2010: The Next Generation
As the first decade of the millennium ends, Elaine Knutt asks three groups of young managers what they see as the key challenges of the next 10 years. Photographs by Wilde Fry.
At the beginning of a new decade, the outlook for the construction industry is distinctly murky. After nearly 18 months in recession, demand is still running at well below the levels needed to sustain employment and growth in the sector. Commercial developers have had the wind taken out of their business plans by falling property values, and the shot-in-the-arm provided by the government’s decision to bring forward public spending into the current financial year is about to give way to a new era of post-election austerity.
So it’s all doom and gloom ahead? Not according to the young professionals from three of the industry’s junior boards: g4c from constructing excellence, Foresight at Davis Langdon, and taskforce at WSP. the groups give younger managers a voice in the wider organisation and a hand on the steering wheel, a chance to take on responsibility for special projects, and to conduct research and test out ideas. And this generation needs a vision of the future – compared to their colleagues in senior management, they have many more working years in the industry ahead of them.
This is also the generation that studied Latham and egan at university, that came of age in a world threatened by climate change, and that stay in touch using the digital media the rest of us only read about. From their point of view, the recession is a catalyst for change, the sustainability agenda is a platform for growth, and digital communications are the route that a traditionally self-contained industry can use to tell the wider world about its achievements.
Underlying their optimism is a belief that the shared pain of the recession will allow connections and collaboration to be forged more successfully than the economically buoyant boom days. “in recessions of old, there was a tendency to retreat back [to the old ways]. But the credit crunch is everyone’s problem, and we’ve got to attack it together,” says Simon matthews mcioB, an associate at Davis Langdon and member of the fi rm’s Foresight panel. “In the past year, we’ve already learned to work in a slightly more intelligent manner, and in 2010 now we know we can’t compete by doing the same old thing.”
In 2010, the industry will certainly be challenged to fi nd new ways of delivering both projects and value. The backdrop will be continued constraint in both public and private sector spending. According to the economists at the Contruction Products Association, overall output fell by 15% in 2009, will fall by a further 2% in 2010, then grow by only a marginal 0.7% in 2011. Longer term, anyone looking for a return to 2007 volumes will have to wait until 2021.
In the public sector, the current slowdown in OJEU notifi cations is set to get worse before it gets better. December’s pre-budget report showed that net investment in 2009/10 was in fact higher than 2008/09 – £49.5bn compared with £45.3bn. But looking ahead, the government is projecting net investment of just £29bn in 2011/12 and £22bn in 2013/14. In other words, capital investment is currently 3.9% of GDP, but is expected to fall to 1.25% in 2013/14. But the industry is hoping that the new government – of whichever persuasion – will heed last year’s CBI report, which calculated that every £1 invested in construction generates £2.84 in terms of asset value, taxation and employment.
In the private sector, some property developers will undoubtedly take advantage of the estimated 15% cut in construction costs to get back on site, and there are encouraging signs of renewed confidence in the retail sector. At the end of 2009, Sainsbury’s confi rmed and Waitrose announced plans for store building programmes, while Tesco showed signs of warming up some iced-over mixed-use developments. But where the rents and yields have fallen further than construction costs, private sector developers are likely to watch and wait.
Housebuilding starts showed a slight improvement towards the end of last year, although mortgage availability will continue to stifle development. However, the public sector could provide a welcome boost: the Homes and Communities Agency is due to announce the contractors and consortia on its Delivery Partner Panel in January, and 47 local authorities are to progress plans to build new council homes.
Against this overall decline in workload – which also threatens jobs, businesses and industry capacity – there are a set of long-term challenges facing UK plc. The country needs new renewable energy facilities to meet 15% of energy needs by 2020, a viable nuclear building programme, a network of data centres to keep broadband traffic moving, and a network of high-speed rail links to keep us physically on the move.
“We need to build the capacity to deliver the solutions, or in two or three years we could end up employing people from overseas to solve the uK’s energy and infrastructure problem,” warns g4c’s Nathan Jarman.
