Category Archives: Philosophical

Lets Talk Business

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In sustainable construction it has become commonplace to focus on carbon footprint. We cleave to the metric of kg CO2e / m2 for both operational or embodied carbon. This has clearly grown out of the practice of valuing buildings by floor area. Yet this measure of sustainability is largely meaningless to the leaders of businesses that will occupy our buildings.

Businesses have their own measures of performance and success. In commercial enterprises these are likely to involve profitability and productivity ratios. Schools will measure their performance in terms of learning outcomes, hospitals by recovery rates. None of these measures relates to floor area.

A business leader choosing premises needs to evaluate many criteria. It is well known that location is a primary consideration. Design, as in the overt appearance, may also play a role. However, since assessing performance against building carbon footprint quickly becomes complex, it is rare that sustainable design gets sufficient consideration.

By sustainable design, I of course mean design that addresses the social and economic performance of business, not just the carbon footprint of buildings. There is plenty of evidence that well designed workplace leads to happier and more productive staff. This should be of immediate interest to a business leader, as the cost of staff dissatisfaction and absenteeism is likely to far exceed the cost of energy in offices.

On the other hand, less tangible design features should also feature in property decisions. Workplace designs with higher carbon footprints, such as air-conditioning, may actually permit higher occupation densities, in other words more staff in the same space. These considerations should also be critical in the choice of premises if only the benefits could be made explicit.

The simple metrics of construction cost and carbon emission by floor area do not reveal any useful information about the true benefits of a building’s design. Imagine instead metrics for office buildings of construction cost and carbon emission per workstation at design occupancy. These give direct measures of the efficiency of the design in terms that are meaningful to the occupier.

These metrics allow true comparison between naturally ventilated out of town offices with low occupation and a densely occupied, air-conditioned, city-centre offices. These metrics would allow a business leader to immediately relate productivity to resource consumption via the vector of staff. This is a compelling tool for property related decision-making.

It doesn’t end with commercial offices. If we understand the end user businesses a little better we can develop metrics for cost and carbon efficiency appropriate to any business sector. We would measure the efficiency of a hotel by bed space and a distribution warehouse by the number of pallets of goods accommodated. It will require some work to establish suitable measures at the outset, but this will lead to better business outcomes for us as well as our customers.

The recent RIBA survey of chartered practices revealed that the majority do not have a business plan nor set themselves business performance targets. We would probably also find this to be true of consulting engineers and other related professionals. This lack of familiarity with business issues could be limiting our ability to communicate with our customers in language familiar to them.

If we want to see substantial change in sustainable construction we may need to start by changing ourselves a little. A bit more business savvy would not go amiss. Not only would we be more successful in the business of making buildings, but we could learn the language of business to better communicate our skills and ideas to our customers. Measuring the cost and impacts of buildings in terms that are evident and compelling to business leaders has to be a good start in the transition to a new paradigm.

Race to the Bottom

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The built environment is of vital importance to the creation of a sustainable society and construction needs to be considered as being for the public benefit. Decarbonising the UK building stock will not be easy or cheap and it requires concerted effort and co-operation across the supply chain. The capitalist free market is no longer an appropriate mechanism for the construction industry if we are to deliver the new paradigm.

Despite numerous spectacular failings in the delivery of IT and defence projects, our political leaders persist in their faith in the free market. Thus least first cost tendering is now applied across all aspects of public procurement for construction, from initial design right through to the regulatory functions. Where the Government leads the private sector will surely follow.

Open competition certainly does drive down prices but it is equally clear that it does not deliver real value or quality.

Any student of economics can tell you that people respond to incentives and that competition creates perverse incentives. Consider the case of the exam board official caught out last year feeding prior knowledge of exam questions to teachers at a training event. When schools are judged by exam results and exam boards compete to attract schools to use their examinations, they will do whatever is necessary to capture business. The market has created an incentive for perverse behaviours by exam boards including dumbing down the questions and advising teachers which areas to focus on during revision.

Nowadays even Local Authority Building Control has been forced into competition with approved inspectors. There is no longer any protection for the regulatory function. Developers will select their inspection services based not only on fees, but also on who is likely to give them the easiest route to compliance. So, just as with the competing exam boards, there is an incentive for building inspectors to be lenient in order to encourage future business. Any inspector who rigorously applies the regulations is likely to be quickly out of work. How can we therefore expect the statutory regulation function to be rigorously and impartially executed?

So, if our system of statutory oversight is compromised, can we rely on the supply chain to deliver the quality and performance improvements we need? I don’t think we can, as I said in a previous article ‘The Root of the Performance Gap’.

