You try to convince him that you are better than the competition, but it is just your word against your rivals'. If only you could produce an independently ratified league table that shows you really are better than the rest.
Performance league tables 鈥� like those produced for schools 鈥� are no longer a pipe dream. This week, the government-backed Movement for Innovation, which is charged with implementing Sir John Egan's Rethinking Construction report, published details of how firms can measure their performance against the rest of the industry. And the DETR's Construction Best Practice Programme is set to administer the scheme, collecting data on performance and compiling league tables of companies.
The tables will be based on 10 key performance indicators. Seven are applied on a project-by-project basis: construction cost; construction time; cost predictability; time predictability; defects; product satisfaction; and service satisfaction. Three indicators look at company performance: profitability; productivity and safety.
Tool for improvement
If firms are honest in presenting data, the indicators will give construction a useful tool for improvement. And companies could use them in-house as a catalyst for greater efficiency.
However, the initial reaction from the industry is cautious. Contractors and consultants are wary of giving away information that will reflect badly on them, prejudicing the accuracy of any performance leagues. Clients, too, believe firms may not be completely open about their performance. They are also concerned that the indicators do not take account of issues of value to them, such as rent yields and aesthetics.
The data that has been used to calculate the benchmarks that firms will measure themselves against has also come under fire. Critics say the base data is unreliable and that the methods for calculating performance are seriously flawed.
For each category, the Movement for Innovation has produced benchmark graphs compiled from DETR, Construction Clients Forum and RICS data. The line graphs trace the industry's average performance for each indicator on all types of project. There is also a set of "supergraphs" that plots the entire industry's average performance for all 10 indicators. There are also six sector-specific sets of graphs covering new-build public sector housing; new-build private sector housing; new-build public sector non-housing; new-build private sector non-housing; infrastructure; and repair, maintenance and refurbishment The benchmark graphs are available as wallcharts from the Construction Best Practice Programme, so firms can measure their own performance. To find out how you measure up, calculate the difference between your performance on a particular project and the Movement for Innovation's 1998 comparison project. Then, plot the figures on the graph. If you are above the benchmark score of 50%, you are better than the average, lower than 50% means you are worse.
The idea is that clients can use the indicators to make more informed choices. They will ask contractors for their key performance indicators and compare them with competitors'. When enough information becomes available, companies will be ranked.
The Movement for Innovation says contractors and consultants can also benefit from the performance indicators by using them to assess how particular project teams are performing. They can also compare their companies with the rest of the industry.
Industry reservations
Publicly, the industry is keen to be seen backing the initiative, which has been endorsed by construction minister Nick Raynsford. But, in private, it has concerns. One contractor confided that the methods are "pseudo science" and open to abuse. "It all depends on how much information the contractor gives and how he interprets the definitions in the methodology," he says.
Performance is worked out by comparing a recently completed project with one finished a year ago. To ensure a like-with-like comparison, "normalisation" factors are applied to the data. These adjust it for differences in location, building type and size, and take account of inflation. Once the data has been normalised, it is possible to find out whether a project was faster, slower, more costly or cheaper than the comparator.
The contractor says competitors might put forward bogus information. He believes that even data from a client cannot be relied on: "How many contractors bid low and pull back costs later in the courts?" And, he adds, some contractors are prepared to take on loss leaders to gain an advantage or to win framework agreements with major clients.
A source at one top 20 client, who did not want to be named, says clients may not give genuine information. "The kind of cost information you see published has been processed by our marketing departments to make us look good," he says. "Our real cost information is commercially sensitive and we would never risk our competitors seeing it." The client also says the indicators do not take account of some factors that he values highly. "If a great site comes on the market, we go and build on it. Costs might be higher than projects finished last year because ground conditions are bad or planners are more demanding, but in the end, we make up for it in rents," he says.
Fashion is also a factor. "If our tenants demand buildings clad in gold next year, we will provide them, even though they are more expensive to build 鈥� that is no reflection on the contractor's efficiency," he says.
Although the client believes the initiative is a "noble effort", he says the normalisation factors are not sophisticated enough He also questions the base data. The construction time and cost graphs have been plotted from the DETR's database. He says: "The DETR can pick up accurate data for public sector projects, but how can it know whether data for private projects is accurate? The whole graph might be skewed by expensive public sector projects."
A top 10 QS criticised the way the time indicators were calculated. These measure the design and construction periods. The problem is that the definition of when the design period starts and the construction time finishes is open to interpretation, says the QS.
The QS also questioned the productivity and profitability indicators. These have been plotted for consultants and contractors on the same graph. Consequently, all contractors 鈥� even the most profitable ones 鈥� end up on the lower end of the graph because they generally make less profit than consultants, says the QS.
There are also problems with assessing consultants in this way. "Consultants that undertake a lot of [highly paid] litigation work or project management will look better than those companies that just do quantity surveying," he says.
There could be more serious problems if the indicators are used for selecting firms, says one City law firm: "If the methods for working out the performance are not watertight, there is a potential commercial libel," says a senior partner. So, a contractor that is not selected because the indicator is erroneously poor might have a case for defamation.
"It's good to get rid of inefficiencies, but you have got to be right," says the lawyer. "I hope there will be a review in a few months. Otherwise, things could go too far."
