What is perturbing, however, is that the report does not appear to have had, at least as yet, a similar effect on attitudes among the most of the industry’s customers in the private sector.
At the heart of British construction lies a little observed paradox. According to free- market economic theory – a theory to which most contractors and their clients are firmly wedded – the most effective way to ensure customer satisfaction is to establish conditions of perfect competition. The British construction sector – which, lacking effective barriers to entry, suffers from chronic over-capacity – is one of the most ruthlessly competitive markets in the developed world. Yet if Sir John Egan and others are to be believed, customer satisfaction is not higher but much lower than in most other sectors. Unless free-market economic theory is bunk, how can this be so? One possible explanation is that many clients greatly exaggerate the scale of their dissatisfaction, the competitive swapping of horror stories being an enjoyable national pastime rather than a reflection of their real views about most builders’ performance.
An alternative – and in my opinion more convincing – explanation is that, although unfettered competition among contractors has conferred enormous power on the industry’s clients, they have not used that power wisely.
Instead, by too often focusing on lowest tendered price rather than on long-term value, and by insisting on contractual arrangements that impede process integration, clients have themselves created almost insuperable obstacles to the achievement of the standards of service they seek. On this view, the customer is unquestionably king in the construction sector, but the king has ruled in a manner inimical to his own interests.
If this analysis of the fundamental cause of the industry’s woes is correct, it does not follow that the performance of contractors is beyond criticism. On the contrary, contractors may not have been responsible for the procurement policy framework in which they have been obliged to work, but within that framework they could often have done very much better.
What does follow, however, is that the aspirations of the Egan report will not be achieved on anything like the scale its authors wish unless there is a radical change of attitude on the part not only of contractors but also of clients – including clients in the private sector, which now comprise the largest segment of the construction market. Some private sector clients do, of course, recognise this. Notable examples include several water companies and large retailers.
Virtually every contractor, however, has experience of private sector clients that enthusiastically talk the language of Egan in general, and of partnering in particular, but do so in a manner that is misleading. As one of my colleagues once put it, close scrutiny of the contract conditions on offer frequently makes it clear that the word “partnering” is merely the velvet glove on the iron hand around the contractor’s throat.
Recently, I attended a dinner addressed by a substantial property developer and a professed proponent of Egan principles. He told a hugely impressive tale about one of his contractors in another country which, faced with fire, flood and unprecedented snow storms, completed an office scheme on programme and within budget, without making a claim. His stunning standards of performance were, we were told, exactly what Egan was demanding. Yet, asked whether, in the spirit of Egan, the contractor would be rewarded with a guarantee of future work, the developer admitted that that was unlikely. His firm remained committed to competitive tendering for all new projects.
A few days later, I met the procurement director of a major utility who, in contrast, said he was strongly committed to providing repeat business on a negotiated basis to contractors that proved capable of meeting his exacting performance requirements. Dismayingly, however, he immediately added that he believed the trade-off had to be a willingness on the part of the contractors concerned to accept more onerous conditions and higher levels of risk than anybody in the UK has hitherto contemplated.
Such unreconstructed attitudes to the sharing of risk and reward on the part of those who claim they want to get away from traditional adversarial attitudes induce near despair. To their credit, the authors of Rethinking Construction acknowledge the problems caused by unenlightened clients and call on contractors to educate them. The difficulty is that contractors inevitably tend to be circumspect when talking to actual or potential sources of much-needed work, not wishing to offend them and only daring to suggest that their procurement policies may be misguided in the most guarded of terms.
But the time has come to recognise that what is at stake is too important for such a mealy-mouthed approach. The best contractors must proclaim not only that they are ready and able to play to the full their part in transforming the industry along precisely the lines that Sir John recommends, but also that they cannot do so on their own.
Dermot Gleeson is chairman and chief executive of MJ Gleeson Group.