Government Construction Strategy - My Response

The Cabinet Office issued its Construction Strategy yesterday and I have spent the past 24 hours looking through it trying to understand what it means for the industry.

My overriding thoughts are that this is a really welcome strategy, which is long overdue. This government has clearly given consideration as to how it should spend its capital wisely and has pulled together a report which has included collaboration across a number of high level offices within Whitehall, the efficiency and reform group of the Cabinet Office construction sector unit of BIS, as well as Infrastructure UK.

In the past we have suffered from reports which have set out a vision rather than a strategy and plan. This document is different and has some clear, measurable objectives which enable us to move forward as an industry.

Clearly the issuing of the document is only step one and the critical issue now is whether it is adopted by all government departments and becomes central to what the government does.

The focus of the document seems to be very much on internal government procedures and how the government will procure and manage work, and less so on how the construction industry should respond. I believe it is here that the construction industry comes in, and should be capitalising on statements the government has made about benchmarking energy performance and cost, as well as the delivery of all buildings using BIM (Building Information Modelling).

Essentially, the government is setting out its expectations as a client challenging the construction industry, in the same manner as a potential preferred bidder must do, to set out its best response solution.

Traditionally the industry has been very conservative and has not progressed at a pace. Without a doubt, the expectations from government will be high and their benchmarks will be challenging. The industry therefore will have to invest in research, development and innovation. To achieve the levels of capital and revenue cost expected, the industry will have to think completely differently. I anticipate that a kick back from these proposals and only those who are willing to open their mind and think differently will flourish.

Throughout the document there are some very interesting facts and the one that struck me was that there are 300,000 businesses within the construction industry, of which 99.7% are SMEs with over 2 million workers, so clearly the fragmented nature of the industry will cause a problem in generating a holistic response.

The government is intending to establish a board which will be the centre point of this strategy and will communicate with all government departments. This is a much needed initiative in an industry that is so fragmented and does not yet speak with a single voice, so hopefully this will give clarity and direction to the industry.

It is interesting to see that the government has used the terms ‘standardised’ and ‘mass customised product’ in the report. Many organisations and individuals in the industry have fought against such an approach but the government’s advocacy of it is a clear indication of their intention to encourage the construction industry to move forward in this vein.

Another interesting addition is the fact that there is now a linkage between those who design and construct a facility and those who subsequently occupy and manage. Usually this linkage has not existed in any particular way and hopefully with the adoption of BIM the benefits will easily be demonstrated in the savings to revenue.

Across the action plan there are some very straightforward, yet important aspects which will make a considerable difference to the efficiency of the industry. There is a proposal to look at standardised Pre-Qualification Questionnaires (PQQs), such as PAS 91, as well as the potential of standardised procurement and contracts, something not currently prevalent within the industry.

Whilst BSF has been much maligned for its expensive approach, some of the information gained from the initiative was positive and has helped to inform policy. Clearly the idea of another forward plan of capital expenditure is a positive one, and it will allow organisations to invest long term and demonstrate value to client departments.

There also seems to be a willingness to ensure that the correct skills of procurement and management of projects are in place across the public sector, and as long as the individuals with these skills are sourced properly, their presence will ensure continuous learning and realistic expectations.

The idea of having structured cost targets and value criteria is also to be applauded. By collecting data and benchmarking, league tables can be identified and this in turn will help to develop the industry positively. The Movement for Innovation Programme was a good method of demonstrating the best in industry and provided some excellent benchmark data.

As an early adopter of BIM, _space group is pleased to see it mentioned within the strategy. The government clearly recognises the benefit that it will now receive as a client and will legitimise the approach across the construction industry. It is also interesting to see that integrated project insurance has also been considered and will be researched in greater detail in the future.

Overall I think this document clearly sets out what the government will be expecting from the construction industry over the next four years and will encourage a refreshing approach within the industry.

As the government is the single biggest client to the construction industry, spending around £41billion per annum, the industry has no excuse not to respond and achieve the benchmark targets which the government has set out in this report.

