with David Edwards, Chief Executive, ECITB
Please introduce the ECITB to OGFJ readers.
The ECITB is a government body that operates directly on the interface between government and industry, raising funds for training development and support through a statutory training levy. Employers that are “in scope” have to contribute an annual amount to the ECITB as a percentage of payroll. This creates a collective pool of resources that the industry, through a series of sectoral and regional forums, uses to plan and execute training against the demands as they are identified locally. The ECITB is a different type of organization in that it’s not optional to pay into the training fund, and because it’s compulsory, my job is to ensure a better value for money delivered against the needs of industry in total, which is to be expected from a governance model in which a board representing the industry at the highest level sets policy and strategy. At the operational level, authority for delivery is implemented at the regional level or the sectoral forum level. There is a dedicated forum for the offshore oil and gas industry, and currently the ECITB raises in the region of £5 million per year directly in support of the offshore oil and gas, out of £18 million total budget. This training levy goes toward a system of grants to support against training products and qualifications designed in partnership with the industry. It’s a little bit circular: the ECITB takes money from employers, works with them to facilitate design of their desired training, and then if they do the training they get the money back.
Skills shortages are a common and loud refrain throughout the industry. In your view, what are the biggest issues, and what is the nature of any shortages?
The ECITB recently published a report called Securing Engineering and Construction Skills for the Future, and it was the second document following an earlier piece of research called Bridging the Skills Gap. We went out to the community and asked, “Is there a problem, or not?” Upon receiving feedback, the ECITB decided on the necessary planning models for the future. We came to a view based on consultation with upstream, downstream, power generating, and all sectors engineering construction is central to in terms of design, like project management, construction, and repair and maintenance activities. In 2007, everybody was certain that we should plan on what we called a “medium” scenario. Because of the credit crunch and market realities of the last few months, the ECITB has gone back and asked, “Are there still growth expectations?” The bottom line is yes, and while there is some softening of the market generally, we see particular hotspots in the power sector and offshore oil and gas industry. In the latter, there will be a reasonable number of people employed in finding new oil and bringing in new technology, and the current skills base is just not big enough. The number of people needed for growth might soften, but we still need to replace the existing workforce.
Our core business is providing the right people with the right skill set, and by 2014, there will be a need to recruit, train, and retain in the area of 44,000 people across the skills range, of which 15-20% will be in the upstream oil and gas sector. This includes high-level engineering at the graduate level, as well as craft, technician, and operator level. ECITB now has the best-ever picture of industry needs and how to address them, and by and large the industry players have subscribed to it. The bad news is that, despite this subscription, the money isn’t available.
It’s available; it’s just not being made available to you.
That’s a very good distinction. We have a statutory system, and in the middle of 2008 conducted a consultation, saying that roughly speaking the amount of money ECITB collected needed to double from present, going from £18 million to £36 million, doubling the levy rate from 1.5% to 3% of payroll.
What was the response?
It was mixed, as you might expect. The board took the view that it was an argument we were not going to win, because the legislation we operate under requires support from the employers. We said to them very clearly, “Doubling is needed to meet demand. Are you willing to raise the levy?” And the answer was no. However, to their credit they were willing to keep it the same, so we have core funding in place, and we need to maximize its leverage. There’s a capacity issue in the market for training people – not in the training centres, but in the workplace, and there are constraints on availability of good learning places in the offshore environment. That’s a very practical issue that needs resolution is ECITB is working on it alongside OPITO and OGUK, but it’s a bit intractable.
Of the attract, train, and retain areas you mention, which one is the most critical to address?
The train piece, because that’s where all the expenditure and costs are incurred. By changing our delivery methods, changing demand, and negotiating delivery options with our customer base, ECITB saw a 500% increase in apprentice intake over the last five years. That’s a huge growth in a market where apprenticeship growth has been completely static if not declining across the economy as a whole. We’re ahead of the UK trend, but can still take on only 750 apprentices across the whole of the industry. We need to be taking on 1,500, but we’re oversubscribed. Even if we could do 1,500, it would still be oversubscribed by candidates to a factor of 3-4:1. There is no blockage at the apprenticeship level in attraction, the blockage is in having a secure employment position and the work experience opportunity to train them.
The constraint lies in the fact that absolutely green workers can’t be put into an offshore environment. They’ve got to have a certain level of skill, knowledge, understanding, and capability, before they are safe to be let into that environment. Another blockage is of course the issue of who pays for it.
