Construction management interventions towards sustainable constructing organisations

1. Construction management interventions towards sustainable constructing organisations Bruce Morton 5th Construction Management Summit Day 1 – 28 June 2016

2. Contents • Context • Sustainability concept • Stakeholders • Construction (Project) Management • Is sustainability an issue • Top risks to industry • Construction Management principles • Interventions to ensure sustainability • Contractor • Consultant • Client • Government • Closing Remarks

3. Context • Sustainable business • Management of the triple bottom line - a process by which companies manage their financial, social and environmental risks, obligations and opportunities • Profits • People • Planet • Stakeholders in this process of creating a sustainable construction industry • Clients • Professional team (Consultants) • Contractors • Society at large – the end benefactors • Construction (Project) Management • The overall planning, coordination, and control of a project from beginning to completion and is aimed at meeting a client's requirement in order to produce a functionally and financially viable project “The technique of losing your shirt under perfect control” Goal: Improve the society in which we live to the benefit of all

4. Context ….continued • Is sustainability an issue ? • Profits • 54% Y-Y decline in net profits in civil construction in 2016 • People • Environment CO2 Emissions: Fossil Fuel and cement

5. Top Industry Risks • South African JSE Listed Construction Companies • Weighted average of largest industry risks currently faced

6. Industry Risks • Macro Economic • Public Sector Infrastructure Estimates • Nominal Y-Y negative outlook • Industrial Action and Community Protests • Service delivery issues

7. Industry Risks….continued • Skills Shortage • Ageing highly skilled workforce within the construction industry • 6 times below average in comparable countries • Funding • Significant increase in defaulting payments throughout industry from all client groups • Distribution Private/Government = 51/49

8. Construction Management • Classic PMBOK management system

9. Construction Management … continued • Ideal Practice • Ensures sufficient planning of the works has been undertaken to predict a positive outcome

10. Construction Management … continued • Actual Practice • Reasons for this lack of sufficient planning • Limited funding and timeframe • Inaccurate information basis • Lack of perceived value of comprehensive planning– “necessity to see dust flying” • Not limited to construction management, but all management processes within the full project deliver lifecycle Management starts at the onset of the project and not after tendering for the actual services rendered

11. Construction Management Interventions: Contractor • Work Selection • Select Clients and Consultants • Need clear understanding of client trends on: • Stability and capability • Ability to pay • Contractual history • It is still a game of relationships no matter the selection process • Tendering • Consistent process with equal priority provided to: • Costing • Programming • Risk quantification • Commercial • No use planning after the tender has been awarded • 2 man-months spent to compute 100,000 man month project ? “Tender Submission: A poker game in which the losing hand wins Tender Sum: A wild guess carried out to 2 decimal places Successful Tenderer: A contractor who is wondering what he left out”

12. Construction Management Interventions: Contractor ….continued • Project Execution • Risks are real • Need to be identified, quantified and thereafter mitigate, transfer or cost • The plan is everything • Accurate programming and production and cost monitoring is critical • The only way to ensure profitability is to complete within cost and time frame • Programming should be undertaken weekly and integrated with cost management • Procurement Management • Vital in ensuring best services • Price is not the only factor • Consistency of delivery and product is as important “We will push for a R5,000 saving in materials, but happily let a R200,000/day production team wait for supply”

13. Construction Management Interventions: Contractor ….continued • Project Execution • Sweat assets • Equipment utilisation needs to improve • Proper planning • Multi-usage • Maintenance and age of equipment - need to understand the relationship between age of equipment (hours), productivity and maintenance costs

14. Construction Management Interventions: Contractor ….continued • Project Execution • People management: Project • Multi-skilled workforce • Clear and transparent assessment of performance • Ownership/Profit Sharing – how can you motivate people to improve their performance when they are not committed into the long term future of the organisation ? • Separated operating model • Office based/site team • Lack of cohesion • Late reaction • In worst cases : working to different priorities • Provide dedicated planners and commercial personnel on site • Community Relations • Only the site management can solve the communities concerns • Be transparent and upfront in work allocations: don’t make unachievable promises • Beware of the legitimate concerns being manipulated by an few to their benefit “The site is where the work is undertaken and the value generated supported by the corporate and management teams”

15. Construction Management Interventions: Contractor ….continued • Health and Safety • It is not a requirement but a pre-requisite • A healthy and safe work environment is critical to your people and the public that we impact • Our industry goal is improve society for all • Two key aspects that need implementation: • Near Miss reporting and Visible Felt Leadership • Environment • Less impact on environment is financially viable and is our responsibility • Fuel efficient equipment linked with higher production rates reduce CO2 emissions and save on costs Green buildings concept well established • Need to expand to take account of other civil disciplines • Reuse of construction materials • Use of manufacturing by-products

16. Construction Management Interventions: Consultant • Project Delivery • Method specification becoming prevalent over product specification • Regression and not a solution to skills shortage in all areas (Contractor, Consultant & Client) • Commercial Complexity • Consistency is required and standardisation whether through FIDIC, NEC, GCC, JBCC… • Veer clear of bespoke commercial terms unless adequately assessed and proven in industry • Limit Separation of Roles • The best project mangers are generally those involved throughout the process and not merely execution managers during construction stage • Design “sweat shops” might be cost effective during design stage, but could result in significant cost overruns, claims and ultimately non-optimal delivery 5% saving in design equates to less than 0.5% of total project cost

17. Construction Management Interventions: Client • Project Delivery • Traditional design and construction process inherently flawed in ensuring most efficient outcome for infrastructure provision • Look at other methods successfully applied internationally • Alliance • Design and Build • Turnkey Consultant Design Alternatives 10% of cost Construction RFP 85% of cost Client 5% of cost Consultancy RFP

18. Construction Management Interventions: Government and Client • Macroeconomic - It is a Long Game • Infrastructure is intergenerational by nature • Programs need to provide long term view of consistent work to ensure industry can tailor capacity and skills to match • Tendering and project funding • Project funding needs to be secured prior to commitment • Ensure that tenders process is not compromised though cancelling of tenders after submissions • Payment should be prompt to avoid unnecessary claims and additional costs • Leadership and structure • The best performing SOEs and clients are those who have consistent leadership, management and processes in place • Focus locally for services supply • Give preference to local consultants and contractors • Ensure local funding agencies funded by government award projects to local companies that contribute to the tax basis

19. Construction Management Interventions: All stakeholders • Skills development and transformation • It is in all stakeholders interests to ensure that skills are developed across the industry • Contractor • Embrace continuous professional development • Develop partners and not merely groups to meet tender requirements • Consultant • Re-structure the project life cycle to ensure that each of the phases is geared towards SMME development • Ensure project supervision team is experience and skilled • An obstructive or inexperienced professional team can put huge pressure on even the most experienced contractors, and hence on the SMME • Allow provisional costs for the management of SMME • Only way to ensure that sufficient time is spent developing SMME • Client and Government • Drive industry change not only through employment requirements and ownership • Require registration and qualified staff throughout project team and partners • Create the environment where engineering and construction numbers are increased to international norms

20. Closing Remarks • Sustainability in the industry should take cognisance of financial, social and environmental responsibilities • Contractor: • In the current constrained construction environment construction managers need to focus even more on project execution and performance to ensure that they are sustainable • Integrated planning and cost management is critical • Sweat your assets • Look after your people, society at large and the environment • Consultant • Limit role separation • Avoid contractual complexity • Client • Investigate possible alternative delivery models • Combined professional team working to one goal • Government • Leadership and management consistency is critical to the industry’s long term sustainability

21. Thank You References: SAFCEC quarterly reports Stats SA