Behind the Hype – What Difference Will Collaboration Really Make to Your Construction Costs?
Everybody’s talking about it, but how much collaboration is taking place in the industry, and what’s the impact on construction costs?
82% of construction professionals expect greater collaboration between owners and contractors over the next five years, according to the KPMG Global Construction Survey 2015.
Collaboration is certainly a hot topic in the construction industry right now. In response to the growing adoption of Building Information Modelling , Pinsent Masons published a review of collaborative working in construction in June 2016.
The report made the claim that collaboration would provide a vehicle for reduced construction costs, in procurement for example, and on top of that, promised to deliver:
Opportunities to build longer-term relationships with major construction companies and their supply chain members
Increased value for money
Opportunities for stakeholder and community engagements.
Other commentators raise the stakes even higher, arguing that without a more collaborative approach, much-needed growth in the sector will be stunted in the future.
The 2016 research report, The Case for Collaboration in the Homebuilding Supply Chain, for example, states that:
Without increased collaboration within and between homebuilders and their supply chains, the potential for systemic labour and skills shortages remains for this economic cycle; and for so long as there is no change in the pattern of homebuilding with intense competition for skills at half year and year end periods, subcontractor loyalty will likely be a transactional commodity.
The report goes on to argue that homebuilders and subcontractors seem to want the same outcomes: profitable work, positive reputations, safe and productive sites.
But are these shared objectives enough to overcome that barriers that have stood in the way of collaborative approaches up to now? Away from the rarified world of global surveys, what is actually happening on the ground? To find out whether collaboration delivers key benefits such as lower construction costs, let’s look at these three initiatives:
Three Collaboration Case Studies
By working collaboratively to pre-qualify its supply chain, Skanska made significant time savings in supplier and subcontractor evaluation.
This has allowed our procurement community to focus most of their effort on the formal tendering process and procuring to best value. As the construction industry moves into a period of significant growth there is also more time available to spend on advanced supply chain management, developing long-term relationships, sharing risk and opportunity, and unlocking innovation to provide the best solutions for our clients. Dale Turner, Director of Procurement and Supply Chain, Skanska.
Interserve collaborated with the Ministry of Justice and its tier 2 subcontractors, applying BIM to a building project at HM Cookham Wood. Against a target of 10% cost savings, the project demonstrated cost savings of 20% compared with a project of a similar nature and size.
Collaborative Waste Reuse
Earth Exchange was a construction industry portal, through which builders were able to arrange to collect other builders’ materials, making significant cost savings in the process.
Sadly, the portal proved onerous to support and fell into disuse. As well as issues of shared costs, there were very specific issues of trust here. Due to the regulated nature of waste management, construction businesses need full confidence that the material is what it purports to be.
The Trust Deficit
If these cases are anything to go by, the issue of trust may stand in the way of the significant cost savings that collaborative approaches offer.
Turning attention back to the KPMG survey – as well as reinforcing the industry’s belief in collaboration, the report also found that only 32% of respondents in the construction industry have a high level of trust in their contractors.
KPMG suggested that the aspiration for collaboration is actually built on distrust rather than trust, with owners staying closer to contractors because they don’t trust them & the industry equivalent of ‘keeping your enemies closer’.
Can it be true that basic issues of trust are going to stand in the way of the construction industry working together to cut the cost of construction?
There does seem to be a genuine will for shared ways of working which should be celebrated. In the light of the EU referendum, with the UK construction industry thrown back on its own resources, a collaborative approach seems to open up ways of cutting costs and improving productivity in an industry where narrow margins are endemic.
82% of construction professionals expect greater collaboration between owners and contractors over the next five years.
There are now examples of collaborative initiatives that make demonstrable savings in construction costs.
Trust seems to be the biggest barrier to increased collaboration in the construction industry, but this problem may be surmountable.
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