Speech

Better public building

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Speech given by Peter Hansford, on behalf of Francis Maude, about what government is doing to improve construction in the public sector.

Peter Hansford, Chief Construction Adviser, gave the following speech on behalf of Francis Maude, Minister for Cabinet Office, who was unable to attend on the day because of parliamentary business.

Public sector building in our country has entered a new era.

In the past it would be in the limelight for all the wrong reasons – poor quality, over budget projects, not delivered on time.

But this is changing fast – public sector building is proving beyond doubt it can be up there with the best of them when it comes to delivering efficiency, sustainability and innovation.

The whole world witnessed this last summer at the London Olympic Games –

The Velodrome, the Aquatics Centre, the Olympic Stadium – all showcased our ability to design, construct and deliver the best.

Nor were these achievements a one-off. Today we are here to celebrate more than twenty world-leading public sector projects which were all shortlisted for the Prime Minister’s Better Public Building Award at the recent British Construction Industry Awards.

And for everyone at this summit, from the public sector and from the industry, this has been, I know, a valuable opportunity to hear more about these pioneering projects and the whole story of their success from procurement, to design, to construction.

And I hope the message will go out to everyone involved in the construction industry – quality delivery in the public sector is now routine and anything less will not be accepted.

The Prime Minister’s Better Public Building Award

Today I want to say a bit about how the government has and will continue to promote efficiency and reform in public sector construction, alongside innovation and growth in the construction industry.

But first of all I’d like to pay tribute to the award winners and runners up you have been hearing about today. In particular the 2012 winner of the Prime Minister’s Better Public Building Award - the UCH Macmillan Cancer Centre.

This centre was right from the beginning designed around the users’ needs. Patients were involved in the design of the centre, from the light and airy entrance hall to an uplifting colour scheme to the development of web-hosted ‘patient portals’ that give patients more control over their care.

And as well as clinical excellence the centre also exceeds the high NHS environmental targets – it is one of the first healthcare projects to achieve an Excellent BRE Environmental Assessment Method rating. And thanks to the use of natural light and an innovative glazing system, ‘green roof’ and on-site energy generation - carbon emissions will be cut by a third.

In short, this Centre has set new standards for patient care and sustainability, which other projects of this type will aspire to.

And the same can also be said to the other shortlisted projects for this hotly contested award.

Every project shortlisted whether a rebuilt railway station, a flood prevention scheme or a new university campus, measured up against tough criteria for high-quality design, sound financial management, sustainability and economic and social value.

And as you’ve heard today - each project has through better building ensured better public services for local communities.

The Government Construction Strategy

The government of course has a vital role to ensure this kind of success is replicated across the public sector and around the country.

Since coming into office we have made it a key priority to reform public sector construction so we can build the schools, hospitals, prisons and roads this country deserves – and at the same time help develop a more efficient, more innovative and more competitive construction industry.

This is a hugely important agenda for us. Firstly because our construction industry is critical to this country’s growth – both in sustaining thousands of SMEs and in providing the crucial infrastructure this country needs to compete globally.

Secondly because the public sector is under unprecedented pressure to produce more for less today. As we address the huge deficit we inherited - budgets are tighter across the sector, but the demand and expectations for public services are rising.

It’s imperative that we work with the industry to deliver public services that don’t just cost less but are better – more innovative and more focused around the users’ needs not the administrators – like the projects here today.

Eighteen months ago I published a cross-government Construction Strategy focused on achieving this and setting out an ambitious target to make public sector construction 15 to 20% more efficient by 2015.

The process of implementing this Strategy is well underway. Last year we achieved savings of £72million and in the first half of this year we have identified £69m of savings and we are working towards a target of £350million savings by the end of the year.

By 2015 we are targeting £1.2bn savings.

So what steps are taking to achieve this ambition?

From the start we knew that government had to build a better, more open, more collaborative relationship with the industry.

We needed a much better understanding of how much we should pay for the buildings and infrastructure we needed – but at the same time we needed to be less prescriptive in what we asked for-

And this would enable the industry to mobilise and grow its own potential for innovation – effectively coming up with new answers to our questions rather than just pricing a single answer that has been developed without industry input.

In the last 18 months this process has begun and you can already see real change happening on the ground.

For example before the launch of the strategy, few government clients had compiled their construction cost benchmarks and made them widely available.

This is no longer the case. We have now published department cost reduction trajectories and construction cost benchmarks, which help inform central government and wider public sector clients as to what they currently pay for construction and what their construction should therefore cost moving forward.

This is important for spurring on efficiency. For example since 2010 the Education Funding Agency has reduced the average cost of a new secondary school from £2450/m2 to £1460/m2 and is currently out to tender with the Priority Schools Building Programme at this lower cost. This represents a 40% reduction.

They did this by drawing on earlier benchmark data, engaging with the industry prior to going to market and setting a suitably challenging benchmark. Bidders were then invited to offer their “best school” against this benchmark. This is the future.

