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Construction sector Insight report
Construction sector insight report
Foreword Key findings
Although 2020 has to be marked down as a truly tough and troubling Over a two-month period at the end of 2020 and early 2021 we
year on so many levels, the construction sector has proven that it’s invited feedback from over 200 contractors from a wide range
commercially robust enough to endure in its core form, and that it of organisations, to provide an opportunity for reflection on
could also rise to some of the critical challenges thrown down by lessons learned, and to support contractors in 2021 with a shared
COVID-19 ways of working. understanding of where they have landed after such a unique time.
Here are the key findings from our research.
Perhaps what 2020 has also proven is that Nightingale Hospitals being completed in only
the industry has long been wise to its own nine days. Greater use of digital, and more
developmental challenges, but that it sometimes creative applications of offsite and modular
takes exceptional circumstances to empower driven by COVID-19 proximity restrictions on site, Lack of early engagement and
Cost concern
individuals en masse as an industry to surmount have all helped the sector accelerate the pace of £ procurement limits innovation to
outweighs COVID-19
the traditional contractual boundaries, and change. offset risk
natural commercial risk aversion on incredibly
tight margins, that may have limited the pace of But for this change to endure, and remain
progress in the past. commercially feasible, our survey respondents
show a need for recognition that this added Impact of COVID-19 not all Positive opportunities to support
With the publication of the Construction value approach comes at a cost. One that negative modernisation momentum from 2020
Playbook, which echoes many of the best practice can be surmounted at moments of national
sentiments set down in the 2016 Modernise emergency, because the industry knows what
or Die, Farmer Report, and even the Egan and can and needs to be done, but one that can
Latham reviews of the 80s and 90s, some may only be hard-baked into a real modernisation
be saying that it’s simply a case of ‘here we go programme if the sector can be judged on quality Balance of risk still with Sustainability the biggest driver
again’. But attending recent industry events, and value, not lowest price, and given longer the contractor for 2021
it’s been inspiring to listen to contributors time visible pipelines and commitments to give
sharing examples of real change, improvement the commercial certainty needed to fund further
and modernisation, that have been given new innovation and change. Then we really could
momentum and a ‘cost blind’ licence to plough ‘build back better’.
through, due to COVID-19.
They described how genuine collaborations
delivered transformations, from major projects Caroline Romback
developing new ways of working (to offset Director of Construction
COVID-19 delays) that will cut years off delivery
timetables, to building conversions like ourConstruction sector insight report
Section 1
Methodology Reflections
Our new Construction Sector Insight Report takes
stock of sentiment and commercial perspectives “Bidding work costs the
after a unique and incredibly challenging 2020.
industry millions and billions
Over a two-month period we invited feedback
from the sector to provide an opportunity for of pounds a year, I’m not sure
reflection on lessons learned and to support clients always realise this. So if
contractors in 2021 with an understanding of it costed us nothing to bid work,
where they have landed after such a challenging
time. we’d have great profit and our
bid prices would be less.”
“We are always expected to add Shortly after the survey launched, the
value, and in particular social Government introduced its new Construction
value to a project. I don’t think Playbook, highlighting many parallels between
the challenges and obligations outlined by
some clients fully realise the the sector in this survey, and the heightened
implications, such as x number expectations of the Government as a major
of hours of apprenticeships. client. In this report we show a sector that fully
recognises this modernising agenda but sets
There is a cost implication to all it against an enduring pressure from clients to
of this.” drive down cost.
Who responded – over 200 contractors from
a range of organisations, from SMEs to major “Improving the procurement
contractors, with the majority describing their
process will play a large part
work as national/working nationwide. We asked
them a series of questions on their views of the in setting the tone for any
market, the impact of COVID-19 and the other construction project. This is
key pressures and opportunities that they are
where the drive for quality and
facing in 2021.
the required safety outcomes,
rather than lowest cost, must
start.”
Construction Playbook
4Construction sector insight report
Reflections after a challenging year Where do you feel the balance of risk is in the industry now?
