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The accelerator
Housing Today – 11 April 2002

Sir John Egan gave his name to the governemnt's agenda for restructuring the relationship between the construction industry and its customers - but he still wants more. Mark Smulian asks him why.

As housing associations get to grips with their new approved development programme allocations, the man who gave his name to the improved construction procurement route they must now follow is limbering up for a further assault on tradition.

Sir John Egan is putting the finishing touches to Accelerating change, the follow-up to his Rethinking construction report that in 1998 sounded the call for a revolution in the way in which housing associations and other clients work with the construction industry.

The Housing Corporation was sufficiently impressed with Egan's programme of partnering, standardisation and continuous improvement to make full compliance compulsory by 2003/04. This financial year, 60 per cent compliance is required.

The Housing Forum, the body set up to promote the Egan agenda, has more than 125 approved projects that demonstrate different aspects of improved procurement and working methods.

Yet Egan himself remains dissatisfied. "The short answer is that we do not know how much impact we have had, though we hope to know by the time Accelerating change is published," he says.

"It will use the wisdom of the last few years to show how to accelerate change. Everybody is absolutely clear that the number one thing that solves problems is to have an integrated team in place before you design anything."

This applies even to those building one-off projects, whom Egan feels would benefit from having an independent client advisor to put such a team in place.

Get that right, and millions of wasted pounds could be ploughed into building and improving homes, instead of being absorbed by the construction industry's wasteful processes, Egan believes.

But he finds it hard to hide his frustration at the way in which what he sees as a common sense approach is frustrated at many turns, despite the acclamation his original report received.

He says: "I've got all kinds of worries about social housing, because the flow of government money is so uneven and people have to bid for it. Where you have seen constructive efforts to put manufacturing solutions in place, tying those up with the flow of money from the government is often difficult.

"The pre-planning process and manufacturing off-site proved to be relatively complex to get right. The planning system is among loads of things that conspire to make this difficult."

One reason that social housing was chosen to pilot much of the Egan agenda was that it comprised relatively few clients who build relatively similar buildings.

But tying up funding, land, designs and planning approval is hugely complex, never mind trying to add the delivery of factory-produced components to the package, and the vision of a seamless flow from pre-fabrication of materials through to a satisfied tenant is still some way off.

"I hope the government will produce better planning regulations which are consistent, predictable over time and fair, so that we can pre-plan the process," Egan says.

One problem with the concept of partnering in social housing has been probity; reconciling long-term partnering with the need for open tendering to prove that business is being conducted honestly.

Egan says: "I'm not sure that issue has been sorted out, but the fundamental thing is that people should start to understand value for money.

"The idea that you had a tendering process that was competitive and that that translated into a final product was all very well, but the translation was so clumsy and unpredictable."

Clients with repetitive needs, such as housing associations, should start to build up lists of what is good value for money and know what each part of the process should cost, so that they can set targets both for these, and for improvements.

Egan was once the boss of Jaguar cars, and recalls that the motor industry enjoys productivity gains of 5-10 per cent a year. Similar gains would be available in social housing construction "once they can understand value for money and targeting," he notes.

Another controller of costs is to hand though, and most housing associations with development programmes already have thousands of them. They are called tenants.

"I've noticed how in social housing there are now customer satisfaction indices, and these are an excellent idea.

"I would hope that eventually the quality control will be with the eventual customer, and that cannot do anything other than assist the industry to get things right first time."

This approach, Egan remembers, helped to transform the motor industry. "With things like the Which? indices it is today simply impossible to sell a car that no one wants, but that was not the case 30 or 40 years ago."

Satisfy one's tenants and much else will fall into place, Egan believes. "It seems an obvious control. You do not need day-to-day managerial control of your staff if you get your customers to help you do it."

Among the least satisfied tenants are probably those living in poorly built social housing dating from the 1960s, most of which Egan would like to see demolished.

He thinks that the traditional attitude that tenants should be grateful for being housed at all, "was a very sad mindset".

"When you drive round the best we were able to do 30 or 40 years ago there is the realisation that the vast majority not only has to be pulled down, but as quickly as possible. The rebuilding we must do must give people high quality, low cost, homes."

But, as many stock transfer landlords are finding, it is hard to deliver on promises to rebuild homes, or even repair them, when there is a skills famine across most of the construction industry.

A succession of well-meaning reports have called on the industry to improve its image to conquer its recruitment problems, but Egan doubts this is possible at present.

"It can't improve its image by doing a bad job - if it carries on killing 100-odd people every year and injuring and maiming as many as it does. If it offers bad and unpredictable value for money it will never have a good image either.

"If we could achieve world standards, half the cost could be removed and redistributed - including some as competitive wages to people doing brilliant jobs. But you cannot base any of that on the old ways of doing things."

In the short term, Egan puts his faith in greater use of factory components which can be assembled on site using far fewer craft workers than do traditional projects.

But there is a problem of 'short-termism' poised to undermine this route.

"You need critical mass and predictability and longer time horizons. A factory is probably not going to make any money for four or five years, and so it needs economic stability that allows it to grow," he says.

The corporation's attempts to create a market for factory components, and the government's decision to plan public spending over three years, are both fine as far as they go, but insufficient to deliver the predictability needed for cost effective solutions, he fears.

Egan is retiring from the construction industry's strategic forum in June, after which his only direct connection will be through his internet supply chain management venture Asite.

Elsewhere, he chairs automotive trading group Inchcape, and Qinetiq, the curiously named and soon to be privatised scientific research arm of the Ministry of Defence.

Next year he becomes president of the Confederation of British Industry. He is likely to make full use of this role as the voice of business.