Initiatives of Change - Detailed view of For A Change Articles

When four people were killed in a rail crash near Hatfield, caused by a broken rail, the UK's Health and Safety Executive threatened to prosecute executives from Railtrack and Balfour Beatty, the construction company responsible for track laying. It was a high profile case. Many believed that it exposed a culture of inefficiency that has plagued sections of the construction industry for years.

A recent devastating report on public works contracts by the National Audit Office found that, in 1999, nearly 75 per cent of projects were completed over budget and behind schedule. The government spends £7.5 billion a year on construction. Four government agencies--in defence, the National Health Service, highways and the environment--say they can save £600 million a year by changing how they buy and manage construction projects. But John Bourn, head of the NAO, told Parliament that the government could save up to £2 billion 'if such good practice were extended across the whole of central government'.

Construction, including suppliers, employs 1.9 million people in Britain and is worth around £65 billion a year--eight per cent of GNP. It accounts for over 50 per cent of fixed capital investment. 'Construction is both the Cinderella and sleeping giant of the economy,' says Professor John Carlisle, President of John Carlisle Partnerships (JCP) in Sheffield, who is a leading building industry consultant. 'But it has been tearing itself apart for nearly 20 years. The industry developed a conflict-ridden culture revolving around competitive tendering and adversarial working relationships up and down the supply chain. The result has been catastrophic.' In the mid-1990s, over a thousand writs were issued, involving claims of over £500 million, 80 per cent of which were settled out of court.

There have been notable exceptions. A joint Esso and Shell project in Fife, Scotland, in 1981 was completed five months ahead of schedule and 10 per cent under budget after their contractor, Lummus, saw it as 'the last chance for the British construction industry to change its world image'. 'Some medium-sized contractors did take the learning on board and are doing very well out of their cooperative cultures,' Carlisle comments. 'And the bigger companies like Bovis, Tarmac and Balfour Beatty are becoming more collaborative. But it is a slow process.'

The sleeping giant seems to be waking. In 2000, UK construction leapt from twelfth to seventh place out of 23 industrial sectors ranked in order of profitability. Returns on capital expenditure increased from 14.78 per cent in 1999 to 15.53 per cent in 2000.

But Carlisle asserts that there is still something inherently corrupt about competitive tendering. The pressure to underbid rivals inevitably--some would say cynically--leads to unrealistic tenders and deadlines, he says. The channel tunnel was a classic case, while the new British Library in London opened some two years behind schedule. Meanwhile, cost cutting creates shoddy work. It all adds up to a culture that has turned construction into the world's most corrupt business sectors, according to the anti-corruption body Transparency International. In earthquake regions, the consequences spell death.

Can anything be done to change things? Tory MP Sir Michael Latham's report into reforming the UK construction industry was published in 1994. By that time, Carlisle had already established a reputation for partnering in the North Sea oil industry. On the strength of this, Professor John Bennett of Reading University's Construction Forum urged him to implement the Latham report by establishing partnerships between all stakeholders in construction--from clients and contractors to subcontractors, suppliers, architects, surveyors and designers.

Since then, JCP has been involved in over a thousand private and public sector contracts world-wide, from housing and highways to defence. Turnover in 1999-2000 was £2 million. The company is based in Broom Hall, a three-storey oak-beamed Tudor mansion in Sheffield, built appropriately enough to last for centuries. A full-time staff of 12, and some 30 associate consultants in England, Australia, South Africa and Hong Kong, advise on projects valued around £3 billion a year, and the savings and added-value to clients come to over £400 million. Major clients range from Railtrack's Thames Link 2000, building the new multi-million pound rail link across London, to a giant £2.6 billion underground extension in Hong Kong; from the Johannesburg Stock Exchange to Shell, Sainsbury's and the Australian Department of Justice. 'We are Sheffield's best-kept secret,' Carlisle comments.

The first step in partnering, he says, is to build relationships between all the parties involved right from the start. 'The optimum approach is to have everyone around the table at the planning stage. It is here, with early involvement, that the systematic inefficiencies are rooted out. Cooperation helps others to achieve their interests without sacrificing your own. Organisations that know how to cooperate and operate in partnership or in alliances are much more successful than those that do not.' Carlisle sees cooperation and trust--the key words in his lexicon--as the building blocks of business. His company's motto says it all: 'Cooperation works… but it's hard work!'

