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Does the builder-developer model need to change?

As the industry awaits the Grenfell Inquiry phase-two report, Dr Bernard Rimmer asks whether the builder-developer business model needs a complete overhaul

It looks as though the final report of the Grenfell Inquiry could be presented to the government this summer, so perhaps now is the time to reflect on how our industry produced thousands of flats with flammable cladding. This disaster has been hugely damaging to the reputation of the construction industry and I am not sure that the lawyer-led inquiry will get to the root of any mistakes caused by human behaviour rather than by contracts.

Governments over the decades have never seemed to understand the construction industry and why it apparently performs so badly, with overspends, overruns and dubious quality. In the 73 years from 1945 to 2018 they initiated 81 investigations into the industry, appointing task forces chaired by luminaries from outside the sector – indicating that the industry was incapable of reforming itself.

Separating design from construction came at a great cost” 

Dr Bernard Rimmer

The last major taskforce to investigate the industry was chaired by industrialist Sir John Egan in 1998, resulting in his report Rethinking Construction. Egan understood that many of the industry’s problems resulted from the lack of teamwork and collaboration when using competitive tendering of main contracts, but shis aspiration that leading public-sector bodies should become best-practice clients was a tall order when ministers are always declaring that they will insist on competition to get the best value for taxpayers.

Also, Egan’s vision of a wholesale revolution in the industry was unrealistic given that it is highly dependent on its clients for its performance.

He did leave us with some important pointers on striving to create customer value and eliminating waste, but did not say much about how best to address these in the context of bespoke teams, bespoke products, and clients of varying capabilities.

Ten years after Egan produced his report, he gave the industry four out of 10 for the progress it was making “delivering value and challenging the waste and poor quality arising from existing structures and working practices”.

Across the board the quality of the built environment still varies enormously, and much of this variation results from the way clients assemble their teams, selecting from a diverse industry in which design resources are now largely separate from construction resources.

Architects and engineers often used to be directly employed by builders and public bodies in the 60s and 70s, but decided to form their own businesses with the protection offered by professional indemnity insurance. This change was hugely beneficial to the creative process, spawning some world-class designers in the process.

But the split introduced tricky liability issues, multiple types of contracts, tendering costs, disputes and litigation.

It also resulted in construction-only companies fighting to protect their small margins instead of striving to improve the value their expertise could bring to their clients. And it became rare for builders to even meet their clients.

It ultimately led in 2001 to the sale for £1 of John Laing, a company which, in the 1970s, had all the design and construction resources in-house to carry out projects, including research and development, building product manufacture and trades and plant, allowing it to complete iconic projects such as the Barbican, the Bull Ring and the British Library.

The challenges of a fragmented industry

Separating design from construction therefore came at a great cost. Putting them together again in the best ways possible is the challenge for all clients, both public and private.

Clients have in effect become the most important players in the process, no longer able to call on the likes of John Laing to handle all their needs.

Those that follow best practice today use more negotiated, collaborative forms of procurement in which they have direct relationships with all the players including major specialist contractors. The control of the design and construction process by in-house experts is the key to their success, and world-class developments such as King’s Cross are the result.

However, at the other end of the client spectrum, this control can be abused in the pursuit of profit. Egan might not be pleased with the way things have turned out but should take solace from the fact that innovation, driving out waste and continuous improvement are taking place in the companies that design, manufacture and install large discrete parts of buildings, such as whole facades, structures, and mechanical and electrical services.

Furthermore, he may find it gratifying that there have been significant advances in construction management and IT techniques for coordinating the interfaces between these main specialist subcontractors.

But problems still remain. With the now-fragmented industry, and the multitude of different clients battling to put together teams to satisfy their needs, it was to be expected that suboptimal results would be common – but not that buildings would be created that were immediately dangerous for occupation.

Investigations that followed the shocking Grenfell Tower tragedy discovered that flammable cladding was being used on hundreds of blocks of flats around the country.

The cladding that caught fire was a rainscreen cladding (RSC) system. Open-jointed RSC systems were developed in the 1960s, but they have also been adapted by developers of new buildings.

These systems are no longer available from companies that design, supply and install them (taking full responsibility). RSC is now designed by architects, and they can obtain technical guidance from the industry-funded Centre for Cladding and Window Technology (CWT) in Bath. RSC today is supplied by subcontractors that procure all the specified parts and install them, but they do not have design liability.

When aluminium composite material cladding had to be replaced in other high-rise blocks around the UK, critical components such as firebreaks were found to be missing in many cases.

The net result was an open-jointed cladding system with a cavity lined on both sides with foamed plastic and absent critical parts, for which no single party was responsible.

Egan’s best-practice aspirations were nowhere to be seen – except that best value was produced for the builder-developers and negative value for the ultimate customers, with many flats still unsaleable.

The division of responsibility for the performance of the cladding was a significant factor in all of this.

The builder-developer model

To understand how some builder-developers, who are ‘self-build-for-sale’ clients, with full control of building design and procurement processes (they are de facto chief designers), came to build dangerous buildings, we must look at their business practices.

Builder-developers of flats are mainly former builders (some retaining the great names of the past) who started building houses for sale and then branched out into building flats for sale.

When building houses for sale, they retained their building skills – most of which were (and still are) in traditional trades like brickwork and timber – and the heads of companies remained builders that were proud of their work. But when they started building flats, a completely different skillset was required to handle high-tech design and construction.

And, judging by how difficult it is to find executive directors from the building side on the builder-developers’ boards, it seems that the land purchasing and development executives rose to the top of these companies and the building executives took a step back in seniority.

Builder-developers still call themselves housebuilders, but their boards are comprised mainly of chartered general practice surveyors, accountants, bankers and insurers.

Contrast this with the top commercial developers that have executive directors who are chartered engineers controlling the design and construction process. It speaks volumes regarding the business culture of the builder-developers that they did not hesitate to blame Building Regulations for the faulty design of its products, heaping financial stress on thousands of its own customers who were mostly people of modest means with little or no savings.

It would be nice to think that flat developers will change their business practices and focus on their customers’ needs for long-lasting trouble-free facades, but it would appear that it is necessary for the government to regulate this development activity.

First, they need to be forced, by Building Regulations and planning requirements, to design facades for longevity and low maintenance and to provide full-time supervision of any labour-intensive facade installations.

Second, they need to be made to take full responsibility for the design and construction of their buildings through a government-approved standard contract for sale of flats. The government also needs to redraft Building Regulations in such a way that developers will not be able to escape design liability problems for buildings for which they receive regulation approval.

Egan’s Rethinking Construction report unfortunately did not prevent certain working practices of the industry creating dangerous buildings, and we should not expect the Grenfell Inquiry recommendations to make much of a contribution to dealing with the serious problem of how builder-developers handle design.

As clients of the industry, as well as claiming to be part of it, and with some of them still using the names of great builders from the past, builder-developers have brought shame to the sector and need regulating in both design and liability if they are to continue operating.

Dr Bernard Rimmer has a PhD in civil engineering from the University of Leeds. He previously held managing director roles at Clarke Construction and John Laing Concrete, and was construction director at Slough Estates

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