South Africa – What IF?
South Africa’s construction industry problems are not unique – they have been created by people in many countries and have been solved with some success and then they have been re-created elsewhere and somehow solved again. Once again, these same issues are rife throughout the industry and we are not alone with Australia, and the UK under similar albeit different stress. The undeniable fact is that we do not learn from history and now we are faced with having to solve our problems in our own way.
Let’s look at where we aspire to be and then look at where we are and then in discussion, map a way for us to collaborate and focus on achieving our aspirations.
We should all be aspiring to contribute to society in a way that improves ourselves and our fellow citizens by adding value in a sustainable way focusing on achieving personal growth and economic freedom for all. Our actions should be respectful towards our safety and that of our colleagues as well as cognisant of our planets limited resources and mindful of the legacy we leave for generations to come.
Construction is currently driven by creating winners and losers in other words we have gone back to basic survival and reverted to the years of the Neanderthal. Survival of our species (Our Industry) is at stake and we are hunting for something to eat without being eaten. How can it be that we have forgotten that humans became the most successful species on the planet by collaborating in large groups? At the very heart of this dilemma is the fact that our competitive nature and the success we have achieved through collaboration is totally out of balance.
To be successful as a relatively new nation we need to collaborate properly and efficiently, embracing the global economy where warranted in a national effort of nation building, embrace the wave of the 4th Industrial revolution and drive towards proper transformation and a sustainable future that we can all share for generations to come.
Using Cyril Ramaphosa’s announcement in the recent “State of the Nation Address” of a new “Smart City” to be built as a catalyst to see if we can generate some further discussion and action specific to our Industry. We cannot successfully procure buildings and infrastructure for a Smart City using the current prevailing model which generally as follows the tender format described in my previous article.
It is very evident that the current methods of procurement and the inherent and inappropriate risk transference contained within the processes has failed spectacularly and particularly on large complex projects in South Africa. This is evidenced by the fractious and quite frankly unsustainable level of legal and commercial dispute processes being conducted as I write. Failures of large, medium and small contracting enterprises are currently at unprecedented levels. The current procurement process drives this conflict in that the outcome almost always creates big winners and big losers. PPP projects proposed as a potential solution are cost prohibitive to tender with the bidders confined to only the very large contractors and are thus some way off in terms of investor appetite.
Smart Cities require far more than the developer securing their return, the contractor losing money and the customer paying the price. Smart Cities, by description, need to respond to efficiency in energy irrespective of source and deal with waste in an environmentally responsible way. Protection of the environment is a key driver and clever utilisation of environmental resource is a necessity. They demand built in redundancy for future proofing, movement of a growing population and re-creating space that is conducive to profitable work and leisure opportunities for all the stakeholders, present and future. The projects that make up these Cities need to demonstrate value throughout their life cycle. These cities should also respond to the national requirement to create sustainable employment and develop skills that respond to our requirements as a developing nation. This requires smart people working smartly.
As a guide we should consider following is the famous JF Kennedy 1961 anecdote, when he asked a janitor during a visit to NASSA what he was doing – The janitor responded, “I am helping to put a man on the moon”. Perhaps you have also heard the story of Christopher Wren, a seventeenth-century English architect who walked one day unrecognised among the men who were at work upon the building of St. Paul’s cathedral in London, which he had designed. “What are you doing?” he inquired of one of the workmen. The man replied, “I am cutting a piece of stone.” As Wren went on he put the same question to another man, and the man replied, “I am earning five shillings two pence a day.” To a third man he addressed the same inquiry, and the man answered, “I am helping King Charles II to build a beautiful cathedral for our country.” The Janitor and the third man had vision. They could see beyond the cleaning and cutting of the stone, beyond the earning of a daily wage, and were working with a tangible purpose.
I think that the King Charles ll analogy is best as he was considered a weak king, the “great plague” and “fire of London” happened during his reign yet, he managed to build new cathedral and many other beautiful national buildings. In our case we are weak, yet we can collectively have the vision and will to build a great South Africa and even a “Smart City” (where everybody is economically active and being rewarded for applying their skills effectively and enterprise rewarded for the risk burden carried in delivering.)
To conceptualise and deliver smart cities requires collaboration on a grand scale. The endeavour requires the fostering of a collective winning and accountable mentality with rewards for all willing participants. There is in my view no place for greed, yet there is place for success and reward.
If we start with the overall cost of a building a project through its design life of +30 years being 100%.
The cost to design and construct the project will equate to between 20% and 40% and the cost to operate and maintain will be between 60% and 80% of that overall cost.
The current procurement model does not suit the smart customer.
1) If the project is at the bottom end of the scale i.e closer to 20% to build, it won’t have the efficiencies described above therefore will be far more expensive to operate and maintain and the customer will bear that cost (80%) over a long period.
