If We Want a Resilient Industry, We First Need Sustainable Economics
In a series of articles, CEO Andy Steele will be looking at how the current crisis will affect the way we do business, and whether it will foster new thinking and new ways of working to help the construction industry address its deep rooted challenges on productivity and value.
Resilient industries find a way to keep going no matter what hardships and obstacles are thrown in their way. They have the depth of resources and know-how to stay on course, even when external forces threaten to stop them in their tracks.
Resilience means reassurance, not just for individual businesses, but for customers, suppliers and end users. It means commitments and promises will be met and that plans carry a high degree of certainty. I firmly believe that this is the future. The question is, how quickly can we make it a reality?
Resilience doesn’t emerge out of nowhere. It is a product of a healthy business culture and contractual relationships based on collaboration and trust. And before resilience can flourish, we first have to have sustainable economics.
None of this is news. Customers, contractors and supply chains know that cost-driven procurement leads to instability. It spawns low investment and an innovative drive that is more like a moped than a jet-engine in its dynamism. This is the cycle we have to break free from.
We Can Change the Culture Faster and More Radically Than We Think
Despite a desire to adapt, change has been slow. Too many projects are still awarded based on rigid specifications and price – and with unsustainable margins. Even Carilion wasn’t a big enough shock to prompt the scale or pace of change needed.
I believe that rapid and radical change is always more achievable than we imagine. When Covid-19 hit, businesses in many sectors realised that remote working and project communications were suddenly both possible and advantageous.
Deep down, they’d known this for ages. But it took a pandemic to spur them into action. This is the mindset of urgency we need to cultivate resilient contractors and supply chains. Through this we will improve productivity, quality and project certainty. It’s time to stop theorising and start acting.
There’s a clear blueprint for the principles that underpin the relationships we need. The details include the following:
- Early engagement of contractors and specialist supply chain partners to engineer better solutions and eliminate problems before they happen.
- A collaborative culture with one agenda, shared goals and a single version of the truth.
- Shared benefits from efficiencies, cost savings and improved productivity.
- Active promotion through procurement of innovation and MMC.
- Realistic budgets and timings that prioritise ‘right first time’ delivery.
- Procurement based on lifetime value rather than delivery cost.
The BRE Constructing Excellence Nuclear Focus Group recommended that procurement should become the enabler of greater productivity. This argument applies to all areas of our industry, in my view.
There are enough wins for everyone in this vision, so let’s start making it a reality and stop kidding ourselves that price-driven procurement leads us anywhere that we’d want to go.