Construction Crisis
I don't say this lightly, but I believe the construction industry faces a massive crisis.
Is construction becoming un-insurable?
Space Architects have just received their Professional Indemnity Insurance renewal. After our broker spending months chasing underwriters, they managed to find someone to provide us with cover.
We are not designing high-risk buildings or have a portfolio of multi-storey towers covered in ACM cladding. However, our premium has DOUBLED this year after similar increases since the Grenfell Disaster.
I can only see this continuing, with underwriters having little appetite for the sector. Who can blame them when they have watched the Grenfell Inquiry?
The inquiry has a way to go, followed by the publishing of the findings themselves. The sector will continue to be in the spotlight for a few more years yet.
The government's response in the form of the Building Safety Bill seems to be crawling through the legislative process whilst cladding continues to be of interest to journalists.
At the same time, the industry faces uncertainly following the pandemic whilst there may still be a fall out from Brexit, which we have all forgotten.
With a reduction in opportunities, margins reduce. Payments become delayed putting pressure on working capital when many companies have used up reserves to survive the pandemic.
To make insurance cover affordable, companies are reducing cover or increasing their excess. Many clients will unknowingly be uninsured for cladding or fire risk.
In the years ahead, when defects appear, building owners may find out they are not covered, or the company responsible may have no option but to fold, leaving the building owner to pick up the cost themselves. This is the exact opposite of what the Inquiry and Building Safety Bill is trying to prevent.
Some businesses will be bumping along the bottom or, unfortunately, have no option but to close the doors.
The industry only has itself to blame; however, when our PI renewal landed, I didn't think we'll it's my fault.
I feel frustrated and even annoyed about the sector I have made my career. I love what I do, and I love buildings; however, change over the 30 years I have been an Architect has been too slow. The reality is the majority of the sector either doesn't want to change or cant afford to.
Things have got better, but not in a significant way. Any change or innovation is an uphill struggle.
I am ever the optimist, and I am too old for a change in career to become a professional footballer, so I will stick with it and remain optimistic.
However, the sector's issues are the worst they have ever been, and they will only worsen.
Unfortunately, the only answer is legislation to prevent us from cutting our throats and encouraging clients not to accept the lowest price.
Those of us who are up for it still need to keep going, but mark my words, there are challenging times ahead.
If you want to read what journalists think about the sector, the article below is a good read:
Senior Executive Delivering Exceptional Project, Commercial, and Innovation Leadership across Construction and Infrastructure.
3 年Maybe it’s time to adopt project based insurance (pilots have occurred), where clients are required to take out insurance to cover performance issues in their supply chain. This would perhaps focus minds on appointing reputable designers and contractors with much greater focus on competency and capability rather than lowest cost (where that is the case). Bi-party contractual arrangements cascaded down the supply chain also foster complexity, fragmentation and lack of transparency - the use of multi-party contracts across the delivery team could create the necessary environment, ie, shared risk, pain/gain, peer pressure and ultimately full team accountability within projects. #integratedprojectdelivery #ipd
freelance Design Management and Architectural Design work at AJ Design NCL
3 年Hi Rob ,totally agree with your article the profit God for Contractors drives the commercial side to take chances with inferior materials and then apply pressure to the Architects to sign them off , the road to perdition!!
Founder and Principal Consultant at EvrBilt, Chairperson at Little Britain Challenge Cup
3 年Interpretation of risk is one of those things that blights our industry and not just from an insurance perspective. I remember when I started my career with some experience it was possible to start in practice and win decent sized (￡5M) projects. You wouldn't have a hope of that now, and at the same time frameworks force bigger practices to do those same projects at a loss. Prequalification requirements are also often ridiculous and in many instances I suspect falls by the wayside as soon as projects are won.
Solutions Architect - Verification & Validation
3 年Interesting read. The tragedy is innocent people lost their life through money saving incompetent value engineering and now leaseholders / tenants are paying for the mistakes of the industry. Worse still the MPs could have stopped landlords / developers from charging innocent people. The insurance companies are risk adverse and don’t like to pay out, so naturally they are being more selective and increasing the PI premiums. They know there is a possibility of huge insurance claims to retrofit safe building materials. The industry should have acted in a diligent and professional manner, offering fit for purpose solutions.
Managing Director at IPInitiatives Limited
3 年Sadly we so often reach for the legal solution to technical problems, but legislation is a sledgehammer to crack a nut. We need to change the process that encourages poor performance in the first place. We need genuine collaboration in which it is not possible for one party to succeed unless all succeed, and we need to shift the focus to outcomes instead of inputs. PII is a blame based insurance, but what if you had an alliance contract where none of the parties, including the underwriters are able to blame each other, whilst at the same time completion can only be achieved if the installation is given a clean bill of health by technical experts and outcomes are insured for 12 years, with everyone working under one contract and one insurance policy that eliminates the need for PI and insures the financial cost overrun too. Its not a dream its reality, its called the IPI Model and it works. BUT you are so right about the industry adopting change. We have been working on this for over 15 years and are still proving it delivers just one project at a time. So Rob, don't despair, lobby your clients to help us introduce a method of working which minimises risk while making project enjoyable for all and ultimately means you won't need your PII anymore. #ipialliancing