Do Not Resuscitate! The Mode derni nise se or Die Challenge To Do - - PowerPoint PPT Presentation

‘Do Not Resuscitate!’

The ‘Mode derni nise se or Die’ Challenge To Do Things Differently Mark Mark Farm armer r

Industry Transformation Agenda Auckland, 6th March 2018

Q: Why Do We Need To Do Things Differently?

A: ‘Business as Usual’ Is No Longer An Option For The Construction Industry …..in either the UK or New Zealand

Reminder of Context

Four UK Construction Industry Reports – Similar Themes, Different Points in Time But It’s Clearly Evident We Now Have Different Drivers For Change

‘Modernise or Die’ - 10 ‘Symptoms of Failure’ Identified

THE CORE PROGNOSIS IS DECLINING INDUSTRY RESILIENCY………

• Skilled construction labour now in long term structural decline
• Quality of new ‘backfill’ labour force reducing
• Increasing reliance on shrinking pool of experienced & competent labour force
• Main Contractors not in control of sub-contractors
• Sub-Contractors not in control of their labour force
• Designers being de-skilled by procurement routes & transactional interfaces
• Surveyors increasingly removed from understanding true cost rather than price
• Increasing litigation and contentious project failures
• On going commercial failures of businesses unable to control outcomes and hold ‘risk’
• New disruptors and disruptive models emerging challenging status quo

Future Prognosis for ‘Business as Usual’

Future Prognosis for ‘Business as Usual’ – New Zealand

Major suppl ply y price inelasticity asticity pro roblem em in constr tructi uction n costs if if la labour ur in intens ensity ty & wa waste e remai ains ns at current nt levels vels Amplitud tude e & f freque uency ncy of p peaks aks & t tro roughs ghs increases eases Increas easingl ngly y upward ard trend nd line e on costs

Constru ructio ction n costs will ll gradua ually lly become e much more volati tile e & w wil ill l trend nd increa easin singl gly upward rds s throu

• ugh

gh resou

• urce

e & s skil ills ls scarcity ity

Future Prognosis for ‘Business as Usual’ – UK & New Zealand

The Modernise or Die Challenge Addressed to Clients, Industry & Government

We need to train and retain more home grown talent Through creating more attractive long term career opportunities Which will prepare us to be able to do more with less resource in the future To help do this we need to create a new type of demand for better outcomes We need to then use that demand to underpin the evolution of new skills and training which will make us to be more productive & attract a new generation of workers

Discontent From Within….

The ‘Die’ in ‘Modernise or Die’ has taken on a renewed significance in the UK in last 2 months

But Discontent With Construction Performance Is Now Coming From Elsewhere……

↑PROCESS, SKILLS & COMPETENCY ↑COMPLIANCE & ENFORCEMENT

For the Homebuilding Sector There are Some Very Real Pressures That Need to be Addressed

Condensed summary of Farmer Review Recommendation Themes

Need to for clear leadership & institutional reforms that better integrate clients, industry & government A productivity led change agenda letting innovation dictate future skills development & which clients and the supply chain can either lead or respond to Government & progressive clients have a critical role in the strategic initiation of change All of the above

• ve underp

erpinn inned ed by a move ve to higher her levels vels of preman manufactured ufactured value ue on

• n

projects jects combin bined ed with a more e integrated grated delive ivery ry model el

Design, Procurement and Construction Delivery Failure

• Design Uniqueness
• Site Labour Intensity
• No. of Transactional

Interfaces (Vertical Integration)

• No. of Works Interfaces

(Horizontal Integration)

An Understanding of the Root Causes of Delivery Failure Needs to Define the Solution Move ve toward ards s manufacture ufacture led & hybrid rid constr struction uction Move ve toward ards s more e integrated grated procurement curement models els

Digital Enablement From Design to Site to Asset Management

Design, Procurement and Construction Delivery Success

INCREASED LEVELS OF PRE-MANUFACTURED VALUE - MANUFACTURE LED & HYBRID CONSTRUCTION

Focus on BIM & Digitalisation is Wasted Without Transforming Construction’s Analogue Led Physical Delivery Model

+ +

‘Delivery Platform’ Thinking Can Revolutionise Design, Construction & Asset Performance

‘Construction as Manufacturing’ Is Not Just About Big Centralised Factories – It’s About Re-Shaping The Entire Supply Chain – SME’s Included

INTEGRATED PROCUREMENT

We Need to Also Recognise that the Traditional ‘Tier One Contractor’ Model is Broken

CLIENT ADVISORS

LUMP SUM MAIN CONTRACT OR SC 5 SC 2 SC 4

SC1 1

SC 9

SC1 2

SC1 8

SC1 5

SC1 7

SC 7 SC 6

SC 3

SC1 6

SC 1

SC1 3 SC1 4

SC 8

SC1 9 SC1 SC2

On cost & risk transfer escalation Horizontal interface risks mis-managed No control or

• wnership!

