Effects Of Partnering In The Construction Industry Construction Essay

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The chosen topic for this dissertation is the idea of partnering a concept that was really brought to the forefront of the construction industry in1994 by sir Latham and his report XXXXX. This reported focused on construction moving away from its traditional abrasive cut throat nature were by stakeholders tend to look after their own interests, towards a much more open and honest approach, encouraging teamwork amongst all stakeholders to work towards common goals. The report boast's of projects becoming far more economical in terms of both cost and time.

With common goals being a major aim conflicts between stake holders are said to of been reduced dramatically, in turn dramatically reducing the costs and time on litigation.

However partnering is not a new concept, but simply a modification on supply chain management which has been in play for many years with great success in other industries namely manufacturing this will be discussed in further detail though out the dissertation.

Perhaps it is the success of other industrys that helped give so much weight to the Latham report and convinced so many stakeholders to ditch the traditional approach and attempt partnering. Reports and case studies suggest that in the main these companies have had favourable outcomes though there are companies who have had the opposite. Leading academic 'Jonh Bennet' of reading university has been involved in many studies since the emergence of partnering, in his code of practice for strategic collaborative working he highlights time savings of 60% and cost savings of 50% can be made due to successful partnering agreements.

Given the evidence of such huge saving on time and cost it seems unthinkable that some stakeholders are reluctant to join in the feeding frenzy, so why do stakeholders have their doubts, well one of the main reasons comes down to contractual matters. The intended sprit of partnering says it should be conducted in a way that doesn't warrant negotiation as this can destroy relationships, though in traditional contracts negotiations are the norm. Many companies are keen to be protected by these contracts in which cash penalties are awarded for late completion and extra works ETC, making the very essence of a partnering agreement obsolete. However in order to help this situation several new contracts have developed for partnering namely project partnering contract (ppc2000) and the NEC engineering and construction contract with the partnering. This will be addressed in more detail throughout the dissertation.

1.1 Aim of Dissertation

The aim of the dissertation is to let the idea of partnering be fully understood, unravelling the opinions and studies of construction professionals and academics alike in order to dissect the advantages and disadvantages that partnering brings to a very unique and important industry. Another aim is to find the best way to conduct partnering agreements and how they can best fulfil their potential including the most suitable contract for partnering.

With such bold targets and predictions set out in major reports by the likes of Latham and Egan a key aim is to discover the opinion of key stakeholders regarding partnering and if they think that the objectives set out in these reports have been successful and have in anyway managed to replicate the success of other industries such as manufacturing. In other words is partnering as good as they say?

As with all things in life matter of opinion comes into fruition and some practitioners have certain criticisms of partnering these cannot be ignored and need to be addressed, different options are correct at different times, some may say " why has it taken so long for construction to join the modern world, it can only be a good thing". Others may say "only time will tell, give it a go" and other will want to give this so called "Buzz Word" a wide birth. Saying this leaves the definite aim to gain a measurement of the success or failure by those involved in construction regardless of their involvement in partnering agreements. I believe this will give a none bias measurement of how far partnering can take you.

1.2 Objectives.

A. To gain an in-depth knowledge of partnering, to fully understand how to put partnering in to practice and be aware of the different types of partnering and the different benefits and drawbacks they may bring.

B. look at other industries to try and gain an insight in to the origins of partnering and the success similar practices have achieved in these industries, and measure if





1.3 Methodology

Do this when lit review is complete.

1.4 Literature Review

*Partnering developed originally in North American manufacturing industries in the 1980s and 1990s as a response to Japan's strengths in key manufacturing industries. It was adopted by the construction industries frist in the USA and then in the UK. These early uses of partnering in construction were directly infulanced by research in to Japanese construction practice. Now partnering is used extensively in western construction industries. It is supported by a substantial body of research that includes case studies of partnering used on individual projects and series of projects*. ( needs changing all copied) This research is published in a number of forms which are; books, journals, code of practices and government reports the aim of this dissertation is to unearth the most relevant information that has reflected the behaviour of the construction industry since the emergence of partnering.

Professor John Bennet is somewhat of a partnering guru who has a great deal of relevant literature published including the "Seven pillars of partnering" and a "code of practice for strategic collaborative working" he and his work needs special consideration and the author will examine this work during the dissertation.

Reports and codes of practices also provide excellent recommendations and evidence of case studies that need to be considered to gain a feel for the potential partnering have. The Latham Report published in1994 brought the idea of partnering to UK construction and really started the ball rolling so this needs special attention as do the Egan reports "Re-thinking Construction" and "Accelerating change" which tackled problems in construction recognized in the Latham Report.

Other authors include Ron Baden Hellard who is responsible for "Project Partnering Principle and Practice". Gill & Mike Thomas the Authors of "Construction Partnering and Integrated Teamwork" and "Clive Thomas Cain the Author of Profitable Partnering for Lean Construction", these are just some of the resources call upon to fore fill the aims of this dissertation the rest will be listed in the references and bibliography.

The origins of Partnering

*The author feels at this early stage in the dissertation he should outline partnering activities within other industries. He feels that this may help the reader to understand further chapters to a higher degree*.( needs changing)

As mentioned in the previous text partnering is not a new concept it has been around in other industries for some time. "Supply Chain Management" is the favourable terminology used in most industries, so what are the fundamentals of supply chain management and can this be adapted for construction industry if so what does it offer ?.

Introduction to supply chain management

There are many definitions of what SCM means and various beliefs in how much an organisation can benefit; simply by lending them self to the best SCM strategy for that particular business, no matter what sector the business belongs to there is always room for improvement. This is not a onetime fix with a standard design across the board for every organisation, as each organisation and industry need improving in different areas but when these improvements are made it becomes highly likely other problems in other areas will arise.

