SECOND REPORT
The Committee of Public Accounts has agreed to
the following Report:C
IMPROVING CONSTRUCTION PERFORMANCE
INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
1. Business generated by the UK construction industry
is worth some £65
billion a year, of which direct expenditure by government departments
and their agencies accounts for £7.5
billion. Government departments and agencies can have a major
influence on the construction industry as sponsors, regulators
and purchasers of building and repair and maintenance projects.[1]
2. Government-funded construction projects have a
long history of being delivered late and substantially over budget.
Numerous reports by this Committee's
predecessor have highlighted the need for improvements and the
importance of tendering arrangements which encourage contractors
to put forward bids that will provide value for money. We have
stressed the need for strong budgetary control throughout the
duration of construction projects and vigorous quality assurance
systems operating as construction progresses.[2]
3. On the basis of a report[3]
by the Comptroller and Auditor General, we examined the action
which the Department of the Environment, Transport and the Regions
and the Office of Government Commerce are taking to improve the
way departments and agencies procure and manage construction projects,
and to encourage the UK construction industry to innovate and
be more effective in providing construction services. We draw
three general conclusions:
- A recurring feature in traditional construction
projects is the acceptance by departments of lowest price tenders,
following which contractors[4]
seek to recoup their profit margins through variations and claims
for additional work. This often results in poor performance, made
evident by confrontation, delay and substantial cost overruns.
Better value for money may therefore be found by looking beyond
the lowest price, as long as the improvements to be secured are
clearly identified and closely monitored.
- Longer-term collaborative relationships (partnering)
between departments and contractors have the potential to improve
value for money. Departments need, however, to put in place well
thought through arrangements to ensure that, over the lifetime
of the relationship, continuous measurable improvements in performance
are achieved.
- The ability of the construction industry to provide
cost effective construction services for both public and private
sector clients depends on their having the necessary skills, but
the industry appears to be becoming reliant on a less skilled
workforce. The Department of the Environment, Transport and Regions
should work with the industry to improve its technical and professional
skills and also its performance in protecting the health, safety,
and well being of the workforce.
4. Our more specific conclusions and recommendations
are as follows:
On improving value for money in departments
(i) We welcome recent initiatives to improve
construction performance. There have been, however, numerous previous
initiatives over many years which have failed to secure improvements.
If the current drive is to succeed it is essential that all departments
and their agencies promote change in the industry by improving
their management of construction projects through practices such
as clear project sponsorship and robust project management (paragraph
17).
(ii) Ensuring that departments improve their
performance in managing construction projects requires reliable
information so that progress can be monitored and corrective action
taken where necessary. The Office of Government Commerce should
monitor what benefits are being achieved by departments against
the baseline established in 1999, should spread examples of good
practice, and should encourage departments to use this information
to improve their performance (paragraph 18).
(iii) Much of the effort by the Office of
Government Commerce to improve the performance of construction
projects is directed at the large spending departments. Smaller
departments and agencies individually may spend less but collectively
have a substantial construction programme. The Office of Government
Commerce have started discussions with smaller departments on
how they can better their construction performance. The Office
should secure the adoption of the same rigorous project management
and controls and principles of achieving long-term value for money
(paragraph 19).
On improving industry performance
(iv) 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 (paragraph 28).
(v) 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 (paragraph 29).
(vi) 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 that good practice 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 (paragraph 30).
(vii) 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 (paragraph
31).
On new forms of contracting
(viii) There is scope for benefits in terms
of quality, faster construction times and financial savings through
contractors and their clients working more closely together in
longer-term relationships (partnering). Subject to appropriate
safeguards, such productive relationships deserve to be promoted
in public sector construction. These safeguards include the appointment
of partners through competition; periodically re-tendering; agreeing
clear, measurable targets for continuous improvements in quality,
delivery time and cost reductions; establishing payment arrangements
to give contractors incentives to be innovative and cost effective;
and securing reasonable access to contractors'
financial records and cost information to check that agreed improvements
in efficiency and performance are being achieved (paragraph 34).
On the skills of the construction work force
(ix) The Committee welcomes the commitment
made by the Confederation of Construction Clients and major contractors
to work to achieving a fully qualified workforce by the end of
2003. The Department of Environment, Transport and the Regions
should work closely with the industry to develop and monitor plans
to improve technical and professional skills so that it can recruit,
train and retain a skilled workforce (paragraph 39).
1 Comptroller and Auditor General's report — Modernising
Construction HC 87 (2000—2001) paragraphs 1, 1.1 Back
2 Committee
of Public Accounts Forty-First report 1994—95, Ministry of Defence.
Management of Capital Works Programme (HC 454 (94—95)); Fortieth
report 1997—98, the Management of Building Projects at English
Higher Education Institutions (HC 558 (97—98)); and Second report
1996—97, Progress in Completing the New British Library (HC 38
(96—97)) Back
3 C&AG's
report HC 87 (2000—2001) Back
4 The
term 'contractor' is used to mean any party within the supply
chain who is concerned with delivering the construction to the
client. Back
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