27th January 2017 Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Last year the Construction Industry Training Board (CITB) and the Department for Business, Innovation and Skills announced that firms with a payroll over £3m would need to pay both the CITB levy and the government’s new all-industry apprenticeship levy, which will come into effect from April. It’s fair to say the news did not go down well with the 900 large firms it’s set to impact.

But it seems our complaints have already been heard, as the CITB have just unveiled plans to cut its levy by almost a third. The training body is proposing cutting the levy paid by employers from 0.5per cent of total wage bills to 0.35 per cent and reforming the way it delivers training grants to provide better value for money.

It’s no surprise that the CITB are trying to get the larger firms back on their side, with the organisation set to face a fight for survival later in the year. The statutory levy is up for renewal in autumn, and firms, both big and small will be voting on whether to continue it. So, for them, the more firms on their side, the better. But with the double levy coming into effect this April, and the cut in the levy not starting until 2018, chances are most firms still won’t be their biggest supporters come autumn.

There are a lot of things up in the air this year, the majority being an impact of the Brexit result. The government is considering imposing a £1,000-a-year levy (yes, another levy!) on each skilled European Union worker hired by British companies. The decision would have a huge impact on the industry, an industry already so strained by a skills shortage. It’s estimated that nearly 12 per cent of the UK’s 2.1 million construction workers come from abroad, the majority of those coming from the EU. In an industry that is already struggling for workers and dealing with two apprenticeship levies, it makes no sense to add another skills levy on top, especially one that will impact so many workers and companies!

The housing minister said the levy on EU workers will help the British economy and British workers who feel they are overlooked when applying for new jobs, but what about the workers that we already have, those that have committed years of their lives to our industry? A cost of £1,000 per worker, per year is a massive hit to companies that employ a high percentage of EU workers, it puts jobs and companies at risk and the last thing we need is more companies going bust.

But nothing is set in stone yet, so I guess for now we sit back and wait for the levies to come into place. The government and the CITB seem confident it’s the right move for the industry but only time will tell.

CENE are holding an event on Apprenticeships, new Degree Apprenticeships, levies and how to gain funds towards a training grant at Northumbria University on 14 February. For more information or to register your interest, please contact Leanne on 0191 500 7880 or leanne@cene.org.uk.

20th January Journal Column

By Stephen Hamil, Director of Research and Innovation at NBS

The Government’s April 2016 Building Information Model (BIM) mandate has been and gone –and now nine months on, we’re all wondering how well BIM Level 2 is working in practice and if it was really worth it. Well, looking at what the UK has achieved since then and how we’re now viewed in an international arena against how much it cost us to do, then yes, I’d have to say it was worth it.

At NBS we are always working with people, companies and partner organisations to find and drive the science and technology innovations that will grow the UK economy, and if you compare the cost of BIM investment, to the contribution the industry makes to the UK economy, it’s not very large at all.

Funding spent on running the BIM Task Group for five years, developing standards and investing in technology through Innovate UK has returned a set of standards and tools that define a standard process focused around digital information exchanges. Without the BIM Level 2 mandate, this process would be much longer with fewer decisions being made. A project team would come together, made up of many organisations, and they would either (a) start without agreeing responsibilities and the process or (b) spend unnecessary time discussing what process to follow, potentially having to learn a new process for each new project – equalling a lot of wasted time, time that most projects just don’t have.

But there is of course, more work to be done. The launch of Digital Built Britain at last year’s Institute of Civil Engineers BIM Conference announced support for BIM Level 2 adoption. UK and International guidance will eventually be published on the official British Standards Institution website and in addition, the United Kingdom Accreditation Service have been appointed to establish a certification scheme for Level 2 BIM – all examples of more support for the industry to make this a success.

The Digital Built Britain strategy looks towards putting the foundations in for a ‘Level 3’ world which will see BIM and ‘smart cities’ coming together. A big part of the ‘smart cities’ idea is the internet of things. Learning from our built environment will help us to maintain it better and also design new assets better. Albert Einstein’s definition of insanity was doing the same thing again and again and expecting better results. We need to implement a ‘feedback loop’ so that actual performance of an asset feeds back into the process of the designing and constructing the next asset.

Digital is the key enabler to allow us to build a more sustainable built environment and deliver on our climate change targets. Unless it is possible to make informed decisions based around performance, it is not possible to deliver fully on sustainability.

The UK industry has made great strides forward with BIM Level 2 – this way of working must now be embedded into the majority of projects across the country and continue evolving in the future to build on the position that the UK finds itself in as a world leader in digital construction.

