Last week I went to the regular meeting of the Herts and Beds Constructing Excellence Club. A big turnout, over 50 people, and a very good presentation by Renewables East. Paybacks are much lower than 10 years ago. But the conversation afterwards turned to the extent to which the recession will mean that such ‘nice-to-haves’ as renewables will take a back seat for a while. The leader in Building magazine the week before took a similar line: “Sustainability like collaborative working is a child of the boom years”, wrote the editor Denise. Which begged a reply from me that, in that case, now is the time for them to come of age and be taken seriously…..
Everyone is telling me of stories that the industry is ‘reverting to type’, particularly with single stage lowest price tendering and aggressive commercial behaviours such as arbitrary demands for 10-20-50% price reductions “or else…”. Six months ago Building’s front cover asked whether we would soon be seeing the return of the claims QS, and sure enough, many say we have. So how much of the last ten years’ improvement in the industry could be undone, and will all that effort prove to be wasted?
I suspect not. It seems to me that budget concerns are a fact of life, and clients or contractors always want more for less – recession or no recession. There are two schools of thought on how to achieve that: one is to focus on the tender price and drive it as low as possible, even to the point of a sub-economic bid where the contractor must make a loss – unless of course they can make some claims. Which is pretty likely as it is a long time since most people saw a fully-complete set of drawings or an accurate Bill of Quantities.
The industry loves lowest price tendering – it invented it, and back in 1963 codified it in the NJCC’s code of practice for single stage tendering. Large parts of the industry have since conspired with clients over the years to continue with lowest price tendering – it is easy, and it means you don’t have to work too hard to deliver on value. But let’s face it, it usually knowingly sets the project up to fail. It’s a bizarre process – as a questioner said at a conference the other day put on by the Universities of Reading, Loughbrough and Salford, construction must be the only industry that competes to deliver the same thing for the client rather than something different? And is it the only industry that thinks it’s clever to make its money by screwing the client and/or the supply chain?
There is another way, of course, which is to sit down with the team early, talk to them about the target price, remove any concern about profit by ring-fencing that amount, say 3%, and then work together on the remaining 97% to drive out cost and waste. When suppliers are asked to achieve 10-20% cost reductions in order to keep a project viable, well that can’t be done by sharpening the pencil or threats about future work, it requires lean techniques and, above all, collaborative working.
We are at a crossroads in industry improvement, and now need to see leading firms avoid the temptation to turn back if the change is to be sustainable.