The Housing Forum makes some suggestions
In the run-up to the general election, the Housing Forum at its annual conference in April attempted to predict how the coalition should address planning and regulation and how the housing industry should address falling markets and tight financial constraints. E-voting by delegates on political manifestos attracted 92% support for the promise of “free bouncy castles for every home” (the Monster Raving Loony Party) and the conference also heard recommendations from working groups on tenure choice, localism, the funding of infrastructure and the future of procurement and partnering.
The sub-theme of the procurement working group was “how to deliver cost savings and efficiencies”, and reflected six months’ research (available on the Housing Forum website). One interesting finding revealed the extent of due diligence undertaken by private developers on the viability of their architects’ designs through dialogue with contractors and suppliers before authorising start on site.
Public sector housing providers are constrained in this respect by EU procurement rules, but nonetheless the working group saw the need for a more intrusive approach by public sector clients to assess whether consultants’ designs could be enhanced or made more cost-effective by shared contractor experience. Concern was expressed that in low-ball pricing, bidders hold back criticism of the viability of designs and instead exploit any problems in the brief through later claims to enhance profit.
Concern was expressed that in low-ball pricing, bidders hold back criticism of the viability of designs and instead exploit any problems in the brief through later claims to enhance profit
There was particular concern from manufacturers that they are left out of the project team until after the scheme starts on site and have no chance to offer proposals in relation to improved life-cycles, reduced energy use, reduced carbon omissions and apprenticeship places. This limits innovation and stifles community benefits.
The working group recommended that savings and efficiencies be transparent to the client so that cost could be balanced against added value under a new procurement model. This model is neither the traditional nor the partnering approach but would be an EU-compliant system for “early contractor procurement” that fitted with the time constraints of overarching funding models and land deals. This “third way” would help clients facing a choice between an arm’s length, cost-driven tender or a full-blown partnering approach.
The working group recognised the need to use electronic tender systems and e-auctions to improve efficiency, with web-based portals acting as a depository for project information and a conduit through which project management processes were routed. There was concern that these systems did not pass information to all supply chain members in time for them to use it in the most productive manner, and that they should be combined with risk management techniques such as early warning and urgent consultation so as to avoid problems escalating into disputes.
The third strand of the working group’s findings was the need for greater simplicity and clarity in procurement. The lack of consistency in client briefs and the complexity of procurement documents were criticised as obstacles to the marketplace returning their most competitive prices and proposals. This drive for clarity was also picked up in relation to performance measurement, where key performance indicators (KPIs) have become an industry in their own right. The working party recommended six basic KPIs to be used across all housing projects and reported consistently by all housing clients in order to embed proof of what works and what does not:
- Cost savings (by reference to budget or prices previously paid on other projects)
- Accurate programming (during the preconstruction and construction phases)
- Numbers of defects (at completion and during defects liability)
- Numbers of accidents (arising on or off site)
- Added value (that improves whole-life cost of the project and its impact on residents, the environment and the community)
- Successful risk management (including dispute avoidance).
The working party saw continuing changes in procurement models, including growth in collective procurement by client consortia, and client-contractor joint ventures. They considered that the immediate priority is likely to be environmental retro-fit of existing stock and comprehensive asset management measured against stringent savings and efficiency targets. In meeting these demands, the conclusion was that traditional procurement models and vague performance measurement were not good enough when the sector had enough examples of good practice to come up with a better response - and needed to find enough money for all those bouncy castles.
David Mosey is head of the projects and construction group at Trowers & Hamlins