Practice Management - 02 Construction Industry

2.            Construction Industry

·       Latham report – movement for innovation

·       Client centred practice

·       Partnering

Latham report:

Why:

Commisioned by the government in 1994 to investigate the perceived problems with the construction industry.  The Latham report “Constructing the team” described the current situation as being ineffective, adversarial, fragmented and incapable of delivering for its customers.

Latham proposed that the client should be at the core of the construction process and that the industry should move away from its adversarial structure, adopting a more integrated approach with greater partnering and teamwork.

There were a great number of detailed recommendations within the report, some of which are set out below:

·       Risk allocation to be decided as appropriate to ach project but then allocated to the party best able to manage, estimate and carry it.

·       While taking all possible steps to avoid conflict, providing for speedy dispute resolution by a pre-determined impartial adjudicator

·       A specific duty to deal fairly with each other, and their supply chain in an atmosphere of mutual co-operation

·       Interrelated documents clearly defining roles and duties of all involved, suitable for all types of projects and any procurement route

·       Firm duty of teamwork, with shared financial motivation to pursue those mutual objectives.

Improve performance by 30% by using partnering

·       30% reduction in cost and improvement in quality with payment security for the supply chain

·       working groups producing reports on key areas and recommendations.

·       .

The Latham report led to the creation of the Construction Industry Board (CIB) in 1995 to oversee implementation of its recommendations.

A number of other organizations were established following the Latham report which united to become Constructing Excellence in 2003.

Some of the recommendations of the Latham Report were implemented by the Housing Grants Construction and Regeneration Act (the Construction Act) which amongst other things, set out fair payment practices and regulated ‘set off’. In addition, the Scheme for Construction Contracts, which applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act established the right to adjudication.

More recently, there have been significant moves in government procurement to encourage collaborative working and foster partnering, and the government has abandoned GC Works contracts in favour of NEC3.

What is partnering and supply chain:

·       Partnering term used to describe a collaborative management approach that encourages openness and trust between parties to a contract. Within Construction there is a interconnected hierarchy of supply contractors necessary to work together to procure and build a project.  By promoting supply chain partnering, each party becomes dependent on one another for success and this requires a change in culture, attitude and procedures throughout the supply chain. It is most commonly used on large, long-term or high-risk contracts.

·       The longer the contract, the greater the benefit of partnering as there is more opportunity for building working relationships, finding improvements and planning investment.

·       Partnering requires expertise and commitment from the client to set up and manage the process effectively and to act as an adjudicator of disputes. It can be arranged either by use of a traditional contract with a separate partnering agreement, or by use of a contract with an aligned partnering agreement. It can be either a two-party or multi-party arrangement.

·       An example of a partnering agreement is the NEC partnering agreement or the PPC2000

Constructing Excellence

Constructing Excellence (CE) was one of a number of cross-industry bodies established to drive change in response to the Latham Report (Constructing the Team 1994) and the Egan Report (Rethinking Construction 1998) which concluded that ‘the industry as a whole is under-achieving’, and called for dramatic improvements.

Constructing Excellence is a not-for-profit organisation governed by a Board of Management made up of representatives from across the industry. It has 9 Regional offices across England and Wales. Client and supplier organisations can become members of Constructing Excellence for a fee.

It’s activities include:

·       Lobbying to try to influence change.

·       Publishing construction industry Key Performance Indicators (KPIs) each year using performance data collected by the Department for Business, Innovation and Skills.

·       Benchmarking and demonstration projects.

·       The Construction Clients' Group, promoting best practice and industry improvements.

·       G4C

·       Constructing Excellence in Learning Ltd (CELL), accrediting qualifications.

Since Latham and Egan, there have been significant moves in government procurement to encourage collaborative working and foster partnering, and it is generally considered that construction has become more efficient and safer.

Key performance Indicators

Key performance indicators in construction can be used to:

·       Monitor costs.

·       Track progress.

·       Assess client satisfaction.

·       Identify strengths & weaknesses.

·       Compare performance across and between projects.

·       Assess specific areas of a project such as sustainability, safety, waste management etc.

It is important that key performance indicators are identified in tender documentation and that the regular provision of the information required to assess key performance indicators is a requirement of the contract. This may require the provision of sub-contractor information where performance on specific packages is to be monitored.

Key performance indicators may be of particular importance where the contract stipulates that the contractor will be rewarded or penalized based on their performance relative to certain indicators.

Examples of key performance indicators that can be used on construction projects include:

·       Cost vs budget.

·       Project progress relative to milestones.

·       Number of complaints.

·       Number of incidents / accidents.

·       The number of working hours spent on different aspects of the works.

·       The use of materials (for example the amount of concrete poured).

·       The number of defects.

·       The amount of waste generated and the amount of recycling.

·       The number of variations.

Benchmarking:

Benchmarking is a process by which the you can compare different aspects of your practice against a collective average.  It can be used as a tool to enhance, develop and plan in the financial and practice management of a firm.  Analysis could focus on financial performance, day-to-day management, business development and human resources.  The RIBA runs a business benchmarking service available to all RIBA chartered practices, which can be used to highlight areas of design that are not offering good value for money and can help in the assessment of tenders from suppliers and contractors.

·       Benchmarking can enable you to be more informed to position your practice within the market with regards to fee setting.

·       Can help to identify gaps in the market within which your can try to position your practice to creates a specialty or niche

Teamwork

·       Firm duty of teamwork, with shared financial motivation to pursue those mutual objectives.

Improve performance by 30% by using partnering