Opinion

Procurement is key to a better industry

3 March 2017

A trio of strategies establish a solid road map, but the government can drive one of the key elements in improving industry outcomes, namely procurement, says Don Ward.

Don Ward

It was perhaps overshadowed by Brexit and Trump developments that week, but Theresa May found time in late January to launch the government’s Modern Industrial Strategy.

It had 10 main points, which included: Investing in science, research and innovation; Developing skills; Upgrading infrastructure; and Improving procurement. All are important for our sector, and provide a good focus for policy and funding.

With the Construction Leadership Council, which was set up to lead our sector focus on industrial strategy (Construction 2025), recently confirming its three areas for transformational change as Digital, Manufacturing, and Whole-life performance; and Mark Farmer’s review of the UK construction labour model Modernise or Die (#FarmerReview), which identified industrialisation and delivery through “premanufactured” offsite methods, we have a new trinity of connected strategy reports to address the sector’s ailments.

Plus ça change

Of course, if this all seems familiar, it is. In the 1990s the reports of Sir Michael Latham and Sir John Egan identified the same challenges. In the past 20 years UK construction has progressed – it is 70% safer, clients are 30% more satisfied, and the sector is responding to pressures on carbon. You would not always think so to listen to some of the government rhetoric, but the sector is improving.

It’s collaboration that is delivering change, enabling BIM-led integration of the supply chain. And continuity of policy is good, our sector needs certainty and confidence in its change agenda as much as in its pipeline of work.

Integrated project insurance

IPI has exciting potential to be a game-changer. Its first project is Dudley College’s Advance II building (pictured above), which is progressing nicely as a look at its project webcam (easily found via a search engine) shows. It features an integrated project team, appointed under OJEU rules, with an alliance contract, true collaborative working (as the insurance removes any business case for confrontation), a full BIM model, a project bank account, lean delivery, and uniquely gain/pain share with cost overrun insured for the client.

But government itself still holds one of the keys to unlock improvement — modern procurement. As the new strategy says: “…we must use strategic government procurement to drive innovation and enable the development of UK supply chains.”

In the Government Construction Strategy 2016-2020 three new models of construction procurement were highlighted: two-stage open book; cost-led procurement; and integrated project insurance (see box). These all feature early involvement and aligned commercial arrangements to incentivise collaboration.

Constructing Excellence and other industry bodies have since worked together on a programme of trial projects. The first two approaches are quite well known and well proven. In our programme they have delivered on public sector projects in terms of value, cost savings of 10%-20% or more, time, quality, sustainability and social value. Proven good practice to be adopted far and wide, with a need to ensure Tier 2 of the supply chain and below is also fully engaged on a collaborative basis.

The Infrastructure and Projects Authority (IPA) of the Cabinet Office now recommends these approaches for widespread use in the public sector – and detailed guidance and case studies are available on the IPA website as well as our own.

The government’s Crown Commercial Service has included capability in the new models as a core competence expected of tenderers for its latest frameworks, and they are included in IPA’s Project Initiation Toolkit. So “all” that remains is for clients and their advisers to default to their use, unless there is a good case for traditional methods – or further innovation.

The government has progressed, it has good policies in place and while there undoubtedly remains a gap between policy and implementation, that gap is closing. The supply side now has a responsibility to respond – and to mirror the improvements by procuring for collaboration, early involvement and value in their own arrangements with their supply chains.

Supply chains? Hastily arranged one-off subcontract arrangements bought on lowest tender price are not supply chains. Neither will they be, until procurers recognise this and are incentivised on the amount of repeat business they do with their suppliers.

The best way for clients to facilitate this is... to procure supply chains! Not a Tier 1 contractor, or a design consultant in isolation and then leave it to them to deal with the rest. As the new strategy puts it, modern procurement must “drive innovation and enable the development of UK supply chains”. Time to walk the talk HMG.

Don Ward is chief executive of Constructing Excellence

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