Workshop on SSC for the Construction Industry

1. Construction Skills Initiative:
SSC workshop
Workshop type
Document document
April,
Date 2012
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited

2. TRACKER
Agenda for SSC workshop
Unit of measure
Topic Time
Title
Key aspects of current proposal (by SSC proposers)
Unit of measure 10.00 – 10.30
Background and vision of skills effort 10.30 – 11.00
What they have done well, and opportunities for improvement 11.00 – 11.30
BREAKOUTS 11.30 – 14.00
Breakout 1: Standards, Accreditation and Certification
Breakout 2: Delivery and Operations
LUNCH 14.00 – 14.45
Plenary presentations by Breakout groups 14.45 – 15.45
Governance 15.45 – 16.45
Wrap-up and next steps 16.45 – 17.15
1 Footnote
SOURCE: Source | 2

3. TRACKER
Objectives of our discussion today
Unit of measure
Title
Unit of measure
▪ Share context for this discussion
▪ Discuss opportunities for
improvement in the SSC proposal
1 Footnote
SOURCE: Source | 3

4. TRACKER
Addressing the issue of skill gap in the construction sector could add $20
Bn to the GDP, and prevent value loss for individual companies…
Unit of measure
APPROXIMATE
Title
Individual companies starting to experience significant Under-performance in infrastructure due to skill gaps
value loss, onlyUnit of which is quantified
part of measure could cost ~US$ 200 billion in GDP by FY ’17
POWER SECTOR EXAMPLE Opportunity cost, US$ billion; 2008-17
Average delay on a project Tendering 100
attributable to skill gaps1 (e.g., ~2-3 months
high pressure welding)
Engineering 20
Loss per day of delay for a 1
Rs. 2.4 crore
GW project2 Procurement 10
At least
~20 of this
Construction 50 attributable
Loss due to 3 months Rs. 220 crore or largely to
of delay US$ 50 million skill gaps
Financing 20
~12-20% of
Average cost of re-work Total 200
contract value
1 Based on a few sample projects. Average total delay on such projects: ~6 months
2 Footnote
1 Assuming a minimum margin of Rs. 1/unit
SOURCE: Source
McKinsey; secondary research | 4

5. TRACKER
… However, the skilling landscape currently is nascent and challenging
Unit of measure
No clear ‘owner’ for skill development has emerged so far
Developers & Material/
End customer Title
developers’
Construction
Sub-contractors equipment Workforce
companies
Unit of measure
associations manufacturers
▪ May hold construction ▪ Dependent on ▪ Unorganized ▪ Act only as ▪ Limited interest
company to quality and time, sub-contractors ▪ Short-term material/equipme as no wage
but no standards exist for labor orientation nt suppliers – no upside for skills
▪ Far removed from problem of ▪ Recognize need ▪ Hire & fire labor, stake in skill ▪ Cannot afford
skilled labor for skill building limited interest in building loss of daily wage
skilling
Current training models are small scale; no universally recognized certification exists
Captive training Others
Government bodies Private providers
ITIs/ITCs centers (e.g., L&T (Indian Welding
(CIDC, NAC) (e.g., CREDAI)
CSTIs) Institute, etc.)
Scale ~2 lakh1 ~50,000-80,000 ~6,000-7,000 ~2,000-5,000 <1,000
▪ 1-2 year courses ▪ Short-term ▪ Short-term ▪ Short-term ▪ Short-term
▪ Select trades courses (3-6 courses (3-6 courses (<3 months)
(surveyors, months) months) (3 months) ▪ 1-2 specific
Model masons, etc.) ▪ Multiple trades ▪ Multiple trades ▪ Multiple trades trades (basic-
▪ Center-based (basic-advanced) (basic-advanced) (basic skills) advanced level)
▪ Center and on- ▪ Center-based ▪ Center and on- ▪ Center-based
site site
Certificatio
NCVT/SCVT Own/MES Own certification Own/MES ISO/International
n
1 Footnote relevant to construction
For trades
SOURCE: Source | 5

6. TRACKER
We now envision a large scale initiative to build construction skills for
India
Unit of measure
Title
Unit of measure
Annual output of 25-30 lakh skills per year
in a 3-year period
High quality Well Strong Highly Strong
standards, established demand for distributed emphasis
with world certification skills, from key delivery on “train-the-
class thinking processes, for customers model, trainer” and
& ▪Skilled labor (developers, ▪Largely “on technology,
customization ▪Training builders & site” training incl. rural
to the Indian providers construction with strong broadband
context ▪Contractors companies) sourcing links as important
multipliers
Use of technology, with UID linkages, to monitor training outcomes & build LMIS
Advocacy to bring together key stakeholders with tangible commitments, & mobilize trainees
Funding of new training capacity & per-trainee training costs
1 Footnote
SOURCE: Source | 6

7. TRACKER
The initial push is being led jointly by NCSD & NSDC, however, SSC is
Unit of measure step up and lead the effort in due course
expected to
Objectives of NCSD-NSDC
interactions with industry leaders
Title ▪ Clear targets for skilling: 2.5 lakh people in year 1, 10 lakh in year 2 and 25
1
Unit of measure per year by the end of Year 3
lakh people
2
▪ Set up the construction Sector Skill Council (SSC) as a “model SSC”
– Create standards & certification for 6-7 high demand trades
– Create curriculum for priority trades as an industry resource to facilitate rapid
ramp-up of trainings
– Train ~750 trainers to conduct training in these trades
3
▪ Get commitment from top customers (developers, builders, construction
companies, state & central govts.) and EPC players to mandate 20%1 skilled
labour in their top real estate and infrastructure projects for 2012-2013
4
▪ Develop a set of premium labour suppliers with certified labour on rolls
5
▪ Build a network of 35-40 training partners to carry out skilling in an on-site
manner, leveraging technology to increase scale
6
▪ Run advocacy campaigns to mobilize trainees
7
▪ Build UID-linked technology platforms to monitor outcomes of the effort
(incl. creating skill repository)
8
▪ Mobilize all available resources for skilling (from government schemes,
1 Footnote
construction cess contributions, contribution from industry, credit window)
1 Increasing to 40% and 60% in subsequent years
SOURCE: Source | 7