To use GSL a GRP manufacturing company from the south of England as an example; one of the reasons they were able to gain a 25% entry level into a very competitive but lucrative water treatment market is that they noted that rival firms use stainless steel to fabricate the treatment tanks, this very expensive and time consuming to build.GSL decide to make GRP versions, which are quicker, easier and cheaper to build the biggest expense is the moulds used, to save even more money they modularised the treatment tanks making standard sizes this also cuts down on lead times, making their tanks cheaper and quicker to acquire but When they receive an abundance of orders these lead times were not as impressive, a way around this is to outsource production but this will reduce the profit per vessel, but will also reduce overheads and capital costs.(J, Heathcote lecture notes 2010)

This is clearly a complex balancing act that needs to be broken down into pieces, effective management have to coordinate all the pieces of the chain as swiftly as possible keeping costs down, quality up and good relations with both customer and supplier. "The process from the initial raw materials to the ultimate consumption of the finished product linking across suppliers and user companies" (operations management 2002 p.400)

There are many ways SCM can be advantages to an organisation for instance Just in Time (JIT) was introduce and widely adopted by the Japanese with organisations such as Toyota. "The term JIT is used to indicate that a process is capable of instant response to demand without any need for overstocking either in expectation of demand being forth coming or as a result of inefficiencies in the process" (Just in time 1990 p.1).

The prime objective in JIT is to achieve zero inventory, ensure nothing is left to chance, no deficiency no matter how rare is disregarded, this results in a very economical operation saving on space, storage of parts, upping production, reducing faults and maintaining quality at no extra cost. These saving along with the quality guarantee can be passed down to the customer.

The cost of quality like many things in SCM things aren't always as they seem, Upping quality doesn't mean lowering productivity and increasing costs, take more care and less mistakes will be made. Therefore fewer delays, more satisfied customers and more repeat business will more than pay for the extra money put into the prevention costs.(just in time 1990)

Example of some Advantages of SCM

Lower supply and storage costs

Smooth flow of goods inwards and outwards

Better inventory management

Powerful delivery scheduling

Lean and flexible operation

End-to-end visibility of supply and demand

A faster response to events in any part of the supply chain (Needs Addressing

These case studies are proof that the correct management at each stage of the supply chain can save money; improve on quality and increase sales and turnover. This is all achieved by forward thinking, planning and communication with all involved in the supply chain.

Can this be used successfully in construction using a partnering agreements?, well if you take the GSL example it highlights that specialists may have a better design idea on products such as the GRP tanks this will contribute to the overall cost and time savings, then the Toyota example shows with the right amount of planning the correct coordination with suppliers money is saved on inventory and there are far less defects to content with. This shows in principal the concept can work in construction but a major fear of the author is in practice, given the adverse nature of the construction industry this will present substantial barriers to the idea of partnering. This will discussed in further detail though out the dissertation

Chapter 2

Partnering Explained!

2.0 Introduction to partnering

What is Partnering?

" Partnering is a management approach used by two or more organisations to achieve specific business objectives, by maximising the effectiveness of each participant's resources" (Bennett and Jayes 1995).

This can be a very efficient way to commission the design and build of construction projects, from the unique to the more common and repetitive build. The three main types of Partnering are as follows:

1. Project partnering: objective driven, tactical and short term in approach, used on a single project.

2. Strategic partnering: long term alliances that continue across a series of project opportunities.

3. Framework agreements: a hybrid, which packages a series of projects having a known life span.

2.1 The aims of partnering

Though the success of partnering should not just be measured on cost savings it is a good place to start as Rob Bad Hellard states " The successful application of quality management techniques allied to it's philosophy and principles has shown, in industry across the world , that the quality company is the profitable company and that quality investment reduces costs. What is needed is the successful adaptation and adoption of these maximums to the project situation so that all stake holders in the project benefit, not least in the achievement of individual and team satisfaction, and so have fun in the process"- what Deming called ' the joy of work'! (Project partnering pg 3)

In order for this to be achieved then all stakeholders must aim to take full advantage of the value of the assets of each other has to offer, reaching mutual agreed targets that haven't been plucked from the sky but are accurate and achievable for all parties.

2.2 project partnering

Project partnering is seen by many as the first step in the partnering procedure as this is normally for a single project, often this is seen to be an experiment or trial to give stakeholder the opportunity to try out partnering and get a feel for each other as companies and perhaps move into a strategic partnering relationship. When stepping into a project partnering agreement caution should be taken when setting targets on cost and time savings after all partnering is all about continuous improvement which is difficult to achieve when the lessons learnt on the learning curve can't be carried across projects. It should be note that time and cost savings of % can and have been made as shown in case study *******.

Often with project partnering it will start off as one small job, (this is to keep the initial cost of setting up the agreement down, this will be talked about in greater detail in chapter 2.3), if this project is a success the stakeholders have the confidence to enter bigger longer term agreements, and are willing to take and share bigger risks out amongst each other, significantly improving on the cost and time saved on a project compared to the traditional approach, this is moving into a strategic partnering agreement shown in case study**********.

2.2.1 Strategic partnering

2.3 Cost & Giving partnering the best chance

2.4 Benefits of Successful Partnering

2.4.1 case studies of successful partnering

2.5 Problems with Partnering

Case studies 'when Partnering went wrong

2.6 Extensions on Partnering

Chapter 3 contracts and procedures

Chapter 4 Government intervention

Chapter 5 Has construction Finally caught up