The problem with procurement

Anyone who is passionate about building information management know the potential benefits it can bring to the construction industry.

Over the past few decades construction costs have escalated way above the rate of inflation and construction timescales have continued to extend. Our client base in the industry is looking for a greater level of predictability of time cost and quality. Through the use of new technology and new thinking, BIM gives us the opportunity to deliver greater certainty.


However, using clever new software alone will not address the challenges and deliver results. The whole approach to design and construction has to be re-thought if we are going to maximise potential.


BIM is now accepted as a better way of designing and delivering buildings. Some have had to accept this reluctantly as it has taken away what they have known for many years and has the potential of undermining their own areas of expertise and knowledge.


To be able to deliver true lean efficiency we also need to align procurement. We are adopting new approaches which alter the design and delivery cycle and to maximise the benefits the procurement route, has to be changed to suit.


A brief history of procurement


Procurement has become increasingly complex over the years. We have a range of very complex contracts to cover every eventuality. The reality is, however, there is only one favoured procurement route in the UK at present and that is design and build. There are a number of subtle variations such as single stage or two stage but in principal the intent is the same. The contract is in place to move the risk away from the client to the main contractor.


If we go back 50 years there was no such thing as design and build contracts. At this time the client had a requirement and asked an architect to develop proposals and design information. A package of information was produced and the builder provided a price based upon accurate drawings and bill of quantities.


In the following years buildings became increasingly complex and we entered a period where there were elements of information missing or incorrect. The contractor then had the opportunity to recover his additional costs through the courts.


A whole industry of litigation built up and construction became very adversarial. The building process became more of a legal battle than a building project.


The answer to this problem was to develop the design and build contract where the early design intent was passed to the contractor and he developed the design for approval by the client. The client was provided with contractors proposals for approval and given an agreed maximum price. This took away all of the litigation and in effect priced the risk.


Over the next few decades we have seen construction prices increase steadily. This has been down to a number of factors but one of the most significant being the pricing of risk on projects. Contractors have consistently increased risk cover to a point where the procurement route no longer provides value to the client.


The downside of design and build is that it stifles innovation as there is reluctance to push boundaries or take even the smallest risk in design. The D and B contract is focused on risk and cost rather than providing any opportunity to asses value. As soon as the design intent is passed to the main contractor the opportunity for innovation in design is lost due to the way procurement is structured.


Once the main contractor has the design intent he is looking to reduce cost and risk. There is no criticism intended here as this is the purpose of the contract in place.

However today’s clients are considering how they can increase value and want to be able to make choices in the development of their building.


The client today pays a very high price for risk. Through BIM much of this risk can be managed. The coordination of complex structures and systems can now be completed digitally. The coordination is no longer subjective and can be clearly identified on the screen with accurate reports highlighting areas which lack coordination.


The construction process can be planned meticulously in advance again removing delivery risk.


If more design and coordination is carried out at the early stages the risk significantly reduces and procurement waste can be minimised. A good example of this is in the design of M and E. Often the detailed design is not carried out until stage E or F. There are often a number of designers involved to get the system to operation. If there was only one designer who produced the detail from the outset surely there would be benefits.


My view is that we should look at what the best way to design a building is for the client and how we can maximise value. We should review the risk and then decide the right procurement route.


For me the most efficient method which delivers the greatest value is to design a building in its entirety. The building should be tested and coordinated. The construction process should be developed and tested in detail to maximise efficiency. The supply chain should be engaged early and selected on not only cost but value. The earlier they are involved the greater value they can deliver.


The design team need to take more responsibility for the design early in the project and help the client to make value driven decisions rather than decisions based totally on cost. Investors are taking longer term views and they want to consider issues such as maintenance and energy costs in use.


In reality, this is a move back towards traditional procurement and management contracting. The risk will be visible, fair and managed, and profit and costs will be recovered in line with the services provided rather than the level or risk or gamble taken.


These are huge changes to consider but no one can say that the UK construction industry in the way it operates today. The majority of our main contractors are frantically shrinking their businesses or focusing the efforts on international opportunities.


We have an opportunity to re engineer our industry to one which is sustainable and joined up to deliver real value throughout the building lifecycle.