Six ways to close our industry's productivity gap
With the UK set to have a new government in the coming weeks, what if we considered a new construction industry as well? One of our greatest strengths as an industry is that we are delivery people. However, it is also one of our greatest weaknesses. Why? Because it constrains our ability to imagine something different.
We are great at doing what we know best. But what if we took a moment to consider a different industry? To redesign it from the bottom up. What would it look like? How would it be different? What type of business models would it have?
One thing is for sure: it would be a productive industry. But we are a far cry from this ideal. The Construction Leadership Council’s report on productivity found that there are 25% productivity improvements on the table—the equivalent of £45bn, 2% of the entire GDP of the UK. This is the construction productivity gap.
According to CLC analysis, only 7% of this gap would be closed by better building and only 2% by doing better business—the majority of the gains can be found by better preparation, leadership, and planning.
Therefore, if we want to close construction’s productivity gap, we need to redesign our business model to create a system that consistently leads to the best buildings being built in the best way.
The CLCs’ productivity report set out a number of ways we can achieve this, with recommendations for all parts of the industry as well as for government. Here are six things consultants and contractors can start doing now to start closing the gap:
For consultants:
1. Take ownership of the productivity challenge
Operating at the interface between clients and the supply chain, consultants are uniquely positioned to help redesign the way our industry operates. They should take ownership of the productivity challenge by helping clients understand the implications of their decisions and supporting the industry in better planning and preparation.
2. Prioritise insights over data
While our industry has been inundated with data for years, we have yet to fully harness its potential. We need to improve our ability to gather data, understand it, and act on the insights we gain at the sector, business and project levels.
3. Change the currency
Quantity Surveyors are used to dealing in sterling, but as the industry changes, new currencies will be needed. I’m not talking about Bitcoin – but carbon, productivity and programme. What gets measured improves, and while QS’s are laser-focused on cost, we need them to shift their mindsets and start to apply that commercial acumen equally to a broader set of metrics.
For contractors:
4. Prioritise value
The traditional business model in construction is based on contractors taking on a lot of risk with very little reward. With insolvencies at an all-time high in our industry, it begs the question of how sustainable this model is. Do we risk contractors becoming an endangered species?
Imagine a world where, rather than chasing retentions or arguing over paper-thin margins, we could focus that energy on creating value. If we want to increase margins collectively as an industry, we need to focus on delivering consistent, predictable, high-quality and high-value construction.
5. Early contractor selection
Clients should select their construction partner early and then work together to develop the plan, build the plan and manage the risks as an integrated team. We’ve got great examples like Project 13, where such an approach led to a productivity-focused design, with minimised changes and proactive contractor involvement.
6. Look beyond cost
Contractors need to be bold enough to stand behind alternative metrics when bidding, so cost isn’t always the primary factor. Equally, clients need to take a more holistic view when choosing a contractor, placing a greater weight on other performance metrics such as programme, carbon and quality. This will then drive positive behaviour with contractors competing on quality, rather than cost. Those that can’t compete on these terms would go bust. This is where we need to move if we want to see healthier margins.
A different, more productive, sustainable, and investable industry is possible. Indeed, many other sectors already work in this way. There is no reason for us to continue as we always have done. But to get there, we need a radical shake-up of the business models we have all grown so used to. We need a new model that rewards planning, preparation and performance.
If we don’t change, then we risk going the way of the dinosaurs, a relic of a time past - this would be a loss not just for us all, but for our clients and society.
