Diversity and Structure of the Construction Industry

Diversity and Structure of the Construction Industry1.1 IntroductionThis chapter illustrates how unique, huge, diverse and enormously complex is the winding fabrication. This application for the most part constitutes of enterprises and professionals whose primary objective is to build communities, roads, schools, homes, business line, hospitals and including its maintenance. The plait process consists of many activities, right from the onset of the befuddle figure and right through its implementation, maintenance, refurbishment, and goes up to the eventual goerning of its buildings or in some opposite words, the whole liveness cycle of the project. This constancy therefore require a wide range of suppliers, avowers and including patch uprs of hooeys and components to carry come out its activities. The industry had motleyd a carry on in its complexness oer time, entirely the objective of the industry remains basic everyy the same as it was 100 years ago.However, the formula industry has a unique structure with very few large establishments that dominate the infrastructure by carrying out works, that produces the majority of the turnover of this industry on a whole. Sears et al. 2008, p.2 state that contractors who vary widely in size and speciality accomplish the plait works. Some contractors choose to con centimerate on a grouchy task or aspect of the construction project and argon therefore referred to as specialty contractors. Others assume broader responsibility for a comprehensive work sheaf and are referred to as main contractor. payable to the alteration present in the industry, the industry is fragmented which is a reality, the reason might be due to the adversarial short-term relationships which causes dissatisfaction within the industry and is therefore a project focused relationship. more thanover, lack of potent conference and implementation may also contribute to the fragmentation of the industry as it leads to signifi a fter partt negative upholds, low productivity, address and time overruns and last-placely end up in conflicts and disputes.The industry also now faces new levels of complexity as it moves forward trying to keep pace with the increasing energy, strong and labour costs which are to a great extend mitigated by the other industries by adopting the new technologies in particular communication and information technology and also advanced management strategies.1.2 OverviewThe industry is considered to be one of the major scotch sectors, which contributes a lot to the gross domestic product of the nation in respect to other industries. Cooke, and Williams, 2009, on p.3 states that the annual output of the UK construction industry is slightly 114 billion, which represents almost 9% of gross domestic product. This industry also underpins the remaining sectors of the economy by providing the essential infrastructure and facilities on which all sectors of the economy depend. correspond to Potts, 2008, on p.3, this construction sector with 11.8 million operatives directly employed makes it Europes largest industrial employer accounting for 7% of total employment and 28% of industrial employment in the EU.There was also a report of the government policies, which was published by BIS (Department for Business Innovation and Skills business group sector document), stating that the UK construction industry consists of over 250,000 firms employing 2.1 million people in a multitude of roles. The sector is defined as one which embraces the construction materials and products suppliers and producers building services manufacturers, providers and installers contractors, sub-contractors, professionals, advisors and construction lymph nodes and those organisations that are germane(predicate) to the send off, build, operation and refurbishment of buildings.However, construction industry is very different from other manufacturing industries and therefore difficult to achiev e similar performance, mainly due to its degree of singularity in its use, in the size, its location and complexity due to the varied non-uniform working conditions from one project to another. Therefore, it appears to be underperforming when compared to many other industries. Jones, Saad, 2003, on p.12 state that, the diversity of the construction and the variability in the production process has to be reorganised with each new construction project. For each project, a series of decisions has to be interpreted which take into account the clients specific requirements and the context in which the tasks are to be executed. This go off make project outcomes difficult to predict and can result in short and often adversarial relationships.Cox, Townsend, 1998, on p.21 states that the productivity, value for money, and overall client satisfaction in the construction industry are fairly low compared to other industrial sectors. The factors being low and discontinuous demand frequent ch anges in specification inappropriate (contractor and client) natural selection criteria inappropriate allocation of risk short fictional character ineffectual manners of construction poor management inadequate investment an adversarial culture and a fragmented industry structure. In rank to improve the performance of this industry, government had interpreted initiatives and had produced many reports but had not made any impact.1.3 Reports and recommendationsThe publication of major notable reports namely Lathams Report Constructing the Team (1994) and two Egan Reports Rethinking Construction (1998) and Accelerating Change (2002) produced a considerable impact in UKs construction industry and come oned changing its working culture.Constructing the Team by Sir Michael Latham was published in July 1994, the key issues as summarised by Holroyd, 2003, on p.39 are as followsClients have a role in promoting good design which provides value for moneyClients should select the most app ropriate procural get across on the basis of the type of projectEffective design is crucialA modern contract should includeA specific duty for all parties to deal with each otherFirm duties