From the depths of the last recession came Egan, Latham and the seeds of a truly integrated industry. This time around, we must not let that message fall by the wayside, says Colin Harding
There’s nothing like a serious recession to concentrate minds and drive out all the fluff and waste that gradually accumulates during the preceding boom. It forces all businesses to review dispassionately their operations and cut back to lean management structures.
In the depths of construction’s deepest recession, in the early nineties, the Building Employers Confederation asked me to organise a conference to focus attention on the industry’s parlous state. The speakers at the Building without Conflict conference on 25 November 1991 included the secretary of state for the environment, Sir George Young, all his junior ministers and a certain Sir Michael Latham. The overwhelming conclusion was that the fragmentation of the industry’s structure had created an ingrained adversarial culture forcing everyone involved in projects to focus on protecting their own interests through the contractual process, rather than on the success of the finished product.
The other message was that to precipitate the major cultural change required to integrate the process and so solve the problem would require government support. Within a year, the secretary of state had appointed Latham to consult widely and report, leading to the publication of Constructing the Team in 1993.
To get the reluctant RIBA on board, the integration message (design and build was still heresy) was softened to “partnering”. However, for the first time, the architect’s divine right to rule the construction contract was being officially challenged.
By the time the economy started picking up, the industry was slipping back into its traditional adversarial comfort zone
By the time John Prescott became responsible for construction in 1997 and the economy was at last picking up, the industry was slipping back into its traditional adversarial comfort zone. Prescott then appointed Sir John Egan, who with more independence, built on Latham’s solid groundwork, and published his report, Rethinking Construction in 1998. Egan unequivocally documented how fragmentation of the industry both in overall structure and the procurement and management of projects was by far the biggest cause of inefficiency, unreliability and conflict. His overriding recommendation was total integration of the process, with the application of lean management techniques.
Despite the many successes of Rethinking Construction (not least the steady growth in the proportion of design-and-build work), full frontal integration was never given a proper chance to run. Partnering was generally restricted to frameworking supervisors and consultants. With the Treasury’s insistence that contractors and subcontractors be subjected to “rigorous competition”, supervisors were able to regain their hold on the procurement and project management process.
Yet all the evidence from both Latham and Egan points to the fact that risk-averse, non-productive, external consultants add no value to the service or end product and only bring unnecessary cost, waste and conflict to the process.
Statistically, construction should be bracing itself for an even deeper and longer recession than the nineties. The reaction against the extravagant and costly designs of this decade has already started. To survive in any reasonable shape, Real Construction must reduce the end costs of its products, while maintaining survivable margins. The industry will not survive yet another round of contractor and subcontractor bashing – they are trading at cost now.
Under the firm leadership of someone like Egan, we could
have a plan in place within six months. Let’s hope he’ll do it
We must all concentrate on offering well-designed, as-standard-as-possible, low-cost products by applying lean thinking to the industry’s process and structure.
Egan had the answer: “It’s integration, stupid.” You bring the responsibility for design, project management and cost control back to the producer, a “principal constructor” with full responsibility direct to the client. You achieve it through integration, that is, bringing everyone into a single entity to work together for the collective (including the client’s) good.
We don’t need another quango. The work has been done. The evidence is there to be used. Under the firm leadership of someone who is committed to integration, like Egan, we could have the plan in place within six months. Let’s hope he’ll do it.
Then, it will be up to the market and the recession to do its work.
Colin Harding is chairman of the G&H Group
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