No control!

WE NEED TO DISINTERMEDIATE TRANSACTIONALLY LED, NON- VALUE ADD MODELS

We Need to Move to New Organisational Models Enabling Higher Levels of Pre- Manufactured Value With Less Transactional & Management Hierarchy

CLIENT

TC 5 TC 2 TC 4

TC 7 TC 6

TC 3 WC1 – HIGH PMV

DESIGNERS CONSTRUCTION INTEGRATOR

MULTI-PARTY ALLIANCE – PROGRAMMES OF WORK INSURANCE PRODUCT BACKED?

DIGITAL ENGINEERING & ASSET PERFORMANCE

OPERATO R

PROJECT BANK ACCOUNT

AN UNPRECEDENTED POLICY ENVIRONMENT NOW EXISTS IN UK STIMULATING A MOVE TOWARDS HIGHER PRE-MANUFACTURED VALUE, INTEGRATED PROCUREMENT & SUPPLY CHAIN TRANSFORMATION

The 2017 Autumn Budget & The Industrial Strategy White Paper Create an Unprecedented Policy Backdrop

Changing Procurement HA HAS To Accompany Any Increase in PMV

THE OPPORTUNITY FOR NEW ZEALAND’S HOUSING & INFRASTRUCTURE PROGRAMMES? UK CASE STUDIES - HOMES ENGLAND & HEATHROW EXPANSION PROGRAMME

HOMES ENGLAND

Commercial Deliverability & Quality Pre-Manufactured Value

20 % 20 % 60 %

This balance is predicated on application of control ‘pass / fail’ parameters on PMV & Deliverability & Quality which act as ‘gate’ to drive primary required

• utcomes

Public Land Disposal or Affordable Housing Programmes Subject to Balanced Scorecard Procurement

PRE-MANUFACTURED VALUE % 40% 50% 60% 70% ‘Traditional build’ base line DfMA led ‘Traditional’ Pre-manufactured structure timber / precast Pre-manufactured structure + composite cladding system ‘Hybrid - Panelised wall / floor systems – Steel, Closed Panel Timber, CLT + volumetric bathrooms / kitchens’ & plant / risers Panelised structural wall / floor systems – Steel, Closed Panel Timber, CLT Full volumetric modules incl fitting out

Requires and Understanding of PMV Spectrum

PRE-MANUFACTURED VALUE % 40% 50% 60% 70% ‘Traditional’build base line DfMA led ‘Traditional’ Pre-manufactured structure timber / precast Pre-manufactured structure + composite cladding system ‘Hybrid - Panelised wall / floor systems – Steel, Closed Panel Timber, CLT + volumetric bathrooms / kitchens’ & plant / risers Panelised structural wall / floor systems – Steel, Closed Panel Timber, CLT Full volumetric modules incl fitting out PMV ‘FLOOR’ #1 @ 45% PMV ‘FLOOR’ #2 @ 55% PMV ‘FLOOR’ #3 @65%

Is Agnostic to Exact Approach But Forces Innovation

PRE-MANUFACTURED VALUE % 45% - 55% 55% - 70%+

PMV Decision Making Framework for Sites

HEATHROW EXPANSION

A Different Approach – From a Privately Financed Client

To Initiate ‘Demand Led Skills Transformation’ & More Balanced Geographic Dispersal of Activity

A Client Who Knows What They Want!

Predicated On A Strong Design, Procurement & Delivery Disruption Model

A Model Influenced by New Drivers For Change

Not A Natural Default to Traditional Hierarchical Structures

Benefits Case Led – Realistic Comparisons to ‘Business as Usual’

An Emerging Strategy That Will be Co-Created

In The Meantime, UK Industry Itself is Moving Towards Change, Slowly but Surely…

Modernise or Die is a challenge which is about raising awareness of unprecedented looming problems for construction – generic international issues! New drivers for change are starting to impact that we have not seen before – skills crisis & discontent combining with an unprecedented technology opportunity But ultimately both UK & New Zealand’s construction sectors will require industry led change to take hold – clients, advisors & financiers have a key role to play Closing….. Emerging government policy & progressive major public & private clients have the potential to strategically initiate the industry on its modernisation journey