Industry must restructure to cut costs by up to 30%

A complete restructuring of the construction industry is needed in order to cut build costs by up to 30% in preparation for the UK’s move to a low-carbon economy, says a report by chief construction adviser Paul Morrell.

The reshaping of the industry around more collaborative forms of working, previously addressed in reports by Sir John Egan and Andrew Wolstenholme, was again the centrepiece industry recommendation at the heart of the Low Carbon Construction Innovation and Growth Team report. Morrell said the industry should be able to reduce costs by between 10% and 30% by re-organising the way it works.

I think In five years’ time the industry will be organised very much as it is now

Richard Steer, Gleeds

The report, which the chief construction adviser has been working on since his appointment 12 months ago, also called for much more commitment from the government to an organised, secure programme of low-carbon work to give the industry the confidence to restructure and increase skill levels.

In addition to these recommendations, the 230-page report called for:

• Extending the proposed Green Deal
• Formulating an industry-accepted standard for measuring embodied carbon in construction materials
• Setting up an industry/ government existing homes hub, which would work like the current Zero Carbon Hub for new homes
• Creating a major projects review group
• Bringing commercial fit-out jobs under the auspices of Building Regulations
• Taking a new approach to evaluating infrastructure schemes, based on whole-life performance.

Morrell launched the report this week at the Treasury alongside construction minister Mark Prisk, communities minister Andrew Stunell, and climate change minister Greg Barker. A formal response is expected from the government by Easter next year.

The report calls for the industry to “transform itself in accordance with a well-established agenda for integration” in order “to make the cost savings of 10-30% … holding out the prospect of delivering zero or close to zero-carbon buildings” at no extra cost.

This would be achieved by integrating the supply chain into the procurement process, and by more collaboration on bidding and design.

It is understood that a group led by the Specialist Engineering Contractors Group (SECG) and another led by Constructing Excellence have both proposed taking forward pilots of how a fully collaborative approach might work on a public scheme, in order to demonstrate potential cost savings.

Rudi Klein, director of the SECG, said: “The time has come for action on collaboration.

We’ve been talking for 12 years and we must start implementation. We’ve actually gone backwards on this in the last couple of years.”

There is, however, widespread scepticism over whether integration can deliver the 30% savings. Richard Steer, senior partner at QS Gleeds, said: “It’s been shown time and time again that the industry is fractured. I think in five years’ time the industry will be organised very much as it is now.

“Putting the 30% target forward to the government is not helpful at all in the depths of recession. This is a political statement rather than a practical one. I’m sure Paul would have said something different if he was still working at Davis Langdon.” different form of delivery.

The Treasury is evaluating the proposals.