“Never waste a good crisis” Don Ward Chief Executive Constructing Excellence
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“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
0
50
100
150
200
250
300
350
Client S
atis
fact
ion -
Product
Client S
atis
fact
ion -
Servi
ce
Defec
ts
Enviro
nmen
tal I
mpac
t Pro
duct
Enviro
nmen
tal I
mpac
t Pro
cess
Safet
y *
Safet
y - A
ll Com
panie
s *
Safet
y - C
ompan
ies
T/O >
£10
m *
Predic
tabili
ty C
ost -
Desig
n
Predic
tabili
ty C
ost -
Constru
ctio
n
Predic
tabili
ty T
ime
- Des
ign
Predic
tabili
ty T
ime
- Const
ruct
ion
Profit
abili
ty **
Product
ivity
Constru
ctio
n Cost
Constru
ctio
n Tim
e
Emplo
yee
Satis
fact
ion
Staff
Turnove
r
Qualifi
catio
ns & S
kills
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
atis
fact
ion -
Product
Client S
atis
fact
ion -
Servi
ce
Defec
ts
Enviro
nmen
tal I
mpac
t Pro
duct
Enviro
nmen
tal I
mpac
t Pro
cess
Safet
y *
Safet
y - A
ll Com
panie
s *
Safet
y - C
ompan
ies
T/O >
£10
m *
Predic
tabili
ty C
ost -
Desig
n
Predic
tabili
ty C
ost -
Constru
ctio
n
Predic
tabili
ty T
ime
- Des
ign
Predic
tabili
ty T
ime
- Const
ruct
ion
Profit
abili
ty **
Product
ivity
Constru
ctio
n Cost
Constru
ctio
n Tim
e
Emplo
yee
Satis
fact
ion
Staff
Turnove
r
Qualifi
catio
ns & S
kills
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
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