Contractors also explain that they feel risk still remains
predominantly with them (c50%), potentially a reflection of
the growing number of wider programme responsibilities that
they are expected to deliver, over and above the build, while
What is the main pressure on your organisation? around 1/3 do feel it is now shared, hopefully signposting
a direction of travel for the sector in 2021 as genuine
collaboration increases.
Respondents highlight the pressures of delivering programme obligations
from social value delivery and sustainability to offsite and modern methods
of construction on very tight margins as cost remains the biggest industry
pressure (42%), even during a pandemic, with the next nearest pressure Predominantly with the contractor
being COVID-19 at only c20%.
Shared responsibility
Predominantly with the client
Predominantly with the developer
40%
0% 10% 20% 30% 40% 50%
30%
Has COVID-19 had a lasting impact on Do procurement processes force
your organisation? contractors to deliver to programme
and cost constraints, rather than
20% Although the sector has obviously been hard hit encourage genuine innovation?
by the pandemic, respondents recounted mixed
experiences, with some saying they have gained Contractors also point to the enduring challenge
during this period 31%, while others confirm a of cost and programme pressures continuing
negative impact 47% or are neutral 22%. to limit their scope for innovation, with 82% of
10% respondents agreeing.
0%
Cost and COVID-19 Other Net zero and Health Recruitment Levelling up Social No Yes
profitability sustainability and safety and diversity inclusion
18% 82%
47% 31% 22%
Yes Yes No
Detrimental positive impact
6 7Construction sector insight report
Section 2
Programme needs and obligations Views on individual
obligations
Respondents highlighted a full range Government and its departments, by way of
its major National Infrastructure Strategy and
of primary obligations, the biggest
£100bn spend, and other key programmes.
being social value delivery, followed
by environmental management/ So although the headline is investment in order
mitigation, then communications to restore the economy under the banner
& stakeholder engagement and ‘building back better’, it could also be argued
under ‘other’, modern methods of that the Government is using its buying power
to drive forward a slightly more covert change
construction/offsite and digitalisation.
agenda.
And these core programme needs are here As our respondent quotes show, this
to stay as social value delivery, environmental modernisation is not unwelcome or
management/mitigation, communications & unrecognised. Many contractors are keen to
stakeholder engagement, modern methods of embed best practice more fully, and do drive
construction/offsite and digitalisation, as well as innovations, but the cost to fully deploy these
EDI, are all seen as growing trends for the next programmes, over and above the day job of
five to ten years for the sector too. engineering and building, needs to be reflected
in the costing of projects, so that quality
This is echoed by the new Construction Playbook, becomes the marker of value on a project, not
which also outlines these modernisation drivers price.
as key reciprocal expectations in return for a
substantive and visible pipeline of work from
What do you think the key trends for the
industry will be over the next 5–10 years?
50%
40%
30%
20%
10%
0%
Sustainability Delivering more Modular Digitisation Equality, diversity Social value Communications Other
for less construction and inclusion and engagement
8Construction sector insight report
Sustainability
When asked what was now expected of them
Here respondents share their views on which was not previously, 50% of contractors
the individual obligations that make “It is clear that the built “I think the things clients
pointed to environment management and
up an expanded delivery programme environment produces a mitigation. Environment management and wanted pre-COVID-19 haven’t
for contractors on most substantial significant proportion of the mitigation came neck and neck with social value, changed, like environmental
projects, but increasingly on smaller further demonstrating the changes in terms of
UK’s greenhouse gas emissions positions.”
scale developments too. And top of what is expected of the construction industry.
the list from our respondents, not and therefore industry has
that surprisingly given wider societal a key role to play in making
concern, was sustainability. buildings more energy efficient What are contractors expected to do now that
and reducing their carbon they were not expected to do previously?
Over half of respondents (57%) saw sustainability
footprint, in order to meet
as the construction industry’s key obligation
over the next decade, echoed by a wide range of the Government’s target to
Government initiatives from the new Ten Point eradicate the country’s net
Social value
Plan for a Green Industrial Revolution to the contribution to climate change
new Energy White Paper and our leading role in
hosting COP26 in November 2021. by 2050.”
