‘Do Not Resuscitate!’ The ‘ Mode derni nise se or Die’ Challenge To Do Things Differently Mark Mark Farm armer r Industry Transformation Agenda Auckland, 6 th March 2018
Q: Why Do We Need To Do Things Differently? 2
A: ‘Business as Usual’ Is No Longer An Option For The Construction Industry …..in either the UK or New Zealand 3
Reminder of Context 4
Four UK Construction Industry Reports – Similar Themes, Different Points in Time But It’s Clearly Evident We Now Have Different Drivers For Change 5
‘Modernise or Die’ - 10 ‘Symptoms of Failure’ Identified THE CORE PROGNOSIS IS DECLINING INDUSTRY RESILIENCY……… 6
Future Prognosis for ‘Business as Usual’ • Skilled construction labour now in long term structural decline • Quality of new ‘backfill’ labour force reducing • Increasing reliance on shrinking pool of experienced & competent labour force • Main Contractors not in control of sub-contractors • Sub-Contractors not in control of their labour force • Designers being de-skilled by procurement routes & transactional interfaces • Surveyors increasingly removed from understanding true cost rather than price • Increasing litigation and contentious project failures • On going commercial failures of businesses unable to control outcomes and hold ‘risk’ • New disruptors and disruptive models emerging challenging status quo 7
Future Prognosis for ‘Business as Usual’ – New Zealand 8
Future Prognosis for ‘Business as Usual’ – UK & New Zealand Major suppl ply y price inelasticity asticity pro roblem em in constr tructi uction n costs if if la labour ur in intens ensity ty & wa waste e remai ains ns at current nt levels vels Amplitud tude e & f freque uency ncy of p peaks aks & t tro roughs ghs increases eases Increas easingl ngly y upward ard trend nd line e on costs Constru ructio ction n costs will ll gradua ually lly become e much more volati tile e & w wil ill l trend nd increa easin singl gly upward rds s throu ough gh resou ource e & s skil ills ls scarcity ity 9
The Modernise or Die Challenge Addressed to Clients, Industry & Government 10
We need to train and retain more home grown talent Through creating more attractive long term career opportunities Which will prepare us to be able to do more with less resource in the future To help do this we need to create a new type of demand for better outcomes We need to then use that demand to underpin the evolution of new skills and training which will make us to be more productive & attract a new generation of workers 11
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Discontent From Within…. The ‘Die’ in ‘Modernise or Die’ has taken on a renewed significance in the UK in last 2 months 13
But Discontent With Construction Performance Is Now Coming From Elsewhere…… 14
↑PROCESS, SKILLS & COMPETENCY ↑COMPLIANCE & ENFORCEMENT 15
For the Homebuilding Sector There are Some Very Real Pressures That Need to be Addressed 6 March 2018 16
Condensed summary of Farmer Review Recommendation Themes Need to for clear leadership & institutional reforms that better integrate clients, industry & government A productivity led change agenda letting innovation dictate future skills development & which clients and the supply chain can either lead or respond to Government & progressive clients have a critical role in the strategic initiation of change All of the above ove underp erpinn inned ed by a move ve to higher her levels vels of preman manufactured ufactured value ue on on projects jects combin bined ed with a more e integrated grated delive ivery ry model el 17
An Understanding of the Root Causes of Delivery Failure Needs to Define the Solution • Design Uniqueness Move ve toward ards s manufacture ufacture led • Site Labour Intensity & hybrid rid constr struction uction Digital Enablement From Design, Procurement Design, Procurement • No. of Transactional Design to Site to Asset and Construction and Construction Interfaces (Vertical Delivery Failure Delivery Success Integration) Management Move ve toward ards s more e integrated grated procurement curement models els • No. of Works Interfaces (Horizontal Integration) 18
