Last reviewed 3 May 2022
Following the Covid-19 outbreak, Roland Finch explores what improvements can be made in the construction industry after the virus.
The construction industry, like many others, has been adversely affected by the recent Covid-19 pandemic. At the beginning, the Government announced that construction work could continue despite the lockdown imposed on other industry sectors. This turned out to be something of a mixed blessing, with practitioners reaching for their contracts and consulting their legal advisors to see what the implications were of materials and labour shortages, and delays caused by access constraints, changes to working practices and other obstacles.
As we emerge from the restrictions, it might be useful to focus on some aspects and areas which might be refined, to offset some of the problems which have been encountered, with a view to mitigating them if something similar happens in the future. Here are some things which might be looked at.
There has been a lot of discussion in recent years about collaboration and integrated supply chains. Many initiatives have been tried, with varying degrees of success. The Government encouraged Clients to use compassion and exercise leniency when dealing with Contractors who might otherwise be disadvantaged by onerous contract conditions, especially where this could result in default or possible insolvency, which would benefit nobody.
It is almost three decades since “Constructing the Team”, (officially the Final Report of the Joint Review of Procurement and Contractual Arrangements in the United Kingdom Construction Industry, chaired by Michael Latham) identified significant failure in the construction sector caused by lowest price procurement, and proposed collaborative working as a “better way”. There have been many reports since which endorsed this finding, but implementation of change has been slow.
Although some progress has been made, it is still a source of bewilderment that these principles have not been fully embraced, but the opportunity exists to embed them in future projects.
The UK Government’s latest fair payment charter was introduced in 2014, and contained 11 commitments, which organisations in both the public and private sector were invited to sign up to. These included shorter payment timescales, the use of project bank accounts, electronic payment where possible and the elimination of retentions by 2025.
However, the Charter was withdrawn in January 2022. According to the Government, it was overtaken by the Reporting on Payment Practices and Performance Regulations 2017, which were introduced under s.3 of the Small Business, Enterprise and Employment Act 2015 (and, for limited liability partnerships (LLPs), s.15 of the Limited Liability Partnerships Act 2000).
These Regulations placed an obligation on the UK’s largest companies and LLPs to report on their payment practices, policies and performance for financial years beginning on or after 6 April 2017. Further information and guidance is available from www.gov.uk.
Apart from things like the Housing Grants, Construction and Regeneration Act 1996 (as amended), the Government seems reluctant to introduce legislation requiring prompt payment, particularly in the construction sector, but there is no doubt that paying the correct amount for work done in a reasonable timescale is the right thing to do, not least because it improves cashflow and business relationships. It also reduces the risk of supply chain insolvency, and this ultimately results in a better deal for Clients.
Review construction processes
While construction work continued under restrictions, it became clear that many activities could not continue in the way that they had previously, especially in view of the need to avoid close contact. That meant a review of the way that everything was done, including travelling to and from site, the use of tools and equipment, and even the way that work itself was organised. It presented an opportunity to look again at how some “traditional” tasks could be approached differently, and while it inevitably meant that some activities were undertaken less efficiently, it also encouraged the use of innovation to find better methods. Involving the supply chain in finding and developing that innovation, which has been advocated for years under the topic of “early contractor involvement”, must be something to be adopted more widely in future.
Increase the use of digital technology
One of the big successes during the pandemic has been the use of digital communications.
At the beginning of lockdown, very few organisations made widespread use of remote working and videoconferencing applications such as Zoom, Microsoft Teams, Skype, GoToMeeting and WebEx. However, two years down the line, and their use has become commonplace. The adoption of cloud computing has increased dramatically, with file and data sharing online becoming the preferred way of doing business for many. Although many construction processes will still involve site-based activity, there are a number of areas such as off-site manufacture of components, project planning and work sequencing which lean heavily on digital technologies.
If we can add to this, things like the increased use of BIM, digital identification of products and linked stock control for suppliers, customer relationships and payment processes, as well as the use of digital tools on site, such as virtual reality for training, health and safety and other practices, the industry might finally begin to catch up with other sectors which have been using these tools successfully for years.
Invest in skills and culture to support the new ways of working
New practices require new skills. While there will still be a place for traditional “construction” skills — and there seems to be a perennial shortage of these as workers have moved to different sectors — there needs to be more investment in those which apply to the digital world. Organisations need to develop a culture and find ways of working that will maximise the benefits of these new technologies. There is an opportunity to provide training in the areas of BIM and other areas, while at the same time reducing the risks associated with the use of new tools.
Care should be taken, however, to ensure that this is not done in a way that causes unease in the workforce, especially in terms of job security or perceived obsolescence. And, as ever, the focus must be on equality and diversity. An appropriately skilled and motivated workforce will result in improved productivity and capability.
Improve supply chain performance
As noted earlier, there has been a lot of discussion over the years regarding the make up and integration of supply chains. The pandemic has identified many weaknesses in existing arrangements, such as the non-availability of resources at critical times. There is an opportunity to review and perhaps to rebalance relationships between members of the supply chain, not only in terms of things like payment and contractual arrangements, but also when considering roles and responsibilities, work packaging, risk and contract management.
One notable change has been the move towards off-site production. This provides greater control of the processes and has significant benefits in terms of both quality and health and safety.
It is also vital to maintain the supply chain itself; we must look at how it can be protected and strengthened, so it can become more sustainable and enduring, because it is the supply chain which underpins the whole of construction activity.
There has been a drive towards greater sustainability of projects, most notably in terms of economic, social and environmental aspects. One of the things we must focus on as we get used to living with the pandemic is a continuation of this direction.
In 2021, the Government published its proposals to reform the (public sector) procurement process. One of these was to amend the concept of “Most Economically Advantageous Tender”, by removing the term “Economically”, thereby allowing greater focus to be placed on sustainability and social value.
There are many other possibilities, as processes and technologies are reviewed to include sustainability as one of the cornerstones, and BSI, for example, have recently issued a number of Publicly Available Specifications (PAS) such as PAS 2030 and 2035 which provide a framework for improved energy efficiency. Sustainability is high on everyone’s agenda at the moment, so it is something which the industry must address.
Improve customer relations
Finally, but perhaps most importantly, the industry has the chance to re-engage with its customers, both internal and external. Covid-19 has resulted in changes in priority in a number of areas, with some of them fundamental in nature. There have been substantial changes in the way that business is done, from contactless payment to remote working, and a renewed focus on environmental and social elements. The construction industry needs to engage with its target audience and make sure that it is meeting demands and expectations.
As unpleasant as the pandemic has been, it has presented the construction industry with the chance to pause and look again at the way it conducts itself. It caused us to realise that ours is primarily a human activity, which involves real people, whether they be workers, consultants, advisors or clients.
There are clearly a large number of diverse components to consider, and it is likely that there is no single simple answer, but we have the opportunity to consider and review what we do and how we do it.
Only time will tell whether we make the right choices, but at the very least, we owe it to ourselves and future generations to try.