Better supply chain management was recognised as the key to unlocking these improvements. Egan’s vision was for all players in the construction industry to achieve a whole raft of improvements, such as a 20% drop in defects on handover and a 10% drop in capital cost. The quid pro quo would be increased profits for designers and constructors.
So a year on, how have the various sectors of the construction industry – clients and constructors – responded to Sir John Egan?
The Government’s tale
Central Government procures services worth £7.5 billion a year from the construction industry. The public sector as a whole is worth about £24 billion, just under a quarter of total construction business. This basic arithmetic shows how much responsibility government had to take for the ills of the construction industry.
To say that the public sector has been preoccupied with lowest acquisition price at the expense of value for money would be putting it mildly. “There was no real commitment from ministers to improve,” recalled the Treasury’s head of procurement Mike Burt, “and no real understanding of what the construction process required. So when Sir John Egan said that competitive tendering should end, it sent a shiver down the spines of Treasury officials,” reported Burt.
In the Government’s defence, it operates under the beady eye of the National Audit Office and the public accounts committees, the latter populated by backbench politicians eager to find any evidence of waste in government spending. Historically these bodies have been geared to finding fingers in tills and tracking down the latest scandal, rather than looking at strategic issues.
The Government Construction Clients Panel (GCCP) was formed last year to act as the single, collective cross-government voice on improving performance. The GCCP is trying to co-ordinate the procurement activities of the 50 or so government departments. But as As Mike Burt admits, getting better management, measurement, standardisation and integration across government has been “like trying to herd cats”.
Burt thinks a client’s charter will help. This will detail what the government client will expect of itself, and what it will expect from the industry. “Government expects that 50% of clients will sign up to the charter soon after it is launched in July” reported Mike Burt.
A notable success, trumpeted by its originator the MoD, has been the Building Down Barriers project. This has pursued the notion of ‘prime contracting’, or to put it another way, the integration and management of design and construction through a single point of responsibility.
Two prime contracting pilot projects have reported labour efficiency improvements of 70% and a reduction in construction time of 25%. Contractors have allegedly seen their profits jump by a factor of three.
So where is this work taking the Government in its crusade to be a best practice client?
By March this year, Government was reporting that 56% of departments were practicing lean project and financial approval chains. Fifty six percent of departments were also claimed to be practicing partnering and team working, and 50% were operating an integrated supply chain.
Government is now planning changes to its procurement practices. New contract forms, to complement those recently published for the Private Finance Initiative, are due by Easter 2000. These will extend prime contracting beyond the Defence Estates. Integrated design and build will also feature in amendments to the GC Works contract suite. Three new government documents are also due out in May 2000, covering whole life costing, benchmarking and post-project appraisal methods.
Work will also continue on benchmarking and supplier satisfaction schemes, with key performance indicators due on sustainability and respect for people.
NHS Estates is developing a model procurement method, ProCure 21 – shorthand for procurement in the 21st Century – which is another way of describing the standard set of Eganesque objectives in an NHS context.
The industry must start setting strategies for the entire supply chain, not just a part of it
Clive Cain
ProCure 21 will be launched soon by health secretary Alan Milburn. It will have strong emphasis on partnering, benchmarking and performance management which, the department hopes, will save it 10% in construction costs year on year.
The NHS is aiming to create specialist procurement teams, working with each NHS Trust, to build economies of scale in purchasing and supply. It will develop supply chain partnerships and attempt to reduce the number of contracting consortia. But will these changes take the price pressure off the government?
“It’s interesting that the National Audit Office is not taking its traditional approach of beating up departments for not following established guidance,” said Burt. “It is actually looking at best practice case studies and how these can be disseminated.”
The private sector
The problem with the private sector is its sheer fragmentation. At least with Government clients there is some opportunity to agree objectives and priorities, but the private sector is largely composed of lay clients who build once in a blue moon.
By the same token, designers come from a variety of backgrounds, from media hungry architects to designers working in contracting firms, and the oft ignored, but extremely knowledgeable, product suppliers. And then there are the contractors, who have been working in an industry preoccupied with the bottom line rather than in the quality of the finished product.
“At best they are system integrators, and at worst, traders in contracts,” said Slough Estates’ Peter Thompson. “They generate their profits by…exploiting legal opportunities and manipulating money.”
Harsh words. But clients, said Thompson, often fair little better. “In many ways clients get the industry they deserve. They often don’t identify their objectives and priorities properly, and they pay lip-service to things like freedom from defects and quality. They then allocate no resources to managing risks and defects.
“The future must be true supply chain management. Not in the form of a cosy partnering arrangement, but a way of involving contractors all the way down the line to the army of artisans who are actually delivering projects,” concluded Thompson.
Project Jaguar is BT’s interpretation of re-engineering the supply chain. This initiative will bring together BT’s construction procurement activities with its extensive facilities management portfolio – valued at £2 billion – sometime in 2001.
And the expected payback of this? “The whole of our facilities management operation will be brought together so that accommodation, supply and management will be under one delivery vehicle,” says BT’s director of property Alan White. “By the end of this year we should be saving £0.5 billion on our operating costs…and at least £75 million/year on facilities management.”
What is left to do?
“The industry must start setting strategies for the entire supply chain, not just a part of it” believes Defence Estates’ Clive Cain. “That includes the totality of the workforce and the management of the entire supply chain down through the various layers.
“There is a lot of chat about the need for commitment and leadership, but very little about what happens at the bottom,” observed Slough Estates’ Peter Thompson. “All too often the product is still delivered by a mercenary army of labourers in Wellington boots.”
Clive Cain agrees: “I’m constantly amazed at how little the leaders in the construction industry understand about supply chain management,” he says. “We need to understand it better – we can’t just use the words.”
Source
Building Sustainable Design
