Select Committee on Business and Enterprise Ninth Report


1  Introduction

Our inquiry

1.  In March 2007 the then Trade and Industry Committee launched its first major inquiry into the UK's construction industry.[1] Setting broad terms of reference, it challenged the sector to demonstrate its strengths, but also to highlight areas where there was need for improvement, and the role government could play in achieving this. We received an overwhelmingly positive response from the sector. One year ago, the outlook for the industry was optimistic, against a backdrop of over a decade's near continuous growth. Today, industry sentiment is much more uncertain, with the expectation of economic slowdown both this year and the next in the wake of the US sub-prime mortgage market crisis. It is unclear at the moment what the implications of these events are for the UK's construction industry, especially when weighed against the many large building programmes expected in the coming years, such as the 2012 London Olympic Games, a new generation of nuclear power stations, Crossrail, and Building Schools for the Future. These developments require a "strong and dynamic UK construction industry".[2] We hope this Report may act as a catalyst for long-term improvement across the sector, helping it to weather the current storm and prepare for future challenges.

2.  In the course of our inquiry we took oral evidence from the Construction Confederation, the Construction Industry Council, the Construction Products Association, the Union of Construction, Allied Trades and Technicians (UCATT), ConstructionSkills, Unite—the union, Constructing Excellence, the Commission for Architecture and the Built Environment (CABE), the Building Research Establishment (BRE), the Building Sector Research and Information Association, the Construction Industry Research and Information Association, the Federation of Master Builders, the National Specialist Contractors' Council, the Specialist Engineering Contractors' Group, the Construction Clients' Group, the Olympic Delivery Authority, BAA, the Office of Government Commerce (OGC), and the Minister of State for Competitiveness at the Department for Business, Enterprise and Regulatory Reform (BERR), then Stephen Timms MP. The Committee also visited the Olympic site in Stratford and the Royal London Hospital redevelopment at Whitechapel. In addition, we received more than 50 written memoranda.[3] We would like to thank all those that have contributed to our evidence-gathering. We are grateful to all of them for their patience as this Report has taken longer than we would have liked. Initial uncertainty over the future of the Department of Trade and Industry (and therefore our own future as a committee), and then the huge volume of evidence we received, and to which we wished to do justice, both delayed its publication. We hope it is judged to be worth waiting for.

3.  The remainder of this chapter sets out why construction is important, the current structure of the industry, the reforms it has undergone in recent years, and its relationship with government. It also establishes the key themes of the Report. Chapter 2 looks at the role of the client, particularly in the public sector, in reforming the industry. Chapter 3 considers recent and expected growth in the sector and the role government can play in giving firms the confidence to invest in their capacity to deliver. Chapter 4 analyses the recent economic performance of the industry and looks at ways in which it could function better. Chapter 5 considers issues relating to the construction workforce, including progress in improving health and safety and the provision of training. Chapter 6 looks at government's role in improving environmental sustainability both in the construction process and the end product. Chapter 7 concerns the responsibilities of government as client, regulator and provider of funding in raising standards in the sector. Finally, Chapter 8 analyses how accumulated best practice is being put to use for the 2012 Olympic Games.

Why is construction important?

4.  Construction matters. It provides employment for more than 2.8 million people. The sector contributed 8.7% of the UK economy's gross value-added (GVA) in 2006, worth over £100 billion. That is more than twice the GVA produced by the energy, automotive and aerospace sectors combined.[4] Construction generates some £10 billion of exports each year. Parts of the sector are held in high regard internationally—design alone produces over £3.8 billion of export income per annum.[5] In turn, the built environment—the roads, houses, offices, factories, etc, which represent the output of the industry—is estimated to account for some 70% of UK manufactured wealth.[6] The construction sector's ability to deliver projects successfully in terms of time, cost and design quality has a major impact on the economy's wider performance.

