Rethinking Construction - Partnership or Competition - Essay Example

Rethinking Construction Partnership or Competition Introduction In 1998, at the behest of John Prescott, then Deputy Prime Minister, John Egan's taskforce produced a report1 outlining a new approach for the construction industry, in which they advocated partnering and long term alliances as the way forward instead of the previous competitive tendering format. The purpose of this report is to evaluate the validity of this conclusion. In preparing this study we have researched the industry reaction to the task force report since 1998 and endeavoured to ascertain, where possible, whether the theory is working in practice. As a result of our research, the conclusion we have reached, with some notable exceptions, is that there was merit in John Regan's task force findings and that, in general, it has improved the performance of the construction industry. However, we have also concluded that in certain areas of the industry in general, and despite the incentives and organizations set up2, the implementation of the proposal is taking longer than had been envisaged. Report The main thrust of the "Rethinking Construction" report was for the partnering approach to form the central focus of construction projects. Such a system has been successfully implemented in many other industries as part of an integrated supply chain procedure. The report went on to suggest that if the construction industry executed the initiatives recommended, there could be anticipated significant annual improvements and savings in a number of key industry areas. These included: - Construction time - Reduction of 10% Complete on time - Increase by 20% Defects - Reduce by 20% Accidents - Reduce by 20% Productivity - Increase by 10% Profitability - Increase by 10% The intention was to show the industry a way forward and help it to revitalize and refocus itself after a period of stagnation and poor productivity and profitability. It was also seen as a foundation stone in the rebuilding of the industry's less than perfect reputation, resulting from its propensity to deliver projects late, over-budget and not to the highest quality. In 1998 the report suggested to the industry guidelines in respect of the timescale for change, warning of the possible repercussions if the need for such change was not taken on board and treated seriously. In an effort to show the way and prove to the industry in general the value that the "Rethinking Construction", the task force called upon the government and construction industry leaders to put together a number of demonstration development projects, which would act as models for evaluation purposes. It asked for 500 millions worth of such projects. In the event, some 6 billion's worth were forthcoming. Positive Results There have been some notable successes where the task force recommendations have been fully implemented. The following, (figure 1) shows how the joint government / industry pilot schemes fared in the year 2001. It can be clearly seen from this table the results on a number of the KPI's3 set down by the task force have exceeded expectations. The most notable of these have been in safety, design time predictability and defects, which the original report had suggested should be targeted for 20% per annum improvement. There have also been some notable successes in partnering within the private sector. L.T. Deeprose Ltd, based in Guildford in Surrey, is a case in point. This company has embraced both the spirit and the physical aspect of "Rethinking Construction". The company concentrate on two aspects of the industry, development and contracting. On the development side they have built up working relationships with property advisor and estate agents, contracting Clients, specialized sub-contractors and consultants, including architects. By building a long term relationship with all of these organizations and involving them at all stages of a project, the company is able to meet, and continues to meet, the majority of the benefits that the report suggested would be available to organizations within this industry. Negative Results However, as previously stated the demonstration projects represented 6 billion. Of this figure, over 40% was represented by public sector projects. In reality, the public sector itself has had a lot of experience in terms of the "Rethinking" process since the inception of the PPI4 in a wide range of sectors including health and defence. The total value of projects for the construction industry is 64 billion. It follows therefore that less than 10% was represented within the demonstration projects. Thus it follows that for the four year period from the timing for the research for the task forces original 1998 report and the 2001 results shown above in figure 1, the vast majority of the industry was still either not taking on board the report's recommendation at all, or struggling to introduce the component parts of them within their organisations. Our research discovered that these failings occurred in two key areas. One of the key difficulties is that, unlike manufacturing where the product is assembled in an orderly fashion from component parts, the construction industry in exceeding more diverse and, in addition, much more labour intensive. Therefore it is difficult to achieve the same level of co-ordination, co-operation and teamwork throughout the industry as a whole, in order to achieve those predefined goals. The other difficulty faced when trying to implement change in the construction industry is the structure and sizes of those organisations that form the backbone of the industry. As can be seen from the following table (figure 2), the vast majority employ 8 or less people, with over 71% employing 3 or less. Of that 71% most would be too intent upon making ends meet and too entrenched in the competitive pricing regime to consider the "Rethinking Construction" theory, and that is presupposing they were aware of it in the first place. As a result of the poor results a new report was commissioned in 2002 "Accelerating Change"5. This set new targets, the main ones being that by the end of 2004 20% of all construction projects should be conducted under the 'partnering' process and the same percentage should take on board the principles of the clients charter, with those numbers rising in both instances to 50% by the end of the year 2007. However, perhaps the most important factor of this latest report was its intention to construct a information awareness campaign, which included a booklet outline the basics of the "Rethinking Construction" initiative, to get the message more effectively across to the SME sector of the industry. In view of the structure of the industry this is indeed an essential ingredient. Summary The Minutes of Evidence. (July 2001) states that, "partnering has been shown to yield significant savings in time and cost. Longer-term strategic partnering arrangements have been shown to yield the greatest benefits with costs savings of up to 40 per cent." Where the John Egan report has been put into practice, especially in the demonstration projects, it has been proven that the recommendations made are effective and resultant savings and efficiencies exceed expectations. But there is still a very large section of the industry, which is not taking on board the recommendations. Until that situation is altered the industry will not achieved the position of strength and profitability that it desires, despite the pockets of success. III. Conclusion It would be easy to conclude from our research that the original report chaired by John Egan (1998) "Rethinking Construction" has failed. As Ian Abley (2001) commented, "In failing to learn the lesson of the Egan report - to make the most of the workforce by turning to capital-intensive manufacturing - the tendency has been to say that Egan was wrong." In reality this is neither fair nor accurate. It has been proven that, where implemented, the findings and recommendations of the report have produced the expected results and furthermore, in many cases those results have surpassed and exceeded the expectations of the report by a wide margin. Where the element of failure occurred was not in the report itself, it was a failure of getting the message across to the diverse numbers and structures of organisations operating in the industry. This is not really surprising when one considers the make up of an industry where the vast majority of firms, as analysed in figure 2, employ less than 8 people, and over 71% employing 3 or less. References Minutes of Evidence. (July 2001) Procurement Guidance: Key Points for Senior Management. Select Committee on Public Accounts Egan, John. Chairman of Task Force. (1998) Rethinking Construction. Report of the Construction Task Force. Egan, John. Chairman of Task Force. (2002) Accelerating Change. Report by the Strategic Forum for Construction. Abley, Ian. (November 2001) The point of prefabricated building is productivity. Architects Journal, p38. Read More