Audit trial

The public sector may be keeping the construction industry afloat at the moment but it sure ain’t efficient. The latest report from the National Audit Office into central and local government funded buildings reckons that £2.6 billion of taxpayers’ money is wasted each year by the slow take-up of industry best practice initiatives.

The NAO claims that while progress has been made by some departments since its last investigation in 2001, many government bodies are failing to act on guidance offered by the Office of Government Commerce. The report calls for departments to:

• employ collaborative working approaches and integrated teams;
• use non-adversarial forms of contract;
• get contractors involved early;
• use project accounts to smooth payment;
• adopt project-wide insurance;
• improve productivity by the use of more effective programmes and streamlined procurement;
• look at the use of off-site prefabrication;
• base design decisions on whole-life costs and sustainability;
• learn from past projects.

Sir John Bourn, head of the NAO, said: “Departments and agencies have had a reputation for delivering construction projects that were late or over budget and designing buildings that were not cost-effective to operate. There has, however, been a considerable improvement in performance since my last report on the subject in 2001. Departments cannot, however, be complacent. There remains scope for further improvement.”

The report, Improving public services through better construction, puts forward possible savings of £2.6 billion if best practice improvements were implemented. “Even if only 20% of these improvements are practicable this would still release some £500 million to be reinvested in front line public services or higher quality built assets to deliver improved public services,” said Bourn.

The NAO estimates that between April 2003 and December 2004 55% of construction projects were delivered to budget. This compares with just 25% in 1999. During the same period, 63% of projects were delivered to time, compared with 34% in 1999.

Even if only 20% of these improvements are practicable this would still release some £500 million to be reinvested in public services

The Government’s own targets, launched in February 2003 as the Achieving Excellence in Construction strategic targets, were to see 70% of construction projects on time and within budget by March 2005.

“There is a slight air of impatience in the report,” according to Rudi Klein, chief executive of the Specialist Engineering Contractors’ (SEC) Group. “It is clear why the NAO wants the pace of change to increase since it believes that further value-for-money savings of up to £2.6 billion in annual construction expenditure is possible if good practice is applied across the public sector,” said Klein.

The report now goes to the Public Accounts Committee in the House of Commons. The SEC Group has been talking to the committee with a view to urging them to consider a time frame in which the NAO recommendations should be implemented. The SEC Group believes that within the next three years, every public sector project should have a project bank account.

The report has been warmly welcomed by the Electrical Contractors’ Association. “We are pleased that the NAO appreciates the significant contribution that early and full involvement of the specialist contractor can make to the successful delivery of a construction project,” said ECA director David Pollock. “We also welcome the NAO’s call for government departments and agencies to have in place correct and fair payment mechanisms.”

His comments were echoed by Sir Michael Latham in the report’s foreword: “Best practice is about partnering and collaborative working. It is vital to involve the supply chain. The vast majority of work on site will be undertaken by specialist contractors. They need to be involved particularly, as many of them have have significant detailed design responsibilities.”