Rumford Club debate 16 December 2016: The future of Trade Associations in the age of austerity’ Presented by Professor Rudi Klein

Professor Rudi Klein is a barrister and the chief executive of the Specialist Engineering Contractors (SEC) Group.

The UK in 1947

In line with the celebration of the Rumford Club’s 70th Anniversary, and before jumping into the main body of the discussion Professor Klein drew a picture of some aspects of life in the UK 70 years ago:

–        Most of the UK froze over in “The big freeze”.

–        The first nuclear reactor in Western Europe opened at Hartwell.

–        The Tories published their industrial charter. They now appear to be repeating the exercise by publishing their industrial strategy. The charter from 1947 highlighted the need for an end to protectionism and the promotion of free trade.

Professor Klein moved to explain that there is a key role for Trade Associations in the age of austerity but it’s a role that does require some statutory framework.

In 1944, three years before the Rumford Club was established, the government created a committee to identify the way building works were delivered. This committee delivered the Simon Report, which had the additional title of “The Planning and Management of Building Contracts”. The main highlights of the report’s findings were:

–        There were several inefficiencies in traditional contracting including indiscriminate competition. Work was often assigned to organisations with the lowest standards.

–        Within the UK construction industry at the time the focus was on lowest price and the lowest standard.

The UK in 2017

Professor Klein stated that, 72 years later, little had changed. The emphasis as still on selecting those offering the lowest price irrespective if their technical professionalism (or lack of it). Organisations have little incentive to improve skills and invest in training when they have to compete against organisations which could offer the lowest price because they had not made such investment.

Professor Klein argued in favour of the importance in joining professional bodies and gaining professional qualifications. He stated that, as demonstrated by the large number of people in the room with high level engineering qualifications, “we are holding out and showing ourselves as capable and skilled individuals and are placing value on ourselves”.

But across the construction industry, specifically in the contracting sector of construction, there is little store placed on value and on what goes on in the industry and because of this, anyone can come into the market. In his 1998 Report, Re-thinking Construction, Sir John Egan commented on this.  He observed that the city had little regard for construction because there were too many poor performers and no barriers to entry.  

Professor Klein asked this question: “How can you attract people into the industry if you do not place value on what it is you do and what you deliver?”

“Zombie” firms are another example of the problem. Out of 250,000 contracting firms in the UK, 25,000 are zombie firms, firms with no assets.

Legislation in Queensland requires that contracting firms have a certain level of assets. This has resulted in fewer insolvencies in Queensland than in other Australian states.

These firms often drag down the value of the sector.

Trade Associations add value in various ways

Trade Associations in the construction engineering sector do one key thing that brings value to the industry. They are the only organisations that are custodians of quality and technical competence. The industry trade associations to maintain standards and quality. Over the years they have successfully done this by accrediting and inspecting their members for the quality of their work.

This year an All-Party Parliamentary Group carried out a quality review of new build houses and found that there was a significant gap between the customer’s expectations (with regards to services, roofs and surface finishes) and the delivered result.

Building on this, an interim report by the Chartered Quality Institute Construction Specialist Interest Group found that improving quality within the industry could save between £7 billion and £12 billion a year.

Professor Klein highlighted that the roles of construction engineering Trade Associations in this regards are:

–        To inspect, verify and accredit management systems and technical performance.

–        To continuously monitor performance through regular risk status assessments.

–        To write codes of practice to facilitate client/consumer feedback and complaints.

In a survey this year the Specialist Engineering Contractors (SEC) Group found that 31% of Welsh local authorities value Trade Association membership for pre-qualification of technical capability but only 6% of English local authorities rely on Trade Association membership for this purpose.

Professor Klein concluded that we needed to build on what Trade Associations are already doing.

Arguably we already have a statutory quasi-statutory licensing scheme albeit it is very disjointed.  For example a building services contractor may have to be a “gas safe registered installer” (Gas Safety Regulations 1998), an “approved contractor” (Water Supply Regulations 1999), an “accredited [Green Deal] installer” (Energy Act 2011), a “competent person” (Building Regulation) and a “certified installer” (Microgeneration Certification Scheme) and a TrustMark “registered firm”.

Per recent research carried out by TrustMark there is a high degree of commonality (80%) between the competencies required for most of these schemes.

Therefore the future for construction engineering Trade Associations lies in bringing these schemes together within one statutory framework that provides for the core technical capabilities (i.e. the 80%).  Within this the role of the Trade Association would be to accredit firms as having the required capabilities and, thus, satisfying the statutory requirements on a deemed to satisfy basis.

Such development, said Professor Klein, could bring about untold benefits – greater investment in skills, more innovation and, thus, increased productivity.  Countries having licensing systems such as the US and Australia have higher construction productivity than the UK.

Our next meetings

There will be dinner discussion meetings on these Thursdays: 12 January 2017, 16 February 2017, 16 March 2017 and 27 April 2017.