Construction Industry Benchmark Report

Construction Industry Benchmark

The Review of the UK Construction Industry Benchmark Reports

The first and foremost major report that reviewed the performance of the UK construction industry was enacted in 1929 and several other reports had followed suite up till the present time (Cain, 2003).

Due to the multitudes of problems plaguing the UK construction industry, the UK government had at different times assembled teams of expert to bestow a panacea and impeccable modus operandi on the UK construction industry. Consequently, the UK government keeps reviewing each reports year after years for an up to date solutions for the UK construction industry by learning from the limitations of each report and re-examining the non-conforming of the industry to the findings and recommendations of the reports.

Cain (2003) notes that the inspiration behind all the reports were the client concerns about the impact on their commercial performance of the inefficiency and waste in the UK construction industry.

This chapter presents the review of various benchmark reports and initiatives of the UK government and construction industry as a response and panacea to the problems and imbroglio prevalent in the UK construction industry. Fragmentation, inefficiency and adversarialism had led to unnecessary high construction cost and poor functionality (Cain, 2003). Preceding chapters have elucidated on these problems and succinctly explored the benchmark reports in emphasizing the need for the UK construction industry to shift from its adversarial position and embrace a more integrated approach. The reports also charged the construction client to embrace co-operation and teamwork for an enhanced relationship among the supply chain members.

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This chapter reviews different reports that had shaped and are still shaping the direction of the UK construction industry. The recommendations of the reports which are regarded as a universal remedy for the adversarial make up of the UK construction industry are well highlighted. The BDB initiative will be left out since it has been discussed in earlier chapters. Major reports will be dilated more upon such as the Latham report, Egan Report and the Strategic Forum for Construction (SFC) report.

CONSTRUCTING THE TEAM (The Latham Report of 1994)

One of the earliest reports was Alfred Bossom Reaching for the Skies report of 1934 and different other reports such as Simon report of 1944 and Barnwell report of 1967 came afterwards before the Latham report of 1994 (Cain, 2003).

In 1994, Sir Michael Latham report came into being with audacious recommendations to provide panacea to the quandary besmirching the UK construction industry. The Latham report vital message was that the client should be at the core of the construction process (NAO, 2001). It recommended more standardised construction contracts, better guidance on best practice and legislative changes to simplify dispute resolution (NAO, 2001).

Cain (2003) notes that various reports before the Latham report all failed to have any impacts on the performance of the UK construction industry because of the industry continued sightlessness to its shortcomings. The UK construction industry had long been fraught with adversarial relationships, process fragmentation and ineffective planning. The continued reliance on the aforementioned failings had made the UK construction industry to still be enmeshed in its precarious state. It was however surmised by Cain in 2003 that the Latham report came as a catalyst in dissuading the construction clients from their unfavoured disposition and charged them to lead the reform movement.

The Latham report ‘Constructing the Team’ wished-for an understandable action plan with timescales, scheduled people to implement its recommendations and consequently sought the views of contractors and key private and public sector clients (NAO, 2001). It charged both the private construction client and the UK government that its recommendations implementation onus is on them and recommended that the latter should commit itself to becoming a best practice client (NAO, 2001).

The Latham report identified inefficiencies which indicated the need for partnering and collaboration among the players in the construction industry. Teamwork was also identified and the report acted as a precursor for more initiatives. The Latham report led to the creation of the Construction Industry Board (CIB). Government benchmark reports and initiatives such as the Levene Efficiency Scrutiny report of 1995; the Egan report ‘Rethinking Construction’ of 1998; the National Audit Office (NAO) report ‘Modernising Construction’ of 2001; the SFC report; ‘Accelerating Change’ of 2002; the Guide to the ‘Construction Best Practice Programme’ (CBPP) of 1998; The Construction Client Charter’; and ‘The Movement for Innovation’ (M4i) were all designed to move the UK construction industry in the right direction.

