Facing Future Challenges

1. Facing Future Challenges Dr Neil Jarrett CEO, CWC (UK) Ltd

2. Global Trends

3. 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Global population growthThe global population is expected to exceed 9 billion by 2050 Population (millions) Africa Europe Latin America Asia North America Source: UN, the 2004 Revision Population Database

4. Asianisation • 60% of the world’s population lives in Asia. With wealth and living standards rapidly increasing, and the continent rapidly accumulating vast foreign currency reserves, our lifetimes will see a marked increase in Asia’s political and economic importance.

5. US has the largest number of migrants in the world Source: UN, International Migration, 2006: http://www.un.org/esa/population/publications/migration/2006_Migration_Wallchart.pdf

6. Global Trade Over recent years, international trade has consistently grown at a greater rate than the global economy, pointing to an increasingly economically integrated world. In 2020 world trade will be 80% larger than it was in 2000.

7. Ageing populations • By 2050, a fifth of the world's population will be over 60 (UN) • Between 2000 and 2020, the world’s population of over-50s will have increased by 70%, and the world’s population of 15-24 year olds will have increased by significantly less, at 11%. (Source: UN 2005. United Kingdom Office of National Statistics)

8. Urbanisation • Cities occupy less than 2% of the world’s land surface, but house almost half the human population • Almost 180000 people are added to the urban population each day • By 2015, 23 cities in the world are projected to hold over 10M people; all bout four will be in less developed countries

9. The ongoing march of technology The internet and supporting technologies are empowering ever-growing numbers of people to instantly communicate with each other and consumers to research and purchase goods and services from around the world. Internet usage grew by 126% between 2000-2004. With accelerating adoption in Asia, Africa and South America, this rate looks set to rise.

10. The environment – the only show in town Humanity’s ecological footprint grew at an average rate of 160% from 1961 – 2001 There are only 1.9 global hectares of biologically productive space available per person in the world. Humanity is already exceeding this by over 20%

11. Construction Trends

12. Modernisation Repeatable processes Houses in containers from China Lessons from manufacturing Prototyping and the Airbus

13. Large Infrastructure projects . Wembley, T5, Arsenal Stadium The Olympics Who should champion the romance of large infrastructure projects?

14. Housing Shortage 4 million additional households are expected by 2021 200000 houses need to be built each year Currently below 160000

15. Procurement - Excellence • Collaborative working, joint or partnership working in the press, is on the rise in the public sector. • There is an awareness that while collaborative working can succeed in the public sphere, it can also fail if not carried out correctly – a low-level scepticism which needs to be shown concrete proof of success. • ‘Partnership work is not without its challenges’ – the main problem is ‘cultural differences’ (Society Guardian: 08.11.06)

16. Procurement • Sustainable procurement – what is it, how it will work (Supply Management: 16.10.06) • Being able to prove your ‘green credentials’ (Telegraph business section: 19.10.06) • More than one third of the local government efficiency savings are expected to come from procurement (Local Government Chronicle: 31.08.06) • “For greater energy efficiency in public procurement, we are publishing new guidelines to ensure that £125 billion we invest each year is spent both well and in a sustainable way, and … achieve a level of excellence in carbon reduction.”

17. Local Government • Local authorities becoming more like social enterprises – Sir Michael Lyons (Society Guardian: 04.10.06) • Growth of consultation culture has seen councils and ALMOs encouraging tenant participation (Local Government Chronicle: 17.08.06) • ‘in the past, people were prepared to put up with what they got, but in a more self-aware and diverse society, people will demand solutions tailored to their needs.’ • ‘we need a new politics of engagement and community that attracts more of the energy and diversity of the third sector into local government.’

18. Sustainable Communities The Local Area Agreement will include a single set of targets for improvement, tailored to local needs, In this way, we will focus on the things that really matter to people everywhere, guaranteeing national minimum standards, but leaving room for local innovation and local priorities. We will introduce a duty for local authorities and other local partners to work together to agree the priorities in the Local Area Agreement.

19. Value . Replacing concepts of time and cost as the major drivers of performance with the idea of value to the occupiers throughout the life of the building Focusing on the long term value to the needs of the occupants and community

20. Future VFM Policy • Comprehensive Spending Review: • Anticipate min 5% cashable savings • Inflation on top • OGC – Common Minimum Standards • Achieving Excellence becomes mandatory • Sustainable Communities

21. Procurement principles mandated by Achieving Excellence • Long term relationships between client,designers, contractors and key suppliers. • Collaborative contracts – non adversarial forms of contract • Detailed understanding of cost and other aspects of performance and targets set for continuous improvement • Collaborative behaviour with everyone trained & incentivised to deliver for the client

22. But the reality is…CWC/CE Review findings

23. What we found from ALMOs internal processes • Variable records of delivery to budget. • Even more variable records of delivery of VFM for budget. • Extensive reported savings through partnership working but limited real benchmarking or audit. • Silo working is prevalent with little transfer of best practice • Management systems and reporting are often inadequate • Slow progress in setting up commercial and PM processes and understanding contractors costs. • Few have processes in place to manage change • Non Decent Homes is still mainly fixed price contracts with no share of risk or reward or pressure to improve • Large number of staff – more than are required to manage partnering • Little evidence of strategy in place for moving to future state

24. But policy pressure will continue to change the way you work…

25. 1. Project Manage Contractor & Supply Chain Partners • Gain long term commitment of contractors, and key suppliers through linked frameworks. • Deliver transparency & development of the supply chain beyond tier 1. • Re-assess partners based on evidence of resources and skills. • Work with partners to develop local training programmes.

