The Effect of the Recession on Partnering in the Construction Sector

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Information about The Effect of the Recession on Partnering in the Construction Sector
Business & Mgmt

Published on July 27, 2009

Author: JohnCave

Source: slideshare.net

Description

A presentation given by Don Ward, Chief Executive of Constructing Excellence at the AEC Network Meeting in London on the 23rd July 2009 http://aecnetwork.ning.com

“ The effect of the recession on partnering in the construction sector ” Don Ward Chief Executive www.constructingexcellence.org.uk

Our purpose is to Improve industry performance The outcome will be A demonstrably better built environment

Our purpose is to

Improve industry performance

The outcome will be

A demonstrably better built environment

Core business activities

UK Construction Key Performance Indicators “A Measured Approach” Economic Client satisfaction Product and service Defects Predictability Cost and Time Profitability Productivity Safety Construction Cost Construction Time

Economic

Client satisfaction

Product and service

Defects

Predictability

Cost and Time

Profitability

Productivity

Safety

Construction Cost

Construction Time

Safety Reportable accidents per 100,000 employed (Industry AIR) Better 1354 1271 1318 1217 1097 1172 1023 901 946 865 906 0 500 1000 1500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Client satisfaction – product Scoring 8/10 or better 72% 73% 72% 73% 78% 80% 83% 84% 82% 83% 86% 50% 60% 70% 80% 90% 100% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Client satisfaction – service Scoring 8/10 or better 58% 63% 63% 65% 71% 74% 77% 79% 75% 77% 84% 50% 60% 70% 80% 90% 100% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Client satisfaction – value for money Scoring 8/10 or better 67% 69% 73% 74% 79% 80% 75% 75% 82% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009

Profitability Profitability: Median profit on turnover (%) 4.4% 5.1% 5.2% 5.4% 7.0% 8.1% 7.9% 8.2% 9.6% 9.9% 0% 5% 10% 15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Cost predictability - project % On or under cost 50% 46% 48% 52% 50% 48% 45% 46% 49% 48% 0% 20% 40% 60% 80% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Time predictability - project % On time or early 28% 36% 42% 44% 44% 46% 44% 58% 45% 45% 0% 20% 40% 60% 80% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Pioneering projects BAA: Pavement Team, Genesis, mid 1990s onwards After 7 years, frameworks save 55% on time and 60% on design and management costs GlaxoWellcome: Fusion, mid-late 1990s 3 projects worth total of £50M saved £8.75M of cost and saved 13 (7+6) months worth £2.25M MOD Building Down Barriers, late 1990s MOD Andover North

BAA: Pavement Team, Genesis, mid 1990s onwards

After 7 years, frameworks save 55% on time and 60% on design and management costs

GlaxoWellcome: Fusion, mid-late 1990s

3 projects worth total of £50M saved £8.75M of cost and saved 13 (7+6) months worth £2.25M

MOD

Building Down Barriers, late 1990s

MOD Andover North

Demonstration Programme Implementing the principles of Rethinking Construction 525 Projects since 1998, incl. 203 housing sector Value £13bn 430 completed, 95 live Involvement of 1176 organisations UK-wide 176 case histories 63 associated reports and publications Innovators Early Adopters Early Majority Late Majority Laggards

Implementing the principles of Rethinking Construction

525 Projects since 1998, incl. 203 housing sector

Value £13bn

430 completed, 95 live

Involvement of 1176 organisations UK-wide

176 case histories

63 associated reports and publications

Economic KPIs Demonstration v Industry 2009 CE 2009 Industry 2009 = 100 Profitability Client Satisfaction - Product Client Satisfaction - Service Defects - Impact at Handover Predictability Cost Predictability Time Productivity (Current Values) Productivity (Constant 2000 Values)

Demonstration v Industry 2009(2) CE 2009 Industry 2009 = 100 People and Environment KPIs 2009 Demonstrations outperform the industry by an average of 80% Safety – Overall Safety - All Projects Employee Satisfaction Staff Turnover - All Projects Qualifications & Skills Environmental Impact - Product Environmental Impact - Construction Process

Core improvement themes

Construction Commitments Procurement and integration Client leadership Design quality Commitment to people Sustainability Health and safety

Procurement and integration

Client leadership

Design quality

Commitment to people

Sustainability

Health and safety

26% reduction in new orders (last qtr, £B) - 28% - 57% + 20% + 36% - 36% - 41%

The long-term cycle Page Construction output £m in 2000 prices Source: CSN (ONS, NISRA, Experian)

“ Crisis = danger + opportunity” 危機

‘ Economic climate change’ U-turn back to the old ways Go for full collaborative working

U-turn back to the old ways

Go for full collaborative working

‘ Economic climate change’ Revert to type Long tender lists Lowest tender price Claims Cost and time overruns Abandon sustainability Shed people Collaborative working Best value/real value Collaborative working Target price plus lean Delivery to all KPI targets Sustainability remains key driver Retain good people however possible

Revert to type

Long tender lists

Lowest tender price

Claims

Cost and time overruns

Abandon sustainability

Shed people

Collaborative working

Best value/real value

Collaborative working

Target price plus lean

Delivery to all KPI targets

Sustainability remains key driver

Retain good people however possible

Collaborative working key principles Leadership Vision Processes ‘Hard’ measures People ‘Soft’ issues

