CHAPTER 16

Key Performance Indicators and Benchmarking

Construction Industry Key Performance Indicators (KPIs) The Construction Industry Key Performance Indicators are produced by a partnership of the Department for Business, Innovation & Skills and Constructing Excellence using data from the Office for National Statistics, Building Cost Information Service, Health and Safety Executive, Dun & Bradstreet and other third-party financial analysts. The twelfth annual Construction Industry KPIs, relating to performance in 2009, were published in June 2010, and are now available online at www.kpizone.com The website gives access to all KPIs for economic, social and environmental performance as well as those for the construction sectors, thus enabling the user to choose relevant KPIs and store and retrieve data to help benchmark effectively. Methods of measurement, data collection forms, trend charts, examples and links to improve performance are included for each KPI as well as calculators to obtain benchmark scores. The KPI builder has the facility of being able to store performance information in a secure area called My KPIs, analyse and report results and then produce a tailored document called My KPIs Handbook. Other areas of the website include secondary and additional performance indicators, international KPIs and industry progress tables. The website also includes a large amount of supporting information including case studies, KPI best practice guide and masterclass information. The Construction Industry KPIs are intended for use by individual firms wishing to measure and compare their performance. Economic Key Performance Indicators The headline Economic KPIs are as follows: Client Satisfaction - Product Client Satisfaction - Service Defects Cost Predictability (Project, Design, Construction) Time Predictability (Project, Design, Construction) Profitability Productivity Safety Cost Time

The Economic KPIs are arranged as a 'family tree'. At the highest (or headline) level, the 'All Construction' KPIs include data from all the major construction industry sectors excluding material suppliers. More detail is given in the sub-sector KPIs contained on the website, for new-build housing and non-housing, repair & maintenance and refurbishment housing and non-housing, and infrastructure (see Figure 16.1).

Figure 16.1 Family Tree of Economic KPIs

All Construction

New Build Housing

New Build Non-Housing

Repair & Maintenance & Refurbishment (Housing)

Repair & Maintenance & Refurbishment (Non-Housing)

Infrastructure

In order to collect and use the economic KPI graphs, three key project stages have been identified: A. Commit to Invest the point at which the client decides in principle to invest in a project sets out the requirements in business terms and authorises the project team to proceed with the conceptual design. the point at which the client authorises the project team to start the construction of the project. the point at which the project is available for substantial occupancy or use. This may be in advance of the completion of the project.

B. Commit to Construct

C. Available for Use

These stages are shown diagrammatically in Figure 16.2.

Figure 16.2 Key Project Stages

A Commit to Invest

B Commit to Construct

C Available for Use

Design

Construction Performance in Use

The Construction Industry KPI definitions are shown in Table 16.1

Table 16.1 Definitions used for the Project and Company Performance KPIs
Project KPIs Client Satisfaction Product Definition How satisfied the client was with the finished product/facility, using a 1 to 10 scale, where: 10 = Totally satisfied 8 = Mostly satisfied 5/6 = Neither satisfied nor dissatisfied 3 = Mostly dissatisfied 1 = Totally dissatisfied How satisfied the client was with the service of the consultants and main contractor, using a 1 to 10 scale, where: 10 = Totally satisfied 8 = Mostly satisfied 5/6 = Neither satisfied nor dissatisfied 3 = Mostly dissatisfied 1 = Totally dissatisfied The condition of the product/facility with respect to defects at the time of handover, using a 1 to 10 scale, where: 10 = Defect Free 8 = Some defects with no significant impact on client 5/6 = Some defects with some impact on client 3 = Major defects with major impact on client 1 = Totally defective There are three indicators- one for design cost, one for construction cost and one for project cost. 1 Design Cost - actual cost of the design process at Available for Use less the anticipated cost of the design process at Commit to Invest, expressed as a percentage of the anticipated cost of the design process at Commit to Invest. 2 Construction Cost - actual cost of the construction process at Available for Use less the anticipated cost of the construction process at Commit to Construct, expressed as a percentage of the anticipated cost of the construction process at Commit to Construct. 3 Project Cost - actual cost of the combined design and construction process at Available for Use less the anticipated cost of the combined design and construction process at Commit to Invest, expressed as a percentage of the anticipated cost of the combined design and construction process at Commit to Invest. There are three indicators- one for the design phase, one for the construction phase and one for the whole project. 1 Design Time - actual design duration of the design process at Commit to Construct less the anticipated duration of the design process at Commit to Invest, expressed as a percentage of the anticipated duration of the design process at Commit to Invest. 2 Construction Time - actual duration of the construction process at Available for Use less the anticipated duration of the construction process at Commit to Construct, expressed as a percentage of the anticipated duration of the construction process at Commit to Construct. 3 Project Time - actual duration of the combined design and construction process at Available for Use less the anticipated duration of the combined design and construction process at Commit to Invest, expressed as a percentage of the anticipated duration of the combined design and construction process at Commit to Invest. The normalised1 construction cost of a project in the current year, less the construction cost of a similar project one year earlier, expressed as a percentage of the construction cost of a similar project one year earlier. 1 The normalised time to construct a project in the current year, less the time to construct a similar project one year earlier, expressed as a percentage of the time to construct a similar project one year earlier. Definition Company profit before tax and interest as a percentage of sales. 2 Company value added per employee ().
3 4 Reportable accidents per 100,000 employed per year .

