Re-Thinking the Construction Process for the 21st Century
Earlier this year I attended an event, and then read a number of articles, following the demise of Carillion Construction. The speakers at the event included people who were passionate about change in the construction industry. They were vociferous in the belief that something must be done to deliver projects better, without dispute, and that there must be new ways of doing things.
The one thing that was missing from this very positive approach, was an actual idea about what should be done. Apart from that teensy issue, the scene was set for change.
Preferring to be proactive, I started thinking about what the core issues actually are. What exactly needs fixing?
Major construction enterprises seem to work on low single figure margins, while delivering great feats of engineering, at great risk, and in the middle of a serious skills shortage. Hard to fathom that one. With tight margins, there is nowhere to go on a problem job, when costs start to mount. Accepting that there are many problems, one often cited is that the whole endeavour costs too much and the costs always rise, seemingly out of control. Over the years, ideas have come along to save money and do so by making the industry more efficient. I remember going to partnering seminars back in the noughties and being promised savings of between 20% and 25%. I have also attended BIM conferences, where savings of 15% to 25% have been set out as the key drivers to integrate new working methods. By now, projects should therefore be costing between 35% and 50% less than before. As a quantum expert, reporting on pricing of projects on a regular basis, I hate to be the bearer of bad news, but these savings are not yet on my radar. Moreover, costs are rising year on year, as one would expect.
So, what cunning plan can be deployed to create great savings in construction and engineering?
Sometimes it’s important to go back to basics. Start with a very simple project. Let’s start with two bricks. Ok, so not an ambitious project, but potential for a barbeque at least. In order to lay two bricks, I need:
i. The bricks
ii. Some mortar
iii. A bricklayer
I accept that you can save money on anything. I however suggest that once you have specified a brick of good quality and a small amount of mortar, there is very limited scope to save any more. The bricklayer can be local, or imported at lower rates, but a skilled man in any environment will have a minimum price he can work for. The price, is effectively the price. Partnering is not going to save 20% here, nor will a collaborative form of contract or the use of BIM.
I use this simple example to suggest that the materials and labour required are not going to be the opportunity for great savings, without compromising quality, in almost any project. If a competent buying process takes place, these costs have a minimum value.
That bricklayer will have people behind him. There will be:
i. An estimating department
ii. A buying department
iii. A Manager
iv. Accountants
v. Support staff
vi. An HR department
vii. A sales or BD department
viii. Some marketing staff
ix. A quality assurance team
x. An insurance manager
xi. Some designers or checkers
xii. Some directors, a CEO, and many others
My latest favourite addition to this list being a GDPR compliance manager. Don’t try laying any bricks without one. I apologise to the many support functions I have not mentioned. The 40 or so people now involved in this company that will, in some way, help the guy laying the bricks, all do a good job and have a clear function.
My point is, it is these support and management functions that have grown over the years, and these are the areas in which the savings could be found. In other words, the only way to really save is to take out extra layers that you have already put in. Get back to two bricks. Can these support functions be executed in such a way as to reduce costs by increasing efficiency? Can this be done while still delivering quality in a safe manner, without increasing the risk of defects or disputes?
Reviewing large construction companies’ costs, is a complex process that specialist management consultants often undertake. They don’t lay any bricks either.
In the UK we have some great innovators. Not just in construction, but in technology-based industries. In the aerospace and automotive industries, their products are developed by evolution of a period. Each version slightly improved on the last, the latest iteration seemingly light years ahead of the first but achieved by a series of small steps. I have already written about Kaizen for Consultants in another article, and that’s the approach. However, in those industries, technology (and often updated regulation) dictates that every few years a completely new approach is needed from scratch. A clean sheet of paper. There is also a constant push for better performance, without waiting for a catalyst for change. I have just finished reading the autobiography of Adrian Newey [1], a well-known innovator in his field, and the last few sentences of the book sum up his consistent approach of the last 35 years “…How can we increase performance? How can we improve efficiency? How can we do this differently? How can I do this better?...”
Conclusions
Perhaps the time has come to take a new approach. Instead of studying the existing processes to see what can be modified, altered or adjusted, instead of searching for new software or clever gadgets, the answer might be to take a different approach.
To start with a clean sheet of paper.
Perhaps go back to two bricks, and re-imagine how we go about building from the basics?
[1] Adrian Newey – How to build a car – Harper 7 Collins - 2 November 2017 - ISBN-13: 978-0008196806