5.  However, as the Minister of State for Competitiveness, who is responsible for the industry told us, "its importance for government goes a long way beyond its economic contribution".[7] Construction is vital for the provision of good quality public services, playing a role in the delivery of just over half of the 30 public service agreements set out in the 2007 Comprehensive Spending Review.[8] Better quality schools and hospitals or investment in housing and urban regeneration have the potential to create improved outcomes for their users and enhanced standards of living. Moreover, buildings account for around half of greenhouse gas emissions—hence, the construction industry is key to the Government's long-term objective of making the UK a low-carbon society.

6.  The construction industry is of vital importance, not only because of the sector's size, representing one twelfth of all value-added in the UK, but also because its output—the built environment—underpins most other economic activity, as well as contributing to the delivery of the Government's social and environmental objectives.

The structure of the UK industry

7.  The construction sector as defined by BERR encompasses a range of different activities, covering the whole construction supply chain. It includes the mining, quarrying, production and sale of materials and products. In 2006 the UK produced 2.5 billion bricks and more than 87 million cubic metres of concrete blocks.[9] It also covers construction contracting, be it house-building, large-scale civil engineering, or repair and maintenance. A whole range of professional services, including architectural, civil, structural, mechanical and electrical design, and project management are linked to construction, as well as allied services such as finance, IT and insurance.[10] As the Construction Industry Council told us, "the industry is enormously varied and large".[11] Unite claimed it "is unlike any other sector of the economy".[12]

8.  The UK construction industry is highly fragmented, both by international standards, and in comparison to other domestic sectors. It has more than 270,000 active enterprises.[13] Over 90% of the 186,000 companies in construction contracting employ fewer than 10 workers, and almost 72,000 businesses are one-man operations. At the other end of the spectrum fewer than 130 companies have a workforce of 600 or more, although those firms generate around a quarter of the industry's output by value.[14] The professional services side is similarly fragmented—some 23,500 firms employ 225,000 people.[15] Even the largest company in the UK sector, Balfour Beatty, holds only a 3.5% share of the market. This would not even place it within the world's top 20 construction firms.[16]

CONSTRUCTION'S CLIENTS

9.  Table 1 below gives a breakdown of output by contractors in Great Britain, including estimates of unrecorded output by small firms and self-employed workers, excluding the construction products and professional services parts of the industry. It shows that the public sector was client to just over 31% of construction output in 2006, making it the single largest customer to the industry.[17] Repair and maintenance contributes the largest share of output, at 43%, followed by 'other new work' (31%), new housing (20%) and infrastructure (6%).

Table 1: Construction output in Great Britain in 2006
Category
£ million
%
New housingPublic 3,4423.0
Private 19,57217.2
Infrastructure 6,5325.8
Other new workPublic 9,9398.8
Private Industrial 4,8884.3
Private Commercial 20,13817.7
Housing repair and maintenance Public8,864 7.8
Private 15,76613.9
Other repair and maintenance Public8,779 7.7
Private 15,64813.8
Total 113,568 100

Source: BERR, Construction Statistics Annual 2007, Table 2.1, August 2007

THE WORKFORCE

10.  BERR estimates that close to 600,000 of the sector's 2.8 million workers operate in the informal economy, particularly in private housing repair and maintenance, and therefore do not pay tax. We explore some of the implications of the size of the construction informal economy in Chapter 5. Of the 2.2 million legal employees, around 90% are male and more than 90% work full-time—both figures are significantly greater than the national average. There is also a high level of self-employment, estimated at over 900,000—also much higher than the national average—although this is subject to considerable seasonal variation and does not take account of the informal economy. Although a higher number than average hold trade apprenticeships, a greater proportion of people have either low or no qualifications in the construction industry, and fewer have level 4 qualifications. Migrant workers are also becoming increasingly important for the sector. Their share of the construction workforce has risen from 2.7% to 7.7% in the last 10 years.[18] But such national figures mask considerable regional variation. Self-employment is more prevalent in the South, corresponding to lower levels of trade apprenticeships and a greater dependency on migrant labour. In London 42% of construction workers are migrants, and 89% of firms are self-employed contractors.[19]