26. 2. Manage Costs • Develop individuals and deliver a clear understanding of cost management processes. • Define cost management processes. • Develop shared client & supplier cost database including: • Benchmarking • Innovations • Savings • Actual cost data

27. 2. Manage costs… • Develop capabilities for value management, value engineering, & whole life costing. • Develop expertise in • Target cost setting • Final account audits • Open book audits • Incentivisation calculations • Develop best practice user manuals.

28. 3. Measure & Drive Continuous Efficiency Improvement • Put processes in place to deliver robust KPIs linked to critical success factors • Underpin performance measurement with understanding. • Develop a co-ordinated and consistent approach to Performance Management

29. 4. Process Improvement… • Establish a structured approach to process improvement • All partners using continuous improvement processes and techniques. • Set up CI teams and develop an open culture • Appoint in-house CI champions. • Establish a PIT (Performance Improvement Team) to drive change from within.

30. 5. Change Behaviours • Link to other training support activities. • Combine process development with people development. • Supporting people through change • Development of teams & individuals • Empowerment and ownership

31. So Why is Change Slow? Evidence From The Review: • Client roles and responsibilities must change • All client stakeholders must understand the process and benefits and use output specifications. • Fewer contractors to be selected and given work continuity: • On basis of ability to deliver superior underlying value • Not lowest price • New internal measures required to motivate staff to change • New collaborative commercial agreements required to motivate contractor’s team to work in the clients interests • New skills required to collaborate in optimising design and defining functionality • New skills required to deliver process improvement

32. But when it is done well…

33. Benefits Achieved To-Date - Hillingdon Key Benefits • Price & Cost reductions – up to 40% in client management, 20% in cost – year 1 • Safety improvements • Productivity improvements 16 – 40% • Reduction in project time by 25% - year 1 • Quality improvements 70% - year 1 • Client satisfaction up 90% - tenants Additional • Increased supplier investment in local training • Improved staff morale and motivation • Improved environmental control & management

34. Efficiency Savings Opportunities: • Prelims…11%-16% ( Better Management & Continuity of Work) • Risk Management….5%-8% ( Taking some risk from the contractors and placing in a risk pot) • Open Book 3%-5% ( eg Baldwin’s New Target Cost is 6%+ lower than their schedule of rates) • Continuous Improvement 5%-8% • Work Scope & Specification 2%-5% (The specification is fairly standard across the Almos but some Almos are doing more than the standard Decent Homes work.)

35. Capability Requirements For The Management of Collaboration The organisation will need to develop new capabilities through training and mentoring: • Capability to performance manage contractors and suppliers to deliver optimal VFM • Capability to understand costs and reduce waste • Capability to develop improved processes to meet all stakeholders needs. • Capability to build on internal and external best practices

36. Understand nett cost of works

37. Process Improvement Includes: • Measurement • What and how to measure. Data collection including Activity sampling through method study. • Process Improvement • Reviewing, evaluating and reengineering processes. How to strip out waste. Focussing on value. • Behavioural Change • Developing collaborative working skills. Appropriate values and behaviours. Supporting change.

38. * Value Stream Mapping - Team Buildworkshop - Project delivery - Information flows 2 3 * Goals & Objectives * Critical Success Factors * KPI measurement Data collection to drive process improvement Change Champions On-site / in-process direct support Establish data collection & measurement processes early in the programme Mentoring & Supported Process Improvement Activities The C-CIT Process • Developing the knowledge & ‘know-how’ to improve supply chain integration and Q, D & C performance Facilitated Workshops Framework Award Client Team Build Wkshp 1 4 5 6 7 8 9 10 Performance Imp Training, Mod 4 Establish Benchmarks

39. CITB Construction Skills • Sustainable Training for Sustainable Communities • 691 Trainee Placements • Further 494 Trainees – Future • Retention rate 86% • Focus on Black, ethnic minority & female trainees • Supporting – Strategic partnering arrangement & fully integrated supply chains • Real focus on delivering the right training, right time for employers and individuals to improve performance in the industry

40. CITB Sector Skills Agreement • Increasing SME’s investing in training by 300% • Stronger connections between lifelong learning and creating bottom line business benefits • Supporting capacity planning for the future • Training better managers to link up supply chains • Integrating migrant labour to bridge skills gaps • Apprentice completions for Construction up 400%

41. The client leadership challenge How can we have: • More integrated teams • Fully embrace the principles of good Client leadership • Ensure workforce is fully trained • Use buildings to enhance education • Take out non value adding costs

42. Quite Simply When we think we’re through changing :- We’re through