The Egan Report Rethinking Construction

This Article is about The Egan Report Rethinking Construction.

Stravelles run a course in Adjudication which aims to allow the student to run their own adjudication as the referring or responding party without paying for legal representation.

We support legal representation in more complex cases but we want to encourage especially smaller companies to feel more confident fighting for their contractual rights.

The Egan Report Rethinking Construction is a 1998 report commissioned by the UK Government and prepared by Sir John Egan, a well known business manager.

A copy of the report can be downloaded here.

This report basically was a view of the construction industry by an outsider looking in.

It was very critical of the construction industry by saying it was not delivering a good product for the customer and the outcome of each project in terms of time, cost and quality was unpredictable.

Introduction to The Egan Report Rethinking Construction

The report was commissioned by the New Labour Government in 1997 and followed the issue of the Latham report in 1994.

The Latham reports greatest success was recommending Adjudication as the main form of dispute resolution and stimulating debate about how and where the construction industry should change. But while the Latham report started the conversation, and the Government started to use the NEC contract more,  little other action actually happened.

This is why the Egan Report was commissioned, to essentially keep the embers of change alive and spark some debate.

The Egan report looked at ways of introducing the best ideas from modern manufacturing into the construction industry.

When the report was issued its criticism of the industry shocked and annoyed construction industry leaders but this ultimately led to attention back onto how the industry could improve.

The Task force 1997

In 1997 a construction task force was commissioned by The Deputy Prime Minister John Prescott.

Its remit was to take an outsiders view of the construction industry and make recommendations for change.

Sir John Egan was to chair this task force as he was deemed a success story from the world of manufacturing and industry.

Recommendations of The Egan Report Rethinking Construction

The Report had several recommendations focusing on improving the industry across all variables. These included:

• Endorsed the changes recommended in and implemented since the Latham report
• The construction industry should issue lean techniques to offset waste
• Promote offsite construction
• Increase collaborative working including communication between the Client, Architect, Engineer and Quantity Surveyor.
• Integrated design and production process
• A move away from traditional tendering and the lowest cost gets the project model
• Improvements in health and safety.
• Cut defects in the final product
• Increase customer satisfaction
• Introduce these ideas into model projects that demonstrate how these ideas work in practice

What did this report actually do ?

Reports are great, Governments especially love commissioning reports.

But if the recommendations are not practical then what is their use?

What did the Egan Report actually achieve apart from spawning more organisations who issue more reports and business speak?

Like the Latham Report the Egan report was very ambitious and set a lot of goals.

The Latham Reports success was adjudication and encouraging a different way of thinking.

Health and safety

The success of the Egan Report was an increase in health and safety.

Customer Satisfaction

The reported kept the industry focused on a renewed emphasis on customer satisfaction. Lots of construction companies, especially the largest businesses track and analysis how their customers rate their experience. This has not filtered down to the smaller firms who would see that as a luxury resource that they cannot afford. A lot of builders would not be able to manage the customer experience instead just trying to do their job. With small and large construction businesses it is like comparing a corner shop and a national supermarket chain.

Partnership

Private companies have taken on some of the partnership recommendations and have framework agreements with consultants and contractors.

The Government still has a reputation for hiring the cheapest bid.

Property developers and property investors still focus on price as their number one concern. There is a lot of talk about health and safety, a lot of box ticking exercises ‘for the cameras’ but when it comes down to it, the price is what matters. Property developers want to increase their profit or rate of return so it makes sense to spend the least amount of money as possible on construction. For sure, they do not want the financial’ legal or moral implications of a death or injury on their project but they only want the bare minimum. They will not pay for belt nor braces when a drawstring will do the job and protect themselves legally.

Movement for innovation

Movement for innovation was an industry organisation formed in 1998 to implement rethinking construction.

This became part of construction excellence in 2004.

Weaknesses of the Egan Report

The Egan report was wrote by a man largely known for turning the Jaguar Motor company from struggling automobile manufacturer into a profitable business.

So his proven skills are management of people and processes in a factory environment. Cars are made in a sealed environment away from the public and you are generally making the exact same car hundreds of thousands of times over and over from the same plans. The designers of the car, the workers putting together the car, the managers all work in the same building. The same product is sold to the Client with the exception of some custom modifications like the colour of the car.

This is the weakness of the Egan Report. Construction does not happen in a factory and every single project is different. Every project has a different site location, has different site conditions, different Architect, Engineer and other consultants.

The Client is different on every single project and they are the ones who lead the design, the program and so on.

Again just like the Latham report, the Egan report recommends partnership. What do we mean by actual partnership and does this ever include the construction industry? If we are talking projects where the Government and Private wealth combine to create a resource, the construction industry is rarely a partner. In such cases private finance and the Government are the partners while the Construction industry is a resource, a tool — not a partner.

And with public finance plus private finance projects, these are a very small amount of projects that involve say the top ten national companies and no one else. Its find to talk about partnership on an airport or a hospital project but what about new houses, extensions, loft conversions, apartment blocks, bars, restaurants etc — there is no partnership there.

How can there be partnership between the Client and the Construction industry? The Client is the one paying for a product or service and wants the best price, quality and program etc. In most cases the Client just sees the construction industry as a resource or tool and wants to pay the cheapest price. There is no such thing as premium construction, maybe a client will pay a little extra for a hassle free experience but not a lot more.

In summary, the Egan report is a positive, not a negative. It stimulates people in construction think more the construction industry. But the fundamental problem with the construction industry is that it provides a service to its Client and not a product. By allowing each new Client to dictate what the product is then the industry needs to shape itself around what the Client dictates. Imagine where say Apple would be if customers came to them with their mobile phone designs and said ‘make that’.