the movement for innovation alan crane – chairman industry advisor-- li brandt & co in...

The Movement For Innovation

www.m4i.org.uk

Alan Crane – Chairman

Industry Advisor-- Li Brandt & Co in association withHammondSuddardsEdge

Why rethink construction ?

£64 billion turnover - 10% of GDP

Employs 1.7 million

Low profitability

Substantial under-achievement

Low levels of investment

High client dissatisfaction

The Report: - Commissioned by the Government

The Scope: - For improving the quality and

efficiency of UK construction

The Task Force: - Led by Sir John Egan included a

number of people from other industries

‘Rethinking Construction’

Bases its recommendations on tried and tested methods from other industries

Sets out a model for change and improvement

Based on integrated teams-people working together!

Needs the procurement process rethinking

‘Rethinking Construction’

Why M4I was created

Committed leadership

Focus on the customer

Product team integration

Quality driven agenda

Commitment to people

Drivers forChange

Product

development

Production of

components

Project

implementation

Partnering

thesupply chain

Improving theProject Process

Targets forImprovement

Capital cost

Construction time

Predictability

Defects

Accidents

Productivity

Turnover & profits

-10%

-10%

+20%

-20%

-20%

+10%

+10%

‘Rethinking Construction’ – a reminder!

The structure of Rethinking Construction

The ‘Rethinking Construction’ report recommended:

Clients committed to improvement should undertake demonstration projects to develop and illustrate the ideas set out.

This core of projects to become the basis of a movement for change & innovation

Why M4I ?

Mission Statement

“The Movement for Innovation aims to lead radical improvement in construction in value for money, profitability, reliability and respect for people, through demonstration and dissemination of best practice and innovation.”

Rethinking the Procurement Process

Teamwork, not individualism

Eliminate social barriers

What we need to do

Satisfy the customer

Eliminate blame culture

Front end integrated thinking

Partner!

Progress in the first two years

270+ Demonstration Projects with value of more than £5 billion

M4I website and Knowledge Exchange

Established nine regional clusters within UK

Pan industry key performance indicators – proving the business case

M4I Membership

Annual national conferences and regional events

More than 6000 organisations engaged

74 Published Case Histories with a further 25 on the way

The Demonstration Projects

From all industry sectors

Participate in ‘Clusters’ and share knowledge

Demonstrate innovation relating to ‘Rethinking Construction’

Commitment to measure performance

Be open and honest about success/failure

Set high standards of safety and respect for people

Innovations are therefore implemented on real projects and in real-time and tested by industry peers

The demonstrated innovations are further developed with peer feedback (ongoing improvement)

New ideas and fresh inputs are received

Prove the business case for change

Share expertise and experience across commercial and trade barriers of both successes and failures

Benefits of Demonstration

Recognised as leading edge

Attract media and peer interest

Opportunity to raise profile

Be part of a standard setting forum

Be a member of a network for radical improvement

Share and develop ideas without commercial barriers

Utilise innovations developed by others

Improve performance

Secure commercial advantage

Benefits to Demonstrators

Targets for next 12 months

Maintain Demonstration Project Programme – with targettingof priority areas particularly design and manufacturing

Trial developing procurement processes

Continue to make the business case.

Build on developing background drivers.

Background Drivers

National Audit Office Report (Modernising Construction) strongly endorsed the application of Rethinking Construction principles to Government procurement- it is unlikely that the lowest price will represent best value!

Legislation requires local Government to obtain Best Value (and achieve continuous improvement) in procurement and service delivery.

Support for Rethinking Construction from major Clients through the application of the Clients Charter.

Implications

Leading private and public sector clients will increasingly be looking to place business with construction companies applying Rethinking Construction principles.

  Increased opportunities for strategic partnering with supply side

partners.  Businesses that have a (justified) reputation for innovation and

commitment to their people will be more attractive as strategic partners.

  Cost of ownership will increasingly become the most critical factor

for clients,and design for whole life holds the key! 

Whole Life Cost

1 : 5 : 200

1 = Capital cost

5 = Maintenance and Operation

200 = Occupation

Local Government- Best Value

Central Government- Achieving Excellence

PFI/PPP

Design and Construct

Prime Contracting

Partnering Agreements - PPC 2000/ NEC/ Traditional

Common threads- Integrated Teams, value not cost, look at the whole life, measure performance.