I am encouraged to see the report and it gives me hope for a better industry. However I am very realistic about the reticence that there will be across many organisations to adopt some of the proposals made in the report, and that this continues to be a tough time for the construction industry, one that will see many businesses stand or fall based on their decisions over the coming months and years.

The big housing question

I have been inspired to write this blog entry following a recent episode of Panorama. The programme was all about the need for affordable housing across the UK. There was a shocking contrast of housing in London which was fraudulently being let by landlords at extortionate rates and a family of 9 in Sheffield living in a 3 bedroom house.

There are around 5 million people on the housing waiting list in the UK and it was clear that the majority of people on this waiting list have no chance of being housed. During the show, Portsmouth Council went through their own list contacting most of the people on it, informing them that there was no chance of them ever being housed by the Authority. This meant that they cut their list considerably.

The big question however, is what happens to the people who will never be housed?

We have been developing Spacehus as a potential product for this market and we have managed to get a 3 bedroom house at an all in cost of around £84k on a small development. The running costs of this house would be around £10 per week which also would go some way to address fuel poverty.

A concept image of the £84k Spacehus that could help solve the affordable housing issue

The challenge is however, encouraging RSLs to develop. I have spent the last few months talking to many RSLs, and there is not ability or desire to develop new homes. This therefore means that the market is stagnant, so as no improvement is being made in relation to the waiting list, we face the problem of it getting longer.

It seems the reasons the RSLs are reluctant to develop is that they have been familiar with the grant process and the Government is now encouraging to change models and progress with an affordable rent model, which seems to increase their risk considerably in the longer term. All the details are not clear at present and I hope that I can dig deeper to understand what the problem is and to try and find a way around the challenges and encourage take up.

It does seem however, that there is a standoff between the Government and Social Landlords, meaning that we have a growing housing crisis in the UK.

Land values continue to be unrealistic and planning continues to be challenging. Both of these are preventing private sector involvement, putting the market in stalemate.

I still remain convinced, with my entrepreneurial hat on, that there is a need for housing which is affordable to buy or rent and run. At _space group we will continue to invest in finding a solution to this problem, until we find a way of getting affordable sustainable homes delivered.

For a number of years, we at _space group we have been driven by the purpose of making life better. After watching Panorama, I am sure that if we manage to crack this problem we will definitely make life better for the family in Sheffield who are currently sleeping on the settee.

The Future of Architecture

Will onsite be replaced by offsite manufacture in the future?

The recent publication by Building Futures about the future of architecture is an excellent insight into the challenges facing the industry. The report paints what I believe to be an incredibly accurate and perceptive view of our future.

The premise of the document is that there may be no architecture profession by 2025, which is an interesting argument and one I feel is close to what will be the reality of the situation.

Ultimately, I believe that the RIBA will end up representing two very different types of organisation.

At one end of the spectrum, the RIBA will represent the small general practitioners which operate in local markets on one-off niche projects. At the other end of the spectrum they will represent architects internationally – large international practices which deliver high profile complex schemes around the world.

Those medium-sized architects face the future of a diminishing marketplace. Previously, these practices have been involved in large Government programmes such as BSF or P21+. They have also delivered mixed use commercial schemes for developers across the UK.

In reality, it is no longer an option for these practices to rely on the Government for work, as the marketplace and requirement for these schemes is disappearing fast. Such organisations need an ongoing growth and revenue to provide investment in training and development and to cover large overheads.

The report hints at what these practices need to do to survive. They will need to reposition themselves and do something different in the marketplace.

Their future lies in capitalising in the need for a coordinating role. The use of BIM in construction projects supports the need for a lead designer or coordinator. There is an opportunity to embrace this role however I am sure many design managers within construction businesses will attempt to take on this role for themselves.

The role of consultant engineer may also diminish as both M&E and structural sub contractors take on more and more of the technical requirement.

The medium sized practice could also look to develop products on behalf of the industry. There is an opportunity to use the design skills which architects have to produce buildings which are manufactured rather than constructed. These products can then be sold to the large contactors or direct clients. If the designers can be clever enough they could create products which depend less on constructors and more on assembly, changing the industry through an investment in innovation. Large contractors who have strong balance sheets tend not to invest in research and development and are happy to continue to deliver projects how they have always been delivered.

