Windowfab Exhibition

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Windowfab Exhibition

• 14th/15th May 2003
• Presentation by
• Sir Michael Latham,DL,MA, FRSA
• Deputy Chairman, Willmott Dixon Ltd,
• Chairman, Partnership Sourcing Ltd,
• and Chairman of The Construction Industry
• Training Board

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My Agenda Today (1)

• The U.K. problems, 1992-3
• The Response
• Taking it forward
• The Egan Process
• The Requirements

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My Agenda Today (2)

• Why Change?
• Who isnt / is doing it?
• Partnering How?
• Case Studies
• Where Next?
• Is it all working?
• A thought

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The U.K Problem, 1993

• Client dissatisfaction
• Poor performance
• Adversarial relationships
• Claims culture
• Non-existent profit margins
• Heavy lobbying by sub-contractors

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The Response 1992/93

• Heavy pressure for a review
• Government support and funding
• 8 months to decide terms of reference
• 3 more months to decide type of enquiry
• 3 more months to decide reviewer
• No rush of volunteers
• So I got the job

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Background to Constructing the Team 1993-1994

• Joint Government / Industry Initiative
• Aims
• Reduce conflict litigation
• Improve productivity competitiveness

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Taking it Forward Rethinking Construction

• New UK Government new ideas
• Client focus and membership Sir John Egan
• Leadership from Deputy Prime Minister
• New delivery mechanisms CBPP and M4I
• Now taken further Strategic Forum and
  Accelerating Change, 2002

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The Egan Strategy

• Partnering
• Benchmarking
• Supply chain management
• Product development
• Component Production

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The Egan Targets

• Capital costs - Minus 10 per year
• Construction time - Minus 10 per year
• On time within budget - Plus 20 per year
• Defects on handover - Minus 20 per year
• Reportable accidents - Minus 20 per year
• Productivity - Plus 10 per year
• Turnover profits - Plus 10 per year

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Accelerating Change Targets (1)

• By End 2004
• 20 (by value) of projects by integrated teams /
  supply chains
• 20 of client activity / by value / under Clients
  Charter
• By End 2007
• 50

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Accelerating Change Targets (2)

• By End 2006
• Recruit additional 300,000 qualified people
• By End 2007
• 50 increase in applicants for HE FE Courses
• By 2010
• Fully certificated and trained workforce
• For All Targets
• Benchmark Progress
• Produce Toolkits and guidance Dates set

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Strategic Forum for Construction Targets

• As Accelerating Change, but also-
• By end of 2007, 380,000 qualified and recruited
• Introduce Design Quality Indicators -
• 500 projects by end of 2004 -
• 60 of all publicly funded or PFI over 1
  million,
• and
• 20 of all projects over 1 million to use
  D.Q.I s

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The Requirements

• Reduced real costs
• Improved predictability
• Better meet end users needs
• Improve quality and safety

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Latham / Egan

• The client as core
• Reintegrate design construction
• Client expects
• Clear responsibility
• No fuzzy edges
• Design flair / cost conscious
• Specialist design integration

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Best Value

• Challenge
• Why, how and by whom a service is provided
• Compare
• Performance against others across a range of
  indicators
• Consult
• Service users, partners and business community in
  setting new performance targets
• Compete
• Fair and open competition wherever practicable as
  a means of securing efficient and effective
  services

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Why Change? (1)

• Why do it at all?
• Who needs to change?
• Whats wrong with the old ways?
• Didnt we do OK?

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Why Change? (2)

• No, we didnt do OK

• Or if we did .

• Someone else got kicked

• And sometimes it was us

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Partnering Or the old ways (1)

• Probably
• Selection on basis of people, quality price
• Probably not
• Lowest tender
• Dutch auction the supply chain by 5
• A few good claims
• You might make 1

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Partnering Or the old ways (2)

• Probably
• Well run site meetings
• Everyone knows who does what
• Probably not
• Avalanche of letters
• Everyone blames everyone else
• No solutions identified
• Next stop - disputes

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Partnering - Principles

• Agreed mutual objectives
• Agreed decision making procedures
• Commitment to continuous improvement
• Open book and gain share

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Partnering - Types

• Strategic Alliances Fixed period or open ended
• Project Specific
• Post Award Project Specific (Public Sector)
• - Intention to Partner declared in advance
• - Competition on quality price
• - Partnering begins after award

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Partnering - Commitment

• MUST
• Start at the top
• Be a major change
• The whole company must change
• and
• Training required

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What Partnering isnt

• A marketing buzz-word
• A contract
• A soft option
• A quick fix

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Partnering in the Public Sector- EU Compliance
Partnering is acceptable under EU rules if- -
competitively arranged - clients needs
objectives clearly stated - contract for
specified period - safeguards for future
competition. Source Levene Report 1995
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• Evaluating VFM U.K
• Treasury Procurement Guidance, December 1997
• Government Policy - All procurement on VFM
• basis, not lowest price alone
• Consultants and Contractors to be appointed on
• that basis
• Robust mechanisms for each project to ensure
• quality and price (whole life cost) components
  on
• each bid
• Partnering and teamworking
• Evidence of skills ability
• Quality / Price matrix included for contractors

KEY CRITERIA
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National Audit Office Report to Parliament
January 2001
..Partnering offers good potential to improve
the value for money of construction. To be
successful however, all parties departments and
the whole supply chain must be fully committed
to making the relationship work.
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Partnering - Relationships (1)
Client
Partnering
Partnering
Main Contractor
Professional Team
Partnering
Partnering
Partnering
Specialist Contractors Suppliers
All are involved in the partnering process
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Maintenance Process - Partnering

• No essential difference
• Choose partner on quality/price
• Clear financial targets
• Benchmark performance
• Tenant/resident involvement

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Maintenance Partnering - Issues

• Skilled workforce? Resident friendly?
• Directly employed?
• Ease of access to operatives?
• Timescales for response?
• T.U.P.E compliant?

