House of Commons - Business and Enterprise

Select Committee on Business and Enterprise Ninth Report

8 Applying the lessons: The 2012 Olympics

283. In this Report we have discussed the many ways in which the construction industry needs to improve how it works, and the client's role in achieving this. At the time of writing, a major public sector project is underway, where we are encouraged that the client is trying to put current best practice into action. The 2012 Olympic Games represent a massive challenge for the industry. The scale of the programme is twice that of Heathrow's recently opened Terminal 5, but must be delivered in half the time. It will use between 12% and 14% of the sector's capacity in the South East and London over the next four years, with around 9,000 workers on site at its peak.[447] An additional challenge is the fixed date for the project's delivery in 2012 and the fact that the procurer, the Olympic Delivery Authority (ODA), is by definition a one-off, infrequent client.

284. The Government and the sector appreciate the importance of the Olympics as a means of demonstrating client best practice and for this to act as a catalyst for wider change across the industry. In support of this, the ODA and the ministers responsible for the Olympics and construction, have signed up to the 2012 Construction Commitments. These are essentially the same as the recently published industry-wide Commitments, but applied specifically to the Olympic Games. As the ODA said to us: "we are going to put ourselves right there in the goldfish bowl and say, 'We will demonstrate that we are doing what we said we intended to do and we are following the construction commitments'".[448] The following sections briefly assess the performance of the ODA against the sustainability 'triple bottom line' we set out in Chapters 4, 5 and 6.

Economic sustainability

285. The fixed deadline for 2012, combined with intense public scrutiny of costs, make the achievement of economic sustainability fundamental to the success of the Olympics. Our evidence suggests the ODA is making good progress in adopting best practice in procurement, particularly in seeking to develop integrated teams for the various construction projects. Both Constructing Excellence and the Construction Clients' Group commended the ODA for engaging early with their suppliers.[449] The Authority also appears to appreciate that an integrated team must extend beyond the client, contractor and design team, to include specialist sub-contractors as well.[450]

286. In addition to early engagement, the ODA said categorically that it is adopting a best value approach to procurement rather than awarding work on the basis of lowest cost.[451] This is a particular challenge, given the inevitable and increasing political pressure to minimise the costs of the Games. An appreciation of best value is vital for the programme, though, because of the importance placed on the legacy use of the Olympic venues—a key factor in London's successful bid. For example, after the Games, the Olympic Village will be converted into housing, primarily for key-workers. Elsewhere, the International Broadcast Centre/Main Press Centre will provide a new centre for employment in Hackney, while other parts of the main park will be relocated for use elsewhere in the country.

287. However, the lack of bidders for some of the main Olympic venues is a potential barrier to the achievement of best value. The athletics stadium and the aquatics centre both finished with only one bidder each. The ODA does not believe that this meant it had not been able to negotiate a good deal.[452] The main reason for the lack of competition to build the main stadium appears to have been that the strength of the bid from the winning team put off other bidders. It includes Sir Robert McAlpine, which was involved in delivering the Emirates stadium—widely seen as a highly successful construction project.[453] There were three companies involved at the start of the bidding process for the aquatics centre. However, for different reasons two of these dropped out, leaving only the eventual winner, Balfour Beatty.[454] In other words, there was sufficient competition at earlier stages to give the ODA negotiating strength. Other projects received a larger number of bids. The ODA may be confident it has achieved reasonable value, but the low number of bids for the two most prominent parts of the Olympic programme shows a rather meek response from the industry.

288. Elsewhere, the ODA is taking various approaches to encourage integrated team working. This includes its intention to use the NEC3 Engineering and Construction Contract for all projects, which encourages partnering.[455] It has also taken out project insurance, emulating its successful use on the Heathrow Terminal 5 programme.[456] It has adopted a policy of not holding retentions from the main contractor, and stated that it expects this to be reciprocated down the supply chain, in line with the 'Fair Payment' Charter. The Authority stated that where this is not happening, "we will take an extremely dim and proactive view of it".[457]

289. The 2012 Olympic Games is a unique and complex construction programme managed by a one-off client. The adoption of an integrated team-working approach will be key to the delivery of the Games on time and to budget. Early indications suggest the Olympic Delivery Authority (ODA) is adopting most of the best practice required to foster such integrated working. However, construction work has only just begun. We hope in particular that the ODA will ensure its payment and contract practices are mirrored throughout the supply chain. We are disappointed that the construction industry itself has not been more enthusiastic in bidding for the main Olympic contracts, and we hope the ODA will have a better response for its remaining construction contracts.

