Construction 2025Industrial Strategy: Government and Industry in partnership
What you will be covering today; • Construction industry reports • What is the Construction 2025 report? • Its vision, ambitions and joint commitments • Industry S.W.O.T analysis • UK Construction Industry today • Reports strategic priorities • The drivers for change • Industry reaction to the report
Construction industry reports; • The construction industry is viewed as wasteful, does not deliver good value, adversarial, fragmented, lacks innovations etc. • A series of reports have considered how to tackle these issues, including: • 1934. Reaching for the skies. Alfred Bossom. • 1944. Simon Report, Placing and Management of Building Contracts. • 1962. Emmerson Report • 1964. Banwell Report, • 1967. Potts Report • 1994. The Latham Report, Constructing the Team. • 1998. The Egan Report, Rethinking Construction. • 2013. Construction 2025.
Industry Reports; The past twenty years has seen the publication of many significant reports relevant to the built environment. Such as .... ? Latham Report 1994 Egan Report 1998 These reports, and many many more, have challenged the industry to throw off their adversarial practices and reinvent itself in order to become world class.
Industry Reports; These studies have highlighted the inefficienciesof traditional methods of procuring and managing major projects. In particular awarding contracts solely on the basis of lowest price, only to see the price increase through variations and projects often being completed late. Indeed this was often played out, submit a low bid initially and make a profit on variations and claims.
Industry Reports; Emmerson Report 1962 aimed at improving the way the industry was organised and the way construction work was procured. The report pointed to shortcomings and fragmentation in the industry and the professions - engineer, architect, builder, and so on. The Emmerson Report criticised a lack of cohesion between the parties to a construction contract and proposed 'the possibility of adopting a common form of contract for both civil and building engineering work'. It also suggested the standardisation of subcontracts.
Industry Reports; Banwell Report 1964 The report focussed on team relationships, construction contracts and other construction documentation (notably bills of quantities). It looked in detail at the traditional separation between design and construction and criticised the industry for having entrenched positions and operating with a lack of speed and purpose. The report questioned why there was one form of contract for building, a different form for civil engineering and still another for government work. It recommended instead the eventual creation of a common form of contract for building and civil engineering.
Industry Reports; • Latham Report ‘Constructing the Team’ 1994 • Recommendations • the industry should move away from its adversarial structure, • adopting a more integrated approach with greater partnering and teamwork. • The New Engineering Contract (NEC) should be adopted more widely as a less adversarial form of contract. • There should be greater standardisation and better integration of contract documents. • Risk allocation to the party best able to manage, estimate and carry it. • The avoidance of conflict, speedy dispute resolution and adjudication.
Industry Reports; • Latham Report ‘Constructing the Team’ 1994 • Some of the recommendations of the Latham Report were implemented by the Housing Grants Construction and Regeneration Act (the Construction Act) which amongst other things, set out fair payment practices and regulated ‘set off’. In addition, the Scheme for Construction Contracts, which applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act established the right to adjudication. • Also, there have been significant moves in government procurement to encourage collaborative working and foster partnering, and the government has abandoned GC Works contracts, and in favour of NEC3. … and ICE stopped publishing ICE Conditions of Contract in favour of NEC3
Industry Reports; • Egan Report Rethinking Construction 1998 • In the report, Sir John Egan suggested that ‘the industry as a whole • is under-achieving’, and called for ‘dramatic improvements’. • It proposed: • integrated project processes • decent and safe working conditions • improved management and supervisory skills • replacing competitive tendering with long term relationships • that leading public sector bodies should become best practice clients • The report set very ambitious targets of annual reductions of 10% in construction cost and construction time and a reduction in defects of 20% per year.
