Rethink procurement to improve performance

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Procurement may not be a glamorous topic – but rethinking our delivery models is key to transforming the performance of the industry, writes Alison Nicholl.

Alison Nicholl

With so many factors aligning to drive positive change in the sector, we have to grasp this opportunity to turn ourselves into a more productive, more sustainable, more profitable and more attractive industry. To do this we need to rethink our delivery models to transform the performance of the sector and the built environment we create.

Part of the Constructing Excellence vision is clients procuring for outcomes and value. We need to shake up how we procure. We need to rethink the current procurement processes, contractual arrangements and underlying assumptions about what value means.

As an industry, if we are to harness the true potential of the innovation that is moving at pace with modern methods of construction, platform-based approaches to building, digital collaboration and so on, we must adapt our current standard procurement processes or risk failure.

At a recent Constructing Excellence members’ forum we considered how we can unlock the knowledge and expertise that exists throughout the supply chain. One suggestion was to ban design and build. While this might seem extreme, we do need to move away from cost-based procurement to models that recognise and reward value from wherever it comes, ensuring that everyone gets paid fairly for the value they bring.

Collaboration is the founding principle of Constructing Excellence and it remains just as valid today as it was at the time of Latham and Egan. To unlock value, to stimulate and reward innovation, we need to share knowledge, we need to share problems, we need to share data and we need to share risk rather than simply passing it around.

Early contractor involvement is relatively well understood (if not always implemented), however with our move towards a digitally enabled and manufacturing-based sector, we need to involve specialists and manufacturers at an earlier stage to ensure their innovative concepts and solutions are effectively incorporated into the project, rather than bolted on.

To do this we need to change procurement. Manufacturers cannot invest time and effort to come up with solutions if there is no guarantee that they will be used on the final project, or that a lower-cost substitution will not take place.

The Cabinet Office’s New Models of Construction Procurement demonstrates that more collaborative approaches work. Two Stage Open Book and Cost Led Procurement have been increasingly widely adopted, particularly in the local government sector where data shows an estimated £1bn per year of projects are using the models as of the end of 2018.

For example, in 2018 the Surrey County Council Trial Project (Project Horizon) reported an average 12.5% savings over five years, plus new 10-year warranties on 76% of the schemes, and local apprenticeships and recycling initiatives. This was led by Kier Highways.

The first trial project for Insurance Backed Alliancing (IBA), by Advance II Alliance (including Dudley College), demonstrated the value of collaborative working, not just in cost savings but in value to the client. The aim was not simply to save money, but to maximise value, deliver a better quality building, minimise the risk of cost overrun and cost dispute – and it achieved that. However, these approaches are a long way from being commonplace in the sector.

Under the leadership of Ann Bentley of RLB, the Constructing Excellence Procurement Group is considering three key enablers of procuring for value:

• behaviours – removing cost as a barrier;
• giving industry momentum, voice and backing;
• robust metrics in a standardised framework to prove that these approaches work.

Our next step is understanding the stakeholders that influence procurement and what their drivers are. Procurement is not a simple picture. We need to bring together the leaders, the influencers, the funders, the legal teams and the blockers to work collaboratively to unlock the value that procurement can bring.

Alison Nicholl is head of Constructing Excellence, part of the BRE Group