Last edited 12 May 2020

Performance in the construction industry

In construction, the term ‘performance’ can have number of different meanings.

[edit] Contractual performance

'Performance' commonly refers to the carrying out of works according to requirements set out in a contract.

Successful performance discharges the party bound to perform the act from contractual liability. Non-performance is the failure to do something required by a contract. For more information see: Non-performance.

A remedy as a means of relief that either party can pursue to compensate for the other party's non-performance.

Performance bonds are commonly used in the construction industry to insure one party against the risk of another party (typically a supplier such as a contractor) failing to fulfil their contractual obligations. For more information see: Performance bond.

Following the 2011 amendments to the Housing Grants, Construction and Regeneration Act, parties have the right to suspend performance of any or all contractual obligations when a required payment of a notified sum has not be made. This includes, suspension of part or all of the works, but also other contractual obligations such as the provision of insurance.

Performance specifications are a type of specification that describe the result that is required from particular items (rather than a specific brand or type of item) and leave it to the contractor or supplier to satisfy that requirement. In this situation, the nature of the performance required may be defined by the desired outcome, or by reference to standards. For more information see: Performance specification.

A performance bond is commonly used in the construction industry as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client. Performance bonds can also be required from other parties to a construction contract. For more information, see Performance bond.

KPIs can be used to:

Monitor costs.
Track progress.
Assess client satisfaction.
Identify strengths and weaknesses.
Compare performance across and between projects.
Assess specific areas of a project such as sustainability, safety, waste management, etc.

If clients intend to measure the performance of suppliers, it is important that KPIs are identified in tender documentation and that the regular provision of the information required to assess them is a requirement of the contract. KPIs may be of particular importance where the contract stipulates that the contractor will be rewarded or penalised based on their performance relative to certain indicators.

The term ‘performance’ can also be used to refer to the efficiency of a building – how well it retains energy, its air tightness, thermal comfort, and so on. There tends to be a significant gap between predicted performance of buildings and their actual performance in use. This is known as the ‘performance gap’. For more information, see Performance gap.

The UK construction industry is regularly criticised for being wasteful, adversarial, fragmented, dominated by single disciplines, reluctant to innovate and poor at disseminating knowledge (See Construction industry reports for more information).

A wide range of statistics are published to assess industry performance, including regular reports by; the Office for National Statistics, the Health and Safety Executive, the Department for Business, Energy & Industrial Strategy, the Ministry of Housing, Communities & Local Government, Glenigan and others.