There is still a need for tendering for the initial contracts. But the aim of partnering is to marry clients to the most suitable contractors. Once a 'strategic alliance' has been established, and a relationship of trust built, the partnership often continues into future projects. 'Some contractors don't like it because they are used to the old adversarial ways,' says JCP Director David Curtis. 'Partnering puts their noses out of joint.' But the acid test is that most partnered contracts are completed on or ahead of time and within budget. Moreover, litigation is reduced virtually to zero.

'The process of collaboration releases a great deal of intellectual capital from the supply chain,' Carlisle says. 'We encounter situation after situation where partnering has yielded efficiencies and quality of work unobtainable in the competitive paradigm.' Among the examples he cites are:

Sainsbury's stores are now built in 17 weeks instead of 42, with better designed interiors.

The Mass Transit Railway Corporation in Hong Kong saved £3 million in the first six months of one contract alone, and cut five weeks out of the time spent on the contract.

Shell increased the life expectancy of an oil and gas field in The Netherlands by 40 years, thanks to partnering with its drilling contractors.

The Johannesburg Stock Exchange relocated to the suburb of Sandton on time and within budget. The computers were up and running and 'the occupation was flawless', Carlisle says.

'All of these,' he adds, 'are as a result of honest conversation and real involvement of the stakeholders, which brings about creative thinking as well as efficiencies.'

The benefits are not just economic but also environmental. The ING bank in Amsterdam, for instance, was built as 'a marvel of environmental comfort and efficiency,' Carlisle says. ING claims the lowest absenteeism of any office in Amsterdam and its energy bills are said to be 90 per cent less than other banks in the area.

While other companies, such as PriceWaterhouseCoopers, have advocated 'team-working' between individuals, Carlisle stresses the need to create an infrastructure between companies at an organisational level. And this, he claims, is catching on. 'We are being plagiarised all over the place, and that's good news for the industry.'

Carlisle believes the same principle applies to construction in the world's earthquake regions, from Gujarat to Turkey, Armenia and El Salvador, where thousands of people lost their lives. Such devastation calls for strict implementation of international building codes. But Carlisle believes that partnering would also help to overcome a cowboy culture of corruption. 'It is about involving all parties, including planners, regulators and residents who deserve safety and a better quality of life. In South Africa it is a given that you engage the local community. Partnering raises the level of honesty and creates the conditions for honest conversations.' He acknowledges that partnering won't guarantee immunity from corruption. But, he says, 'The people who slink away from engaging all the stakeholders must be regarded as suspect.'

Carlisle brings to his work a background of experience in Africa. He grew up in a small copper-mining town in Zambia, surrounded by the beauty of nature and the outdoors. He worked in the mines as a safety officer and loved both the wild beauty of the country and the din and energy of the mine works and its people.

He was one of four children whose parents imposed strict standards of behaviour--manners at the dinner table and courtesy, particularly towards elders. 'There was no such thing as bad language and dirty jokes were not allowed,' he recalls. 'There was a lot of affection, but certain social attitudes were frowned upon.'

He studied economics, sociology and psychology in South Africa and England, and then returned to Zambia. 'My work was to identify black Zambians to take the place of whites in the workplace. I spent a lot of time with black Zambians and found what a rich social life they led--something I had missed. Learning to understand organisations and people, and to measure behavioural performance, made me interested in the kind of change process which informs the work I do today.'

His thinking has also been shaped, on the one hand, by the total quality guru, Dr W Edwards Demings and, on the other, by his Christian faith and the teachings of the Austrian philosopher Rudolph Steiner. Meditation and daily reflection help him to maintain a sense of balance, he says.

He argues that personal integrity and effectiveness are closely linked. 'Being moral is being efficient,' he told a group of young people in 1999. 'Being kind and generous is being efficient. Having negative thoughts and doing wrong actions stop us doing things efficiently. So trying to be a good business person is, at a certain level, just good business.'

Big business, he asserts, 'is showing signs of a new focus on relationships in the way it delivers its products and services, which may lead to a heightened moral consciousness. This will diminish corruption as transparency increases. Partnering is the most obvious manifestation.'

Additional reporting by Edna Yee. See her profile of John Carlisle in For A Change magazine, June/July 2000.
Also 'A new design to end corruption', The Industrial Pioneer, December-January 2001.