November 24, 2016

Farmer Review warning for the Construction Industry

The review comes after many attempts to reform the industry from Sir Michael Latham's 1994 review titled ‘Constructing the Team’ to Sir John Egan's review ‘Rethinking Construction’ and the 2013 industrial strategy. The warning in the review can be clearly spotted in its straight talking title - ‘Modernise or Die’.

The review avoids the usual themes of collaboration, innovation and best practice. Rather it focuses on the failures facing the industry and calls for action to change from the government, industry and its clients.

The review warns that the problems of low investment in technology, low productivity and adversarial mentality continue to plague the industry and that they now pose an existential threat. Whilst these problems are already familiar to many observers in the industry, the review stresses their effects on the future of the industry. The review finds that only a third of high rise building projects are completed on time or on schedule. Leaving many clients with difficulty to predict projects completion time and creating adversarial relationships between all parties.

The review also finds that low margins, financial fragility, poor investment in research and development and bad public image are part of the features of the industry.

The review calls for coherent leadership and collective responsibility for change and improvement by all stakeholders. It calls for a number of reforms including off site construction (describe in the report as ‘premanufactured methods’), creating model projects, centres of excellence, other wide ranging innovation programme and training to fill the skill gap and shortages in the future. The review avoids being prescriptive about skills reform but rather serves as a platform to demonstrate the urgent need to reform CITB. The review believes that CITB should be expanded to fund training in BIM, digital innovation and skills in pre-manufactured methods. The report encourages the government to drive pre-manufactured methods in its residential housing schemes and programs.

The report provides 10 separate recommendations that together will drive reform and save the industry. Among the recommendations is a call for the government to put a levy on all construction clients that refuse to support modernising the industry. The report refers to it as a ‘play or pay’ charge mechanism. It would reward clients that adopt collaborative practices such as using BIM, off site construction, etc. The report says that the levy should be no more than 0.5% of the value of construction work. It adds that the decision to introduce the measure should be decided within five years by reference to positive trends against industrial strategy targets.

It is without any doubt that the review identifies the decades old problems facing the industry, identifies the areas where the industry needs to innovate and improve on and sets out areas for action. However, the biggest challenge to the report will be the government response. Whether the government will adopt all the ten recommendations exhaustively or some remain to be seen.

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