The introductory panel at the recent Frameworks conference discussed the challenges and successes over the past year within the industry. [emaillocker id=”71749″]

Keith Heard, Chair of the National Association of Construction Frameworks warned delegates that “Contractors are flirting with financial disaster,” he further commented that this had “led to a lot of commentators to suggest the current contracting model is completely broken”. The industry has increasingly had to question the model following the collapse of Carillion in 2018, a major construction services provider.

John Welch,  Deputy Director at the Government Commercial Organisation argued that the industry had improved in the last year, with the lack of a clear pipeline of profitable work being cited a factor in the collapse, he said “They have got better at publishing pipelines, even from the second tier down”. 

The increased focus on social value has been praised as an improvement with the industry with Marie-Claude Hemming   “In terms of social value that’s something that’s very important, it’s important that every project should benefit the community and environment in which it is built” Heard expressed the importance of developments to “Provide a legacy”.

Welch suggested that the “Mindset of customers must change” and that always seeking the cheapest enabled this race to the bottom, he said  “Clients want both [Social Value and cheapest price] but we’ve got to change that mentality, because you have to pay a fair price for a fair product and not a cheap price for a poor product”. He also questioned the entire notion of cheapest price being representative of true cost, saying “It’s gonna cost us twice as much to fix and last for half of the time” .

The notion that clients were purely motivated by lowest price when seeking frameworks was criticised by Steve Tyree , Managing Director of Eastern Procurement, he said that “Certainly our data would show that price is not the deciding factor, it can be a factor but its very rarely the deciding factor”. Tyree suggested as a solution that social value be included directly in the contracts for frameworks as then “the lowest price will then also be a fair price”

The need for greater trust in the industry was emphasised by all speakers, with Welch expressing optimism “If we break the barriers that exist today between client and contractor we will generate more trust”

Political instability particularly, emanating from Brexit has been a significant challenge of the industry, with Tyree saying that “The concern of Brexit is starting to bite”.  Claude-Hemming stressed the need to invest in infrastructure regardless of the instability “there were some infrastructure announcements at the Conservative party conference which is great, but let’s get stuff up, let’s start building”. 

The skill shortage within construction is also an enduring issue Welch described it as having  “Hit in a big way leading to a lot of people to start talking about off-site modern methods of construction”. Claude-Hemming discussed how this has intersected with concerns over Brexit “”There is an uncertainty particularly around the issue of EU migration” but noted that there had “Always been an issue with skills and construction”. 

Connecting skills and social value was seen as a solution to this issue, with contracts including job opportunities “if you ask a contractor to provide a certain number of apprentices that’s what they will do”

Awareness of climate change and carbon emission within the industry was seen to have been a change within the industry, with Heard crediting the work of activists, he said “A Swedish school girl has changed the world,” referring to Greta Thurnberg. 

However, he also described how the industry has been “flirting with carbon for the last 10-12 years”, highlighting how whilst it has long been a concern of developers yet it is only recent pressure that is forcing the industry to make concrete changes.  

Risk management within the industry was also an area in which change in the industry was seen to be in need of reform, with Claude-Hemming described how “The cost of project insurance is increasing simply because of the level of risk”. Both clients and providers were highlighted for changes.  

Tyree described clients tendency “derisk themselves”, and how contractors will take projects that they then “can’t deliver”. Heard noted how the risk was “pushed down the supply chain until you get to a self-employed man, which is why you see so many mental health issues in the construction industry”. Heard was referring to research that showed the construction industry was the worst for male suicide rates, showing the urgency of tackling these challanges.

Construction frameworks do provide many opportunities to Small businesses despite these challenges, with Heard mentioning the fact that “Local frameworks are designed specifically for SMEs” and that “70-80%” of the supply chain even on major projects is provided by SMEs. Market oversaturation of frameworks was generally seen problem however, with there currently being over 7,500 frameworks, causing difficulties in differentiation. 

The signature issues raised by the panel were all interconnected.  Avoiding a race to the bottom means incorporating social value, it means that both clients and providers have to work together to create deliverable projects, rather than both being solely focused on cost-cutting

Delivering lower risk projects will allow the two to improve trust. The focus on Social value will create jobs and educational opportunities, helping the skills shortage to be tackled. And while costs in the industry may rise, this can best be enabled by greater government investment, which the industry has been calling for. The cost of the race to the bottom, to businesses, to social value, to individuals, is far greater than the cost of creating value for all through construction projects. [/emaillocker]