No construction industry is an island

UK construction maintains an inward-looking “island mentality”, largely ignoring what’s happening in the rest of Europe. But as Elaine Knutt reports, there’s plenty to be learned on the Continent. 

In our industry, it’s easy to feel a little isolated. Construction, by its nature, doesn’t travel well across borders, so there’s little natural cross-fertilisation of ideas. Even if we try, cultural factors tend to mould construction projects in their own image. If a contractor tried to import, say, German ideas and procedures wholesale to the UK, or vice versa, they’d still find themselves constrained by the local legal system, planning and building control, employment practices, architectural taste, product availability and 101 different cultural nuances.

But maybe we should be trying a bit harder to import bright ideas and new thinking from the Continent: speaking generally and with caveats, they’re delivering projects more efficiently and cheaply than we are. That point was made most forcefully in a 2006 EU report by consultant Bernard Williams Associates, and repeated last month in the interim report of the Infrastructure UK review group. Chaired by Terry Hill of Arup, it concluded that a typical civil engineering project cost 60% more to deliver than in Germany, and that the UK had the third highest project costs in the EU.

Of course, as the report identifies, differences in out-turn costs are bound up with the multiple cultural factors mentioned above. And these same factors complicate any attempt to compare outcomes: do country X’s lower costs reflect efficient processes, or lower building standards and poor safety records? If country Y always delivers to time and budget, is this due to better skills in management or its regrettable tendency to build everything in blockwork?

Difficulties in separating outcomes from background factors has traditionally been a disincentive to getting to grips with the issue. “The comparisons aren’t that helpful,” said Paul Morrell, the government’s chief construction adviser, speaking to CM in July. “If you took into account every difference between a building here and in France, you’d find that the two cost the same — if only they did that and we didn’t do this. And that’s useless, you want to look at what you can change about current practice to pull money out of the process.”

But “pulling money out of the process” is exactly what government and industry are urgently trying to do. With everyone under pressure to produce more output for less investment, surely finding cost-saving and efficiency-raising ideas from other national industries — even if they are initially obscured by a smokescreen of cultural factors — is a strong incentive for the UK industry to dust off its passport? After all, clients might balk at paying the price of our of our “splendid isolation”. 

To get the ball rolling, CM has pulled together ideas that have worked well in Norway, Denmark, Ireland, Switzerland, Belgium and the Netherlands (see boxes p44-46). They include Norway’s insistence on using BIM on state projects, the Belgian approach to project insurance and liability, and those fabled low school building costs in Ireland. But just to prove it’s not all rosier overseas, we also uncovered “Germany’s Scottish Parliament” — with a 300% overrun, a 12-month delay and the added insult of being built with BIM (see news, page 7).

We also include a statistical snapshot of each country’s construction efficiency from a May 2010 report by the European Construction Industry Federation (FIEC), the Brussels-based umbrella for national construction bodies. Although the same exercise today would produce different raw figures, it’s unlikely the overall Europe-wide pattern has changed. In the UK, our 2009 output was €120bn; employment was 1.98m; output per head was €60,000; there were 209,000 construction enterprises, and output per enterprise was €574,000.

Today, more voices are calling for a better understanding of how these figures relate to the UK way of doing things, and how our neighbours’ apparently more efficient results are tied to their procedures, whether it’s la manière francais or die deutsche Weise. For instance, consultant Bernard Williams’ report for the European Commission Construction Directorate in 2006 — “Benchmarking of Construction Costs in the Member States” — found that the UK was building at 30-40% lower efficiency than was being achieved in Belgium, the Netherlands, Sweden and Germany.

“We are an island, and we have lots of self-fulfilling prophecies about the way we budget our work,” says Williams. “The UK contractors who do venture overseas tend to do well, we can build as well as the best. But at home, the market’s closed, and we tend to populate our budgets with redundant performance. It’s only when people like me do some benchmarking that we realise things aren’t as good as we thought they were.”

Meanwhile Martin Davis, formerly of Drake & Scull and Emcor, and a member of the Strategic Forum, is hoping to persuade the Strategic Forum, the Department for Business, Innovation and Skills and Constructing Excellence to undertake some simple, targeted benchmarking, and extend it to cover the US and Australia.

“I’d like to see a quick and dirty analysis, not a huge complicated study,” says Davis. “We could draw up a matrix of the things that cause differences in efficiency: the regulatory burden, the prevalence of sub-contracting, prefabrication, lowest-cost tendering and procurement differences. Then we can put ticks and crosses against each country and then compare the results to typical comparative costs in schools and hospitals. We want to get as many ticks as possible, and plan how to get there.”

