“The effect of the recession on partnering in the construction sector”

Don WardChief Executive

www.constructingexcellence.org.uk

Our purpose is to

Improve industry performance

The outcome will be

A demonstrably better built environment

Core business activities

UK Construction Key Performance Indicators“A Measured Approach”

Economic

• Client satisfaction– Product and service

• Defects

• Predictability– Cost and Time

• Profitability

• Productivity

• Safety

• Construction Cost

• Construction Time

Safety

Reportable accidents per 100,000 employed (Industry AIR)

Better

13541271

13181217

10971172

1023

901946

865 906

0

500

1000

1500

19992000200120022003200420052006200720082009

Client satisfaction – product

Scoring 8/10 or better

72% 73% 72% 73%

78%80%

83% 84%82% 83%

86%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Client satisfaction – service

Scoring 8/10 or better

58%63% 63%

65%

71%74%

77%79%

75%77%

84%

50%

60%

70%

80%

90%

100%

19992000200120022003200420052006200720082009

Client satisfaction – value for money

Scoring 8/10 or better

67% 69%73% 74%

79% 80%

75% 75%

82%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009

Profitability

Profitability: Median profit on turnover (%)

4.4%5.1%5.2%5.4%7.0%

8.1%7.9%8.2%9.6%9.9%

0%

5%

10%

15%

2000200120022003200420052006200720082009

Cost predictability - project

% On or under cost

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

0%

20%

40%

60%

80%

100%

2000200120022003200420052006200720082009

Time predictability - project

% On time or early

28%36%

42% 44% 44% 46% 44%

58%

45% 45%

0%

20%

40%

60%

80%

100%

2000200120022003200420052006200720082009

Pioneering projects

• BAA: Pavement Team, Genesis, mid 1990s onwards– After 7 years, frameworks save 55% on time and 60% on design

and management costs

• GlaxoWellcome: Fusion, mid-late 1990s– 3 projects worth total of £50M saved £8.75M of cost and saved

13 (7+6) months worth £2.25M

• MOD– Building Down Barriers, late 1990s– MOD Andover North

Demonstration Programme

• 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

Laggards

0

50

100

150

200

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Pre

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Economic KPIs

Demonstration v Industry 2009CE 2009 Industry 2009 = 100

Clien

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Clien

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Defe

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Pre

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Valu

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0

50

100

150

200

250

300

350

400

450

Safety-Overall 4

Safety-Allprojects 4

EmpSat StaffT/O Q&S EnvImp-Product

EnvImp-Process

Demonstration v Industry 2009(2)CE 2009 Industry 2009 = 100

People and Environment KPIs

2009 Demonstrations outperform the industry by an average of 80%

Safety – Overall

Safety - AllProjects Employee

Satisfaction

Staff Turnover -All Projects

Qualifications &Skills Environmental

Impact -Product

EnvironmentalImpact -

ConstructionProcess

Core improvement themes

Construction Commitments

• Procurement and integration• Client leadership• Design quality• Commitment to people• Sustainability• Health and safety

26% reduction in new orders (last qtr, £B)

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

危機 危機 “Crisis = danger + opportunity”

‘Economic climate change’

U-turn back to the old ways

Go for full collaborative working

Collaborative working key principles

LeadershipVision

Processes‘Hard’ measures

People‘Soft’ issues

Collaborative working Critical success factors• Early involvement• Selection by value• Common processes and tools• Measurement of performance } continuous• Long-term relationships } improvement• Modern commercial arrangements

MONTHACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Appoint Architect

Appoint Consultants

Concept Design

Tender Documentation

Evaluation/Negotiation

Redesign/Design Dev.

Planning

Appoint Contractor

Mobilise/Procurement

Construct

Competition Appointment

Tender

Historic procurement17 months to “start on site”

MONTHACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Appoint Architect

Appoint Consultants

Appoint Contractors

Concept Design

Design Development

Procurement

Agree Cost Plan

Planning

Mobilise

Construct

Over 6 months early

Aspirational procurement10 months to “start on site”

Frameworking clients

• Retail: Asda, Marks and Spencer, Sainsbury, Sommerfield, Tesco, Boots

• Developers: Stanhope, Slough Estates, Land Securities• Corporates: BT, BBC, Abbey National• Utilities, eg all water companies under AMP4• Central government: defence, health, work and pensions• Local government: “Best Value”• Housing: RSLs

The potential for further value for money savings in the public sector” NAO, 2005

UK public sector construction 2004: £33.5 billion

Central govt Local govt

Improved productivity based on more effective programmes and streamlined procurement

£220M £500M

Collaborative working approaches £325M £760M

Savings in whole life costs of built assets

£770M

Total savings £2.6 billion

GLAMALCO

Early involvement - lead times

• System 6-12 weeks• Glass 8-20 weeks• Pressings 4-14 weeks• Auxiliary products 4-14 weeks

Piping cost = £155,000

Equivalent length = 700m Piping cost = £116,000

Equivalent length = 494m

Early involvement - design expertise

Tender priceValue added/benefit for client- people, supplies

Profit

Other cost/waste

Claims = extra cost + profit

Old understanding of “price”Tender price, outturn price, claims

‘Right’price

Overheads

Tenderprice

Manage

Agreed

‘Targetprice’

Agreed

Reduce

Increase

Claims = extra cost + profit

Value added/ benefit for client

Profit

Other cost – waste

New understanding of “cost” Value, budget, target price, cost, risk, profit

Overheads

Risk

What is “Value”?

Value =

Benefit___________

Cost

Be ValuableHow facilities add value for users

DEVELOPMANAGE LIFE

CYCLE

CONSULT

CONSTRUCT

DESIGN

Whole life value

Construction

What the customer really needs

Business Costs

Operation and Maintenance

Process Push

User Pull

Business outcomes

Design

Source: Royal Academy of Engineering

Construction

What the HEALTHCARE customer really needs

42

Business Costs

4.31

Operation and Maintenance

Process Push

User Pull

Healthcare outcomesClinical outcomesHospital-acquired

infection ratesSafety outcomesMedication error ratesMedication ratesRe-hospitalisation ratesLength of staysCosts per unit of servicePatient & visitor satisfactionStaff morale & turnover

CABE: Patients discharged in 6.4 days rather than 8.1 due to better environment

Design 0.1

(ANNUAL COSTS)

Construction

What the EDUCATION customerreally needs

“200”

Business Costs

“5”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

“A school which offers its pupils a green-focused education has won plaudits for having the best teaching standards in the country.

..John Drane, the school's assistant principal, believes the ..teaching environment has been one of the key factors in motivating the pupils to do better”

Green values help academy top new league tableThe Independent, 11 Jan 2007

Whitecross High School“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%

‘Economic climate change’- value through collaborative working

U-turn back to the old ways

Go for full collaborative working

Value through collaborative working

Don WardChief ExecutiveConstructing Excellence

www.constructingexcellence.org.uk