Despite the logical plan of action being proposed in the preceding recommendations, a realistic view should be taken as to how the systemic change inertia which besets the construction industry may act to inhibit or prevent some of the desired outcomes defined in this review.
One of the largest barriers to be overcome is the behavioural resistance to change amongst many clients as well as industry. The working premise is that change will be not happen in the construction industry unless it is instigated by clients changing their construction commissioning behaviours. This means by implication that there may be a need, subject to the rate of progress observed by implementing the ideas presented, to more radically influence client behaviour if the ultimate goal of transformational change is not achieved through voluntary means or by any of the 'initiator' policy suggestions identified above.
The key here will be an appropriate carrot and stick framework within which to influence how clients engage with the construction industry. Some of the recommendations already set out have identified various 'carrot' characteristics but there remains a more drastic option to use a 'stick' as a behavioural change mechanism. Comparisons can be drawn to the so-called 'carrier bag tax' which has been very successful in dissuading consumers from making what is considered to be an undesirable purchase by the levying of a relatively small charge. The same principle could be applied to clients who procure construction work in a short-termist or irresponsible manner which harms the future sustainability of the industry and in reality, clients' own ability to rely on the construction industry in the future.
Ultimately, a modernised construction industry will need greater investment, more collaboration and better alignment of industry and client interests. The potential need to introduce a statutory contribution from clients is not one taken lightly but it could have two purposes:
• To act as a behavioural deterrent for clients who may not naturally believe they need to assist with the modernisation of industry through reformed construction commissioning.
• Assuming some clients will accept the charge and continue 'business as usual', to build a supplementary fund in addition to the CITB levy or its equivalent that can then be scaled up to better to fund and implement large scale technological advancement, major manufacturing capacity investments or strategic skills development.
The intention would be to allow clients to avoid paying such a charge by defining specific qualifying activities or behaviours which would be seen to be benefical for industry's modernisation. It would therefore be a 'pay or play' charge mechanism. The type of qualifying activities defined should perhaps be changed over time to make it initially easily viable for clients to avoid paying by doing simple but important things that are not perceived as 'too difficult'. The compliance bar can then be raised over time to drive a progressive level of industry improvement that does not create a viability shock for clients and is in tandem with a gradual cultural change in procurement trends, collaboration or the embracing of pre-manufactured approaches. Any such charge should not duplicate liabilities that clients have under any Section 106 training obligation.
A timescale for a decision on whether to introduce a client charge should be set out clearly in advance and should in any event be decided within the next five years. The decision should be made by reference to progress against key targets for the industry: for example the Construction 2025 targets for a 33% reduction in costs and a 50% increase in speed of development, supplemented by additional targets for improving industry productivity and output (specifically housing output). If a client charge proves necessary, it should be calculated in relation to the total value of construction work undertaken and should be no more than 0.5% of this total value. It is suggested that this charge would not apply to the domestic public consumer, only business consumers of the industry.
In relation to a government contribution to such a system and to avoid any possibility of a greater tax payer burden, it could be considered whether a limited land value tax is imposed to fund a contribution to such an enhanced fund. This might be linked to taxing a relatively small element of 'windfall' real estate price rises driven by tax payer funded major infrastructure projects such as HS2 or Crossrail 2. Such receipts would be ring fenced and re-invested in construction innovation and skills development so allowing construction to benefit from the wider 'non-earned value' economic benefits that its end products directly generate.
It is recognised that not all clients of the industry may react well to a proposition seeking investment from them. They may feel that they are being unfairly driven to support the construction industry's inability to sort its own problems out. However, this is the nub of the issue. The lack of industry's capacity to pay, its inability to see an alternative client-led demand profile and the lack of external stimuli to change, all combined with a reluctance by all parties to take collective responsibility means that unless clients stand back and see the bigger picture, strategic change will not happen and that is ultimately to their own detriment. If change does happen, clients of the industry will get more predictable outcomes in terms of cost, time and quality with long-term productivity gains improving their returns / competitiveness. The appropriate integration of technology should offer end users of built assets, including new homes, much more choice in product design, intelligent / smart buildings & assets and drive more end value for the real estate and infrastructure investment markets and occupiers / users. There should also be less volatility in capacity levels, pricing and the quality of outcomes if this funding builds extra capacity through new and traditional skills and new methods of delivery.
| Recommendation 10: In the medium to longer-term, and in particular if a voluntary approach does not achieve the step-change necessary, government should consider introducing a charge on business clients of the construction industry to further influence commissioning behaviour and to supplement funding for skills and innovation at a level commensurate with the size of the industry. If such a charge is introduced, it should be set at no more than 0.5% of construction value, with a clear implementation timetable. Clients should be able to avoid paying this by demonstrating how they are contributing to industry capacity building and modernisation by directly or indirectly supporting skills development, pre-manufacturing facilities, or other forms of innovation and R&D. |