Commercial break

Why PFI?

Private Finance Initiative (PFI) schemes are one example of the ways that the public sector is changing how it procures it’s buildings. Courtesy of Nick Farraway, md of PFI advocate Thorn Lighting, here’s six things you should know about the PFI:

• since 1996, over 400 public sector projects have been completed under PFI terms, with a further 217 in the pipeline
  
• combined spending under the scheme is now over £56 billion
  
• PFI accounts for only 15% of public sector spend
  
• there is no single method of procurement for PFI schemes
  
• 88% of PFI projects are completed on time and within budget, compared with only 30% of non-PFI work
  
• average bid costs are estimated at £7.7 million for each new hospital and £3.1 million for each new school.

Fleet of foot will gain most from new legislation

Bill Wright, W Wright Electrical, ECA president

“Industry is going through a prolonged period of change, but change can positively influence the commercial success of our business,” said the newly inaugurated ECA president Bill Wright, outlining key issues including commercial practices, sustainability and new regulations.

The almost total disappearance of the nominated subcontractor, the problems with the domestic subcontract and the rise of the claims surveyor all mean that electrical contractors feel distanced from strategic decision making. Wright saw some hope in moves towards better integration, in the public sector at least, but warned: “Best value still means lowest cost but also includes issues such as whole life performance and client procurement practice. The private sector, on the other hand, with notable exceptions, continues to run for cover and pass on as much risk as it can down the supply chain.”

Sustainability “will change our industry forever”, he predicted. “If there is one single driver for integrating the project team it will be sustainability and the increasingly onerous statutory requirements of sustainability.”

“We should assess [new regulations] from a commercial point of view and see what opportunities we can seize from them,” said Wright. “It will be the fleet of foot who will exploit those opportunities to their maximum commercial advantage.”

Future lies with integrated teams, project bank accounts and project insurance

Rudi Klein, chief executive, Specialist Engineering Contractors’ Group

“Change is not easy. We talk about it a lot but we don’t do an awful lot of it,” said Klein. The boss of the SEC Group pointed to the recent report from the National Audit Office (NAO) on public sector construction (EMC, May, p25) as evidence of how improvement could be made. The NAO has estimated that over £1 billion (“I think that’s a conservative estimate – I reckon you could triple that,” thought Klein) could be saved by the public sector adopting:

• early involvement of specialists in integrated design teams
  
• use of non-adversarial forms of contract
  
• use of project bank accounts
  
• project insurance.

Payment remains the big stumbling block to change. “We’ve got to get this right, otherwise you won’t see big improvements in collaborative working and integration,” said Klein.

Design issues were also seen as a “major failure”. Defects and poor health and safety performance stem from the lack of an integrated design (in one study, 50% of accidents could have been avoided through design changes). The SEC Group is working on a checklist of design tasks to improve matters.

On project insurance, Klein estimated that over £1 billion is wasted annually in overlapping premiums. Project-wide insurance is being implemented at Heathrow Terminal 5 and was successfully used at the MoD’s Andover North development.

Improved health and safety is good for business

Kevin Myers, outgoing chief inspector of construction, Health and Safety Executive

There is a growing awareness that sound health and safety practice is good for business. In one HSE study, 60% of firms felt that working within guidelines saved time and money on site.

“There has been progress and significant improvements since the construction industry health and safety summit in 2001,” felt Myers, “against a not very helpful market backdrop of rising output and skills shortages.” Getting clients, designers and small firms engaged is key to further improvement. “Designers are in denial. There is a big challenge here – if consultants don’t change their culture, they risk becoming an endangered species.”

The HSE and Constructing Excellence web sites outline the business benefits: apart from reductions in injuries, there is lower absenteeism, recruitment costs, downtime and insurance premiums.

The HSE sees partnerships like the ECA’s ZAP initiative as the way forward. “Some people change because they see the light; others because they feel the heat,” said Myers. “ZAP shows that electrical contractors are in the light.”

Time to change course on sustainability

Charles Lever, building services director, Taylor Woodrow Construction

No stranger to the ECA conference as a firm advocate of partnering, Charles Lever urged electrical contractors to take sustainability issues seriously. “Our industry is responsible for a lot of the problems; it’s time to change course,” said Lever. “Blue-chip clients will be insisting that we change.”

Lever cited Taylor Woodrow’s experiences at the National Assembly for Wales. Sustainability is embedded into the contract, with a 100-year design life, use of indigenous materials and renewable energy. “We only won the contract because we could address the sustainability agenda – we weren’t the cheapest,” explained Lever.

Sustainability is not just for the big boys. “There’s a lot you guys can do straight away,” said Lever, urging contractors to work with their partners to deliver improvements:

• devise an action plan
  
• provide guidance notes for project teams
  
• set targets for one, five and ten years
  
• benchmark and monitor using KPIs
  
• deal with non-conformists and poor performance.

-L plates

Part L will create a big demand for new innovations but some products on the market will not be available in five years’ time, according to Dave Dossett, director of electrical equipment trade association BEAMA Installation. Expect:

Electric heating products to be under the spotlight – all heating will be low carbon rated
Big implications for lighting products and energy transformers – all lamps will be energy-saving
Opportunities for integration with renewables.

Houses will have embedded electricity generation such as chp, solar panels, wind turbines. New types of accessories will be needed to interface with them
There will be a market for better controls and sophisticated metering LV (12 V dc) ring mains

WEEE problem

“The WEEE (Waste Electrical and Electronic Equipment) Directive has been around a long time but is plagued with government indecision,” says Dave Tilley, sales and marketing director at GFE Electrical Wholesale and self-confessed WEEE Directive anarchist. Implementation of the Directive has been put back to January 2006, but could be delayed further to March.

Tilley identified opportunities for contractors in areas such as lamp recycling. He estimated that the market could be as high as 100 million lamps annually, with only around 20% of that currently recycled.

Contractors will have to consider factors such as: procedures for the handling of hazardous waste; transportation and storage; training; documentation and certification.

Brand awareness

J Brand is one firm that has wholeheartedly embraced the conference theme of commercial success out of change. Paul Jordan told the audience how the company has moved from being a traditional electrical contractor, developing and expanding into datacomms, telecomms, wireless LANs and beyond that into EPOS (electronic point of sale) roll-outs in the retail sector and pc deployment.

Boasting an impressive list of clients including Woolworths, Superdrug, Dixons, B&Q and Ikea, J Brand has gone from supplier to strategic partner. “Any business that is not changing is too insular,” said Jordan. His top tips include:

• maximise the business opportunities of existing customers
  
• keep other companies away from your customers
  
• build and develop the skillsets within the company
  
• niche markets create opportunities.