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As part of its efficiency agenda, the Cabinet Office published the Government Construction Strategy in June 2011. It is a core part of the government’s strategy for increasing growth in the UK economy and follows on from the review of the cost of civil engineering works, which highlighted the role that the client can play in driving value in construction.
Context
The Strategy notes that construction output in the UK is worth in the region of £110 billion per year, of which around half is accounted for by refurbishment and improvement of existing building stock. The Strategy notes that poor procurement practice, a lack of investment, and the need to maintain a competitive market have all presented a case for fundamental change.
The Strategy intends that the public sector becomes a better client, understands construction costs more thoroughly, gives better visibility of construction activities, and facilitates the creation of more effective supply chains.
Better coordination
More effective coordination of public sector construction practice is a core aim of the Strategy. A Government Construction Board has been created, bringing together representation from across the public sector and including local government. The group will be chaired by Paul Morrell, chief construction adviser, and will direct a number of task forces and workgroups focused on reform. It will also drive the development of mandatory Government Construction Standards for all central and English local government construction.
ACE has noted the often disparate nature of public construction practice, and believes that this new grouping offers the opportunity to facilitate sharing of effective practice, particularly in local government.
Greater visibility
The Strategy recognises that suppliers require sufficient visibility of planned projects in order to adequately invest in the people and resources needed to deliver. To this end, the government will establish a rolling two-year pipeline of works to which funding has been allocated. Once established, this horizon may be extended.
While this is a welcome commitment to increase visibility, ACE feels that two years may prove to be too short, particularly given that major programmes can extend beyond the lifetimes of parliaments.
Procurement models
The Strategy aims to drive the development of improved procurement models that reduce waste, encourage the development of integrated supply chains, incentivise cost and programme efficiency, encourage standardisation and attract private finance.
Within all of this, the development of a truly integrated delivery team is paramount. One of the chief criticisms levelled at the construction industry is its perceived fragmentation and disconnected.
Cost benchmarking
As part of improving government understanding of value for money, the Strategy emphasises the need for benchmarking of construction costs, leading toward a more standardised understanding of value for money.
ACE has recognised that the lack of comprehensive understanding of the cost base of construction is a chief barrier to delivering better value. It is therefore pleasing to see this acknowledged as part of government strategy.
Contracts, prequalification, payment and insurance
ACE has consistently called for the greater use of recognised standard forms of contract with minimal variations. The Strategy recognises this.
Repetition and waste in prequalification processes – a long-standing concern of ACE members – is addressed by the adoption of PAS 91-standard prequalification forms in all central government procurement processes.
The Strategy reiterates previous government commitments to speed cash flow through the supply chain through fair payment provisions.
The Strategy also proposes the development of integrated project insurance, in collaboration with the construction industry. This should help to drive down project costs and improve the management of risk.
Aligning design, construction and operations
Under the Strategy, proposals will be developed in regards to how designers and constructors will be required to prove the operational performance of buildings in around three to five years post-handover. This reinforces proposals for a “new professionalism” made by the Usable Buildings Trust, and is aimed at realising greater energy efficiency and sustainability in new buildings.
Implications for ACE members
The Government Construction Strategy potentially represents a significant step change in the way that the public sector procures and manages construction. Clearly, achieving cost efficiencies is the primary motivation, yet the need to ensure achievement of carbon reduction targets is also embedded.
For ACE members, the Strategy appears to address some long-standing criticisms of public sector behaviour. Recognition of the role that clients have in achieving best value was identified strongly by Infrastructure UK in its review of the cost of civil engineering; the Government Construction Strategy continues this theme.
Commitments to improve the use of contracts, prequalification questionnaires and project insurance are also welcome, as is the renewed focus on greater understanding of the cost base of construction.
There is also the recognition that public sector clients need to share knowledge and best practice with each other, including local government.
However, all of this is likely to be driven through a fundamentally changed industry structure. Public sector clients will expect integrated propositions from the industry, which may encourage more consolidation, alliance building and joint ventures.
Paul Morrell and his team also face a significant challenge of changing cultures. Embedding best practice principles across the public sector will take quite some time. While some agencies and bodies are already making strides to address the efficiency challenge – notably Network Rail with its proposals for new models of programme delivery – others will take longer to make the transition. Support at all levels in the public sector will be critical to ensuring that the Strategy is translated into real benefits.
Another major risk to construction is political. Changes of government can pose a risk to programmes, and thus can pose challenges to developing longer-term and larger-scale projects. A key priority for government must be to find ways of mitigating political risk, thus giving assurance to suppliers, promoters and investors.
The Strategy does not apply to devolved matters in Wales, Scotland or Northern Ireland. ACE will continue to engage with authorities and core delivery agencies in the devolved nations in order to facilitate the best value agenda.
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