Client Satisfaction Service

Defects

Predictability - Cost

Predictability -Time

Construction Cost

Construction Time

Company KPIs Profitability Productivity Safety

NOTES 1. Normalisation is a statistical method for removing the effects of specification, location, function, size and inflation. 2. Value added is turnover less all costs subcontracted to, or supplied by, other parties. 3. Reportable accidents are defined in Health and Safety Statistics published by the Health and Safety Executive as fatalities, major injuries, and over 3 day injuries to employees, self employed people and members of the public. 4. The figures need to be compared pro-rata if they cover a period shorter than a year. Such short term period rates should be compared only with rates of similar periods, not the annual rate.

A summary of the performance of the industry over the five years to 2009 is shown in Table 16.2. Figure 16.3 below then converts these performance figures to an index, with the 2005 performance for each KPI normalised to a base of 100. Table 16.2 Summary of Industry Performance from 2005 to 20101 - Construction Industry KPIs
Performance KPI Client Satisfaction Product Client Satisfaction Service Defects - Impact at Handover Safety - Industry
2

Measure % scoring 8/10 or better % scoring 8/10 or better % scoring 8/10 or better Mean accident incidence rate % achieving zero accident incidence rate % achieving zero accident incidence rate % on cost or better % on cost or better % on cost or better % on time or better % on time or better % on time or better Median % profit before interest & tax Median value added / FTE employee (000) Median value added / FTE employee (000) % change compared with one year ago % change compared with one year ago

2005 83% 77% 72% 1,023 50% 1% 63% 48% 48% 52% 62% 46% 8.1%

2006 84% 79% 77% 901 51% 1% 66% 44% 45% 57% 60% 44% 7.9%

2007 82% 75% 73% 946 62% 1% 64% 49% 46% 58% 65% 58% 8.2%

2008 83% 77% 73% 865 60% 1% 65% 48% 49% 58% 58% 45% 9.6%

2009 86% 84% 77% 906 63% 1% 61% 46% 48% 53% 59% 45% 9.9%

2010

87% 82% 75%

971 65% 1%

Safety - All Contractors Safety - Contractors over 10m 3 T/O Predictability Cost Design Predictability Cost - Construction Predictability Cost Project Predictability Time Design Predictability Time - Construction Predictability Time Project Profitability
4

67% 47% 52% 69% 57% 43%

7.7%

Productivity (Current Values)4 Productivity (Constant 2000 Values)4, 5

34.2 27.5

38.2 29.3

42.0 31.2

45.5 32.3

46.2 33.0

49.5 39.3 1.5% 0.1%

Construction Cost

-0.8%

-0.8%

-3.8%

-1.7%

-4.3%

Construction Time 1 2 3

1.3%

0.1%

-0.3%

-0.5%

-3.9%

KPI data for earlier years can be found in previous editions of Construction Statistics Annual. This KPI is based on company annual accident incidence rates published by the Health & Safety Executive on its website at Table 1 Injuries in GB by Industry & Severity of Injury as reported to all Enforcing Authorities. This KPI is based on company annual accident incidence rates collected in the BIS Contractor Survey which is adjusted for under reporting. In order to regularise the volatile mix of financial data by company size from year to year, in 2006 a standard method of weighting by number of employees was adopted in line with other international financial KPIs. This method has been applied retrospectively to past years and, where applicable, their results have been revised. Current values are deflated by the "All construction output price index" for the first year's KPI to arrive at constant values.

