Construction’s worst flaw is said to be its supply chain, which is why so much work is going into improving relationships between suppliers, contractors and clients. Here are some examples of joined-up thinking
Products and services provided by the companies in a construction project supply chain typically account for 80% of the cost of the project, according to Constructing Excellence. Unsurprisingly, the way in which those products and services are managed has a profound effect on the outcome of the project in terms of cost and quality.
Traditionally, the companies that make up the supply chain are linked by contracts that have been procured on lowest price against fixed specialisations. The supplier is asked to deliver the specified product as cheaply as possible, and that means there is no motivation to work in the client’s interest. And in some arrangements, the chain is not even linked by contracts, with designers and contractors having separate contracts with the client.
Constructing Excellence and other industry stakeholders, including ConstructionSkills and the Construction Confederation, are encouraging an integrated supply chain approach whereby members of the chain have a long-term objective to work together to deliver added value to the client.
Setting up an integrated supply chain is, in the main, about establishing long-term relationships between the contractor and the suppliers and subcontractors who are critical to the delivery of a project. So the first step of setting up an integrated supply chain is to choose these ”first tier” suppliers with whom the risks and rewards of the project will be shared.
Learning to integrate the supply team in this way will be new for many construction professionals and developing successful supply chains takes time and skills. But the rewards of collaborative working can be significant (see John Rackstraw interview, page 6).
Guidance for improving supply chain management skills is available from the following resources:
- The Strategic Forum Toolkit available online at www.strategicforum.org.uk
- Achieving Excellence guidance, Office of Government Commerce www.ogc.gov.uk
- The Handbook of Supply Chain Management and Rethinking Construction training pack, CIRIA www.ciria.org.uk
Looking for a partner?
The Construction Accredited Performance Standards (CAPS) scheme aims to help client groups and prime contractors identify companies for partnering programmes (see case study).
Developed by the National Federation of Builders (NFB), CAPS provides a set of standards that contractors need to meet in order to fulfil the prequalification requirements of clients from the public and private sectors. Contractors and suppliers that can demonstrate they meet these standards are eligible for CAPS accreditation. Launched in October 2003, the scheme is backed by construction minister Nigel Griffiths and ConstructionSkills.
Prior to CAPS, the absence of a register that specified and confirmed the skills required for partnering programmes restricted the ability of clients to achieve consistent best value and continuous improvement from their construction supply chains. This led to increased costs for contractors, who were forced to respond to a variety of overlapping questionnaires and inadequate registration schemes to confirm their policies and standards.
To date, CAPS has accredited about 100 registered companies at the highest category (CAPS Endorsed). It has also secured the backing of the industry's principal trade associations including the Heating and Ventilating Contractors' Association, the Construction Products Association (CPA) and the Electrical Contractors' Association (ECA). The Chartered Institute of Building (CIOB), British Woodworking Federation (BWF) and the National Federation of Roofing Contractors (NFRC) also support the scheme in principle.
On 1 January 2005, CAPS will be incorporated as a separate business entity from the NFB.
Roy Wakeman, chairman of the ConstructionConfederation and chief executive of doorsetmanufacturer LS Group
I believe that if the whole supply side of the construction process unites we can provide the customer with a more cost-effective, safer and eco-friendly product. We can also be more persuasive with legislators. The result of this, if carried out comprehensively and with everyone's support, should be increased output and profitability.
Peter Rogers, chairman of the Strategic Forum
There are two fundamental reasons for using the integrated approach to supply chain management. First, the industry has become more technologically complex – this makes it important to work closely with all the relevant specialists. Second, you can only add real value by getting your supply chain together at the design stage of a project, Once you get to the construction stage it's already too late. The integrated approach is vital.
Peter Lobban, chief executive of CITB-ConstructionSkills
It is not only the integration of the supply chain that is central to the success of the industry, it is also the development of the skills to enable people to manage and work within an integrated supply chain. We must equip people with the 'softer' leadership, communication and management skills they will need to engage successfully all supply chain partners and deliver the best outcome to the client.
The more we know, the better we can work
Efficient and accurate data collection is a vital tool for assessing the construction industry's future training needs. Measurement is also critical for identifying areas where the industry is succeeding in making positive change, and for pinpointing weaker areas.
According to Lee Bryer, research analyst at CITB-ConstructionSkills, recent studies have highlighted a pressing need across the industry to bring together information.
He says: "Different institutions and companies have different ways of taking measurements and that makes it difficult to make accurate forecasts about the industry's future, for example, factors affecting productivity, skills needs and future training requirements."
In summer 2004, ConstructionSkills and the DTI decided action needed to be taken to gather data relating to construction's activities. They are in the process of developing a model for data collection called the Skills and Productivity Observatory (see "Skills Observatory plans" below).