Different Procurement Routes

Government - Achieving

ExcellenceRethinking Construction Procurement

Why Change? Central Government spends £11 billion per annum

a 10% saving equates to £1.1 billion

Which is 12 hospitals, or

50 secondary schools

REAL VALUE INCREASES

Government - Best Value

Rethinking Construction Procurement

Why Change? Local authorities spend £16 billion per annum

a 5% saving equates to £800 million

St. Helens spends £26 million per annum

A 5% saving equates to £1.3 million

REAL VALUE INCREASES

Government - Best Value

Best Value in Construction

Do these never happen in your Authority? Design programme late.

Tender period cut short.

Bill of quantities period cut short.

Tender price varies widely from budget.

School not opened on time.

Extensive defects list.

What about the Private Sector

Are they leading or following? Framework Agreements

Supply Chain Relationships

Partnering- whatever that means!

Strategic partnering through the supply chain

What is Strategic Partnering ?

“All partners must embrace partnering as - a rigorous management method which requires an internal policy, formal selection, training, the identification of clear objectives and the development of an agreed strategy for effective implementation at all levels.”

Partnering is not,

post award team building as an anti-litigation strategy

Strategic partnering through the supply chain

Strategic Partnering - Key Principals

Partnering Policy Selection & assessment - (culture & level of compatibility)

Compatible organisations

Continuous Improvement Programme

Commitment to performance measurement

Win : Win arrangements

Problem solving and dispute resolution

Training

Linking procurement and profit

Profit is for everyone !

Reduce the reliance on costly competitive tendering

Develop long term relationships

Replace ‘Contracts’ with performance measurement

Design for construction and use

Invest in training

Secure our industry’s future

Increase profits by at least 10%- year on year - Sir John Egan, Construction Task Force

ProjectProject performanceperformance

Client satisfaction: (Product and Service) Defects Predictability: (Cost and Time) Construction Cost Construction Time

ProjectProject performanceperformance

Client satisfaction: (Product and Service) Defects Predictability: (Cost and Time) Construction Cost Construction Time

Company performanceCompany performance

Profitability

Productivity

Safety

Company performanceCompany performance

Profitability

Productivity

Safety

The 10 (Headline) KPIs

Economic – KPI Working Group

Client Sat. - Product

Client Sat. - Service

Defects*

Safety

Year on Year Comparisons - 1999 v 2000Year on Year Comparisons - 1999 v 2000

1999 2000

73%

63%

65%

1037

INDUSTRY

72%

63%

53%

1088

M4I

93%

76%

86%

620

81%

76%

89%

716

1999 2000

Pred. Cost - Design

Pred. Cost - Constr.

Pred. Time - Design

Pred. Time - Constr.

Year on Year Comparisons - 1999 v 2000Year on Year Comparisons - 1999 v 2000

1999 2000

64%

45%

37%

62%

INDUSTRY

63%

52%

41%

60%

M4I

61%

66%

67%

69%

84%

59%

55%

69%

1999 2000

Profitability*

Productivity*

Cost

Time *

Year on Year Comparisons - 1999 v 2000Year on Year Comparisons - 1999 v 2000

1999 2000

5%

59

-2%

3%

INDUSTRY

5.5%

28

+2%

1%

M4I

7.1%

36

-7.1%

-12.9%

7%

164

-6%

-8%

1999 2000

Client S

atisf

actio

n

-

Product

Client S

atisf

actio

n

-

Servi

ceDef

ects

Predict

abili

ty

Cost -

Des

ign

Predict

abili

ty

Cost -

Con

struct

ion

Predict

abili

ty

Time -

Des

ign

Predict

abili

ty

Time -

Con

struct

ion

Profit

abili

ty

Product

ivity

Safet

yCos

tTim

e

M4I 2000 v Egan year-on-year targetsM4I 2000 v Egan year-on-year targets

50

100

150

200

Egan year-on-year target

M4I 2000

120 120 120 120 120

110 110 110 110

120

KP

I C

omp

aris

ons

1999 Construction IndustryAverage - DETR

Why Change ?

