A panel of cross-industry experts came together to discuss what we can learn and how we can progress at a recent FIS roundtable.
The COVID-19 crisis has sent a shockwave through our industry and required us to radically rethink the construction process. As we start to emerge from the initial impact and look forwards it has become clear that the industry can’t return to normal – we must start to reinvent a new normal.
The Construction Leadership Council (CLC) has been interrogating this new normal and the Roadmap to Recovery identifies three distinct phases of COVID response, restart, reset and reinvent. The reinvent phase echoes the findings of seminal reports – from The Egan Report through Dame Judith Hackitt’s ‘Building a Safer Future: Independent Review of Building Regulations and Fire Safety’, the Construction Sector Deal, the now infamous CAST report Modernise or Die and the more recent CBI report Fine Margins: Delivering Financial Sustainability In UK Construction.
The aim is to encourage the industry to evolve to “a more capable, professional, productive and profitable sector, which delivers better value to clients, better performing infrastructure and buildings, and competes successfully in global markets.” Against this theme, FIS organised a roundtable, drawing together leaders from all parts of the fit-out and finishing supply chain. The aim was to examine the impact of COVID-19 and review how, as a supply chain, we need to work, communicate, and collaborate to ensure that the finishes and interiors sector evolves to meet and define this new normal.
What have we learned?
A key positive has been the unprecedented examples of how the industry is working together for the greater good and the adaptability shown in terms of how we have been able to change and embrace new working practices.
Throughout the COVID-19 outbreak, initiatives such as the Nightingale Hospitals, the work of the CLC and groups like the FIS Health and Safety Working Group had demonstrated that we can work together as a supply chain when we put our minds to it. “For an industry that does not collaborate, we have collaborated like never before,” Iain McIlwee, stated.
Nigel Ostime felt that a focus on productivity was being driven by the changing working practices. In the design world, remote working, leading to less time commuting, had resulted in much greater productivity in some aspects of their work. “Design-wise we are not just working internally, we are collaborating with other architects,” he said, adding that in order to kickstart the economy, productivity improvement throughout construction was going to be key.
Angela Mansell praised her team and the adaptability they have shown. She also reflected on how important strong relationships with distribution partners had been in helping to quickly adapt to changes required, enabling them to work around some of the material shortages. Another positive was less of a ‘them and us’ divide between those working in offices and those working on site, which had made operations smoother – lockdown had demonstrated that there wasn’t always a need to be on site. “The collaboration that technology affords everybody has brought huge rewards in terms of delivery on site,” said Angela.
Can a crisis really change a sector?
Helen Tapper questioned whether a crisis can drive positive change. Whilst there are some real positives and examples of great collaboration and communication, her feeling was that previous recessions had not so much revolutionised the industry but created a new race to the bottom. Angela reflected on a lack of control specialist contractors “at the bottom of the food chain” feel – at times in recent weeks with uncertainty in payment and pipeline this felt worse than ever. Productivity and spending can just be codified discussions that mean “rates will drop and everybody wants more for less” she said, adding that there is a worry that any tightening in the market will lead to suicidal bidding again.
Core concerns existed in the supply chain as we entered the lockdown period and some of the ingrained bad practice (eg over contractualisation, pushing risk down the supply chain and withholding payments and retentions) have not disappeared. In some cases they had been exacerbated and these need to be left behind before we can look ahead with confidence.
Brian Hendry reflected all but essential work had stopped in Scotland and is only now starting to open up again. He said a positive had been better communication and closer working with some companies, but fears that at the lower levels nothing is changing.
Whilst not all had changed, there are positive examples felt Richard Waterhouse. Drawing a comparison to the 1973 oil crisis that had kick-started designing for energy efficiency, the 1990s which saw a global move towards CAD, and the previous decade being the pre-curser to BIM.
