Allied to success

Like many organisations at a time of change, Taylor Woodrow examined its processes and methods when the business was reorganised some years ago. "We recognised that we had a great opportunity to improve the way we deliver construction projects," says Taylor Woodrow director of building services, Charles Lever.

"At that time there were reports coming out on construction such as those by Egan and Latham. The Reading Construction Forum report was called Trusting the team. The executive summary from that clearly identified that the way to move forward if you wanted huge savings was to look at partnering."

The Reading report identified that if organisations partnered on one-off projects with teams that they were accustomed to working with, then savings on project costs could be between 2% and 10%.

Lever says that those kind of figures were realistic and demonstrable, but that the potential savings on longer term, strategic partnering looked even more attractive: "The report estimated that if you created longer term partnering agreements where the same teams work together over a series of projects then you could potentially benefit from 30% savings on costs – huge savings."

Taylor Woodrow looked long and hard at these figures. The company also looked at its own internal examples of where long term relationships had already created greater efficiencies. "We found that the best results we were getting, and the best relationships, were where we ourselves had long term partnering agreements in place. We were giving better service and results to key account clients, and getting better results for ourselves," adds Lever.

Tesco had been one of these clients, working with Taylor Woodrow for 20 years. Many important lessons in better working were learned from working with the supermarket on new stores, warehouses and offices over the years. More than a decade ago, Tesco set up a partnering agreement with Taylor Woodrow, and set targets under this agreement.

The targets included reducing the build cost of new stores by 8%, reducing the build programme for a store by four weeks and improving quality while reducing defects. "The aim was not just to make those improvements, but to reflect improved business for the mutual benefit of both parties," says Lever.

"At that point we asked if those targets were really achievable, and how we might do it. In many instances, if you shorten a build programme, you have to increase resources and working hours and hence cost. But we worked in a positive frame of mind with the client to find ways of avoiding this. We looked at new ways of delivering Tesco projects to improve co-ordination, improve sequencing of the works, new materials, new design solutions."

The results of this exacting process were tangible. In 1997 a Tesco store in Blackpool was constructed in 37 weeks (from structural steel stage). The current programme for a similar store is 16 weeks. And costs have also been slashed. In 1990 the average store cost £220 a square foot; current costs are below £140 per square foot.

With these kind of figures, it is easy to understand how Taylor Woodrow became so keen to carry the philosophy of smarter working across its organisation. Lever comments: "We knew as a company that partnering obviously works for our clients. So we started to ask, how do we use the same strategy and philosophy to improve our business?"

But Rome wasn't built in a day, and Lever is the first to emphasise that this kind of business-level strategic partnering isn't something which can be achieved overnight.

"You have to remember that when we started with Tesco, it didn't all happen in the first few years. It took quite a while of working together and changing the way we work to get the benefits coming through. We bore this in mind when we were looking at where to start in our business, but the truth is that we did want to try to get some quick wins as well."

Taylor Woodrow quickly realised that building services offered the most potential for benefiting from a change in working style. Almost 35% of Taylor Woodrow's prime cost is spent on m&e, and it is also a resource-intensive area. "It was clear that this was an area we should target to try to build better relationships, and work smarter to improve the way in which we deliver that part of the construction project."

Lever and his team, including David Westwood, supply chain manager for building services, started the process by selecting building services companies with which Taylor Woodrow might potentially form partnering agreements.

This was a time consuming and detailed process, and the challenge was all the greater because of the nature of the building services sector: "The amount of spend that we have is quite significant. The projects that we were targeting require a lot of resources. When we started looking at the market, we found that the building services market is very fragmented - 99·5% of companies employ less than 24 people. Only 13% of tradesmen are directly employed. This was a problem for us in terms of being able to identify companies with the right resources, the right training and the right skills to match our needs as a business while using this reduced number of companies.

"We also had to make sure when selecting partners that the amount of work that we could offer them was enough for them to take us seriously and for us to be a key client, but not too much that it took over their business and would put their business at risk."

The eventual result of this process was a list of 16 companies, which met initial criteria in terms of turnover, resources, training, health and safety records. A more robust selection process then took place, in which business culture played a greater part.

"This wasn't just about selecting on size, it was also about people and about companies which had within them an ability to recognise where we could make improvements, to accept that we could work together with competitors to improve and identify best practice and improve going forward. Culture, attitude and willingness to change were as important as a lot of the initial criteria," says Lever.

The three organisations selected were: Staveley, Rotary Group and NG Bailey. Along with Taylor Woodrow, they formed the Strategic Alliance Partnership.

The SAP has its own board, with representatives from each of the partners. Four senior management teams were formed in the areas of project management, design and r&d, procurement, and communications and marketing.

Each team was asked to identify best practice in that area, and to develop new processes then implement them with the SAP businesses. The teams have now been working in this process for two years, and have completed development of design and project management tools, and also devised procurement strategies.

For the other three SAP partners, the rigorous selection procedure wasn't offputting. Richard Foster, senior contracts manager with Staveley says: "We saw this as a good business opportunity. We had a relationship with Taylor Woodrow which we were keen to continue. They were offering us more work, but they also wanted a commitment from us. We felt that the initial commitment wasn't a problem, because we could focus on something that would give us real payback. We really went into this on the basis that SAP is something unique, and it's something that we need to try. I don't think any of us knew exactly how it would turn out."

