Don Ward: Never Waste a Good Crisis

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Don Ward (Constructing Excellence) presentation to the club on 13th July:
Never Waste a Good Crisis

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  • Thank you and good morning For a long time we were carrying a working title of ‘a little less talk a lot more action please’ Presley Quote from one of Baracka Olbama’s aids. ‘Never waste a good crisis’. I said the cover should have a road, about 10 years long, pointing towards sky with clouds. It should then have a bend that changed the direction of travel towards a crisis – leaving in peoples mind doubt as to whether the road avoids or passes directly through the storm. If ever you are invited to chair an industry report there should be a simple check sheet Are you about to make a major career change? Having done so are you about to make a major acquisition? It seems a long time since I was invited by Don Still at BAA still passionate about playing my role to improve the industry I resigned from the M4i steering committee in 2004 – rather than talk about innovation I decided to put my efforts into delivering innovation and took on the delivery role for T5. For most of the 60,000 people this was a once in a lifetime opportunity. As a client we set about creating an environment where the supply chain could deliver exceptional performance. We got a lot wrong, but most of what we did was along the right lines – despite the opening we delivered on time and on budget and the quality is what you see today. In June I was asked – with many others to attend Sir John’s speech in the Commons. A bitter sweet occasion. Not a disaster, but at the same time a missed opportunity. The industry 4/10 and housing 0/10 It seems a long time since Don invited me to chair the review – CE asked me to look at ‘what has happened over the last 10 years and pointers for the future industry agenda’ There was no book on the shelf – no guidance. We did not carry the authority of a task force, no civil servants, no archivists We set about selecting a core team Zoe Le Monde – PM and Don to guide us Many people helped us in some of our work shops, and almost 1,000 gave us feedback through the questionnaire For all those I am grateful Special thanks to G4C who have been brilliant – infact inspirational in supporting and coming up with so many bright ideas that we have used in this report. David – big thank you
  • Keep on Collaboration with clients and suppliers is even more important in a recession Building and maintaining relationships is more important than ever, especially in preparing us to take a bigger slice of the action when the recovery comes Compete on a superior understanding of what is value to the customer Keep good teams together to avoid them being irreparably damaged We cant cut training or strategic marketing as these will be our lifeblood when the recovery comes Work with suppliers to understand cost, drive out waste and therefore reduce price without harming value or profit We need to keep a focus on more sustainable products and ways of working as our clients will still expect improvement Turn back We are only worried about the next 12 months so collaboration doesnt matter Lowest price tendering will do fine for now, the short-term is all we are worried about Clients wont care about value, only lowest price, so we dont need to either We dont need to keep teams together, whoever gives us the lowest price will do fine We take a sharp pencil to all our costs, they are all just overheads Suppliers will be desperate for work so we can drive a hard bargain on the price We can forget about all sustainability issues and other new-fangled ideas, no-one will care about these in a recession
  • Don Ward: Never Waste a Good Crisis

    1. 1. “ Never waste a good crisis” Don Ward Chief Executive Constructing Excellence
    2. 2. “ Never waste a good crisis” <ul><li>The industry has improved over the last decade </li></ul><ul><li>4 blockers have slowed the pace of change </li></ul><ul><li>Recession may provide the impetus needed for change </li></ul><ul><li>Collaborative working is even more important for this next era </li></ul>
    3. 3. <ul><li>Our purpose is to </li></ul><ul><ul><li>Improve industry performance </li></ul></ul><ul><li>The outcome will be </li></ul><ul><ul><li>A demonstrably better built environment </li></ul></ul>
    4. 4. Industry reform can be charted by a number of key reports... 1994.........................................................2009
    5. 5. ... and organisations! <ul><li>1994 1998 2001 2003 2005 2006 2010 </li></ul>DBF
    6. 6. Egan inspired the Construction Industry Key Performance Indicators <ul><li>Client satisfaction </li></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>Service </li></ul></ul><ul><li>Defects </li></ul><ul><li>Predictability </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Time </li></ul></ul><ul><li>Profitability </li></ul><ul><li>Productivity </li></ul><ul><li>Safety </li></ul><ul><li>Construction Cost </li></ul><ul><li>Construction Time </li></ul>
    7. 7. Client satisfaction with the service (and the product) they receive is up Scoring 8/10 or better 58% 63% 63% 65% 71% 74% 77% 79% 75% 77% 84% 50% 60% 70% 80% 90% 100% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
    8. 8. The industry has improved its safety performance...