2) If the project is at the top end of the scale described (Smart City Quality) i.e closer to 40% to build, it will have all the required efficiency built in, however at occupation the long-term efficiencies will be largely intangible and theoretical and make it difficult for the developer to convince the customer to pay the premium on the “going rate”.
The developer therefore has two choices, they either develop to sell and the long term running cost becomes a customer problem (Short term) or develop with the long-term view and are then rewarded on the full lifetime savings and efficiency of the project. Both these choices create conflict that won’t suit the customer. We are very quickly at the real issue – CUSTOMER EDUCATION.
What really drives value for money? It is not the Taj Mahal where money is no object. It has got to be more than the view from an attractive looking but inefficient building. It is also more than a “RDP” house that is poorly insulated, barely habitable in all but the mildest of climates. Smart Cities need to cater for all and it is up to government(s) to legislate minimum standards and create the space for us to exceed them.
I firmly believe that, to create smart buildings and smart infrastructure that demonstrate value for money during the operational design life and beyond, that the full value chain needs to be put to work in collaboration from the very inception of the project or at least the earliest appropriate point to extract all the value.
The customers vision of their future needs to be interrogated far more robustly than it is at present and the solutions then tailored in respect of that vision with the proviso that the solution can be adapted to suit a changing economy. There are thousands of buildings in South Africa that are empty well within their design life simply because they have not been future proofed and are prohibitively expensive to refit and therefore unattractive to new occupants. The customer is no longer the king, it is the customers customer who has taken the throne.
To believe that a contractor and sub-contractors cannot add huge value to the finally proposed solution prior to applying for planning permission is folly. There are many instances where smart construction and system solutions have been proposed which have assisted in obtaining approvals and reduced the cost of construction and many a scheme that has failed to leave the drawing board stage because the designs have been cost prohibitive in that they have not taken the build-ability into account. There is also the 5 P’s factor (Poor planning precedes poor performance!) How can we possibly think that a smart building can be built without collaboration throughout the value chain?
BIM (Building Information Modelling) and 4D design (Spatial design in conjunction with programme) is a must have and so is the use of new technology where appropriate! Rework due to poor coordination and clash detection costs the contractor dearly which adds to backlog, inefficiency and the consequent conflict.
Technology is moving on at a rapid rate and SABS is falling behind, inhibiting the use of new technology in the build environment and this is not only in the tech world but in realm of basic building materials. An example of which is geopolymer cement, a material made largely of waste product and a bit of chemistry with proven but not “SABS certified” properties that outperform traditional cement in strength as a binding agent and the manufacture process thereof is significantly lower in the emission of carbon into the atmosphere not to mention that it is significantly cheaper.
We should not compromise on quality even in the most basic forms of construction and to achieve this aspiration we need to ensure that we train our people properly and that means continuously equipping them with new skills and the confidence to self-equip and contribute by utilising these skills in an evolving industry. Off-site solutions are a case in point, the more work that can be fabricated in a controlled environment and effectively bought to site as pre-assembled components the better the quality and greater the predictability of delivery and performance should be. We will need to re-skill a large portion of our workforce to operate in a manufacturing environment which in turn will have the added benefit of revitalising a sector which has been put under pressure by imports from the far east.
With respect to financial reward we need to establish a model of procurement that as a basic principle ensures that businesses are compensated fairly for the risk burden that they carry in participating on a project and that they are selected on an equitable basis that is competitive in the design and construction solution chosen for the project. In this respect we need a strong collective industry recognised body(s) such as the MBA or SAFCEC and others with a proper mandate and powers of sanction. The barrier for a participant’s entry onto the body needs to be transparent (without fear of accusation of collusive behaviour) and appropriate with regards to expertise, systems and behaviours required to be a member and to participate competitively on any specific project.
All forms of contract have their own pitfalls however nothing focuses a project team more than a win – win scenario where the whole team shares in the risk and reward of the project in proportions that are appropriate to input and with the proviso that it is every team member’s responsibility to ensure that the other members perform. Equitable procurement models and “target cost” type contracts that have terms and conditions without favour to either party and surety of timeous payment is what is called for.
WHAT IF WE CHOOSE TO WIN TOGETHER?
PUT THE NEGATIVES BEHIND US – PARTNERSHIP AND REAL COLLABORATION IS THE DIRECTION PROPOSED, HOW WE SET THE RULES, CHOOSE OUR PARTNERS AND MOVE TOWARDS A BRIGHTER FUTURE IS THE CHALLENGE TO BE FACED BY GOVERNMENT AND INDUSTRY TOGETHER. IF GOVERNMENT IS UNWILLING OR TOO SLOW, THEN INDUSTRY SHOULD DO IT ANYWAY BECAUSE IT IS THE RIGHT THING TO DO – NOW AND FOR THE NEXT GENERATION.