The government’s industrial strategy, Construction 2025, was announced amid much fanfare in July 2013. But does it meet the needs of construction? Dr Stephen Gruneberg from the University of Westminster proposes an alternative approach.
- Arbitrary targets
- New approach, new aims
- Eight strategies
- Ministry of Construction and Works
- Managing demand for construction
- Reputation must usurp image
- Continuous improvement
In 2011 the coalition government argued that the adversarial culture of the construction industry should be replaced with a collaborative philosophy.
But it ignored the lack of trust in the industry and the conflicting interests of firms in the supply chain.
A year later, the Government Construction Strategy Implementation Report stated that the overarching aim of the government was to reduce construction costs by 15 to 20 per cent.
But this overlooked the fact that construction firms only survive by being extremely competitive and existing on exceptionally low profit margins.
More recently, the targets set in Construction 2025 included lowering costs by 33 per cent, speeding up delivery by 50 per cent, reducing emissions by 50 per cent and increasing exports by 50 per cent.
How were these targets arrived at and how were they calculated?
The figures appear to be rounded and arbitrary. Who gains from these targets and who loses?
“The government’s targets are incompatible, inconsistent and unachievable”
Even if the targets were met, what happens next? Could firms ease up on their ambitions?
And what if these aims were not met?
The fact is the government’s targets are incompatible, inconsistent and unachievable.
They distort the way construction projects are delivered from what is actually required of the industry towards meeting unobtainable and contradictory targets.
The time has come for an approach that replaces targets with priorities.
This would shift the debate towards agreeing objectives for construction as a whole and contractors in particular, rather than setting arbitrary targets.
New approach, new aims
The following measures of success, or some version of them, should become embedded in industry culture.
Six broad objectives form this core priorities of the proposed vision.
First, construction firms must be competitive, as measured by the international sales of UK-based firms, regardless of their country of ownership or registration.
“Construction firms and professionals should not only produce what clients require but should seek to surpass these requirements”
An annual report and review should monitor competitiveness and an assessment of export and import penetration is required to measure progress.
Second, construction firms must produce quality output.
This can be measured in terms of the satisfaction expressed by clients, while meeting their built requirements.
Complaints and disputes need to be monitored and recorded at industry level.
This should be balanced with awards and recognition, where merited.
A yearly review of measures of satisfaction should also be published by a new Office for Construction.
Third, the building industry and the built environment must be efficient.
Construction firms and professionals should not only produce what clients require but should seek to surpass these requirements.
Moreover, the built product itself must meet sustainability criteria and an annual survey of the performance of the built environment and the industry, including productivity, should be published by the Office for Construction.
Fourth, the industry must be safe for the people who work in it, with a workforce not only trained in health and safety but also able to deliver to high standards of workmanship with a pride in their work and a professional attitude.
Qualifications, status and recognition should be reflected in pay scales and terms and conditions.
The image of the industry cannot improve until the people in the industry are genuinely respected and what they build is appreciated by others within the sector.
Due to the high proportion of smaller firms in the construction industry, it is not possible for it to be left to its own devices to carry out certain functions, such as training.
It is essential that the public sector becomes actively involved, with training undertaken through colleges.
“Due to the high proportion of very small firms in the construction industry, it is not possible for it to be left to its own devices to carry out certain functions, such as training”
Where skills are in short supply, the grant levy system needs to be reformed or replaced to meet industry requirements.
Fifth, image is less important than reputation.
Reputation is based on real achievement and actual performance.
An annual survey of outstanding achievements should be published and celebrated along with a critique of failures, where these have occurred.
And finally, construction firms must aim to be productive and innovative wealth producers.
An annual report and assessment on productivity should be published.
Taken together, these priorities could create a vibrant, competitive, internationally engaged construction sector that meets the needs of government and private sector clients on safety, reliability and consistency.
To achieve these priorities, eight strategies are needed:
1) Create a dedicated Ministry of Construction and Works to include architects, consultants and others.