The Association of Consulting Engineers’ submission to Infrastructure UK agrees that “there’s undoubtedly scope to strip away national factors and look at the real drivers of cost”, says acting policy director Michael Hall. The ACE also proposes a National Construction Research Institute, a “virtual” organisation pulling together universities’ research resources and those of the industry, to target the vital questions of the day. “Understanding the cost base of what the industry does [ie where costs arise] would clearly be pertinent at the moment and one of its focuses,” says Hall.

In fact, there’s general agreement on where the UK should be looking if it wants to learn lessons from Europe. Again and again, the topics that come up are prefabrication and offsite methods; the spread of Building Information Modelling; reducing the burden of regulatory compliance; and changes to the legal and contractual climate that make the background weather for every project.

Williams’ report (see www.bwa.co.uk) ranks the UK 9th out of 13 European countries on a “resource efficiency index”, ahead only of Italy, Ireland and the Czech Republic. The report looks at the ratio between labour costs and materials costs, which range from 55%:35% in traditional industries, to 30%:55% in the most industrialised. As well as demonstrating a link between high pre-fabrication rates and lower out-turn costs, it also links pre-fabrication to higher average salary levels.

Belgium sits at the top of Williams’ efficiency table, thanks largely to its advanced pre-cast concrete industry. “If you go on a large Belgian site, there’s hardly anyone there. You’ll have a delivery of pre-cast elements at 7am, and 10-12 men will cement them into place. There’s no formwork, no rebar, and they can build a 200m by 75m floor every four days,” says John Goodall, formerly FIEC technical director, who is due to meet Treasury officials to discuss Belgium’s approach.

Recent comments from Paul Morrell on the public sector adopting BIM have revived interest in it, but the UK is still lagging. “The Nordic countries have been at the forefront of adopting BIM, where it’s been driven by the public sector owners,” says Arto Kiviniemi, professor of digital architectural design at the University of Salford. “Statsbygg in Norway, Senate Properties in Finland, and other European owners, such as the regional government in Bavaria, have already started to demand the use of BIM. They want more accurate information, on life-cycle costs and environmental impacts, right from the design phase.”

Kiviniemi believes that client-led BIM is essentially more efficient than contractor-led BIM. “Skanska has its global BIM competence centre in Finland, and Hochtief has been developing its in-house system. But when these companies use BIM tools, they don’t necessarily want to share them — they see it as a competitive advantage. Companies might optimise their own processes, but if they don’t share their knowledge and tools, then the change in the overall industry is small.”

The other key area is liability and litigation, where the UK’s adversarial Anlgo-American model is out of alignment with European legal systems based on the Napoleonic Code. In France, Belgium and other European countries, project teams and clients adopt project-wide insurance, spreading the cost of defects or delays, and fostering an attitude that everyone has to work together — and trust each other — to get it right.

“Centralising insurance here would definitely foster a different mindset,” comments David Hayhow, director of construction at insurance broker Lockton International. “Professional indemnity insurance fosters a culture of blame — the employer has to point the finger and say ‘you’ve done something wrong’.” Although he adds that the UK insurance market would be wary of underwriting such policies, many do run Europe-wide operations and sufficient demand from UK clients could shift attitudes.

It’s easier than ever to feel isolated and island-like when there’s a protracted economic crisis and public spending being slashed. But most of our European neighbours are experiencing similar issues, creating bridges of sorts. And a forthcoming report for the European Commission, seen by CM in draft form, points to another factor that unites us with the Continent. The report’s thrust is that the construction industry EU-wide needs to become more efficient and technologically-advanced  — or it could face increasing competition from Chinese and Asian contractors.

Illustration by Ben Kirchner

Belgium: Sharing liability and reducing litigation

Aside from its advanced skills in pre-cast concrete — which contribute to typical building costs 30-40% below the UK — Belgium stands out for its liability system, based on the Napoleonic Code.

This puts a ten year post-completion defects liability period on the contractor and design team.

Clients take out “project insurance”, to protect them both against latent defects (where tenants are also covered) and to insure the project budget and programme. Under the policy, the contractor and design team share liability — and a mindset that they have to work together to get it right.

If there’s a problem, the policy pays out without any argument about blame and responsibility. “There are no rights of subrogation, and no witch hunts,” says John Goodall, formerly of the FIEC.

Policies typically cost about 1% of the value of the works insured — less than the combined costs of designers’ professional indemnity policies, contractors’ insurance cover and clients’ latent defects insurance.

As well as the direct savings, more savings arise from not having a claims culture, and the procedural and psychological benefits of not having to “protect your back”.

The insurers often underwrite construction projects on the basis of technical inspections from SECO, an independent third party organisation set up by contractors and architects in the 1930s. SECO employs 160 engineers to check projects in design and on site. But the system isn’t an enemy of design innovation: Richard Roger’s daring Antwerp Law Courts were built with SECO-backed insurance.