Potential; • The National Audit Office in 2001 reported the potential for 30% cost savings through improving these inefficiencies by: • adopting a more collaborative approach • founded on competition • appropriate risk sharing • clear understanding of project requirements • transparency as to costs and profits • appropriate incentives • early involvement of the whole construction team • With the aim of increasing the clients certainty of outcome and value for money! • Note that most of recommendations are related to procurement tasks such as integration of design, construction, operation etc. (integrated supply chain options), and allocation or risks
Industry Reports; • These reports identified the following key issues in order to improve the industry: • Leadership and commitment from clients • Involvement of stakeholders throughout the project • Clearly understood roles and responsibilities • Integrated project team (client/designers/constructors/specialist suppliers/facilities managers/operators) • Integrated procurement process: where design / construction / operation / maintenance are considered as a whole • Design takes into account functionality • Commitment to Health and Safety • Risk management, managed throughout the project • Award of contract on basis of best value for money over whole life of project not lowest tender price • Commitment to continuous improvement
Industry Reports; Remember these key areas identified 20 years ago for improvement, they may sound familiar when we cover the Construction 2025 report !
The Need for Change: • The Construction Industry has made important improvements as a result of the reports especially Latham, Egan and Wolstenholme. • However, these changes have been incremental and less than comprehensive, and the perception of the industry as wasteful and adversarial remains. On the ground, practice continues to be driven by market forces rather than government reports because the industry's culture is so set in the habit of lowest price appointments. • To achieve the vision and meet the ambition of the Construction 2025 there will have to be radical transformational change!
Background to Construction 2025; • “The global construction market is forecast to grow by over 70% by 2025” • Global Construction Perspectives and Oxford Economics July 2013
Where is this growth coming from?; • Worldwide output is to be rocketed by 70% through to 2025 driven by Countries such as • China • India • USA • The fastest growth will be found in the developing countries, China, India, Nigeria, Indonesia • But some developed countries are also predicted to preform well such as UK, USA and Canada due to the rapidly growing population and the need for housing, new infrastructure etc and the willingness of Middle Eastern and Chinese firms to invest
Construction 2025 – Introduction: • With this in mind the latest of industry reports by the Government, Construction 2025 report published July 2013, wishes to take full advantage of this growth. • Over the past 6 months the government has been working the sector to develop a long term vision, a joint strategy between industry and government to put Britain at the forefront of global construction. • The government believes the British construction sector has world class expertise and is leading the way in sustainable construction solutions. • Therefore there are considerable growth opportunities for the UK Construction sector to compete in the global market to help boost the UK economic recovery.
Construction 2025 Vision: • Aspirations for UK Construction Industry by 2025: • People: attracts and retains a diverse group of multi-talented people, operating under considerably safer and healthier conditions, a sector of choice for young people • Smart: leads the world in research and innovation, fully embracing the transition to a digital economy and the rise of smart construction • Sustainable: become dramatically more sustainable through its efficient approach to delivering low carbon assets more quickly and at a lower cost • Growth: drives and sustains growth across the entire economy by designing, manufacturing, building and maintaining assets which deliver genuine whole life value for customers in expanding markets both at home and abroad • Leadership: has clear leadership from a Construction Leadership Council that reflects a strong and enduring partnership between industry and Government
Construction 2025 Vision: • In summary the Government and Industry partnership aims to restructure the construction industry to an industry no longer characterised by: • late delivery • cost overruns • commercial friction • late payment, accidents • unfavourable workplaces • a workforce unrepresentative of society • or as an industry slow to embrace change
Construction 2025 Commitments; • The joint commitments from Government and Industry to achieve • the vision: • Build the UKs competitive advantage in smart construction and digital design • Create jobs and growth from driving carbon out of construction • Identify global trade opportunities • Improve the image of the industry • Ensure capability and capacity issues are addressed • Develop and refine the pipework of future work load • Drive procurement efficiencies • Address access to finance and payment practices • Bring forward academic and research developments • Provide Leadership (through the new Construction Leadership Council )to lead the transformation of the industry
UK Construction Sector Strengths; • Key sector to the UK economy - 3 million jobs are based in construction, 10% of total UK’s employment • The sector builds and maintains workplaces to enable businesses to flourish • Large supply chain and construction spend tends to stay within UK supply chain, accounting for around £124 billion • World class design skills
UK Construction Sector Weaknesses; • High reliance on sub-contracting • Lack of integration often leads to fracture between design and construction management and a fracture between the management of construction and its execution leading to lost opportunities to innovate • Low levels of innovation investment in R&D • lack of collaboration and limited knowledge sharing: learning points from projects are often team-based and lost when the team breaks up and project ends • High construction costs in comparison to foreign competitors
UK Construction Sector Opportunities; • Large growth opportunities in emerging markets, both in products and high value services • substantial opportunities both in domestic and foreign markets due to environmental requirements and greater societal demand for greener products • BIM implementation both domestically and abroad which could improve sector productivity and lower costs due to improved information flow and greater collaboration. • Cost reduction, through greater efficiency and greater technology and information sharing such as Building Information Modelling (BIM).