INCREASED LEVELS OF PRE-MANUFACTURED VALUE - MANUFACTURE LED & HYBRID CONSTRUCTION 19
Focus on BIM & Digitalisation is Wasted Without Transforming Construction’s Analogue Led Physical Delivery Model + + 20
‘Delivery Platform’ Thinking Can Revolutionise Design, Construction & Asset Performance 21
‘Construction as Manufacturing’ Is Not Just About Big Centralised Factories – It’s About Re -Shaping The Entire Supply Chain – SME’s Included 22
INTEGRATED PROCUREMENT 23
We Need to Also Recognise that the Traditional ‘Tier One Contractor’ Model is Broken No control or ownership! CLIENT On cost & risk transfer ADVISORS No control! WE NEED TO DISINTERMEDIATE LUMP SUM escalation MAIN CONTRACT TRANSACTIONALLY LED, NON- OR VALUE ADD MODELS SC SC SC SC SC SC SC SC SC SC1 3 1 2 7 4 8 9 5 6 0 Horizontal interface risks mis-managed SC1 SC2 SC1 SC1 SC1 SC1 SC1 SC1 SC1 SC1 1 2 3 4 5 6 9 0 7 8 24
We Need to Move to New Organisational Models Enabling Higher Levels of Pre- Manufactured Value With Less Transactional & Management Hierarchy DIGITAL ENGINEERING & ASSET PERFORMANCE MULTI-PARTY ALLIANCE – PROGRAMMES OF WORK TC TC TC 2 3 4 CONSTRUCTION INTEGRATOR OPERATO WC1 – CLIENT HIGH PMV R DESIGNERS TC TC TC 5 6 7 INSURANCE PRODUCT BACKED? PROJECT BANK ACCOUNT 25
AN UNPRECEDENTED POLICY ENVIRONMENT NOW EXISTS IN UK STIMULATING A MOVE TOWARDS HIGHER PRE-MANUFACTURED VALUE, INTEGRATED PROCUREMENT & SUPPLY CHAIN TRANSFORMATION 26
The 2017 Autumn Budget & The Industrial Strategy White Paper Create an Unprecedented Policy Backdrop 27
Changing Procurement HA HAS To Accompany Any Increase in PMV 28
THE OPPORTUNITY FOR NEW ZEALAND’S HOUSING & INFRASTRUCTURE PROGRAMMES? UK CASE STUDIES - HOMES ENGLAND & HEATHROW EXPANSION PROGRAMME 29
HOMES ENGLAND 30
Public Land Disposal or Affordable Housing Programmes Subject to Balanced Scorecard Procurement Commercial 60 % 20 20 % % Pre-Manufactured Deliverability & This balance is predicated on application of control ‘pass / fail’ parameters on Value Quality PMV & Deliverability & Quality which act as ‘gate’ to drive primary required outcomes 6 March 2018 Farmer Review - 3 months in 31
Requires and Understanding of PMV Spectrum Full volumetric modules incl fitting out ‘Hybrid - Panelised wall / floor systems – Steel, Closed Panel Timber, CLT + volumetric bathrooms / kitchens’ & plant / risers Panelised structural wall / floor systems – Steel, Closed Panel Timber, CLT Pre-manufactured structure + composite cladding system Pre-manufactured structure timber / precast DfMA led ‘Traditional’ ‘Traditional build’ base line PRE-MANUFACTURED VALUE % 40% 50% 60% 70% 32
Is Agnostic to Exact Approach But Forces Innovation Full volumetric modules incl fitting out ‘Hybrid - Panelised wall / floor systems – Steel, Closed Panel Timber, CLT + volumetric bathrooms / PMV ‘FLOOR’ #1 @ 45% PMV ‘FLOOR’ #3 @65% PMV ‘FLOOR’ #2 @ 55% kitchens’ & plant / risers Panelised structural wall / floor systems – Steel, Closed Panel Timber, CLT Pre-manufactured structure + composite cladding system Pre-manufactured structure timber / precast DfMA led ‘Traditional’ ‘Traditional’build base line PRE-MANUFACTURED VALUE % 40% 50% 60% 70% 33
PMV Decision Making Framework for Sites PRE-MANUFACTURED VALUE % 55% - 70%+ 45% - 55% 6 March 2018 Farmer Review - 3 months in 34
HEATHROW EXPANSION 35
A Different Approach – From a Privately Financed Client 36
To Initiate ‘Demand Led Skills Transformation’ & More Balanced Geographic Dispersal of Activity 37
A Client Who Knows What They Want! 38
Predicated On A Strong Design, Procurement & Delivery Disruption Model 39
A Model Influenced by New Drivers For Change 40
Not A Natural Default to Traditional Hierarchical Structures 41
Benefits Case Led – Realistic Comparisons to ‘Business as Usual’ 42
An Emerging Strategy That Will be Co-Created 43
In The Meantime, UK Industry Itself is Moving Towards Change, Slowly but Surely… 6 March 2018 44
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