Get what you pay for

I have seen the way forward. IT is a path open to clients and contractors, and it leads to construction nirvana. No, it's not Tony Blair's "third way". It is "selection by value".

There has been plenty of talk about choosing contractors on the basis of best value rather than lowest price, but not much action. But now, as indicated in last week's Building

(page 9), this is about to change. John Prescott has called for public bodies to choose contractors offering best value – and he has Treasury support.

What's more, for the first time in the history of the industry, practical guidance on choosing by value is available to clients and their advisers. Rather than having to prove a professional judgement that a certain tender represents better value, there are now auditable procedures. In January, the Construction Industry Research and Information Association issued guidelines that represent an important first step towards implementation, and I urge anyone who buys or supplies construction services to read it.*

This shift towards choosing contractors by value will transform the industry for the better. But to succeed, it will need a change in attitude. Enlightened clients have always realised there is a right price for every job. And this is not necessarily the lowest price at tender stage. They know there is often someone willing to submit an unrealistic offer.

There are a number of reasons for this: it can be because of a lack of understanding; a desire to increase turnover; the hope of a claim redressing the position; or inaccurate estimating. When contractors hear they may have been successful on a tender, they typically say: "Let's hunt the mistake."

When employers accept such tenders, they may be rewarded with a claim, either genuine or contrived, and a poor-quality project.

So, why have employers and their advisers relied on lowest price for so long? Because it is familiar. Because it is comparatively quick, cheap and easy to justify to auditors and committees. And because, if one price is lower than the rest, it may be perceived as a saving.

This short-term mentality pervades the industry. Consider the lack of adequate information at tender stage. Who pays for this in the end?

We at CJ Sims are increasingly taking-off our own quantities, recently from reduced scale drawings and once, in the absence of anything else, from photographs. Who pays for this?

If the tender period is too short and we do not have sufficient time to wait for quotes to be returned, we will price for risk. Who pays for this?

Balancing quality and price is common sense. We do it every day as customers. So why should clients be any different?

To be successful, the industry needs to move beyond thinking that the lowest price wins. The logic of balancing quality and price has been proved successful when applied to consultants. But what about contractors?

Supporters of lowest-price tendering will claim that quality has been allowed for in the shortlisting of bidders. But surely it is the quality of the final tender submission, not the pre-qualification, that should be considered?

Of course, I accept that contractors' prices will always be a consideration. But they are not necessarily the most significant and should never be the only consideration.

Balancing quality and price is common sense. We do it as customers every day. So why should construction clients be any different? They want, as we do, the best possible value for their money.

There are encouraging signs of a trend in the right direction. I am starting to hear more reports of contractors picking up work on the basis of added value, and recent Ministry of Defence figures show that 32% of contracts were awarded to the second-lowest and 16% to the third-lowest tender.

How can we build on this momentum?

I agree with the construction taskforce that contractors have a duty to raise awareness among clients and their advisers – so they should send them a copy of the new guide.

Where can contractors add value? There are certain skills we should be honing: better teamworking and a closer involvement with our subcontractors; better programming; better buildability and value engineering; and better budgeting and better risk management.

Ultimately, however, adding value is about having the right attitude. It is the difference between merely responding to a specification and coming up with practical solutions that come from a thorough understanding of the project and the client's needs.