SEC Group Northern Ireland

A Manifesto For Securing A Better Future For Firms In Northern Ireland Construction

The Specialist Engineering Contractors’ (SEC) Group Northern Ireland represents the largest sector in the Northern Ireland construction industry by value.  It is an umbrella body comprising the industry’s premier trade associations:

  • British Constructional Steelwork Association
  • Electrical Contractors’ Association
  • Building & Engineering Services Association
  • Lift and Escalator Industry Association
  • Scottish and Northern Ireland Plumbing Employers’ Federation

This manifesto sets out a list of priorities for the construction industry to be addressed by policy makers in the next Northern Ireland Executive.  These priorities are aimed at:

  • Removing wasteful practices in order to make the industry more efficient;
  • Enabling SMEs to realise their full growth potential;
  • Improving standards across the industry.

ELECTION 2016, Priorities for Construction

  1. Improving payment
  2. Streamlining pre-qualification
  3. Reducing carbon emissions
  4. Overcoming the skills deficit
  5. Achieving savings via a radical change in procurement
  6. Improving construction procurement
  7. Raising standards

1. Improving payment

Issue:

Poor visibility of cash-flow, under-capitalisation of large companies and lengthy supply chains cultivate payment abuse which produces unnecessary cost within projects and, thus, waste.  The collapse of the Patton Group in November 2012 had a devastating impact on small firms.

At any one time approximately £60 million is withheld by way of retentions in the public sector in Northern Ireland, ostensibly as security in the event of insolvencies or defective work; in practice the monies are used to generate a positive cash flow for the receiving party.

The Construction Procurement Directorate has promoted the use of project bank accounts in public sector construction. Once progress payments are certified as due they are paid into a bank account, ring-fenced from the risk of insolvency of tier 1 contractors. All those involved in delivering the works are paid simultaneously out of the account.

From the beginning of this year (2016) project bank accounts have been mandated for all central government projects (valued at £2m and upwards)  in Northern Ireland.

Required NI Executive Commitment:

To make construction industry payment practices more efficient through:

  • increasing the use of project bank accounts throughout Northern Ireland public sector construction including universities, local authorities and all bodes in receipt of public monies for their construction procurement;
  • making payment for off-site materials and labour in exchange for title to materials
  • protecting cash retentions by requiring that they are lodged in a ring-fenced account ;
  • excluding from public procurement those firms with a poor payment history;
  • digitising the payment process, using tools (such as Oracle) to facilitate greater monitoring and auditing of cash flow along the supply chain.

2. Streamlining pre-qualification

Issue:

Pre-qualification is a process for vetting the general suitability of firms to carry out construction works. Firms are required by public bodies to be vetted under different schemes (some provided by commercial operators) which generate excessive duplication and bureaucracy and, therefore, waste; small firms are spending (on average) 9 days a year filling out lengthy questionnaires.

The Construction Procurement Directorate has promoted the use of its pre-qualification template in an effort to standardise the pre-qualification process but the majority of public procurers are still using their own questionnaires.  True efficiency comes from suppliers maintaining a pre-qualification profile on one digital platform which can be accessed by clients or customers as required.

Required NI Executive Commitment:

To make mandatory one pre-qualification template across the public sector (and all through the supply chain) and to use the e-Sourcing NI portal as a “one-stop shop” for storing all firms’ pre-qualification data.

3. Reducing carbon emissions

Issue:

Existing legislation requires that carbon emissions are reduced by 80% by 2050 and the UK Government has targeted a reduction of 50% by 2025.  As much as 60% of UK carbon emissions are from buildings.

Required NI Executive Commitment:

To adopt the following actions to reduce carbon emissions:

  • A carbon audit of the Northern Ireland public sector estate prior to commencing a programme of retrofit (allowing carbon efficiency to be designed into the retrofit programme to help achieve those targets).
  • Incentives for carbon efficiency – for example, through modification of local council taxes – should be provided to owners (especially those in smaller companies) of properties in the private commercial and industrial sector to carry out a similar audit and retrofit programme.
  • Simultaneously, expertise should be made available to property owners by not-for-profit advisory bodies to enable them to calculate reliable payback figures for returns from investment when investing in carbon /energy reduction technology.
  • There should be a statutory duty on owners of commercial/industrial buildings to get their buildings to a good standard of carbon/energy efficiency before they can be let to tenants.

