Housing shortage is a construction industry skills crisis

18 January 2016

Headlines focus on the emotive issue of hard-working families being unable to afford their own homes, and the Government’s pledge to get Britain building.

However, the Government’s massive pipeline of major construction projects (like Crossrail), its recent announcements to get directly involved in house building, and a collaborative risk-sharing contracting philosophy (NEC contracting), all point towards a housing shortage that is unlikely to abate without major investment by the Government in skills-development across the construction industry.

Government set to become land-owning residential developer

On the 4 January 2016, the Government announced that it is to directly commission thousands of new affordable homes, with Prime Minister David Cameron noting that the Government is “rolling its sleeves up and directly getting homes built”. The Government is, in effect, taking on the challenge of being a residential developer, which is no easy feat, and which requires a skilled and well-resourced client-side workforce.

The Government notes that “currently the top 8 house builders provide 50 per cent of new homes” and, accordingly, “the direct commissioning approach will support smaller builders and new entrants who are ready to build but lack the resources and access to land”. However, Brian Berry, Chief Executive of the Federation of Master Builders, commenting on the announcement, said: “As positive as this development is however, it remains only one piece of the jigsaw. The on-going skills shortage is as pertinent for local firms as it is for larger contractors.

Government commits even more resource to house building

On the 10 January 2016, Prime Minister David Cameron announced a Government commitment of regenerating the most run-down housing estates with the aim of transforming them with attractive and safe homes. However, a Savills report, which was commissioned by the Cabinet Office, makes the following observations about this announcement: “Given the leadership capacity and technical skills available to most Local Authority housing and planning departments, the management of more than one or two sites at a time would be difficult. This makes a case for providing additional capacity and resources…”.

Is Government resource already overstretched?

The Government currently has some massive infrastructure projects, such as High Speed 2, Crossrail, Thames Tideway Tunnel, Hinkley Point C and Highways England projects. There have been attempts to address the predicted skills shortfall through training initiatives like the Roads Academy initiative, National College for High Speed Rail, and the Tunnelling and Underground Construction Academy.

However, the National Audit Office (NAO) has just issued their latest report on the Government Major Projects Portfolio, which includes major service reforms, ICT projects, and infrastructure and construction projects (such as Crossrail). “There are 149 projects in the Government Major Project Portfolio (the Portfolio), with a combined whole-life cost of £511 billion and an expected spend of £25 billion in 2015-16” (NAO).

The NAO noted: “Key recurring issues included an absence of portfolio management at both departmental and government level; poor early planning; lack of capacity and capability to undertake a growing number of projects; and a lack of clear accountability for leadership of a project”.

The Government’s contracting philosophy for construction and infrastructure projects

The Government typically contracts on such projects using the NEC suite of construction contracts, which has the aim of promoting collaboration, a spirit of mutual trust, appropriate risk allocation, and better project management. These are worthy aims, but realising them requires that NEC contracts are given careful and considered thought pre-contract, and are actively managed and operated during the lifetime of the contract. Steve Rowsell, NEC Users’ Group Chairman (writing in NEC Users’ Group Newsletter; January 2016; Issue 76) says: “NEC contracts are most successful when administered effectively and efficiently by skilled practitioners”.

The headlines need to change

No doubt we’re going to continue reading headlines of a Government determined to give people a helping hand onto the property ladder, but if the overheated and under-resourced construction industry is to successfully deliver major infrastructure projects and the required volume of new homes on time, the headlines and attention must be re-focussed towards the less voter-friendly issue of skills-development across the construction sector.

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