Despite any number of reports admonishing our industry for its poor productivity, waste and lack of innovation, it remains structurally dysfunctional
‘We consider that the most urgent problem which confronts the industry is the necessity of thinking and acting as a whole. It has come to regard itself as a series of different parts, roughly consisting of specialist advisers, contractors and suppliers and operatives of various crafts and skills …these attitudes must change.”
The above is an extract from the 1964 Banwell Report, The Placing and Management of Contracts for Building and Civil Engineering Work. Now read this extract from another report: “The construction industry is often characterised as an example of ‘market failure’. This usually refers to its highly fragmented structure (both vertically and horizontally), introverted nature and unusually high levels of self employment.”
Both statements are very similar. The only significant difference between the two relates to their timing. The second statement was made 52 years after Banwell. In fact, it was taken from The Farmer Review of the UK Construction Labour Model. The Farmer Review, which was published last month, was commissioned by the government (albeit in the name of the Construction Leadership Council) as part of an exercise to reduce the industry’s vulnerability to skills shortages.
Between Banwell and Farmer we had the seminal Latham and Egan reports. How many more reports will it take for us all to wake up to the fact that it is first and foremost the industry’s structural dysfunctionality that hampers innovation, wastes resources (especially our skills resources) and reduces our productivity? As a result, UK construction costs stubbornly remain the highest in Europe.
The authors of another recent report, Innovation in the Supply Chain, also concluded that little has changed since Banwell. This excellent report was written by a team from Pinsent Masons, Costain and the University of Cambridge and published in September.
BIM was supposed to be the harbinger of supply chain involvement in the early stages of the procurement process but this turned out to be just hype
The authors state: “It is disappointing that despite pockets of supply chain consolidation and collaboration [Banwell’s description of the industry] is largely still true today.”
The message that emerges from this report is that the greatest potential for innovation lies in the supply chain which is responsible for delivering the bulk of the industry’s added value. Therefore, such innovation must be harnessed through early supply chain engagement. But does this happen? Hardly ever. BIM was supposed to be the harbinger of supply chain involvement in the early stages of the procurement process but this turned out to be just hype.
Mark Farmer said that his report was not going to be another report about the skills crisis. “It had to look much deeper at the fundamentals of how we deliver and why.” But who will take up the cudgels? Following the 1998 Egan Report we had the Movement for Innovation. A board was set up to drive the necessary change. We had demonstration projects. I recall speaking passionately at conferences in the belief that the Egan vision of a more integrated and collaborative delivery process was just around the corner.
Almost 20 years on, I look back and think that I must have been extremely naive. This is not to say that the industry hasn’t tried. I recall all the enthusiastic and passionate people working within Taylor Woodrow’s Strategic Alliance Partnership a few years ago. This was genuinely collaborative. One senior manager employed by an M&E contractor involved in the partnership abhorred the usual adversarial relationships and now looked forward to going into work. Sadly this experiment did not last.
I fear that the Farmer report will go the way of the countless other reports unless we are serious about addressing the failures in the procurement and delivery of construction. This must involve setting up a government/industry taskforce that is properly resourced to deliver a more integrated and collaborative delivery process. We don’t need to search for appropriate delivery models. The government is piloting three procurement models under its Construction Strategy. One of these models – integrated project insurance – aims to deliver project savings of up to 20% by eliminating process waste (unfortunately progress on piloting these models has now been put into abeyance because of resources being diverted to the Brexit departments).
I believe a statutory “stick” will be necessary to force public sector bodies to implement the Constructing Excellence criteria of collaborative working as part of their procurement strategies. As taxpayers, why should we continue to needlessly pay for non-value added activities? Farmer recommends that a charge be imposed on private sector clients to influence their commissioning behaviour; I would prefer that there be some fiscal benefit such as a reduction in VAT.
As former chief construction adviser Paul Morrell once said, we need to deliver better for less. This is even more apposite now that we face the challenges of Brexit, whatever they might be. The industry has to become leaner and fitter or, as Farmer puts it, we must “modernise or die”.
Professor Rudi Klein is chief executive of SEC Group and president of the NEC Users’ Group