Finding a just price

The Whole Life Value (WLV) tool enables stakeholders to procure on best value rather than lowest cost. Policy requires the public sector to procure buildings on best value but until now there has not been an easy way of comparing procurement options in terms of an optimum balance of whole life costs, design quality and other key values such as sustainability. So billions have been wasted on ill thought-out schemes with inappropriate regard for sustainability and life cycle considerations.

The WLV concept is based on principles everyone uses on a major investment such as buying a house or leasing a car. So, it is not a complicated process.

Designed to be easy to use for everyone in the procurement chain, the tool takes account of not just costs over the whole life, but also non financial value drivers such as time, quality, functionality, impact and compliance issues.

The tool presents the key factors affecting value in a radar chart format which provides an easily understood balanced scorecard. Project options can be assessed rapidly and performance compared against the required target performance.

The RICS has helped F&G develop the use of whole life costing and simplify the process of doing option appraisals. The Construction Industry Council’s Design Quality Indicator (DQI) has provided the means to measure non-financial factors affecting value, such as design quality, impact and functionality. To date, the DQI has been used on over 450 projects.

At the start of the procurement process, stakeholders using the WLV tool must meet to decide the project’s value drivers, and then set the value parameters against which options can be compared. Various scheme options are then scored against the target parameters. The tool enables stakeholders to quickly discover whether their requirements will be met or exceeded. For instance, the WLV tool will reveal instantly whether build functionality or quality needs to be reduced in order to cut down costs or meet completion deadlines. Stakeholders can then make trade offs until there is a close fit with the target parameters.

The process is, in essence, exactly how we lease a car. One keeps refining the options to identify the best value for money, taking all other value drivers into account.

The Whole Life Value tool has been designed to capture knowledge, as good practice is identified during its use. More sophisticated WLV tools are being developed for specific industry application for the education, transport and process sectors.

Martin Print, of Constructing Excellence, is a member of the KPI consortium which is responsible to the DTi for the annual production of the construction industry KPIs. He has helped the WLV task force to refine the method of measuring value and to present it in a way that is easy to understand.

Martin also helped by facilitating peer group review meetings and workshops attended by organisations such as the Office of Government Commerce, National Audit Office, RICS, DfES, BP, Bovis Lend Lease, BAA, Astra Zeneca, Huntsman, the Concrete Centre and many other organisations representing all sectors of the construction industry.

The tool is no pipe dream. Representatives of the WLV task force have met the OGC and BAA to discuss its possible adoption.

If the OGC decides to use the tool it will be significant as it is responsible for £40bn of public sector construction spending every year. Be sure to watch this space for further developments.

• Andrew Green is head of Whole Life Costing at Faithful & Gould, which teamed up with Constructing Excellence and the European Construction Institute to develop a radical new procurement tool