, to identify the types of issue that lead to the collapse of Carillion and provide either assurance, or warnings to both shareholders and creditors.

The KPMG Involvement

KPMG were the auditors for Carillion, their involvement in this saga was finalised a couple of weeks ago when Britain’s accounting regulator, the Financial Reporting Council (FRC), fined KPMG a record £21 million (AU$40 million) for a ‘textbook failure’ in its auditing of the Carillion accounts. The FRC said the number, range, and seriousness of the deficiencies in the audits of Carillion including not challenging Carillion management, and a loss of objectivity were exceptional, which meant that Carillion was not subject to rigorous, comprehensive, and reliable audits in the three years leading up to its demise. The FRC fine would have been £30 million, but was discounted due to admissions and co-operation by the auditor.

In addition to this fine KPMG and its partners have received the following penalties:

  • KPMG was ordered to pay £5.3 million in costs
  • The lead auditor for 2014 to 2017 was fined £250,000 and banned for 10 years after a discount to reflect his cooperation and admission of failures.
  • The lead auditor for 2013 was handed a £70,000 penalty
  • Three other auditors were respectively; banned for eight years and fined £45,000, banned for seven years and fined £30,000 and banned for eight years and fined £40,000
  • KPMG was also fined £14.4 million in 2022 after providing false and misleading information to the FRC during spot checks on its audits of Carillion and another UK company
  • In February, KPMG paid an undisclosed sum to settle a separate £1.3 billion legal claim by the company’s liquidators, who claimed the auditor had missed ‘red flags’ resulting in the group’s accounts being misstated.

The FRC found that KPMG had failed to respond to numerous indicators that Carillion’s core operations were lossmaking and that it was reliant on short term and unsustainable measures to support its cash flows. The Carillion case is the 16th since 2018 in which the FRC or an industry tribunal has imposed sanctions against KPMG. It takes the total penalties and costs levied against the firm in that time to more than £95 million — far more than its rivals. 

Conclusions

The lack of press coverage of this saga in Australia at least can be attributed to the coverage of first the referendum, then the war in the Israil, plus the years of investigation and multiple trials since the Carillion collapse in 2018.  The still largely unanswered questions include:

  1. Can large organisations really be that bad at controlling major projects?  My answer is yes – look at London’s Crossrail project[2], HS2, and a long list of other projects.
  2. A more focused controls question is are the controls failure on this type of project a question of not knowing, or not wanting to know?  My answer is in Carillion’s case, the Directors did not want to know! Other situations are likely to vary[3].
  3. Who is responsible for the controls and reporting failures? My answer is the governing body. It is the Board of Directors who set the standards required from management and you do not get good controls without a significant investment[4].
  4. What about the Auditors?  My answer is both governments and corporations need to seriously rethink the way they engage with the ‘big four’, and the ‘big four’ need to be completely restructured – the ‘partner model’ has clearly failed.

For more on the failure of organisations to govern projects see: https://mosaicprojects.com.au/PMKI-ORG-005.php#Process4

[1] PFI = Private Finance Initiative, a form of PPP (Public-Private Partnership) contract.

[2] For more on the Crossrail saga see: https://mosaicprojects.com.au/PMKI-ITC-012.php#Crossrail

[3] For more on the link between governance and project controls see: https://mosaicprojects.com.au/PMKI-ORG-005.php#Process3

[4] See Predicting Completion – A Governance Requirement: https://mosaicprojects.com.au/PDF_Papers/P214-Predicting_Completion-a_Governance_Requirement.pdf  

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Baked In Optimism – Why so many projects fail

Posted on October 21, 2023 by | 4 comments

This webinar presented as part of the free PGCS 2023 Webinar Series looked at two processes that are ‘baked into’ standard project management estimating and control to show how recommended good practices are still optimistically biased.

  • When preparing an estimate good practice recommends using Monte Carlo to determine an appropriate contingency and the level of risk to accept. However, the typical range distributions used are biased – they ignore the ‘long tail’.
  • When reporting progress, the estimating bias should be identified and rectified to offer a realistic projection of a project outcome. Standard cost and schedule processes typically fail to adequately deal with this challenge meaning the final time and cost overruns are not predicted until late in the project.

This webinar highlighted at least some of the causes for these problems. Solving the cultural and management issues is for another time. Download the PDF of the slides, or view the webinar at: https://mosaicprojects.com.au/PMKI-PBK-046.php#Process2

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The Diolkos: Innovation, Evolution, or a Parallel Development?

Posted on October 17, 2023 by | Leave a comment

As part of the research underpinning our series of articles on the history of railways (and the people and projects that created them), we identified the Diolkos (built in the 6th century BCE) as probably the first purpose built railway used to move commercial ships overland across the Isthmus of Corinth in Greece; see: /2023/04/17/the-diolkos-the-first-truly-commercial-project/

While the Diolkos’ place in the history of railways (or more accurately guided trolley ways) is not challenged, it seems the innovative approach used by the Corinthians was based on synthesis and elaboration rather than a ‘Eureka’ moment. As this post demonstrates, the use of a man-made structure designed to facilitate the movement of ships across land predates the Diolkos by more than 1000 years. Were the Greeks aware of these earlier developments?  Was the Diolkos the result of an inspirational insight, or, as it appears the result of synthesizing a number of ideas from diverse sources to solve a novel problem?