Government review of Modern Methods of Environment management
Construction, 2017-2019. and mitigation
Increasing awareness around sustainability
and environmental mitigation is no doubt
linked to the urgency of the climate crisis, and Communications and
the growing advocacy surrounding the issue. stakeholder engagement
Sustainability and environmentalism were not “Clients’ need for
thought of as pressing issues as little as 10 years environmental mitigation and
ago. However, growing awareness regarding the Project management of
sustainability commitments design services
dire consequences of climate change have now
filtered through to the construction industry in are likely to remain at pre-
the form of new expectations. pandemic levels. Pressure
Other
moving forward will be
shifted towards the need to
demonstrate value for public Take responsibility for
discharging planning
funds along these lines, as well conditions
as demonstrating productivity.” 0% 10% 20% 30% 40% 50%
10Construction sector insight report
Social Value Delivery
For nearly a decade now, organisations Contractors have become familiar with using
apprenticeships, local employment opportunities,
seeking to win public sector contracts “Promoting social value “We need to look at community
school outreach, volunteer time banks for their
have had to commit to delivering will help local communities employees and supply chain and donations of engagement roles as being
social value (Public Services Social recover from COVID-19, tackle resources and materials, in whatever form they almost as important as an
Value Act 2012) as part of their project felt best, to meet that obligation.
economic inequality, promote engineer – part time or daily.
programme. And that legal obligation is
reflected in respondents’ views, as 47% equal opportunities and But now, with a clear desire to use their
Communities need to be
point to a current and ongoing need to improve wellbeing.” substantial spend in the built environment to spoken with in languages they
deliver social value as part of a project Construction Playbook support COVID-19 recovery and ‘build back better’, understand. We need these roles
the Government has escalated their focus on
build programme. to be created.”
social value delivery. With the launch of a new
Procurement Policy Note 06/20 (September 2020), Over time this methodology will become familiar
In the new Construction Playbook (November 2020) and less resource intense, but to start with
they have defined a new Social Value Model,
the Government now drive home the importance this will add yet more to an ever growing list of
that they place on social value as a key by product “COVID-19 will force our with five core themes to ensure all organisations
structure their social value contribution in the contractor obligations.
of the build programme, giving it a new 10% industry to ramp up responses same way, to maximise targeted benefits.
weighting in contract award criteria, to ensure that to social value. We need to be
the process of building generates a proportion
of benefit realisation, not just the completed
teaching people within the
development. construction industry about the “Social value is a real big one
environment and wider social that’s come to the fore recently
Whilst this clear indication should signify a
issues.” and we’re finding it in bids now.
departure away from lowest price bidding, echoed
by other recent reforms to the Green Book to We did a bid recently where
broaden the definition of value, there remains
40% was your price, 40% was
a concern in industry that cost is ultimately the
deciding factor in the tender process. your quality and 20% of the
overall assessment of the tender
Regardless of how the cost of delivery is addressed, was social value.”
social value and the tender process now go hand in
hand. We also know that where the public sector The model award criteria (MAC) specifies expected
leads, the private sector often follows, and with deliverable activity for each of the model themes,
a strong and growing agenda from investors for which then needs a supporting method statement
Ethical, Social, Governance (ESG) assured activity, it for how you will deliver your MAC obligations and
may not be that long before social value becomes a a timeline and project plan. This increases the
universal obligation. complexity, reduces the potential flexibility and
adds more work to the already growing task list of
contractors trying to get projects built.