Parts of the industry were already changing, the infrastructure sector particularly has started to see the benefit of whole life value procurement, looking beyond capital-led “buy it cheap, stack it high and see what happens, that we are all familiar with” said Ann Bentley. There is a recognition now that the government will have limited resources, which means spending focus can’t just be on the capital cost. Public investment must ensure the cost of maintaining the asset is good value for the exchequer and delivers long-term return on investment. Ann felt that this thinking is increasingly being mirrored in top-flight developers who are “very conscious of value – they care about rentability” and customers are getting more discerning when it comes to quality and whole life costs. Her hope is that this thinking,, as more evidence becomes available ,will percolate out to the wider market.
Rob Frank agreed. “I shudder when I hear people say ‘value’ because it just means they are going to go for the lowest price,” he said, adding that we need to reclaim this term away from “cheapest price” and ensure it reflects consideration for quality, added value, experience and personality to deliver better projects. “We remain defect free and that will be what we will stick to,” he said.
A challenge for the industry is how we present this more effectively to clients “the lowest-priced options, more often than not, end up costing more in the long run,” said Nigel Ostime. “In reality, because of all the rework required, it ends up being an additional cost.”
Change has to start with better collaboration
To adapt and move forward, better collaboration is essential “long before work starts on any site” according to Helen. We really need to completely rethink timeframes, calling in a specialist a week before is “a non-starter now”. With the requirements for efficient and safe working standards we need to be engaged months before work starts and at this point we can actually add value to the whole process.
Helen cautioned that collaboration had worsened and relationships become more strained during past recessions and we must not allow this to happen again. Things had been steadily improving within the industry prior to the COVID-19 outbreak and we need to accelerate this, not lose ground again.
Brian responded that some of the early signs were not too positive – he had already experienced new contracts not flexing and the risks associated with COVID costs being pushed down the supply chain.
Rob recognised this concern and said his company had tried to keep sites open because BW has contractual obligations and clients have pushed these. It has paid off in some ways, but they have not been given much leeway or understanding in terms of price or expectations and the contractor is being expected to take the risk. But we need to be proactive as we look forward. “You can’t blame everything on the client. You just have to find ways around things,” he said.
Supply chain adaptability
Looking at things from the supply chain perspective, Philip Johns from SIG said distribution had been able to flex pretty effectively with the huge fluctuation in demand. Setting aside some of the challenges in getting plaster, it has been relatively seamless. “I don’t think there has been any point during which we have not been able to meet the demands of our customers,” he said.
Different practices were needed to keep the supply chain going and there had been no resistance towards the requirement to adapt.
Hours have changed and working practices, but he had been impressed at the flexibility and resilience of people. “You have to balance the two issues of keeping people in a safe environment but also businesses have got to survive through this to ensure that people have long term jobs and stability.”
Mike Chaldecott was struck by how quickly things can change. Agility and speed are key to success for a modern supply chain, he said.
He reflected on the fact that communication with the contractors and distributers has been unprecedented and the situation had underpinned the importance of digital solutions “if you haven’t got an e-commerce platform you are stuffed through a lockdown period”.
Todd Altman reported that SAS had carried on manufacturing throughout lockdown, linked to the international customer base, not just the UK, and is starting to see some positive signs. “We are seeing the UK coming back quite strongly,” he said. “People are up-spec’ing, especially in London as they know it will need to be top quality to get the sort of tenants they want.”
Angela raised concern that demand for student accommodation and hotels is dropping owing to a lack of clarity surrounding what was going to happen in the university section and whether there would be remote learning short-term or long-term. Similarly, American investment in hotels had started to filter through post-Brexit, but uncertainty over when and how the hospitality sector would open up had stalled this.
“Offices will survive but will look very different and that is going to be very exciting for us as an industry,” Rob said. “You don’t have to jam 80 people in now. We can put 30 in and have more scope in how to improve the design of that office.” The general consensus was that ultimately there would still be a good demand for office space going forward. Rob and Helen reflected on the importance of the sense of community an office facilitates.