Egypt during the Middle Kingdom

The complex history of the relationship between Ancient Egypt and Nubia (modern day Sudan) goes back millennia and is dominated by wars, conquests (in both directions), and trade; with the Nile being central to all these activities. However, in the ‘border’ region between Egypt and Nubia and extending upstream (South) the flow of the Nile is disrupted by a series of cataracts, the Second (or Great) Cataract being the most challenging for navigation.

The period this post focuses on is during the Middle Kingdom, when Egypt conquered the Nile Vally well to the South of the Second Cataract and built a series of massive forts to control both the land and the trade on the Nile. Goods from Upper Nubia and beyond were moved by boat on the Nile, including ebony, ivory, spices, exotic fruit, live animals, and skins, as well as gold, diorite, and other minerals from various mines.

During the reign of Senusret III (c1878-1841 BCE) great importance was placed on Lower Nubia. He established a separate administration for the Head of the South, and a canal was rebuilt around the First Cataract at Aswan enabling easier access for troops and trading vessels to reach as far as Buhen and the Second Cataract.

Getting around the Second Cataract was more difficult.

Fort Mirgissa

The Fort at Mirgissa was the largest of eleven Forts built by Pharaoh Senusret III during Egypt’s 12th Dynasty between the second and third cataracts. It was strategically placed above the cataract to control the River Traffic from the North, collecting revenues and taxes from all traders. Placed in the Western Wadi, the fort grew to 40,000 sq. meters. It was made of 10-meter-high mudbrick walls which were doubled to form a 6-meter thick outer and 6-meter-thick inner protective skin to the Fort, it had 12-meter-high square corner towers and numerous bastions for further protection.

After its construction, the fort also protected the harbour at the Northen end of Boat Slipway that run from the Nile below the cataract. Given that neither trade, exploration, nor war wait for the annual high waters needed for relatively safe navigation through the cataract, building the slipway to ensure safe portage was a prudent investment, of potentially great strategic advantage. The labor and resources invested to construct such an elaborate portage certainly indicates the significance of the traffic.

The Mirgissa slipway

The Mirgissa slipway is the only known example of its type. Conceived as a ‘boat road’, and constructed to avoid the least navigable portion of the Second Cataract, this structure allowed shipping movements all year. The slipway may have been built before the fort (the adjacent town is much older), and was used at least as late as the reign of Amenemhat III and possibly into the New Kingdom, a span of some 300 years.

As mentioned, the southern (upstream) end of the slipway was in close proximity to the fort of Mirgissa (but which came first is an open question), while its northern end may have been at Matugaor Abu Sir. This means the slipway ran straight for no less than 1.5 and perhaps as much as 4 km.

The slipway had a support structure of mudbricks, packed mud, and lateral wooden ties ‘rather like a railroad’, but remained low enough to benefit from the wetness of the silt to allow the boats to navigate the Slipway more easily sliding on the wet mud and timbers.

The slipway is approximately 3m wide, more than enough to accommodate the maximum beam (width) of the Twelfth Dynasty Dahshur boats (2.15 – 2.43 m) and would provide ample clearance for the width of a sledge. Both boat hull marks, and sledge tracks are evident on the excavated section of the slipway, these last travels baked into the watered silt road:

Why the portage stopped being used is unclear, the Second Cataract remained a major shipping hazard until submerged under the waters of Lake Nubia, created by the Aswan High Dam some 3,500 years later.

Conclusion

The correct answer to the question posed at the start of this article is unknowable.  While the Diolkos may have been a parallel development with no outside influence, we know the Ancient Greeks and Egyptians traded across the Mediterranean and ideas travel with trade. We also know the Ancient Egyptians used both sledges and wheeled carts to move boats across land as part of their funeral rites and there is evidence of carved ruts being used to guide 4-wheeled carts in Malta well before the Diolkos was built.   

What is not knowable is if Greek merchants or travelers made the journey up the Nile in the time of the Middle Kingdom and/or if the idea of man-made portages had wider currency and were a normal concept at the time.

From our perspective, there seems to be very few truly original ideas. Synthesis and elaboration are two of the key components of most innovation and there are very few completely original ideas.
For more on innovation see: https://mosaicprojects.com.au/PMKI-PBK-005.php#Process3 

Primary Refences:

Overland Boat Transportation During the Pharaonic Period: Archaeology and Iconography.
Pearce Paul Creasman, Laboratory of Tree-Ring Research, University of Arizona
Noreen Doyle, Institute of Maritime Research and Discovery
Journal of Ancient Egyptian Interconnections | http://jaei.library.arizona.edu | Vol. 2:3, 2010 | 14–30

Retrospect Journal (Edinburgh University):  
https://retrospectjournal.com/2020/12/13/the-second-cataract-fortresses/

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