13th January Journal Column

By Graham Sutton, Associate Solicitor at Hay & Kilner

Adjudication is the process of resolving disputes without lengthy and expensive court procedures. Following changes to the Construction Act in 2011, specifically Section 108 A, it is generally accepted that in the absence of an effective agreement to the contrary, the parties involved in an adjudication cannot recover the costs of the adjudication process. However, given that those costs can be substantial, it’s no surprise that parties still try, and fail to recover them – trying various ways to get around the “no costs” rule.

One attempt to overcome the prohibition on costs can be seen in the recent case of WES Futures Limited (‘Futures’) v Allen Wilson Construction Limited (‘Wilson’). Futures started adjudication proceedings to recover payment of unpaid invoices. The proceedings stopped when the adjudicator resigned because he lacked jurisdiction. Futures then instructed their solicitors to issue court proceedings to recover the outstanding payments, but before doing so, the solicitors wrote to Wilson confirming that their letter was to be regarded as a “Without Prejudice Part 36 Offer” offering to accept a lesser sum than the full amount claimed in the full and final settlement of Futures’ invoices. The letter also said that Wilson had 21 days to accept the offer, and if acceptance occurred later, Wilson would be liable for all Futures’ legal costs incurred in the case.

Wilson made no payments and Futures started a second adjudication. This time the adjudicator was in favour of Futures and ordered Wilson to make the payment.  However, Wilson continued to refuse to pay and Futures began adjudication enforcement proceedings. Wilson then backtracked and decided to accept the Part 36 Offer of settlement that Futures had earlier offered.

Seeing an opportunity to recover costs, Futures argued that acceptance of the earlier offer meant that Wilson was liable to pay not only all the legal costs incurred in the legal proceedings, but also the costs of the two previous adjudications. The Judge rejected the argument and found that Futures was not entitled to claim any of the adjudication costs.

The Judge re-iterated the accepted rule that under the “Construction Act” adjudication costs are not recoverable. He found that if a successful party cannot recover its costs in the adjudication itself, it cannot recover those same costs in the enforcement proceedings either. However, the separate and distinct costs of the enforcement proceedings were recoverable. The Judge also pointed out that the Part 36 Offer letter referred to “the costs of proceedings” which included the court proceedings but could not embrace the costs of separate and stand-alone adjudication proceedings.

This case serves as a helpful reminder that if the parties to an adjudication wish to recover the costs of the process, they need to enter into an express agreement to that effect. In the absence of such an agreement we await with bated breath for the next attempt to straddle the “no costs” hurdle.

6th January Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Happy New Year to you all – I hope you’ve all had a lovely Christmas break and are raring to get started. I cannot believe 2017 is here already, but I’m looking forward to seeing what the next 12 months have in store for us – I think it’s certainly going to be a busy one!

It might only be the first week back to work, but 2017 has definitely started off on the right foot. We had two major and very promising, housing announcements before lunchtime on Tuesday, which hopefully sets a precedent for the year ahead of us.

The government confirmed that they plan on building discounted starter homes for young, first-time buyers, this year- part of their project to build 400,000 new affordable homes. The starter homes will be sold at a 20 per cent discount to first-time buyers aged between 23 and 40 and will be capped at price of £250,000 outside of London.

The first starter homes will be built on brownfield sites across the country and the first wave of 30 local authority partnerships, including Northumberland County Council, were selected for their ability to get the scheme up and running quickly.  The partnerships will have access to the government’s £1.2bn Starter Homes Land Fund and will see councils will work closely with the Homes and Communities Agency to identify and take forward further land opportunities for the fund – let’s hope the councils show interest, step up and help the scheme live up to its full potential.

And for first-time buyers the good news continues. The government also announced this week that England’s first garden villages have been proposed for 14 sites across the country to deliver between 1,500 and 10,000 properties.

The garden villages are to be built to a high quality, be attractive and well designed and are being built purposely to meet the huge housing need. Although there are no plans to build the villages in the North East just yet (the closest is Cumbria as a proposed Ponteland site has been submitted but not approved yet) it will be interesting to see how well they work and if they serve their purpose.

It’s always good to start the year on a positive note, and it’s encouraging to see that the government is putting house building at the front of its plans for 2017. The government’s White Paper on housing supply is expected later this month, and will set out its plans for building new homes – come on prime minister, please don’t let us down!

We can achieve a lot in a year, and it would be great to look back this time next year, and say that we’ve achieved everything we needed to, so let’s get our heads down and give the industry exactly what it needs.