To move forward against this challenging background, all three groups talk about the need to broaden the industry’s outlook and find new ways of creating value. instead of delivering buildings and margins, construction needs to switch to creating built assets for the client, the wider community and a carbon-conscious future. From this starting point, other ideas fall into place: sourcing materials locally to benefit the local economy; employing and training local people; and creating a positive experience of construction that generates confidence to invest.
As the carbon content and long-term energy performance of buildings will also become more important to clients, the groups’ conclusion is that whole-life costing and long-term responsibility for performance will have to become more prominent in the industry’s service offer.
“One way of getting the supply chain behind whole-life costing is to go back to the ideas behind PFi. We could see the larger contractors appointed on more deign, build and operate contracts, where the contractor has a stake in the asset constructed,” says g4c’s David Whysall. and one tool that can help release this pent-up value is it, from construction teams sharing single, collaborative design models to the use of digital networking tools to share ideas and communicate across the old dividing lines.
“Our generation has definitely got an edge [in ict] and i think it will change construction,” says Catherine Irons of g4c. “We’re better at using it to speed the process up, whether it’s watching an online presentation or sharing best practice.”
So 2010 will see the industry adjust to a new economic paradigm, where it’s asked to deliver projects to an austere economic and ambitious carbon agenda, to squeeze out value in every way it can and to build capacity for the future. If the ground rules are changing, then every age group in the industry needs to adapt to new ways of thinking. But perhaps it’s the younger generation – the 20- and 30-somethings that have most invested in the long-term health of the industry – which has the ideas, outlook and determination to guide the industry forward.
Andrew Fettes-Brown (left), Catherine Irons, Nathan Jarman
Andrew Fettes-Brown (left)
David Whysall (not pictured)
Generation 4 Collaboration, part of Constructing Excellence, is an organisation for younger professionals who want to build up cross-industry contacts and ideas to form a solid platform for their later careers. True to their name, the group believes that 2010 will herald a new era of collaboration as a mechanism to deliver high-quality projects with shrunken budgets and tougher green targets.
“If we’re turning out similar volumes of work but at lower profit margins, then we need to become more efficient by cutting down the barriers and collaborative working,” says Andrew Fettes-Brown, of Mace’s cost consultancy division Sense. “In 2010, finding ways to work together will be a necessity.”
That will mean reducing the number of project interfaces with co-located teams, early contractor involvement, better use of IT to cut inefficiencies, and the management skills to motivate integrated teams towards a common goal.
As well as more collaboration as project level, the group believes 2010 will bring more consolidation at corporate level. Pointing to Balfour Beatty’s acquisition of Parsons Brinckerhoff, Turner & Townsend senior cost manager David Whysall predicts that other contractors will see the benefits of moving “upstream” to offer strategic project and design advice.
“Balfour Beatty is getting itself a foot in the door for major infrastructure projects, and I think you’ll see other major contractors following suit,” says Whysall. “Greater integration lowers the risk for both sides, and it’s closer to how major players like Bouygues and Ferrovial operate on the continent.”
G4C sees 2010 as the year when everyone realises it is no longer “business as usual”. Instead, everything will have to re-examined in the light of the new business realities.
“This year, people will need to question everything we do. Why is it there? Can we improve on it? Where open-minded people come together, there shouldn’t be any boundaries,” says Nathan Jarman, a Turner & Townsend cost manager.
This rethinking of construction should also extend to the way the industry trains its rising generations.
Here, G4C doubts whether the professional institutions are doing enough rethinking on education and chartership. The group, mostly quantity surveyors with MRICS to their names, agrees that chartered status from the RIBA, CIOB, ICE or RICS is a worthwhile goal: clients expect it and employers support it. But they question whether these core skills are enough in a complex, consolidated industry.
“What do the institutions provide individuals after giving them the rubber stamp? Is there enough joint working between them?” asks Fettes-Brown.
At the same time, the group believes the industry needs to open its doors to professionals with a background in health, education, energy or other targeted sectors. To complete the circle, homegrown staff could take up secondments to client organisations. “I think it will be useful for people to spend six months working for a client,” says Jarman. “If you’ve just got technical skills, you’re quite narrow. You need to see the bigger picture.”
