The Egan Report, Rethinking Construction (1998)

Rethinking Construction is the name of the report produced by Sir John Egan’s Construction Task Force. The report, commissioned by John Prescott, the Deputy Prime Minister, was published in July 1998. The central message of Rethinking Construction is that, through the application of best practices, the industry and its clients can collectively act to improve their performance.

The Rethinking Construction report proposed the creation of a movement for change which would be a dynamic, inspirational, non-institutionalized programme to champion radical continuous improvement within the construction industry. The report led to further action to facilitate cultural change, with particular emphasis on the need for involvement of the whole of the supply chain. Another such change was the launch of the Movement for Innovation (M4i) in November 1998, which since 2004 has been part of Constructing Excellence.

The report also encouraged recognition that the industry can and indeed must do much better. This led to M4i capturing 180 demonstration projects submitted by clients and contractors, which exemplified some of the innovations advocated in Sir John Egan’s report. Many of the demonstration projects did exceed Sir John Egan’s targets in productivity, profits, defects and reduced accidents.

The report identified what can be summarized within the ‘5:4:7 mantra’ as: five drivers which needed to be in place to secure improvement in construction; four processes that had to be significantly enhanced; and seven quantified improvement targets.

Drivers for change 1 committed leadership 2 focus on the customer 3 product team integration 4 quality-driven agenda 5 commitment to people.

Improving the process 1 product development 2 partnering the supply chain 3 product implementation 4 production of components.

Targets for improvement (annual) 1 Capital cost –10 per cent 2 Construction time –10 per cent 3 Predictability +20 per cent

4 Defects –20 per cent

5 Accidents –20 per cent

6 Productivity +10 per cent 7 Turnover and profits +10 per cent.

To enable the construction industry to achieve the targets, radical changes were identified within the Egan Report. One such change was the replacement of traditional contract strategies with integrated supply chain-led strategies, such as design and build, alongside long-term partnering relationships based on clear measurement of performance and sustained improvements in quality and efficiency, which continued the theme from the earlier Latham Report.

Key recommendations within the Egan Report were summarized by Bennett and Baird (2001) as follows:

• The industry and its major customers need to rethink construction so as to match the performance of best consumer-led manufacturing and service industries.

• Integrated processes and teams should be introduced as a key driver for change.

• The industry should organize its works so that it offers customers brand-named products, which they can trust to provide reliably good value.

• The industry should work through long-term relationships using partnering, which aims at continuous improvements in performance.

• Benefits from improved performance should be shared on an openly fair basis so that everyone has real motivation to search for better answers.

• Project teams should include design, manufacturing and construction skills from day one so that all aspects of the processes are properly considered.

• Decisions should be guided by feedback from the experience of completed projects so that the industry is able to produce new answers that provide even better value for the customer.

• Standard products should be used in designs wherever possible because they are cheaper and, in the hands of talented designers, can provide buildings that are aesthetically exciting.

• Continuous improvements in performance should be driven by measured targets, because they are more effective than using competitive tenders.

• The industry should end its reliance on formal conditions of contract, because in soundly based relationships in which the parties recognize the mutual interdependence contracts add significantly to the cost of projects and add no value to the customer.

Indeed, this latter point was one of the more controversial comments made within the Egan Report:

The Task Force wishes to see: an end to the reliance on contracts. Effective partnering does not rest on contracts. Contracts can add significantly to the cost of a project and often add no value for the client. If the relationship between a constructor and employer is soundly based and the parties recognize their mutual interdependence, then formal contract documents should gradually become obsolete. The construction industry may find this revolutionary. So did the motor industry but we have seen non-contractually based relationships between Nissan and its 130 principal suppliers and we know they work. In reality, this may be a step too far for many within the construction industry.

The targets set by Rethinking Construction have been met by several major construction clients. However it appears that the benefits are not cascading down the supply chain. After achieving the necessary cost and time reduction for several years running without the anticipated increase in turnover and profits, there comes a time when contactors begin to wonder whether it has been worth the effort (comment from commercial manager of major contractor in 2004).

The UK government policies have now increased the need for all public sector clients to fully implement the principles of Rethinking Construction which are now firmly established and recognized as best practice.

Key performance indicators

A key feature in the promotion and implementation of improvement targets demanded by Sir John Egan in his report, Rethinking Construction, was the creation of Construction Industry Key Performance Indicators (KPIs) in 1999. Over the years, the number of KPIs has grown considerably. Different suites are available for Consultants, M&E Contractors and Product Manufacturers. The Centre for Construction Innovation (CCI) through its ‘KPIzone’ also provides an economic suite with separate subsets of the data for New Build Housing, New Build Non-Housing, Repair and Maintenance and Refurbishment (Housing and Non-Housing), and Infrastructure. A separate suite of ‘social’ KPIs called ‘Respect for People’ are also available which evaluate organizational elements such as Health and Safety and Equality and Diversity. An Environmental suite measures KPIs such as Mains Water Use, Waste and Impact on Environment (see CCI website).

The construction industry KPIs are published each year by Constructing Excellence using performance data collected from across the UK construction sector by the Department for Business, Innovation and Skills. The ‘KPIzone’ suite of products provide organizations of any size and from all sectors of the construction industry with an easy way of measuring and benchmarking performance against this national data (see kpizone within CCI website). The ‘KPI Engine’ allows users to benchmark their company and project performance against the construction industry KPI and, additionally, allows them to access a more sophisticated set of benchmarking and reporting options such as comparing their performance over time, between projects and against averages.