Supplementary evidence submitted by the
NSCC
SELECT COMMITTEE INQUIRY INTO THE CONSTRUCTION
INDUSTRY
1. CLIENT DRIVERS
FOR USING
INTEGRATED SUPPLY
CHAINS
Q354 Mr Weir: It does not sound to me like
there is an awful lot of drivers for anybody to actually push
this forward in any way, the contractors or the clients, from
your explanations
The majority of clients do not understand that
the industry operates in such a fragmented manner and they presume
that when talking to their preferred main contractor that he will
bring a "team" with him and will advise his client on
issues such as a project bank account if they were appropriate.
This does not happen as the tier 1 or main contractor (for reasons
outlined during our evidence session) has his own reasons for
not implementing an integrated team and a project bank account
does not benefit him directly he is unlikely to recommend is use.
We believe that as the majority of clients are
unaware of how beneficial a transparent payment process is and
that by reducing disputes over payments which ultimately lead
to delays, overruns in programme and budget, they and their project
will benefit.
Essentially if clients really want their project
to meet their expectations in terms of quality, performance and
construction programme, they need to ensure that members of the
supply chain (those that actually build the project) are paid
for the work carried out when they should be. Many clients do
not recognise that it is the supply chain that carries out the
actual construction work, are not made aware of this by their
main contractor and are not equipped to, or have no wish to, get
involved in supply chain management.
However, the implementation of a project bank
account is a good way for the client to facilitate a fair payment
procedure. Payments are transparent which means it can easily
be seen if a particular contractor has been paid for his work
or if the fact that he has not been paid is actually causing a
delay or dispute. The real issue is that the industry has not
yet demonstrated visibly to clients that by establishing a project
bank account the client is better able to manage their project.
This work is in progress and we are confident that the very real
and tangible savings realised by the use of project bank accounts
will be demonstrated, showing that they result in a better value
project which is on programme and on budget.
Some case studies of how poor integration can
lead to problems are detailed below.
Case Study 1—Incomplete design
A main contractor took on a project at a guaranteed
maximum price (GMP) with an incomplete design and proceeded to
subcontract out the specialist work packages on a similar basis.
The piling contractor gave a GMP based on a
fixed scope of work. The piling contractor then prepared the foundations
design based on building loads provided by the Consulting Engineer
but was unable to get value engineering proposals agreed through
lack of time.
One week into the piling work construction drawings
were issued by the Consulting Engineer which showed a 30% increase
in the loading of the building. The piling contractors GMP was
no longer applicable as the design had changed requiring an increase
in materials and labour leading to a cost escalation of 30% in
the piling package and a substantial increase in programme as
the work would now take longer.
As a result of design changes across the project
similar increases affected the majority of the specialist trade
contractors on the job with varying implications depending upon
the work to be carried out.
The piling contract was originally £7.5
million; a 30% increase is £2.5 million. Now multiply that
across the project and add in the increased programme time required
in all areas . . . . . .
Case Study 2—Misunderstanding of Specification
and Prices
A steelwork/cladding contractor tendered for
a contract to erect the steelwork and fix the cladding. The total
package was priced at £150,000. The client looked at the
two elements of work separately and compared the price to other
tenders submitted. The client liked the cladding price from the
original contractor but thought the steelwork package too expensive
so he let the packages separately.
The steelwork was erected by another contactor
who completed his work and handed it over to the main contractor.
The cladding contractor arrived on site to fix the cladding and
asked when the purlins for fixing the cladding to would be attached
to the steelwork.
The client in his drive for lowest cost had
compared the steel and cladding contractor price for the steelwork
with other tenders without looking at the specification or asking
some critical questions. The original £150,000 quoted was
for the complete package with the purlins included in the steelwork.
The other tendering contractors had quoted for stand alone steelwork
with no purlins, so their prices, when compared, were lower.
The purlins had to be retro-fitted to the now
erected steelwork resulting in the steelwork and cladding costing
in excess of the original £150,000 quoted. In addition the
work:
— exposed workers to unnecessary work
at height;
— required welding on site;
— increased the programme time;
— gave a lower quality finish making
the fixing of the cladding more difficult and time consuming;
— incurred storage costs of the cladding;
and
— increased the impact on the environment
as the cladding was transported to two different locations rather
than straight to site.
Understanding the tender pricing at the beginning
would have eliminated all of these extra risks; at the very least
holding a meeting between the appointed steelwork and cladding
contractors would have identified the missing purlins up front
and the problem solved at design stage eliminating the extra risks
and costs incurred.