But overall, G4C is optimistic that the industry’s collective order book for 2010 will be full enough to allow it plan for a profitable future. “Whatever the next government, we know public spending will be tightened. But the government will also know that if public spending is cut too much, the economy will be plunged back into recession,” says Jarman.
Dan Rogers (left)
Joanna Miller (not pictured)
In 2010, construction businesses will have to do far more than talk the sustainability talk, say the representatives of the junior management Taskforce at design and engineering consultant WSP. To be credible as low-carbon contractors or consultants, companies will have to demonstrate that they’re adopting the same low-carbon strategies they’re advocating for their clients.
To practice what it preaches, WSP has gone beyond a corporate low-carbon plan. Under its voluntary Carbon Tracking scheme, staff are financially incentivised to reduce their personal carbon footprints outside work, including personal journeys and energy bills. “It’s important to be seen as visibly acting on sustainability to other companies,” says Joanna Miller.
”If we can do it for ourselves, we could do something like that for clients.”
The group sees the scheme as part of the new “social contract” with their employer that younger staff in the industry are seeking. “We did some research on this last year, and found that Generation Y [born in the 1980s] is quite value-driven and focused on work-life balance and social responsibility rather than just on salary,” says project manager Mike Reynolds.
It’s an outlook that will help them advise the 2010 client generation, which is itself looking beyond financial values to take a broader view of projects’ social and environmental impact. “Where a local authority is procuring schools on a value basis, the bidder that can show £23m of value on a £20m budget will win,” says Jonathan Bluh.
Davis Langdon Foresight
Simon Matthews (pictured)
Over the past decade, the industry has made advances in several fields, from off-site construction to low-carbon design. But if there’s one area where 21st century projects have limped along using 20th century technology, it’s in integrated IT. As a rule, projects get by on piecemeal solutions, missing out on the efficiencies of implementing a shared, 3D digital model that would grow with the project from inception to handover.
But 2010 could be the year this starts to change, according to Davis Langdon’s Foresight group, a forum for younger managers from across the business. “In the past 10 years, when the industry was booming, people haven’t needed to look at BIM [building information modelling]. But if it’s out there and can deliver real savings, then they’ll be looking at implementing it along the supply chain,” says associate Simon Matthews.
IT will become a key concern for contractors that want to stay competitive in the year ahead, the group believes. In the first place, implementing a single IT solution along the supply chain will shave weeks off lead times and help them get to site more quickly – putting them in pole position to win new tenders when the marketplace finally picks up. Getting to grips with e-procurement and e-tendering will trim costs and broaden their client base, while social networking tools will let them tell the world what they’re about in many different ways.
“The future is about collaboration and pooling ideas, and the new technology supports that,” says Matthews.
Post-Copenhagen, the group believes that the green agenda will gather pace. While commissioning a building has always been complex, it now comes loaded with responsibility for saving the planet as well.
The role for contractors and consultants, they believe, will be to help clients find a clear path. “As an industry, we need to up-skill so that we can help clients by keeping things simple. It’s an incredibly complex subject, but basically it comes down to looking at measures in terms of cost and impact,” says partner Ed Brown.
“And we can start to bust the myth that sustainability is more expensive – there’s no link between sustainability and increased costs.”
But there is a link between sustainability and long-term value – whether that’s measured in terms of the client’s bottom line, the local economy or the community’s pride in its new asset. Foresight believes that a far broader definition of “value for money” will start to take hold in 2010.
“The starting point will be that it’s about more than building a building and walking away – it’ll be a much broader focus,” summarises assistant project manager Simon Venner.
One example will be the increased importance of whole life costing. “It’s a tool that allows you to assess the impact of decisions. Contractors that have traditionally just looked at capital costs will need to empathise more with clients’ aspirations and consider the whole-life issue,” says senior project manager Adrian Boyce.
Finally, 2010 could also be the year when the UK construction sector starts to reap the early benefits of the Olympic programme. The Olympic effect could give an added edge to British construction businesses – and individual professionals – seeking opportunities in the emerging markets of Africa, South America and the Middle East. “2012 is UK plc on trial, and by all accounts, we’re winning,” says Matthews.