Double-dip recession hinders construction performance

The latest Construction Industry KPIs, launched last Friday, reveal the impact that the double-dip recession is now having on the industry’s performance. The KPIs are based on survey data collected and analysed by Glenigan of projects completed during 2011.

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The results show that the harsh economic climate and protracted downturn in industry workload has exacerbated the squeeze on firms’ profitability, with median profitability falling to 2.7% in marked contrast to the 9.9% recorded in 2009. Labour has been shed over the last three years as companies have had to adjust to the deterioration in market conditions, with the retained workforce being more intensively deployed. Whilst this has lifted productivity, there are indications that a more stretched labour force is limiting the industry’s delivery against other performance measures.

In particular the latest KPIs suggest that the challenging economic environment is now undermining the industry’s efforts to deliver an improved product and service to clients.  The previous surveys had found that despite the economic downturn the industry had been able to hold on to previous improvements in client satisfaction, while the predictability of project delivery, both to cost and to budget, had been further improved. Unfortunately the 2012 Key Performance Indicators have recorded retrenchment in a number of important areas, such as the timely delivery of projects. Although external influences, such as the availability of finance, may be contributing factors, clients will value companies that can maintain a strong performance in these areas. In particular, value for money and quality of service will remain key for clients over the coming year.

Looking ahead, whilst the industry is expected to gradually emerge from recession, trading conditions will remain tough. Public and private sector clients alike will continue to demand that firms demonstrate their ability to deliver projects to time and to budget. In addition many of the industry’s major repeat clients are assessing their own performance against a wider range of commercial, social responsibility and environmental criteria; and are looking to contractors and their supply chains to demonstrate a similar approach. Strikingly, half of firms surveyed reported that over 79% of their turnover was attributable to repeat clients.

The Construction Industry Key Performance Indicators provide firms with the benchmark for appraising their own performance against these criteria and can help identify where they can secure future improvements that will help safeguard their competitive position and win work. Using KPIs on projects can also help strengthen the relationship with existing clients and win repeat business. Our analysis found higher levels of both client and contractor satisfaction on projects where KPIs had been used to monitor performance during the construction and design process. The difference was particularly marked for clients’ perception of service delivery, with 80% of clients giving a rating of 8 or more out of 10 on projects using KPIs, compared to 70% on non-KPI projects. This appears to demonstrate how using KPIs can improve the dialogue across the supply chain and hopefully help secure repeat business from clients.

Download a FREE copy of the 2012 UK Industry Performance Report today...