Select Committee on Business and Enterprise Minutes of Evidence


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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