The end of the spend

As the credit crunch recession bites deeper and deeper into construction’s medium-term prospects, the need to restructure the industry fundamentally, that our dysfunctional establishment has put off for so long, is now an imperative.

Gone are the days of profligate spending by politicians, bankers and industrialists anxious to buy their own extravagant monuments to architectural glory or notoriety. “Economy” and “utility” are going to be the key words for the foreseeable future. That in turn, presents us all with a monumental problem. Over the past 10 years of the “Millennium boom” that has just ended so abruptly, UK construction costs rose at twice the rate of inflation. They are now among the highest in the world and totally unsustainable in our suddenly reduced circumstances.

Much of this is self imposed. Our archaic “design-led” process allows architects to dictate the design of the project, however ill thought out, extravagant or flawed those designs may be. Constructors have to adapt and innovate to suit the individual, site-specific whims of the designers, rather than using established, proven technology. This is an incredibly wasteful and inefficient approach to any industry.

The architects, together with Cabe, have puffed up the value and importance of the superficial design of a building, overriding the real essentials of affordability and fitness for purpose. They have planted the myth that to be “good”, a building’s design must be unique, with purpose-designed components and that a building is “badly designed” if it incorporates standard products, or builds on previously successful designs.

Cabe has inflicted too much damage and must be axed, not expanded as suggested last week

If we are to drive construction prices down (and in my opinion we need a 5-10% real reduction in current costs), a drastic role reversal is urgently required. Construction management must take back control of the design and therefore the cost of its own products. We can’t take any more from contractors’ and subcontractors’ margins. The savings have to come from process efficiencies. Cabe has inflicted too much damage and must be axed, not expanded as suggested last week.

As in global banking, high earning designers and supervisors, ostensibly employed to ensure competitive prices, have been directly responsible for increasing the industry’s costs. Construction can no longer afford to carry this unnecessary £10-15bn burden of external consultants.

Designers will have to work with principal constructors as part of a single, unified team, applying their design skills to make the most of economic construction technology, creating good design quality while reducing cost.

The main objectives of Sir Michael Latham’s report, Constructing the Team and Sir John Egan’s Rethinking Construction were both to reduce overall cost. Latham’s target was 30% and Egan’s an initial 50%, later softened to 10% year on year. Rethinking Construction made it clear that the application of lean management principles to a fully integrated design and construction management team could achieve significant cost savings through improved efficiency, the use of economic standard products and off-site manufacturing techniques.

Architects, together with cabe, have puffed up the value of design, overriding the real essentials of affordability and fitness for purpose

Many informed clients are now enjoying the benefits of engaging integrated teams giving a one-stop service. My own company has recently come out as a “construction solution provider” and is thriving on projects that couldn’t be made to work traditionally. Laing O’Rourke led the way several years ago.

We must change construction’s entire structure and processes to survive this catastrophe – and do it now. If Gordon Brown can persuade banks to merge in the national interest, then why not persuade construction to integrate? The government has everything to gain, as it recognised when first appointing Sir John Egan in 1997.

I have previously suggested (20 June, page 40) that Egan should be invited to lead a fast-track integration implementation programme. The evidence was collected and the plan prepared 10 years ago. All that is needed is to give Constructing Excellence some funds, and I’m sure they could start next week. We don’t have a moment to lose.

And by the way, architects, QSs and project managers still remain an essential part of any construction project. But only if they are working constructively within an integrated team as part of the solution, rather than outside, as the problem.