Project-wide insurance has some history in the UK. AXA wrote a project-wide policy for Terminal 5, and Martin Davis of the Strategic Forum describes a pilot at Southport General Hospital where integrated working backed by integrated insurance was on course to deliver savings of £1.5m on an £11.5m project — until the capital funding was pulled.

FIEC facts and figures 

2009 construction output: €35bn

2009 employment: 256,000

Output per head: €136,000

Total number of construction enterprises: 71,000

Output per enterprise: €493,000 

Ireland: Setting benchmark costs

From a UK perspective, school building costs in Ireland are almost shockingly low. In February 2006, the Department of Education set a maximum build cost for primary and secondary schools of €1,230/m²  (£1,095), including VAT at 13.5%, but excluding site preparation and groundworks, professional fees and contractors prelims.

In November 2009, the DoE dropped the building cost limit to just €990m² (£880). In fact, recent tenders have been coming in below that: according to Galway-based contractor JSL, the going rate for the building element is €600-€750/m².

But the specifications expected in the two countries really aren’t comparable. Classroom sizes are smaller in Irish schools, there is no catering provision or dining halls, while floor, wall, ceiling and door finishes are all basic. Steve McGee FCIOB, JSL’s director of construction, says that it’s like visiting a “two-star hotel” compared to four stars in the UK.

Secondary schools are all individually designed, but primaries are based on the DoE’s “generic repeat design”: four variations each on 8, 12 and 16-classroom schools.

The DoE has also built “rapid delivery” primary and secondary schools using prefabricated timber SIPs or concrete panels in just 20 weeks. And it recently tendered two Passivhaus primaries, although McGee says the DoE was disappointed with the cost: JSL’s unsuccessful bid was €1,600/m².

Ireland’s strict cost limits no doubt galvanised the market and put pressure on suppliers and product manufacturers. Unified procurement also meant no variation in procedures around the country, so learning from one project could be taken to the next. But the market struggled with the Passivhaus project.

FIEC facts and figures 

2009 construction output: €20bn

2009 employment: 190,000

Output per head: €105,000

Total number of construction enterprises: 10,000

Output per enterprise: €2m 

Switzerland: A new class of residential development

If you happened to move to Switzerland, you might find yourself in a typical private rental flat. It will be modern, robust and purpose-built. It will have polished concrete or blockwork walls, rubber flooring and good acoustic separation. It will have three double bedrooms, suitable for key workers and young professionals, or “squeezed middle” working families.

Heating and electricity will be provided by the building’s own CHP power system. There will be easy access to all pipes, cables and risers for maintenance, and smart metering to generate bills. Cabling will be on view in galvanised conduits. The larger-than-average bathroom will include a washing machine and a wet-room drain set in the floor.

Building apartments to these standards in the UK would result in build costs “substantially” lower than today’s affordable or social rented housing — not to mention the reduced running costs and service charges. That’s according to developer Iain Hutchinson, whose London Rental Housing Company aims to bring the “Swiss model” to sites in Greenwich, Croydon and Bromley. He has had costings from contractors, but declined to state a percentage saving.

“You’re designing out the maintenance problems at a desk-top level,” says Hutchinson. “It’s been on the Continent for years, and we need to move it here. We’re setting out with the remit of bringing as much as possible of the Swiss approach over here, and seeing how close we can get to it.”

Hutchinson prefers to talk about an “accommodation problem’ rather than a housing problem. “We’re seeing an enforced cultural change that’s fundamentally down to the scarcity of mortgages. We’re being forced to come more in line with [the prevalence of private rented] in Continental Europe.”

FIEC facts and figures 

2009 construction output: €37bn

2009 employment: 291,000

Output per head: €127,000

Total number of construction enterprises: 36,000

Output per enterprise: €1.03m 

Norway: Stipulating BIM on public sector projects

Statsbygg manages new-build construction projects and existing properties for the Norwegian government. It has an annual construction budget of NOK2.5bn (£275m), and its portfolio covers 2.6m m² of cultural, government and administration buildings.

In 2007, Statsbygg announced it would move to “open BIM” for all its business processes — ie construction, refurbishment and facilities management — by 2010. As senior engineer Ole Kristian Kvarsvik explains, Statsbygg couldn’t dictate which BIM tools the market should use, which include Bentley Microstation (native file format .dgn), Revit (.rft) and Autocad (.dgw). But data  originated in all BIM authoring tools can also be saved in an “open” file format, such as .ifc.

“It’s the format for transporting information between native processes. It doesn’t carry all the information of the native format, but it’s enough for our business,” says Kvarsvik.

In 2009, the design teams entering the international design competition for Norway’s new National Museum also had to use BIM, with 237 uploading their anonymised open BIM design files. 

