Examination of Witnesses (Questions 540-559)
ODA
15 JANUARY 2008
Q540 Mr Binley: I would assume that
you see project bank accounts being an important part of managing
that particular risk and I was just a little surprised not to
hear a slightly more definitive answer in that respect. Would
you add to that or comment on that?
Mr Shiplee: Forgive me, I thought
I had been very definitive.
Q541 Mr Binley: Well, I am not sure
you have, particularly with sub-contractors.
Mr Shiplee: What I said was that
I do not believe, and we do not believe, that it is appropriate
in the majority of the forms of approach that we have adopted
that we should try and administer the payment of the supply chain
which is actually owned, if you will, by the primary tier one
contractor. What I did say was that we expect to be intrusive
in ensuring that, if we are paying fairly, properly and promptly,
that should be reciprocated down the supply chain because I am
very conscious, as I think you are alluding to, that it is in
fact down the supply chain where a serious problem can occur,
that someone goes bankrupt and you are in trouble. I have personally
been in situations where, as the client, there is only one answer:
go and buy the company because you have to have it complete the
work for you. Does that answer the point?
Q542 Mr Binley: Yes, that helps me,
thank you. You are committed to not withholding unfair retentions,
and that has been stated, as I understand it.
Mr Shiplee: Correct.
Q543 Mr Binley: How are you working
to ensure that your main contractors do not hold retentions, and
this impacts upon the earlier question, for their sub-contractors?
Mr Shiplee: You said "unfair
retentions", but we are not holding any retentions, fair
or unfair. The second issue is that we expect that to be reciprocated
down the supply chain. I have also to say, however, that one of
the important things about supply chains is the 80:20 rule and
it also applies to the whole issue of client relationships with
the industry. If you talk to any major contractor and say, "Where
is your base of income?", it will be 80% of income comes
from 20% of his customers, and so on and so forth. Therefore,
I think one has to respect in this that certain contractors may
well have within their supply chains organisations with whom they
have worked for a long time. Now, if they have got an arrangement
which suits them, whatever it may be, then I am quite content
to leave that as long as it is fair and appropriate, but I would
not particularly wish to see people trying to hold retention on
others because actually they are making money out of cash they
are getting.
Q544 Mr Binley: I understand that.
Your phrase "I would hope", do you not think you need
to be just a little more specific in that respect?
Mr Shiplee: Well, perhaps because
I have some faith in the industry—
Q545 Mr Binley: I am delighted.
Mr Shiplee:— and when I
say "I hope", that is not an act of blind hope. Perhaps
a better way to put it is that I anticipate that the industry
will reflect our approach and I wish to see it reflected on down
the chain and, by the way, if it is not reflected down the chain,
we will take an extremely dim and proactive view of it.
Q546 Mr Binley: I am delighted at
that. Finally, could you explain just a little what you do to
ensure that SMEs play a significant role in delivering the Games,
and it is almost self-evident that they will, but I want to add
to that what I asked in the earlier session of questioning, which
is how are you ensuring that you really do get down, in terms
of quality and risk management, to the bottom of your sub-contractors'
organisations, small though many of them might be?
Mr Shiplee: Without going back
to the contracts, we have currently placed in the order of 500
contracts. Now, some of those contracts may be for the supply
of paper, but, nonetheless, we have 500 contracts that have been
placed and 50% of those contracts have been placed with SMEs and
about 25% of those contracts are actually with SMEs within the
five boroughs within the area, so we are actually working very
hard in this area and we have also tried to make it easy. I think
you have mentioned the costs of bidding and I think approaching
an organisation with a bureaucracy of the type that we have to
have, for a small company can be difficult and of course very
dissuasive, so what we have got is a supply chain booklet, it
is very simple, it is very user-friendly, and it tells people,
and we left a pack with you, how to get engaged and how to get
registered. We have also been holding, with the regional business
networks throughout the regions and throughout London, meetings
with industry at all levels to explain to them again how to get
engaged because we wish to see small- and medium-sized enterprises
and of course enterprises from other parts of the valley, for
instance, with the five boroughs where there is a very large mix
of different backgrounds. We want to see a spread of all of this
activity and across as many small companies as we can, and the
same within our contractor supply chains.
Mr Binley: Can I congratulate you. I
knew about that and I just wanted to get that on the record because
I think it is a very good example that we can use in other areas,
quite frankly, so I thank you.