It seems paradoxical that this would be such an issue. Even doubling this payroll expense would be pretty marginal compared to the supposed benefits of having a better supply of well-trained labour. As consistently one of the top concerns, where’s the disconnect between companies putting their money where their complaints are?
Although it may seem confusing, as it’s a questions of 20p per worked man hour at 1.5%, it’s not all bad. ECITB works in partnership with OPITO offshore, and has a unified scheme where everybody who comes into it has the same terms and conditions, and the operators of the installations generally put more money into the system, which is fine and helpful. But it’s still a volume issue. To double the numbers is almost an overtraining requirement now, to replace the volume of individuals leaving the workforce. Fundamentally, the data show an availability across the whole industry at high levels in the past, and because of high investment in previous years, that stopped, but we’ve been riding the downcurve of the demographic. Now that we’re in the growth area, the available workforce is not able to meet demand, making skills importation from elsewhere very attractive.
Detailed engineering design work is being done in the Middle and Far East under the supervision of UK-based contractors; companies like Foster Wheeler will work in the industry on a global basis. India, the Middle East, and the Far East have good quality people, and therefore do some of the detailed engineering because there isn’t the capability capacity to do it here in the UK. Even the practical people who need to go offshore to do the hands-on work, some are coming in from overseas as well, and there are many conversations around whether we can have a global workforce in the upstream oil and gas industry, where repair and maintenance work in one hemisphere is 180 degrees out of phase with work in the other hemisphere, and therefore have a truly global workforce. The issues arising from that include different standards and competence levels, and associated issues and risks around that need managing. ECITB has an interest in all of that, and wants to support the likes of PSN, Wood Group, and Petrofac in their total global operations even though we are statutorily and legally centred on the UK.
In recent client feedback, there was some disappointment in ECITB’s ability to reduce turnover and maximize ROI; what exactly is being criticized here?
To be fair, some of these concerns have to be taken with a pinch of salt, because in the last round of consultation, the level of dissatisfaction that comes through in these reports is not matched by the level of support, feedback, and engagement employers put into the program to do more training and development. What’s being addressed here is the issue that some major employers pay over £1 million annually, but won’t get it back in grant. Therefore the material investment on a straight pound for pound basis does not look good, if they pay £1 million and get £500,000 back.
But doesn’t the output of that £500,000 far exceed £1 million?
Yes, but in a strict accounting term, ECITB can’t give back more in terms of levy in any one cycle. We can spend some of our reserves, but fundamentally, around the suite of services, companies get a lot of things for free, but don’t see that in the transactional analysis.
Not to mention that by increasing the skills base of the industry as a whole, the general skills base raises so when there is the inevitable turnover between companies, they all indirectly benefit.
And ECITB tries to represent that to the companies, creating a balance sheet detailing the amounts of direct cash received, payment rates, and direct cash back. But there are added benefits in for example having 25 supervisors in the free training course, and therefore 15 apprentices performing subsidized work, which by the time it’s added up, in our view the benefit far outweighs the investment through the training levy, because capability and productivity go up. Those things are subjective depending on who you talk to, but what I would like to think is the senior people in the industry really do appreciate the collective need for funding approach.
In an ideal world of being able to double the levy tomorrow, what areas do you see as having the most impact to deal with immediately?
Definitely to ensure supervisory quality and standards are increased, because they are critical for productivity of teams in the workplace, and have generally been underfunded. Supervisors today, and in recent years, have been falling behind workers in pay rates. A skilled welder or pipe fitter can actually earn more than the supervisor, so there is little incentive for them to come up through the ranks.
This has created an additional problem, because individuals can earn £80-90,000 per year as a skilled craftsman, but only need £40-50,000, so choose to work a part of the year and live the rest of the year in Spain, for instance. Because pay rates are so good generally, this reduces the availability of the workforce. This effect is especially prevalent with an older workforce who have mortgages paid and kids away from home. There’s plenty of work out there; it’s a seller’s market for skills. Because of that, there’s an issue about adequate safety and competence levels, and that’s why supervisory skills are essential for maintaining safe and productive working environments, which is an issue in some quarters.
The UK has the innate ability to be competitive with anybody; the challenge is to get more people in quickly enough. There are issues at the graduate level, with project management being one of the key disciplines underpinning the whole of engineering construction no matter the operating domain, and with a weakness in project management capabilities and project control skills, it’s impossible to deliver on time, to quality, to budget.
