Warning: If you are easily offended or prefer to toddle along with the status quo because ‘that’s how it has always been done’ then please don’t bother reading any further… this article is for advocates of change only!
This is the definition of a ‘meme’:
As Leo Varadkar put it,
“The PWC Report makes grim reading”.
The findings of the PWC Report on the National Children’s Hospital demonstrate the monumental failure that has taken place in the Construction Industry. The findings are shocking while not all that surprising. A ‘state of the art’ hospital was intended to be built using out-dated processes and technologies. It is a crying shame that it has taken a failure of this magnitude to give the Irish Construction Industry, and the processes and technologies used therein, a well-deserved kick up the arse. The shortcomings of the Construction Industry are well documented, and advocates of Digital Construction have been trying to rectify these issues for years. Let this be the watershed moment! If there is to be a silver-lining to this dark cloud that has descended over the nation, we need to ensure that measures are put in place to counteract such failures taking place in the future.
The Construction Industry is a going through a revolution… a ‘Digital’ revolution. The ability to digitalise industries is not a new thing; the Construction Industry has just lagged behind almost all other industries. Traditional Engagement Methods are severely outdated. Contract Types and Administration Procedures do not accommodate the availability of advancements in technology.
On projects such as the National Children’s Hospital, the Client’s expertise lies in paediatric care. They are responsible for the well-being of the nation’s youngest generation. They are not expected to be experts in the Planning, Design and Construction of an advanced healthcare facility. Therefore, Clients make the decision to bring in the ‘construction’ experts.
However, most ‘experts’ are still using out-dated workflows to deliver advanced projects. They have their heads in the sand much like the ostrich above. The ‘experts’ are allergic to the adoption of new technology and lean workflows. We live in an age where the technology exists to share information openly in a transparent manner. However, if the technology necessary to get the work done efficiently and effectively is not being used to deliver the project then the end result is a showcase of inadequate delivery methods. The book ‘The Innovators Dilemma’ by Clayton Christensen discusses how new technologies can cause companies to fail. Concisely put, the social culture within an organisation can result in old mindsets using new technologies to complete old workflows.
This is going to be a difficult but worthwhile transition for the Construction Industry. There are several well-established consultancies who understand the Construction Industry but do not understand Digital Construction. There are a few consultancies who understand Construction Technology but lack Site experience, lack Project Management experience, lack Procurement experience and in many cases do not understand the logic of the Build Sequence. When these organisations offer themselves forward as construction experts, they are for all intents and purposes exploiting the Clients lack of understanding.
The PWC Report states that
“The content of the BoQ changed during the GMP Process, resulting in an increase in costs of €158.3m”.
This finding demonstrates that maybe it wasn’t the Main Contractor that was wrong; it demonstrates that there were fundamental issues with how the Client’s appointed party priced the project. There are a number of likely reasons for this:- Inadequate Design
- Inefficient/Conflicting Quantification Techniques
- Ineffective Project Controls
- Lack of Digitalisation
The NCH Design Team comprises of some of the best designers in Ireland. These companies are household names with some great individuals among them. However, big ships turn slowly and speaking from experience, their deliverables in this new era of Digital Construction can sometimes leave a lot to be desired.
Design Teams (through the Client) tend to push the risk down to the Main Contractor by passing on inadequate, uncoordinated designs that result in large amounts of RFIs and Variations. To combat this, Main Contractors have taken steps to embrace Digital Construction as it offers a means to mitigate the inherent risk.
Where Main Contractors used to inevitably get burnt by these risks, they now have the capability to use the Design Teams tactic of offloading the risk against them. The Main Contractor can price what is put in front of them (e.g. insufficient or inaccurate quantification) in what is known as the ‘price it low’ strategy and then hit the Client with Variations to bump up their margins.
In the case of the National Children’s Hospital, the Main Contractor will undoubtedly have used the advanced Digital Construction technologies alongside their advanced level of construction knowledge to unearth problematic issues with the available information. This process will have been made all the more important due to the Guaranteed Maximum Price (GMP) nature of the project. This will have resulted in the Main Contractor pushing back against the Client during negotiations. As a result, there will have been a necessary uplift in price in order to mitigate the risk caused by Inadequate Design and Inefficient Quantification Techniques.