Q547 Mr Bailey: We have heard a lot
about the Emirates Stadium which was delivered on time and on
budget, but, we were told, using something like 70% bogus self-employed
labour which obviously has wider implications. What are you doing
to ensure that the same is not true for the Olympic Stadium, given
the fact that McAlpine is doing both?
Mr Shiplee: Well, the first thing
is we are not here to debate whether it was or it was not bogus
self-employed, so I am not sure whether it is or not, but one
can only take what has been said.
Q548 Mr Bailey: It was the union
that said that.
Mr Shiplee: I do understand. The
issues that we have made are very plain, that we recognise the
significance that direct employment can make and that it is something
that we wish to see passed down, and through, our primary contractors.
Of course, we have been asked to mandate it and we cannot mandate
it because legally people are entitled to be employed on various
mechanisms. The important issue is that people, first of all,
we hope, will substantially be self-employed and at the moment,
approaching 2,000 people on site, 85% are directly employed, so
we are trying to live up to what we have said. I think, as we
proceed forward, it will be important to ensure that the people
who are employed on the Olympic site, irrespective of whether
they are directly employed or by some other mechanism, are legally
entitled to work, are paying the appropriate tax and other things
necessary and are, therefore, not bogus, but are legitimate self-employed,
and I think that is very important and we will be doing all we
can to ensure that that is the case.
Q549 Mr Bailey: I think that is the
crucial thing. What can you do to monitor that?
Mr Shiplee: A number of things.
If we, first of all, take the issue of, for instance, immigrant
labour which is one issue which I think you have raised previously,
on site we have embedded in our organisation not only the Metropolitan
Police from the point of view of general control, but we are also
in discussions now with the border immigration authorities and
our proposal is that they become part of our site team, that they
are there, that they are present and that we can, through our
process of issuing passes on to the site, assure ourselves that
people are people who are entitled to be here, entitled to work
and that they are being appropriately employed. Again, we have
trade union representatives who are now accredited trade union
representatives who have been recognised by our current incumbent
contractors and are on site, and I am sure that they also will
be taking an active interest in these matters and I would expect
that, if they saw things that were unsatisfactory, through a mechanism
that we have set up with the trade unions, the group that we have
set up, they will be bringing that to our attention and we will
discuss it and, if things are not being done properly, then they
will have to be rectified by the employers.
Q550 Roger Berry: Inevitably, there
will be migrant workers from other parts of the UK and indeed
from other countries. What proportion of the workforce do you
anticipate being migrant workers from other countries?
Mr Shiplee: One might ask that
nationally, what is the situation. We reflect what happens in
the nation, so I think it is a very difficult question for anybody
in effect to answer. We, at the moment, have not yet differentiated.
I can tell you that of our labour force, in broad terms, 20% comes
at the moment from within the five boroughs which is very significant
and about 50%, so the remaining 25% taking us to about 50%, comes
from London and the South East and then about 40% comes from other
regions and other parts of the UK and we are not yet differentiating
in terms of people who are migrant, but we will be doing so. We
are just moving to our next stage of securing the site, as you
will have seen from your visit, and that will then start to close
off and put in place our control processes and procedures. Inevitably,
I think it will be a similar mix to that which exists in the industry
at the moment. I do not see any huge influx of people specifically
coming from Eastern Europe for the Olympics. The one thing that
the industry has been very successful at doing over the years
is flexing its size and scale to meet market demands.
Q551 Roger Berry: Are there any particular
places that yourselves and contractors are actually recruiting
from at present?
Mr Shiplee: That is a matter for
our contractors. Just to put it into context as it may be helpful
to you, whilst the Olympics is a very big programme, we, in terms
of the UK construction capability, represent about 2% of capacity.
In London and the South East, we represent something between 12
and 14% of capacity, so we are not a swing player in that sort
of respect and at that sort of level our issue is to make ourselves
attractive in a competitive marketplace to get the right and best
resources we can.
Q552 Roger Berry: You said earlier
that you take the commitment to the five London boroughs very
seriously and a large proportion of the 50%, you said, or 20%
comes from those boroughs. In the construction commitments, that
commitment to the five London boroughs, does that constrain the
opportunities? Is it a commitment that on the ground you find
difficult to uphold?
Mr Shiplee: I think there are
two issues. I am not sure exactly where you are coming from, but,
first of all, this is a national event and, therefore, the nation
will participate.