of teamwork so all can share in successA clear definition of the roles and responsibilities of all parties slowly understood language with guidance notesA choice of risk allocationAvoid variations if it is need, price it in advanceEnsure fair, prompt and secure defrayment to all partiesAvoid conflict on site and disputes if any to be resolved speedilyWhen selecting suppliers or tenderers, consideration should be discontinuen toQuality as well as priceA lead managerSensible tender listsNo burdensome qualification proceduresValue for moneyCost in useFactors which determine performance includeAdequacy of safety consideration skill of operativesImproved trainingRelevant professional educationAdequate RD, which is by rights fundedTeamwork on site depends on fair treatment for all partiesThe liabi lity for defects post- end should be properly addressedRethinking Construction by Sir John Egan delivered the report in July 1998 for the success of the construction industry. He opined that while UK construction at its best is excellent, substantial improvements can be made, and it is vital that they are made. The key issues of this report as summarised by Holroyd, 2003, on p.40 are as followsThe UK construction industry needs to improve there should beLess fragmentationIncreased profitabilityMore capital investmentMore investment in RDMore and meliorate trainingDifferentiation between price and costSet targets for improvement and give commitment to the needs of the customer, to quality, and to people the team and the process should be integrated around the product, and management should be committed to improvement throughout the organisationThe construction process should be improved byMore process repetition on projectsIntegrating all team members to use their skills to deliver value to the clientFocus on the end product how best to achieve the desired resultContinuous product improvementImplement projects correctly, suiting the site and the customerPartnering through the supply filamentOnce improvement starts, maintain itImprovement could be accomplished by developing a better culture in the industryProviding decent working conditionsMore and better trainingProduce designs which considers the projects end useStandardise components where possibleImprove regulatory controlsImplement coherent term relationshipsThe National audit office report (2001) Modernising Construction as stated by Cooke, Williams, 2009, on p.11 that a major contributory factor to the poor performance of this industry was the adversarial relationships that existed between the construction firms, consultants and clients and between contractors, subcontractors and suppliers. The report also identified that government departments and agencies to ensure collaboration, integration and va lue for monies in the procurement of construction services.Further, it also suggested that the entire supply chain be integrated and that risk and value must be managed in order to reduce accidents, develop out waste and improve buildability. McGeorge and Palmer 2002 on p.54 cite CIRIAs definition of buildability as the extent to which the design of the building facilitates ease of construction, subject to the overall requirements for the completed building.These reports produced during the various periods had contributed a lot to the growth of the construction industry. Since these reports were published, a changed performance could be clearly noticed in the activities of this industry. The findings of the report had tried to build up a scrap in the construction industry to procure projects that could achieve best value and also help in understanding the balance between quality and whole-life cost of the project.Many more studies on the performance of the construction industry we re also conducted subsequently, which had identified the areas of strength and weakness of the construction industry. According to Jones, Saad, 2003, on p.2, the strength of the industry includes its flexibility and adaptability and its persistent weakness include its fragmented structure and project processes and its adversarial relationships. Furthermore, deficiencies in its performance in relation to customer focus, learning and leadership were revealed when benchmarked against other industries.1.4 Material useThe construction industry is considered one of the major consumers of natural resources mainly the virgin materials from its surrounding surroundings. This will give rise to many environmental issues, which are unsustainable such as depleting natural resources, diminishing the earths biodiversity, and even cause extinction of habitat if we continue the present rate of consumption. As stated by Kelley et al. on p.298 that materials used in buildings account for some 40% of natural resource use, 30% of CO2 emissions and 40% of waste. However, the environmental issues would certainly create a vital impact on the society and then this industry should take earnest attempt to develop a strategy to provide low snow solutions by way of minimising its carbon footprint. In addition, the projects Corporate Social Responsibility (CSR) that voluntarily decides to contribute to a better society and a cleaner environment and along with its procurement policy, could contribute to the environmental success.Built environmentThe paper presented by Natural Building Technologies, have quoted One Planet Living material of BioRegional and the World Wide Fund for Nature have shown that if everyone in the world-consumed resources at the same rate that of UK, it would take the equivalent of three planets now to sustain this consumption. Hence, UK and the other western nations urgently need to take radical measures in order to reduce this present rate of consumption of res ources. As we are aware that this planet has only a finite quantity of resources and therefore we in the construction industry should have a moral responsibility to ensure that industry is resourced utilize sustainable techniques. More over the construction industry should also insist on an environmental management system (EMS) accreditation for every project, which could help in continually, modify