Facing Future Challenges

Dr Neil Jarrett

CEO, CWC (UK) Ltd

Global Trends

Global population growthThe global population is expected to exceed 9 billion by 2050

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Africa Asia Europe Latin America North America

Population (millions)

Source: UN, the 2004 Revision Population Database

Asianisation

60% of the world’s population lives in Asia. With wealth and living standards rapidly increasing, and the continent rapidly accumulating vast foreign currency reserves, our lifetimes will see a marked increase in Asia’s political and economic importance.

US has the largest number of migrants in the world

Source: UN, International Migration, 2006: http://www.un.org/esa/population/publications/migration/2006_Migration_Wallchart.pdf

Global Trade

Over recent years, international trade has consistently grown at a greater rate than the global economy, pointing to an increasingly economically integrated world. In 2020 world trade will be 80% larger than it was in 2000.

Ageing populations

• By 2050, a fifth of the world's population will be over 60 (UN)

• Between 2000 and 2020, the world’s population of over-50s will have increased by 70%, and the world’s population of 15-24 year olds will have increased by significantly less, at 11%.

(Source: UN 2005. United Kingdom Office of National Statistics)

Urbanisation• Cities occupy less than 2% of the

world’s land surface, but house almost half the human population

• Almost 180000 people are added to the urban population each day

• By 2015, 23 cities in the world are projected to hold over 10M people; all bout four will be in less developed countries

The ongoing march of technology

The internet and supporting technologies are empowering ever-growing numbers of people to instantly communicate with each other and consumers to research and purchase goods and services from around the world. Internet usage grew by 126% between 2000-2004. With accelerating adoption in Asia, Africa and South America, this rate looks set to rise.

The environment – the only show in town

Humanity’s ecological footprint grew at an average rate of 160% from 1961 – 2001

There are only 1.9 global hectares of biologically productive space available per person in the world.

Humanity is already exceeding this by over 20%

Construction Trends

Modernisation

Repeatable processes

Houses in containers from China

Lessons from manufacturing

Prototyping and the Airbus

Large Infrastructure projects

.

Wembley, T5, Arsenal Stadium

The Olympics

Who should champion the romance of large infrastructure

projects?

Housing Shortage

4 million additional households are expected by 2021

200000 houses need to be built each year

Currently below 160000

Procurement - Excellence Collaborative working, joint or

partnership working in the press, is on the rise in the public sector.

There is an awareness that while collaborative working can succeed in the public sphere, it can also fail if not carried out correctly – a low-level scepticism which needs to be shown concrete proof of success.

‘Partnership work is not without its challenges’ – the main problem is ‘cultural differences’ (Society Guardian: 08.11.06)

Procurement Sustainable procurement – what is it, how it will work

(Supply Management: 16.10.06)

Being able to prove your ‘green credentials’ (Telegraph business section: 19.10.06)

More than one third of the local government efficiency savings are expected to come from procurement (Local Government Chronicle: 31.08.06)

• “For greater energy efficiency in public procurement, we are publishing new guidelines to ensure that £125 billion we invest each year is spent both well and in a sustainable way, and … achieve a level of excellence in carbon reduction.”

Local Government Local authorities becoming more like social

enterprises – Sir Michael Lyons (Society Guardian: 04.10.06)

Growth of consultation culture has seen councils and ALMOs encouraging tenant participation (Local Government Chronicle: 17.08.06)

• ‘in the past, people were prepared to put up with what they got, but in a more self-aware and diverse society, people will demand solutions tailored to their needs.’

• ‘we need a new politics of engagement and community that attracts more of the energy and diversity of the third sector into local government.’

Sustainable Communities

The Local Area Agreement will include a single set of targets for improvement, tailored to local needs,

In this way, we will focus on the things that really matter to people everywhere, guaranteeing national minimum standards, but leaving room for local innovation and local priorities.

We will introduce a duty for local authorities and other local partners to work together to agree the priorities in the Local Area Agreement.

Value.

Replacing concepts of time and cost as the major drivers of performance with the idea of value to the occupiers throughout the life of the building

Focusing on the long term value to the needs of the occupants and community

Future VFM Policy

• Comprehensive Spending Review: – Anticipate min 5% cashable savings – Inflation on top

• OGC – Common Minimum Standards– Achieving Excellence becomes mandatory

• Sustainable Communities

Procurement principles mandated by Achieving

Excellence• Long term relationships between client, designers,

contractors and key suppliers.