4 5

Figure 16.3 Economic KPIs All Construction - Industry Performance from 2005 to 2010 (2005=100)
2005 140 130 120 Index 2005 = 100 110 100 90 80 70 60
Client Sat isf act ion Product Client Sat isf act ion Ser vice Def ect s - Impact at Handover Pr edict abilit y Cost - Pr oject Pr edict abilit y Cost - Design Predict abilit y Cost Const ruct ion Pr edict abilit y Time - Project Predict abilit y Time - Design Predict abilit y Time Const ruct ion

2006

2007

2008

2009

2010

2005 140 130 120 Index 2005 = 100 110 100 90 80 70 60

Const r uct ion Cost Const r uct ion Time Prof it abilit y

2006

2007

2008

2009

Product ivit y ( Cur rent Values)

Pr oduct ivit y (Const ant 2000 Values)

Saf et y - Indust r y

Saf et y - All Cont r act or s

Saf et y Cont ract or s over 10m T/ O

Respect for People Key Performance Indicators (RfP KPIs) The Respect for People KPIs address 10 key areas of social performance in the construction industry. The headline RfP KPIs are as follows: Employee Satisfaction Staff Turnover Sick Absence Safety Working Hours Qualifications & Skills Equality & Diversity Training Pay Investors in People

The RfP KPI definitions are shown in Table 16.3. Table 16.3 Definitions used for the Respect for People KPIs
KPI Employee Satisfaction Definition How satisfied direct employees are with: a) the amount of influence they have over their jobs b) their pay and conditions c) the sense of achievement they get from their work d) the respect they get from line managers/supervisors using the 1 to 10 scale where: 10 = Very satisfied 8 = Satisfied 5/6 = Neither satisfied nor dissatisfied 3 = Dissatisfied 1 = Very dissatisfied The performance rating is the average of the individual ratings for the 4 responses The number of direct employees that have left and been replaced, expressed as a percentage of the average number of direct employees per year. The number of working days lost due to sickness per direct employee per year Reportable accidents per 100,000 employed per year The number of usual hours worked per week per direct employee in his/her main job. The total number of usual hours worked should include all time spent working and overtime paid or unpaid. The percentage of direct employees qualified to NVQ level 2 or higher The extent to which a policy relating to equality & diversity in the workplace is in place and used, using a 1 to 10 scale where: 10 = Policy is fully implemented and clearly understood by all personnel 8 = Policy is well on the way to being fully implemented 5/6 = Policy is only partially implemented at present 3 = Policy is not implemented 1 = No policy and do not consider the subject The number of training days (on and off - the - job) provided per employee per year The gross weekly earnings (before tax) per full time direct employee The percentage of direct employees either formally committed or covered by the Investors in People recognition. There are 3 stages in the Investors in People Accreditation process: - Not involved - Formally committed to achieving - A recognised Investor in People This Key Performance Indicator assesses the final 2 stages.

Staff Turnover Sickness Absence Safety Working Hours

Qualifications & Skills Equality & Diversity

Training Pay Investors in People

A summary of the performance of the industry over the five years to 2009 against each of the Respect for People KPIs is shown in Table 16.4. Figure 16.4 below then converts these performance figures to an index, with the 2005 performance for each KPI normalised to a base of 100.

Table 16.4 Summary of Industry Performance from 2005 to 20101 - Respect for People KPIs
Performance KPI Employee Satisfaction Staff Turnover Sickness Absence Safety Industry
2 3

Measure % scoring 8/10 or better Median % staff turnover Median number of days lost Mean accident incidence rate % achieving zero accident incidence rate % achieving zero accident incidence rate Median usual hours worked per week Median % of direct employees qualified to NVQ Level 2 or higher % scoring 8/10 or better Median annual training days per full-time equivalent employee Median gross weekly earnings () Mean % of direct employees covered by IiP commitment & recognition

2005 51% 6.7% 1.5 1,023 50% 1% 40 33% 54% 1.0 441 14.9 %

2006 55% 5.9% 1.4 901 51% 1% 40 40% 54% 1.0 460 11.1 %

2007 47% 5.0% 1.7 946 62% 1% 40 33% 56% 0.9 481 11.1 %

2008 46% 6.3% 1.7 865 60% 1% 40 25% 56% 1.0 495 12.4 %

2009 44% 4.2% 1.7 906 63% 1% 40 22% 60% 1.1 512 17.6 %

2010 44% 2.5% 1.7 971 65% 1% 40 21% 66% 1.2 .. 16.7 %

Safety - All Contractors Safety - Contractors over 10m T/O3 Working Hours Qualifications & Skills Equality & Diversity Training Pay

Investors in People4 1 KPI data for earlier years can be found in previous editions of Construction Statistics Annual. 2 3 4

This KPI is based on company annual accident incidence rates published by the Health & Safety Executive on its website at Table 1 Injuries in GB by Industry & Severity of Injury as reported to all Enforcing Authorities. This KPI is based on company annual accident incidence rates collected in the BIS Contractor Survey which is adjusted for under reporting. Based on Investors in People UK Ltd latest industry average performance. IiP UK Ltd made major revisions to the make up of the SIC Code content of their database of Construction Organisations in 2005 & 2006.