Case Study 3—Attempting to Cut Costs
A contractor was requested to lay expensive
terazzo flooring and as part of the specification the terrazzo
contractor required 150mm depth of isocrete on which to lay the
terrazzo. Another contractor was appointed by the main contractor
to provide the isocrete; no interface between these two contractors
was facilitated.
Shortly after the terazzo was laid it began
to "fail". Water began to seep through the terrazzo
and pushing up the joints causing an uneven floor surface. The
specialist terrazzo contractor was called back to site and investigated
the reasons for the floor failures. They appointed an independent
surveyor to take core drilling samples of the floor. The main
contractor stated that 40mm core samples would be sufficient but
the terrazzo contractor requested 150mm core samples. The samples
showed only 40mm of isocrete and then 90mm of latex underneath
and not the 150mm isocrete that was within the terrazzo contractor's
specification.
Further investigations identified that the main
contractor had changed the specification to save money without
understanding the implication of amending the specification and
without consulting the terrazzo contractor. The expensive terrazzo
had to be lifted, the 40mm isocrete and 90mm latex removed and
the complete job redone.
Case Study 4—Ignoring Specialist Advice
A major infrastructure client required over
1 million m2 of tiling and spent substantial sums on identifying
the tiles they wished to use. The design team selected and then
specified the tiles to use on the entire project. The tiles were
expensive, £90/m2 and made by hand using an "old fashioned"
method.
A number of specialist tiling contractors were
approached for the project as it was a "big job". On
learning of the tiles specified the majority of the contractors
said they were unsuitable for the purpose, would not fix effectively
to the curved surface as required and would not be suitable for
the wear and tear likely to be experienced. The client and architect
chose to ignore the advice given by the specialist tiling contractors
and retained the specification of the selected tiles.
The contractors fixing the tiles raised the
same problems with the main contractor and the client stating
that they were not fit for purpose. The contractors were instructed
to continue with the selected tiles. The tiles continued to fail
and the client and architect are now reviewing their continued
usage for the remainder of the project and it may be necessary
to remove all the tiles already fixed.
2. RETENTIONS
Q367 to Q374 relate to the issue of retentions
and a number of responses were made which are not quite correct
in respect of NSCC Specialist Contractors.
In many cases NSCC Specialist Contractors do
not employ sub-contractors so any withheld retention and the cost
of financing that retention is actually borne by them; there is
no one to pass it on to (and if there is they are likely to be
even smaller SME's that are even less able to bear the cost).
This means that it is the contractors that NSCC represents that
have the 2.5%-5% retention withheld from them for a period of
up to one year after the project completion date.
In order to demonstrate our commitment to the
removal of retentions, the JCT (Joint Contracts Tribunal) sub
sub-contract (the only contract which NSCC can change without
agreement of main contractors) does not contain a retentions clause.
3. IMPLEMENTATION
OF CSCS
At paragraph 5c(e) the NSCC evidence states:
The NSCC is working towards achieving a fully qualified workforce
by 2010. Clients in the public and private sectors have committed
to using contractors that hold CSCS carded workforces, yet this
is still not happening in practice, which is causing consternation
amongst the Specialist Contractors that have invested in qualifying
their workforces.
Q367 to Q374 are questions from Mr Lindsay Hoyle
MP on this statement and the following is relevant supplementary
information.
— The number of CSCS cards obtained
by workers is constantly increasing with over one million CSCS
cards issued to date.
— Specialist contracting companies
are committed to obtaining CSCS cards for their workforce and
many now have a fully carded workforce.
— Members of the Major Contractors
Group (MCG) have publicly committed to a fully qualified workforce
and regularly carry out audits on their sites.
— The Office of Government Commerce
(OGC) has published common minimum standards which state: Clients
are to include a contract clause requiring that all members of
their supply teams who are workers on or regular visitors to a
construction site are registered on the Construction Skills Certification
Scheme (CSCS) or are able to prove competence in some other appropriate
way.
All of this clearly demonstrates a commitment
from all parts of the industry to CSCS.
However, the commitments made by some clients
and contractors are not actually being followed through. Contractors
that have not committed to CSCS, or are not obtaining CSCS cards
are still invited to tender for projects, and are then awarded
contracts on private and public sector funded projects. Workers
are allowed onto sites without a CSCS card or with inappropriate
cards (ie a card that does not reflect their actual occupation)
even where it is a contractual requirement for all workers to
hold CSCS cards. This frustrates Specialist Contractors that have
expended (often substantial) resources to achieve a qualified
workforce when they see contracts awarded to `lowest price' contractors
that do not meet the stated criteria ie a CSCS carded workforce.
15 January 2008
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