Industries Ripe for Change #1: Building Trust in Construction

Trust is paramount for any company to function. It is the confidence, between individuals and between companies, that the work gets completed in the best possible way.

Construction projects are the backbone of economic growth for many countries. Each year a magnitude of funds is funnelled into infrastructure projects - think HS2 and Crossrail in the UK. But often because of the sheer scale and complexity of these construction projects (the number of phases and contractual links, and the government involvement), scope for corruption in the industry is high. However, trust issues often also arise from much less nefarious circumstances. Usually, because of miscommunication i.e. something not being noted down in minutes, minutes being distributed later than expected, change orders not being acknowledged etc.

The collapse of Carillion in early 2018 shook the UK construction sector to the core and brought the trust conversation to the forefront. Brexit, the housing crisis and sustainability issues also present the industry with hefty obstacles. Having a solid foundation of trust is now more critical than ever.

Existing Practices

In the words of Laurence Peberdy, a freelance Project Manager for the construction industry, “The main function of trust in the construction industry, is that it allows for changes to the contract to be incorporated in a way that is not obstructive to the programme.”

In an ideal scenario, the instruction process used to alter construction contracts is usually as followed:

  • The change order (CO) is issued by a Project Manager (PM) or Contract Administrator (CA) to a Contractor or Construction Company.
  • The Contractor will then respond to the change order with an estimated impact of the change upon cost and time (it is a form that they fill out, for example they may advise, ‘this change would add 4 weeks to the programme and cost an additional £2000’).
  • The Project Manager would then review this response and decide whether or not to instruct the change by issuing either a Project Manager’s Instruction (PMI) or Contract Administrators Instruction (CAI).
  • Finally, the Contractor acknowledges receipt of this instruction.

In some scenarios, a project manager will need to issue an instruction without issuing a change order and waiting for advice regarding time and cost implications from the contractor - this requires the PM to trust the contractor.

What Gets in the Way of Building Trust

Slow Payments

The construction payment model is heavily reliant on credit. The cost of materials and labour can be substantial, and the need to float this cost can be detrimental. This credit-based approach extends along the entire chain of work. In many cases, a company’s own bills can’t be paid until payment is received from parties higher up on the contracting chain. Stresses for lower-tiered stakeholders can create problems and risk for those on the top-end too. There’s room for money to slip through the cracks all the way along this chain and, thus, the likelihood of disputes is high.

Poor Communication

In construction projects, clients are very inclined to change their minds. The process of formalising this change is by sending a contract administrator or project manager the instruction via email to the contractor. These emails can often be missed and you end up with changes not incorporated. This can lead to big mistakes causing trust to breakdown if both (or either) parties feel the other can’t be responsible for the communication procedures.

Lack of Transparency

Similarly to the payment situation, general job information can be lost or missed along the chain of contractors and subcontractors. It’s normal for the work to be concealed and the cost and difficulty to see that the work has been done according to standards makes it appealing for contractors to do a poor job and bribe officials to certify their work. There is also a culture of secrecy surrounding costs and the true costs are often kept secret in the name of confidentiality.

Engendering Trust in the Construction Supply Chain

Paying People on Time

Paying people on time engenders goodwill between two parties. One way to achieve this is by implementing a workforce management system that integrates with your invoicing system. This means, as soon as a job is complete, you can raise an invoice straight away - leading to faster payments and less disputes along the chain of work.

You could also improve trust by improving a company's ability to quote, so the numbers come in right away without any unpleasant surprises.

Streamlined Communication

Delivering on time and on budget means optimising the communication and decision making process.

Matt Voyce, Construction Director at Quintain says “We deal with issues in a very fair and quick way. We’re very streamlined in our management, we can take fleet-of-foot decisions that are in the interest of the job. We don’t allow things to fester; we deal with things head on.”

This means having a way to access all contractors and levels of management in real-time. Better communication between parties means a higher likelihood of carrying out the job in the best possible way.

A Better Overview of Work

Integrated workforce management systems like Okappy give stakeholders a better view of the status of jobs. Users have the ability to edit the job details as they're updated and also view job history for each respective customer or subcontractor.

You could also improve trust by using information management technology for clearer version control, so you can track changes to a project as they happen and still access past versions. BIM 360 is a system that gives users the confidence that they are always working on the most current version, whilst also knowing that they can access older versions when required.

Trust Me, I Got This

The effect of poor trust between industry stakeholders is the increased likelihood of failing a client’s needs. These stakeholder relationships focus on their respective self-interests rather than on mutual interests. Innovative collaboration systems are what provide the building blocks for a more trustworthy industry. The improved efficiency and communication that they bring will lead to an industry that thrives AND stands the test of time.

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