End the delusion of competitive contracting
The Carillion collapse is a reminder that everyone loses from lowest-price tendering – clients, contractors, supply chain and workers.
“This morning a series of delusional characters maintained that everything was hunky dory until it all went suddenly and unforeseeably wrong,” said a statement from co-chairs Frank Field MP and Rachel Reeves MP after the board of Carillion appeared before both the Work and Pensions and Business Select Committees.
If such delusional behaviour is possible in one company, is there more of it about and who else is deluded? The companies stuck in a business model that does not work? Governments which think every complex project can be done on a competitive tender, lowest-price model? MPs who have never made a mistake?
In the Carillion case, the tragedy becomes very personal; it’s the many thousands of people who will be affected either through impaired pensions or unemployment, as well as the users of hospitals, roads and schools which Carillion used to manage.
It seems everyone “knew” that Carillion was in trouble, except the deluded few at the top. It’s easy to be critical. A time comes when any rescue plans have to be abandoned and salvage plans put in place.
That time was well past in Carillion’s case, as evidenced by the drop straight into liquidation, rather than administration. The taxpayer will have to pick up the tab.
Notwithstanding what everyone knew or did not know about Carillion, everyone is agreed that construction is not working. Other major companies around the world are experiencing problems.
Competitive contracting is a mug’s game, where everyone loses money eventually. It’s akin to gambling – only worse: it’s a bet for the client, a bet for the contractor, a bet for the supply chain and a bet for the workers too.
Without doubt a culture change is needed in construction, but how? Some would argue that we don’t have enough good people in the industry – with the right skills and right attitude.
The Hackitt Independent Review of Building Regulations and Fire Safety criticises the culture of the industry and the competencies within it. As an industry awash with professional bodies, way more than any other industry, there seems to be a significant difference between being competent, being qualified and being professional.
Professionalism can be hard to define but you know it when you see it, and there are plenty of competent people out there who operate very professionally but who do not have a string of letters after their name. Professionalism is not a question of whether you get fees or a salary, or whether you are trade or white collar.
Taking steps to change behaviours
In terms of culture change, the common factor across the world is the relationship with the biggest client: government. Projects are getting bigger, taking longer, with wider scopes and more complex supply chains and relationships. It’s equally delusional by governments to think they can continue as they have always done.
Unless governments take meaningful steps about how they behave and manage risk, then there is the very real prospect that if they want construction done they will have to do it themselves. Competitive contracting is fast becoming a lose-lose game; we need to make it a win-win. The alternative is to continue the collective delusion.