Prescott targets suppliers in drive to cut housing costs

John Prescott has turned his cost-cutting guns on housebuilders once more and called on them to “sort out” their supply chains.

Speaking to Building at the annual Offsite exhibition for housing at the BRE in Watford the deputy prime minister said that 80% of housebuilding costs were not linked to the price of materials. He said this was unacceptable and had to be “sorted out”. These non-material cost areas include labour costs, plant and plant hire.

He said: “It is time we started working more on the supply chain of housebuilding. There is certainly an argument to make changes – I am looking to get further savings on traditional construction.”

Referring to the 1998 review Rethinking Construction by Sir John Egan, Prescott said he accepted that “things had moved on” in terms of trying to control costs but added: “Egan was able to have an effect on the supply chain building airports and I think we should be able to have that effect in the building industry also. So you can lay down some of these standards in the purchasing stage.”

His comments come in the wake of a 77% increase in the costs of building social housing since 1993 that was revealed last December (see graph).

Prescott said: “We have now got the industry moving and want to be sure you can use its power and influence to be able to affect the supply industry. In fact we don’t have enough competitiveness and efficiency in providing the supply of products. All I am saying is, let’s start a debate about this.”

He declined to elaborate on what these changes might be or what the ODPM was planning to do, but did rule out a further Egan-style review.

There is an argument to make changes – I am looking to get further savings

John Prescott

Ian Robertson, chief executive of housebuilder Wilson Bowden, said: “Prescott is right that some of the volume housebuilders could obtain better discounts, but without total consolidation it seems unlikely that this can go much further.”

He added that Wilson Bowden had 145 “production units” building housing around the country. He said the reason for this was the scattered nature of the sites the company was developing.

He said: “It is not perhaps as big a prize as Prescott thinks. The industry is too fragmented for more centralised procurement to work.”

Michael Ankers, chief executive of the Construction Products Association, said: “Housebuilders should use their purchasing power but through partnering with suppliers as Egan suggested in order to cut waste, not a confrontational cost-cutting approach.”

Ankers said the rise in the price of building housing was largely because of soaring labour and plant costs.

• The industry is not doing enough to reduce cost and time overruns, according to this year’s key performance indicators released this week by Constructing Excellence.