Assessing the legacy

Bored, but not giving up

Peter Rogers, chairman, Strategic Forum and director of Stanhope

Rogers has a low boredom threshold. And over the past two years it’s been breached.

“It certainly has been more political than I had expected, with all the complexities between the different organisations,” he says. “We spent the most of the first year just trying to get everyone to come to the table.” He means not so much the individual members of the board, but the institutions they represent.

However, he’s not giving up. Even though his term as chairman of the Strategic Forum was to last two years, the board has asked him to stay until the end of 2005, and he has accepted. A deputy chairperson will join him in the first quarter of 2005. That person will take over the reins when Rogers departs.

Has it worked? He thinks it is starting to. The basic tenets are accepted at the so-called top of the industry, that is, main contractors and big specialists. But the vast territory represented by medium and smaller companies operating regionally remains largely unpenetrated.

What evidence would he point to that it’s working? The lack of bad news, he says. The two major blots on the horizon are Jarvis, with its financial woes, and Multiplex, which he says is a foreign firm using traditional methods.

Who are the winners? Apparently everybody. The government can procure more and better schools and hospitals for less. Developers, like his own firm, Stanhope, also get better results for their money, he adds.

So who are the losers?

“I’m not sure anybody loses,” comes the reply. “Maybe a few dodgy guys on the margins. The get-rich-quick guys.”

Still optimistic, after all these years

Sir Michael Latham, author of Constructing the Team, 1994

Yes, the industry has changed, Latham says. Just look at clients like registered social landlords, local authorities and Defence Estates. They’re all visibly grappling with reform-style techniques. Anyway, there is no real option to partnering.

“I’ve never had any sympathy for those who say partnering is essentially uncommercial. The industry has tried those other routes to death, and the adversarial climate always leaves corpses on the battlefield, and sometimes it will be you.”

Strategic Forum spent too much time deciding what it had to do but he believes it has had an excellent chair in Peter Rogers, who boiled down the plethora of recommendations in Accelerating Change to six headline targets – and he says those targets are looking pretty hittable, especially the ones about DQIs and education. Latham believes that the Strategic Forum was hamstrung by the lack of client representation, because reform will not happen unless clients drive it.

“Without clients, the Strategic Forum is basically the industry speaking to itself,” he adds.

So will the new Construction Clients’ Group fill the gap? Latham thinks it is too early to tell.

Global success story

Dennis Lenard, chief executive, Constructing Excellence

Its budget may be on the block and it may be in talks to converge with Be, but Constructing Excellence is far from hitting the buffers, according to its chief executive, Dennis Lenard.

In the last two months, he says nearly 200 companies have each donated £3,000 in response to his plea for support. And the cheques are still coming in.

This is a big boost for an organisation that sustained funding cuts earlier this year (to £4.5m) and will get even less (£3m) next year.

Lenard says Constructing Excellence is worth supporting because it alone has reached smaller, regional companies through its web local best practice clubs, of which there are 45, each drawing up to 250 people each.

“We’ve created a business-to-business network where people are getting to know each other, becoming friends, creating synergy. This is going on around the country all the time. We’re isolated from it in London.”

But what about the Egan/Latham principles themselves? Are they embedded? Lenard believes so. Look at ProCure 21 in health, and Building Schools for the Future in education. Both have partnering, continuous improvement, and whole-life costing at the centre of their methodologies.

“We’re heading to be the most efficient construction industry in the world,” he says. “It’s the biggest success story. Certainly bigger than Australia and the US.”

No fun for small firms

Ian Davis director general of the Federation of Master Builders

Thanks to framework deals and partnering agreements, small firms are being crowded out of long-standing relationships with clients.

“They don’t understand why, having had successful relationships, done a good job and made the client happy, they have to take crumbs from the table as a subcontractor,” says Davis.

A small number of FMB members have entered framework agreements but the rest are kept afloat by a buoyant market – which can’t continue forever. He adds that the reform movement has been frankly patronising for small firms.

“There’s a feeling about the movement, to a certain extent, that seems to be saying ‘you naughty little boys, you really should be doing it this way’.”

Benefitting only the best

Graham Watts, chief executive, Construction Industry Council and board member of Constructing Excellence

It’s the best that are getting better, admits Watts, while a huge part of the industry remains untouched. But that’s what Egan intended.

