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2007: Is the industry fit for the boom?

industry SWOT - Over the next four pages, NCE' s exclusive SWOT analysis assesses whether UK construction can handle a 30 year workload peak.

Civil engineering is set to boom in 2007 with contractors reporting record order books.

But can the industry cope?

To find out, NCE has convened an expert panel of some of the industry's most experienced personnel to offer an exclusive SWOT (strengths, weaknesses opportunities, threats) analysis of the industry.

The panel comprises:

Mouchel Parkman chief executive Richard Cuthbert l Osborne chairman Simon Murray l Bovis Lend Lease head of UK south Julian Daniel l EC Harris partner Graham Matthews l Construction Products Association economist Alan Wilen l Association for Consultancy & Engineering chief executive Nelson Ogunshakin l Highways Agency procurement director Steve Rowsell Their analysis shows a genuine belief that the industry's passionate and technically brilliant people will see it through these booming times, provided it can get - and retain - enough of them.

The panel says that with pressure on resources already acute, there is a risk of projects and companies failing.

People are the industry's biggest strength, the SWOT panel concludes.

'Many are highly committed and enthusiastic people wanting to deliver good performance in a partnering culture, ' is Rowsell's personal view, one echoed by the rest of the panel.

One big question is: will the industry shoot itself in the foot by constantly blowing the budget? That is the panel's biggest concern.

'There is a failure throughout the industry to provide robust cost estimates and to drive unnecessary cost out of project delivery, ' says Rowsell.

The shortage of skilled staff to bid for and design major schemes is considered a signifi cant weakness.

This problem is being compounded by the growing complexity and high cost of bidding for major projects. This appears to be squeezing out medium sized contractors and forcing large firms to be more selective about the schemes that they bid for.

The opportunities out there are obvious. A host of major schemes are promised or underway and contractors' order books are on the rise.

And the Olympics and other planned high profile schemes offer the opportunity to showcase the industry's talents.

The Olympic projects can also be used to attract new blood into the sector.

What about threats? Will the government get cold feet and pull the plug on public spending?

Will a lack of long-term forward planning make it impossible for clients and the supply chain to deliver the long-term sustainable improvements that the government's commitment to spending plans could achieve?

Already there are worrying signs of planned major projects being delayed, and there is a worry that 2007's Comprehensive Spending Review could impose further constraints on public spending.

Clients' failure to adopt best practice is also identified as a major threat. Poor client leadership on procurement issues leads to delays and poor profit margins with some clients is leading to the cherry picking of the most profitable jobs.

strengths

People: highly committed and enthusiastic, wanting to perform in a partnering culture Technical capability: strong technical and professional skills across the supply chain Consistent investment: long term public private partnerships mean the industry is less exposed to stop/go spending cycles Better profitability: good for company growth and staff pay High profile: major projects often with political importance raising construction's status and making it more attractive as a career Good odds: plenty of work around and fewer big players competing for major projects Choice: companies can be more selective in the projects they choose to target World renowned: UK construction has globally recognised quality consultancy and contracting firms, and adequate materials capacity.

Rising share prices: higher market valuations enable firms to attract more investment cash

weaknesses

People: the boom will strain labour and materials supplies and compound recruitment difficulties.

Cost estimating and cost management Lack of diversity: the industry has failed to create an ethnically and sexually diverse workforce Failure to restructure: industry is failing to exploit the opportunities to restructure and provide a better service while profitability is good.

Little R&D investment: high workloads mean research and development is neglected Poor performance: projects nationwide are going wrong, are poor quality, late, over budget and fail to meet client aspirations Polarisation: the smartest minds are often working for consultants, but clients deal direct with contractors who are struggling to find good people Low pay and poor working conditions High bidding costs: limit pool of bidders for major projects Not enough training: because staff are too busy Poor client leadership: causes delays, late payment and confusion about what is needed Poor profit margins: leading to cherry picking of most profitable jobs opportunitiesThe Olympics: an exciting work programme with the chance of good publicity to encourage more young people into construction.

Client collaboration: early contractor involvement, and partnering help everyone get better value, and develop a common culture with consistent working methods.

Better margins: as demand outstrips capacity The sustainability drive: government commitment to sustainability opens new business

opportunities

More investment: there is government recognition that more investment is needed in our ageing infrastructure Training: demand is encouraging new enthusiasm and investment in the training and development of engineers Integration of design and construction: makes the process more efficient

THREATS

People: not enough skilled personnel to do the work Lack of long term forward planning: making it impossible for clients and the supply chain to deliver the long-term sustainable improvements to infrastructure Client capability: the lack of skills in some client organisations and their reluctance to adopt best practice Industry capability: UK suppliers not giving clients what they want because they have enough work and do not feel the need to make any extra effort More accidents, more mistakes, more failures: because of overstretched, under skilled workforce.

Risk transfer: this is not yet equitable creating a 'survival of the fittest' climate PFI transaction costs: at around 10%, could make schemes uneconomic or unbiddable Higher energy prices: could force project deferrals as costs spiral Salary inflation: because of the on-going skill shortage Reduced innovation: because of market consolidation and an increasing focus on short term profi tability End of the boom: the fall off in demand that will follow the boom could lead to lay offs

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