8. TRACKER
Objectives of our discussion today
Unit of measure
Title
Unit of measure
▪ Share context for this discussion
▪ Discuss opportunities for
improvement in the SSC proposal
1 Footnote
SOURCE: Source | 8

9. TRACKER
The construction SSC proposal works well on several dimensions,
however, there are opportunities for improvement
Unit of measure
What works well Opportunities for improvement
Title
▪ Ensures representation from 4 key
Unit of measure ▪ Ensure faster scale-up to address sec-tor’s
industry associations in the sector needs, leveraging NCSD-NSDC push
▪ Identifies main challenges to skill ▪ Have greater clarity on operating and roll-
development in the sector out plan for key functions of the SSC
(standards, certification, accreditation, close
▪ Identifies key roles and skills needed
industry collaboration)
across the value chain
▪ Prioritizes SSC activities for the first 3 ▪ Re-align the “delivery” group to focus on
specific initiatives that can truly catalyze
years to maintain focus
large scale training – including advocacy to
▪ Adopts an “incremental” approach to mobilize individuals and existing training
standard creation, rather than an capacities (ITIs, polytechnics, private
ab-initio one providers)
▪ Pro-active leadership (by the SSC ▪ Ensure participation from all parts of the
working group) of priority initiatives value chain (e.g. material and equipment
identified in the December workshop has suppliers) to make the SSC truly
ensured convergence of the two efforts representative of the sector
▪ Opportunity to leverage the NCSD-NSDC ▪ Have greater clarity on working level
joint push in construction structure, including role and capabilities
needed for CEO and function heads
1 Footnote
SOURCE: Source | 9

10. TRACKER
BREAKOUT 1: Standards, Accreditation and Certification
Unit of measure
▪ Target population: What mix of unskilled labor (for scale) and semi-skilled labor (e.g.
foremen, that can have greater impact on productivity)?
1 Operating Model
Title ▪ Methodology: Which standards/certification and accreditation framework could form a
starting point? Blend of current industry standards or industry-cum-international?
Unit of measure
▪ Implementation model for standards, certification and accreditation:
▪ What is in-house vs outsourced?
▪ Laying down protocols for accreditation, assessments and certification
▪ Approval of assessment and accreditation bodies
▪ Physical activity of assessment and accreditation
▪ Certification by SSC
▪ How can we ensure industry collaboration and acceptance?
▪ Revised ramp-up plan to achieve target of 30 lakh skills per year by end of Year 3
Implementation
2 plan for desired
– What activities can be covered in the initial start-up stage of the SSC?
scale-up – How to crunch timelines to release standards and certification for one new trade
every 2-3 months (for example)?
– How to maintain Standards and QA during ramp up stage?
▪ Internal team structures and key sub-units within the standards, certification and
Internal team accreditation groups in the SSC
3
composition ▪ Roles, key qualifications and possible sources for function heads for the groups
▪ Possible revenue streams (per candidate, total)
4 Revenue model ▪ Costs incurred (per candidate, total)
1 Footnote
SOURCE: Source | 10

11. TRACKER
BREAKOUT 2: Delivery/Operations
Unit of measure
▪ What key activities can the delivery group perform to truly catalyze large
scale skill development? (co-develop a best practice delivery model with
1 Operating Model
Title NSDC partners, develop curricula as industry resource, create train the trainer
Unit of measure mobilize existing training capacities)
capacity,
▪ For each of the above, what is the operating model? (e.g., joint venture with
industry player for train-the-trainer, tweaking of best existing curriculum and
making it available for all providers for a license fee)
▪ Implementation model:
– What is in-house vs outsourced?
– How can we ensure industry collaboration and acceptance?
Implementation
▪ Revised ramp-up plan to achieve target of 30 lakh skills per year by end of Year
3
2 plan for desired
scale-up – What activities can be covered in the initial start-up stage of the SSC?
– How to crunch time-to-market for each trade once standards have been set?
▪ Internal team structures and key sub-units within the delivery group in the SSC
Internal team ▪ Roles, key qualifications and possible sources for function heads for the group
3
composition
▪ Possible revenue streams (per candidate, total)
4 Revenue model ▪ Costs incurred (per candidate, total)
1 Footnote
SOURCE: Source | 11

12. TRACKER
THEME 3: Governance
Unit of measure
Title
Unit of measure
▪ Are there any additional members of the construction value chain who should
be represented on the Board of the SSC?
▪ How can individual sub-units with the SSC ensure close industry participation
(e.g. in creation of standards, outlining best practices)? Is there a need for
Advisory Councils for key sub-units of the SSC?
▪ What competencies should the CEO of the construction SSC have? What are
the possible sources for such competencies?
▪ How do we ensure neutrality while constituting the Board of the SSC?
▪ How can we ensure fair processes for recruitment of the working team (CEO
and function heads)?
1 Footnote
SOURCE: Source | 12