Select Committee on Public Accounts Second Report




IMPROVING INDUSTRY PERFORMANCE

Co-ordination of initiatives aimed at the construction industry

20. The Department of the Environment, Transport and the Regions are promoting several initiatives to disseminate good practice to the construction industry. Many industry bodies have also been established to promote improvements reflecting the large and diverse nature of the construction industry. Some members of the industry find it difficult, however, to identify the best source of assistance and where to devote their time to facilitate the most improvement in their company or organisation.[18]

21. We asked the Department of Environment, Transport and the Regions what could be done to refine and co-ordinate this variety of bodies and initiatives. They said that the diversity was not surprising, since the construction industry had 1.9 million employees and has 140 different institutions representing a very broad range of interests. The arrangements were complicated but those working in the industry could relate to their own industry body, which in turn could relate to the various industry programme initiatives which the Department were promoting.[19]

Demonstration projects

22. As part of the Movement for Innovation initiative contractors and clients have been encouraged to put forward demonstration projects which reflect innovation and good practice from which other companies and their clients can learn. By May 2000, however, of 171 demonstration projects submitted only 31 had resulted in case histories promulgating good practice.[20]

23. The Department was asked by the Committee how they were ensuring that the projects selected demonstrated lessons worth learning. They said that, when the demonstration projects were launched, the first priority had been to capture the enthusiasm of the industry to participate and to get companies to volunteer projects. The criteria to qualify as a demonstration project were now much tighter and the results of each project in terms of improving construction performance had to be capable of measurement.[21]

Construction Best Practice Programme

24. The Construction Best Practice Programme was established in February 1998 and in 1999—2000 cost 2 million. It is intended to raise awareness across the construction industry of the need to change, to identify good practice and disseminate it to enable companies to take action to improve. It is estimated, however, that the programme has only reached 9 per cent of those working in the industry.[22] The Department told the Committee that 9 per cent of the working population of the construction industry represented a considerable number of people and said there were difficulties in communicating within an industry which has many different characteristics. It was not possible to compel companies to follow the programme's good practice. The key priority was to have a consistent improvement strategy and to incentivise the industry to implement it.[23]

Commitment of the construction industry to improve

25. The Construction Industry Board was set up in 1995 to represent all sides of the industry and to promote improvements in its performance. In June 2000 the Board reviewed its role and responsibilities, and its remit was changed to develop policies that would lead to improvements in the performance of construction firms.[24] We asked what the Board had been doing for the last six years, and whether there was a lack of commitment on the part of the construction industry to improve. The Department said that the Board had made progress, but the industry needed considerable help to modernise, as it consisted of a wide range of companies of different types and sizes, operating in different sectors with some more willing to improve than others.[25]

26. Such initiatives mainly involve large companies dealing directly with government while further down the industry the contact tends to diminish. It is important to involve the whole industry. We therefore asked the Department what percentage of the construction industry was involved with the Construction Industry Board. The Department estimated that the Board represented about 90 per cent of construction companies. The 10 per cent not represented included small companies or the self-employed, who elect not to become members of any trade association or other body. The Construction Industry Board also comprised four umbrella bodies representing a collective membership of over 150 trade associations and professional institutions (Figure).[26]

Investment in research and development

27. In 1999—2000 the construction industry, with a business valued annually at 65 billion, invested only 147 million in research and development. The Committee asked the Office of Government Commerce if that low level of investment was another factor demonstrating that the industry lacked the will to improve. The Office said that, because the profit being earned by the industry as a whole was low, it was difficult to find more money for research and development and for training its workforce, though larger construction companies were earning much more. The 1998 Egan ReportCRethinking ConstructionChad concluded that margins in the industry were too low to sustain healthy development.[27] The Department said it was possible that not all of the research undertaken was being recorded.[28]

Conclusions

28. Given the size of the construction industry, there is likely to be a role for a variety of organisations in promoting good practice. The current range of advice on offer carries the risk that people in the industry may find it difficult to identify the source of assistance most appropriate to their circumstances and where best to devote their efforts to bring about improvements in the industry's performance. The Department of the Environment, Transport and the Regions working with the Construction Industry Board, should develop a clearer marketing plan for the various improvement initiatives with better signposting for potential users so that they can find the most appropriate source of advice.

29. Demonstration projects which reflect good practice in construction performance are an important means of disseminating lessons. As at May 2000, however, only 31 of the 171 demonstration projects submitted by the industry since November 1998 had been accepted as demonstrating benefits which could be transferred to other projects. The Department of the Environment, Transport and the Regions assured the Committee that the criteria to qualify as a demonstration project are now better defined. The Department should nevertheless work with the Movement for Innovation to develop a more robust method for measuring the performance of these projects and sharing the lessons with the industry.

30. The Construction Best Practice Programme was established in February 1998 to raise awareness across the construction industry of the need to improve, to identify good practice, and to disseminate to companies. It is however, estimated that the programme has reached only 9 per cent of those working in the industry. That figure admittedly represents over 170,000 people; and difficulties also exist in communicating within an industry which has many different characteristics. The Department of Environment Transport and the Regions should nevertheless explore ways in which the programme can be better presented so that it reaches a higher proportion of the industry's workforce.

31. The drive to improve the performance of construction projects depends on public and private sector clients improving their performance in their purchasing and management of construction and also on the industry delivering better quality services. The Department of Environment, Transport and the Region's are seeking to work with those in the industry who are committed to these changes. The Department should convince all sectors of the construction industry of the benefits to both suppliers and clients of achieving long-term improvements in the performance of construction projects, and should secure the commitment of all sectors of the industry to achieving that goal.


18  C&AG's report HC 87 (2000—2001) paras 13, 1.15 Back

19  Qs 7—8  Back

20  C&AG's report HC 87 para, 1.13 Back

21  Qs 9—10 Back

22  C&AG's report HC 87 para 1.9 Back

23  Qs 32—37 Back

24  C&AG's report HC 87, paras 1.5, 2.18 Back

25  Qs 38—40, 47—49, 56, 71 Back

26  Qs 62—63 and Evidence, Appendix 2, pp 18—19 Back

27  Rethinking Construction by Sir John Egan, published by the Department of the Environment, Transport and the Regions and the Stationery Office in 1998 (ISBN 1851120947). The report sets out the findings of a review to advise the Deputy Prime Minister from the clients' perspective on the opportunities to improve the efficiency and quality of delivery of UK construction and to make the industry more responsive to customer needs. Back

28  Qs 15, 50—56 Back


 
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