I have a feeling this could be our year, change is going to come so bring it on 2017, we’re ready for you!

23rd December Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

It’s that time of year again when everywhere you look there are reviews of the last 12 months and predictions of what we can expect from the year ahead. If I had to summarise what 2016 was like for our industry, I would say two things- amazing, but bloomin’ hard work!
A new year is a natural point in time to stop, assess how things have gone over the past 12 months, look at everything that we’ve achieved and look at what we can do better in the coming year. The end of 2016 marks the end of the industry as we know it, for good or bad we don’t know yet, but what’s certain is that the industry will definitely change over the next few years- in the words of our new Prime Minister Theresa May ‘change is going to come’.

It’s certainly been a year for reviews and changes. This year, Homes and Communities Agency (HCA) came under review to look at how they can deliver the homes the country needs. It was agreed that there’ll be a review and total reform of the Construction Industry Training Board (CITB). April saw the collaborative use of BIM Level 2 in all government procured buildings become mandatory, not to mention the end of the Budget update and the Autumn Statement as we know it. It really has been all systems go!

Probably the biggest thing to come out of 2016 is Britain’s decision to exit the European Union, the impact of which we are still unsure of. Currently, the impact of the Brexit decision hasn’t really been felt, but that’s all going to change next year as we prepare to leave the EU. This is a move that could take six years, so we’re just at the start of what I expect will be a very long and demanding journey.

As well as the industry, we at Constructing Excellence in the North East (CENE) have had a very eventful year. We’ve had a very full Continuing Professional Development (CPD) calendar, which has seen us go up and down the country for events and awards. We’ve had the Constructing Excellence Awards, both Regional and National, and the first Generation 4 Change Awards, celebrating young professionals in the industry – something we are always more than happy to do.

There are so many other things that I could mention as it’s certainly been a busy year, but I don’t want to keep you away from your festivities for too long! So, based on that, there’s just one thing left for me to say, from all of us at Constructing Excellence in the North East, we wish you a very Merry Christmas and a happy and prosperous 2017.

16th December Journal Column

By Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Last month, the government published a wide-ranging review of the Homes and Communities Agency (HCA) that aims to help improve its efficiency and provide greater focus to its housebuilding work.

The review stated that the agency must have a clear principal objective of delivering housing. Going forward, it will need to remain a delivery agent for essential government programmes but should take a broad approach, using its expertise, land and investment to facilitate and maximise housebuilding. The review recommended the organisation needs to it become more active in the land market, to enter and shape new markets through Accelerated Construction, and to drive delivery of new products such as Shared Ownership and starter homes. The review concluded that the agency should ‘continue in its current form as a public body, but with a renewed and revitalised purpose of supporting housebuilding and increasing the supply of available land’. To achieve this purpose, the review recommended that the agency’s social housing regulation function should become a separate public body altogether. However, they have stated that this is merely an administrative change and will not affect the regulators powers or operations.

Currently, the HCA holds a dual role, as the regulator of registered social housing providers in England and the national housing, land and regeneration agency. The review didn’t criticise the agency, in fact it said that the agency was mostly working well, but suggested that the social housing regulation function become a separate public body only to remove the potential for conflicts of interest. This will allow for a stronger focus on the HCA’s primary objectives of housing delivery, regeneration, growth and devolution. For me, it’s a smart and necessary move, it’s best to avoid conflicts of interest altogether and not put yourself in that position.

The review was carried out between February and April as part of a wider programme of government activity to scrutinise the effectiveness and efficiency of public bodies. Improvements will also be made to the agency’s partnership working, with an additional emphasis on reducing bureaucracy and ensuring staff have the right set of skills for the future.The HCA Regulation Committee has welcomed the government’s decision to separate the regulator from the HCA, admitting it will strengthen their ability to promote a viable, efficient and well-governed social housing sector able to deliver homes that meet a range of needs.

Gavin Barwell, housing minister, said: “We are determined to create a housing market that works for everyone and the Homes and Communities Agency and regulator will play an important role in delivering the homes this country needs” – and I don’t think we can ask for much more than that!

9th December Journal Column

By Richard Waterhouse, Chief Executive of NBS

It’s safe to say that the effects of the Brexit decision are still unfolding. Industry forecasts, like those produced by the Construction Products Association and Experian, suggest that whilst we are not heading for a recession, construction output has significantly diminished following the Brexit decision. But it seems uncertainty, rather than speculation about the ultimate form Brexit takes, is the root cause.
Current projections suggest that even though the economy is performing better than expected right now, the referendum result will be a downward pressure for at least the next two to three years.

