Carillion has highlighted construction’s tendency to get stuck in a rut by sticking to what it has always done – but by asking the right questions, we can drive real change
The layman’s definition of madness is to do the same thing over and over again and expect different results – without questioning why. For the construction industry, Carillion’s demise has rightly reignited the debate on this kind of dysfunction, for instance the continued confusion between value and cost, pursuing a “right first time” build quality through the use of retentions, and cultural schisms around the risks and rewards of construction – who actually believes that profit margins of 0.38% are acceptable, let alone sustainable, for our suppliers and the industry at large?
The sluggishness in driving industry change is due in part to a preoccupation with promoting consistency. Clearly there is a legitimate need to promote consistency, set standards and define best practice on aspects ranging from integrity and collaborative behaviours through to professional competency, which for the commercial practitioner centres on managing and forecasting liabilities, influencing performance and ensuring appropriate, fair and timely payment.
“It is the actions of clients, suppliers, professional institutions and individual practitioners that will accelerate industry change, first by asking “why?” and then by supporting techniques that bring demonstrable improvement”
Asking the right questions
But what is often absent is the asking of two wider questions: “why are we doing this?” and “does it give us what we want?” If the answers to these are: “because we’ve always done it that way” and “not really”, then a change in approach is clearly needed.
This invites a further question: “who should be driving that change?” It is right to look to industry figures to show leadership, inform thinking, set a vision for a better industry and lobby effectively for change. There are many longstanding examples of such individuals, some of whom regularly feature in this magazine, but while they clearly influence the industry’s landscape, they are only part of the answer.
It is the actions of clients, suppliers, professional institutions and individual practitioners that will accelerate industry change, first by asking “why?” and then by supporting techniques that bring demonstrable improvement.
As with mainstream construction, the rail sector has been tackling these issues and Network Rail’s drive to improve the commercial stewardship of railway investment began with a sector-wide dialogue as to what we do, how it’s done and, vitally, why. Why pay in 56 days when we can pay in 28 days? Why apply retentions when it provides no assurance to build quality? Why can’t we drive a culture of prompt and fair payment; why can’t we show UK-wide industry leadership from a sector (rail) that is often misunderstood or noticed more for the challenges it faces than the progressive changes it is bringing?
Until recently, answers to many of those questions have gone unnoticed outside the infrastructure arena despite an annual investment of some £6bn – examples include our effective sector-wide engagement has secured strong and demonstrable supplier advocacy; our burgeoning portfolio of successful programmes have been delivered via collaboration. Network Rail has certification to the international standard for collaborative working (ISO 44001) – one of the first six organisations globally to do so, and perhaps most pertinent of all, our key suppliers have adopted a fair payment charter, which has set payment expectations between tier-ones and tier-two suppliers at 28 days and removed retentions.
But our recent move, in consultation with our key suppliers, to formalise the fair payment charter within our terms and conditions (part of a broader suite of valuable but less eye-catching improvements) has put a spotlight on our methods. Why have we done it? Because it’s the natural next step to take and because culturally it sends a huge signal about the value we place on a sustainable supply chain and the way we want our practitioners to do business – in short, it’s the right thing to do.
Opening the door to new approaches
When discussing our approach to retentions with industry commentators, I was asked why other clients wouldn’t follow suit – there’s that “why” question again – and spoke about two key factors that inform the answer. First, when it comes to retentions: why hold them? Does the holding of monies via retentions actually assure the quality of workmanship and secure a “right first time” product? Or is it more of a belief or worse, simply a habit – “because we’ve always done it that way”? Second, there is a need to understand the maturity of key relationships and how any abolition of retentions would be received by the supply chain – will suppliers feel they are being done to, done for, or done with?
But in reality, it is for clients and suppliers to ask the “why” question of themselves, and I don’t just mean the executive leadership of such companies. Leadership takes many forms and should not be confused with seniority. Each day, graduates, practitioners, managers and executives from across industry are presented with the opportunity to challenge the norm, to show leadership and ask “why?”.
Doing so will open the door for new approaches, drive industry change for the better and improve our collective ability, not only to do things right, but perhaps more importantly, to do the right things.
Stephen Blakey is commercial projects director for Network Rail’s infrastructure projects division