In its conclusion it affirms that if all its recommendations were put into practice, the potential for the achievement of efficiency savings of 30 per cent over five years in total construction costs is highly discernible and realizable (NAO, 2001).

While the whole of this chapter is devoted to the review of the key UK construction industry benchmark reports, this section succinctly outline the key recommendations of the Latham report of 1994.

As earlier noted at the beginning of the chapter, the first key recommendation of the Latham report is the need for the construction client to accept the onus of the reforms in the UK construction industry. It specifically emphasized that government being one of the biggest procurer of projects should commit itself and be acknowledged as a best practice client. It charged government to improve the training of its workforce for the achievement of the industry’s goal of value for money and establish benchmarking arrangements to provide pressure for continuing improvements in performance.

The report also noted that the private sector construction client is the biggest procurer of project and they thus need a unison voice to effect changes and improve standards. It was noticed that there was no single focus for the private sector construction client and a need was however identified. The setting up of an organisation called the ‘Construction Clients’ Forum’ was recommended to represent the private sector client and provide influential voice, with responsibility for promoting forward thinking on key issues. The creation of the organisation was considered a priority.

The report recommended that the Construction Sponsorship Directorate of the Department of the Environment be designated by Ministers as the lead Department for the implementation of the reports recommendations.

Secondly, adjudication was acknowledged as the impeccable way of dispute resolution which must be introduced within all the Standard Forms of Contract and be underpinned by legislation. It emphasized that the impeccable solution is the avoidance of disputes. However, dispute can still abound despite concerted efforts of prevention. The report reckons that if procurement and tendering procedures are improved therefore there will be reduction in the causes of conflict. Mediation/conciliation was also acknowledged as another route of Alternative Dispute Resolution.

Thirdly, the report recommended that the CIC should provide a guide to briefing that would assist the clients. It was also recommended that it should be part of the contractual process that the client should approve the design brief by signing it off. Also it was recommended that DOE should coordinate and publish a Construction Strategy Code of Practice (CSCP) to inform and advise the client. The CSCP should be legible and decipherable and circulated through all the government agencies.

Fourthly, the report recommends the inclusion of detailed advice in the CSCP to all public clients on the specific requirements for selective tendering of EU directives. NJCC code of procedure was recommended as the focal point for the numbers of tenders for single stage tendering. It advised that clients that are subject to EU regulation must do away with open tendering procedures. It also advocated that client that procures their project through design and build approach should proceed by the following tender routes (1) On a single stage basis, not more than three firms should be invited with one other name in reserve (2) When a project is of complex nature and substantial, a two stage tender should be employed subject to EU considerations (3) When it is envisaged that ground investigation cost would be incurred by tenderers, they should be allowed to pool such cost by the retainment of single firm of consultants acting on behalf of them all (4) It should be made known in advance when a very large and expensive scheme is to be undertaken that a reasonable proportion of expense incurred by unsuccessful tenderers will be paid back to them (5) Based on quality and price basis assurance should be sought from the contractors that their own professional consultants will be retained.

It recommends the creation of a more standardisation and effectual forms of contract, which tackle matters of simplicity, justice, roles and responsibilities, risks allocation, dispute resolution and payment (NAO, 2001).

Fifthly, partnering was advocated by Latham for fostering long term relationship. It emphasizes that competitive tendering process should be used in seeking the partnering arrangement for a specific period of time. The partnering arrangement should be based on mutually agreed and measurable targets for productivity improvements. Training was however not well considered by the Latham review but it advised that the issue should be examined as a matter of urgency by the industry and the government.

It also recommends that the industry should move away from the established structure that the industry handles contracts and works with designers and equal opportunity should be given greater consideration. It recommends the creation of a single central public sector register of consultants and contractors (NAO, 2001). This has led to the creation of ConstructionLine which is a central qualification database of contractors and consultants run by a public/private partnership with a Government steering group (NAO, 2001).