12Construction sector insight report
Modern methods of construction
MMC, such as digitalisation, modular However if we don’t look at approaches like
MMC as blanket solutions but apply them
methods and offsite construction, “Whilst technical software “The Government have been
where appropriate, we may well see more
are viewed by Government and and innovations such as BIM, rapid adoption. The Government’s new schools looking at delivering modular,
articulated in the Playbook as being the use of drones, and offsite programme could provide an ideal platform for asking the question is it
key to the modernisation of the offsite and modular delivery, as designs can be
construction are certainly cheaper? It’s not cheaper but
construction sector. And many standardised and packages of schools delivered
contractors agree that it is a logical becoming more commonplace, by one contracting team to give an ability to it’s quicker”
and very necessary evolution, often the construction sector remains mass produce at a viable cost and a quicker pace
of delivery.
being honest and critical of the sector one of the least digitalised “We have tried it with a hotel
that they work in. industries.” scheme which was all factory
And their honest self-reflection is echoed in Almost half of respondents ready, we did one and it
data, with a recent index from McKinsey ranking
point to an increasing went live within 24 hours of
construction as one of the least digitalised
industries, above only agriculture. For an obligation to deliver MMC completion. But the project
industry that accounts for 6% of the national and digitalisation - 45% didn’t make us money, the cost
economy and hires as many as 8% of the entire
of respondents mentioned of the modules was too great
UK workforce, the lack of digitalisation and
uptake of these modern innovations may seem modular construction, and 41% with not enough orders.”
surprising. said digitalisation
But if you come back to the context of cost,
which on extremely tight margins becomes
key, it is less cut and dried when looking at
offsite and modular, as well as digitalisation. If
theoretically it costs £5,000 to employ a trade
to build a garage on a housing development,
but £10,000 to manufacture offsite, and you
are limited by the value gained from volume
production, by the pace of the build programme
on the development and how many garages
you can install, you can understand why a lack
of change is not about luddite resistance, but a
much more fundamental overhaul of process, Recent research shows that among the top 100 contractors, the average profit margin was
while the existing process still works. just 1.5%.... Lower profit margins mean less money for investment in digital innovation, which
in turn harms productivity. The UK government estimates that this productivity slump could
be costing the industry as much as £15bn a year.
14Construction sector insight report
Early Contractor Involvement (ECI)
Given the wide range of added value When set out contractually, Early Contractor The ECI concept has been championed by a range
Involvement (ECI) provides a structure that of Government bodies, some with substantial
obligations placed on contractors, “Investing time in ESI can
involves an integrated contractor and design build programmes like Highways England. In
as outlined earlier on in this team appointed under an incentivised, two- their Project Control Framework (PCF), Highways lead to more effective designs,
report, we wanted to understand stage contract. The sooner a contractor can England and the Department for Transport outline reducing changes and potential
if contractors were being given be involved in any project, the higher the how they manage and deliver road projects that
cost increases downstream.
adequate opportunities to work with potential benefits of ECI. Through this process meet the needs of communities, cost effectively
their clients more closely at an earlier the contractor can contribute during the design and efficiently from start to finish, by bringing This results in faster delivery
stage. To collaborate on an added phases and work to deliver more innovative contractors into stage 5 of the PCF, enabling them when construction starts.”
solutions, a better and more insightful cost to inform design and programme development.
value programme and for important Construction Playbook
model, more accurate project timescales and a
project benefits like being able to secure supply chain ready to deploy on site.
inform a workable design, bring
insight to cost and risk modelling and “Engaging early with the
other wider mutual benefits of earlier supply chain and developing
involvement.
“Early conversations and
clear, appropriate outcome-
engagement are incredibly
Respondents were, however, largely unanimous based specifications are critical
important. They allow the
in agreement about the fact that they are still factors in achieving timely and
not engaged early enough, with 82% saying deliverability and feasibility of
cost-effective delivery.”
they are not, given that early engagement the scheme to be considered,
opportunities can support the planning and revisions to be made at an
design development stages. Encouragingly, the value of an early engagement
early enough stage and better approach is echoed in the new Construction
outcomes for the project can be Industry Playbook, which also recognises the
importance of Early Supply Chain Involvement
realised.”
(ESI), which comes as a potential ripple benefit of
ECI. It also recognises the importance of long-term
visibility of projects in a procurement pipeline to
give the sector confidence to invest and engage. It
will be key to see how some of these Government
commitments to an exemplar approach as a
Are contractors brought in model client translate into their new programmes,
early enough to help design as this should set the benchmark from which a
and planning processes? wider ripple of change could follow.