its environmental performance. An internal EMS audit if periodically conducted would help in checking the effectiveness and delivery capability of the management system.The strategy paper of the UK Government, Building a recrudesce Quality of Life A Strategy for more Sustainable Construction by the Department of Environment, Transport and the Regions (2000 b) as summarised by Kelly et al. 2002 on p.296 recognises the importance of sustainable construction and had challenged the construction industry to provide built assets whichCause minimum damage to natural and social environmentsMi nimise the use of resourcesEnhance the quality of lifeWill be acceptable to future generations1.6 NeedsThe working pattern of the society is changing quite an fast and construction industry is known for adapting to change at a faster pace than other industries. Nowadays many people tend to work from home since jobs functions can be remotely performed and is quite feasible. The benefit from working at home helps in the reduction of transport movements, thereby considerably reducing pollution and traffic congestion curiously during the kick hours. It is an eco-friendly option and is to be encouraged. Hence, this working culture would require housing to provide a richlyer quality of life and greater flexibility of adaptable life story and space requirements. Therefore, in majority of existing homes, a need for up gradation would be necessary and a lot more of new homes constructed to halt this new culture in the coming years for which a huge quantity of materials are required by the industry. This results in a heavy material flow. In addition, while designing a sustainable project, selection of materials should be made based on locally and easily available material, in order to reduce the embedded energy cost of transportation. This option would also decrease the carbon footprint of the project.1.7 RegulationsA government publication by energy redeeming(a) trust on the Code for Sustainable Homes New build housing (Relevant to England and Wales), states that the government intends that all new build homes should be zero carbon by the year 2016. Code level 3 is proposed to become the new standards for Building Regulations in England in 2010 and by 2050 the nations entire housing stock will be virtually zero carbon. Clients, who desire to increase value of their project, could insist on the use of sustainable materials in order to acquire higher sustainability rating as mentioned in the BREEAMs inscribe for sustainable homes.These regulations create a lot o f pressure on the project management team if a proper supply chain management technique is not available.. As mentioned in the Code for Sustainable Homes (Annex B Category 3, Materials on p.37), the supply chain management and material stewardship are essential elements of responsible sourcing. Hence, the supply chain manager is to consider the consequence and impacts of using materials by analysing its life cycle (right from the point it was mined or harvested,through manufacture and processing of the material, including its use, reuse and disposed off as waste with no further value), onwards the material is in reality used in the project. However, all tonus used in the project should be 100% legally sourced and 80% for all other assessed materials.1.8 Sustainable sourcing codeFor the London 2012 games, London Organising Committee of the surpassing Games (LOCOG) had prepared a Sustainable Sourcing Code in consultation with industry leaders, sponsors and non-governmental organis ations. It had been reviewing how its sponsorship and procurement activity could achieve the highest possible standards to ensure that the goods and services it procures comply with this code in impacting the sustainability objectives for the 2012 games. This code could be used as a benchmark in the preparation of a similar code of practice by the construction industry.The four core principles of the LOGOs Sustainable Sourcing Code and supporting guidelines on packaging and carbon emissions of products and services originally published in November 2007 and updated in December 2009 are as shown belowResponsible sourcingLabour practicesHealth and SafetyDiversity and inclusionAnimal welfare and TestingAnimal and embed productsTimber and timber productsUse of secondary products materialsReducing wasteRecycled contentPackagingWaste electrical and electronic equipmentMinimising embodied impactsEnvironmental management try of productsTransportLow carbon GamesHealthy materialsRestricted s ubstances and materialsHeavy metals and brominated fire retardants1.9 Controlling material resourcesA material at site is money and is to be prudently handled. The cost of materials constitutes a major portion of the project cost. March 2009, p.139 states that the value of the materials incorporated into a building represent anything from 40 to 60 per cent of the final cost. Therefore, control of materials at site is a crucial element. Materials are not be wasted or lost. For proper control an effective communication between all involved for the project success namely the planning department, purchasing department, the site and the supplier is beta. Responsibilities are to be clearly defined especially in buying of materials within the estimated sum total since efficient buying results in savings, which in turn contributes to the profitability of the contract. Similarly hoarding of materials at site should be discouraged by initiating just in time delivery, but care is to be taken in the selection of material supplier so that the availability of bulk materials is ensured. Therefore, materials management in construction projects is essential for its success.As Cooke and Williams 2009 on p.401 states that an essential component of materials management begins with site layout and planning. Designated areas must be allowed for material memory board in order to reduce waste and damage to materials. Excessive stock of materials is a problem need to be controlled. March 2009, p.139 enumerates the reasons as to why ebullient stock is to be controlledExcessive stocks take up capital which