“I remember talking to Egan and Simon Murray when they were writing the report and that was exactly their prognosis,” says Watts. “Egan suggested that the top 10% would

dramatically increase and improve their performance. The rest of the industry doing major new work would be pulled up to meet these targets probably as a result of construction consultants who would transfer their knowledge to other clients.”

We’re heading to be the most efficient construction industry in the world

Dennis Lenard, Constructing excellence

The Strategic Forum is looking to target other parts of the industry, with the possible formation of a second tier forum for SMEs.

If the finger has to be pointed anywhere, says Watts, it should point towards those schemes such as Quality Mark that aimed to accredit small builders so that homeowners could be sure they were employing someone reliable. It’s failed to take off, he feels, because there’s no financial incentive for small players to jump through the administrative hoops and pay the fee. So now discussions about how it can be simplified are underway.

Watts thinks it is right that government funding should be withdrawn from Constructing Excellence. “I’m not too sure that it’s the government’s job to pay for the construction industry to improve itself. It’s the government ‘s job to pump prime the reform process, which it has already done.

“Government funding will be much better directed towards how to improve the standard of the small end of the industry.”

For Watts’ end of the industry, the professional bodies and other organisations, this is an unprecedented period of collaboration, he says. The Construction Industry Council and CITB have come together in ConstructionSkills and there are countless projects where several bodies are working together.

“There is a much more joined-up approach than there has been before. You haven’t got 10 or 15 initiatives all being run by competing organisations,” Watts adds.

Consultants under control

Geoff Wright, director of Hammerson and CIOB president

Things have definitely changed for the better over the last decade, but not necessarily due to Egan or Latham, says Wright. The biggest difference is teamworking with consultants who wield less power these days.

“Consultants have been brought under control,” he says. “15 years ago, the architect designed a building and said: ‘There you are. Now build it.’ Now the relationship between the design and the construction of a building is much greater than it was the past.”

Egan’s Rethinking Construction movement has made its mark in the regions, says Wright, whereas he feels the achievements of Latham’s report were more focused in London.

The downside? Wright believes that neither initiative has made sufficient impact on central government.

The revolution needs a leader

John Rackstraw, chair of Constructing Excellence, South West region, and MD of Pearce

Construction reform is like the IT revolution. Eight years ago only one in 15 people had access to a computer. Now everybody does.

“It’s very easy to say it was all a load of hot air. But in fact it has had a huge impact, it’s just that we don’t remember the revolution.”

What’s the huge impact in the South West? Rackstraw’s branch put on three health and safety awareness days this year and each drew hundreds of small contractors – firms that previously didn’t know there was a reform agenda. But the one thing missing in the reform movement is leadership, he says, someone like Latham or Egan who combines visibility with political clout, someone who can “stand up and shout, and be welcome at Number 10”. That’s beyond Dennis Lenard’s remit, and Peter Rogers is unknown at a grassroots level, adds Rackstraw.

Clients are back on track

Chris Morley, executive director, Construction Clients’ Group

If anything took the wind out of the sails of the reform movement it was the demise of the Construction Clients’ Confederation in late 2002. Egan believed clients ought to lead the revolution, but without a representative body, how could they?

The CCC folded because it failed to get enough clients to sign up to – and pay for – its Clients’ Charter, a toolkit many thought was too complex. But all that is history, says Morley, executive director of the new Construction Clients’ Group. “We want to get away from the idea that the charter is some kind of hair shirt, or death by KPIs,” Morley says.

Signing up to the Charter costs about £1000, and adopting its tools takes time and effort, which made it attractive only to high-volume clients like the Highways Agency and housing associations. But the CCG will offer free tasters on the web and a cheaper service consisting of project-specific guidance.

“Hopefully we’ll seduce these clients to pay for a little more,” says Morley.

Already it seems as though the CCG is gathering a head of steam, with buy-in from the CBI, the Federation of Small Business, the Heritage Lottery Fund and the British Soft Drinks Association.

Subcontractors have been excluded

Don Ward, chief executive of Be

“Our original objective of helping our members walk the walk has not been met,” he admits. “They are not doing it unless they are told to do it. They are still content to sit around and wait to be told what to do by the client.”

Nor are they implementing Egan principles down the chain, so subcontractors have missed out on the reform process to date.

But Rethinking Construction had some major successes. It got the message out through the demonstration projects, it has set up a regional network, it brought together the big-spending clients and it engaged the Labour government who might have shunned the Tory-commissioned Latham report.

Now, market forces should do the rest.

“Soon the laggards won’t even be able to talk a good game. They won’t be able to get any work out of local authorities or housing associations. They’ll just get one-off clients.”