UK Construction Sector Threats; • Access to finance and late payment • Low training among self-employed and skills shortages among trade and professional occupations inhibiting technology deployment and innovation. • Lack of career attraction due to perceived low image, lack of gender diversity, low pay and job security due to cyclical nature of demand for construction • UK has not yet specialised in construction exports UK remains a net importer of construction products and materials • High degree of fragmentation relative to other sectors and countries which impacts on levels of collaboration, innovation and ability to access foreign markets
UK Construction Sector Today; • Construction contributes £90 billion gross value added to the UK economy (nearly 7% of the total) • comprises over 280,000 businesses • accounts for 3 million jobs, equivalent to about 10% of total UK employment • It creates, builds, manufactures and maintains the workplaces to enable our businesses to flourish, the economic infrastructure which underpins how the economy functions, and our schools, hospitals, and homes. • But construction has been badly hit by the economic downturn. • Key markets for construction have declined – output in the private housing market has fallen by 40% and private commercial building decreased by over 30% since 2007 – reflecting the general weakness in the economy over this period.
UK Construction Sector Today; • The UK Government has introduced measures to try and support the sector: • Planning reforms: • to simplify the process, reducing national policy from 1,300 pages to 50 with the presumption in favour of sustainable development. • Introduced new permitted development rights • Making planning appeals faster, getting stalled sites moving, allowing renegotiation of affordable housing requirements • Infrastructure: • The largest investment in railways since Victorian times • Investment in Roads, Schools, Housing • Crossrail • Offshore wind farms • Housing: • Provide finance to stimulate development • Surplus public land released for development • Help to Buy scheme
Construction 2025 Priorities; For UK construction to be the heart of future low carbon, resource efficient, modern and globally competitive economy Construction 2025 has identified the need to address three strategic: Smart construction and digital design Low carbon and sustainable construction Improved trade performance.
Construction 2025 Priorities - Smart; • We are moving quickly towards a digital economy, we must ensure UK construction is at the vanguard • The transition to a digital economy will be dramatic, with global data traffic set to significantly rise • These developments have already made a huge impact in other industries. In the coming years they will drive a step change in how we build and how our built environment operates. • Crucial to this is the emergence of new technologies in sensors and data management that will become embedded in our assets, enabling performance to be constantly monitored • Adopting these innovative technologies will provide asset owners with a full understanding of the performance of their assets, both during construction and throughout their design life. This will result in smarter designs, requiring less material, reducing carbon and needing less labour for construction, whilst still ensuring durability
Construction 2025 Vision - Smart; • The UK has world class science and research bases that support the development of innovative solutions • These solutions need to be exploited • Investment is needed • For example Building Information Management (BIM) • The industry must embrace technological progress • The government has mandated BIM for all centrally procured Government projects from 2016, therefore the industry must meet this challenge.