A key role of the proposed observatory would be to co-ordinate the use of data and intelligence that already exists – in effect bringing all that information under one umbrella. Bryer says "By bringing together data from different sources, we could reduce the level of duplication of data in the future, as well as benefiting from research in other sectors that have a bearing on construction."
This approach could also have implications for funding in areas such as training, as there is a stronger lobbying position when individuals from different organisations, who share a common cause, quote results from a common evidence base.
ConstructionSkills says the observatory will deliver its first batch of reports in early 2005; it hopes the fully fledged forecasting model should be ready in one year.
Through the SSA, this proposed pan-industry Productivity and Skills Observatory (see box below) is being designed as a club covering industry experts, development agencies, and federations and associations to pool sector intelligence. Sub-sector panels as well as national/regional panels will be established to evaluate future skills requirements.
Skills observatory plans
Research that will be collated at the observatory include:
- Analysis of labour inputs in supply chains – This means taking a project, for example building a house, and breaking down the labour required for each stage of the project – such as how much carpentry, brick work and joinery does the project use. The last time research of this nature was undertaken was in the 1970s, so an update is needed.
- Skills to improve productivity – This research aims to identify which skills make some companies more productive than others, and it will use surveys and benchmarking exercises to identify these skills.
- Employment by industry sectors – It is known how many, for example, bricklayers work in the industry, but it isn't clear which sectors they work in. The observatory is attempting to produce a snapshot of where people are working.
The view from downstream
What do the Egan principles of partnering and supply chain integration mean for your business?
As a small company, we very rarely use subcontractors so I feel the government is targeting the large main contractors that are reliant on subcontractors in promoting the significance of the supply chain. But that's not to say we work in a totally different way. For example, we do a lot of work for the Catholic Church and have done for more than 15 years. Though we don't have a partnering contract as such with the Church, we know the client very well and have a strong, trusting relationship. About 50% of our total work is for the Church.
What kind of relationship do you have with your clients?
For each project we do for the Church we use open book accounting. Often it's very hard to give the Church a project cost at the start because the projects involve restoration work and we don't know how much work it'll take to get the job done. So we set a provisional cost and everything we buy is accounted for on a computerised system. Every last nail will be on that system. For example, we have recently finished a £700,000 project to convert the former Brazilian Embassy in Rickmansworth into a convent. We weren't sure how much plastering work we would need to do and explained the situation to the client and it accepted there would be some uncertainty.
What are the benefits of employing tradesmen directly?
We employ our own plumbers and electricians as well as builders and joiners. The benefits are huge. As our employees (and we do have IiP status), they are trained to a high standard so we know they are skilled to do their job and of course as our employees they are available for projects when we need them. We are a small company but we are big enough to ensure we have enough work for all our employees – I suppose it's different if you are a very small firm with fluctuating workloads.
Do small construction companies get enough support from government?
We receive lots of support from CITB-ConstructionSkills, which has helped the company put together a training plan. But central government needs to stop placing such an emphasis on tertiary education – for example its goal to send 50% of youngsters to university. The skills shortage is a real issue for the whole industry and practical education needs to be given a higher value by government and the public too. We want a share of some of the best and bright students. This means we need centres of training excellence for construction for the brightest people to reach their full potential. Too often construction is seen as the industry to place people who can't get into other sectors. Twelve of our employees are from Eastern Europe – most were once professionals but have had to retrain to get work. They are very bright – these are the kind of employees I want.
What further support could CITB-ConstructionSkills give small firms?
I'd like to see its grant system and training assistance made more flexible. CITB-ConstructionSkills' training plan service is useful but it is all done on their computer package. Ideally I'd organise my own plan using my own format.
Case Study - a caps case study: Henry W Pollard & sons
Henry W Pollard & Sons, a contractor based in Bridgwater, became CAPS-accredited within five months of the scheme's launch. The £11m-turnover contractor had a strong order book within the education sector but wanted to strengthen its place in the health sector. David Nisbet, managing director at the company, says CAPS presented an opportunity for the company to demonstrate its abilities and skills. He explains, "The business underwent a series of detailed audits to demonstrate we met the required standards in client service, business processes, health and safety and technical competence. We subsequently became one of the first batch of companies to receive scheme accreditation."Nisbet believes that the scheme has already assisted the company in some areas: "We have benefited through the scheme by our improved knowledge, which enables us to hold our own when competing for substantial partnering schemes. We haven't as yet taken a share of the NHS' partnering programme (Procure21). But we're not too put off. We are looking at ways that we can be proactive in using the accreditation to get a place on the supply chain of larger contractors – not just as a quality supplier of labour, plant and materials but as a respected contractor in our own right."
CITB Supplement 2004
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