How we operate on site
When it comes to operating on site, the social distancing measures have created challenges, but also demonstrated areas where activity and productivity can be improved. Fewer people on site and more off-site productivity are pointing to better efficiency on certain tasks and should become standard procedure going forward.
Angela said people may finally wake up to the fact that getting more people on site to get back on programme did not equate to greater productivity. Certainly, from a drylining perspective, work had flowed more smoothly and efficiently by having fewer people on site at once. On the flip side, loading was becoming more labour intensive owing to social distancing.
Mike noted that restrictions are causing people to consider whether things need to be done on-site. They are starting to see demand for smaller boards, which reduce weight or bespoke lengths which limit the need to cut on-site, reducing the need for labour on-site. Mike also reflected that limitations on space and bodies on site adds to the pressure to produce less waste, which requires additional handling and storage. Nigel questioned whether this wholesale review could finally create a tipping point for modern methods of construction. Components could be pre-sized so there is less cutting required on site, along with the need for manual waste removal.
Designers need to do more to understand the products and logistics.
Todd believes that the past few months have demonstrated how much more efficient the industry can be when there is more integration, with more work taking place off-site, for example the integration of lighting and other services into ceilings. The big problem with that is that many specialist subcontractors don’t currently have the skills to work with all the different products. But trials were promising and it was an opportunity that needed to be explored further.
Angela raised the concern that pressure had slowly been building on specialist contractors before COVID, linked to the Hackitt Review and new requirements. The level of scrutiny/detail has not been reflected properly and there is often just not enough money in the schemes to make them financially viable, Angela added, with the contractor shouldering the risk for very little reward.
‘The circular argument’ whereby builders, designers, main contractors and the client all blamed each other for delays and stumbling blocks to work flow, was a recurring theme within the industry, but there was a need to reset and consider the actual end-user, the person who uses the building and ultimately suffers from any collective failure. Ann believes there is more leverage with owneroperators where they need to live with their decisions. She added that many clients suffer from risk blindness. “Some clients still believe you can move risk, even when you clearly can’t. Look at Carillion. It proved you can’t offset all of your risk.”
The need to price for risk was discussed. It was felt that trying to parcel it up and contract it out undermined attempts to collaborate. Ann rsaid risk sharing models exist, incentivising all from designers through to finishing contractors, but need upfront work and front-end investment that is often underestimated. “However collaborative you want to be, your professional indemnity insurer will be sitting on your shoulder saying ‘don’t tell anybody that’,” said Ann. “Unless you can get over that issue of where the liability will sit if something goes wrong, it is a massive barrier to collaboration.”
Iain McIlwee asked about the potential of Integrated Project Insurance (IPI). Ann felt this would be a positive step. Nigel echoed this and he could not understand why more companies weren’t using IPI. He said this change needed to be driven by clients, with the government/public sector leading the way. “There are plenty of integrated insurance packages out there that have been available for years. We need to educate clients about these options. At the end of the day they are making the decisions and we are advising them,” he said.
In terms of how installers would manage competency and have more control over quality going forwards, both Angela and Helen said this boiled down to clearer and longer pipelines of work and earlier engagement.
“We deal in subcontract labour because we don’t have visibility that far in advance of what labour we will need. Three to six months isn’t enough,” said Angela. Going forward, she feels there will be more direct employment, which will allow more control over labour and hence quality. Helen said as a fit-out contractor, Tapper Interiors could not have a complete PAYE workforce either, but a solid core helps to maintain quality. Predictability would enable better planning of labour, a healthier ratio of employed to sub-contract labour and ability to control quality.
Brian recognised this challenge, stating that his company does try to directly employ, but this is a challenge, particularly when things are uncertain. Brian agreed more control was possible if people are “books in” and emphasised the incentives to invest in and train people are far more apparent when people are on the books. Shifting more to employment would have a positive impact, but learning the lessons on sequencing and better programming will also improve quality moving forward, he said.