IMPLICATIONS OF THE INDUSTRIAL STRUCTURE

11.  The structure of the industry and the makeup of its workforce affect the way it operates. Because there is relatively little vertical integration in the supply chain there is a major reliance on sub-contracting. For most non-housing projects, main contractors will bid for work on the basis of a fixed price, working to produce one-off designs for their clients and sub-contracting the delivery of much of the work. Specialist sub-contractors, in turn, further sub-contract work so that, for any particular project, a number of firms are likely to be involved. The Specialist Engineering Contractors' (SEC) Group told us around 85% of the value of the industry's output is delivered by a supply chain, containing specialist contractors, suppliers and manufacturers. Yet despite the fact that the supply chain is a key determinant of the success of a project, it often has comparatively little influence over procurement decisions, design and costings—this being largely the gift of the main contractor.[20] Once projects are completed, teams tend to break-up, each moving on to the next venture.[21] Some will regroup and work together over a number of projects, though, this is not yet the industry norm.

12.  Not all parts of the construction industry function in this way. The construction products sector more closely resembles wider manufacturing in its processes. Elsewhere, the housing sector is characterised by the existence of developers who buy land and build homes speculatively, rather than to order, although it still operates on a project-by-project basis.[22] The domestic repair and maintenance market also works slightly differently, mirroring more closely the retail sector than other parts of the construction industry.[23] In addition, it has a higher proportion of firms with only a small number of employees.

13.  Because profit margins are typically only 2-3%, the construction industry is particularly sensitive to cost. Activities which are not immediately necessary risk being sacrificed to ensure short-term profitability. All too often this can include investment in training, and research and development. Three quarters of construction employers do not offer any form of training. What is more, the project-based nature of large parts of the industry means the workforce has to be mobile and flexible. Although this allows the industry to respond quickly to changes in demand, it also means that companies are reluctant to invest in their employees, since they believe the benefits are more likely to be reaped by other firms.[24] At the same time, the industry struggles to innovate because the learning points from particular projects are usually team-based and lost when the team breaks up.

14.  This industrial structure also helps explain the contrasting ways in which the sector is perceived internationally and by the general public. The Construction Industry Council told us that while the sector is "absolutely world-class, at the top, the public's perception is often conditioned by what they see in terms of the builder who comes to do a repair job in their home".[25] The fragmentation of the industry is also reflected in the sheer number of representative bodies, which BERR estimated at about 300.[26] The plethora of construction trade associations was demonstrated to us by the number of organisations we needed to examine to ensure our evidence adequately reflected the views of all stakeholders.

15.  The construction supply chain encompasses an extremely wide range of activities, from quarrying to civil engineering to associated professional services. It is a highly fragmented industry, dominated by small firms with very little vertical integration. This, together with the inherently project-based nature of the sector's work, has profound implications for the way the industry operates. It uses sub-contracting extensively, which in turn has consequences for the composition of its workforce. Unreliable rates of profitability have repercussions on the sector's approach to investing in areas such as training and innovation, which are likely to be exacerbated under current market conditions. Our Report looks at what can be done to overcome the difficulties arising from the fragmented nature of the industry.

Recent construction industry reform

16.  Since the industry came out of recession in the early 1990s there have been various drives to reform practices across the sector. The first concerted effort came in 1994 with the publication of Sir Michael Latham's influential Constructing the Team report. This was an independent review of construction, commissioned jointly by government and the industry. Its main recommendation was that "the client should be at the core of the construction process" and that the route to achieving client satisfaction was through "team work and co-operation".[27] As one of our witnesses said, it "remains one of the most effective and well considered studies of the industry".[28] Indeed, its central message that the role of the client is key and that team working is the necessary response to the fragmented nature of the industry, remains relevant 14 years on. The Housing Grants, Construction and Regeneration Act 1998 (usually referred to as the Construction Act), which sought to deal with the endemic problems of poor payment practices and disputes in the sector, was a direct consequence of the Latham report.[29]