Lastly, the report notes that the industry has invested little in research and development and that the DOE should take urgent step and involves clients in its research strategy programme which should be properly monitored. It also recommends the acceptance of 30% real cost reduction by minister and the industry. It recommends that clear definition should be given to the roles and responsibilities of the project manager.

RETHINKING CONSTRUCTION (The Egan Report of 1998)

In 1998, the Sir John Egan report came into being. The Sir John Egan’s construction task force presented it to the then deputy prime minister. The former Deputy Prime Minister, John Prescott commissioned the report in July, 1998 with the central message that the UK construction industry and its client can jointly act to improve their performance by applying best practices to improve the quality and efficiency of the service provided by the industry to its clients (AZoBuild, 2008; Construction Excellence, 2006). Cain (2003) notes that the basic distinction of the Egan report in comparison with other reports is its insistence on the extraction of best practice in supply chain management from other sector.

It was commissioned as part of the Government’s effort to improve the quality and efficiency of the service provided by the industry to its clients.

The Egan report advocates the creation of a “Movement for Change” which would be a vibrant, motivating and non-institutionalised body of people who are an advocate of the upliftment of the UK construction industry (AZoBuild, 2008). It was also noticed that the report acted as a harbinger for cultural changes with outcomes such as the launch of M4i in November 1998 (AZoBuild, 2008). The report also emphasize that the industry needs to improve on their activities but it however believe the industry is capable of doing that (AZoBuild, 2008).

Several demonstration projects were undertaken to exemplify the innovations advocated by the report which to public astonishment exceeded the reports’ targets in productivity, profits, defects and reduced accidents (AZoBuild, 2008). Demonstration projects are regarded as live construction projects that are either innovating or imbibing an element of best practice (Construction Excellence, 2008a). Lesson learnt from these projects are used in influencing the UK construction industry change (Construction Excellence, 2008a).

The report stoutly consolidated the apprehension of clients at the high level of inefficiency and waste and similarly powerfully consolidated the earlier message of the call for integration (Cain, 2003). The report lucidly admitted that total integration of processes (design and construction) and the application of supply chain management are key to better value for end user client (Cain, 2003).

Cain (2003) in his review of the Egan report averred that the report was highly critical of the UK construction industry’s disinclination to the grapple of the benefits of greater commonality and standardisation of components and materials.

It was revealed in the report that the industry had low profitability, too little investment in capital, research, development and training and that too many of the construction clients in the industry were not satisfied with what they are getting (Construction Excellence, 2006). Consequently, 5 drivers for change were identified by the report with 4 project process improvements and 7 targets for improvement, which are summarized in Fig.3.5 in the previous chapter.

Egan recommendations also include the attainment of the UK construction industry’s potential. The report notes that for this to be achieved the industry needs to shift from its present culture and structure of competitive tendering and replace it with long term relationships based on clear measurements of performance and sustained improvements in quality and efficiency (Construction Excellence, 2006).

MODERNISING CONSTRUCTION (The NAO report of 2001)

In 2001, NAO Modernising Construction report came into being with brave recommendations by summarising previous reports that had recently set the tone for the eradication of the quandary besmirching the UK construction industry. The report’s provision includes an analytical appraisal of the factual effectiveness of the industry and the barriers that hamper improvement (Cain, 2003). The report is about how to modernise the procurement and delivery of construction projects in the United Kingdom that benefits the construction clients and the UK construction industry in general (NAO, 2001). It critically chastises the UK construction industry for its poor performance and the consequences this poses (Cain, 2003).

The report is seen to be very influential in dissuading the construction clients and the construction industry to discard their old adversarial ways and imbibe the Egan best practice (NAO, 2001). In Cain’s review of the report, it was identified that the major impediments to improvement of the performance of the UK construction industry are (1) the separate appointment of the designers from the rest of the supply chain (2) limited application of value management (3) opposition to supply chain integration (4) inconsideration of the factual cost of construction processes and components (5) little single point responsibility in one hand of design and construction process (6) limited regards to end users needs and inconsideration of fitness for purpose of the construction (7) use by client of narrow and rigid specifications, which stifle innovation and limit the scope for value for money; and (8) less inputs of buildability.

