Relevance of Partnering and Frameworks in the UK Construction Industry

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Abstract

The construction industry of the United Kingdom accounts for over 7% of GDP of which 40% is constituted by the public sector, thus making a sizeable impact on the economy (Cabinet Office 2011:3). Despite this, the construction industry has traditionally been regarded as inefficient, with a reputation for completing projects late and over budget. The UK Government has attempted since the Latham Report was published in 1994 to change the ethics of the construction industry and make it less adversarial. The significance of tender prices as the basis for assessing value and selecting the contractor leads to adversarialism, diverts attention from total acquisition cost, lifer-cost and value and has perpetuated fragmentation in the industry (Cox & Townsend, 1998) and the solution proposed by Latham (1994) is the use of partnering, he regards partnering as the essential element in eliminating this adversarial relationships amongst construction team (Heath, 2010). This paper will focus on examining the United Kingdom Construction Industry, reasons for its adversarial nature and effect and relevance of partnering and frameworks on Projects.

Keywords: Partnering and Frameworks, Uk Construction Industry, Latham and Egan’s Report

  1. Adversarial Relationship

The construction industry is one of the largest and most diverse industries in the UK whose output is equivalent to roughly 10% of Gross Domestic Product. Despite this performance. Thurairajah et al (2005) observed a deep concern about the industry’s underachievement and the relevance of construction industry according to (Thompson et al, 1998, Cox and Ireland, 2002) makes Construction a collective activity. The industry is described as being multi-faceted with different adversarial relationships developed amongst the various organisations who come together in executing the project (Bresnen and Marshall, 2000; Wood et. al., 2002; Sorrell, 2001; Meng et al, 2011). Hampson and Kwok (1997) stated that construction development is extremely competitive and risky business. This competitiveness is compounded where conflicting objectives amongst various firms create an environment for an adversarial and potentially destructive business relationship. The adversarial nature of construction industry contributes to the occurrence of construction disputes (Sai et al 2006), the adversarial nature could be alienated to the UK construction Industry because of its construction culture and style (Stuart, 2014). The culture of looking for someone to blame and antagonising the other party involved because of different objectives rather than an emphasis of co-builder problem serves the focus away from client satisfaction. The success of these construction projects often relies heavily on smooth coordination among the member firms in temporary organizations. The projects are also subject to dispute and misunderstanding risks among member firms, which in turn could cause potentially beneficial relationships turning into relationships that are more adversarial in nature. Various researchers have identified the reason for this adversarial nature in the British Construction industry and the comprehensive list from (Latham (1994), Egan(1998); Chan et al(2003), Harmon (2003), Eriksson(2006), Raymond (2014), Murray and Langford (2003) and Stuart 2014) are explained below.

  1. Suspicion and distrust: The Latham Report (1994) shows different cases of distrust between the design and construction team, solely because there is no mutual trust, and each party is wary of the motives and actions of others.
  2. Different objectives: the goals and objectives of individual team might be quite similar but their actions will still be centred on what’s best for them as an individual and not as a team.
  3. Lack of communications: communications are structured and guarded which affects working relationships, and this usually leads to conflict amongst individual firms.
  4. Lack of information sharing: Sharing is limited due to the lack of trust and different objectives. Therefore there is no sharing of information with regards to business plans and strategies.
  5. Client Orientation: Accoridng to Stuart (2014) the post war regeneration period led to Clients being overly concerned with cost, equating it to value, making selection decisions in relation to both contractors and designers based solely on price (Egan 1998). The hastiness in the construction process in a bid to provide basic amenities for the people created a situation whereby contractors were being exploited by Construction clients to reduce their costs, because it was a monopoly market. The creation of the Quantity Surveying role, helped to foster this adversarial culture.
  6. Increased Competition: Lathams report in 1994 sated this as one of the reasons for adversarial nature because it resulted in contractors tendering very low prices to win work, with the intention of making up shortfalls and losses through additional claims (Murray and Langford 2003) which led to an industry characterised by conflict and disputes and dissatisfied clients.
  7. Traditional Procurement Method: this method of procurement relies on independent firms brought together by competitive bidding has caused adversarial attitude and fragmentation in the construction industry (CIDB,2009) because this relationships are often based on a short-term basis due to the fact that construction is a project-based activity which time, quality and budget are associated with one time individual project (Dubois and Gadde, 2002) and this will inevitably lead to one party taking advantage of the other thereby leading to opportunism (Cox and Thompson, 1997; Axelrod, 1984).
  1. Latham and Egan’s Proposal

