Don Ward: Never Waste a Good Crisis

“Never waste a good crisis”

Don WardChief ExecutiveConstructing Excellence

“Never waste a good crisis”

• The industry has improved over the last decade

• 4 blockers have slowed the pace of change

• Recession may provide the impetus needed for change

• Collaborative working is even more important for this next era

Our purpose is to

Improve industry performance

The outcome will be

A demonstrably better built environment

Industry reform can be charted by a number of key reports...

1994.........................................................2009

... and organisations!

1994 1998 2001 2003 2005 2006 2010

DBF

Egan inspired the Construction Industry Key Performance Indicators

• Client satisfaction– Product – Service

• Defects

• Predictability– Cost – Time

• Profitability

• Productivity

• Safety

• Construction Cost

• Construction Time

58%

63% 63%65%

71%74%

77%79%

75%77%

84%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Client satisfaction with the service (and the product) they receive is up

Scoring 8/10 or better

The industry has improved its safety performance...

...and profitability

50% 46% 48% 52% 50% 48% 45% 46% 49% 48%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

But cost (and time) predictability remains a problem

% On or under cost

Egan called for demonstration projects to prove the case• Implementing the principles of Rethinking Construction

– 525 Projects since 1998, incl. 203 housing sector

• Value £13bn– 430 completed, 95 live– Involvement of 1176 organisations UK-wide– 176 case histories– 63 associated reports and publications

Innovators

Early Adopters

Early Majority

Late Majority

Demonstration projects have out-performed the rest of the industry

7700

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2006 pan-industry performance = 100

CE 2006 Industry 2006 = 100

Demonstration projects have out-performed the rest of the industry

7700

0

50

100

150

200

250

300

350

Client S

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2006 pan-industry performance = 100

CE 2006 Industry 2006 = 100

Overall, the industry has met 2 of Egan’s targets and made progress on 2 others. Demonstrations have done much better

The KPIs and demonstrations plus a regional network of 12 partners and over 40 best practice Clubs give us our evidence

In October we published a review of progress - “Never waste a good crisis”

• Improvement has been patchy....

• “Less than I had hoped, more than I had expected”

• “A little less conversation, a LOT more action please”

We remain committed to the Construction Commitments and are working with the ODA and OGC to measure their impact, as well as assessing our members

Procurement and integration

Commitment to people

Client leadership

Design quality

Sustainability

Health and safety

Collaborative working has been the foundation of industry improvement

There are three key principles which define collaborative working

LeadershipVision

Processmeasures

Peopleissues

There are 6 critical success factors for collaborative working• Early involvement• Selection by value• Common processes and tools• Measurement of performance } continuous• Long-term relationships } improvement• Modern commercial arrangements

33

The recession challenged commitment to collaborative working

- 28% - 57% + 20% + 36% - 36% - 41%

The current industry recession is a major threat to the sector

40000

45000

50000

55000

60000

65000

70000

75000

80000

85000

90000

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

Construction output £m in 2000 prices

Source: CSN (ONS, NISRA, Experian)

This ‘economic climate change’ means companies face a stark choice

Collaborative Working Champions ‘Survival Guide’

A not-so-recent challenge

A recent challenge

“All this stuff is OK but what difference does it make when clients are only buying on price?”

Which do you REALLY want?

Lowest lump sum tender price

OR

Lowest actual/outturn cost

OR

Best whole life value for the client and end users

Tender priceValue added/benefit for client

- people, supplies

Profit

Other cost/waste

Claims = extra cost + profit

Lowest price lump sum tendering incentivises conflict

‘Right’price

Overheads

Tenderprice

Manage

Agreed

‘Targetprice’

Agreed

Reduce

Increase

Claims = extra cost + profit

Value added/

benefit for client

Profit

Other cost - waste

A fair ‘target price’ incentivises collaboration

Overheads

Risk

Four ‘blockers’ have slowed the pace of change• Business and economic models• Capability• Delivery model• Industry structure

We have identified 8 “big themes for future action”• Understand [value in] the built environment• Focus much more on the [low carbon]

environment• Find a cohesive voice for our industry• Adopt new business models that promote

change• Develop a new generation of leaders• Integrate education and training[/development]• Procure for value• Suppliers [all supply side] to take the lead

Above all, clients want value

Value =

Benefit___________

Cost

“Is our sector fit-for-purpose for a future low carbon economy?”

DEVELOPMANAGE LIFE

CYCLE

CONSULT

CONSTRUCT

DESIGN

Of the whole life-cycle of construction, clients only get value from the use of the facility

Design£100K

Construction

The value of customer outcomes far outweighs the project costs

“£200M”

Business Costs

“£5M”“£1M”

Operation and Maintenance

Process Push

User Pull

Outcomes“£250-£2000M”?

Construction

The education customer needsbetter educational outcomes

“30”

Business Costs

“3”1

Operation and Maintenance

Process Push

User Pull

Education outcomesBuilding Schools

for the Future: • “enhance teaching

+ learning• helps to raise standards• address workforce issue”

Design 0.1

Source: Royal Academy of Engineering

St Francis of Assisi Academy, Liverpool, is a good example of value in practice

“The excellent GCSE results and the fact that our students finished top of the national league tables for progress can rightly be attributed to the impact the building had on their studies”

Green values help academy top new league table“A school which offers its pupils a green-focused education has won plaudits for having the best teaching standards in the country….”

The Independent, 11 Jan 2007

Whitecross High School is another good example“The best... secondary school in the country (educational efficiency)” [BRE]

“[Taking] the number of students who have achieved 5 or more grades at A* - C including English and Maths, this year we achieved 51% compared to last [year’s] 35%.... This... is a massive increase and obviously this is the year.. that .. received all of its .. teaching in the new building.”

This compares to a national increase of 2.5%

“Never waste a good crisis”

• The industry has improved over the last decade

• 4 blockers have slowed the pace of change

• Recession may provide the impetus needed for change

• Collaborative working is even more important for this next era

For further informationwww.constructingexcellence.org.uk

or contact don.ward@constructingexcellence.org.uk