Professor Rudi Klein FCIOB says resources that should be directed to the Government Construction Strategy, particularly in reducing waste and inefficiency in procurement processes, are now being diverted to departments dealing with Brexit.
There is a tendency to blame Brexit for any or all of the ills that, currently, seem to befall us. But there is one area where Brexit is having significant impact – it has dramatically changed government’s priorities and programmes. It has always been an uphill struggle to get government to listen to or act on issues relevant to construction. This struggle is about to get even tougher.
The three Brexit departments – Foreign Office, International Trade and Department for Exiting the EU – have drained resources from other departments. The Cabinet Office, for example, has had to cut its resources by up to 20%. Other departments, including the newly-constituted Department for Business, Energy and Industrial Strategy (BEIS) – which has overall responsibility for construction policy – are similarly affected.
Together with the Infrastructure Projects Authority the Cabinet Office is the custodian of the Government Construction Strategy 2016-2020. A key component of this strategy was to continue promoting the three-model procurement options recommended in the 2011 strategy. The options are:
- Two-Stage Open Book;
- Cost-led Procurement;
- Integrated Project Insurance.
The unifying factor for these options was early supply chain engagement and all that it entails including reductions in process waste, greater cost transparency, and integrated working between project participants.
"Brexit takes precedence – the closing down of procurement activity by the Cabinet Office leaves very little in terms of an improvement agenda for construction."
Rudi Klein
Almost three years ago the Cabinet Office published detailed guidance on these options and pilot projects were set in play to trial the options. In fact, a Trial Projects Working Group with industry representation was set up to oversee progress. The aim was for all government departments and agencies to adopt one or more of these options under the banner of “Smart Construction Procurement”.
It should be emphasised that these options represented the best and only opportunity for addressing the major fault lines in the procurement and delivery processes, highlighted in countless reports and initiatives over the years.
The recent Farmer Review of the construction labour market (Modernise or Die) is the latest report to highlight the dysfunctionality in the industry’s delivery processes: “The construction industry is often characterised as an example of ‘market failure’. This usually refers to its highly fragmented structure (both vertically and horizontally), introverted nature and unusually high levels of self-employment.”
The greatest dysfunctionality occurs in the divide between design and construction. The industry spends billions of pounds a year on making designs work so that they address the practical requirements of construction. The supply chain incurs this cost as a result of not being involved in the early planning and design decisions that shape projects. If we are able to address this – as Farmer suggests – the likelihood is that skills shortages could become a thing of the past.
Now comes the bombshell: government cannot continue to devote resources to the work involved in embedding the new procurement options. Brexit takes precedence even though up to 20% savings (as a result of reductions in process waste) could be achievable if these options were to become embedded in government construction procurement. The closing down of this activity by the Cabinet Office leaves very little in terms of an improvement agenda for construction.
The only other initiative in this regard was Construction 2025 launched by the Construction Leadership Council, amidst great fanfare, more than three years ago. This seems to have been reduced to the sidelines because there is a lack of available resources to drive forward its agenda. This will be, no doubt, compounded by the focus on Brexit.
So, where do we go from here? If CM readers are exercised by this, MPs should be contacted and made aware of the situation. They should appreciate that momentum for reforming construction procurement and the fissures in the delivery process will be lost unless the government continues to resource the necessary effort.
After all, a vast amount hinges on this – more efficient use of resources, including scarce skills resources, and more investment in the advanced technologies leading to improved productivity and growth in the sector. Moreover, taxpayers stand to save up to 20% on the costs of construction.
Professor Rudi Klein FCIOB is CEO of the Specialist Engineering Contractors’ (SEC) Group and President of the NEC Users’ Group
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