Those who design buildings are often good predictors of what will happen to the broader construction industry. This is because design work is the earliest work; so, if it tails off, in time, so will construction output.
NBS wanted to understand the views of the design community and the results of our latest survey show how the industry is feeling after the Brexit decision. The survey, which we last ran in June and July found that the design community follow a pattern we have seen elsewhere; a sudden and pronounced dip immediately following the referendum result, followed by a bounce back.

Predictions for practices’ workloads have markedly improved. In July, only seven per cent felt their workloads would increase in the coming 12 months. That figure has risen to nearly a quarter (24 per cent), – the same number of those who expect a decrease. Yet, 42 percent anticipate no change at all.

The latest figures around projected staffing levels are more stable than those in July. A quarter anticipate staffing levels falling in the next 12 months. Yet 19 per cent foresee growth, compared with only five percent in July. Almost half predict no change in their staffing levels, no growth or the increased output that we desperately need, but also no falls- so we can’t really complain just yet.
Designers are now less negative than they were immediately after the decision. The number expecting the industry to shrink is still high, at 44 per cent, but that has fallen a lot from 61 per cent. Whilst people are less pessimistic about the year to come, the immediate effects of the Brexit decision are being increasingly felt. Back in July, one in five had had a project cancelled, that figure has now risen to a quarter. Of those who have had projects cancelled or put on hold, those projects account for, on average, 21 per cent of current projects. That said, seven per cent have had projects re-instated that were put on hold after the referendum result, so we might be down, but we’re certainly not out!

When reading people’s comments, there remains a significant, and at times heartfelt, divide between those who favour our leaving the EU and those who do not. But we are also beginning to see a more rounded assessment of the future, which is what we’ve wanted since the decision was announced, nobody likes the fear of the unknown especially when the industry is at stake. All we do know is that we will be leaving the EU, but what form that exit takes is unclear and very important. The next few years will be very interesting to say the least.

2nd December Journal Column

CENEBy Catriona Lingwood, Chief Executive of Constructing Excellence in the North East

Last week, chancellor Philip Hammond made his first (and last) Autumn Statement and announced a lot of positive things for our industry. Housing and construction companies have welcomed his announcement which sets out new funding for affordable housing and infrastructure amongst other things.
The government have pledged to spend £2.3bn on civil engineering infrastructure work like local roads, which will support the delivery of up to 10,000 new homes where they are needed most.

A further £1.4bn will be provided to deliver 40,000 new affordable homes – a necessary response to the fact that the number of affordable homes in England fell last year to the lowest level in 24 years. The news has been welcomed by housing professionals, particularly Mark Farmer who authored the Farmer Review earlier in the year, who recommended that the government increased commitment to the National Affordable Homes Programme.
The National Housing Federation (NHF)have welcomed the announcement after calling on the government to relax restrictions on existing affordable housing funding for quite some time. Increased flexibility and extra investment will give the freedom and confidence to build more affordable homes, including those for rent, more quickly across the country.

The chancellor said between 1 per cent and 1.2 per cent of Gross Domestic Profit (GDP) will be invested every year from 2020 in economic infrastructure, which is broken down into the likes of transport, energy, flood defences, water, waste and digital communications, which might explain why there was no mention of any specifics- so let’s hope it’s invested exactly where it’s needed.
A ratio of 1 per cent-1.2 per cent compares to 0.8 per cent of GDP that is being spent currently, so it does sound promising, but four years is a long time to wait.

The housing sector has had a promising couple of months, and it will be interesting to hear expert opinions on how the government plans to tackle the housing crisis at the big housing debate. The debate, taking place throughout next week will give an up-to-date picture of the challenges facing the sector and what’s in store for the future, particularly after the government announcements.

While it all sounds positive, especially for housing, I was disappointed not to see any mention of investments in training and apprenticeships considering the number of skills shortage issues the industry is still struggling with. It would have been reassuring to see that a plan is in place to look at training and re-training people in the UK to prepare for any restrictions we may face when the impact of Brexit comes into play, but fingers crossed that comes next year – we need it sooner rather than later.

The statement didn’t feature anything that is going to impact us immediately, it featured a lot of small initiatives and big promises that will take a few years for changes to happen, so for now it’s a lot of waiting around and going about business as usual as we wait for initiatives to come into place – 2017 really is going to be an eventful year.