17.  Four years later, the Construction Task Force, led by Sir John Egan, reiterated the same themes in its 1998 report Rethinking Construction. It acknowledged that while the industry's "capability to deliver the most difficult and innovative projects matches that of any other construction industry in the world […] there is deep concern that the industry as a whole is under-achieving". The report identified five key drivers of change: committed leadership; a focus on the customer; integrated processes and teams; a quality driven agenda; and a commitment to people. In support of these, the Task Force set three-year targets for improvement in areas such as project delivery time, cost and quality, and for on-site accident reduction. It also set up a demonstration projects programme, designed for organisations from across the industry to bring forward schemes that demonstrate innovation and new ways of working. This programme has been at the heart of the implementation of what became known as the 'Egan agenda'. In the intervening 10 years there have been almost 500 such projects, worth around £12 billion and involving more than 1,100 organisations.[30]

18.  While the construction industry and its clients responded positively to Rethinking Construction, actual progress in the years after its publication was described by the industry as 'slow and patchy' and we were told that "partnering and team-working arrangements have often appeared to be 'skin deep' or have excluded the supply chain".[31] Government's response to this was, in 2001, to establish the Strategic Forum for Construction. Its role is to oversee the implementation of the industry reform movement through its member bodies, including Constructing Excellence, ConstructionSkills, the Union of Construction, Allied Trades and Technicians (UCATT) and the main Construction Umbrella Bodies.[32] Chaired by Sir John Egan, the forum's first output was the 2002 report, Rethinking Construction: Accelerating Change. Building on the previous report, this set new targets for achieving industry reform in a range of areas by the end of 2007:

  • 50% of construction projects by value to be undertaken by integrated teams and supply chains. (An integrated project team comprises the client's team and the supplier's teams, including contractors, specialist suppliers and those involved in design. An integrated supply chain is made up of all the parties responsible for delivering the end-product. Such supply chains often stay together from project to project.);[33]
  • 50% of construction activity by value to be procured by clients that embrace the principles of the Clients' Charter. This sets minimum standards for clients to attain in areas such as procurement, health and safety, and environmental sustainability;
  • A 50% increase in applications to built environment higher and further education courses;
  • By 2006, a total of 300,000 qualified people to have been recruited and trained in the industry;
  • By 2010 an increase in the annual rate of apprentice completions to 13,500;
  • By 2010, a fully trained, qualified and competent workforce on all projects; and
  • By 2004, 500 projects to have used the Design Quality Indicators (DQI), and 50% of all publicly-funded and PFI projects (having a value in excess of £1 million) to be using them. DQI is an online tool for evaluating the design quality of buildings.

19.  Although the Strategic Forum has reported good progress against most of the targets set by Accelerating Change, particularly for skills, the most notable exceptions have been in adoption of the Clients' Charter and in promoting greater use of integrated teams and supply chains.[34] On the latter the Construction Products Association (CPA) told us it had proved difficult to measure exactly what was going on in the industry because what would be defined as an integrated project team in one part of the supply chain would not be integrated for another part. Nonetheless, the CPA told us "there is no hiding from the fact that we have not moved anything like as quickly as the Accelerating Change report intended or we would have liked".[35] The Minister responsible for construction also accepted this view in evidence to us.[36] We will refer back to the industry's performance against its recent targets throughout this Report.

20.  At the time the Committee was taking evidence for its inquiry, the Accelerating Change targets were near or at the end of their lifetime. The Construction Industry Council told us it felt "the momentum has to some extent been lost" and that "it is important to find new ways in which a new thrust of energy can be injected to ensure that we are driving ahead on […] some of the big policy challenges".[37] It is encouraging, then, that the Strategic Forum has recently launched a new set of targets to push forward the Egan agenda for the period up to 2012. These are set out in Table 2 below.Table 2: The new Egan targets for the period 2008 to 2012
Key Objective
2010 Target
2012 Target
Procurement and integration (Chapter 4) No specific interim target, but progress to 2012 target will be monitored on an annual basis Different parts of the industry (clients, consultants, main contractors, specialist contractors,[38] and product manufacturers and suppliers) to be engaged in supply chains on 30% of construction projects and for 40% of their work to be conducted through integrated project teams
Client leadership (Chapter 2) 35% of client activity, by value, embraces the principles of the Clients' Commitments 60% of client activity, by value, embraces the principles of the Clients' Commitments
Design quality (Chapter 4) 10% increase year-on-year from 2007 levels in the proportion of projects using DQI in civic (custodial, police, fire, courts and other public projects), housing, and education projects Continued 10% per annum growth from 2010 levels in both of the first two targets
10% increase year-on-year in the number of times the projects above use DQI
80% of projects to achieve at least 50% demand-side representation at all workshops No target
Commitment to people