    9. 9. ...and profitability
    10. 10. But cost (and time) predictability remains a problem % On or under cost 50% 46% 48% 52% 50% 48% 45% 46% 49% 48% 0% 20% 40% 60% 80% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
    11. 11. On time & to budget
    12. 12. Egan called for demonstration projects to prove the case <ul><li>Implementing the principles of Rethinking Construction </li></ul><ul><ul><li>525 Projects since 1998, incl. 203 housing sector </li></ul></ul><ul><li>Value £13bn </li></ul><ul><ul><li>430 completed, 95 live </li></ul></ul><ul><ul><li>Involvement of 1176 organisations UK-wide </li></ul></ul><ul><ul><li>176 case histories </li></ul></ul><ul><ul><li>63 associated reports and publications </li></ul></ul>Innovators Early Adopters Early Majority Late Majority
    13. 13. Demonstration projects have out-performed the rest of the industry 7700 0 50 100 150 200 250 300 350 Client Satisfaction - Product Client Satisfaction - Service Defects Environmental Impact Product Environmental Impact Process Safety * Safety - All Companies * Safety - Companies T/O > £10m * Predictability Cost - Design Predictability Cost - Construction Predictability Time - Design Predictability Time - Construction Profitability ** Productivity Construction Cost Construction Time Employee Satisfaction Staff Turnover Qualifications & Skills 2006 pan-industry performance = 100 CE 2006 Industry 2006 = 100
    14. 14. Demonstration projects have out-performed the rest of the industry 7700 0 50 100 150 200 250 300 350 Client Satisfaction - Product Client Satisfaction - Service Defects Environmental Impact Product Environmental Impact Process Safety * Safety - All Companies * Safety - Companies T/O > £10m * Predictability Cost - Design Predictability Cost - Construction Predictability Time - Design Predictability Time - Construction Profitability ** Productivity Construction Cost Construction Time Employee Satisfaction Staff Turnover Qualifications & Skills 2006 pan-industry performance = 100 CE 2006 Industry 2006 = 100
    15. 15. Overall, the industry has met 2 of Egan’s targets and made progress on 2 others. Demonstrations have done much better
    16. 16. The KPIs and demonstrations plus a regional network of 12 partners and over 40 best practice Clubs give us our evidence
    17. 17. In October we published a review of progress - “Never waste a good crisis” <ul><li>Improvement has been patchy.... </li></ul><ul><li>“ Less than I had hoped, more than I had expected” </li></ul><ul><li>“ A little less conversation, a LOT more action please” </li></ul>
    18. 18. We remain committed to the Construction Commitments and are working with the ODA and OGC to measure their impact, as well as assessing our members Procurement and integration Commitment to people Client leadership Design quality Sustainability Health and safety
    19. 19. Collaborative working has been the foundation of industry improvement
    20. 20. There are three key principles which define collaborative working Leadership Vision Process measures People issues
    21. 21. There are 6 critical success factors for collaborative working <ul><li>Early involvement </li></ul><ul><li>Selection by value </li></ul><ul><li>Common processes and tools </li></ul><ul><li>Measurement of performance } continuous </li></ul><ul><li>Long-term relationships } improvement </li></ul><ul><li>Modern commercial arrangements </li></ul>33
    22. 22. The recession challenged commitment to collaborative working - 28% - 57% + 20% + 36% - 36% - 41%
    23. 23. The current industry recession is a major threat to the sector Construction output £m in 2000 prices Source: CSN (ONS, NISRA, Experian)
    24. 24. This ‘economic climate change’ means companies face a stark choice Collaborative Working Champions ‘Survival Guide’
    25. 25. A not-so-recent challenge Q: “What’s next after frameworks?” A: “More frameworks... ...and do them properly!”
