Radical Changes are Required to Improve Construction Industry

If we examine what project managers in construction industry do, and what they manage, few will merit description of managers of projects. What many have become are managers of contracts.?Books and expensive courses on contract administration and how to avoid, fight or prepare contract claims abound. The legal bill for the construction industry is frightening and golden career opportunities have beckoned for the legally qualified construction specialists. All this is happening because we continue to get the administration of the contact wrong. Somewhere in all this confusion and acrimony is a design and construction process, adding value to raw materials and equipment, transforming them into finished buildings which can then add value to our clients’ businesses.

That is what we need to focus on. The only added value that management can bring to the construction process is to make it safer and more efficient, and we cannot do that simply by quoting the correct clauses of the contract or writing the appropriate letters.

Increasing use of mechanisation brought greater efficiency, but the cost of equipment needed for a particular trade also increased and this growing capital investment started the drive towards today’s specialised sub-contractors. A recession and the cutthroat tendering/contractual claims environment that came with it produced dissatisfied clients and opened the door for management contracting, which in turn required these specialised sub-contractors and gave them their marketplace. Suddenly there was a contract between the manager and the production process and yet we still acted as if we directly controlled the work face. The contractual problems that inevitably arose required a fix and we started down the road to managing contractors, not production.

To increase control, we then developed even more specialisation, splitting the work into ever smaller packages driving deeper the wedge called a contract between the manager and the production process.

In terms of added value, it could be argued that the industry has almost stood still for decades, swapping efficiency gains in one area for inefficiency and increased cost in another.

If we step outside the construction industry, this period has produced some interesting developments with relevance to every industry. A study by the Massachusetts Institute of Technology, the machine that changed the world, published in 1990 describes how the Japanese car industry developed the Toyota Method of Production, often called lean production, and leapt to the forefront of the world in car production. Professor Lauri Koskela and colleagues have developed the concept of lean construction, adapting the ‘Toyota Method’ to our industry. It is fascinating that this advocates what is almost a return to where we started – managing production, but with the added efficiency derived 25 years’ development of power tools, mechanisation, new materials, and management thinking.

In essence, what lean production did was to recognise that the increased specialisation of mass production brought with it massive problem of poor quality, inertia and inflexibility, problems that were to become increasingly important as the pace of technological development increased. The mass production technique was ‘don’t stop for anything’. Quality was a problem for resolution later by expensive re-work programmes – just keep the production line moving because the massive, fixed costs would not allow it to stop.

The specialisation that was achieved and the low wage, low skill mentality that went with it required a large back-up resource of skilled engineers just to keep the line moving – not adding value, just adding cost.

Toyota started by taking skilled workers, training them to increase and broaden their skills, allowing them to fix their own problems instead of standing idle waiting for the back-up resource to arrive. Quality of parts became a major focus, with workers encouraged to stop the line when problem arose, thus focusing everyone’s attention on the problem and how to eliminate it in future. Suppliers became an essential part of that process, being brought in to resolve the quality problem as part of the solution – not the party to blame. Right first time became a way of life with re-work problems and the dead cost associated with it steadily and consistently reducing.

On the surface, the relevance of this to our industry may be obscure, but there are many parallels from which we can learn. Take a bricklayer working on the wall. He starts working well, but then is held waiting for the next load of mortar to arrive. He then needs levels from the engineer to check lintel heights and waits because the engineer to check lintel heights and waits because the engineer is busy elsewhere for 20 minutes time, if the materials and information are there and the scaffolder has amended the lift for the next section. All a result of over-specialisation, resulting in too much downtime.

In studies they have carried out in Europe and the US, Koskela and his colleagues maintain that these ‘non-value adding’ activities equate to staggering 50% of the average construction operation, a figure confirmed time and time again in their studies.

So, let’s return to our brick layer. Train him to take his own levels, train him to alter or erect his own scaffold, safely and securely. Increase his skill, increase his pay perhaps and we start to make major inroads into that 50% dead time. Improve our planning and site logistics, developing further the production management skills we had 25 years ago.

All this seem possible if we directly employed our labour force. However, most skilled labour is now employed by trade contractors. The continuing popularity of managed forms of contract looks set to guarantee their presence for many years to come.

So, the question become, how do we achieve real improvement in the production process when the labour force is employed by a variety of specialist trade contractor?

The way forward is to start with our procurement methods. The current approach has generally had only one real focus – the lowest tender price and we have had that focus for far too long.

The attitude has undermined our ability to assess the added value of competing tenders. Our evaluation methods have become highly statistical, monitoring tender levels, establishing trends and using those and the crude competitive tender comparisons as the means for establishing the ‘best buy’. The impact of that buy on the production process on site is not considered.

Low tenders, often at or below cost, are the traditional response to a recession, producing aggressive trade contractors, with the emphasis on contract, keen to exploit the rules to their advantage and regain the profit that was cut from the tender. Contractual rules drive the situation not production management.

When conditions recover, the contractor reacts, adding profit to his tender, seeking to balance the swings and roundabouts. But budget allowances have been based upon a statistical analyst of previous tenders, all deflated by recession, resulting in a budget overspend. The knee-jerk reaction is to cut the cost, meeting the budget by de-scoping with late and hurried redesign the order of the day. The design disruption produces a routine of ‘firefighting’ on site, desperately trying to keep the design ahead of production, usually with disastrous results. Whatever the outcome, it is not sensible production management.

We must break the cycle. One method is an open book two-stage tendering process.

The trade contractor tender fixed management costs and profit levels, with the actual cost of the works provided on an open book basis. We must have the ability to understand how the prices for his work are built up and have access to his supply chain to properly audit these. We can then use this knowledge as the basis to build far more security into our construction budget.

We need to move the culture on quality from the one of blame to recrimination to the responsible one of investigation and fixing the problem at source, so that we also start to eliminate the re-work problem that creates delay and cost at the end of contract.

The managers must lead this process, building the team and facilitating the right environment, so that they have the confidence to challenge and innovate providing substantial added value for our clients.

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