(Chapter 5)

Net increase of 230,000 qualified people recruited and trained in the industry compared with 2006 Net increase of 260,000 qualified people recruited and trained in the industry compared with 2006
Apprenticeship completions of 13,500 in England, Wales and Scotland Apprenticeship completions of 18,700 in England, Wales and Scotland
Fully trained, qualified and competent workforce on all projects Target to be established in the light of progress to 2010 target with greater focus on smaller contractors
Sustainability (Chapter 6) No interim target By 2012, a 50% reduction of construction, demolition and excavation waste to landfill compared to 2005
No interim target By 2012, a 15% reduction in carbon emissions from construction processes and associated transport compared to 2008 levels
No interim target 25% of products used in construction projects to be from schemes recognised for responsible sourcing
No interim target Water usage in the manufacturing and construction phase reduced by 20% compared to 2008 usage
No interim target All construction projects in excess of £1m to have biodiversity surveys carried out and necessary actions instigated
Health and safety

(Chapter 5)

Reduce the incidence rate of fatal and major injury accidents by 10% year-on-year from 2000 levels 10% reduction year-on-year in the incidence rate of fatal and major injuries from 2010 levels
Reduce the incidence rate of cases of work-related ill health by 20% from 2000 levels 50% increase in projects offering a route to Occupational Health support from 2008 level
No interim target 30% increase from 2007 level of micro-SME's and SME's taking up H&S training and education at an organisational level

Source: Strategic Forum for Construction

21.  The targets are underpinned by the newly established Construction Commitments, listed in the Appendix to this Report. The Commitments set out widely agreed current best practice for construction industry and client behaviour. They are based on the 2012 Construction Commitments, which were developed to embed industry best practice in delivery of the various construction works for the 2012 Olympic Games in London. Throughout this Report we seek to identify how government can play its role in the achievement of these targets.

22.  The new objectives for construction also reflect the acknowledged growing importance of sustainability in all aspects of the construction process. Although traditionally seen only within the context of environmental issues, sustainability is increasingly accepted as having both economic and social dimensions as well—often referred to as the 'triple bottom line'. The concept of economic sustainability involves achieving better value from construction, rather than simply concentrating on minimising short-term costs. Social sustainability embraces issues such as ensuring the industry's workforce is trained to its full potential, that it is treated with respect, and that it is representative of the wider diversity of the working population. In turn, environmental sustainability encompasses not only the construction process, but also the end-product—the built environment.[39] For the industry to be truly sustainable it must respond to each of these challenges. This is reflected in BERR's recently published Strategy for Sustainable Construction, and it is a key theme of our Report.

23.  Since its emergence from recession in the early 1990s, the construction industry has been undergoing a gradual process of reform, which we hope will not be jeopardised by the current economic downturn. The influential Latham and Egan reviews called for a radical new approach to construction—one in which client leadership is key; where there is greater collaborative working between firms within the construction supply chain; and where its workforce is fully skilled. There has been progress on all these fronts, but there is still the potential to achieve significantly more. As such, we commend the industry's decision to set new targets for taking forward the Egan agenda. We also welcome the fact that these targets reflect the need to promote economic, social and environmental sustainability in construction—the 'triple bottom line'—themes which underpin this Report.

