Clash points

Rudi's $64m question misses the point. His comments presuppose that all main contractors will be prime contractors. This is neither true nor realistic. Defence Estates is looking to reduce the number of organisations with which it does business and there will probably be only five or six prime contractors for the whole country. On this basis, the vast bulk of main contractors will feature somewhere along the supply chain just like specialist subcontractors.

The Construction Confederation's response to prime contracting has not been focused on the pre-payment requirement of suppliers; rather it has concentrated on the type of risk that is transferred to the prime contractor under the model conditions. These conditions do not seem to reflect the underlying principle of mutual trust that underpinned Building Down Barriers. This is not just about cash flow.

Rudi recognises that successful supply-chain management means supporting key suppliers. Surely, Defence Estates should also be adopting these principles in the way it treats and contracts with the prime contractor. In terms of building commercial relations, imposing contract conditions that undermine trust and confidence and transfer unmanageable risk is self-defeating.

In relation to PFI projects, the Treasury taskforce has admitted that the wholesale transfer of risk is unlikely to deliver value for money. Why can't Defence Estates learn from this? This is why the Confederation has opposed pre-payment conditions.

From what we understand of the Defence Estates' selection process for prime contractors, the way the supply chain has been formed and managed will be a key consideration. If Defence Estates is truly looking for value for money, then prime contractors will undoubtedly be looking for supply chain partners which will help them deliver a competitive advantage. Remembering that cluster leaders should also be long-term strategic partners, what Rudi seems to be saying is that the construction industry is incapable of entering into mutually beneficial contracts without regulation.

The key message should be about integrated teams and focus on the end product. The best organisations in all sectors of the industry are rising to this challenge in all its various forms. The biggest difficulty it poses, however, is that it requires all sides to put behind them the old animosities and divisions and look to a new way of working. Rudi seems intent on building into the new systems the fault lines and animosities of the past. Sir Michael Latham said that the industry suffered from too little trust and not enough money. Well, Defence Estates clearly has money to spend, and the whole of the industry, clients included, needs to trust itself to work in a new way to deliver benefits for all.