4. Overcoming the skills deficit

Issue:

The construction workforce in Northern Ireland has contracted by over 30% from its peak in 2007. This, combined with an increasing age profile, will present a major barrier to growth in Northern Ireland construction.  With capital spend on Northern Ireland infrastructure – especially energy infrastructure – likely to rise over the next few years, SMEs will be stretched to develop or access the necessary engineering training. This is at a time when the construction industry has become heavily dependent upon engineering skills and know-how.

To deliver sustained growth a priority is to attract new talent into the sector, ranging from young people and apprentices through to adult trainees and experienced workers who move to construction from other sectors and require re-skilling or training to undertake specialised roles.

Required NI Executive Commitment:

To set a target to return to pre-recession training levels within 3 years – representing an increase of 50% in the number of engineering apprentices being trained within the sector (other targets to be agreed).

The targets to be achieved through:

  • Adopting measures to address false employment;
  • Specifying engineering apprenticeship  quotas within public contracts;
  • Greater engagement by those delivering apprenticeship training (eg colleges) with employers in respect of employer requirements at all stages of an individual apprenticeship, including delivery methods, timescales, achievement levels (relevant awards) and grants.
  • Highlighting the need for engineering skills as part of the public sector pre-qualification process;
  • Recognising the key role of industry trade bodies in Northern Ireland in promoting high level engineering skills.
  • Reducing bureaucracy associated with obtaining financial support for training for engineering trades

5. Achieving savings via a radical change in procurement

Issue:

Over 80% of the value of Northern Ireland construction is generated by its supply chains.  But the lack of supply chain involvement in early decisions on design and cost contributes substantial waste when designs have to be subsequently modified or abandoned. Furthermore main contractors are not required to engage firms that have enabled them to secure successful bids.

Integrated Project Insurance (IPI) is a policy of insurance that will underwrite the cost plan for a project provided that the whole project team has robustly managed the risks involved.  It is a financial loss policy that is triggered by overruns on the cost plan.  IPI is being trialled on public sector projects with the aim of providing certainty of construction costs and minimising such costs through eliminating wasteful processes.

Required NI Executive Commitment:

  • To trial in Northern Ireland integrated project insurance and, once satisfied with the outcomes, proceed to roll out the use of IPI across the public sector.  The long-term aim is that public monies should not be released to finance construction projects unless the cost plan has been insured.
  • To ensure that public sector construction procurement policy embraces early involvement (at the design stage) of the engineering supply chain to help deliver the most cost-effective design outcomes.
  • All tier 1 contractors must name their sub-contractors when bidding for public sector work and must use the named sub-contractors in the event of a successful bid.

6. Improving construction procurement

Issue:

There is a need for a more pro-active approach that challenges bad practice in all matters relating to public procurement in Northern Ireland.  In 2013 the Groceries Code Adjudicator Act was introduced; this extends to Northern Ireland.  This provided for the appointment of an adjudicator to promote good practice in relationships between the large retail supermarkets and their supply chains.  The Adjudicator has the power to impose penalties on supermarkets acting in contravention of published guidance. In Canada the Procurement Ombudsman carries out a similar role in relation to public procurement.

There is a need for effective oversight of both public bodies and the supply chain to ensure that good practice is maintained.

Required NI Executive Commitment:

To introduce legislation to establish an adjudicator or ombudsman to promote good practice in Northern Ireland public sector construction with effective powers to deal with bad or punitive practices (such legislation could be broadened to include construction procurement by the private sector).

7. Raising standards

Issue:

There are no barriers to entry to the construction industry in Northern Ireland.  The ease of entry into the industry favours firms having little interest in adhering to the required standards, investing in training and skills and in ensuring the health and safety of their workforce.  Many of the construction trade associations already operate arms lengths arrangements that verify firms’ technical competence.  The Construction Procurement Directorate has launched the Sparksafe initiative in the electrical sector which requires registration of competent firms and employees.

Required NI Executive Commitment:

To set up a joint government/industry taskforce to develop proposals for a licensing scheme for firms operating in Northern Ireland construction. Where relevant these should be based on trade associations’ current arrangements. In the meantime all public bodies should place greater emphasis on firms that can demonstrate innovative capability and technical competence through being audited by reputable trade associations and similar schemes.

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