Government responsibilities for construction

24.  Broadly, the public sector interacts with the construction industry in one of three ways—as client to the sector; as its regulator; or as a provider of funding. Taking the first of these, as client and the largest single procurer of construction works, the public sector has a potentially powerful lever with which to change behaviour within its suppliers. This was a key theme in the evidence received by the Committee. Furthermore, as client to around a third of construction output, the public sector has the potential to influence performance in the private sector, since both are served by predominantly the same firms. Where it cannot do this, government has a second lever as regulator of the industry. For instance, it can ensure high standards in health and safety, and move towards the construction of more sustainable buildings. Regulation is also particularly important for instigating reform in the housing sector, where clients have neither the incentive nor the purchasing power to push for change in the industry. Finally, what government cannot influence through its role as client or regulator, it may do so through direct financial support, such as the provision of training and investment in research and development.

25.  The fact that government wears different hats in its dealings with the industry is in turn reflected in the extent to which various parts of the public sector all have a strong policy interest in construction. For example, BERR has responsibility for areas such as construction legislation and payments practices, as well as overseeing implementation of the Strategy for Sustainable Construction and the Egan agenda. It also takes overall lead for central Government's relations with the industry.[40] However, the Office of Government Commerce (OGC), which sits within HM Treasury, has the lead on procurement and hence pushing for best practice in the public sector's role as client. Elsewhere, the Department for Communities and Local Government (CLG) is in charge of the Building Regulations and planning policy, and the Department for Environment, Food and Rural Affairs (DEFRA) is responsible for environmental regulation affecting the construction industry. Skills and training provision is now split between the Department for Children, Schools and Families (DCSF) and the Department for Innovation, Universities and Skills (DIUS), while health and safety regulation is in the remit of the Department for Work and Pensions and its Health and Safety Executive. The Department for Culture, Media and Sport (DCMS) also has a construction interest in areas such as design and architecture and delivery of the 2012 Olympic Games. Various other bodies, such as the Commission for Architecture and the Built Environment (CABE), the Sustainable Development Commission, and the Construction Industry Training Board, also interface with the industry. Moreover, nearly all departments (for example, the Department of Transport), and every local authority, are clients to the construction sector. As such, they all have a role to play in implementing construction policy.

26.  This complicated picture partly reflects the highly complex nature of the industry itself. However, we are not surprised that the Building Research Establishment (BRE) characterised the sheer number of public sector bodies with an interest in construction as "a completely fragmented mess".[41] This degree of fragmentation has several implications. First, both clients and suppliers have to monitor and interpret policies, standards, and regulations from a wide range of sources, some of which may overlap or contradict each other. The Federation of Master Builders said this meant "never being quite certain where you need to go" on different matters.[42] In turn, the Construction Industry Council told us that, despite the fact that BERR is the lead department on construction, it is hard for it "to ensure really effective integration across central Government".[43]

27.  There is also difficulty in creating consistency in what constitutes best practice for public sector clients. As the industry's largest customer, government is in a powerful position—the Construction Industry Research and Information Association said, it needs to "have the wherewithal to behave as an intelligent client".[44] Although this is an area in which the OGC has done a lot of work—an issue which we turn to in the next Chapter—there is still concern about how best practice is actually enforced.[45] The dispersal of skills and expertise in construction across government inevitably and understandably makes the industry fear that its views and interests are not well represented. It also reduces "the government's ability to influence, communicate and partner effectively with the industry".[46]

28.  Despite the widespread concern about the fragmentation of responsibility for construction, the Minister of State for Competitiveness was confident he was able to co-ordinate the machinery of government to deliver the best outcomes for the industry.[47] He highlighted the Strategy for Sustainable Construction, which has been endorsed by six separate departments, each of which is represented on a joint project board chaired by BERR.[48] Even so, the Minister has a broad portfolio. Construction is only one of 14 business sectors for which the post-holder currently has responsibility, alongside other policy areas including oversight of the Shareholder Executive, corporate social responsibility, business support simplification, and regional development. As one witness noted, while there is a Minister for Agriculture—a sector that comprises just 1% of the economy—construction must compete with many other sectors for ministerial attention, despite having far greater significance.[49] Though the Minister told us he spent a disproportionate amount of his time on construction issues, it is still understandable why the industry feels it does not receive the top-level attention that its importance merits.[50] This concern is exacerbated by the frequency of ministerial reshuffles affecting the post.