It seems like robust demand for the short term, but in the environment of long-term UKCS decline, what are the longer term prospects at an individual employment level?
In 2007, ECITB counted 6.500 people in the offshore oil and gas industry who were accounted for in that year’s levy. By 2014, this figure will drop in total numbers, but in breaking down the numbers, repair and maintenance will lower at the expense of new build and particularly decommissioning.
Does this decline represent the shallow part of an eventually much steeper curve? It seems like in the future prospects for working offshore UK will be greatly reduced, even in attracting record numbers of apprentices, in a reasonable time horizon.
That’s true. If an apprentice comes in now, as fully ready for work by 2010, 2014 is only four years away – at which time there will be quite solid prospects, but working for a global company they will have the opportunity to work globally. This brings up another issue around the mobility of people. The figures I mention wont all be sourced from the UK; although they will be employed here, they will not be UK resident. The goal of ECITB is a UK, self-sustaining, and competitive workforce, and the ideal is to have the skills available on your doorstep when you need them at a competitive price.
What’s your vision for the future of ECITB?
Fundamentally, ECITB set up a vision to create for engineering construction enough people, and to train and developing them as an industry to the necessary standard such that the UK skill base is sustainable. It can be a little elastic, but at the core the industry needs expertise and the right number of people coming through apprenticeship channels, with systems in place to develop people throughout their skill and career progression, and in the right numbers. All this alongside upgrading channels at a graduate level to fill the higher organizational echelons.
In 2002, ECITB had a big think about exactly where we wanted the organization to be in five years’ time, and now at the end of that time, we would never have envisaged 750 apprentices and 9,000 learners in 2009, plus another 50,000 people doing the Safety Passport program. In 1999, we were only at 30,000 people in total, and although this doubling is due in part to rising demand, I would love for people to look back in another five years’ time and say, “those people got it right”, in leveraging everything we possibly could for the sake of the industry, and nobody is saying they have skills issues. It may not be achievable, but that’s our mission and purpose, to work our socks off towards that goal. And so far I’m very proud of what we’ve achieved.
ECITB doesn’t train anybody, which may appear slightly bizarre, but what we do is work with a network of approximately 100 training providers, create a partnership with them, broker demand through our customers, supervise the quality, give them resource material to train to standard, and supervise the attainment of learning and competence. In doing so, ECITB puts its hands around the employer, apprentice, and provider, to genuinely be a supporter and facilitator of that process. The vision of the future is that in every region we will have a network of providers all working to the same agenda and high standard, with a profound flow of people into engineering construction.
ECITB wants people to see the whole of the energy industry, whether upstream or downstream, as being viable career opportunities, and be aware that those working in the offshore oil and gas industry can get jobs anywhere in engineering construction.
ECITB doesn’t see a need to dramatically change strategy, but to work that one commonly agreed-upon plan as hard as possible, and create the necessary partnerships to have an integrated offer.
One blockage is prevailing attitudes, not so much in apprentices, but in clients and all those who need to invest. We have a very peculiar scenario, where it’s a client contracted industry. The contractors will sit there and inevitably respond to the client request for work, and moan that they’ve not put enough resources to get the job. Or, tell the client they’ve got the resources and complain when they haven’t. That being said, we don’t want to turn the clock back to 1980, although in some respects with big national companies there was a lot of overtraining. However, those are no longer a reality, and everything is done against an ROI framework. The good news is, there is recognition, through meeting many clients in upstream and downstream, that they will support the ECITB in raising the training levy and taking a share of the investment. That’s a big shift in attitude, which started a number of years ago in the upstream oil and gas community, as evidenced by the apprenticeship program running since 2000. The next step will be in attitude and behaviours offshore, and trying to get the whole fragmented onshore industry, mechanical and pharmaceutical, interconnected and behaving in the same way. And that’s a bit more challenging.
What is your final message to OGFJ readers about how you will overcome those challenges at the ECITB?
The ECITB has a very clear strategy and plan, and a very good handle on need. We have a certain amount of resources to take us part-way, and we will work with everybody and everybody in partnership to make sure we fulfill the other parts. Everybody has to take a share of the responsibility. It’s not all about money, but making a commitment to the process and helping facilitate it. Making bedspace available offshore would be fantastic, but not everyone is placing the same agenda in the same way. Working together on the problem is the only way we will solve it.
In changing from being on the back foot to the front foot, reactive to proactive, in the last two years, the ECITB will increasingly look for partnerships moving forward, because no one organization can do it on their own.