Construction 2025 appears to be a fading memory, but the industry’s challenges are in ever-sharper focus. It’s time for the Strategic Forum for Construction to lead from the front again, says the Specialist Engineering Contractors’ Group’s Rudi Klein FCIOB.
Just over two years ago, the industrial strategy Construction 2025 was launched as a product of a partnership between industry and government – in truth, I feel, more government than industry. Another new, transformational dawn was promised. By 2025, costs would have reduced by 33% and completion times would be 50% faster. Carbon emissions would have dropped by 50%, and exports would be up by 50%.
Other things were promised, too: payment issues, for example, would be a thing of the past.
There was frenetic activity. The Strategic Forum for Construction – comprising the industry’s umbrella bodies – was sucked into a milieu of action plans, implementation programmes and meetings of one sort or another.
But what do we have to show for all this? Putting it politely, zilch! Oh, I’ve forgotten the Supply Chain Payment Charter – I’ll come back to this non-starter a little later.
"By my guesstimate we are wasting £1 for every pound we spend on construction. The key performance indicators that were published by Construction Excellence over the years from 2000 tell us there has been no discernible improvement in construction times or costs."
Rudi Klein
Worse is to come. In July the new government abolished the Construction Leadership Council (CLC) and reconstituted a slimmed-down version with 12 members. A CLC member will chair each of five workstreams: skills; supply chain and business models; innovation; sustainability; and trade. But what will these workstreams deliver? We have no idea.
In the meantime, the post of chief construction adviser, currently held by Peter Hansford, will disappear in November. The Construction 2025 strategy seems to have vanished in the heat haze of July.
Construction bodies are up in arms over the unrepresentative composition of the new CLC. At the same time, speculation is rife about the impact of Build UK, the new body representing main contractors and building subcontractors.
I call all this consternation “fiddling while Rome burns”. Because by my guesstimate we are wasting £1 for every pound we spend on construction. The key performance indicators that were published by Construction Excellence over the years from 2000 tell us there has been no discernible improvement in construction times or costs.
In London, construction costs are edging close to those of New York – the world’s most expensive city to build in – even though labour costs in New York are 70% higher. Our supply chains are dysfunctional. We waste £2bn a year on rework at a time when there are skills shortages. Our annual transactional costs arising from a disaggregated delivery process must run into millions of pounds. Add in the costs of disputes and delays, and the billions start to rack up.
One could carry on. How about factoring in the costs of late payment, lengthy payments and non-payment, and the consequent insolvencies?
In relation to all these issues, there have been countless reports and initiatives over the years. On payment alone, I calculate there have been about 20 initiatives since 2007.
Yet, at the beginning of this year, the National Audit Office (NAO) condemned government departments for their lack of progress in ensuring prompt payment. Four departments were found to be owing a total of £18m in interest in 2013/14 because of late payment.
Guess who was one of the them? The Department for Business, Innovation and Skills. It was this department that promoted the toothless and useless Supply Chain Payment Charter – I wonder why?
The most effective initiative on dealing with poor payment practices has been Project Bank Accounts. The NAO recommended their use should be extended. Highways England uses them on all its projects and, as a result, payments to Tier 3 contractors are made within 19 days of the main contract assessment dates.
Now is the time to take stock. The Strategic Forum for Construction, which brings together all the industry’s representative bodies, must reassert itself. When Sir John Egan chaired it at the turn of the century, it led from the front. The solutions he proposed are equally valid today. Radical transformation of our procurement and delivery systems is long overdue.
Professor Rudi Klein FCIOB is chief executive of the Specialist Engineering Contractors’ Group and president of the NEC Users’ Group
