Memorandum submitted by New Civil Engineer
THE UK CONSTRUCTION
INDUSTRY
The UK construction industry is world renowned
for having design and construction capabilities of the highest
standard. Senior engineers interviewed in NCE's SWOT analysis
identified this as being one of the country's major strengths
and evidence supports this. UK firms, particularly consultants,
are working all over the world where their advanced design and
management skills are in high demand. In the United Arab Emirates
for example, UK firms dominate the booming construction market.
The use of long-term frameworks, partnering
PPP and PFI have all given the UK industry greater stability in
predicting forward workloads, which has been a massive benefit
to construction. It prevents the boom and bust cycle where staff
are hired and fired according to the winning and losing of projects
and therefore gives greater certainty to both employees and shareholders.
That the construction industry is capable of
delivering the UK's forward work programme is a foregone conclusion
but there are issues that are hampering growth, pushing up costs
and forcing individuals to look to other sectors for work. These
are areas that NCE has extensively analysed and a summary is provided
here.
SKILLS
There is no doubt that the booming construction
industry is impacting on the development and training of staff.
There is a constant pressure for firms to balance having staff
on fee earning work, and ensuring they are receiving adequate
training and personal development. The simple fact is that training
staff doesn't earn fees so training is suffering and will continue
to do so as workloads increase. This was identified as a key industry
weakness in NCE's SWOT analysis. Many engineers have told us of
their frustration with spending all office hours on the job only
to have to work long into the night on their individual training,
particularly those seeking chartership.
On the plus side engineers are highly skilled,
intelligent and technically brilliant people (mostly!) and generally
go into the profession because they love construction. In NCE's
reader survey of 500 civil engineers 25% said they were doing
their dream job.
However, the relatively low pay for such highly
skilled role is forcing these professionals to look for new jobs
outside the industry. Engineers are highly attractive to other
sectors due to their high numeracy coupled with advanced problem-solving
skills, making them highly sought after. A major risk to construction
is that firms won't recognise and reward talent and therefore
staff will leave. NCE's survey found that 46% of civil engineers
are looking for new jobs.
Other NCE research has found that there are
not enough 28-35 year old engineers with project management expertise
to run UK projects. Consultants and contractors say theses are
the people that they need and they are willing to pay more for
them. Everyone wants to hire the same people and competition is
fierce.
This is particularly a problem for the Highways
Agency which has been told by Mike Nichols in the Treasury commissioned
report into the Agency's delivery capabilities to hire more project
managers with commercial experience. The Agency's lack of commercial
know-how was identified as a major problem to them in controlling
costs as I am sure you will hear from other submissions.
Unfortunately there are not enough of these
project managers to go around, and engineers are typically a modest
bunch so perhaps don't know their worth. Many engineers remain
with the same company for the majority of their careers. NCE's
research shows that it is variety of work, rather than salary
that is the main driver for construction professionals. The good
news is that with so much variety in the UK at the moment the
country is less likely to lose staff to overseas markets. Anecdotal
evidence suggests that this is a problem for UK firms looking
to grow internationally, many engineers are reluctant to move,
and there is plenty of work here to keep everyone busy.
PROCUREMENT
The cost of winning work is a real frustration
for most firms and is putting companies off bidding for jobs.
Both contractors and consultants have told NCE that they will
only bid for projects they are certain to win and if competitors
look stronger they will walk away because of the prohibitive bid
costs. This is obviously damaging as there is then less competition
and the client has less choice and may end up paying.
New procurement techniques are being introduced
and in some cases used inappropriately. Competitive dialogue enables
clients to tailor their contract and project specifications to
fit the team that are going to win the work but it is intended
for complex jobs where the scope of work is yet to be defined
and there are lots of options for how it might be undertaken.
Unfortunately some clients, particularly local authorities are
using it inappropriately for straight forward projects like highways
maintenance.
It is a problem because competitive dialogue
requires a lot of investment of time from both the bidders and
the clients, all of whom have to spend hours, days and even weeks,
carrying out workshops, role plays, setting tests and having one-to-ones
with potential project team members. It is expensive high level
time and pushes up the bid costs.
In the case of a simple maintenance job contractors
say that this is overkill and I would agree. The purpose of competitive
dialogue is to enable the client to draw up the scope of work
with the bidder and to help them establish the best solution and
the best team to deliver it. For highways maintenance the solution
is pretty clear, maintain the roads. But for managing the Olympics
or managing decommissioning of the UK's nuclear legacy, competitive
dialogue is clearly appropriate as the scope of work is enormous.
The Olympic stadium is a good example of projects
where contractors refused to bid. It is a high-risk project because
of the associated publicity. The Wembley Stadium debacle, where
it cost several millions pounds more than planned means all eyes
are on this job to make sure the same doesn't happen again here.
There were no shortage of designers willing to do the job but
contractors were giving it a wide birth. In the end the ODA made
a quick decision and went straight for the Sir Robert McAlpine
team that had demonstrated it could do the job on time and within
budget on the Emirates Stadium. Consultants complained that it
wasn't fair but they would have complained more had they been
through an expensive design competition and then lost because
the McAlpine team were always going to win because of their track
record on Arsenal's ground.
SWOT ANALYSIS
This section is pretty self-explanatory and
demonstrates that the biggest challenge for major project delivery
is getting the right people and coming up with realistic costs
estimates so that budgets are not consistently exceeded—again
something the Highways Agency is battling with.
LOCAL GOVERNMENT
High profile cost escalations on local authority
projects prompted NCE to investigate why and what is going wrong.
Engineers were pretty much unanimous in their view that politics
and construction can be a difficult combination. They told NCE
that projects were defined and costs associated with them far
too early to be realistic and politicians are then reluctant to
admit the actual project cost until late in the day.
That is not to say the profession is blameless.
In the case of the Scarborough coastal defence project, costs
increased from the start because the ground investigation was
inadequate. Although this was the decision of the consultant the
council did not challenge this and the foundations for the scheme
had to be changed. There is a consensus that local authorities,
due to budgetary constraints, often do not have enough technical
staff making it very difficult for them to run major civil projects.
They may choose to pass this responsibility on to the consultant
but unfortunately for them the risk of cost escalations remains
with the local authority. And when this happens local authorities
are not always able to challenge the costs, having been relatively
"hands-off" during design and construction.
3 May 2007
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