As noted in the PWC Report,
“The capital budget made no provision for the price premium that the public sector would need to pay the contractors to bear the risks transferred to them through the GMP Process. There was also no contingency in the capital budget to absorb risks that might emerge during the process of agreeing a GMP. As a consequence, the budget significantly underestimated the likely outturn cost”.
The Client and the Design Team are often deemed to be on the opposing side to the Main Contractor. Clients and their Design Teams tend to have a very good relationship… often too good. As stated in the PWC Report,
“This created a situation in which the approved project could never be delivered within the financial parameters agreed”.
Clients need to ensure that they are monitoring their Design Team and ensuring that they deliver what they have been scoped with and not looking to offload the accountability to the incoming Main Contractor.Outdated methods of Project Management, outdated methods of Quantification, outdated Project Controls and a severe lack of Digitalisation are holding back the Construction Industry and causing project failures like the National Children’s Hospital. We use the latest technology every day when we get home from work; there shouldn’t be a divide between work and play.
The PWC Report suggests that,
“Progress reporting was generally unstructured, fragmented and lacked key information. Processes to manage risk, change and documentation were ineffective and project systems were insufficient. This created the conditions for major issues to arise without warning and to escalate unchecked”.
We live in an age of IoT, exploration of the Solar System, automated self-driving cars and yet when it comes to an investment Tax Payers money of this magnitude, we seem happy to put up with a wasteful Construction Industry; An industry being set in its ways is not something that should be tolerated.We should be digitalising the Construction Industry, not only to save trees, but to make it more transparent and more efficient.
This is transition to Digital Construction is achievable. We are part of some great projects in Ireland, one of which recently won a global award for Digital Construction… and guess what! That project is was Guaranteed Maximum Price (GMP)! This particular project was a success because the entire Project Team worked together in a collaborative manner and leveraged the power of the Digital Construction techniques that we showcased.
The PWC Report finds that 65% (€294M) of the cost increase is attributed to
“Costs that are a consequence of underestimation, principally during the planning, budgeting as well as set-up stages of the project”.
Outdated processes and poor project controls meant that problems did not surface until significant cost overrun had been incurred. 
In the words of PAS 1192, we must
“begin with the end in mind”.
The information produced by the Client’s Design Team and Quantification Team must be robust going forward. This is the only remedy for the ‘price low and claim variations’ culture that has become evident in the Construction Industry. The Construction Industry currently favours opacity to transparency. It is preferred to retain any findings of shortcomings on a project for leverage at a later date. Transparency is linked by some individuals to being inefficient.Based upon the findings of the PWC Report, the first recommendation is
“The project control environment should be overhauled to bring it up to the level of maturity and sophistication required for a project of the scale, complexity and importance of the NPH Project”.
There it is, front and centre! The project control environment needs to be overhauled and brought up to a level of maturity and sophistication fitting for a project of the scale, complexity and importance of the National Children’s Hospital. For a project of this complexity, ignorance to new technologies and processes is not acceptable and egos need to be left at the gate.The PWC Report also recommends that
“The scope and responsibilities of the advisory firms that constitute the Design Team should be reviewed to reflect their future roles”.
We know we won’t be on the Christmas Card Lists for any Designers following this publication… we do not mean to offend. Design Teams provide an important function and do a good job. Design Teams now have an opportunity to do a better job by leveraging Digital Construction going forward.We have great relationships with some of the top designers in this country. The Construction Industry is small, and the BIM village is even smaller. We have our differences, but we also unite when it comes to the topic of ‘Changing Construction’ whether the conversation takes place in a meeting room or over a pint! It is time for those in power to take note and set the Construction Industry on a course for Digitalisation. Adapt or Die!
At GagaMuller Group, we pride ourselves on providing services that are traditional in their function but very advanced in terms of the digital processes and technologies that support them. Most importantly we offer something that most others don’t; an Exit Strategy. We encourage all our clients to ensure that an individual or group of individuals from within their organisation is assigned to our team in order to upskill and create a roadmap for our departure. Someone to take over the digital reins when we’ve passed on the know-how. Our passion lies in helping organisations in the Construction Industry to unlock efficiency and productivity through Digitalisation!
Sources:
https://merrionstreet.ie/MerrionStreet/en/News-Room/Releases/20190409_NCH_Report.pdf
https://www.irishtimes.com/news/health/grim-reading-in-this-children-s-hospital-tale-but-key-details-left-out-1.3855005