18th November Journal Column

HK Logo - smallBy Jan Rzedzian, Associate Solicitor, Hay & Kilner

Contractors, employers, construction professionals and solicitors should all be familiar with the 16-year-old Pre-Action Protocol for Construction and Engineering Disputes. The protocol sets standards which the parties to a dispute are expected to observe before court proceedings are issued – the idea behind it being to save time and money by avoiding litigation. It applies to all construction and engineering disputes, including professional negligence claims against architects, engineers and quantity surveyors. So far it seems to be working as, according to the Technology and Construction Solicitors Association, it’s succeeded in 40 per cent of cases.

However, as with everything, it hasn’t been without its problems. Judges and barristers feared that it impeded cash flow, front loaded costs, prolonged the process of dispute resolution and hindered access to justice – basically, it’s done exactly what the industry has been trying to avoid since the Construction Act 1996 came into force.

Following a review by a Technology and Construction Court working party, a revised Protocol was introduced and came into force last week (9 November 2016).
So, what’s changed?
• More concise: The general aim has been modified ¬¬so now only an outline of the case needs to be given. The letter of claim and response should now only contain a brief and balanced summary of the party’s position meaning it should take up even less time.
• Fairer settlement costs: There is now an aim to settle disputes inexpensively, to go along with the original Protocol aims of settling disputes fairly and quickly.
• Voluntary meeting: A meeting is now optional, and may take the form of mediation.
• Timeframes are tighter: Parties now meet within 21 days after the letter of response and a maximum extension for any step of the process is now 28 days.
• Automatic conclusion: Protocol action will be concluded automatically after the meeting, or 14 days after expiry of the period within which it should have taken place.
• Non-compliance penalty changes: Only in exceptional circumstances will the court impose cost consequences for non-compliance.
• Referee procedure: A new consensual referee system has been added, with the intention of enabling directions to be given by a qualified third party during the procedure. As the intended application fee for appointment of a referee is currently £3,500 plus VAT, it is expected that it will only be used in the highest value and most technical cases, where parties wish to ensure compliance with the Protocol and avoid the likelihood of judicial sanctions.
• Although the Protocol is not voluntary, parties can also opt out of using the Protocol altogether, providing they all consent to this.
The new Protocol is designed to be less onerous and less costly but has it relaxed matters too far? If courts are going to be reluctant to impose sanctions such as cost consequences for non-compliance, this may encourage parties to run that risk and we could find ourselves back in the “bad old days” of seven day letters before action.

11th November Journal Column

By Victoria S Beattie, Director of Construction, Gateshead Council

One of my least favourite topics, the gender pay gap, has reared its head in the news once again this week, but for once, it’s not all doom and gloom.

Statistics from the Annual Survey of Hours and Earnings, published by the Office of National Statistics (ONS), show that the pay gap between men and women in construction is now 1.8 per cent below the national average – hooray!

The industry has long been known as a ‘man’s industry’ and it’s been great to see it dramatically change its stance on women in recent years. We’re certainly making more improvements than other industries, but a 16.3 per cent gap, for me, is still 16.3 per cent too much
I’ve personally found that attitudes towards women in construction have changed massively and are more positive than ever before. In the 20 years that I’ve worked in construction a lot has changed, things might not be perfect, but they are certainly better than they used to be.

From next April, the Government will start action to tackle the gender pay gap by requiring all employers with more than 250 employees to publish their gender pay and gender bonus gaps. This will produce more accurate figures, so this time next year we’ll have a much clearer picture of where we’re at, and how we can start to reduce that pay gap even further.

We need to keep working to ensure the industry is seen as an attractive career choice for young girls. Research carried out by YouGov, on behalf of the Royal Institution of Chartered Surveyors (RICS), asked young women aged between 13 and 22 about their perceptions of gender equality in the workplace. The results showed that 29 per cent thought property and construction sectors were only for men, voting them the least female-friendly industry. What’s even more shocking is that 41 per cent of respondents believed being a woman would hold them back in any workplace – something I couldn’t disagree more with; nobody should be held back just because of their gender.

We need to show the world that women can be just as successful as men, particularly when it comes to inspiring the next generation of young women that there is a world of possibilities ahead of them. Of those that took part in the YouGov survey, 43 per cent said having a female Prime Minister or President would help gender diversity at work. We’re still in the early stages of having a female Prime Minister again but Theresa May is proof to young women that they really can achieve anything. Look at Angela Merkel, she was Germany’s first woman Chancellor and is the longest-serving current head of government in the European Union. Earlier this year, Merkel was named the most powerful woman in the world by Forbes for the tenth time – if that doesn’t show young women that gender doesn’t hold you back then I don’t know what does!