UK Construction - The Impact of Recession (so far)

During the summer, I was invited to present to a group of AEC professionals about the impact of the recession on the UK Construction Industry. Whilst still a wee bit premature to be looking back with the benefit of hindsight - let's face it, we're not out of the woods just yet! - it is possible to gather some useful and interesting data on what has been happening during the past 3 years of economic downturn.

First, the basics; a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.

The first of 6 successive quarterly falls in UK GDP started in Q2 2008. The commonly accepted indicator that a recession has begun used to be, “two consecutive quarters of negative growth in GDP”. However, it's not quite so simple!

According to the National Bureau of Economic Research – UK (the official arbiter of recessions) the current recession began as early as December 2007.

5 key measurements NBER UK points to, with respect to a recession:

- GDP (a measure of a country's economic activity, namely of all the services and goods produced in a year)
- Retail/wholesale sales figures
- Overall employment
- Personal income
- Industrial production

Meanwhile, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) – USA, maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007.

So whilst many firms have reported that the UK economy really went into a nose-dive in Q4 2008, it was actually nearly a year earlier that the problems began!

Some interesting data was quoted in a Building Magazine editorial, back in June 2010;

Experian predicts a slight upturn for 2011 and 2012 – depending on recovery in the private sector and no more than £5bn cuts in the public sector. (RV - hmmm not sure that they could foresee the current round of cuts when that was written!)

FT review of Office of National Statistics data found the following unemployment figures:

• 720% increase for architects
• 655% increase for QS’s
• Similar figures for Planners, Construction Managers & Engineers (500%+)

Earlier in the year, the Chartered Institute of Building (CIOB) published the results of their third annual survey, where they polled opinion from 1182 UK construction firms.

• Results show that the industry is still suffering a skills shortage despite the recession and downturn in construction demand.
• 77% of respondents believe there is a skills shortage in construction and 78% of those feel that the loss of skills will hinder the industry’s recovery when the economy improves.
• 54% state that their company has had to make redundancies and 14% expect further redundancies to occur.
  
  

Similar comments echoed by Construction Skills, who observed; 'Forecasts demonstrate the severe effect that the recession is having on the UK construction industry, with rising job losses risking huge skills deficits in the long term.

The Construction Skills Network (CSN) shows the prognosis for the UK construction industry in the short term (2009 to 2010) is poor. The industry is expected to contract in construction output terms by at least 12% in 2009, followed by a more marginal decline of around 2-4% in 2010.

Consistent recovery is not forecasted until 2011 and even then, it is likely to be a slow and steady return to moderate levels of growth as confidence returns to the market.'

Construction News published the following figures;

• UK Construction employment began to fall in 2008 with a decline of 1% over the year, however, CSN forecasts a much larger drop of 15% across 2009 to 2010, with the largest losses (around 13%) expected in 2009. The total number of construction job losses from 2009 to 2010 could be up to 450,000 if output contracts by the suggested higher rate of 13% in 2009. The slow recovery forecast from 2011 to 2014 is set to create around 125,000 jobs.
  
  
• Coupled with the large number of workers who are set to leave the industry in the next 10 years through retirement, the need to increase the flow of apprentices and graduates into the industry and retain as many existing skilled workers as possible is vital if the UK is to sustain a skilled construction workforce.

Data from the CIOB survey, noted the following points about Apprentices & Graduates;

• Only 37% are sure their companies are still employing apprentices.
• 11% stated that their companies usually employ apprentices, but cannot afford to in the current economic climate.
• 12% of respondents are aware of their companies recruiting more graduates.
• Only 1% are recruiting the same number of graduates as before the recession.

So what are the lessons we can take from all of this? What mistakes have firms made and what are the opportunities for growth when things pick up?

Mistakes:

• Panic firing/firing the wrong people, i.e. firing the best software users or even the CAD/BIM Manager!
• Hoping things will get better sooner; waiting too long to make key strategic decisions
• Freeze on technology investment
• Freeze on all hiring
• Freeze on all training & learning budgets
• Lack of cash flow management

Opportunities:

• Removal of ineffective staff (who perhaps shouldn’t have been hired in the first place?)
• Better users remaining
• More time to spend on IT strategy & ‘housekeeping’
• Better hiring practices in future
• Better training & learning plans in future
• Better cash flow procedures
• Better, more realistic business plans
• More focused roadmaps for technology, marketing and business strategy
• Better relationships with remaining clients
• Leaner working practices
• More enthusiastic adoption of BIM

A final word from an article which appeared in the FT in the summer; “Those businesses that survive a recession of this magnitude, are the ones who are best placed to ride the wave back up again!”.

R

UK BIM Roundtable

Recent months have seen a plethora of forums and conferences about this year's numero uno hot potato, namely, BIM. I've attended a number of these sessions and, whilst the networking is always useful, the content has varied tremendously. So many meetings still focus on the big picture of BIM, almost selling the idea that BIM is the future and we all need to get on board. I think, for most firms, they've already made that leap. They kind of get it already, that we can all do better in terms of delivering more efficient projects and harnessing the latest technology to make it happen.