    26. 26. A recent challenge <ul><li>“ All this stuff is OK but what difference does it make when clients are only buying on price?” </li></ul>“Why are they doing that?”
    27. 27. Which do you REALLY want? <ul><li>Lowest lump sum tender price </li></ul><ul><li>OR </li></ul><ul><li>Lowest actual/outturn cost </li></ul><ul><li>OR </li></ul><ul><li>Best whole life value for the client and end users </li></ul>
    28. 28. Lowest price lump sum tendering incentivises conflict Tender price Value added/benefit for client - people, supplies Profit Other cost/waste Claims = extra cost + profit ‘ Right’ price Overheads
    29. 29. A fair ‘target price’ incentivises collaboration Tender price Manage Agreed ‘ Target price’ Agreed Reduce Increase Claims = extra cost + profit Value added/ benefit for client Profit Other cost - waste Overheads Risk
    30. 30. Four ‘blockers’ have slowed the pace of change <ul><li>Business and economic models </li></ul><ul><li>Capability </li></ul><ul><li>Delivery model </li></ul><ul><li>Industry structure </li></ul>
    31. 31. We have identified 8 “big themes for future action” <ul><li>Understand [value in] the built environment </li></ul><ul><li>Focus much more on the [low carbon] environment </li></ul><ul><li>Find a cohesive voice for our industry </li></ul><ul><li>Adopt new business models that promote change </li></ul><ul><li>Develop a new generation of leaders </li></ul><ul><li>Integrate education and training[/development] </li></ul><ul><li>Procure for value </li></ul><ul><li>Suppliers [all supply side] to take the lead </li></ul>
    32. 32. Above all, clients want value Value = Benefit ___________ Cost More for less
    33. 33. “ Is our sector fit-for-purpose for a future low carbon economy?”
    34. 34. Of the whole life-cycle of construction, clients only get value from the use of the facility DEVELOP MANAGE CONSULT CONSTRUCT DESIGN LIFE CYCLE
    35. 35. The value of customer outcomes far outweighs the project costs Design £100K Construction “ £200M” Business Costs “ £5M” “ £1M” Operation and Maintenance Process Push User Pull Outcomes “ £250-£2000M”?
    36. 36. The education customer needs better educational outcomes Construction “ 30” Business Costs “ 3” 1 Operation and Maintenance Process Push User Pull <ul><li>Education outcomes </li></ul><ul><li>Building Schools for the Future: </li></ul><ul><li>“ enhance teaching + learning </li></ul><ul><li>helps to raise standards </li></ul><ul><li>address workforce issue” </li></ul>Design 0.1 Source: Royal Academy of Engineering
    37. 37. St Francis of Assisi Academy, Liverpool, is a good example of value in practice <ul><li>“ The excellent GCSE results and the fact that our students finished top of the national league tables for progress can rightly be attributed to the impact the building had on their studies” </li></ul>Green values help academy top new league table “ A school which offers its pupils a green-focused education has won plaudits for having the best teaching standards in the country….” The Independent , 11 Jan 2007
    38. 38. Whitecross High School is another good example “The best... secondary school in the country (educational efficiency)” [BRE] <ul><li>“ [Taking] the number of students who have achieved 5 or more grades at A* - C including English and Maths, this year we achieved 51% compared to last [year’s] 35%.... This... is a massive increase and obviously this is the year.. that .. received all of its .. teaching in the new building.” </li></ul><ul><li>This compares to a national increase of 2.5% </li></ul>
    39. 39. “ Never waste a good crisis” <ul><li>The industry has improved over the last decade </li></ul><ul><li>4 blockers have slowed the pace of change </li></ul><ul><li>Recession may provide the impetus needed for change </li></ul><ul><li>Collaborative working is even more important for this next era </li></ul>
    40. 40. For further information www.constructingexcellence.org.uk or contact [email_address]

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