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Partnering Relationships (2)
Client
All are involved in the partnering process
Partnering
Service Provider
Partnering
Specialist Contractors
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Partnering - Processes

• Prepare for Partnering
• Collaborative approach, not blame
• Are staff responsive?
• Staff partnering workshops
• Develop skills, behaviour and attitude
• Pre-start contract partnering workshop
• Independent Facilitator - question and probe
• Positive client/contractor relationships
• Ongoing workshops

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CASE STUDY 1HOUSING STOCK MAINTENANCE

• Best Value Review
• Responsive Repairs
• Planned Maintenance
• Improvements
• 26,000 Dwellings
• 22 m Value
• Value Planned - Reactive 40 60
• Stock good condition but decreasing
• 350 m funding gap over 30 years
• DLO provision since 1994

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PREFERRED OPTION

• Partnering arrangement
• one third of total work to be carried out by
  Strategic Partner under a 5 year arrangement,
  subject to performance

• Integrated teamwork between contractors, tenants,
  consultants and other stakeholders will drive out
  waste and duplication resulting in
• More work for less cost
• Better quality
• Greater customer satisfaction

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FINANCIAL ARRANGEMENT

• Annual Guaranteed Maximum Price (AGMP)

• Individual Guaranteed Maximum Prices for Capital
  and one off schemes

• Responsive repairs benchmarked against historic
  costs
• Shared incentives apply to cumulated savings
• Savings ratio is geared to drive early cost
  reduction

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FINANCIAL ARRANGEMENT

• Totally Open Book
• Cost of the Works
• Labour, Material, Plant and subcontractors
  At Cost

• Branch Management Costs At Cost

• Central Overhead Fixed

• Profit Fixed Element Fixed
• Variable Element (performance related) Variable
  
• Cap Agreed

• Variable profit percentage is dependent upon
• performance against Key Performance Indicators

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Case Study 2

• Project Public Housing Maintenance - Tower
  Hamlets
• Government closure of DSO in 1999
• 3½ year measured term contract, covering
  maintenance of 25 of the housing stock
• Open book, partnered scheme
• Agreed overhead, prelims and profit
• EAV 6 million p.a
• Extended a further 2 years from April 2003

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Case Study 3

• Watergate School, London Borough of Lewisham
• New special needs school
• PPC 2000
• Open book transparency incentive scheme
• High stakeholder involvement
• Initial cost plan 5.3m reduced to 4.6m by value
  engineering, supply chain management and
  buildability
• On programme and on budget completion Dec 2002
• High customer and community satisfaction

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Case Study 4

• Project Bleak Hill School for St Helens MBC
• Willmott Dixon selected without reference to
  price
• Compliance with Best Value principles VFM.
• Open book/pain gain share.
• 11 larger school than clients initial design.
• 29 faster programme. 73-52 week.
• 17 cheaper than clients original cost plan.
• Single team focus.
• KPI and Benchmarking throughout.
• M4i demonstration project.

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Case Study 5

• City Learning Centres, St Helens MBC
• Two hi tech City Learning Centres
• Programme 28 weeks at tender
• Contracted and delivered 22 weeks
• Budget 1.5m GMP contracted and delivered 1.4m
• PPC 2000
• Integrated team throughout
• Supply chain transferred from previous schemes

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Case Study 6

• Cheshire Schools Partnership, Crewe
• 2 new one form primary schools
• Full turn key facilities (move fixtures,
  fittings, furniture, equipment)
• Floor area additional 15 from initial design
• Programme 18 weeks, less than tender documents
• Cost/finance savings 403k
• Fully integrated team and project processes

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Case Study 7

• Project Monmouth Sports Hall, Monmouthshire
• First Partnering project for Monmouthshire County
  Council
• Selection on non-cost criteria
• 12 cost savings
• 8 faster
• Performance specifications used for
  subcontractor/supplier tenders
• 5m of further projects on Partnering basis

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Case Study 8

• Project Brownfield regeneration scheme with 100
  open book partnering for Ealing Family H.A
• 54 units in crescent format with high quality
  design
• 4.1m Agreed Maximum Price with shared savings
• Complex design and very restricted site access
• Completed 6 weeks early
• Final time and cost savings amount to 100,000
• Savings shared 50/50 by Client/WD
• Earlier rental income helps Client Business Plan
• WDs 2nd 100 Customer Satisfaction Questionnaire

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Where next in UK?

• Treasury/Audit Office insist on change
• Housing Assocs. committed to Egan
• Local Authorities required to seek Best Value
• Ministry of Defence Estates Building Down
  Barriers, successful project
• National Health Service Estates reforming
  procurement .
• Other public sector clients also committed
• Top private clients driving best practice

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Jurassic Park?

• We can go on as we are
• Some might like that
• But so did the dinosaur
• Look what happened to him
• We wouldnt be here if we were like that

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After All..

• If you always do
• What you always did
• Youll always get
• What you always got
• AND CLIENTS WANT BETTER THAN THAT