Figure 16.4 Respect for People KPIs All Construction - Industry Performance from 2005 to 2010 (2005 = 100)
2005 2006 2007 2008 2009 2010

160 150 140

Index 2005 = 100

130 120 110 100 90 80 70 60

Sa t is fa ct St io n af fT u Si rn ck ov ne er ss Ab se Sa nc fe e t Sa y Sa fe f I e nd ty ty -C us -A try on ll C tra on ct t ra or ct s or ov s er 1 0m T/ W O or k Q in g ua H li f ou ic at rs io ns Eq & Sk ua i ll li t s y & D ive rs ity Tr ai ni ng eo pl e in In ve st or s P Pa y

Environment Key Performance Indicators The Environment KPIs address 10 key areas of environmental performance in the construction industry. The headline Environmental KPIs are as follows: Impact on the Environment Product & Construction Process Energy Use Construction Process Energy Use (Designed) Product

Em

pl oy ee

Mains Water Use (Designed) Product Waste Construction Process

Mains water Use Construction Process Commercial Vehicle Movements Construction Process Area of Habitat Created/Retained Product

Impact on Biodiversity Product & Construction Process Whole Life Performance Product

The Environment KPI definitions are shown in Table 16.5.

Table 16.5 Definitions used for the Environment KPIs

KPI Impact on the Environment Product & Construction Process Definition There are two indicators - one for the product/ facility & one for the construction process. 1. Product How satisfied the Client was that the impact on the environment (such as energy use, CO2 emissions & materials from non-renewable sources) was taken into account in the finished product/facility, using a 1 to 10 scale where: 10 = Basis of design concept 8 = Major influence on design 5/6 = Some influence on design 3 = Minor influence on design 1 = No influence on design

Energy Use (Designed) Product Energy Use Construction Process Mains Water Use (Designed) Product Mains Water Use Construction Process Waste Construction Process Commercial Vehicle Movements Construction Process Impact on Biodiversity Product & Construction Process

Process How satisfied the Client was that the impact on the environment (such as waste, noise and dust) was controlled during the construction process, using a 1 to 10 scale where: 10 = Very effective control 8 = Good control 5/6 = Fair control 3 = Little control 1 = No effective control The amount of CO2 emissions caused by the energy use per year designed into the 2 2 completed product/facility per 100 m of gross floor area (kg CO2 /100m ). The amount of CO2 emissions caused by the energy used during the construction process per 100,000 of project value (kg CO2/100k) The amount of mains water use per year in m3 designed into the completed product/facility per 100m2 of gross floor area (m3/100m2) The amount of mains water in m3 used during the construction process per 100,000 of project value (m3/100k) 3 The amount of waste (including extracted material, demolition waste, etc) in m removed 3 from site during the construction process per 100,000 of project value (m /100k). Number of Commercial Vehicles Movements onto site per 100,000 of project value.

2.

There are two indicators one for the product/facility and one for the construction process. 1. Product How satisfied the Client was that the impact on biodiversity was taken into account in the finished product/facility, using a 1 to 10 scale where: 10 = Thorough consideration of biodiversity 8 = Good level of consideration of biodiversity 5/6 = Fair consideration of biodiversity 3 = Some consideration of biodiversity 1 = No consideration of biodiversity

Area of Habitat Created/Retained Product Whole Life Performance Product

2. Process How satisfied the Client was that the impact on biodiversity was controlled during the construction process, using a 1 to 10 scale where: 10 = Very effective control 8 = Good control 5/6 = Fair control 3 = Little control 1 = No effective control The difference in the area of ecologically valuable habitat within the total site area at completion of the project and at the start of the project expressed as a percentage of the site area. How satisfied the Client was that whole life performance issues were taken into account in the finished product/facility, using a 1 to 10 scale where: 10 = Basis of design concept 8 = Major influence on design 5/6 = Some influence on design 3 = Minor influence on design 1 = No influence on design