When I started as a young engineer, the practice I worked for had a policy of disregarding the lowest tender when we were evaluating mechanical and electrical subcontracts. You could almost guarantee that the lowest bidder had cut his cloth too thin and that performance on site would suffer, leading to poor quality and a continuous battle over proper completion of the works.

These days however, I find that clients not only appoint the lowest tenderer for every service, but that they also try to negotiate the price even lower. Yet it is clear that lowest cost tendering incentivises suppliers to deliver the lowest level of service that they can get away with. I contend that this actually leads to increased overall cost due to the additional management and supervision required to ensure that the bare minimum requirement of the specification is fulfilled.

However, given the urgent need to decarbonise the UK building stock, simply achieving the bare minimum of the specification is not enough. Every party in the construction process needs to deliver over and above. We need an industry in which every individual actively contributes to achieving a long-term vision rather than being focussed on short term financial goals. We need an industry in which selection is on the basis of performance and lifecycle value.

I suspect however that the public sector is still wedded to competitive tendering and we won’t see the necessary leadership for some time to come. In the interim, a step change in construction performance and value could be achieved by simply changing tender rules. There are lots of clever ways to structure competitions to achieve best value rather than lowest cost. However, a simple first step would be for the public sector to commit to taking the second lowest bid in any tender. At a stroke this would remove the incentive to bid at unrealistically low levels. The construction industry would then be able to concentrate on delivering value rather than recouping its losses.

The Root of The Performance Gap

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A number of comments made during an industry dinner last week have crystallised a new understanding for me about the real root causes of the building performance gap that we now hear so much about.

The performance gap is the difference between the notional energy performance of a building predicted by its designers and the actual out-turn energy consumption once occupied. When you eliminate the obvious impact of regulated versus unregulated energy then there is often still a disparity between design and operation. In many cases this is due to failings in the design or construction, but equally often there is a failure in the management and operation of the finished product.

As is usual in the construction industry, blame for the performance gap is being attached to individual parties in the supply chain. However I now realise that the real problem is structural and embedded in the nature of supply chains themselves. Design and continuous improvement is a circular process, but the supply chain is linear. It is like that because procurement and project managers have made it so. Nowhere within the supply chain is any one party responsible end to end for the building performance.

The project manager who implements last minute omissions from the ‘expensive’ metering and control system is rewarded by the client for bringing the project in on budget. Facility Managers who reduce operating cost by disabling systems or purchasing the cheapest replacement parts are awarded bonuses for achieving financial targets. The chances are that neither party will even be working on the project when the consequences of such decisions come home to roost.

Further, at each link in the chain, we create incentives that promote short term thinking rather than action for the long term outcome of better building performance. Most client organisations separate those responsible for capital investment from those responsible for operations. They reward the procurement teams for achieving the lowest capital cost. Thus procurement is through competitive tendering which provides a clear incentive to do as little work as possible whilst achieving an acceptable, rather than exceptional, outcome.

The consultants need to win work at the lowest cost which constrains the time spent on design. The contractors need to make profit to pay shareholders so will select products on the basis of cost not performance. The Building Control Officers need to win future work and are unlikely to tell unwelcome truths about the building performance. The facility managers survive on their meagre fees by not spending money on extensive maintenance and quality replacement parts.

Even within organisations the way people are employed impacts on outcomes. Employees’ performance in regard to promotion and reward is often measured against annual or even monthly financial targets. When you combine this with a project based workload you create a clear incentive to move on to the next project as quickly as possible, rather than spend more time on delivering one project really well. People are then often ‘too busy’ getting work and doing work to plan the future of their business and still less the future of construction.

It is telling that the RIBA survey of chartered practices found that 62% do not have a business plan. I’d be prepared to bet that the most common reason for not having a business plan is being too busy to create one. Having worked in and run small businesses myself I am well aware of the pressure simply to keep turning over the work.

The building performance gap is not the ‘fault’ of the construction industry or the occupiers. It is a product of the systemic failure of procurement, management and operation of buildings.

More thoughts about the impact of procurement on construction value in follow up article ‘Race to the Bottom‘

What Have the Romans (Government) Ever Done for Us?

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The long awaited Government Industrial Strategy for Construction will be published next month. Here’s a suggestion for what it could say and what I think it probably will say:

What it could say:

The UK construction industry is capable of great feats of innovation, but it needs the support of enlightened, intelligent clients to deliver to its fullest potential. This Government will therefore address the shortcomings of public sector procurement to demonstrate that the public sector can be an intelligent client which no longer stifles innovation, focussing on least first cost rather than value and attempting to transfer all risk to the private sector.

