Permanent revolution

To some, a change in procurement systems sounds innovative and exciting. To others it is distracting and potentially expensive. The new year gives us a chance to revisit our successes and our missed opportunities and to focus on where change could add value to our businesses.

Like it or not, more than 10 years of sustained government support for construction reform has had a profound effect on the industry and its clients. It has demonstrated, for example, that properly structured partnering can achieve impressive results.

Case studies of integrated teams working in collaborative frameworks have repeatedly shown that their work has fewer defects and accidents and completed in less time - and at less cost, which is what has attracted the Treasury's interest. For example, the recent £500m Job Centre Plus Programme, procured by Department for Work and Pensions and Land Securities Trillium, reported savings of 22% when benchmarked against traditional projects. To do this they created a single framework agreement with 14 contractors, measuring performance on the basis of open-book pricing.

The government's need to achieve such cost reductions was stated in the Gershon Report, which estimated that the possible efficiency gains in social housing projects alone totalled more than £524m in three years. This in turn has triggered yet more government activity, including the appointment of "national change agents" to drive forward collective procurement by forming consortiums of public sector clients so as to obtain better value through a more substantial and organised flow of work.

Other recent public-private sector innovations include the formation of joint venture companies or limited liability partnerships to undertake local government work, for example the £640m programme for repair and maintenance of all Sheffield's housing and public buildings by an LLP owned by the council and Kier Support Services.

Even in the field of PFI, long-term procurement under joint partnering arrangements is starting to take shape under the NHS LIFT programme and, on a more ambitious scale, through the Building Schools for the Future initiative.

The Gershon Report estimated that the possible efficiency gains in social housing projects alone totalled more than £524m in three years

What all these changes have in common is the use of partnering processes and a move from single transactions to long-term framework arrangements. Clients offer a substantial and stable workflow over a number of years, against which contractors and consultants promise improved performance and invest in their workforce and supply chain. If the framework is "bankable", then all parties are motivated to work more efficiently, particularly if performance targets are the criteria for winning further work.

So what are the barriers to new procurement processes? First, all this innovation presents a challenge to client officers or consultants wishing to stay within their comfort zone. Second, contractors see that investment in partnered procurement initiatives costs a lot of money. In return for this investment, a substantial advance order book and a role in the joint planning of projects alongside clients and consultants should have big benefits. Yet some contractors hesitate when offered collaborative working with clients, particularly if this involves them opening up and restructuring traditional arrangements with important subcontractors and suppliers.

One surprising obstacle on the road to change is the European Union's Consolidated Directive restricting framework agreements to four years. The new directive recognises framework agreements for works and services for the first time but subjects them to a time constraint that limits the scope for long-term performance improvements. There are other options that do not have the four-year limit, such as joint ventures or PFI structures or term contracts. However, all of these need careful structuring, not least to avoid the accidental creation of a framework.

Twelve years on from Latham and eight years on from Egan the construction industry has seen a sustained government-led drive for improved procurement efficiency - unlike anything elsewhere in the world. The benefits are there to be gained but the investment of time and effort should not be underestimated.

Fundamental changes to procurement practices through the use of properly documented partnered processes and frameworks may not be everyone's idea of fun. But they are the only way to ensure results.