The difference is 5%

If you have read some of my recent blogs, you will have picked up that I have been following Phase 2 of the Grenfell Inquiry, which is currently revealing all that is wrong with the UK’s construction sector.

Despite 72 people losing their lives due to these inadequacies, absolutely nothing has changed and there are undoubtedly many more Grenfell disasters waiting to happen.

So, where is the issue?

I’ve struggled with this. It seems that there’s a culture of cutting everything to the bone. This means that everyone is trying to get things done quickly and they want to pass on any risk rather than get it right in the first place.

However, no designer or contractor can make a fortune because of very tight margins which drive certain behaviours.

When Space Architects provide a fee, I can guarantee that it is always too high. There is always a threat that somebody else will do the job cheaper. To make a substantial profit, the businesses who undercut with low fees are driven to cut corners and employ less experienced people on the cheap.

Consultants’ design input is valued at the planning permission stage where the return on investment is clearer. However, technical design is not valued, and the culture is to get it done as quickly and as cheaply as possible.

Construction cost has fallen into a value engineering methodology where a building is designed and then reviewed to see where cost can be taken out, usually by reducing specification to the lowest common denominator.

Quality construction from contractors and subcontractors is also not valued and generally not paid for.

So, we have a culture to drive costs down. The question is: if the designers and constructors are not making money, who is driving down the cost?

In development and investment, there is a magic 20%. Developers want to make this level of return in their appraisals, whether commercial or residential. Looking at the construction lifecycle, this seems to be the only place where there is any headroom. Maybe if this expectation was reduced to, say, 15% it might allow the supply chain to make profit which could then be invested in getting things right the first time by training the future workforce. We would also have time to look at innovation to help us find better ways of doing things.

Developers might say this is not possible. However, several housebuilders made nearly ￡1bn profit last year. Just a little bit of that would make a huge difference.

It is therefore the responsibility of shareholders to look at not only bottom line, but also the value of investing in a better and sustainable construction industry.

This is fine for the private sector but what about the public sector, where there are no shareholders?

In the public sector, the design and construction supply chain have generated their own problems with aggressive fee bids. Consultants and contractors are chasing too little work and cost is often the differentiating factor.

The only way to change this is for the design and construction teams to walk away from projects where the fees and margins are unsustainable.

Clients such as universities and local authorities should be willing to disregard unsustainable fee bids. On many projects, this is the case and the benefits are demonstrated in the outcomes.

I do believe things are changing and, as new people enter the industry over the years ahead, we will see an improvement.

I would just like to see it happen before there is another Grenfell.