29.  As client, regulator and provider of funding, government can influence the construction sector in many ways. The most important is the purchasing power it holds as procurer of almost a third of construction output. This is the main cross-cutting theme of our Report. However, its ability to make effective use of its power is severely hampered by the extent to which responsibility for different aspects of construction policy and procurement is dispersed across government.

A Chief Construction Officer

30.  Many of our witnesses proposed a 'Minister for Construction' to solve the fragmentation problem.[51] While this would probably resolve the problem of raising the industry's profile, it would entail a significant reorganisation of the machinery of government if the minister were to have their own 'department for construction'. What is more, such a development would no doubt create issues of co-ordination in other areas of public policy. Some ministers do work in more than one department—for example, the Minister of Trade and Investment is based both in BERR and the Foreign and Commonwealth Office. However, we believe such overlapping responsibilities should be the exception rather than the rule and we are not convinced of the benefits of this approach for construction. Ministers are inevitably frequently moved around government. Indeed, the Minister of State for Competitiveness who gave evidence to us was moved to another department only a few days after his appearance before the Committee, after only a little over six months in post. The construction brief is broad and complex, and is one that requires a long-term strategic approach. This would not be best served by a revolving door of ministers on their way either up or down the political career ladder.

31.  Nevertheless, we do understand and support the more general view put to us that government needs some form of 'champion' for the sector.[52] We believe this is best provided at official rather than ministerial level. We have given this 'champion' the title of Chief Construction Officer (CCO). The role would be to co-ordinate and engage with all parts of the public sector that have a policy or procurement interest in construction, both at central and local government level. Amongst others things, the Chief Construction Officer could:

  • Enforce the adoption of best practice in procurement across the public sector as defined by the Construction Commitments;
  • Function as the single main point of engagement between government and the construction industry;
  • Oversee implementation of the Strategy for Sustainable Construction and government's contribution to meeting the new Accelerating Change targets;
  • Improve the image of the construction industry generally;
  • Ensure regulatory consistency across departments; and
  • Seek to co-ordinate, as far as possible, the timing of major public sector construction programmes or projects to facilitate planning by the industry.

32.  All but the last of these tasks are currently undertaken by a staff of roughly 16 at BERR's Construction Sector Unit (CSU) in addition to the OGC. We envisage that the Chief Construction Officer would have operational responsibility for construction in both organisations. The post-holder would also be actively involved in policy and regulation development in other Whitehall departments with a construction interest. He or she would be adequately resourced to enable the carrying out of the functions listed above.

33.  The Chief Construction Officer would be a senior official equivalent in standing to the Government's Chief Scientific Adviser or the Chief Executive of UK Trade & Investment. Indeed, these posts offer the precedent for our proposal. Like them, the post-holder would probably not have begun as a career civil servant. It would be essential for him or her to have an in-depth knowledge of how the industry functions, wider private sector experience, as well as an understanding of the workings of the public sector. This would be necessary for them to command the respect and trust of the industry and to have sufficient influence within government. They would also provide the long-term continuity that a ministerial post will never be able to provide. We believe this would significantly address the concerns of the construction industry about fragmentation without requiring a significant reorganisation of the machinery of government.

34.  To overcome the problem of the fragmentation of construction policy and procurement across government, we recommend the creation of the post of Chief Construction Officer. Acting at a senior level as 'champion' of the sector, the post-holder would provide a single point of engagement between the industry and the public sector, having operational involvement in policy and regulatory matters across departments. He or she would hold both private and public sector experience to command the respect of the industry and have sufficient clout within government. Throughout this Report, we highlight areas where a Chief Construction Officer could improve the current situation.



