Construction: service or product?

NEDO commissioned BDP to create a client guide to the procurement of design and construction, based on the NEDO research report ‘Faster Building for Industry’. It included a gameboard of options for assembling the team, together with a scoring approach to help choose an option. 

Introduction

On Wednesday, 29th October 2003 Richard Saxon CBE, Vice-President of the RIBA, Director of BDP and Chairman of Be gave the following lecture entitled ‘Vision for Industry (formerly known as construction)’ to invited guests of The Joint Contracts Tribunal at the Jarvis Hall, Royal Institute of British Architects.

This lecture was the inaugural JCT Povey Lecture, an event by way of a public acknowledgement and tribute to Philip Povey, who served the JCT for over fifty years.

The JCT Povey Lecture is to be an annual event at which an eminent person will be invited to give his/her thoughts on significant matters that are relevant to the construction and property industry.

The American architectural profession has discovered Integrated Project Delivery (IPD) and is enthused by it. At the recent AIA Convention in Boston there were numerous meetings about it and its closely related subject, Building Information Modelling (BIM). The AIA has just published its guidance on IPD at www.aia.org/ipdg

The construction industry is heading for the buffers. Capacity is draining out as skilled tradesmen retire and few enter as apprentices. The go-to supply of EU migrant tradesmen is likely to be restricted soon and is already less interested as the pound falls. Construction quality is declining in the housebuilding world. Mark Farmer’s message: Modernise or Die, is clear that a major move to offsite construction is needed to keep the industry from decline. The core problem is low productivity growth in construction, globally under 1% per annum when manufacturing achieves 3.6%. There are many causes of this, but the making of buildings on site, in all weathers, is one of them.

The collapse of Carillion is probably another nail in the coffin of the current UK model of main contracting where virtually all the trade work is subcontracted. Over fifty years in the industry, I have seen the change from traditional contractors with their main trades in-house to the current, unsustainable pattern. The vertically integrated contractor was brought down by recurrent business cycles which punish employers. Once the idea spread that trade specialists could be hired in just when needed, taking them off the contractor’s books, that approach spread fast. Tier Two firms could be left with the work of recruiting and training people, innovating in their specialism and managing the risk handed down to them. They could also provide working capital to the main contractor by accepting slow payment for their work. Most of the business cycle impact became ‘subcontracted out’. In practice, with Tier Two firms bidding at low margins to win work from the Tier One contractor, the scope for innovation and proper training was driven out. One of the stubborn failures of the industry since this pattern became the norm has been the lack of any productivity growth. Scratch teams, built up per project, learn nothing from experience and waste considerable resources in the procurement process. The critique of the method reads:

Construction is many industries within one classification. It stretches from the mammoth to the minute, from infrastructure work like HS2 to household repair tasks. Any critique of construction therefore needs to recognise the part of the industry to which it refers. The statistical classification of the industry also fails to include its clients and consultants, essential parts of the cultural and economic system of the built environment. All that having been said, new initiatives at one end of the scale spectrum could create momentum for change across much of the industry.

Every part of the construction industry is challenged by rapidly evolving threats: stagnant productivity, falling human resources, failing business models, climate change, globalisation, advancing computer power, to name some of them. Most attention is paid to the plight of contractors and specialists, but the world of consultancy also faces these same issues. Professionals additionally face falling credibility and authority as respect for expertise declines. Their professional institutions seem powerless to communicate the value of the professional contribution to the public, to clients and to government.
 

When a construction client signs a contract to deliver a project, they usually have three targets in mind: to deliver the required facility on budget, on time and to required quality. Cost and Time have proved relatively manageable, with objective evidence and increasingly clever tools with which to manage. Quality has never been so simple. There is a perceived degree of subjectivity about it and it is quite hard to monitor the progress of work to ensure that all standards are being maintained. The result has been that whenever there is pressure on cost or time, it’s usually quality that suffers. Value Engineering has become an ironic term as it usually means cost reduction by reducing the quality that delivers required value.

The Office for National Statistics lists the construction industry as part of the service sector. This makes some sense in that we provide bespoke facilities to customers rather like a restaurant provides meals. However, our output is not a transient meal but delivers a very concrete asset which needs looking after for its whole life, a service we do not provide except reactively. We treat our output like a product, leaving the buyer to look after it. Owners are not often expert at this, generating waste and depreciation. Our landlord and tenant legislation dumps repair and maintenance responsibility on unskilled tenants, charging them to restore the property to its original state on departure or pay ‘dilapidations’.

You may not know that I have been a long-time fan of American Football. The game is sometimes called ‘violent chess’ as it’s based on pre-planned ‘plays’ by one side’s offence team and the other’s defence team. The plays are radioed into the quarterback, the leader of the offence, by a coach on the side-line and the whole team must remember the moves implied by the coded name of the play, then execute it flawlessly. All the team’s plays are set down in their playbook, a secret document that team members must learn by heart and practice continuously. New plays are devised all the time too. No wonder the game originated in colleges.

A generation has passed since the excitement of the 1990s as first Latham and then Egan called for radical change in the construction industry. Initiatives seemed to pour out of both government and the industry, yet here we are still with an industry which seems much the same, racked by cost pressures, defensive, risky, unsustainable and unattractive to the workforce that it needs. We seem to live in Groundhog Day, repeating the traditional process with scratch teams, collaborating weakly and producing poor results.