The construction industry's Olympic challenge

London’s 2012 Olympic bid win gave a huge psychological boost to the capital,
but can the UK’s construction industry deliver the games on time and to budget?

It is one of Britain’s biggest industries, contributing 10% to the UK’s GDP
and employing over two million people, but construction lags behind other
sectors when
it comes to embracing change.

The industry is something of an ‘underachiever’ when it comes to delivering
projects on time and within budget. At a time when London is preparing for the
2012 Olympics, the message is clear ­ a shake-up of the construction industry is
long overdue.

It is not enough for London to have simply won the Olympic Games bid; the
capital has to deliver them. But hampered by inefficiency and outdated
practices, one of the toughest challenges facing the sector is eliminating
project delays and cost overruns.

The payoff for getting it right is not to be sniffed at. Hosting the Olympics
stands to boost Britain’s domestic product by £1.9bn over the next 15 years, but
the projected cost to the taxpayer is estimated to be in excess of £4.9bn -­ a
huge shortfall that Britain’s economy will have to overcome. While ministers
promise to double their efforts to keep a tight rein on their £1.4bn budget,
fears of spiralling overheads are already circulating.

There are also question-marks over plans to regenerate the Lea Valley in East
London. Many are sceptical as to whether the project can be completed on time.
Domestic experience, coupled with the chequered history of other flagship
projects (Multiplex has already admitted it will make losses on the new Wembley
stadium) have led to speculation that the Olympic Park, transport links and
media facilities will not be ready in time.

For contractors, a culture of competitive tendering has also fuelled the
downfall of major construction projects. Without efficiency improvements it is
unlikely that contractors will be in a position to deliver these complex
projects on time, within a reasonable budget, and walk away with a profit
margin.

At its best, the industry leads the world in design, product and process
innovation.
But if it is to achieve its full potential and support the deputy prime
minister’s drive for modernisation and sustainable communities, substantial
changes in culture and structure are fundamental. The good news is, anyone can
achieve significant improvements in efficiency and quality, given the time,
commitment, resources and a willingness to think differently.

Admittedly, sustaining radical improvements in a sector as diverse as
construction is by no means easy, but focusing on two key drivers ­ long-term
project relationships, and logistics and supply-chain management ­ can help set
a new agenda for the industry at large.

The UK boasts around 192,000 construction firms, 164,000 of which have less
than 24 employees, resulting in a project process typified as a series of
sequential and largely separate operations.

Continuity of personnel in teams is essential to delivering peak performance
and profit margins for the entire supply chain, moving the focus away from
survival and squeezing suppliers to rescue overheads.

By committing to mutual objectives and devising a way to resolve any
disputes, partnering can eradicate the symptoms of inefficient use of labour,
wasted materials and escalating costs, all of which are commonplace in
short-term alliances.

In an era where skilled labour is increasingly rare and expensive, research
demonstrates that getting materials to the right place and at the right time can
catapult labour efficiency from 40% to over 90%. Lean processes using
just-in-time delivery, already common in the car and retail industry, are a
vital means of eliminating on-site storage and problems associated with leaving
materials that are vulnerable to damage or theft.

Partnering with suppliers also allows organisations to share demand data to
improve product availability and successfully bring new products to market.

All in all, the customer should be at the heart of everything the
construction industry does. Greatest value is not achieved through one-off
advances, but an ongoing commitment to meet customer needs and provide materials
at the right time and at the right budget.

A handful of enlightened companies have applied partnering and supply chain
efficiencies at a grass-roots level. But there is clearly a long way to go. The
key processes need to be accelerated and spread across the rest of the industry
in the hope of avoiding the pitfalls of many flagship projects.

The Olympics will, undoubtedly, leave an indelible mark on London and the
construction industry as a whole. With regeneration works valued at £8.3bn,
construction has two choices.

The industry can either ignore the lessons learnt from other major projects
or integrate the long-term alliances and supply chain efficiencies. This will
establish the industry as the progressive and forward-thinking sector that
projects like the Olympics demand and the country deserves.

Matt Nichols is business development director at building materials
distributor Wolseley UK

Panic over

Members of the accounting, building and software industries have been nothing
short of vociferous in their criticism of HMRC’s clampdown on self-employed
building contractors. Concerns were rife that the new construction industry
scheme, which changes the way contractors and subcontractors deal with tax and
NI liabilities, would lead to incorrect tax payments, fines and at worst,
business failures and job losses.

For once, those fears do not appear to have fallen on deaf ears. Last month,
the Treasury said it was potponing the scheme by 12 months and financial
secretary to the Treasury, John Healey, said the department would ‘step up its
level of advice and compliance activity with the industry’.

New interactive online software and 70 telephone advisers are now available
to assist advisers and their clients. Construction union UCATT estimates that
there are between 300,000 and 400,000 false self-employed construction workers,
costing taxpayers £2bn a year.