1   Following machinery of government changes in June 2006, the Committee took oral evidence as the Business, Enterprise and Regulatory Reform Committee. Its title has since shortened to Business and Enterprise Committee.  Back

2   Ev 161, para 35 (Association of Consultancy and Engineering) Back

3   Business and Enterprise Committee Ninth Report of Session 2007-08, Construction matters, HC 127-II Back

4   Office for National Statistics, Annual Business Inquiry 2006, November 2007, and Ev 123, Annex 1 (Department for Business, Enterprise and Regulatory Reform (BERR)) Back

5   Ev 163, para 5 (Building Research Establishment), Ev 294 (New Civil Engineer) and Ev 271, para 2 (HR Wallingford) Back

6   Professor David Pearce, The Social and Economic Value of Construction: the Construction Industry's Contribution to Sustainable Development, November 2004 Back

7   Q 571 (BERR)  Back

8   Ibid. Back

9   BERR, Construction Statistics Annual 2007, August 2007 Back

10   Ev 123, Annex 1 (BERR) and Ev 259, para 6 (Greater London Authority) Back

11   Q 27 (Construction Industry Council) Back

12   Ev 381, para 8.3 (Unite-the union, Amicus branch) Back

13   Ev 117, para 4 and Ev 133, Annex F (BERR) Back

14   BERR, Construction Statistics Annual 2007, August 2007 Back

15   Ev 123, Annex 1 (BERR) Back

16   Q 266 (Building Research Establishment) Back

17   Around 65% of infrastructure output stems from the private sector, with the remainder from the public sector.  Back

18   Ev 131, Annex E (BERR) Back

19   Q 579 (BERR); Ev 259, para 5 (Greater London Authority) Back

20   Ev 326, para A.1.3 (Specialist Engineering Contractors' Group) Back

21   Ev 236, para 2.5-2.7 (ConstructionSkills) Back

22   Q 402 (Home Builders Federation) Back

23   Ev 190 (Chartered Institute of Building) Back

24   Ev 237, para 2.9 (ConstructionSkills) Back

25   Q 27 (Construction Industry Council) Back

26   Ev 117, para 7 (BERR) Back

27   National Audit Office, Modernising Construction, HC 87, January 2001; Foreword written by Sir Michael Latham Back

28   Ev 271 (HR Wallingford) Back

29   Ev 220, para 2 (Constructing Excellence) Back

30   Ev 220, para 4 (Constructing Excellence) Back

31   Ev 327, para A.1.7 (Specialist Engineering Contractors' Group) Back

32   The Construction Umbrella Bodies comprise the Construction Confederation, Construction Industry Council, Construction Products Association, National Specialist Contractors' Council and Specialist Engineering Contractors' Group. Back

33   National Audit Office, Improving Public Services through better construction, HC 364-I, March 2005 Back

34   Ev 218 (Construction Products Association) Back

35   Ibid. Back

36   Q 614 (BERR); Ev 327, para A.1.8 (Specialist Engineering Contractors' Group)  Back

37   Q 3 (Construction Industry Council) Back

38   These targets only apply to those specialist contractors involved in mechanical and electrical work. For other the specialists the target is to establish by 2012 a mechanism for measuring integration in their sector. Back

39   Ev 226, para 39 (Constructing Excellence) Back

40   Ev 117, para 8 (BERR) Back

41   Q 286 (Building Research Establishment) Back

42   Q 292 (Federation of Master Builders) Back

43   Q 9 (Construction Industry Council) Back

44   Q 274 (Construction Industry Research and Information Association) Back

45   Q 343 (National Specialist Contractors' Council) Back

46   Ev 311, para 1 (Royal Institution of Chartered Surveyors) Back

47   Q 578 (BERR) Back

48   Q 575; Ev 140, para 3 (BERR)  Back

49   Q 286 (Building Research Establishment) Back

50   Q 573 (BERR) Back

51   Qq 292 (Federation of Master Builders) and 342 (National Specialist Contractors' Council); Ev 232, para 29 (Construction Industry Council-East Midlands), Ev 295 (NG Bailey), Ev 311 (Royal Institution of Chartered Surveyors) and Ev 255 (Federation of Master Builders) Back

52   Qq 274 (Construction Industry Research and Information Association), 286 (Building Research Establishment), 341 (National Specialist Contractors' Council) and 344 (Specialist Engineering Contractors' Group); Ev 238, para 5.2 (ConstructionSkills) Back


 
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