‘The Golden Thread’, drawn from Building a Safer Future is a key catalyst for change. Mike felt this was linked intrinsically to competence. British Gypsum now has five levels of competency defined internally to cover advice on fire but spreading to other critical performance requirements. This involves escalation of how far an individual can go in advising a client, designer, architect or installer. There is a huge amount also being spent on product testing.
Richard Waterhouse noted the emphasis within the roadmap on embracing innovation being key to taking us into a new era. Areas isolated as having greatest potential to deliver productivity throughout the construction sector were off-site, automation and digital advancements.
Automation was also being looked at more seriously – the challenge was ensuring you had the correct equipment, Mike said. Some trialled solutions, such as robotic equipment for lifting to ceilings, had proved unpopular in the past, but there was now more pressure to make it work.
Angela said it would be “nice to feel that a building had been designed by the time we arrive on site”, making it easier to keep track of everything, but if this involved sharing information on projects, there are currently too many different ways of doing this, this is a huge challenge.
Todd emphasised the challenge of exchanging information when substitution is so rife. “We test things extensively, but we have no control over how things are actually used,” he said. He experienced this first-hand in the refurb of their own office and reflected that the majority of installation issues are linked to substituting elements with no proper assessment or record.
Helen felt this was already changing and most specialist contractors now recognised the need to install a system that had been thoroughly tested beforehand.
Opinions were mixed over the effectiveness of digital solutions at the moment. Angela and Brian felt this boils down to too many options available. Each major contractor was going their own way, but none of the applications talked to each other. The huge array of choice was not a positive and it was felt that some consolidation and focus on integration would support adoption.
The trust equation
The discussion on information soon turned to trust and the need for accurate and transparent exchange of information. Iain reflected that 90% of construction projects are delayed by over 10% and variations typically account for 20% of final contract value – the whole process of quoting to win work and then trying to work to make money on variations and substitutions needs to change. The question remains as to whether COVID-19 will be a tipping point, but if we start to learn from the better control required to support social distancing and get the detail right, there will be greater control of programming and sequencing and ultimately the process will improve for all. The discussion concluded that credit was key to oil the wheels of evolution and early engagement and clear pipelines are critical as they will ultimately support the confidence of investors and ensure construction business can raise the credit needed to invest more effectively.
Goals for 2022
Over the next two years, a number of changes could come into effect to improve the industry, drawing on our recent experiences and the panel’s wish list for sector improvements was definitive:
· Taking eye off the capital cost and look at the first five years (at least of occupation).
· Re-engineering the procurement process, with earlier involvement of the entire supply chain.
· Far better PR for the construction sector, we spend too long talking the industry down and not enough time reflecting on our achievements. It is a great industry to work in and people need to know this.
· A refocus on useable off-site solutions, better leadership and real collaboration.
· Understanding the value added at each stage of the supply chain and respecting better the contribution that is made at each level.
· Early engagement is critical and positive, proactive engagement.
· Better collaboration driven by use of project bank accounts and project insurance.
· Standardisation of contracts – accepting amending contracts is often about risk avoidance rather than risk management.
· Strong leadership and the courage to embrace change.
Ann Bentley, Global Board Director, Rider Levett Bucknall
Philip Johns, Managing Director, SIG UK
Mike Chaldecott, Chief Executive Officer Saint-Gobain UK and Ireland
Todd Altman, Chief Executive, SAS International
Brian Hendry, Managing Director, Brian Hendry Interiors Ltd
Iain McIlwee FIMMM, CEO, Finishes and Interiors Sector Ltd
Helen Tapper, Operations Director, Tapper Interiors FIS President
Richard Waterhouse, Chief Strategy Officer, NBS
Rob Frank, Customer Experience Director, BW Workplace Experts
Angela Mansell, Managing Director, Mansell Interiors