The final area of opportunity for these mid-range practices is on international work. Over the past 10 years many of these practices have built up a great amount of experience in designing hospitals and schools. These skills should not be wasted and can easily be exported to other parts of the world. It will mean competing on a global stage, but with the right targeted marketing there may be an opportunity to fill the gap left by the reduced spending in the UK.

There is no doubt that the prognosis for architectural practice as we know it today is not good. By 2025, the profession will be very different and many of the current medium sized practices will not exist in their current form. A number of new businesses will have been formed by the more entrepreneurial and innovative business leaders, whilst many of the others will have been absorbed by larger construction companies who have identified the need for the coordination skills which are inherent in the traditional architect.

Wanted - 100,000 School Places

Students will have to work harder in overcrowded classrooms if changes aren't made - image from _space group.

Recent research has revealed that England is facing an acute shortage in the number of school places, with more than 1 in 10 pupils in the country in schools suffering from overcrowding.

The suggestion is that the government will need to build a total of more than 100,000 places at primary and secondary schools, at a cost of up to £2bn. 50,000 of these places are required just to alleviate overcrowding, while the other 50,000 are places that local government officials have estimated will be needed to prevent the spread of overcrowding.

This overcrowding is driven by attempts by Local Authorities to cope with the lack of good schools in their boundaries. Popular schools are being allowed to grow beyond their buildings’ limits, so that as many families as possible get a place at their first choice institution. This means that already full schools will be unable to expand to meet demand as pupil places continue to rise, and larger shares of children will need to take up places at less successful schools.

Not only could a lack of classrooms force schools to increase class sizes, it also threatens to undermine the government’s plans to boost competition in education, which appears to depend on spare capacity for children to move between schools.

Currently, more than ¾ million children, 12% of the total in Local Authority schools, are in buildings that are more than 4% over the capacity for which they were designed. Among these children, more than 250,000 are in schools that are 10% over the limits of their facilities, while over 60,000 are in schools that have 20% more students than their buildings are intended for.

Considering that the amount of four year olds is set to rise by 8% over the next two years, this issue will only get worse, and in order to prevent overcrowding, Local Authorities will need to find another 25,000 new primary school places, with similar numbers for secondary schools required by 2014/15.

These growth numbers will be problem for a new education secretary who is planning wide-ranging reforms. His reforms are intended to increase the competition among schools. However this relies on a margin of spare capacity and new link choices to be made.

Apparently the school places crunch is not evenly distributed with London suffering particularly badly. The previous government had identified indentified investment for Local Authorities facing the shortage of primary school places and Building Schools for the Future was intended to be the long term answer to this issue.

Obviously, there was a bit of political too-ing and fro-ing on this issue, however there can be no doubt that the overcrowding is increasing and that this is likely to be a political timebomb. Clearly, there needs to be a stand back in relation to education building provision and how this aligns with ambitions, policy and performance of schools.

Rob

Living in a recession

Illustration by Claudia McGehee.

We are all in a very strange situation at present. We currently sit in the middle of a recession where all around us budgets are being cut funding is disappearing and businesses are contracting. On top of this we have the added unknown of a potential new Government and changes in policy.

For business all of this presents a new set of challenges. We have to try and second guess what a new Government may do and how we can plan a strategy around this. Many of the plans we are making are based upon how we operate today. However in less than a year the Government could very quickly implement new policies which would affect everything we do. You only have to look at the change of policy by the Learning and Skills Council to see the massive impact that this had on the construction industry in such a short space of time.

A counter to this uncertainty is the amount of opportunity which appears during such times. Companies looking at joint ventures or working together are on the increase. Markets which were previously saturated now provide opportunity. Even recruitment is providing opportunity. Over the last 10 years one of the greatest challenges to our business has been in recruitment for our needs. Now we find incredibly talented people working in warehouses or maintaining gardens.

Recession is just another business challenge where risk and opportunity have to be balanced for long term sustainability.