Rethinking Construction’s greatest effect has been on Britain’s biggest client: the government. Although the Ministry of Defence was pioneering prime contracting before the launch of the report, it has now absorbed Egan’s proposals in their entirety.
Now the Treasury is pushing prime contracting through its guidance document, the National Heath Service has pledged to introduce prime contracting for all non-private finance initiative work, and the DETR is staging a conference on Egan on 19 July.
MOD Defence Estates Organisation quality director Clive Cain is an Egan enthusiast. “Egan captured the concerns of clients in one report and it has had an amazing influence over the past year,” he says. “Now all of us clients have one hymn sheet to sing from. Prime contracting is all about driving out waste and is just one way of meeting Egan’s targets.”
Now is the time for action, says Cain. “Not warm words – action is the message we are pushing,” he says. “The time for talking is done. We want to see contractors benchmarking their performance, reducing waste and meeting Egan’s targets.”
Cain says the major contractors have largely got the message and that this year it will start to trickle down to their suppliers.
Whereas some private sector clients, such as Railtrack, BAA and the major retailers, are Egan evangelists, others are more sceptical. One major City developer says that Egan has no place in his relationships with suppliers.
“Egan is too rigid,” he says. “We build up relationships with our suppliers and keep using them until those relationships break down. Then we look for new partners.” One-off clients stand to benefit from the Egan movement. The British Property Federation, among others, is keen to see leagues of contractors and consultants based on key performance indicators. This will give one-off clients a quantitative way of selecting contractors on performance as well as price.
The City sees the report as a way of making construction sexy. “It promotes barriers to entry, differentiation and life-cycle costing – therefore I’m all in favour,” says one banker .
The contractor’s view
We want contractors to benchmark their performance, reduce waste and meet Egan’s targets
Clive Cain, Ministry of Defence
Contractors bore the brunt of Sir John Egan’s criticism. Their training, leadership and site organisation all came under fire. How have they reacted to this slap in the face?
The bigger firms refuse to acknowledge that the Egan report has made any difference to their businesses. However, most are implementing Egan-like continuous improvement programmes to cut waste in production and are using performance indicators to measure how they are doing.
The view of Keith Clarke, chief executive of Kvaerner Construction, is typical. “Egan has made a considerable difference to the construction industry, but only we [Kvaerner] affect our own business,” he says, dismissing Sir John’s direct influence on the contractor. Clarke explains that Kvaerner has had a continuous improvement programme running for the past 30 months and that the board takes direct responsibility for the policy.
Although Kvaerner uses its own business-specific performance indicators, Clarke does support the Movement for Innovation’s 10 key performance indicators. “There should be generic key performance indicators so that performance can be measured and the best performers rewarded,” he says.
Construction managers such as Bovis and Mace are, arguably, further down the line in embracing Egan. Like the major contractors, construction managers claim they were implementing Egan-like measures well before Rethinking Construction was launched.
Bovis used productivity monitoring on the recently completed City of London office, Garrard House, and is updating the methods on Christ Church Court – another big City office that is on site. The firm has even gone as far as to employ a continuous improvement and best-practice manager, and is using the Movement for Innovation key performance indicators to measure its performance. Mace, too, is using methods of continuous improvement and process monitoring on work for BAA, among others.
These firms realise they have some catching up to do. One medium-sized south coast contractor admitted that his company was embracing Rethinking Construction wholesale to keep up with major contractors. The firm’s managing director says: “If we don’t keep up with the majors on things like supply-chain management, we will lose out on work by default. They will take our market.”
We have far greater problems dealing with skills shortages. We can’t get bricklayers to save our lives
Small Midlands Contractor
The managing director admitted that he has used the Movement for Innovation’s key performance indicators to measure the performance of his own company. “I was hoping we would come out well, but we were average,” he laments. On a positive note, he adds: “At least it has focused our minds for the coming year. This is year zero – now we know what we’re up against.”
As for the Egan targets of 10-20% efficiency improvements to be made each year, the contractor is sceptical. “I don’t think we can make those kind of improvements unless we take control of the whole construction process, including management of the design,” he says.
Nick Higgs, managing director of Bristol-based Cowlin Construction, says the Egan report has made no difference to his company. The contractor, which turns over £50m a year, is not using key performance indicators or supply-chain management. Higgs adds that Egan does not even seem to be having an effect on his clients.
“Competitive tendering is still king but with more and more two-stage bids,” he says.
Like most companies involved in housing, Rydon Construction remains largely unaffected by the Egan agenda. Colin Dixon, managing director of the £50m-a-year turnover contractor, says: “Housing associations have been tightening the screws for years now, so we have been reducing waste in our processes, and this has meant innovations.”
As well as reducing costs through close management of site waste, Rydon has been dealing with a tight band of regular subcontractors for years. And, just like the alliances being created by the major contractors for prime contracting, Rydon manages the workload so that the subcontractors do not get overloaded, and makes sure they have enough turnover to keep in good financial health.
Ian Davis, director-general of the Federation of Master Builders, says Egan has had a limited effect on his members over the past year. He questions how applicable it is to small builders. For instance, he says: “Concurrent engineering – running design and construction in parallel – is fine on major projects, but is it applicable to house extensions?”
Davis admits that some of the ideas are useful and that it is best for his members to start remodelling their businesses now, rather than have changes forced on them by players up the supply chain. His one piece of advice to members is: “Don’t worry if you’re not benchmarking right now, but watch the layer above, because it won’t be too long before you will be expected to do the same.”
When it [prime contracting] all blows up, we will be waiting to pick up the pieces
Partner of top QS
The managing director of one £12m-turnover Midlands contractor dismissed the Egan report as irrelevant. “Waste is a factor of complexity. Most of our jobs are so small that it is not a factor,” he says. “No one ever mentions Egan to us. We have far greater problems dealing with day-to-day issues like skills shortages. We can’t get bricklayers to save our lives.”
The consultant’s view
Although most architects profess never to have heard of Sir John Egan, some are starting to take on the message. According to Penoyre & Prasad partner Sunand Prasad, those practices that don’t embrace the Egan movement will be left behind. “The problem is going from good intentions to making it happen,” he adds. This is a problem for Prasad’s practice. “We are very busy, so it is hard to start measuring our performance,” he says.
Robert Sakula of Ash Sakula is waking up to the benefits of benchmarking. He is benchmarking his practice against 30 others that went on a recent business management course for architects organised by management consultant Caroline Cole.
“There were lots of business issues like finance, salaries and fees that needed to be better understood,” says Sakula. “We need to know how others work so that we can compete effectively – and so that we don’t all reinvent the business wheel.”
The practices, ranging from large commercial to small residential, are now filling in benchmarking forms, says Cole. “The information will be pooled and each architect will receive a half-day briefing to explain where they are and how they might improve.” It is understood that the RIBA is considering adopting the benchmarking methods to assess all its members.
QSs are split into two camps: those for the Egan agenda and those against it. Sir John has warned time and again that QSs must change or die. EC Harris, Gleeds and Franklin & Andrews are hell-bent on changing their businesses from quantity surveying to management consultancy. And all are helping their clients use the Movement for Innovation’s key performance indicators or are developing business-specific performance indicators for clients. For instance, Franklin & Andrews and Gardiner & Theobald are advising Railtrack on the kind of indicators it should use to start benchmarking suppliers.