Press Release - Modernising Construction
11 January 2001
The urgent need for change in how government departments and
agencies procure and manage new construction projects, currently
worth some £7.5 billion a year, is highlighted today in a National
Audit Office report. It concludes that there is now no excuse for
government clients and the industry to fail to take advantage of
readily available solutions to well-known problems.
Presenting the report to Parliament Sir John Bourn, the head of
the NAO, said that:
- four agencies – Defence Estates, NHS Estates, the Highways
Agency and the Environment Agency – estimate that they will achieve
efficiency gains of over £600 million a year and improved buildings
by changing how they buy and manage construction projects; and
- as much as £2 billion in total efficiency gains could be
delivered if such good practice were extended cross the whole of
central government.
And for the construction industry itself, the potential prize is
a level of profitability higher than the current industry average
of one per cent of turnover.
There has been a long history of reports into the problems of
the construction industry which have failed to result in any real
change in the industry or client behaviour. The National Audit
Office examined the role of and progress made by the Department of
Environment, Transport and the Regions (DETR) and the Office of
Government Commerce (OGC) in promoting innovation and good
practice; and examples of good practice across Government and in
the private sector.
According to the report, the DETR, through vehicles such as the
Movement for Innovation and the Construction Best Practice
Programme, has worked with other industry bodies in successfully
raising awareness of the need for change. And the OGC in its work
with departments and agencies has set the climate for change within
central Government.
The report recommends that industry and clients should implement
good practice and the Department of Environment, Transport and
Regions and Office of Government Commerce should continue to
encourage this and ensure understanding in the following
areas:
- Selection of contractors on the basis of value for
money. Too many contracts are still awarded on the basis
of lowest price tenders only to see the final price for the work
increase significantly through contract variations and claims often
resulting in court cases. The services of specialists, contractors,
sub-contractors and suppliers should be selected on value for money
grounds not lowest price tenders. Value for money means securing a
construction which is fit for purpose, fulfils user needs, and
achieves a balance between quality and costs throughout its
life.
- Better relationships between clients and the supply
chain. Clients and all those involved in the design and
construction process need to work more closely together with more
sharing of information, clear and agreed targets and incentives and
a commitment to continuous improvement. This is not incompatible
with clients using competition to select those they work with.
- Integration of the supply chain. The entire
supply chain including clients, professional advisers, designers,
contractors, sub-contractors and suppliers of materials must be
integrated to manage risk, to develop designs which improve the
"buildability" and value of projects, to encourage innovation and
to drive waste out of the process. This process should reduce the
overall costs of the construction throughout its whole life, lead
to fewer accidents, provide greater certainty of project time and
budgeted costs and result in more sustainable construction. More
attention also needs to be given to greater use of prefabrication
and pre-assembly and standardised components and
processes.
The Department of Environment, Transport and Regions and Office
of Government Commerce should ensure continue to encourage this and
ensure understanding
Sir John Bourn said today:
"With Government plans to increase infrastructure
spending to £19 billion over the next three years, the need for
widespread implementation of good practice now has a greater degree
of urgency.
"This report highlights the urgent need for change in
the procurement and management of new construction, refurbishment
and repair and maintenance. The problems of the construction
industry have been well described in the many reports on the
industry, the solutions to many of these problems have been
identified – there is now no excuse for not getting it
right.
"I hope that my report will provide encouragement to
those in the construction industry and their clients who are
already changing and motivation to those who are finding the
challenge more difficult."
The Office of Government Commerce, the Treasury and the
Department of the Environment, Transport and the Regions welcomed
the NAO report for providing very real encouragement to those who
were already working to change their construction
practices.
Notes for Editors
The quality of construction products and the efficiency with
which the industry provide them impact on all economic and social
activities within the UK including commerce, health, education,
housing and transport. Government departments have a major
influence on the construction industry as sponsor, regulator and
purchaser of construction.
The Department of Environment, Transport and the Regions (DETR)
has central responsibility for securing improvements within the
construction industry and clients. The Office of Government
Commerce (OGC) leads the promotion of improvements in the
performance of departments and agencies as purchasers of
construction services.
The construction industry is worth some £65 billion a year,
8 per cent of gross domestic product, and employs some 1.9 million
people.
Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office employing some 750 staff. He and the
NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 03/01
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