Everybody has a role to play in coping with the far-reaching consequences of the war in Ukraine. Collaboration is key, writes James Wates
The war in Ukraine reminds us of how interdependent our sector is. Though the military conflict is more than a thousand miles away, its impact on our operations in the UK is palpable and not likely to ease anytime soon.
Our businesses are seeing daily reminders of the vast number of construction products impacted because a key raw material comes from Ukraine or Russia, or because world markets have been affected by the conflict. Who knew that the world was so dependent on Ukraine for neon? Well, we do now.
And we also know much more about the many other supply chains weaving through Russia and Ukraine, as well as the impact that higher energy prices have on the cost of steel, glass, and other products whose manufacturing processes are very energy-intensive.
A lot of attention has been paid to cost increases, and this is undeniably a pressure that we must deal with. But the impact is also on availability – at any price.
The situation is yet another reason why our sector needs to work ever more collaboratively, in order to deliver value for money for clients
We are seeing that a combination of market conditions and governmental restrictions can mean that production taps are turned off completely, or product distribution is re-directed by governments to ensure that national security needs are met. Such lack of availability of materials can cause long delays with real consequences for clients.
The webs that are woven by our supply chains are very complex. This is the reality. And the situation is yet another reason why our sector needs to work ever more collaboratively, in order to deliver value for money for clients.
In March, the Construction Leadership Council’s guidance note on the Ukraine war highlighted direct and indirect impacts, and its warning of disruption to supply chains and increasing costs has been borne out by events. More importantly, the note set the right tone for our response to the situation, making a strong case for collaboration in order to preserve the sector’s longer-term capacity and capability.
Indeed, failure to deal promptly with short-term challenges – for example in dealing with product shortages – can result in issues spinning out of control, causing long-term damage to the sector ecosystem. The CLC note concludes with a set of recommendations that are common sense (we learnt these during the covid-19 lockdowns) but bear repeating:
- Communicate clearly. Ensure that issues and problems are understood and that solutions are discussed.
- Anticipate. Identify potential issues and plan ahead for their resolution.
- Be flexible. Be prepared to change plans in response to events as they develop.
- Problem solve. Consider a range of options to solve problems caused by the crisis.
- Conduct business with respect. Play by the rules and expect others to as well.
Everybody has a role to play here. As contractors, we need to be transparent with clients – to anticipate and be open about the supply chain restrictions and possible solutions – for example, to source elsewhere, or go for a different product. This requires painstaking work in researching not just our direct suppliers and their vulnerabilities, but who their suppliers are, and tracing the chain of custody as far back as possible. This is difficult but necessary work if we want to be completely transparent with our clients.
As a broader principle, clients and contractors need to have early engagement with the supply chain, a logical good practice that is captured in the Construction Playbook. Adhering to that good advice is more important than ever in turbulent times such as these, and the government needs to play its proper role by encouraging a more consistent implementation of the Construction Playbook across governmental clients, as we are still not seeing the rigorous application of the playbook that is needed for it to realise its full potential.
We have seen collaboration work well in some of the large government frameworks in anticipating and managing supply chain challenges
On the positive side, we have seen collaboration work well in some of the large government frameworks in anticipating and managing supply chain challenges. For example, the Ministry of Justice’s new prison programme, which is being delivered by the Alliance 4 New Prisons that includes ISG, Kier, Laing O’Rourke and Wates, is showing that effective collaboration can smooth out supply issues and maximise value for money.
As the saying goes, never let a good crisis go to waste, and this should be in the front of our minds as we deal with the ramifications of the war. The situation in Ukraine has followed the systemic shocks of Brexit and the covid-19 pandemic. There will, undoubtedly, be more to come.
Disruption to supply chains and price rises are the norm. Integrating more collaborative approaches into business as usual should be our response.
Sir James Wates CBE is chairman of Wates Group