黑洞社区

When George Osborne sat back down after delivering his Budget speech to roars of approval from his own benches last week, the industry may have momentarily relaxed. No new surprise cuts, and a decent package for businesses. Yet buried in the Treasury鈥檚 Plan for Growth that accompanied the chancellor鈥檚 speech was the mother of all challenges for the industry: reduce costs by up to 20%.

The government envisages a three-pronged attack. It is going to 鈥渆ncourage standardisation rather than bespoke designs,鈥� set 鈥渃lear criteria for asset performance鈥� and bring in 鈥渘ew models of procurement鈥�. The Cabinet Office has clarified that it is looking to save 鈥�10-20% over the next four years鈥� but will only reveal exact details in May. Most in the industry think the savings are possible. Yet how can construction shave a fifth off its costs when the Latham and Egan reports in the nineties seemed to bounce off an entrenched industry?

Although few complained at the time, the 黑洞社区 Schools for the Future programme is now seen as the most extravagant example of the 鈥渂espoke鈥� design the government wants to squeeze. David Mathieson, head of public sector at Turner & Townsend, says savings of 20% can easily be made by passing design from architects to contractors. 鈥淎 bespoke school might come in at 拢2,500/m2, but a contractor-designed one can be done for 拢1,700-拢1,800/m2,鈥� he says.

Standardisation of hospitals is perfectly possible too, says Christopher Shaw, director of MAAP architects. 鈥淪tandardisation is something that has sat behind hospital design for as long as I have been involved with it,鈥� he says. They were made more uniform after the oil crisis in the seventies, he adds, and have become even more so since. Compared with the French, for example, Shaw thinks British hospitals are 20-30% more expensive. 鈥淲e do things expensively on the engineering side,鈥� he says.

Yet this is largely down to a 鈥済old plating鈥� of specifications like fire safety, which risk-adverse NHS managers will be loath to discard, rather than 鈥渂espoke鈥� design, Shaw believes. And without a big drive of work, it will be impossible to get the large contractors to standardise public buildings like hospitals for production off site. 鈥淵ou want to go to Laing O鈥橰ourke or Balfour Beatty and have systems, but we don鈥檛 have the demand or appetite for large hospitals of that type.鈥� In other words, a public sector recession is the worst possible time to try to standardise.

鈥淔lat pack鈥� public buildings could also run into problems from a generation of architects determined to make their mark with a signature project. 鈥淲e don鈥檛 want to work with architects who are trying to build the new Stirling Prize,鈥� says Chris Gilmour, director of design and marketing at BAM. He thinks standardisation will squeeze them, but most are determined to work within a budget. 鈥淢ost architects try extremely hard to standardise,鈥� says Shaw. 鈥淚t needs to be driven by architects not contractors.鈥�

Architects argue that not only are they open to standardisation but that they are crucial to cutting costs through good design. 鈥淵ou do not throw out the architect to save money,鈥� says Angela Brady, RIBA president-elect. 鈥淚f they [the government] ask us, we can tell them about new ways of working that can save money and time and that good design in itself does not cost money but can enhance all aspects of our built environment,鈥� she says.

Standardisation could also constrict the localism agenda. 鈥淗eadmasters may get to choose their own design [of school] but from a limited pattern book,鈥� says Stephen Ratcliffe, director of the UK Contractors Group. 鈥淚t doesn鈥檛 feel like it鈥檚 gelling together.鈥�

The second weapon in the government鈥檚 armoury is better procurement. Few doubt savings can be made here, and this emphasis is hardly a surprise. The Plan for Growth argues that 鈥渇ragmentation of the public sector client base鈥� drags down public sector efficiency, as do 鈥渋nconsistent procurement practices鈥�. Some expect that fewer, bigger frameworks are the answer to this problem, yet this clashes with the parallel aim of bringing in more SMEs to the public sector table. 鈥淔rom the SME side, bigger frameworks would be counter to what the government has been saying,鈥� says Alasdair Reisner, head of public affairs at the Civil Engineering Contractors Association.

The third - and most nebulous - idea the government has floated is 鈥渟etting clear criteria for asset performance鈥�. Chief construction adviser Paul Morrell says he understands it means looking at 鈥渨hole life value based on a clear stated understanding of the outcome the asset is intended for,鈥� presumably instead of detailed design specifications. Morrell, who will be leading the cost-cutting drive, has put forward the idea of getting contractors to run public sector buildings for five years after construction to force them to think harder about how they will operate. But there could be a contradiction between spending less on buildings and pressing for them to be cheaper to run while operating. 鈥淭here鈥檚 a tension between capital and revenue spend,鈥� says Shaw. 鈥淵ou can make the savings in capital, but it might lead to a higher revenue outlay.鈥�

Still, everyone thinks the 20% figure is possible - partly because the announcement is not seen as a smash and grab raid on contractors鈥� profits, but a call to work more cleverly. 鈥淚f the government was going to cut costs out of contractors鈥� margins there would be a cause for concern,鈥� says Ratcliffe.

But if cutting 20% from the cost of construction is so doable, then why has it not happened before? 鈥淭hat鈥檚 an extremely good question,鈥� says Mathieson. 鈥淚 think the government is saying it鈥檚 got to work or we will start looking at margins.鈥� The industry has told the government it is wasteful and can do better, and so has been spared the immediate price cuts cabinet office minister Francis Maude has eked out of other suppliers. The pressure is on to deliver.