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