Report calls for cost cuts in construction

THE CONSTRUCTION sector must cut costs by 30 per cent by the end of the decade and focus more on customers' needs, according to a report by Sir Michael Latham, commissioned by the Government and the industry.

Sir Michael sets out a framework for reducing conflict between clients and companies. It says the Government must play a big role in changing attitudes.

The construction business, which had an output last year of pounds 46bn, is famed for its adversarial approach and the time and money spent on litigation, the report says. Sir Michael said the time had come to improve the performance of the sector.

He called for the adoption of a standard set of contracts to be used throughout the industry and supported by a construction contracts bill. Certain unfair contract clauses should be outlawed, including those which sought to deny anyone the right of immediate adjudiction in a dispute.

The contracts could be based on the new engineering contract introduced by the Institution of Civil Engineers last year, which includes the right to interest on late payment of debt.

Sir Michael also argues for the establishment of trust funds to ensure that sub-contractors are paid should the main contractor on a project go out of business. At present, if a contractor fails those further down the chain are treated as unsecured creditors. In future, he says, clients should pay into a trust fund during a project.

Legislation would be needed to ensure that if a contractor failed trustees had the duty to pay the other companies involved for work done and materials supplied. The scheme would also allow trustees to pay contractors should the client's business fail.

The report acknowledges that clients often cause problems by giving companies insufficent briefs and then demanding changes. Sir Michael called on the Department of the Environment to issue a construction strategy code of conduct for clients.

He attacked the industry for its record on equal opportunities. 'The industry is notoriously bad in its treatment of women,' he said. More also needed to be done to promote research and development and training.

The Department of the Environment said it would comment on the report next Monday.

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