The proposal made by both Latham and Egan to resolve the adversarial nature of the industry were Government sponsored publications namely ‘Constructing the Team’ (Latham, 1994) and ‘Rethinking Construction’ (Egan, 1998). The Latham (1994) report was published following a tough recession in the late 1980’s and early 1990’s and with extensive consultation from within the industry. While Latham’s report influenced collaborative and teamwork thinking, Egan's report strongly enforces the ideas of Latham and further recommends the collective improvement of performance by the application of best practice (Thurairajah et al, 2005). The summary of both report can be seen in Table 1 below:

LATHAM (1994)

EGAN(1998)

1. The adoption and practise of partnership arrangements was recommended to help foster relationships.

1. The focus of the industry should be on the client and not personal motivated interests.

2. Earlier involvement of subcontractors to achieve project objectives and develop a better team throughout the project life cycle.

2. Integrated production teams, Long-term partnering relationships, and continual monitoring observed as relevant in the manufacturing sector were recommended to address the fragmented structure of the industry.

3. Establishing a more structured, standardised and ethical approach to procurement and management of subcontractors.

3. A knowledge centre should be provided to help construction personnel gain good knowledge of best practise, innovations, and project and company performances.

4. Both Private and Government client should come together and commit themselves to best practise in promoting excellence.

4.

5. There should be a basis provided by Construction Industry Council for the preparation of briefs for client because it requires patience and practical advice. In dealing with Project management and tendering problems, The Department Of Environment should publish a simply worded Construction Strategy Code of Practice.

5. The Government should lead public sector bodies to becoming best practising clients by making necessary improvements in procuring construction projects.

6. Design responsibilities should be clearly stated and assigned with a checklist prepared.

7. Enforcing the use of co-ordinated project information as a pre-requisite in contract is recommended.

8. There is a great need for the amendment of the JCT and CCSJC structures.

.

9. The adoption and use of the New Engineering Contract should be used as against old documents by both Public and Private sector clients

10. The Department of Environment can develop a list of registered consultant, contractor and subcontractor who wants to be involved in public sector projects. In selecting this consultant, there should be an assessment mechanism for checking quality and price.

11. A clearer definition of project manager’s duty should be made to help them carry out their roles effectively and prevent conflict.

12. A stipulated amount of time for tendering process should be provided by NJCC to prevent hastiness which allows for future conflicts. This will ensure that client evaluate tenders based on quality and price.

13. Provision of a Joint code of practise for subcontractors’ selection should be made.

14. Equal opportunities need to be created in the industry by implementing previously formulated recommendations thus improving public image

15. A target of 30% cost reduction in year 2000 should be set so as to improve productivity

16. Adjudication should be the espoused method of settling disputes

17. The British eagle judgment should be reversed and trust fund for payment of construction work should be created

18. The recommendations of the working party should be included on construction liability law by Construction Contracts Bill

19. "BUILD" insurance should become compulsory for new commercial, industrial and retail building work, subject to a de minimis provision

20. Progress should be monitored by a forum Implementation committee who also consider whether a new Development Agency should be created to increase productivity and encourage teamwork.

21. Research and Information initiatives should be organised to involve all clients and this can be funded by a levy on insurance premia

Table 1: Latham and Egan’s proposals to improve the industry. Adapted from Latham (1994) and Egan (1998)

In addition to the above proposals made by Egan (1998), he added that the application of lean construction, total quality management, business process reengineering, key performance indicators, benchmarking, concurrent construction and supply chain management will improve the construction industry because they have been successful from his background in the manufacturing industry. The recommendations and targets contained in this report are summarised in Figure 1, which has become established as the 5:4:7 model of Rethinking Construction. Thurairajah et al (2005)

Figure 1: Egan’s principles from Rethinking Construction. Adapted from Thurairajah et al (2005)

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