In an industry starved of innovation, specialists are often the pioneers in research and development – and now the government has pledged £170m to help them. But those at the technical forefront still face obstacles.
Construction has a problem with innovation. Alas, this is not a particularly controversial statement. Report after report, from Egan to Wolstenholme to the Farmer Review, has highlighted the industry’s stagnant productivity – almost unchanged in the past 25 years – a consequence of decades of low margins and low investment.
Of course, it is possible to point to world-class UK projects that have genuinely broken new ground. But official figures are bleak. They show the £150bn-turnover industry invested just £211m in research and development (R&D) in 2016 (the most recent ONS figures) – equivalent to just 0.13% of its output that year. To put that in context, the motor manufacturing industry invested 22% of output in R&D in the same period. In fact, 2016 was a good year for construction – as recently as 2010 a minute £14m was invested.
“The vast majority of the actual innovation comes from tier two – the big concrete frame, mechanical and engineering, steel frame and cladding firms”
Ann Bentley, Rider Levett Bucknall
While the woefulness of this record isn’t really debatable, the big tier-two specialist contractors might be tempted to feel aggrieved by the characterisation. From new kit to reduced time spent on rail electrification, to the use of precast concrete to deliver top-down construction on Crossrail, specialists are investing where they can to make construction quicker, smarter, cheaper and safer. And the government is now looking to make things easier too, with this year’s construction sector deal making innovation a key target, and allocating £170m to a fund designed to transform construction (see What does the sector deal mean for innovation?, right).
But even specialist firms face huge problems making space to fund R&D within a highly competitive environment. So, can specialists really be the answer to the industry’s innovation problem? And what might this mean for main contractors?
What does the sector deal mean for innovation?
The government’s overall industrial strategy has a target to raise total R&D investment to 2.4% of GDP by 2027. To that end, the construction sector deal has allocated £170m to a “transforming construction” challenge programme designed to “help industry overcome the innovation barriers in moving to a greater use of digital, manufacturing and integrated energy technology approaches”.
In practice, the Construction Leadership Council’s supply chain lead Ann Bentley says this will see a variety of initiatives, including investment in standardisation of components to enable offsite manufacture at what is being called a “core innovation hub”. In addition, the government will launch competitions for collaborative research, the formation of university-led “innovation networks”, and procurement reform.
‘iPhone moment’
Don Houston, construction and engineering director at concrete specialist Byrne Bros, agrees that what innovation there is in construction “comes from the supply chain, from tier two and below”. He says: “We’re always looking at alternative ways to do things, with a better safety case, and that save time and money.”
The reason is the depth of specialist contractors’ technical expertise, and their role in actually practically delivering – rather than overseeing – the job. This makes them best placed to come up with ways of doing things differently to save time and money. Phil Price, group managing director of rail and infrastructure at groundworks, demolition and structures specialist Keltbray, says: “We innovate because we are specialists in niche areas. For us to expect clients to choose us, we have to be technically at the forefront of what we do.”
“When you try to change anything fundamentally you come up against standards, lawyers and insurance companies. We’ve got to find a way to be more responsive”
Don Houston, Byrne Bros
In contrast, main contractors’ expertise is in managing others to deliver while assessing and holding risk. Ann Bentley, chair of consultant Rider Levett Bucknall and the lead on supply chain issues on the Construction Leadership Council, says: “Major contractors have a huge role to play in influencing what their suppliers do. But I think the vast majority of the actual innovation comes from tier two – the big concrete frame, mechanical and engineering, steel frame and cladding firms. They have huge technical expertise.”
The lack of R&D in construction is in one sense a paradox, given that most in the industry would pride themselves on being, at heart, problem-solvers. But coming up with creative solutions to practical or process issues is not the same as deeper innovation stemming from blue-sky research, which looks to change things in a more fundamental way. While the former is relatively common (see Specialists’ light bulb moments, overleaf), the latter is much more rare. Simon Bingham, managing director of steel specialist Caunton Engineering, says: “Day to day we feel like we’re being super-inventive because we’re always solving problems. But it’s always about doing old things just that bit better. We’re not having an iPhone moment.”
Specialists’ light bulb moments
Electrification
Specialist contractor Keltbray worked with Swedish manufacturer SRS and German engineer Zeck to develop a wiring train that can halve the time to install overhead lines on railways. Capable of running on both road and rail, the new train avoids the need for long journeys on the busy network simply to get to the location of the line installation. When in use, its ability to hold wires at full tension during installation has enabled Keltbray to reduce manpower, cost and possession time on contracts such as the Great Western Railway electrification. Phil Price, Keltbray’s group managing director for rail and infrastructure, says Keltbray invested £1m at its own risk on the project without financial support. “This is something that has been done in the same way for years. The idea came from the front line and it is delivering real client benefits, dramatically reducing time and cost.”
Concrete pouring
Delivering the architecturally finished concrete for Crossrail’s underground station at Paddington provided a challenge for concrete specialist Byrne Bros because of the “top-down” construction method used. So the firm developed a system using precast slabs buried in the ground, on which further concrete was poured. As construction progressed downwards, the earth under the precast slabs was removed to revealed perfectly finished soffits. Byrne’s construction and engineering director Don Houston says Crossrail supported the innovation by partly funding its development. “This was driven by the quality that Crossrail wanted to achieve,” he says.