Q553 Roger Berry: Indeed.
Mr Shiplee: I made the point that
quite a substantial amount of the workforce is from other parts
of the country and I think that is as it should be and historically
that is how it always has been in London, that there has been
a level of work undertaken by people from other parts of the country.
I think that the issue of the five boroughs is a very, very important
one. If I can just add one other statistic, 10% of our workforce
was actually unemployed before they started work on the Olympics,
and the reason I mention that is because it is another part of
an important piece of work and that is the whole issue of legacy.
There are a lot of discussions about what the legacy means to
the Olympics, what it means in terms of venues left and the facilities,
but we also see the legacy in the construction sense as leaving
behind us when we are complete a greater level of local employment
and upskilling into our industry and, therefore, employment, skills
and training as an important cross-cutting theme are very, very
high on our agenda. That is not just because it is a good thing
to do, which it clearly is, but also because the more people that
are trained and come from the local area puts less strain on the
local transportation systems, so that is a great advantage. Of
course, finally, we want the people in the location to see us
not as interlopers, but as good neighbours and again, if people
are working for us on the programme, then they have a vested interest
in its success just as we have.
Q554 Roger Berry: It is a national
event, indeed an international event, so my question, I suppose,
is to what extent is there a conflict between the understandable
emphasis on the five boroughs and the benefits to people who live
and work there, but also the wider commitment that this should
be a project that benefits the UK as a whole? Is there a conflict
there in reality?
Mr Shiplee: No, I do not think
there is a conflict. First of all, much of what we need will have
to be manufactured, much of it pre-fabricated, and what we want
to do is exactly as the lessons learned from T5, that you get
best production in a factory environment, so what you want to
do is assemble it on site and, therefore, the more we can transfer
off the site to good facilities throughout the country will be
very important to us.
Mr Wright: I think the design
is focused on achieving safety, but also off-site assembly, so
by designing appropriately for off-site manufacture, we can mobilise
the supply chain in a number of parts of the country and not rely
solely on local, which of course will not have the capacity, but
encourage, as Howard has said, the local training such that we
get a win, win because we are getting the skills we need and we
are not putting a strain on the transport system that would otherwise
occur if people came from further away.
Q555 Anne Moffatt: Just talking about
skills, what targets have you set and what arrangements have you
made for the training of your on-site workers?
Mr Shiplee: First of all, we have
not yet set targets and there is a reason why we have not set
them, because we are still working on the landscape of where we
are going. What we have done, first of all, in terms of on-the-ground
training, we opened just over six weeks ago the first of our training
facilities, which is a plant driver and training facility for
plant operators of which there is a shortage in the industry,
and it is very interesting how that has been achieved. It has
been achieved by a public-private partnership between our Learning
and Skills Council, the LDA and many other organisations and by
very substantial amounts of money, not cash, but equipment provided
by JCB which will come to us free. They are on site now and people
are being trained to use them and then will ultimately be transferred
to the National Skills Plant Training Centre, so that is the first
of our training operations now running on the site. We are currently
working on a second one which will be eventually in Waltham Forest,
using again a public and private approach, and that will be for
staff who are training in, and an awareness of, working at heights
because again, from the safety point of view, falls from heights
are the single biggest cause of fatalities in the industry and,
therefore, it has a dual role. We are starting shortly a Women
into Construction programme which will start probably in the next
six weeks. Importantly, on a rather more global approach, we have
formed what we call our "Corporate Social Responsibility
Group" and we decided that we did not have the time to try
and reinvent the wheel on training and upskilling and it became
apparent to us, through investigation, that there are a lot of
organisations in government particularly and other organisations
in the public sector which do this work, which do training and
are involved in all of these things and of course also have hands
in budgets. One of the challenges when you talk to them is that
they will train people, but how do they get them into jobs because
there is no leverage to the employers? We of course sit between
those people and a large number of employers. We formed the Corporate
Social Responsibility Group which brings together those private
and public sector organisations and the employers that we are
moving into contract with and we have now established a series
of cluster groups within that operation which are now working
on a whole range of initiatives in order that we can start moving
training out into the very broad areas that we want to, and of
course apprenticeships is one of those important areas, although
"apprenticeships" has different meanings these days.
We are working very hard on that and have been now over probably
the last five months and I think, as we move forward this year,
we will be setting ourselves some very stretched and, I would
hope, ambitious objectives to be achieved in this area because
I think this is one area where we have to demonstrate some real
effort made and some real results in what we are trying to do.