The question now is, how exactly do we, as individual firms and collectively an industry, sally forth and turn all the rhetoric into BIM-reality? If you speak to the marketing teams of many UK design & engineering firms, the story is that BIM is altogether sorted, that they are 100% BIM proficient and can deliver projects in any technology, at any time, with maximum efficiency, no fuss and zero downtime! :) Talk to the operations teams, who are tasked with actually making this all happen, and the story isn't quite the same. And this is in no way a criticism of these hard-working people. Quite the opposite. But, ironically, when firms speak openly about this stuff, the reality is that they are all wrestling with the same challenges!

To this end, we've been working with a group of connected people this year, to put together a programme of round table meetings, whose sole aim is to provide detailed answers to some key questions about BIM - at a practical level. The nice thing about this initiative is that no-one is forcing an agenda onto the proceedings. Whilst we all have a vested interest in the UK Construction industry picking itself up off the floor, the rest is all about using whatever connections or influence we may have individually, and pooling our resources to bring together the right people, at the same time, to figure out some new answers to these questions.

This Thursday in London, we have the first UK BIM Roundtable. All being well, we anticipate that this could develop into a regular series of half-yearly, or even quarterly, forums, each addressing a different area of BIM.

The first meeting focuses on the dynamics of the relationship between Architects and Engineers and General Contractors. Discussion will be based around the following topics:

• What are the needs and requirements of consultants and what are the needs and requirements of contractors, when undertaking a BIM project?

• How can we negate conflicts occurring at the interface of a design-based BIM as it undergoes the transition to the construction phase?

• Getting BIM deliverables in sync throughout the project; exploring commonly accepted workflows and identifying the requirements of each discipline.

The meeting is by invitation and all 30 available places were filled very quickly. The following firms will have representation at the session;

Consultants: AECOM, WSP, Buro Happold, Halcrow, Hoare Lea, Capita Architecture, Zaha Hadid, Atkins, Levitt Bernstein, Foster + Partners, Davis Langdon, Waterman, IBI Nightingale, HOK, Tribal, Jacobs, Ramboll UK, Scott Wilson, BDP.

Contractors: Skanska, TPS Carillion, Carillion, Bovis Lend Lease, Mace, Laing O'Rourke, Costain, BAM, Vinci, Robert McAlpine, plus UKCG.

We also anticipate having people from TfL, Crossrail and BIS in attendance.

This is designed to be an interactive discussion forum. There will be an agenda and specific objectives for the session, steered by co-chairs representing both groups, but the rest is up to the delegates. We have no commercial sponsors, nor formal presentations from pre-arranged speakers. The minutes of the roundtable will be documented and issued in the form of a short report following the meeting. Thanks to Buro Happold for providing the venue for this meeting.

R

Sketchup is dead! (Long live Sketchup!)

I've noticed an interesting trend on my travels this year, regarding what was, up until recently, the darling of the design office (at least from a drafting software pov) - yes, I mean our old friend Google Sketchup.

We have had a ton of requests for a Sketchup test this year. And I should make this clear, we have manfully resisted this for quite some time, feeling that a Sketchup test was somehow an exercise in overkill. Many times I have asked the question, 'Why on earth would you want a Sketchup test?!'.

Nevertheless, it still keeps coming up in feedback forums, so it has been added to our list of short term devs.

However...

...I don't know if something is in the water, but over the past few months, I have been in meetings with heads of design and technology (mostly in Architectural firms, to be fair) where Sketchup is no longer the poster-child of design software. Oh no, in fact, quite the opposite! 'We're trying to kill Sketchup', was the anguished cry from one leading design firm in New York. And back in Blighty, the same trend is emerging; 'Sketchup has become my biggest pain in the ****!', bemoans another technology leader.

But what has prompted such a collective venting of creative spleens, I hear you cry? Well, it seems that, whilst Sketchup is great for knocking out quick visualizations, too many people are trying to use it for much more than that.

In some ways, Sketchup is becoming a victim of its own simplicity. Because Architects are nowhere near as scared of learning Sketchup as they are of, say, Revit or MicroStation, they're now trying to use it for all sorts of inappropriate outputs. Let's make this clear - Sketchup is not Revit. You can't create a BIM model in Sketchup - so stop trying!

And it doesn't stop there. Not only is misguided use of the drafting tool causing the collective blood-pressure of BIM managers everywhere to reach Vesuvian levels, it is also now being cited in a couple of legal cases where, I kid you not, firms of Architects are being sued by clients for mishandled project information leading to mistakes during a build. Turns out that shadow diagrams quickly crunched out in Sketchup have been used as hard data during a build, which, in turn, has led to some pretty upset clients!

Suddenly, the ramifications of using technical software inappropriately on projects isn't funny at all. It can cost AEC firms thousands of dollars in lost income - not to mention the management time that goes into yet another round of unnecessary litigation. And those design firms who poo-poo the importance of technical software as a highly sought after skill? You have been warned. No longer can you get away with the familiar refrain, 'We only employ good designers. Software skills don't matter - we can always get them up to speed in Revit later'. (For the record, my blood freezes whenever I hear those 5 words - get... them... up... to... speed).