could be better usedTakes up space and absorb further capital for security measure against weatherLikely to be damaged resulting in unnecessary expenditure and possible delay incurred in replacementMay be necessary to ikon handle stock to elsewhere on the site and missing the opportunity to have just in time deliverySite efficiency can be increased by effective material handlin g and result in costly waste reduced. Every project worth more than 250 000 effective from April 2008 should have a Site waste management plan (SWMP), without which it would be a serious criminal offence as mentioned by Cooke and Williams 2009 on p.403 quoting The fresh Neighbourhood and Environment Act 2005 (Section 54 of Part 5).1.10 Whole-life thinkingIn addition, the construction industry need to consider the aspect of whole life cost during the procurement as the project not only consumes sustainable resources, but also generates waste in construction and demolition activities. The procurement of materials for the industry is strongly affected by environmental issues. Greater use of modern methods of construction and off-site prefabrication could be a solution in reducing the total amount of waste generated at site. Hence, the construction industry should strive to develop and implement the new paradigm of the triple bottom line namely environmental, social and economic sust ainability.Green building is an innovative technology and is good to be adopted by construction industry. This approach creates a positive environmental, social and economical impact over the entire life cycle of the project. It is a holistic approach of design and considers its impact on the wider environment and community around it. This technology procures homes, which are durable, save energy, reduce waste and pollution, and promote health and well-being.1.11 procurement methodsOne of the main problems in this industry says Cooke Williams, 2009, on p.4, is that it separates design from production far greater than other industries and is still common despite the deficiencies of traditional procurement and the benefits offered by the newer and more flexible approaches. In traditional method of procurement, the design stage is illogical from production by a tendering period. McGeorge and Palmer, 2002 on p.54, also support this view and quote by comparison with other industries t he separation of the process of design and construction is unique to the construction industry.Construction industry provides successful projects, the outcome of which is increased efficiency, greater borrowing capacity and payback long-term worth. The business objectives should always drive the selection of an appropriate procurement strategy, so as to procure a project to the complete satisfaction of the client. The procurement strategy so selected would depend on many factors namely the client, the risk profile of the client, the cost certainty needed, accountability, flexibility, the type of project, time, funding, market condition, the industries capacity and capability.1.11.1 Projects prioritiesMoreover the factors that are to be considered while analysing a business objectives requirements and their relative priorities as pointed out by Kelly et al., 2002 on p.178 are as listed belowFactors outside the control of the project teamClient resourcesProject characteristicsAbility to make changesRisk managementCost issuesTimingQuality and performanceThe choice of the strategy should ensure that control is maintained over those factors that are grave to the clients perspective of the project.1.11.2 Procurement strategyThe authors also state that the choice of the strategy should ensure that control is maintained over those factors that are of most importance to the client. after a selection is made, a strategic brief will need to be produced defining the clients project and the parameters within which the project must be earn to take the project to a success. Often less importance is imparted to the projects objectives as compared to the primary criteria of time, quality and cost.These three primary parameters form the key criteria in the selection mechanism and are interdependent of each other. Therefore, procurement strategies adopted for the project would not be able to deliver all of them as high priority. For example, fast-track solutions for a project deliver speed and time certainty, whereas the other criteria such as cost certainty and quality may be less achievable. Similarly, in projects where quality or costs are considered to be of top priority, then the other criteria are affected. Hence, if a high priority is imparted in defining the project and especially linking of the prioritisation of objectives to the business case, greater then are the chances of a successful procurement of the project to the entire satisfaction of the client.However, from the clients perspective of a project, time, quality, cost and functionality are important criteria for the success of a project. The client generally prefers the highest quality at the lowest cost and the project being completed in the shortest possible time. As preferably mentioned it is not possible to attain all these parameters together for a given project. Depending upon the clients business objectives, a suitable selection of the procurement strategy should be chosen.1.11.3 Procurement optionIf according to the client, a signature building is required for the project, then a traditional or design-bid-build strategy is an appropriate option for the project. For this project, quality would be very essential but this procurement technique adopts a sequential nature of activities, and therefore has no parallel working activity, which means that, construction could actually begin only after the design is completed as fully as possible. Hence is not suitable option for any fast track projects. However, this option fairly provides with cost certainty and time predicted. The delay experienced in completion of the project might be because considerable time is allowed for the design to take a full shape and thereafter in the preparation of detailed brief and also in the tendering