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FS51 - Developing a Process to improve productivity and competitiveness

Written by: CIC Start Online

"Developing a Process to improve productivity and competitiveness" by the University of Dundee and Pert Bruce Construction Limited

SUMMARY

This feasibility study addresses the improvement of productivity and profitability within a construction firm. This feasibility study explores the opportunities to embed a process of productivity improvement in Pert Bruce – a contractor based in Montrose working in the new-build and refurbishment sectors. Working with support from staff at the University of Dundee the ultimate goal of the study will be to allow Pert Bruce to improve productivity and to roll that process out throughout their supply chain.

This study seeks to determine the feasibility of developing a process within Pert Bruce and their supply chain to improve labour productivity. Labour accounts for some 30% of typical construction costs. An increase in productivity of 30% would therefore reduce construction costs by 10% . In days when contractors’ margins were 4%, this would represent a 250% increase in profits. Equally, it could represent an 8% cut in costs to the client and a 50% increase in profit to the contractor. In an environment where contactors’ margins are zero or even negative , improvements of this magnitude potentially represent the difference between survival and extinction.

The UK Government has recognised that one of the keys to economic recovery is to increase productivity. This recognition is reflected in many publications for example, the Department of Business Innovation and Skills’ Economics Paper No 12 (March 2011) . Additionally, the Scottish Government’s second purpose target after economic growth is to rank in the top quartile for productivity against key trading partners in the OECD by 2017. Improvements in productivity will assist both Scotland and the UK to meet these targets.

By developing processes to aid productivity improvement, this project seeks to improve Pert Bruce’s profitability and help them to grow. The company may choose to deliver the immediate benefits internally, or provide increasingly competitive bids to clients or a combination of the two.

Labour productivity is central to the successful delivery of construction projects. It has a major impact on both time and cost. Improvements in labour productivity offer the greatest potential for reduction in costs . And yet, few contractors collect productivity data, and even fewer analyse it in a way which is designed to improve performance. There are some very good reasons for this: first, traditional cost models and contract documents such as the bill of quantities do not readily lend themselves to the isolation of labour productivity; second, items in the bill of quantities are not activity based and are not designed to measure labour activity, but focus on the materials required for a project; and third, there are far too many activities on a construction site to contemplate measuring productivity in them all. Previous research undertaken at the University of Dundee has developed approaches to help contractors overcome these challenges. This has been supplemented by the development of a Productivity Benchmarking Tool. The study will explore and test appropriate tailoring of this tool to Pert Bruce’s requirements and determine the applicability to their existing systems.

The scope of this study is to develop a process within Pert Bruce to allow them to measure and control productivity which are the first steps in allowing them to improve. The feasibility of application to the wider construction industry will be explored. The study will be limited to two sample projects owing to it being at feasibility stage. The overall scope of the study will be:

  • Explore the significant activities that might be measured and how they can be measured;
  • Tailor and test the applicability of the Productivity Benchmarking Tool to record, measure, analyse and benchmark their productivity and the factors that affect it;
  • Explore the adaptation of internal systems (eg time sheets, allocation sheets) to best measure productivity at the task level;
  • Using the knowledge and experience of managers and supervisors run two case studies on measuring productivity at the task level, recording that data, analysing it to determine necessary actions and establishing benchmarks as an incentive to productivity improvement;
  • Explore the use of detailed planning with supervisors and managers as a means of improving productivity.
  • Ensure that estimating and planning systems are aligned to use the productivity data to base decisions on real data from the productivity measurement.

Key words: construction, supply chain, productivity

AUTHORS

Prof. Malcolm Horner, University of Dundee

For Pert Bruce Construction Ltd

The outputs of this study will be disseminated in due course.

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