Industry must focus on performance and value

Constructing Excellence chair and global head of infrastructure at Turner & Townsend, Murray Rowden, says the infrastructure sector must focus on performance and value if it is to build on recent successes.

What's happening in the UK infrastructure market?

The UK is considered a leading market for global investment. We have a mature approach to major projects and setting them up for success through strong delivery models and contractor strategies. The Infrastructure UK Routemap is a good example of this, attracting a lot of international interest.

What are the key issues facing the sector?

Despite its successes, our industry faces some major challenges, which include:

• Inconsistent performance across the industry. We need to create exceptional performance through collaboration and new approaches to programming, delivery, procurement and supply chain management

• Traditional delivery models that are too unpredictable and contain too much risk. This makes investors wary and stretches the financial investment decision process

• Contractors and consultants too often cite margin erosion and risk as major issues. We need to reposition business models and put service at the heart of how the industry operates

• Planning, which can cause huge delays. This uncertainty affects market confidence and investment and stops the supply chain building capability

• Skills shortages in the supply chain and with some clients. We need more people that can properly lead major programmes, plus new talent is needed to deliver new business models

• Big projects coming on stream at the same time. There is a danger of too much competition for the same resource, resulting in hyperinflation in the market

• Investment that is generally low and fragmented. We don’t bundle together investment and collaborate enough due to paranoia over intellectual property rights.

• Inconsistent standards for designing, procuring and delivering major programmes

• A lack of benchmarking data and knowledge costs, performance and productivity information. We don’t have an industry Performance Forum, like the oil and gas industry has.

What actions should be taken to address these issues?

As Constructing Excellence chairman, I have provided the government with a number of recommendations:

1.Work with industry to further develop the Infrastructure UK Routemap and promote this as the industry initiation and execution standard for major projects.

2.Establish a Leadership Council that’s truly representative of the industry.

3.Further develop the Infrastructure Cost Review through an initiative similar to the oil and gas industry’s CRINE (Cost Reduction In the New Era) project.

4.Establish an industry performance forum.

5.Government clients should come together and adopt a consistent approach.

6.Implement an industry-level, structured innovation strategy with supporting investment fund.

7.Invest in new industry business models, including those for procurement and delivery, and identify how to bring these into the market. 

What’s the impact if no action is taken?

There’s a growing impatience in government because our industry isn’t responsive enough in either the supply or demand side. We have an opportunity to address this issue, but we need to grasp it. If we don’t, the government might decide to spend its money on something else with a higher economic impact, or look outside the UK marketplace for better operating models.

What skills are needed across the supply chain?

Programme leadership skills are obvious, but we also need better commercial skills, such as an ability to better define benefits and how best to realise them.

Improved predictive models will have data at their core and we need new skills to understand ‘should-costs’ and ‘should-takes’. We need to believe that collaboration is the only route to exceptional performance. Traditional approaches to commercial management will become a fault line to achieving better results.

Skills to harness technology mean we can avoid manual interventions and measurements, and allow us to look at manufacturing skills and alternative technical solutions, such as robotics and modularisation. 

How do you see the next five years developing?

New business models will be based on risks and rewards. They will be performance-driven and will emphasise sharing and adopting new techniques, measured through a performance forum. There will be a push for consistent standards.

We will become a more collaborative but tiered industry. Some will focus on integration, collaboration and value added; others will provide transactional ‘commodities’ (and experience price pressures, needing to innovate to survive).

We will see manufacturers become the ‘main contractor’. They will change the supply chain and become solution providers or integrators, similar to those in the technology sector (e.g. Cisco). 

What role do commercial managers play in successfully delivering infrastructure projects?

Commercial managers shouldn’t be measurers or estimators – these traditional functions need to be automated, quickly.

They have an opportunity to become the designers and managers of contracting strategies that incentivise performance. They have an important role in translating the language of business into project language.

They should become value and performance managers (encompassing commercial and contractual issues), predictive modellers (from the business case through to outcomes) and the integrators of cost and schedules.

They also should manage the competing requirements from all stakeholders. Commercial managers need to think ‘customer’ more – we don’t position ourselves as a service industry as other sectors do.

Institutions such as RICS and Constructing Excellence have key parts to play in making these improvements happen. But we need a more joined-up approach, with each institution focusing on its strengths. It’s clear that RICS should focus on commercial issues, but it needs to assess what exact skills are needed in the future and help its members to gain these.

RICS members who already focus on performance and value have made great career strides in the construction and infrastructure sectors. These skills are in our commercial DNA.

Murray Rowden is the Global Head of Infrastructure at Turner & Townsend

The challenges that commercial managers face will be discussed in more detail at the RICS conference Commercial Management in Infrastructure on 26 April at IET in London.  For more information visit www.rics.org/infrastructureconference