According to NAO (2001), the report is seen to be forward looking and underscores good practice being espoused by the industry which if widely applied could achieve much considerable improvements in construction performance achieving better value for money. It was noted within the larger spending departments and agencies estimate that by adopting new approach to procurement and management of construction, efficiency gains of over £600 million annually and improvement in the quality of construction was achieved (NAO, 2001). It was established that there is greater potential in the application of best practice that leads to improved profitability when comparison is made with the current industry average of one per cent of turnover (NAO, 2001).

Furthermore, the report also shows that there is no provision of value for money in the acceptance of the lowest price bid in both the final cost of construction or the through life and operational costs (NAO, 2001). It was also noted that conflict and distrust which have contributed to poor performance have severed the relationship between the public sector client and the construction industry (NAO, 2001).

The report emphasises the need for integration of the clients, professional advisers, contractors, subcontractors and suppliers of materials in order to better manage risk and apply value management and engineering techniques for the improvement of buildability and the elimination of waste from the process (NAO, 2001). This integration will be bring greater concentration to achieving a better construction which meets end user’s needs at a lower through life costs (NAO, 2001). Integration has the propensity of reducing through life and operational costs which consequently leads to greater certainty of time and budgeted costs of project (NAO, 2001).

The report also charged the Department of the Environment, Transport and the Regions (DETR) to develop more sophisticated performance measures and provide more co-ordinated direction to initiatives to promote better performance by the construction industry (NAO, 2001). The report acknowledged the department collaboration with the construction industry in developing and promoting key performance indicators to measure construction performance such as (1) the operational and running costs of completed buildings (2) the cost effectiveness of the construction process (3) indicators for health and safety; and (4) quality of the completed construction.

Lastly, the report emphasises the training of more staff for the effectiveness of the construction clients and the importance of partnering for the adversarial relationship that abounds in the UK construction industry (NAO, 2001).

ACCELERATING CHANGE (The SFC Report of 2002)

The first act of the then minister of construction, Brian Wilson MP were to announce the arrangement for the SFC and consequently the elongation of the Rethinking Construction programme for another two years which led to the publication of Accelerating Change in the year 2002 (SFC, 2002). In the ministers’ foreword for the publication, he was more impressed with the reports emphasis on creating a sustainable, customer focussed industry (SFC, 2002). He noted the best in the industry, with particular references to the Rethinking Construction demonstration projects, which showed that Rethinking Construction principles hold good in practice and deliver real tangible returns for clients, consultants, contractors, suppliers, and communities (SFC, 2002).

The minister acknowledge that clients of the UK construction industry all want projects that exemplify superior whole life value and performance, excellent design and functionality, that are devoid of defect, delivered within budget and within the stipulated time (SFC, 2002). It was seen that the report did not come with something alien to the industry but it rather builds on and reaffirm the rethinking construction principles (SFC, 2002). The report presents better ways to tackle the hurdle to progress and identify ways to accelerate the rate of change (SFC, 2002).

The chairman of the report Sir John Egan also emphasize his wish for the extinction of profligate and erratic process of lowest cost tendering as the main procurement route with its replacement with one where clients procurement is based on value for money against world class benchmarks and projects delivery by integrated teams of experts involved in continuous improvement in customer satisfaction, productivity, safety and value for money (SFC, 2002).

Bruntland (1987) defines “sustainability as development that meets the needs of the present without compromising the ability of future generations to meet their own needs“. Sir Egan further stressed that the inability of the rethinking construction report to fully explore sustainability as a core issue was deliberate (SFC, 2002). He noted that concept of pre-planning must come before planning for sustainability and that the ability of pre-planning a project through from start to finish is a pre-requisite to the design in sustainability (SFC, 2002).