My KPI figures prove the benefits...

<webonly>
</webonly>Nigel Griffiths, Construction Minister<webonly>

</webonly>griffiths declined our request for an interview, but issued a statement citing certain key performance indicators (KPIs) as evidence that Rethinking Construction delivered real benefits. He said the most significant was “predictability of construction projects completed on time”, which, he said, rose from 34% in 1999 to 60% in 2004. Now this is either a slight error in wording, or spin.

Griffiths’ statement suggests that in 1998 only 34% of construction projects were done on time and in 2004 that figure shot up to 60%.

That’s not what has happened. When it comes to measuring “time predictability”, KPIs separate Design, Construction and the Project as a whole. The hike Griffiths mentions happened in the construction part only. When it comes to predictability in time of projects as a whole, only 44% hit the target in 2004, and that has been pretty static for the last three years.*

KPI’s present a mixed picture of an industry getting better in some areas, and staying the same or getting worse in others.

Soon the laggards won’t even be able to talk a good game

Don ward, Be

* Industry Progress Report 2004, published by Constructing Excellence

Councils relent on lowest price

Peter Bishop, director of Local Government Task Force

In 1998, almost all projects went to the lowest bidder. Now 65% of local authorities let none of their last three contracts on price alone, and 79% say they have long-term relationships with contractors. Bishop says the results (taken from a Local Government Task Force (LGTF) survey) prove Egan principles are sinking in, but admits the LGTF hasn’t quite delivered what it said it would. The goal was that 80% of authorities would have adopted Rethinking Construction principles, though they didn’t set a deadline.

There is a shadow hanging over these moves: Peter Gershon’s efficiency review. He has asked local authorities to save 2.5% on procurement over the next four years. “We think the efficiency review should be treated with some caution,” Bishop warns.

How are we doing? Three reports and their goals, and did they achieve them?

“Constructing the Team”, Latham’s 1994 report recommended:

1. A fresh construction bill to be drawn up to outlaw onerous contracts
> Yes

2. Create forum to give clients a strong voice
> Sort of...

3. Government departments should commit to being model clients
> Sort of...

4. New clients should be drafted onto JCT
> Yes

5. New family of standard contracts based on NEC to be introduced
> Yes

6. Clients should implement new milestone payment regime and scrap retentions
> Sort of... well, no

7. Industry must improve efficiency (reducing real construction costs 30% by 2000)
> No

8. Clients should choose on quality and price
> Sort of...

9. The image of the industry must improve
> Yes

10. The government must improve public sector project managers
> Yes

“Rethinking Construction”, Egan, 1998. Here are Egan’s suggested headline targets. Year-on-year improvements are marked against Industry KPIs and Demonstration Project KPIs. The latter are doing only marginally better, but not in profitability!

1. 10% reduction in capital cost
> NO

2. 10% reduction in construction time
> NO, but improving

3. 20% increase in predictability (time)
> NO

4. 20% increase in predictability (budget)
> NO

5. 20% reduction in defects
> NO

6. 20% reduction in accidents
> NO, but improving

7. 10% increase in productivity
> YES

8. 10% increase in turnover and profits
> NO

“Accelerating Change”, 2002. The Strategic Forum cut down the number of targets to just six, most of which the industry had already started to move towards by 2002

1. By 2004, 20% of projects undertaken by integrated teams. Target is 50% by 2007.
> No one defined “integrated team” so who knows? There is a toolkit on the Strategic Forum website now, though. Roll on, 2007.

2. By 2004, 20% of clients embrace principles of the clients’ charter by 2004. 50% by 2007
> No. The strategic forum reckons it’s more like 10% of clients by value if you count signed up clients like Defence Estates and housing associations.

3. By 2006 300,000 qualified people recruited and retained in the industry
> It’s early to tell, but figures on new entrants to the industry seem healthy

4. By 50% increase in applications to higher and further education courses
> Looks positive for higher education. No stats for colleges but anecdotal evidence suggests they are booming

5. By 2010, a fully-trained, qualified and competent workforce on all projects
> A third of the workforce have CSCS cards, and demand remains strong. It could go either way

6. By end of 2004, 500 projects to have used Design Quality Indicators (DQIs). By the end of 2007 60% of all publicly-funded/ PFI projects (over £1m) to use DQIs, and 20% of all projects (over £1m) to use them
> By last month just under 350 projects were users. 60 more kits had been purchased.