• Construction industry under-achieving

• Low profitability & inefficiencies

• Not enough capital investment

• Lack of research and development

• Too many dissatisfied clients

• Labour and skills shortage

• April 1999 - March 2002 extended to 2004

• Supported by DTI, The Housing

Corporation, NHBC and members:

to reflect whole industry

• To promote Egan targets: innovation and continuous improvement in the housing

sector

The Housing Forum

Nearly three years on…….

• 125 approved Demonstration Projects representing £1.6bn construction costs

• 185 subscribing members

• Seven regional groups

• Four reports on DPs progress

• Eight working reports

Key initiatives

• National customer satisfaction survey

• Development of RR&M KPIs

• Impact of planning on innovation

• Promoting recruitment, retention and respect for people

• Sustainable construction

Key partnerships

• Housing repair and maintenance Demonstration Projects with the Local Government Task Force

• Case studies and dissemination with the Construction Best Practice Programme

• Benchmarking Club with Building Research Establishment

The Movement for

Innovation

M4i

The Local Government Task Force

Government Construction

Clients’ Panel

Rethinking Construction Ministerial Steering Group

The Housing Forum Board

Executive

Open members

Demonstration Projects Panel

(standing)

Regional groups (standing)

Working groups (time limited)

KPIs

Customer Satisfaction

Sustainability

Recruitment, retention and

respect

Steering Group

Core Members (standing)

Policy Development Groups (time limited)

Industry Liaison Group

(standing)

Construction Best

Practice Programme

Structure of the Housing Forum within the Rethinking Construction initiative (at 04/00)

Demonstration ProjectsDemonstration Projects

• Emphasis on partneringEmphasis on partnering

• Strong trend towards prefabricationStrong trend towards prefabrication

• Projects cover all the ‘Egan’ targetsProjects cover all the ‘Egan’ targets

• Using Key Performance IndicatorsUsing Key Performance Indicators

• Additional voluntary indicatorsAdditional voluntary indicators

• Supported learning networksSupported learning networks

Repairs and maintenance

• Call centre operated by contractor

• Reducing administration costs

• Increasing tenant satisfaction

• Reducing defects

• Covers 8,000 properties

Demonstration Projects by theme - Broomleigh HA

HOUSING FORUM PROJECTS COMPARED WITH HOUSING INDUSTRY PERFORMANCE 2000

0

10

20

30

40

50

60

70

80

90

100

KPIs

% O

n Ta

rget

or

Bet

ter

Housing Industry 2000

Housing Forum May 2001

Housing Forum August 2001

PRODUCTIVITY

0

5

10

15

20

25

30

35

40

45

50

Housing Industry2000

Housing Forum May2001

Housing ForumAugust 2001

MED

IAN

VA

LU

E A

DD

ED/E

MP

LO

YEE

(£0

00)

TIME

-10

-8

-6

-4

-2

0

2

4

6

8

Housing Industry2000

Housing Forum May2001

Housing ForumAugust 2001C

HA

NG

E C

OM

PA

RED

WIT

H O

NE

YEA

R A

GO

(%

)

COST

-5

-4.5

-4

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

Housing Industry 2000 Housing Forum May2001

Housing ForumAugust 2001C

HA

NG

E C

OM

PA

RED

WIT

H O

NE

YEA

R A

GO

(%

)

ACCIDENTS

0

0.05

0.1

0.15

0.2

0.25

MARCH 2001 MAY 2001 AUGUST 2001

DATE

AV

ERA

GE

NU

MB

ER O

F A

CC

IDEN

TS

P

ER P

RO

JEC

T

PROFITABILITY

0

1

2

3

4

5

6

7

Housing Industry 2000 Housing Forum May2001

Housing ForumAugust 2001

MED

IAN

PR

OFI

T O

N T

UR

NO

VER

(%

)

The Movement For Innovation

www.m4i.org.uk

Alan Crane – Chairman

Industry Advisor-- Li Brandt & Co in association withHammondSuddardsEdge

© 2002 Alan Crane, Movement For Innovation, U.K.All rights reserved. No part of this paper may be reproduced, distributed, published, or transmitted without the prior permission of the copyright owner.