Social sustainability

290. The ODA is also committed to an Olympic Games that fosters social sustainability. UCATT, the union, wished to see the ODA mandate a direct employment model for all workers, and for it to agree standard wage levels across the whole programme.[458] However, the ODA stated that, though it recognised the value of direct over self-employment, legally it was not able to mandate it. Despite this, the Authority did note that currently around 85% of those on site are directly employed.[459] It has also declined to implement a unified pay structure across all the Olympic projects, stating that this was "unrealistic", and that what "is important is that people are fairly and appropriately paid within the working rule agreements and there is a realistic level of parity across the piece".[460]

291. The ODA has given a high priority to developing its workforce. In February 2008, it published its Employment and Skills Strategy. In this the Authority outlined its aim for previously unemployed people to make up at least 7% of the workforce. The ODA is currently achieving 10%, and a large number of workers are being re-engaged to work on subsequent contracts.[461] Elsewhere, the Authority is also aiming to get people into trainee apprenticeships and work placements across the Olympic sites. To this end, a branch of the National Skills Academy for Construction, with £38 million of funding, will be based on the Stratford site. To support this, the Major Contractors Group has agreed to make available 1,000 job placements to young people who have completed further education courses and need on site experience; 1,000 training placements for local people over 21; and sponsorship for 50 undergraduates to obtain a construction-related degree. This is the sort of effort which should help begin to address the domestic skills capacity constraints the industry currently faces.

292. The ODA has also committed to promoting workforce diversity. In 2007 it published its Equality and Diversity Strategy. This sets out its aim to work with partner organisations to encourage women, Black, Asian and minority ethnic (BAME), and disabled people to apply for jobs in the Olympic construction programme. Currently, just under 12% of the ODA and its contractors' workforce are women, suggesting there is still some way to go. The ODA in conjunction with the London Development Agency is establishing a 'Women into Construction' project, which will focus on supporting more women working directly on the Olympics construction.[462]

293. Finally, on health and safety the ODA stated its intention to be "extremely intrusive" in ensuring best practice was embedded through out its supply chains. At the time of its evidence to us, the Authority had recently passed its second million man hours without a reportable accident on site. It has also created a Safety Leadership Group, whose members include the Health and Safety Executive, contractors and the unions, to ensure all stakeholders work together to promote the highest standards in heath and safety. In addition the Authority has stated clearly its requirement for all site staff to carry a CSCS card or equivalent. Furthermore, the ODA has recently opened an occupational heath centre on site.[463]

294. The ODA has made good progress in delivering a socially sustainable 2012 Olympics. It is demonstrating exactly the sort of engagement with the workforce that we would like to see in all large public sector construction projects. We are particularly encouraged by its health and safety record to date. We welcome also its commitment to provide substantial training opportunities and promote workforce diversity. If other public sector programmes followed this approach, it would significantly improve the industry's capacity to deliver. However, these efforts will be undermined if contractors are allowed to use 'bogus' self-employed workers. It is regrettable that the Authority cannot legally mandate direct employment across the programme, but it should encourage a strong preference for it as far as possible.

Environmental sustainability

295. An environmentally sustainable Olympics is one of the six themes of the 2012 Construction Commitments. To this end, the ODA has published its Sustainable Development Strategy, which outlines a number of objectives, covering, among others, carbon emissions, water use, waste, materials sourcing, and noise and air pollution. Examples of the approach taken by the ODA include the energy centre for the main site, which will be a combined cooling, heat and power plant (CCHP), fitted with woodchip boilers that will provide hot water to all the venues, including the aquatics centre.[464] Elsewhere, as part of the site clean-up process, over 1.3 million tonnes of soil, contaminated with substances such as oil, petrol, tar, arsenic and lead, is being cleaned so it can be reused to landscape the Olympic Park and provide land for future development.[465] In January 2008, the ODA reported that it was achieving more than 90% recycling or reuse of demolition material. For example, complete buildings are being dismantled and rebuilt for use elsewhere. As part of an ecology programme, wildlife has also been relocated to new habitats, including a small nature reserve at the north end of the main site along the banks of the river Lea.[466]

296. The ODA has shown that environmental concerns can be met if they are designed into the construction process from the outset. The challenge for the Authority in the future will be to ensure that contractors for the various Olympic venues adopt the same attitude, and that concerns over short-term costs do not militate against designs that promote whole-life value.

447 Q 551 (Olympic Delivery Authority) Back

448 Q 515 (Olympic Delivery Authority) Back

449 Q 509 (Construction Clients' Group); Ev 224, para 17 (Constructing Excellence) Back

450 Q 524 (Olympic Delivery Authority) Back

451 Q 519 (Olympic Delivery Authority) Back

452 Q 523 (Olympic Delivery Authority) Back

453 Q 520 (Olympic Delivery Authority) Back

454 Q 521 (Olympic Delivery Authority) Back

455 Q 356 (Specialist Engineering Contractors' Group) Back

456 Q 538 (Olympic Delivery Authority) Back

457 Q 545 (Olympic Delivery Authority) Back

458 Qq 117 and 118 (Union of Construction, Allied Trades and Technicians) Back