What it probably will say:

The UK construction industry does not innovate often enough. Therefore, whilst maintaining the current public procurement structures that favour compliance and accountability over innovation, Government will introduce ever more restrictive rules that will force the Construction Industry to adopt expensive and un-necessary practices such as BIM in the hope that this will in turn force more collaborative working and somehow lead to more innovation.

Government, national and local presently persists in pursuing risk transfer over innovation and least cost instead of best value in public sector procurement. The recent spending cuts have unfortunately merely reinforced the focus on least first cost by setting short term financial targets. A better outcome for the country could be achieved by refocusing procurement on value so that savings are replicated year on year rather than pursuing least cost today at the expense of tomorrow.

Government also continues with its rhetoric about supporting SMEs and promoting innovation in construction. However it persists in policies that are aimed at transferring all possible risks to another party. Thus it creates the conditions for procurement under which only the largest and safest (ie least innovative) companies can be selected.

It is clear that BIM is going to be used as a Trojan Horse to try and force collaborative working on an industry that is poor at collaboration. However the industry does not collaborate as the present public sector procurement structures actively dis-incentivise collaboration. I am a fan of BIM as a tool, but not as a blunt legislative instrument (look at what has happened to renewables and BREEAM). Until procurement and incentives for construction are re-designed collaboration simply will not happen, with or without BIM. In the meantime the expense of deploying BIM will further prevent Government procurement from engaging with the Innovative SMEs that it purports to support.

Government now has the chance to be an intelligent client for construction and in doing so provide the leadership for the rest of the public sector, and eventually the private sector, to become intelligent clients too. Government could demonstrate the benefits of client intelligence in delivering lower cost, better performing, sustainable construction. Government needs to invest in technical expertise within its departments. Much of what Government is presently doing is evidently well intentioned, but ultimately flawed as it simply does not recognise the differences between construction and other industry sectors. Initiatives and incentives that work in manufacturing or aerospace simply do not translate into the construction sector. A restored, expert civil service would consult with the construction industry to create an intelligent system for procurement, financing and operating public sector projects to everybody’s benefit.

I want to hear that the Industrial Strategy for Construction will commit Government to investing in the reform and demonstration that is essential for the industry to move forward and be genuinely sustainable. Not only in what it constructs, but for the sake of our economy, to become sustainable as an industrial sector, able to compete against international encroachment into UK construction. If the Government cannot do this for us we may as well give up and go home.

China’s Conservation Culture

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Having spent the last 2 weeks in Chongqing, China’s fastest growing industrial city, I realise on returning to the UK last week just how cosy and indolent our western economies have become. China is a powerhouse of making and doing, whilst we luxuriate in our undemanding jobs, manipulating imaginary paper wealth whilst ignorantly squandering natural resources in our disposable consumer society.

It is forecast that some 300 million Chinese will join the middle classes this decade. This is in addition to China having the fastest growing urban population in the world. The pressure on Chinese cities and their economy is phenomenal, but they are preparing for it. Our guidebook to Chongqing, published in 2011, lists only one metro line. We arrived to find that they already have four, with seven anticipated by 2015! Compare this with the 20 plus years it has taken to get London’s Crossrail underway.

But it is not just the phenomenal rate of development that I believe will set China apart, it is their culture of conservation and re-use.

Walk down a street in any Chinese city and you can find people who can repair, re-purpose or recycle just about everything you can imagine, from building materials to mobile phones. Demolition sites are immediately picked over for re-usable materials and you can find plenty of trade in recovered reinforcement and plywood shuttering from concrete. Cardboard packaging is collected from high street shops and carried off in huge bundles by little old ladies.

All the litter bins in public places, not just on the street, but out of town too, are all segregated for recyclable and non-recyclable, as you would find in Germany or other more enlightened Euro countries. On corners throughout the cities you will find the street cleaners sorting and packaging up the waste from the litter bins for re-use or recycling.

With a street food culture such as China’s you would expect to find large quantities of disposable food containers in the litter bins. However, you will also find people collecting the containers, clearly for re-use. One might question the hygiene implications of such a trade, but it is unquestionably avoiding substantial quantities of plastic going to landfill, reducing the costs of packaging for the food businesses and providing a subsistence income for the recyclers.

This culture of avoiding waste has clearly grown out of necessity. However, if this culture can be retained and nurtured, particularly in relation to Chinese manufacturing industry and the emerging middle class then there is no question that it will result in a fully developed economy that is far more resource efficient than we can boast in the West.

Whilst we in the West merely debate the principles of a circular economy, the Chinese live and breath it. The disposable consumer culture of the West is simply not for them, and long may it remain so.