Table 16.6 Summary of Industry Performance from 2005 to 20101 - Environment KPIs
Perfor mance KPI Impact on the environment - product - construction process Energy use (designed) - product Energy use - construction process Mains water use (designed) product2 Mains water use - construction process Waste - construction process Commercial vehicle movements construction process Impact on biodiversity - product - construction process Area of habitat - created/retained product Whole life performance - product 1 2 % scoring 8/10 or better % scoring 8/10 or better % reporting no change or an increase in area of habitat % scoring 8/10 or better 33% 45% 76% 41% 36% 48% 83% 41% 34% 46% 78% 39% 35% 49% 80% 35% 31% 47% 82% 44% 48% 54% 81% 49% % scoring 8/10 or better % scoring 8/10 or better Median energy use kg CO2 / 100m2 gross floor area Median energy use kg CO2 / 100k project value Median water use m3 / 100m2 gross floor area Median water use m3 / 100k project value Median waste removed from 3 site m / 100k project value Median movements onto site / 100k project value 53% 44% 4,291 293 53.2 8.2 41.6 29.4 54% 45% 3,729 293 52.0 8.9 37.0 30.4 51% 44% 3,775 273 90.4 8.2 39.1 29.4 55% 48% 4,474 192 80.0 7.1 36.9 26.5 64% 49% 4,539 241 49.5 6.3 36.6 28.3 54% 73% 4,053 249 47.2 6.3 35.1 23.1 Measure 2005 2006 2007 2008 2009 2010

KPI data for earlier years can be found in previous editions of Construction Statistics Annual. Limited data use with caution.

Note: Sample sizes and distribution of data between construction sectors for some Environment KPIs have not yet stabilised.

Figure 16.5 Environment KPIs All Construction - Industry Performance from 2005 to 2010 (2005 = 100)
2005 2006 2007 2008 2009 2010

160 140 Index 2005 = 100 120 100 80 60 40

ct on En th vir e on En m vir en on tEn m C er en on gy ts En t U ru Pr er se c od gy tio M ( uc D ai n U es ns t Pr se i oc W M - C gne e a ai ss te d) ns r U ons -P C W t ru se om ro at ct du (D er m io er n ct es Us ci P i gn e r al o -C ce ed Ve W ss on ) hi a cle st st Pr ru e od M -C ct ov io uc n Im em on t Pr s pa t en ru oc ct c I t es m s on pa - C tion s Bi Ar ct P o ro ns od ea on ce tru iv of Bi er ss ct od si H io ty ab iv n er -C ita P. si .. ton ty Cr st -P ru W ea ro ct ho te du io le d/ n ct Re Li Pr fe ta oc Pe in es ed rfo s -P rm ro an du ce ct -P ro du ct

Benchmarking Sir John Egans report, Rethinking Construction concerned itself directly with improving both the effectiveness and efficiency of the UK Construction Industry. It challenged the industry to meet some ambitious improvement targets and to measure its performance over a range of its activities. The creation of Key Performance Indicators and the release of the first KPI Pack in early 1999 were the first steps in the process of answering those challenges. The Construction Industry KPIs present the construction industrys range of performance using ten headline measures, but do not cover the more diagnostic elements of performance measurement. The KPI Report for the Minister for Construction produced by the KPI Working Group addresses the latter issue by presenting organisations with a framework with which to benchmark and analyse their activities. Identified within the report are both operational and diagnostic indicators to promote a better understanding of the headline KPI results. The former relates to the specific activities of the firm, while the latter provide information on why changes may have occurred in the headline or operational indicators. Both allow more thorough analysis of how and where improvements can be made. The indicators are intended to be applied at the project or company level; however, it is also possible for them to be applied at other stages of the construction supply chain so as to capture the

Im pa

ct o

th e

Im pa

network of clients and suppliers. The following diagram shows the inter-relationships between the KPIs and the parts of the supply chain. Figure 16.6 Supply Chain Cube

Defects Liability Period

Changes Orders

Client Satisfaction

Commit to Invest

Commit to Construct

Etc

Available for Use

Whole Life

Time

Suppliers Sub -Contractors Contractors Consultants /Advisers

Clients

Supply Chain

Quality

Cost

KPIs
Etc

Time

Each individual building block represents a different component of the KPIs. The cube can be sliced to allow analysis from any of the three dimensions pictured: supply chain component, time or by KPI. For example, in the diagram, the first face of the cube if analysed in the direction of arrow A would be time. Here the materials supplier is above the contractors, so the latter is the client. The relevant indicators to consider are specific to the particular supplier-client relationship under examination. By slicing the cube along a different dimension, one can analyse a separate part of the supply chain or a different point in the project cycle. The adaptability of the framework allows companies to take individual KPIs and adapt them to their specific needs and therefore, prompts the industry to integrate it throughout the whole supply chain. Source: Constructing Excellence Contact: Jon de Souza, 020 7592 1100