Currently, Statsbygg is negotiating with the first, second and third-placed firms on the design contract, which will include a requirement on the use of BIM. However, Statsbygg will not be able to insist that the chosen contractor uses BIM throughout. “We will give them the BIM model, and they will be required to give us an as-built model. But we don’t actually own the production planning phase,” says Kvarsvik.

However, he says that Norwegian contractors are “waking up” to BIM. “Contractors will use any tool that works — it doesn’t matter if it’s a hammer or if it’s BIM.”

Statsbygg hopes to deliver better buildings, at lower cost and better value for money. However. Kvarskvik puts the first goal above the second. “We want better buildings, with fewer deviations, that gives the client more return on their investment. Hopefully, that will mean the whole industry can start to be more profitable — construction is very marginal.”

And he acknowledges the significant upfront investment. “It is expensive to re-create your ICT platform to get an integrated flow of information, but we think the savings are obvious.”

FIEC facts and figures 

2009 construction output: €32bn

2009 employment: 208,000

Output per head: €154,000

Total number of construction enterprises: 37,000

Output per enterprise: €865,000 

Denmark: Less regulation and contract negotiation

While Ireland has mastered the art of the two-star school, Denmark shows that it’s possible to build four-star schools at substantially lower costs than the UK. According to Schmidt Hammer Lassen Architects, which has built schools in Europe as well as its Danish homeland, typical costs for secondary schools delivered today are £1,470-£1,911 (inc. 25% VAT) .

This figure assumes a design and build project with contractor and architect working together ab initio, and a structural frame based on offsite-fabricated concrete.

SHL partner Stephen Willacy, a British architect who has lived in Denmark for 25 years but is now running three SHL projects in the UK, points to several factors that contribute to these lower costs. These start with greater certainty for clients in a simpler planning process, a culture of off-site prefabrication and a health & safety regime that expects contractors will get it right (which they generally do) and therefore relieves designers of some of the CDM reporting burden.  

But one of the biggest differences, Willacy says, is that there’s far less time spent in contract negotiations. “It all seems to be a lot swifter and simpler here, consultants and clients are happy with the standard forms and everyone seems to work off the same pitch. In the UK, getting anything signed takes ages. British clients and their representatives don’t seem to want to go for the RIBA contract, but Danish clients go for the equivalent.”

Unlike Denmark, where D&B relationships generally start with a joint bid, SHL’s experience in the UK has been novation post-Stage D, which can bring inefficiencies. “We were happy not to go through a re-tendering process, but there’s so much additional work trying to get everything sorted out. It’s got nothing to do with getting the best deal for your client in terms of quality,” says Willacy.

Denmark also operates a similar system of project insurance to Belgium, with the consultants, and in many cases the contractor too sharing the costs of a project-wide policy. “It’s a good idea. If you build a £20m project, and need to pay for cover for 12 years, that’s quite a load to carry,” he says.

FIEC facts and figures 

2009 construction output: €28bn

2009 employment: 151,000

Output per head: €185,000

Total number of construction enterprises: 33,000

Output per enterprise: €848,000 

The Netherlands: Rediscovering ‘lean’, discovering BIM

Ger Maas, director of strategy at Royal Bam Group, the Dutch parent of the UK’s Bam Construct, isn’t claiming that the Netherlands invented “lean” or even that it’s a particularly new idea. But he does point to a concerted adoption of lean practices by Dutch contractors in the past two years that has reduced construction programmes by up to 25% — with attendant cost cutting.

Maas’s definition of lean management is based on bringing key players together in preliminary planning and design workshops, and drawing up a written protocol of how they will collaborate. “The groundwork contractor and the piling contractor, for example, talk about what everyone expects, what information they need. Then they write the agreement on paper. At each subsequent meeting, we ask ‘does it still fit, or do we need to make changes?’”

Maas says that the drive towards lean has come from contractors themselves, rather than clients or government. “It hasn’t been adopted universally, but many companies are doing tests and pilots. On our five or six pilots [including highways and housing], we had really impressive results. Now we have to organise a wave of awareness training and tool-box training to communicate it to people.”

But the Dutch believe that the full advantages of lean management will only be delivered in conjunction with another construction tool —
BIM. “Bam and other contractors in the Netherlands, support BIM as one of the main instruments to focus on risk reduction,” says Maas.

“There is now a huge investment in BIM and ‘virtual construction’ in the Netherlands. In two years, the next step is to combine the development of BIM and the development of lean management. When you train people to behave in a lean way, and support it with the BIM model, you start to create a different industry.”

FIEC facts and figures 

2009 construction output: €60bn

2009 employment: 461,000

Output per head: €130,000

Total number of construction enterprises: 109,000

Output per enterprise: €550,000