Guess what all of these construction industry reports say?
Mike Murray and David Langford
…. That construction is in desperate need of change… this report will all bring about great innovation and improved productivity… etc
71 years have passed since The placing and management of contracts (Simon Report 1944). Here is what the CIOB have to say about the report:
The report criticised the practice of open tendering (allowing anyone to tender for a construction contract rather than using a pre-qualification process to create a short-list of suitable companies that would then be invited to tender) and suggested that the tendency of clients to simply accept the cheapest price created a situation where tenderers would submit low bids, and then make up their income by reducing quality or making claims. The report also recommended better training of construction managers and a more collaborative approach to design and construction with earlier contractor involvement.
Main issues were:
Collaboration, procurement and the separation of design and production!
Whiz forward 50 years to 1994, in which Sir Michael Latham described the industry as ‘ineffective’, ‘adversarial’, ‘fragmented’ and ‘incapable of delivering for its customers’… The story continues.
4 more years pass and the influence of other industrial sectors come in to play, in the form of Sir John Egan. Originally the chief executive of Jaguar Cars, no doubt his role in the rise of Unipart (British Leyland) had something to do with his rise to a prominent role in the automotive industry. His move to BAA in1990 changed his focus from cars to airports, and ultimately the whole construction industry via Rethinking Construction (Egan 1998). Where the industry criticised Egan’s automotive approach to construction.
In 2008 Sir John Egan stated that:
‘we have to say we’ve got pretty patchy results. And certainly nowhere near the improvement we could have achieved, or that I expected to achieve…..I guess if I were giving marks out of 10 after 10 years I’d probably only give the industry about four out of 10’
4/10, 40% would scrape you a pass in most modes of assessment. For me that is a caricature of the construction industry, whatever it takes to scrape by and not paying much attention to the ‘must try harder next time’ feedback.
In 2009, Andrew Wolstenholme of Balfour Beatty at the time and now CEO of Crossrail, produced Never Waste A Good Crisis – A Challenge to the UK Construction Industry. The report highlighted issues with current business models in construction, due to short sighted business cycles driven by, and to be frank, short sighted clients. The report also highlights that flagship projects in construction were showing significant improvements in quality, vale and collaborative processes (it did suggest whole-life costing, but I disagree completely), but there was little penetration in to the wider supply chain. The report also asserts that the era of client-led change is over… I’ll leave that one for you to decide!
‘… create additional economic social and environmental value through innovation, collaboration and integrated working.’
Let’s unpack that sentence:
- The creation of economic social and environmental value.
- Integrated working.
This gives me a chill down my spine. The BIM2050 report is basically the same in its roots. Please don’t think for a moment that the group went off without checking the history. In a way I hope that this post proves that we did a literature review! We read a wide range of papers and reports, we spoke to many figure heads and young people. In essence the core is still the same, in terms of sentiment around the performance of construction.
A question is why? Why is construction ‘so pants at improvement’…
[pants…. construction report’s, in briefs…. geddit?]
Pants as in pants, not trousers, okay?
Mr Bean, and his pants.
A bigger question is…. is it actually pants?
In the BIM2050 report said that there will be a slowdown of gross fixed capital formation (GFCF) and an introduction of the ‘non-additive construction cycle‘. GFCF is used as a measure of how much has been built in excess of depreciation, in other words how much ‘extra capacity’ has been constructed / developed. This does include intangible things but in the context of the report we stick to shared assets (roads, railways etc) and fixed assets such as houses, warehouses and factories and of course land.
Before we move on to the non-additivie construction cycle…
Thomas Piketty, French economist and writer of Capital in the 21st century, is kind enough to share the raw data from this book and research. I’ve adapted his data on world output, per capital world output and population growth for ease of comparison / clarity.
The fastest change in rate of growth (how steep the line is) was in the time all of the reports listed above were published. Im not one to naively apply causation to correlation, but I do wonder how construction (considering the first 1700 years in this data series) would be expected to adapt to changes never seen before, possibly due to its own produce. What I mean is that construction has contributed to this growth via the delivery of infrastructure (fresh water & sanitation, clean hospitals, schools, roads, rail etc…). I guess the attention is drawn to construction because its benefits have broadly been delivered and the growth of output is slowing, people are asking where all that lovely growth has gone?
The graph shows world output growth, output growth divided by capita growth and population growth. It provides the basis of my explanation of non-additive construction cycle. It’s a construction specific term for circular economy. The difference is its origin of the view point.
As we move from building fixed assets from ‘new materials’ to a circular economy model, the composition of how national and business accounts may need to change. It would also provide a platform for market creation and shift the motives and measurement of how we transfer assets to something more meaningful, not just arbitrary accounting profit.
Right now we measure in terms of rent / revenue / production per meter square of asset. We could find that the performance of assets could follow a Du Pont type system of ratios that consist of rents, revenue, emissions, consumption of energy, embedded carbon and wellbeing. Although measurement of these things right now are not possible.
I digress, the question was if construction was actually pants at improving or is it a throw back of lagging behind population growth and productivity? I don’t want to let construction off the hook, because it is slow to innovate (which is an interesting paradox when compared to the benefit construction has brought to global community). You have to admit that the economic pressures that act on the industry are very influential!
A parting thought, the ‘liberation’ of our senses in decision making (industrial application of the internet of things) will probably enable a shift in productivity per capita. If we can strip out the waste in food production and dynamically improve or consumption efficiency, I can’t see why a another population growth burst could be possible. On the other hand we could fail to innovate the population would dramatically reduce as the food supply collapses…
We have the opportunity to be voted the best advance in medicine again!