Collaborative working Critical success factors Early involvement Selection by value Common processes and tools Measurement of performance } continuous Long-term relationships } improvement Modern commercial arrangements

Early involvement

Selection by value

Common processes and tools

Measurement of performance } continuous

Long-term relationships } improvement

Modern commercial arrangements

Historic procurement 17 months to “start on site” MONTH ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Appoint Architect Appoint Consultants Concept Design Tender Documentation Evaluation/Negotiation Redesign/Design Dev. Planning Appoint Contractor Mobilise/Procurement Construct Competition Appointment Tender                       

Aspirational procurement 10 months to “start on site” MONTH ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Appoint Architect Appoint Consultants Appoint Contractors Concept Design Design Development Procurement Agree Cost Plan Planning Mobilise Construct Over 6 months early                       

Frameworking clients Retail: Asda, Marks and Spencer, Sainsbury, Sommerfield, Tesco, Boots Developers: Stanhope, Slough Estates, Land Securities Corporates: BT, BBC, Abbey National Utilities, eg all water companies under AMP4 Central government: defence, health, work and pensions Local government: “Best Value” Housing: RSLs

Retail: Asda, Marks and Spencer, Sainsbury, Sommerfield, Tesco, Boots

Developers: Stanhope, Slough Estates, Land Securities

Corporates: BT, BBC, Abbey National

Utilities, eg all water companies under AMP4

Central government: defence, health, work and pensions

Local government: “Best Value”

Housing: RSLs

The potential for further value for money savings in the public sector” NAO, 2005 UK public sector construction 2004: £33.5 billion Central govt Local govt Improved productivity based on more effective programmes and streamlined procurement £220M £500M Collaborative working approaches £325M £760M Savings in whole life costs of built assets £770M Total savings £2.6 billion

Early involvement - lead times System 6-12 weeks Glass 8-20 weeks Pressings 4-14 weeks Auxiliary products 4-14 weeks GL A M A LCO

System 6-12 weeks

Glass 8-20 weeks

Pressings 4-14 weeks

Auxiliary products 4-14 weeks

Early involvement - design expertise Piping cost = £155,000 Equivalent length = 700m Piping cost = £116,000 Equivalent length = 494m

Old understanding of “price” Tender price, outturn price, claims Tender price Value added/benefit for client - people, supplies Profit Other cost/waste Claims = extra cost + profit ‘ Right’ price Overheads

New understanding of “cost” Value, budget, target price, cost, risk, profit Tender price Manage Agreed ‘ Target price’ Agreed Reduce Increase Claims = extra cost + profit Value added/ benefit for client Profit Other cost – waste Overheads Risk

What is “Value”? Value = Benefit ___________ Cost More for less

Be Valuable How facilities add value for users

Whole life value DEVELOP MANAGE CONSULT CONSTRUCT DESIGN LIFE CYCLE

What the customer really needs Construction Business Costs Operation and Maintenance Process Push User Pull Business outcomes Design Source: Royal Academy of Engineering

What the HEALTHCARE customer really needs Construction 42 Business Costs 4.3 1 Operation and Maintenance Process Push User Pull Healthcare outcomes Clinical outcomes Hospital-acquired infection rates Safety outcomes Medication error rates Medication rates Re-hospitalisation rates Length of stays Costs per unit of service Patient & visitor satisfaction Staff morale & turnover CABE: Patients discharged in 6.4 days rather than 8.1 due to better environment Design 0.1 (ANNUAL COSTS)

What the EDUCATION customer really needs Construction “ 200” Business Costs “ 5” 1 Operation and Maintenance Process Push User Pull Education outcomes Building Schools for the Future: “ enhance teaching + learning helps to raise standards address workforce issue” Design 0.1 Source: Royal Academy of Engineering

Education outcomes

Building Schools for the Future:

“ enhance teaching + learning

helps to raise standards

address workforce issue”

St Francis of Assisi Academy, Liverpool “ A school which offers its pupils a green-focused education has won plaudits for having the best teaching standards in the country. ..John Drane, the school's assistant principal, believes the .. teaching environment has been one of the key factors in motivating the pupils to do better” Green values help academy top new league table The Independent , 11 Jan 2007

“ A school which offers its pupils a green-focused education has won plaudits for having the best teaching standards in the country.

..John Drane, the school's assistant principal, believes the .. teaching environment has been one of the key factors in motivating the pupils to do better”

Whitecross High School “The best... secondary school in the country (educational efficiency)” [BRE] “ [Taking] the number of students who have achieved 5 or more grades at A* - C including English and Maths, this year we achieved 51% compared to last [year’s] 35%.... This... is a massive increase and obviously this is the year.. that .. received all of its .. teaching in the new building.” This compares to a national increase of 2.5%

“ [Taking] the number of students who have achieved 5 or more grades at A* - C including English and Maths, this year we achieved 51% compared to last [year’s] 35%.... This... is a massive increase and obviously this is the year.. that .. received all of its .. teaching in the new building.”

This compares to a national increase of 2.5%

‘ Economic climate change’ - value through collaborative working U-turn back to the old ways Go for full collaborative working

U-turn back to the old ways

Go for full collaborative working

Value through collaborative working Don Ward Chief Executive Constructing Excellence www.constructingexcellence.org.uk

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