We’re also changing the way we engage with the industry over upcoming contracting opportunities. In the past, constrained by fears about picking winners, cosiness with incumbents and breaching theories of efficient markets, we have left business to flounder in the dark about what’s coming up – meaning we were also blind as to what the industry could offer.

This is changing. For over a year now government has been publishing a pipeline of upcoming opportunities - setting a precedent that is now being followed by other sectors.

The latest iteration includes over 1200 projects and programmes, around £40 billion of investment over four years. By giving the industry sight of what is coming this pipeline means suppliers can have the confidence to make investments in new skills, services and products.

In addition to this government is able to deploy resources more strategically and identify skill gaps allowing us to forward plan better.

The next publication will be in April. We are determined that in the future iterations will be more SME friendly. For example we are planning to give more specific information of work packages in projects - which will be of particular interest to supply chain members, who in the majority are SMEs. We will also extend the reach of information beyond central government to wider public sector which will include smaller projects.

We are well aware that SMEs account for 99% of the construction industry. Because of that another key area of reform is changes to our approach to paying suppliers. Timely access to cash is of course critical to the survival of many SMEs.

There is now a contractual obligation which took effect for all central government contracts placed to pay down to tier three within 30 days. We are working with key central government departments to roll out Project Bank Accounts across government construction projects. This will improve the speed and security of payment to members of construction supply chains down to tier 3 within a matter of days.

This is already working well. The Highways Agency now uses Project Bank Accounts on all contracts awarded post October 2011 across all directorates unless ‘there is a compelling reason not to do so’.

Through electronic bank accounts they pay prime suppliers at the same time as subcontractors down to tier 3 and already this has had a great impact in preventing cash from being held up in supply chains.

Last year alone £1.1billion worth of projects signed up to use Project Bank Accounts and I’m pleased to say that this year we are well on the way to meeting our target for £2billion to go through Project Bank Accounts.

Finally and crucially we are also reforming our procurement practises. When this government came into office businesses from every industry were queuing up to tell us what a nightmare it was bid for government work.

Our processes were notoriously bureaucratic, time-consuming and at times eye wateringly expensive. Many innovative suppliers were shut out from the outset – particularly SMEs. This was partly of course because we were rushing into the procurement stage without engaging with industry first.

But thanks to a package of radical reforms we have had real success in making procurement more efficient and less complex – and more open to SMEs.

We are also trialling three new models of procurement which call for the early involvement of the supply chain, and more integration around the design, the construction and the manufacture of products.

The Department of Health, the Environment Agency, the Ministry of Defence, the Ministry of Justice and a number of wider public sector organisations are now trialling: Cost Led Procurement, Integrated Project Insurance and Two Stage Open Book, which were all proposals from the industry. Building Information Modelling (BIM) is also becoming successfully embedded in departments along with Government Soft Landings.

We are starting to see how effective these new methods can be. For example the Environment Agency’s Rye Harbour project, has used Cost Led Procurement to go from outline design to set up site in just 5 months and has generated estimated savings of 10%.

And at Cookham Wood Prison in Kent, the first Building Information Modelling Level 2 ‘early adopter’ project, they were able to take key stakeholders on a virtual walk through the building before it was built and subsequently identify £800,000 worth of efficiency savings at the outset.

This digital way of working – virtually constructing a facility – not only helps us work out problems in the design stage, it also allows for a more collaborative approach where sub-contractors from every specialism can input critical information into the model before building begins.

The government is now requiring the use of Building Information Modelling, on all centrally procured projects, irrespective of value by 2016.

We are also working closely with industry, forming numerous stakeholder groups such as BIM4SMEs and the BIM2050 Group for young professionals. These are good examples of the public and private sector working together to change the way we work in a new digital, collaborative environment.

And I’m pleased to say our world-leading work here is being recognised. In March, Fiatech a US-based international community of companies and academics working together to lead global development of innovative practices and technologies, will recognise the UK government and industry in response to our work on the Building Information Modelling programme.

We will be presented with the James B. Porter, Jr. Award for Technology Leadership at their Technology Conference & Showcase. This is a great achievement.

Conclusion

We cannot of course start resting out our laurels now - there is further to go but we are heading in the right direction. And I’d like to take this opportunity to welcome Peter Hansford as the government’s new Chief Construction Adviser.

He is already demonstrating great energy, drive and commitment in leading a joint HMG and industry strategy that will be published this summer. This will set out how we aim to improve the industry’s business performance and ensure the UK industry is well placed to serve developing needs and markets by setting out the vision for the sector up to 2025.

As I said at the beginning public sector construction in this country is entering a new era – where design excellence, effective procurement, efficient delivery and competitive pricing will become the norm.

Today we’re hearing about public sector building at its best from the people leading the way. It’s vital we continue to join up and share our resources, ideas and best practise.

If we can ensure the type of innovation showcased here today is replicated across the country – together we will create better public services and a better future for construction in the UK.