“Our vision is for the UK construction industry to realise maximum value for all clients, end users and stakeholders and exceed their expectations through the consistent delivery of world class products and services” (SFC, 2002).

The Forum reckons that for change to be accelerated, three key drivers were identified to secure a culture of continuous improvement namely: (1) the need for client leadership; (2) the need for integrated teams; and (3) the need to address ‘people issues’, especially health and safety (SFC, 2002). However, integration is the key theme of accelerating change (SFC, 2002). All the following were accentuated by the forum as discussed below.

Accelerating Client Leadership

The report indicates that most construction clients in the UK construction industry have access to independent, expert advice for meeting their business or project needs. For clients to receive better solutions in meeting their needs, advices covering such as a range of procurement and management options, including environmental performance, operating and whole life costs are vital. Irrespective of the procurement option, the achievement of maximum integration of the team at the most favourable time should be considered as indispensable in order to make the impeccably explore all available expertise, and central to the delivery of best whole life performance and maximising client value from construction. The report notes that the construction clients should make use of integrated teams and long term supply chains and keenly participate in their creation. The report affirms that to ensure the adequacy, consistency and independence of the service, clients can expect a list of basic competencies and a code of conduct should be made available. The construction industry has various codes of practice and codes of conduct that can assist in bringing about output in this regard.

Accelerating Integrated Teams

A study to be coordinated by the Specialist Engineering Contractors’ Group in consultation with the industry and Government was recommended by the forum. This should be carried out to examine the impact of insolvency law and practice on construction supply chains and make recommendations for change by July 2003. The proposals are designed to provide the trust necessary to reinforce collaborative working. The report emphasize that the UK construction industry must espouse supply chain management techniques presently in use in the manufacturing industry to increase productivity, reduce time, increase cash-flow efficiency and thus minimise risk.

Accelerating Culture Change in ‘People Issues’

It was noted that the construction industry engages 1.5 million people. The report reckons that for the UK construction industry to flourish, it needs excellent quality staff with skill, integrity, reliability and safety too carry out their defined roles. The report also notes that one of the challenges facing the UK construction industry is attracting able personnel and training and retaining them. It was also seen that the employment of wide range of people is imperative over the next five years with skills in design, engineering and all construction crafts with figures placed at around 370,000.

Moreover, due to the besmirched public image of the industry attracting brightest people to the industry is seen to be harder since they do not see the activity in the construction industry to be fulfilling and rewarding. Consequently, the forum identified five areas for particular attention namely: (1) Health and safety; (2) Pay and conditions; (3) Recruitment; (4) Training and competence; and (5) Image.

Cross-Cutting Issues

While the report notes client leadership, integrated teams and tackling ‘people issues’ as drivers for change, the report further notes several other issues that can act as enabling vessels or impediments to change (SFC, 2002). Cross-cutting issues such as

(1) Design Quality:

For a successful realisation of any construction project the investment in high quality design by an integrated team is considered vital. By the integration of design and construction at the front end of a project, majority of value can easily be created. Safety, reduction in defects and lower operating cost of a structure can be realised through integrated, high quality design;

(2) Information Technology (IT) and the Internet:

The introductions of IT and electronic business (e-business), as enablers into the construction sector have brought about a lucid transformation of many operations in the construction sector with greater propensity for more. Its benefits are significant for designers, constructors and building operators. It tends not to be that easier in deriving maximum benefits from its introduction. Through the wider use of the internet and electronic procurement (e-procurement) greater potential exists for the reduction of infrastructure cost. The extensive adoption of e-business and virtual prototyping involve the construction industry transforming its traditional methods of working and its business relationships. The most vital impediments to this transformation include organisational and cultural inertia, scale, awareness of the potential and knowledge of the benefits, skills, perceptions of cost and risk, legal issues and standards. However, considerable potential benefits still abounds such as efficiencies and skills development from knowledge management, economy and speed of construction, improved business relationships, product and process improvement and technology and entrepreneurship;

(3) Research and Development (R&D) and Innovation:

Investment in R&D is essential to innovation and continuous improvement. It provides value to clients and improves profitability;

(4) Sustainability:

Sustainability can be considered as a driver for change. Its embracement in the construction industry can lead to a safer and less lavish sector; and

(5) Planning System: 

A government reform in the planning system is well supported by the report. It considers a fair, transparent, timely and consistent planning system will help to eliminate waste promote responsible development.

