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More for less for contractors: Building on Egan

Are contractors ready to offer something different? Mark Hansford reports.

More from: More for less

For the contracting industry, the concept of being asked to do more for less is nothing new.

“I don’t think it’s a new mantra,” says Costain chief executive Andrew Wyllie. Wyllie points to the fact that his own firm now sees 84% of its business coming from repeat clients as evidence that contractors are firmly on board with consistent improvement − or else. “It doesn’t matter what sector you are in, if you are not demonstrating a better product year on year, you will not win that repeat work.

Chief Executive of Britain’s biggest civil engineering contractor Balfour Beatty, Ian Tyler is also clear that more for less means brave decisions − and that not all firms are yet as proactive as Wyllie suggests.

“The industry needs to find ways of delivering more output for less money,” says Tyler. “But if you are going to do more for less then being a good builder is not going to be good enough. “Productivity and efficiency are key issues for the industry that have to an extent not been tackled. Physical technology will therefore play its part,” he says.

“We are seeing a return to long tender lists, firms chasing work at unsustainable prices and more of a claims oriented approach”

Andrew Wolstenholme

The contracting industry’s perceived “skin deep” approach to improving effi ciency, quality and profi tability was highlighted last October in Constructing Excellence’s root-and-branch review of the industry’s progress in implementing the Egan recommendations.

It is the government body set up to encourage construction industry eff orts to implement the recommendations of Sir John Egan’s Rethinking Construction report published in 1998. It described the industry’s approach as “complacent and ineffectual”.

“Even where the principles of Rethinking Construction have been adopted, too often the commitment is skin-deep.
Scratch beneath the surface and you find many so-called partners still seeking to avoid or exploit risk to maximise their own profits, rather than finding ways to share risk and collaborate genuinely so that all can profit,” Constructing Excellence review team chairman Andrew Wolstenholme told NCE at the time.

Contributing to the report, Egan himself said the response to Rethinking Construction had been disappointing. “We could have had a revolution and what we’ve achieved is a bit of improvement. I would give the industry four out of 10.”

Andrew Wolstenholme

Andrew Wolstenholme

Egan set targets for 10% to 20% year on year improvements in safety, profitability, cost certainty, time certainty, capital cost, construction time and productivity.

Only the profitability target has been met by the industry overall, with safety and productivity considered to have made reasonable progress. Shockingly there is still only a 50/50 chance of a project coming in on cost or on time. Wolstenholme warned that without action, this situation is set to rapidly deteriorate.

“A crisis is coming in so many ways,” said Wolstenholme. “The low penetration of cultural change has been exposed by the economic downturn, with evidence that clients and main contractors are now reverting to type.

“Instead of drawing opportunity up from the supply chain, there is a determination by main contractors in particular to tender every package, every time, and select on the basis of lowest price. We are seeing a return to long tender lists, firms chasing work at unsustainable margins, cost and time overruns, jettisoning of quality or sustainability initiatives and more of a claims-oriented approach,” said Wolstenholme.

“Productivity and efficiency are key issues for the industry that have to an extent not been tackled.”

Ian Tyler

This is a scenario that even Tyler accepts as inevitable. “The events of the last two years have shown that to be sustainable you need financial strength. Sustainable companies will sacrifice the short-term for the long-term,” he says.

Is there an alternative? Six construction trade bodies have this month joined forces to lobby for the creation of a single national “standard” for pre-qualification documents. This, they claim, could save £1bn wasted each year as a result of pre-qualification bureaucracy.

The Association for Consultancy & Engineering (ACE), Civil Engineering Contractors Association (CECA), Federation of Master Builders (FMB), National Federation of Builders (NFB), National Specialist Contractors Council (NSCC) and the Specialist Engineering Contractors Group (SEC) have jointly issued a call for UK construction firms to take part in a month-long consultation launched by the Department for Business, Innovation and Skills (BIS).

The document, which will be similar to a British Standard, has been produced in consultation with representatives from UK government, clients, industry and accreditation service providers. It will for the first time create a common approach that can be used by any UK construction client when asking questions in relation to core criteria such as financial, health & safety, diversity and environmental capability and performance.

This will dramatically reduce the cost of prequalification as companies will only have to prepare this information once, rather than having to fill in their details for each questionnaire they respond to.

Learning from statistics

A recent survey from the Specialist Engineering Contractors Group indicated that the average cost of such duplication of effort was in the order of £7,700 per construction firm per year.

If such figures were replicated across the more than 200,000 UK construction firms recognised by the Office of National Statistics, the overall cost of pre-qualification to the industry could be signifi cantly more than £1bn, even before the cost to clients of evaluating non-standard forms is taken into account.

This represents around 1% of the total value of annual construction output, offering a potentially huge efficiency saving at a time when client budgets are under great strain as a result of the economic downturn.

CECA national director Rosemary Beales, says it is “vital” that the industry plays its part in making sure the final document is robust, ensuring it will be accepted by the clients and companies across the construction sector.

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