• Collaborative contracts – non adversarial forms of contract

• Detailed understanding of cost and other aspects of performance and targets set for continuous improvement

• Collaborative behaviour with everyone trained & incentivised to deliver for the client

But the reality is…

CWC/CE Review findings

What we found from ALMOs internal processes

Variable records of delivery to budget. Even more variable records of delivery of VFM for budget. Extensive reported savings through partnership working

but limited real benchmarking or audit. Silo working is prevalent with little transfer of best practice Management systems and reporting are often inadequate Slow progress in setting up commercial and PM processes

and understanding contractors costs. Few have processes in place to manage change Non Decent Homes is still mainly fixed price contracts with

no share of risk or reward or pressure to improve Large number of staff – more than are required to manage

partnering Little evidence of strategy in place for moving to future

state

But policy pressure will continue to change the

way you work…

1. Project Manage 1. Project Manage Contractor & Supply Contractor & Supply

Chain PartnersChain Partners Gain long term commitment of contractors, and

key suppliers through linked frameworks. Deliver transparency & development of the

supply chain beyond tier 1. Re-assess partners based on evidence of

resources and skills. Work with partners to develop local training

programmes.

2. Manage Costs 2. Manage Costs Develop individuals and deliver a clear

understanding of cost management processes.

Define cost management processes. Develop shared client & supplier cost

database including: Benchmarking Innovations Savings Actual cost data

2. Manage costs…2. Manage costs…

Develop capabilities for value management, value engineering, & whole life costing.

Develop expertise in Target cost setting Final account audits Open book audits Incentivisation calculations

Develop best practice user manuals.

3. Measure & Drive 3. Measure & Drive Continuous Efficiency Continuous Efficiency

ImprovementImprovement Put processes in place to deliver robust

KPIs linked to critical success factors Underpin performance measurement

with understanding. Develop a co-ordinated and consistent

approach to Performance Management

4. Process 4. Process Improvement…Improvement…

Establish a structured approach to process improvement

All partners using continuous improvement processes and techniques.

Set up CI teams and develop an open culture Appoint in-house CI champions. Establish a PIT (Performance Improvement

Team) to drive change from within.

5. Change Behaviours5. Change Behaviours Link to other training support

activities. Combine process development with

people development. Supporting people through change

Development of teams & individuals Empowerment and ownership

So Why is Change Slow? Evidence From The Review:

• Client roles and responsibilities must change• All client stakeholders must understand the process and benefits and

use output specifications.• Fewer contractors to be selected and given work continuity:

On basis of ability to deliver superior underlying value Not lowest price

• New internal measures required to motivate staff to change• New collaborative commercial agreements required to motivate

contractor’s team to work in the clients interests• New skills required to collaborate in optimising design and defining

functionality• New skills required to deliver process improvement

But when it is done well…

Benefits Achieved To-Date - Hillingdon

Key Benefits• Price & Cost reductions – up to 40% in client management,

20% in cost – year 1• Safety improvements• Productivity improvements 16 – 40%• Reduction in project time by 25% - year 1• Quality improvements 70% - year 1• Client satisfaction up 90% - tenants

Additional• Increased supplier investment in local training• Improved staff morale and motivation• Improved environmental control & management

Efficiency Savings Opportunities:• Prelims…11%-16% ( Better Management & Continuity of

Work)

• Risk Management….5%-8% ( Taking some risk from the contractors and placing in a risk pot)

• Open Book 3%-5% ( eg Baldwin’s New Target Cost is 6%+ lower than their schedule of rates)

• Continuous Improvement 5%-8%

• Work Scope & Specification 2%-5% (The specification is fairly standard across the Almos but some Almos are doing more than the standard Decent Homes work.)

Capability Requirements For The Management of Collaboration

The organisation will need to develop new capabilities through training and mentoring:

Capability to performance manage contractors and suppliers to deliver optimal VFM

Capability to understand costs and reduce wasteCapability to develop improved processes to meet

all stakeholders needs.Capability to build on internal and external best

practices

Understand nett cost of works

ACTIVITIES DATABASE BREAKDOWN

ITE

M DESCRIPTION QUANTITY UNIT RATE TOTAL Labour Plant Materials SUB-CONTRACTORS

RISK REF NO.

