COVID has taught us that construction is vital
19 February 2021: With construction at the heart of the UK’s post-COVID recovery, the sector needs to focus on the triple bottom line of profit, people and the planet says Peter Duff, European Finance Director at Laing O'Rourke.
“As the nation locked down, there was intense focus on keeping construction going safely, because it is critical to the overall economy,” says Peter Duff, European Finance Director, Laing O'Rourke. “At the time COVID hit, we were working on four hospitals. I’m proud that at two of them our project teams worked round the clock to make space available to the NHS early to help their pandemic response, and in November last year The Grange University Hospital in Gwent opened four months early.”
Much of this achievement is down to working practices. “We must embrace what COVID has emphasised in terms of how the industry delivers. There is growing evidence that the industry must transform by embracing modern methods of construction. It is about embracing the whole life, cost and value of an asset and clients engaging contractors early to design out risk” says Duff.
“The sector also needs to increase its focus on the triple bottom line – profit, people and the planet. We have more to do in all three areas if we want to become more resilient and valued, to keep meeting human needs and do so in a way which preserves resources. Addressing this challenge is going to be massive in construction.
“There is so much more to construction than simply turning up and building something,” continues Duff. “The delivery of a project is part of the masterplan that connects the way we live and behave as a society – how we care for people, educate the next generation, travel, work and socialise. Infrastructure planning and investment require a holistic approach.”
Embrace modern methods of construction
He says the construction industry must embrace modern methods of construction to drive change and Laing O’Rourke has always been leading that change. Duff says Laing O’Rourke was probably 10 years ahead of much of the construction industry in understanding that offsite manufacture offers so much potential in overcoming some of the sector’s biggest challenges, such as quality, environmental impacts and a long-standing skills shortage.
“Importantly, offsite manufacture enables those within the sector to work in a set location, close to their family and friends and with, literally, a roof above their heads. There will always be hotspots for the construction of buildings and infrastructure, particularly in London, but there is no reason why the components of those projects cannot be precision manufactured elsewhere and simply assembled on-site,” he says.
“We've got our own leading-edge manufacturing facilities. They are truly amazing places and draw their workforce from the local community. That brings opportunity and wealth to a community, which is vitally important.”
So why is offsite manufacture still slow to take off? Duff responds: “The first reason is that it requires a significant and sustained investment. You need to completely redesign the construction process, from end to end, to deliver a project in a completely new way. The most recent example of how to do it well is The Grange University Hospital – off-site manufacturing was vital to its early delivery. It’s proof you can make a transformational change in construction delivery if you completely re-engineer the process, which is what Laing O’Rourke has done.
Taking a longer-term view of value
Rethinking old processes and practices means investment and does have a near-term cost impact. But if you are going to make transformational change in construction delivery, a longer-term view of value needs to be taken. The reality, however, says Duff, is that procurement groups have a tendency – in the middle of a project or at the end – to make decisions that are driven primarily by price.
“Change is required on both sides – from the client side in how projects are procured and contracted so that contractors have pipeline visibility, and from the industry side in terms of consistent quality and programme delivery. From the contractor perspective, it is hard to plan and invest with very limited visibility of what will be invested in.”
Both procurement and planning of major infrastructure projects can be slow in the UK. “The approach is often focused at the local level and then at the national level. This does not help to increase the speed and efficiency with which projects like hospitals, schools, prisons – critical pieces of the social and economic framework – are realised. We have got to streamline procurement and planning,” he says.
Duff is very supportive of progression made so far in this regard, particularly the Construction Playbook, which sets out key policies and guidance for how public works projects and programmes are assessed, procured and delivered. “It includes some really good ways to streamline the pre-selection, qualifying and procurement process,” he says. “And I am obviously curious about the National Infrastructure Bank’s mission. If it is well-defined and there to promote investment, particularly investment around the country to level things up, and if its focus is on projects on a standalone basis, then that can be a real force for good and drive positive change.”
Duff also welcomes the EU-UK Trade and Cooperation Agreement but concedes it is still very early days in understanding what it means for infrastructure. Of course, there were concerns about the quotas on steel, for example, and complications with logistics and assessments about material risk had to be made, but he is confident that the wrinkles will be ironed out.
Retain expertise to deliver projects time and again
One crucial part of the sector is talent and the workforce. “We have looked at our workforce very carefully,” says Duff. “We are an organisation that invests heavily in its people and their well-being. It is important to retain them, their expertise and their ability to keep delivering projects again and again.” And will the necessary skillset change in years to come?
“There is a wide skillset that we embrace,” he says. “We’ve got three absolutely fundamental guiding principles: absolute alignment, complete thinking and sophisticated simplicity. Part of our added value as an organisation is that we know and understand our people so well that we can use that skillset in an optimal fashion to deliver quality to our clients.”
While he acknowledges there remains much work to be done, Duff is optimistic about the future of the sector. “There is change in the air and, for the first time in many years, I sense genuine appetite on the sides of both government and the industry to make positive and lasting change”, he says.
“With the government committed to transforming infrastructure investment and COVID having highlighted the benefits of modern methods of construction, it feels like the sector has the best opportunities it has had for 50 years. We must make the most of this chance by transforming ourselves, delivering on time and on budget and reminding people of the great human and social value our sector delivers.”
Join ICAEW’s Construction & Real Estate Community for free to access resources for finance professionals interested in real estate, property and construction.