procedures required to be completed before the start of the work. Therefore, an early start of the project would not be possible until the letter of intend is issued, which in turn hav e a knock on effect on the overall cost of the project (price escalation, inflation etc.).Sometimes the client might go in for a functional building where cost implication is to be the lowest and had to be completed before a fixed date. Here in order to meet the business objectives, a design-build procurement technique is quite appropriate, since early certainty of the overall contract price could be obtained. Moreover, as this strategy facilitates overlapping of design and construction, a faster start on site is possible resulting in shorter project duration with greater certainty of meeting the targeted date. Hence, this option is quite suitable for fast track projects but is not suitable for any complex infrastructural projects and also in projects wherein the clients brief is uncertain or inadequate.Alternatively, the client would require procuring a huge and complex infrastructural project with an emphasis on the targeted date of completion. Considering the clients business obj ective, the appropriate procurement route would be construction management, which is best-suited option for fast track and complex construction projects. In this procurement route, the construction work is divided into several packages, which are tendered separately to different experienced and qualified contractors. Hence, in this procurement method design, tendering and construction over lap thereby reducing the overall time of the project whereas there could be price uncertainty until the last package of the work had been awarded to a contractor. Due to the speed in completion, quality of the work would probably be effected and therefore a total quality management team would be required to ensure the quality of work during its progress. Therefore, this procurement route is not suitable for inexperienced clients and for those clients trying to transfer risk to the contractor.Therefore, the procurement strategy developed should fall a balance between risks that could cause an impa ct on the clients business and the projects objectives. Some projects could adopt more than one procurement option for the successful completion of the project as per the clients perspective. Traditional approach may be used in the construction of the shell and core, whereas construction management would be used for the final works. The choices made might differ between clients of various projects depending upon their knowledge and experience of the industry. The scale and diversity of those involved in this industry is too enormous and hence this contributes to enormous pressures on the project teams, to ensure that the project completion is on time, budget and quality.1.12 RiskThe diversity of those involved in the industry namely design engineers, architects, consultants, main and subcontractors, suppliers and constructional managers is huge. However, all those who are involved in this industry throughout the world strive together to establish a strategic framework to meet the bu dgetary and scheduling goals of the project.Time is one of the critical factors in construction industry, which has significant legal consequences. The client sets up rigid start and finishes dates for the project and if the contractor must comply with this period, barring any delay caused due to natural calamities, or lose money by paying the liquidated damages as situated down in the contract document. During the construction process delay in receiving of materials, equipments and services may erode profits.For a successful completion of a project, lot depends on the quality of the subcontractors and suppliers. Therefore, construction organisations should ensure that an appropriate subcontractor is selected. The subcontractors selection process involves many important factors including the evaluation of their capacity and also in performing a SWOT (strengths, weaknesses, opportunities and threats) analysis.The risk faced in construction industry is different from that of other in dustries. This is quite evident while analysing the difference between manufacturing risks and construction risks as indicated by Benton and McHenry 2010, on p.2 as shown belowRisk versus reward for the manufacturing sectorRisk versus reward for the construction sectorIn construction industry, the potential for committing mistakes is high and facing problems is magnified by the poor interrelationship that exists between all the entities involved namely, the client, architect, consultant, project manager, contractors and suppliers. The risks, if not mitigated in time, would prove disastrous and hence, recommended to be avoided at an early stage. Construction risks as mentioned by Benton and McHenry 2010, on p.3 are as narrated belowInternal financial problemsWorking capital problemsSlow earnings from the clientInferior plans and specificationsInadequate technical capabilitiesInsufficient information technologyLack of communication between the entitiesProductivity inefficienciesWork quality problemsWork method problemsDelivery reliability problemsBulk materials quality problemsAnother notable difference between the manufacturing and construction industry is the probability of calamity while considering the labour element. This can be clearly understood if an improvement curve technique is performed as explained by Benton and McHenry 2010, on p.4 and p.5 for both industries, the figures of which are as shown belowProbability of failure for the manufacturing industryProbability of failure for the construction industryThe improvement curve is exponential and depicts a constant-percentage reduction of labour, which means that, the workers learn how to do their job better as they produce more and more units at a lower production cost. This advantage is accomplished due to the impact of cumulative learning by experience, which is possible in the manufacturing industry.Now considering the construction industry, which is constantly changing its complexity over time, w e can observ