2) Speed up ongoing changes such as the use of project bank accounts and IT.
3) Ensure continuity of work as in the infrastructure pipeline on a five-year or longer horizon.
4) Develop a national and regional built environment plan or strategy.
5) Reform the planning system so that it supports a work pipeline with a minimum five-year horizon.
6) Enact a housing strategy, again with a minimum five-year horizon.
7) Professionalise skills in an education plan for construction qualifications.
8) Strengthen London as one of the major international construction markets in terms of the quality of its contractors, consultants, legal system and finance sector.
Ministry of Construction and Works
The economic importance of construction has been grossly underrated by policy-makers.
The value added by the construction industry on site was approximately £122bn in 2013, equivalent to between 6 and 7 per cent of the UK economy, according to official statistics.
However, these figures do not take into account the value of prefabricated building components or manufactured products or materials coming from, for example, the steel, glass, concrete and timber industries.
The value of the contribution of architects, engineering consultants and surveyors is also omitted from the official measure of construction value added.
“Construction is important enough to require the reinstatement of a dedicated minister of construction in a designated Ministry of Construction and Works”
According to the National Income Accounts, in 2012 UK GDP amounted to £1.36tn.
In the same year the total value of construction output was more than £208bn (including inputs from other industries and the value added on site), making construction output equivalent to more than 15 per cent of the whole economy.
This figure makes the industry important enough to require the reinstatement of a dedicated minister of construction in a designated Ministry of Construction and Works.
By coming under the direct remit of a minister, such a ministry could bring together the many different specialisms, trades and professional bodies within the construction sector.
One role of the Ministry of Construction and Works would be to help integrate the construction process.
Managing demand for construction
The lumpiness of the workload of construction companies calls for special measures if the problems that result are ever to be managed.
Predictability of work is vital for firms to have the confidence to employ labour and undertake training.
This can best be achieved with a public sector demand management strategy, detailing forthcoming work.
“Predictability of work is vital for firms to have the confidence to employ labour and undertake training”
This is already in place to a large extent: the government’s own infrastructure pipeline of work is a prototype, but this pipeline should be based on at least a five-year horizon, preferably longer.
A consistent and co-ordinated national and regional development plan is also needed to form the vision of a built environment plan, including a housing strategy.
The government has recognised the need to increase housebuilding, but it is clear that without radical reform of the housing market, this is not going to be achieved unless the public sector intervenes.
A planned housing strategy, like the infrastructure pipeline, would also require a minimum five-year horizon.
Reputation must usurp image
One of the existing strategy’s objectives is to improve the image of construction, but the term ‘image’ implies appearance rather than substance.
Reputation, on the other hand, is based on actual performance and is highly valued and easily recognised by firms in the construction industry and by their clients.
The term ‘image’ in strategy documents should be replaced with an emphasis on reputation.
That reputation can be enhanced through training and education and must therefore form a key priority in the overall strategy of the sector.
“The term ‘image’ in strategy documents should be replaced with an emphasis on reputation”
There needs to be a fully funded plan for genuine building qualifications.
This would lead to an enhanced status of the workforce based on actual build quality.
London should be recognised as a world-class market for construction and engineering consultants, major international legal firms, construction finance and the presence of many of the largest global civil engineering firms and contractors.
The effort made by UK Trade and Industry should be reinforced by regularly measuring the size and scope of global construction activities.
This alternative strategy shifts the debate away from a target-setting culture towards one based on continuous improvement and the monitoring of agreed industry objectives.
Its over-arching vision is a construction sector that is modern, productive and professional, meeting the needs of the rest of the economy in terms of providing its built environment, while paying serious attention to environmental issues.
This proud industry should meet its clients’ needs, be profitable for its firms and offer a safe and fulfilling life for its workforce.
Dr Stephen Gruneberg is the reader in construction economics in the Department of Property and Construction at the University of Westminster