Who Should Develop a Construction Industry Strategy, and How?

Wednesday, February 18th, 2015
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It’s high time an industry strategy was devised for the construction industry, but the questions of who, how and what remain.

This is not an academic exercise – we are an industry that employs a million people even in tough times, contributes 10 per cent and more to GDP, and provides indispensable shelter and social and economic infrastructure to every other sector of the economy.

The industry gets a patch press, too often characterised as “tough”, with what are too often presented as intractable problems – industrial relations, insolvency, quality issues and high costs compared to some of our international trading partners. We are regularly accused (often by those with little knowledge of the complexities of the reality of producing bespoke assets) of having poor productivity.

I’d guess that we have had more enquiries and reviews that any other sector over the last 30 years, looking at all these issues, and yet the issues and poor press continue to be downers for us.

What do we need to deal with this, and the undoubted underlying issues? Certainly not any more delivery strategies – I’m old enough to remember when successive silver bullets promised to be the answer to all maidens’ prayers – fast track, project management, construction management, design and construction, two stage engagement, partnering, alliancing, early contractor involvement, and I daresay I’ve forgotten some. Many had merit, and still have their place, but none have met the expectations of their many fervent advocates.

This is not straightforward, we all know that, but that should not be reason to sit on our hands. There’s too much at stake. So let’s at least look at some of the structural issues that make development of a concerted and focused industry strategy so daunting, followed by some examples of how we can break out of the cycle of reviews and enquiries and take charge of our own destinies.

The industry is diverse and populated primarily with small firms. Whilst the major contractors, consulting firms, and specialist contractors, might be capable of developing uniform or at least complementary approaches to the issues, the vast bulk of the industry is more concerned with where the next job is coming from and making a quid from the current order book than looking over the horizon.

Government has vacated the field, both as a policy maker for the industry and, by and large, as a client. Housing aside, there is no focus on the capability of the industry to sustainably deliver for its clients (that’s all Australians) or to prosper. Government agencies delivering services in part through procurement of assets have outsourced most of the capability they once had to contribute meaningfully to procurement or industry policy. There are some important exceptions – Defence, the health and education departments – but their skills are siloed and not available to other agencies in their jurisdictions.

We are a project-based industry, with all firms generating output substantially outside a central manufacturing or assembly location. It is hard for any firm, regardless of size, to adopt an organisation-wide approach to all projects, because each project is different. I’d guess that there would be few firms that would have order books that did not turn over completely within two years. Every project brings together a new team drawn from many firms as sub-contractors and consultants and suppliers, numbering from dozens to hundreds. Each project has a unique team and unique culture. It’s hard for any of those firms to mimic a static manufacturing enterprise and maintain a consistent approach to how it works regardless of project type or location.

The needs, behaviours, and experience of clients vary from project to project. Service providers must, by definition meet the needs of their clients, and manage the expectations they have for each project. It is common (and commonsense) for the same firm to carefully match the client’s profile and culture with that of their own project team members – tough guys for tough clients, collaborative approaches for collaborative clients. Hard to craft a uniform “this is the way we do things here” culture against that reality. Hard, but not necessarily impossible. Many clients prefer to use the same service providers because they get on well and respect each other.

The last time Australia had a go at a national strategy for the industry was more than 20 years ago. The Construction Industry Development Agency was set up as a sunset agency, part funded by the Commonwealth Government over its three-and-a-half year life, from late 1991 to June 1995.  What can we learn from the CIDA experience?

CIDA attacked the then big issues (dominated by industrial disruption in the 1980s from competing brands of far left union leaders) by identifying “clusters” of issues and asking practitioners from industry and government, as well as academics and union officials, to join “Action Teams” to propose solutions. The idea was that involvement would lead to ownership of the solutions, and lead to commitment from the industry to their adoption and implementation. More than 200 people worked on Action Teams.

The other big element in the strategy was that governments, as major clients of the industry, would adopt those solutions and require their service providers to adopt them too. Every jurisdiction would have a consistent approach to what was expected from service providers, led by central works agencies with the skills and experience to manage design, procurement and project management. It was a top down approach if you will.

Most state and territory governments and the commonwealth signed up to the approach in an In Principle Agreement. They then promptly folded their arms and waited to see what would happen next; most did little to honour the approach or their in principle commitments. Most of them also, in the grip of the early infatuation with economic rationalism and at the urging of industry associations, began to outsource their internal design and project management capability, and liberate individual agencies from the control of the central works agencies.

As well, conservative state governments were innately suspicions of the agency and its tri-partite structure. They saw the agency as a deliberate attempt by the Keating government to distract or defer their attempts to address the industrial relations issues that had occupied so much of the work of the Gyles Royal Commission in to the industry in NSW. Top down died as a viable strategy before CIDA could finish developing its solutions.

The CIDA Board was drawn primarily from the private sector, but with two members drawn from the commonwealth government, at least one from state government, and two members from the union movement. The composition of the Board was an issue from day one, and remained so until the agency shut its doors in 1995. The Keating government of the day was persuaded that Board members should be appointed for their personal qualities, rather than for the sector of the industry they represented. A sensible approach I hear you cry, and so it was. The problem that arose immediately was that industry associations felt disenfranchised and disinclined to support let alone promote the work of a body of which they were not a part.

CIDA answered to a committee of the Commonwealth Cabinet, primarily to the Ministers for Industry, and Industrial Relations. And there were lots of them – 11 Ministers over three-and-a-half years. As each was replaced, the newcomer would approach the agency with suspicion, often delaying for months adoption of recommendations from the CIDA Board to improve its own structure and operation. Too many “courageous decisions” deferred or avoided entirely – in one case, recommendations were adopted after a Ministerial adviser spent six months conducting an internal review of the agency’s work.

A small team of staffers, also drawn primarily from outside government, managed the work of the CIDA Action Teams. Communication with the industry was conducted primarily through hard copy newsletters, annual conferences, and six monthly briefings to industry associations who were members of a Construction Industry Development Council. Draft documents or tools to address issues were circulated with invitations to comment. No matter how worthwhile the tools, it was all but all but impossible to persuade industry associations to overcome their suspicion of a body that did not include one of their representatives. Given that the agency operated pre email or internet, communication was, by current standards, clumsy and patchy.

So what could be done differently if an attempt were to be made now to develop an Australian Construction Industry Strategy?

  1. Set up a dedicated organisation focused on identifying solutions, drawn from the private and public sectors, including clients, with a Board drawn primarily from industry, and including representatives of industry association as well as others chosen for their personal qualities.
  2. Do not expect governments to fund the work entirely.
  3. Invite industry to frame the agenda – identify the issues, the desired outcomes, and benefits to individual firms that are strategic objectives. Make sure there are measurable success markers and report against them regularly.
  4. Invite industry to contribute time and skill to proposing issues and framing solutions through ongoing working parties.
  5. Consult regularly with industry more widely through briefings in each state and territory.
  6. Communicate with industry and government regularly through newsletters, invitations to comment on proposed solutions, and briefings.

Guess what? There are two initiatives underway to develop strategies for the Australian Construction Industry. ACIF and the Australasian Procurement and Construction Council set up the Strategic Forum for the Australasian Building and Construction Industry in September last year. It published the first of its tools for the industry in December – a Framework for the adoption of Project Team Integration and BIM.

In Queensland, meanwhile, the newly minted Construction Q (chaired by ACIF chairman Robin Fardoulys) has developed a comprehensive 20-year strategy for the Queensland industry. It has adopted a wide ranging consultative approach to identifying solutions.

Note: The writer was CEO of the Construction Industry Development Agency from April 1992 to June 1995.
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