Julie Steward , regional customer services manager for NG Bailey agrees that this approach to partnering was something very new: "We had done partnering before on individual projects. But at the end of the projects you still go your separate ways. SAP is something much more than that, and it was a unique opportunity for us to get into true partnering."

Andrew Taylor technical manager of Rotary Group says that the SAP approach has created a more positive working environment for those involved: "On this kind of working, you are a valued partner. Your input is listened to and acted upon, so it is important to have the right kind of people working on these teams."

Taylor also draws a clear distinction between the Alliance way of working and the kind of 'partnering' that many construction professionals have experienced: "This way of working isn't the norm for the construction industry; this is business partnering, not project partnering. I think we've all worked on a so-called partnering project at some time, and you all agree to agree, until it's time to argue! This is very different."

The SAP has recently added another level of partners on the supplier/manufacturer side. These companies are: Bailey Telecom; Braylex; Commtech; Galloway Group; Intitial Electronic Security Systems; Protec; Thorn; Whitecroft Lighting; and Waterloo Air Products.

A two-day workshop was held to help these new members of the SAP move smoothly into the Alliance structure. The workshop focused on building a management structure for supplier partners that mirrors the management structure of the SAP.

This way of working isn’t the norm for construction. With project partnering you all agree to agree, until you argue. This is business partnering and it’s very different.

Supplier partners have agreed competitive commercial terms which the SAP teams have tested, and are able to demonstrate are better than the market average. Setting objectives and measuring against these is an important aspect of the SAP way of working.

Bringing manufacturers into the design process early has also brought other advantages: "Our supplier partners can be selected early on in any project. They can contribute to design development and can help value engineer the design at the early stages.

"We get a twofold advantage: one, the price is competitive; and two, we enable the supplier to develop design solutions which use their products more efficiently. That's particularly important when looking at life cycle costing on PFI projects, for example."

Agreements signed with the supplier partners will stay in place for as long as all parties involved can demonstrate that they are gaining benefit and value. Key Performance Indicators are in place and continuous improvement is viewed as central to the success of these relationships.

Emphasising value for money is important for the SAP. It is a common concern with partnering that prices may not be competitive if there is no traditional tendering process.

  Lever is convinced that this is not the case for SAP: "We can demonstrate that we have a better winning record by working closely with Alliance partners. That's because we are working together to come up with the best solutions. We go forward in the knowledge that we are minimising risk, and maximising value engineering at the earliest stage of the project so we can put forward credible, competitive bids." Cost certainty is also a big plus for SAP, and its clients.

Strategic partnering has enabled Taylor Woodrow to drastically cut the amount of time, effort and resources spent on dealing with claims and variations.

Lever says: "Variations on some major projects have been reduced from 25% of the value of the building services, down to single figure percentages. In terms of claims, because we are working together to get better sequencing and delivery and efficiency of resources, claims are minimal and only genuine and quantifiable. Our claims are in the 1% or 2% region, rather than the 20% they were in the past."

Defects are also less of an issue for the SAP partners: "Defects could be a real problem because people have not taken responsibility for them, or a contractor has gone bust, or used some suppliers that aren't there any more.

"Over the years, as a major contractor, we have paid significant costs to rectify these problems. Within SAP the partners take full responsibility for their works, so even if there are defects post-contract, they take responsibility and don't spend three months arguing who should pay for it." Better communication isn't simply an intangible advantage for the Alliance. It is something that has saved costs, and management time.

Charles Lever says: "Of course, not every construction project runs smoothly, but one of the biggest benefits of SAP is that when we do get problems on a major project we work together to find the best solution for all concerned. We therefore minimise the impact of problems and find good solutions. In the past Taylor Woodrow had to put a team on projects to manage building services contractors. We were paying something in the region of 3% of the building services value, just in our resources to manage that project. On current SAP projects it is 0·3% of those costs. On the New Cross Hospital we have saved £300 000 just in that area alone."

Good communication has been at the heart of the SAP. Lever comments that the ability and willingness to share knowledge was a key selection criteria for partners.

  "We were looking to build up best practice from across all our companies with the aim of avoiding previous errors. Our industry always seems to make the same mistakes again and again. We wanted to work together to advance all our businesses, improve working relationships and embrace better working practices."

To communicate across four organisations takes some effort. The SAP holds regular cross-company conferences, gives presentations and sends out newsletters to ensure the message gets across.

There are multi-project site forums where project managers and commercial managers from several different projects come together to debate whether new processes are working, and how improvements might be made. There are also common information packs on design and process for all partners. A mechanical and electrical services designer pack has recently been reviewed by SAP preferred consultants and accepted as a leading tool for managing design development.

Looking to the future, all the SAP partners see great potential. Continuous improvement is the aim. "We have started on the path and are well on the way to meeting the improvement targets we have set ourselves, but there is a way to go," says Lever.

In terms of partnering, it's fair to say that the Strategic Alliance Partnership is the first true example of long-term, strategic, business- level partnering that the UK construction industry has seen. Those who have set up this team should be applauded for their efforts, and for their willingness to share their learning.

Charles Lever says: "I believe we have done what seemed impossible at the outset".