Construction should be a product, not a service
Carillion’s collapse highlighted the fragmented nature of construction once more. It is time to modernise and become an integrated manufacturing industry, argues Colin Harding.
The UK construction industry is facing its greatest challenges in 70 years. But the collapse of Carillion, the quality issues in the housebuilding sector and Scottish schools, even the awful tragedy of Grenfell Tower are symptoms, not the cause, of this crisis.
That basic cause is the fragmentation of the industry, dividing construction into two adversarial parts: those on site – “real construction” – and the project managers, cost consultants and tier one contractors like Carillion who “supervise” the work – “virtual construction”.
Which is where it has all gone wrong. This virtual construction level doesn’t even “supervise” any more, they “administrate”. Some risk-averse contract administrators are now dumping the responsibility for doubtful or difficult details through contractor design sections in tricky forms of contract – cynically offloading their own and their client’s risks.
To compound this, some clients, contract administrators and larger contractors – not only Carillion – are specifying 90 or 120-day stage payment terms, forcing otherwise sound firms to take up credit management facilities with interest rates only just below margins. Then there are the interminable delays in agreeing payment for variations, and even longer to release insecure retentions.
This lack of respect for real constructors is one of the principal causes of the current rash of quality, reliability and solvency issues.
Collaborative or combative?
What would make UK construction change? The only hard evidence is 25 years old, yet is frighteningly relevant. After the Channel Tunnel project, the BRE compared French and British performance using identical administration buildings on either side of the Channel, designed by the same UK architect. The French system produced better results in all seven categories.
Design costs were 25% less. Collaborative France finished on time, combative Britain had a 28% overrun. The French contractors’ profit margin was considerably higher.
The research showed that more than twice the numbers of management and supervision staff were involved in the UK process than in the more productive, profitable and competitive French industry.
“The lack of respect for real constructors is one of the principal causes of the current rash of quality, reliability and solvency issues.”
This is the principal reason UK construction productivity has since plummeted. The French system was and is based on a lean, collaborative and integrated management structure, without the unnecessary involvement of independent contract administrators and their lawyers.
But, like many others in construction over the last 25 years, the report, with its inconvenient truths, was quickly “buried”. This allowed “virtual” companies to build their position as principal industry contact with government and clients, while profiting from the process now known in contracting as “design and dump”.
The solution for real construction is to escape its service provider status by becoming a modern manufacturing industry, which takes control of the design of its own products through Integrated Design and Construction – Single Responsibility (IDCsr). IDCsr is a code of practice supported by the CIOB and is a totally integrated and collaborative procurement, design and construction management system between client and IDC Constructor (IDCC).
An end to retentions
IDCsr unites the real and virtual industries, with the IDCC employing or engaging all the design and construction workers to deliver the project. The development of the detailed design involves the client team and the IDCC design team, all working with the trade suppliers, cost management, estimating and delivery teams. Total responsibility for the design and quality of construction rests with the IDCC backed by insured 12-year warranties (CM February 2017).
Payment terms of the IDCsr product sale agreement are based on pre-agreed stage payments through project bank account, made within three days of authorisation – subject to confirmation by the joint client and IDCC quality managers that the relevant stage has been satisfactorily completed in accordance with the BS:EN 9001 compliant project quality plan.
Retentions are therefore not required. IDCsr collaboration is by far the better way to do away with retentions than any legislation.
Colin Harding is past president of the CIOB and author of Integrated Design & Construction – Single Responsibility: A Code of Practice