Logistics
Construction logistics business Wilson James spent £1m developing an internet-based delivery management system that is as intuitive to use as consumer apps for online banking, to avoid the need to roll out software training programmes for all users. Developed for use on Heathrow, it can schedule and precisely track the movement, driver accreditation and material carried in thousands of deliveries, offering the ability to instantaneously report on issues such as vehicle emissions.
Conservative
This is partly because the consequences of building failure makes regulators and insurers very conservative. Byrne Bros’ Houston says, for example, that his firm has been working since 2014 on a new concrete product that uses 75% less cement, which dramatically cuts its environmental impact.
“But because it’s new and innovative no one wants to use it. The insurance industry is paranoid. When you try to change anything fundamentally you come up against standards, lawyers and insurance companies. We’ve got to find a way to be more responsive,” he says.
But if some process innovation is at least necessary for specialists in a way it isn’t for main contractors, that doesn’t mean even this is easy to do. In a low-margin industry, the challenges are numerous: paying for it, making time to think about it, and getting leeway within contracts to look for a better way. Gary Sullivan, chairman of construction logistics specialist Wilson James, which recently spent £1m of its own money developing an online, mobile-friendly delivery management system, says: “Innovation has always been from the specialists. But very few clients will share any risk on innovation. You have to do it yourself and hope it pays off.”
Rudi Klein, chief executive of the trade body Specialist Engineering Contractors’ Group (SEC Group), agrees. “Firms often just can’t afford to put anything into innovation – the money’s not coming from profits. Often it’s firms’ reserves or borrowing – they have to finance it themselves,” he says.
There are more insidious ways in which innovation is discouraged. On jobs, procurement structures mean many specialist subcontracts get let on a lowest cost basis, and well after project design has been finalised, leaving little opportunity for finding ways of doing things better. Keltbray’s Price says: “Clients have a big role to play. The commercial models they deploy can either make it work or stifle it. If they insist on five prices for everything, they have effectively commoditised the job. It is very difficult to innovate without some head room.”
Risk
SEC Group’s Klein says: “The contract effectively imprisons you, meaning the opportunity to influence the outcome is all but impossible. Meanwhile, you’re probably not getting paid and being pressured to accommodate a disproportionate amount of risk. It’s the business model that’s the biggest barrier to utilising the supply chain for innovation.”
Public procurement rules can also make this an even bigger problem on government construction projects. Rider Levett Bucknall’s Bentley says: “Public sector procurement often precludes innovation because many procurers only want bids they can directly compare. So, if you come back and say ‘there’s a different way of doing this’, many are very nervous about considering it, even if it’s significantly cheaper.”
This structural obstacle to innovation has been one of the drivers behind Project 13, a collaboration led by the Institution of Civil Engineers that aims to reform the way clients, contractors and the supply chain work on big infrastructure projects in order to deliver better outcomes. While Project 13 is fundamentally about enabling proper collaboration across lengthy programmes, it also prioritises specialists’ technical expertise, recommending direct early engagement by clients with chosen specialists – even bypassing main contractors – so they can work together.
The thinking behind it informed the procurement of Transport for London’s Bank station upgrade, as well as Anglian Water’s One Alliance programme covering £1.2bn worth of capital projects between 2015-20, both of which saw the clients tender specialist packages directly. Now Bentley says that through her work on the Construction Leadership Council there is the opportunity to do similar things in the building arena. Her work will, she says, go beyond theory to develop practical procurement models, software and training programmes to make it happen.
“It’s about procurement that gives much more significance to the whole-life cost and operational outcomes that the client wants to see. If clients are looking at outcomes, this will genuinely unlock innovation in the supply chain,” she says.
“But we don’t want to just issue a report – we want to ensure businesses are actually equipped to do it.”
Client attitudes
So, are there any signs clients are so far taking a different view? Klein says in the wake of the Carillion collapse some appear to be considering engaging directly with the supply chain, and he has received a number of enquiries from clients wanting to know how to engage engineering specialists early on in projects. But beyond individual anecdote there is no great sense of a shift.
Byrne Bros’ Houston says: “We’ve seen the Bank station upgrade take a different approach, and on that we’re bang on programme with no cost overruns. It’s allowed us to innovate through influencing the design early on. But there doesn’t seem to be a broader trend. Clients are understandably absorbed with time and money and quality.”
However, if these new approaches do get taken up, Bentley and others maintain that main contractors should have little to fear from more direct client engagement with suppliers. Keltbray’s Price says: “We’re continuing to work with tier one contractors for the majority of our Network Rail work, and we keep very good relations with them.
But we also have good relations with Network Rail as well so we understand what their drivers and challenges are. This intimate knowledge allows you to mobilise innovation in a very positive way.
“But you have to understand the ground rules so people [main contractors] can see you’re not overstepping the mark – which is never the intent.”
Given the huge reach of the biggest main contractors, finding a way for them to benefit from great innovation is likely to be key to making it happen.
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