Oh, and don't blame Sketchup for this mess. It's not the one at fault here! The clue is in the name, stupid! ;)

R

Herbert Hoover's Engineer

I saw an engaging post on a LinkedIn discussion forum this week, about why people became engineers and what their favourite quotes are about the profession.

Here's the one I liked best, a quote from engineer and past US President, Herbert Hoover:

"It is a great profession. There is the fascination of watching a figment of the imagination emerge through the aid of science to plan on paper. Then it moves to realization in stone or metal or energy. Then it brings jobs and homes to men. Then it elevates the standards of living and adds to the comfort of life. That is the engineer’s high privilege.

The great liability of the engineer compared to men of other professions is that his works are out in the open where all can see them. His acts, step by step, are in hard substance. He cannot, like the architect, cover his failures with trees and vines. He cannot like the politician screen his shortcomings by blaming his opponents and hope the people will forget. The engineer simply cannot deny he did it. If his works do not work he is damned.

On the other hand, unlike the doctor, his is not a life among the weak. Unlike the soldier, destruction is not his purpose. Unlike the lawyer, quarrels are not his daily bread. To the engineer falls the job of clothing the bare bones of science with life, comfort and hope. No doubt as years go by the people forget which engineer did it, even if they ever knew. Or some politician put his name on it. Or they credit it to some promoter who used other people’s money…

But the engineer himself looks back at the unending stream of goodness which flows from his success with satisfaction that few professions may know. And the verdict of his fellow professionals is all the accolade he wants."

R

540,000 hours

I was chatting to one of our large AEC customers last week. They have about 1,000 CAD, BIM & Engineering software users around the group. During our chat, we discussed the fact that they are putting together a business case for management, aimed at securing additional budgets for investing in new training & learning tools. As part of this process, they worked out that they spend approx. 540,000 man (or woman) hours EACH YEAR, producing CAD drawings. And that's just in the UK, which is only part of the wider group!

I don't know what their hourly charge-out rates are, but let's say, for argument's sake, that the figure is £100/hr. That's a cool £54M per year on CAD production alone.

Now let's picture the impact of a 2% improvement in productivity across the year - that's over £1M in savings, or half a million quid for every 1% increase!

Suddenly, spending a few grand on testing and training tools starts to make a lot of business sense!

Let's look at some more numbers;

Take an average salary of £25k p.a. and a 225 day working year.

For every 1% improvement in productivity, a practice will save £250 or 2.25 days per person per year. Targeting a 5% annual improvement in performance, this is worth £1,250 or 11.25 days per person per year. (11.25 days = 90 working hours (average 8 hour work day)).

For a firm with 20 staff, this is worth the equivalent of a new member of staff! (20 x £1,250 = £25,000).

Now let's look at hiring; how much does it cost to employ inappropriate personnel for 3 months?

Assuming a £25k annual salary:

15% agency fee = £3,750

3 months’ salary = £6,250

Assuming £18/hr:

7.5 hrs x 5 days = £675 x 12 weeks = £8,100

These examples don’t include advertising costs for staff employed direct, or the cost of re-working for drawings which weren’t done right first time.

R

Daisy-chain

This month, we are introducing a change to the way assessments are authored, based on the idea of linking separate modules in a 'daisy-chain', to create a longer test.

In essence, the KS system breaks down like this;

- A test is one or more modules linked together.
- A module is comprised of typically 4-6 questions, covering the same topic, i.e. Families in Revit or UCS in AutoCAD, etc.
- A question tests an individual's understanding of a particular software feature or command.

Questions and modules have training tag keywords (meta tags) associated with them, which makes training needs analysis, post-assessment, much more relevant.

Questions can be "task" based or "knowledge" based.

A task based question has files associated with it. The user has to do something to the file, in order to work out the answer, as follows;

- Task (interrogate) - the user has to open the file and find the answer, but they don't have to modify or change the file in any way.
- Task (modify) - the user has to open and modify the file, to work out the correct answer.
- Knowledge - this type of question does not require a file to be associated with it.

Test administrators can present a single module as a test, provided they create a new test from the module first.

A 'daisy-chain' happens when an administrator links a series of modules together, to create a longer test.

This concept allows us to create a wide range of test material, in bite-sized blocks, which map closely to corresponding training and learning material.

Daisy-chains go live next month.

R

MCMC 2010

It's that time of year again! One of the year's most enjoyable events takes place on August 10-11; the Mid Continent MicroStation Community User Conference. The venue is once again the excellent Overland Park Convention Center, in Kansas City.

The organisers have pulled out the stops, with an agenda packed full of high-quality speakers, over the course of the two days.

See this link for full details:
http://www.tmcmcmc.org/meetings/2010/Onsite_Agenda_2010.pdf .

Tuesday night's entertainment includes dinner and a repeat trip to Power Play, for another high energy Whirlyball contest. (For the un-initiated, Whirlyball is a mix of lacrosse, basketball - and bumber cars - not for the faint hearted!).

Tickets are just $95 per day, including lunch and snacks throughout the day.

The theme for this conference is Versatility. Covering multiple tracks, including, MicroStation, Civils, Plotting, CAD Management, Collaboration, Building, Structural Analysis and US Army Corps projects.