The forum reckons that if all these cross-cutting issues are properly managed and developed, they offer considerable opportunity of impacting on the pace of change (SFC, 2002).

Charter Handbook (Confederation of Construction Client)

Charter handbook was published by the construction clients’ forum. The charter handbook sets out the obligations that define a best practice client (Jones and Saad, 2003). It emphasizes the leadership role which the construction client needs to play for a rapid radical change in the UK construction industry (Jones and Saad, 2003). The handbook requires charter client to be at the front end of the drive for continuous improvement of cultural relationships throughout the supply chain with performance measurement used to provide proof of improvement (Cain, 2003).

According to Cain (2003) the obligations of the charter client was listed by the handbook as follows: (1) yearly review and amendment as necessary their cultural change programme based on what has been experienced; (2) measure their respective performance in achieving their cultural change programme; (3) prepare a cultural change programme with targets for its achievements; and (4) monitor the effects of implementing their cultural change programme using key performance indicator (KPI) that suites the project.

Jones and Saad (2003) note that it also requires the charter client to engage procurement processes that delivers the following improvements namely: (1) considerable reductions in whole-life costs; (2) significant improvements in functional efficiency; (3) a quality environment for end users; (4) reduced construction time; (5) improved predictability on time and budget; (5) reduction in defects; and (6) elimination of inefficiency and waste.

Moreover, the handbook charged the construction client to consistently procure through integrated teams preferably in long term relationship (Jones and Saad, 2003). The handbook also emphasizes the importance of supply change management (Cain, 2003).

Lastly, the handbook made it clear that consultants must be an integral part of both UK construction industry and the integrated supply chain (Cain, 2003).

Movement for Innovation (M4i)

In November 1998, the M4i came into being to implement, across the whole of the industry, the recommendations contained in the rethinking construction report (Construction Excellence, 2008b). The report came up with the proposition for the creation of a ‘movement for change’ which would be made up of group of dynamic people inspired by the need for change (Construction Excellence, 2008b). Since the start of year 2004, it has been a part of the construction excellence (Construction Excellence, 2008b).

Radical improvement in construction in value for money, profitability, reliability and respect for people, through demonstration of best practices and innovation was the main aims of the movement (Construction Excellence, 2008b).

The report notes that benchmarking against M4i demonstration projects can considerably leads to excellent output or result (Construction Excellence, 2008b). The M4i demonstration projects have shown real benefits of best practice measures and innovations with over 180 demonstration projects being submitted by construction clients and contractors (Construction Excellence, 2008b).

The report seeks to facilitate performance efficiencies to achieve sustained annual improvements of (1) 10% reduction in cost and construction time; (2) 20% reduction in defects and accidents; (3) 10% increase in productivity and profitability; and (4) 20% increase in predictability of project performance (Construction Excellence, 2008). All these are expected to be achieved through the following avenues namely: (1) product development; (2) project implementation; (3) partnering the supply chain; and (4) production of components (Construction Excellence, 2008b). The movement is involved in a range of services which include namely: (1) clusters; (2) working groups; (3) M4i board; (4) M4i teams; and (5) M4i clubs (Construction Excellence, 2008b).

CONCLUSION

There is no system or perhaps industry without its teething problems. Problems are encountered to be experienced and solved. Identifying areas of improvement is the first step in moving in the right direction. UK government and the industry have shown great concerns which have been yielding fruit even if it has not been of great measures.

Subsequent chapters have deliberated on the besmirching situation of the industry which needs to be repa