Construction 2025 Priorities - Sustainable; • the transition to a low carbon economy presents the UK construction industry with terrific opportunities for growth. • The global green and sustainable building industry is forecast as a result of increasing low carbon regulatory requirements and greater social demand for greener products. • The biggest area of potential opportunity is our existing housing stock which accounts for over half of the greenhouse gas emissions from the built environment. • The Government’s flagship policy in this area is the Green Deal, which helps homes and businesses to pay for some of the cost of energy efficiency improvements through savings on their fuel bills.
Construction 2025 Priorities – Growth; • growth opportunities in emerging markets. • UK construction industry is more fragmented than in competing countries • There is one UK firm in the top ten European contractors. • UK-based businesses have a global reputation for architecture, design and engineering, competitive whole life costs and sustainable construction solutions. • manufacturers are renowned for producing some of the most innovative products in the world • However, in construction products the exports vastly outweighed by import • One reason for this is that very few of our prime companies lead on overseas projects. From a lead role, there would be considerable potential to bring in UK-based supply chains, thereby multiplying the potential dividend to the UK
Construction 2025 Drivers of Change: To deliver these priorities fundamental changes are required in the way the construction industry operates and Construction 2025 has identified the following drivers of change: Improved image of the industry Increased capability in the workforce. A clear view of future work opportunities Improvement in client capability and procurement A strong and resilient supply chain Effective research and innovation.
Construction 2025 Change - Image; • Must attract the right people to realise change • Convey excitement of career opportunities, potential to address climate change concerns • Address future skills and capability • Improve the image, as currently suffers from a bad reputation, ieTrustMark • Need to engage young people at an early stage • H&S has improved significantly, but need to build on the large project success rates so that zero harm becomes the norm • The same focus on health as well as safety ie asbestos, dust etc. As emerging countries standards rise UK will become more competitive • Need a diverse workforce that represents society as a whole
Construction 2025 Drivers - Capability: • if the construction industry is to fully embrace the digital economy, it will need to mobilise the country’s brightest talent in order to effectively apply technology. • Training and development activity in the sector is low relative to other sectors, which is likely to be driven by the high number of self employed who often face an ‘earn or learn’ dilemma. • take advantage of the visibility of the work ahead to identify the skills and capabilities that are required across the UK and when and where they will be needed contractors will be able to plan their workforce requirements in advance and meet the needs
Construction 2025 Drivers – Supply Chain: • Construction has been hard hit by the economic downturn. • the impact of this is being particularly felt among the many small businesses that operate across the sector • “typical” large building project (in the £20–£25 million range) the main contractor may be directly managing around 70 sub-contracts of which a large proportion are small – £50,000 or less • number of crucial factors which determine successful delivery of a construction project. These include: equitable financial arrangements and certainty of payment; early contractor engagement and continuing involvement of the supply chain in design development; strong relations and collaboration with suppliers; and capability for effective site management
Construction 2025 Drivers – Research: • the UK has a world-class science and research base that supports the development of innovative solutions in a number of priority areas for construction, these solutions need to be exploited • at Swansea University, aiming to turn buildings into mini power stations by developing coatings for steel and glass that can generate, store and then release renewable energy. • Runcorn Bridge uses an innovative cathodic protection system, with remote monitoring, to stop corrosion and simplify future maintenance and inspection. • BIM allows companies to make more intelligent use of data, which enables waste to be stripped out of the construction process
Construction 2025 Drivers – Research: • Offsite construction solutions: Availability of digital information will also enable more effective design for manufacture and assembly, potential to deliver assets with half the waste and 25% less energy in use will make it an ever more attractive option • Other benefits of offsite construction can include greater precision and quality, reduced overall manufacture/assembly time, and safer and cleaner working conditions
Construction 2025 Targets; How will you achieve these targets?
Questions ? • LJMU Mission; “Our mission is to serve and enrich our students, clients and communities by providing opportunities for advancement through education, training, research and the transfer of knowledge” • LJMU Core Values; • Put the students and clients first • Committed to excellence • Respect and trust each other • Work as a team • Lead rather than follow and defend independence of thought • Recognise and celebrate success • Take work not ourselves seriously • DREAM, PLAN, ACHIEVE