2E External wallsa Facings in walls 66 m2 39.15 2583.90 21.00 0.00 18.15 0.00b 50 cavity 66 m2 1.00 66.00 0.00 0.00 1.00 0.00c Movement joint 11 m 4.50 49.50 2.02 0.00 2.48 0.00d Weep holes 1 No 55.00 55.00 25.20 0.00 29.80 0.00e Form hole 110 diameter 4 No 9.50 38.00 9.50 0.00 0.00 0.00f Form hole 50 diameter 2 No 5.50 11.00 5.50 0.00 0.00 0.00g

Cavity tray with integral lead flashing 0 m24.50

0.00 5.00 0.00 19.50 0.00h DPC ne 225 46 m2 1.20 55.20 0.00 0.00 1.20 0.00j DPC over 225 6 m2 5.00 30.00 0.00 0.00 5.00 0.00j Special weather proofing 66 m2 18.00 1188.00 0.00 0.00 0.00 1188.00

Measurement —What and how to measure. Data collection including

Activity sampling through method study.

Process Improvement—Reviewing, evaluating and reengineering processes.

How to strip out waste. Focussing on value.

Behavioural Change—Developing collaborative working skills. Appropriate

values and behaviours. Supporting change.

Process Improvement Includes:

The C-CIT Process

1 2 3 4 5 6 7 8 9 10

Mentoring & Supported Process Improvement Activities

On-site / in-process direct support

Change Champions

• Developing the knowledge & ‘know-how’ to improve supply chain integration and Q, D & C performance

* Lean Collaborative Planning* Logistics, delivery, kitting, etc.

* Risk Management

* Best Method Planning

Facilitated Workshops

Project Delivery

* Lean site set-up* Direct observation* Productivity improvement* Constraint Management* Interaction of trades* Traffic & delivery plan

Work Time Analysis - Carpentry

17%

83%

Carpentry - Downtime Pareto (29th April - 24th May)

270 270 270

60 7545 30 30

0

200

400

600

800

1000

IncorrectMaterials

InsufficientMaterialsAvailable

Insufficientlabour /

supervision

Unforeseenextra works

Other IncompleteWorks

Work Area NotCleared

ChangedTenant Reqs

Min

ute

s

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Work Time Analysis - Carpentry

17%

83%

Carpentry - Downtime Pareto (29th April - 24th May)

270 270 270

60 7545 30 30

0

200

400

600

800

1000

IncorrectMaterials

InsufficientMaterialsAvailable

Insufficientlabour /

supervision

Unforeseenextra works

Other IncompleteWorks

Work Area NotCleared

ChangedTenant Reqs

Min

ute

s

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Carpentry - Downtime Pareto (29th April - 24th May)

270 270 270

60 7545 30 30

0

200

400

600

800

1000

IncorrectMaterials

InsufficientMaterialsAvailable

Insufficientlabour /

supervision

Unforeseenextra works

Other IncompleteWorks

Work Area NotCleared

ChangedTenant Reqs

Min

ute

s

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Establish data collection & measurement processes early in the programme

Data collection to drive process improvement

* Goals & Objectives* Critical Success Factors* KPI measurement

1 2 3 4 5 6 7 8 9 10

FrameworFramework Awardk Award

Client Team Build Wkshp

Performance Imp Training, Mod 4

* Value Stream Mapping

- Team Buildworkshop

- Project delivery

- Information flows

Establish Benchmarks

CITB Construction SkillsCITB Construction Skills

Sustainable Training for Sustainable Communities 691 Trainee Placements Further 494 Trainees – Future Retention rate 86% Focus on Black, ethnic minority & female trainees Supporting – Strategic partnering arrangement &

fully integrated supply chains Real focus on delivering the right training, right

time for employers and individuals to improve performance in the industry

CITB Sector Skills AgreementCITB Sector Skills Agreement

Increasing SME’s investing in training by 300%

Stronger connections between lifelong learning and creating bottom line business benefits

Supporting capacity planning for the future Training better managers to link up supply chains Integrating migrant labour to bridge skills gaps Apprentice completions for Construction up 400%

The client leadership The client leadership challenge challenge

How can we have: More integrated teams Fully embrace the principles of good

Client leadership Ensure workforce is fully trained Use buildings to enhance education Take out non value adding costs

Quite SimplyQuite Simply

When we think we’re through changing :-

We’re through