Department of the Environment,
Transport and the Regions
Rethinking Construction

CHAPTER 2
Our Ambition for UK Construction

The Scope for Improvement

  1. To illustrate the kind of targets which the Task Force wants to see construction adopt we have set out in the table below our assessment of the minimum scope for improvement in the performance of UK construction. It is necessarily an impressionistic and partial assessment, since construction has no accepted performance indicators. Solid data on company and project performance in terms of efficiency and quality is hard to come by.
  2. The scope for improvement that we have identified is underpinned by evidence from leading clients and construction companies from the UK and the USA. Indeed, we have taken a conservative view in most cases of what we know is being achieved by leading edge companies. We expect that the best UK construction companies and clients will meet these minimum rates of improvement in full and go on to surpass them.
  3. Our assessment is also underpinned by what is known about the amount of waste in construction. Recent studies in the USA, Scandinavia and this country suggest that up to 30% of construction is rework, labour is used at only 40-60% of potential efficiency, accidents can account for 3-6% of total project costs, and at least 10% of materials are wasted. These are probably conservative estimates when compared to the amount of waste identified in manufacturing by best practice firms such as Toyota. Furthermore, an OECD study suggests that UK input costs are generally a third of those of other developed countries but output costs are similar or higher. The message is clear- there is plenty of scope for improving efficiency and quality simply by taking waste out of construction.
  4. We have set our measures in terms of annual improvement. We expect construction to make dramatic initial increases in efficiency and quality, but in our experience greatest value is obtained through significant sustained improvement rather than one-off advances. We expect the leading companies in the industry to adopt these measures as targets, or similar ones of their own devising, to monitor them regularly and to report progress publicly - and that includes companies in all sections of the industry.

The Scope for Sustained Improvement

Indicator

Improvement per year

Current performance of leading clients and construction companies

Capital cost
All costs excluding land and finance.

Reduce by 10%

Leading clients and their supply chains have achieved cost reductions of between 6 and 14% per year in the last five years. Many are now achieving an average of10% or greater per year.

Construction time
Time from client approval to practical completion.

Reduce by 10%

Leading UK clients and design and build firms in the USA are currently achieving reductions in to construction time for offices, roads, stores and houses of 10-15% per year.

Predictability
Number of projectscompleted on time and within budget.

Increase by 20%

Many leading clients have increased predictability by more than 20% annually in recent years, and now regularly achieve predictability rates of 95% or greater.

Defects
Reduction in number of defects on handover.

Reduce by 20%

There is much evidence to suggest that the goal of zero defects is achievable across construction within five years. Some UK clients and US construction firms already regularly achieve zero defects on handover.

Accidents
Reduction in the numberof reportable accidents.

Reduce by 20%

Some leading clients and construction companies have recently achieved reductions in reportable accidents of 50-60% in two years or less, with consequent substantial reductions in project costs.

Productivity
Increase in value added per head.

Increase by 10%

UK construction appears to be already achieving productivity gains of 5% a year.Some of the best UK and US projects demonstrate increases equivalent to 10-15% a year.

Turnover and profits
Turnover and profits of construction firms.

Increase by10%

The best turnover and profits by 10-20% a year, construction firms are increasing and are raising their profit margins as a proportion of turnover well above the industry average.

Performance Improvement in Construction

 

  • Tesco Stores have reduced the capital cost of their stores by 40% in five years. They are now targeting a further 20% reduction in costs over two years and a 50% reduction in project time.
  • Argent have reduced the capital cost of office construction by 33% and total project time by 50% since 1991.
  • BAA Pavement Team have reduced project time on airport runways and taxiways bymore than 30%, reduced accidents by 50%, and achieved 95% predictability of cost and time in two years.
  • The Whitbread Hotel Company have reduced construction time for its hotels by 40% since 1995 and costs have also been progressively reduced annually in real terms.
  • Raynesway Construction Southern in a year have reduced the costs of maintaining Hampshire County Council's roads by 10%, increased turnover by 20% with the same labour force, and reduced accidents by 60%.
  • The Neenan Company in Colorado have used 'lean construction' techniques over two years to reduce the time to produce a schematic design by 80% and project times and costs by 30%.
  • Pacific Contracting of San Francisco have used 'lean construction' to increase their productivity and turnover as a cladding and roofing subcontractor by 20% in eighteen months.
  • Neil Muller Construction of South Africa have used Total Quality Management techniques to achieve an 18% increase in output per employee in a year, a 65% reduction in absenteeism in four years, and a 12% saving on construction time on a major project.

  1. If the industry is not prepared to do this, then we propose that the clients should take the initiative. We are already aware of the Construction Round Table's and the Construction Clients' Forum's intentions in this respect and of the British Property Federation's customer survey. We think it is essential that any comparative data takes account of user satisfaction with the buildings they occupy and with the services of the design and construction team.

Our ambition for UK Construction

  1. This then is our ambition for a modern construction industry in the UK: adoption of the model of dramatic performance improvement that other industries have followed with such success, in order to deliver the challenging targets for increased efficiency and quality that we know are achievable. In the next section we offer the industry a practical approach to doing so, through the concept of the integrated project process.
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Published 16 July 1998