No Yes
82% 18%
16Construction sector insight report
Conclusions and About Copper
recommendations
A strategic consultancy partner with But we also appreciate the challenges of tight
more than 25 years of experience margins, complex and changing programmes,
providing communications and the need to model risk and use it to inform the
Over 2020 the construction sector has And with earlier engagement for the main
commitments/KPIs made on a project, through
not only proven that it is resilient and contractor also comes the opportunity to pass stakeholder engagement for highly
to well informed mitigation strategies to manage
commercially driven, and decades, if this benefit down the supply chain in ESI. If our complex economic and social
those risks and avoid delivery disruption,
not centuries, of risk management survey respondents are correct, the wide range infrastructure, and major projects
increased costs and reputational damage.
have given a tremendous grounding of modernisation obligations built into projects across the UK.
are here to stay, and joint ventures and major
in how to endure arduous market We specialise in delivering campaigns that build
So we pride ourselves on being your complete
contractors can play a strong role in sharing best
conditions, but it has also proven that acceptance and excitement around the world
construction delivery partner, and we look
practice, upskilling the supply chain and helping
it is capable of substantive leaps in of infrastructure development and construction.
forward to working with you…
that modernisation agenda to ripple through
modernisation, when cost is no longer Communicating complex concepts, often in
the wider sector. A more insightful, rather than
the sole driver. challenging political, social and environmental
blanket approach to the shopping list could also
situations, we enable projects to gain consensus
With the introduction of the Construction
help. An example range of
and to take shape.
Industry Playbook, the Government has an
A tailored approach to mandating Modern
Copper services
incredible opportunity to help to deliver a At Copper we are purely focussed on the built
Methods of Construction (MMC) in sectors like
modernisation programme on the back of • Corporate and B2B communications
housing and education, where standardised environment, and our practice structure echoes
2020 momentum. However, this will only work that of the project lifecycle. This enables us to • Stakeholder engagement, including
design can make good use of offsite
if there is a genuine equation of give and take, provide support at every stage from outline perception studies and reports
manufacturing methods, could be preferable,
rather than the only ‘give’ being a programme development and master planning stages, to • Community relations
rather than a forced adoption across all markets.
of work, without cost pressures and unrealistic securing engagement and support at the
Forcing full adoption without time and funding • Social Value Delivery and legacy
expectations being addressed. This would do Development Consent Order (DCO) and Town
to support the innovations needed to make MMC management
little more than hold the sector to ransom, if and Country Planning Act (TCPA) planning stages,
commercially viable risks bringing further cost • Bid support
it perpetuates a race to the bottom on cost, to fulfilling those engagement commitments and
pressures and a race to the bottom on those
whilst reeling off a shopping list of programme • Messaging and narrative building
wider programme obligations like sustainability communications best practice at the construction
obligations. and commissioning phase of the project. • Public affairs
and social value delivery.
• Reputation management
Mechanisms like early contractor involvement This seamless end to end offering gives us the
While times are still incredibly tough, the sector • Copywriting
and engagement could be used to better model ability to transfer knowledge from each stage to
has demonstrated confidence and has entered
design and cost, to generate savings that could • Media relations
2021 on the front foot. If we can continue to the benefit of the client, the contractor and the
then underpin the funding of those wider communities and stakeholders affected by the • Crisis and issues management
collaborate and learn from 2020, we have
obligations. It would also reinforce aspirations project. And we value our role as part of the wider • Social media strategy
the opportunity to deliver lasting change and
to share long-term visible pipelines of major team, coming together with clients, consultants
modernisation for the benefit of all. • Event management
projects by way of early engagement dialogues. and contractors, sharing insights, expertise and
• Graphic and web design
experience in great collaborations to deliver
highly successful projects.Join the debate and have your say Follow @CopperConsult on Twitter and @CopperConsultancy on LinkedIn #ukconstruction copperconsultancy.com
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