Q556 Anne Moffatt: As this evolves,
will you be able to provide us with details of what your programme
is?
Mr Shiplee: I will be very happy
to do so and, frankly, if I may ask, any help you could give us
would be appreciated.
Q557 Mr Bailey: UCATT, early on when
interviewed, scored you six out of ten on industrial relations.
Now, there has been a public outcry about your refusal to have
a unified pay structure for workers on the Olympic site, so it
might be lower than that now. Do you not think that the absence
of a single pay structure is a recipe for conflict?
Mr Shiplee: I think that there
are no right answers to any of these issues and there will be
examples that can prove either side's case in any circumstance.
I think that the point was made earlier about programmes and projects.
The Olympic works do not just cover the Olympic Park, but we have
activities as far away as Weymouth, we have ventures which involved
private-sector funding as well as public-sector funding and we
have different forms of contract. The important issue is that
we are working within the framework of the nationally negotiated
working rule agreements and that is part of the agreement we have
already reached, after extensive negotiations, with what was then
the four, but now the three construction and engineering unions.
Now, the issue of some form of unified pay arrangement, when I
talk about 15,000 companies potentially down our supply chain,
it cuts across the whole structure of the industry and I would
doubt very much that that is a sensible thing to do. The industry,
both client, unions and contractors, regulates itself in this
area and, rather than talking simply about unified pay arrangements
which then leads to a whole debate about unified pay negotiations
and collective bargaining across some 20,000 people which I just
think, frankly, is unrealistic, the issue that is important is
that people are fairly and appropriately paid within the working
rule agreements and that there is a realistic level of parity
across the piece in what people have in their back pockets and
in their wallets as their take-home pay. I believe that has always
been the issue and remains one and we will be taking an interest
in seeing how that progresses. We are continuing discussions with
the organisation which supports the major projects agreement which
is very specific to the electrical industry which was used at
T5 and we continue our discussions there to see whether or not
there are some approaches that might be appropriate for the Olympics,
but we have not reached any conclusions on that yet.
Q558 Mr Clapham: The 2012 Construction
Commitments state that you aspire to be incident-and injury-free.
I know it is early days, but could you tell us how you are performing
at the present time?
Mr Shiplee: What I think is probably
most important is to say that recently we had our first million
man hours passed with no incident. Sadly, someone walked out of
a canteen, slipped and twisted their ankle, so that put us back
to base which was unfortunate, but that is life. We are now well
on our way to, and will shortly pass, our second million man hours
without incident, so we are trying again to walk the talk. In
terms of how we are doing that, again I think you heard Mr Wolstenholme
talk about leadership and safety before, and we again completely
agree with that and we have already established our Safety Leadership
Group which is attended by the HSE, our own contractors and indeed
the trade unions are represented, as indeed are the TUC, so that
we can have commonality of view and work together and that is
what we are doing. We have a programme of leadership which starts
with our Chairman who takes a personal interest and this flows
down into the supply chains and we are going to be extremely intrusive
not only into safety, but also in terms of welfare and conditions.
We recently opened the occupational health centre on site and
you have heard the comments about medicals. People can get a medical
there if they have a safety-critical job, so they can go and get
a health check. I was over there talking to the nurses just before
Christmas and they are talking about all sorts of issues to help
people, and of course we are in a very male-oriented industry,
so things like testicular cancer are very important, and they
were showing the appropriate things that they are going to be
putting up in toilets and various places to try and help people
recognise how they can help themselves in these sorts of areas,
so again we are taking it very seriously and being proactive.
Q559 Mr Clapham: Mr Wolstenholme
also said that it was difficult to sell the business case for
health and safety. You are committed to selling that business
case to all who work on the site?
Mr Shiplee: Absolutely, and my
belief is, frankly, that it is sometimes a difficult case to sell,
but I think contractors and clients alike recognise that accidents
are very expensive. One of the things that we are starting to
look at and actually do, although fortunately we have had no serious
incidents, is indeed to look at the cost of incidents and, by
that, I do not just mean what people perceive as the cost, but
all of the other costs that are associated, the down-time, the
stoppages, the slow-down, the inefficiency, all of those things
because I think, in that way, we can then start having a much
more intelligent debate with insurers and others, although that
insurance issue is a matter for the employers themselves.
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