Lack of cohesive approach is costing industry billions, according to Construction Leadership Council
An overhaul of procurement practices could save the construction sector £15bn a year, according to a government-commissioned report.
Procuring for Value, which was produced by Construction Leadership Council member and Rider Levett Bucknall director Ann Bentley, provides recommendations on how government, clients and the industry can maximise the impact of the sector deal by a change in approach to procurement.
Bentley said: “The single, overwhelming observation that comes from the report is that there is a systematic lack of ‘joined-up’ action within the industry – on the part of government, clients and suppliers.
“And yet the potential prize is huge. Simply bringing the whole industry up to the current average productivity level would lead to £15bn savings per annum.”
The change in approach to procurement would also develop an industry-wide definition of value and a universal methodology for procurement by 2019 and implement a standardised industry pre-qualification process by the following year. Retentions would be outlawed by 2025 under the sector deal.
Bentley’s report laid out several tasks that would have to be undertaken by both the government and industry to achieve the sector deal’s goals.
The report said industry would need to develop an industry-wide definition of value that takes more than capital cost into account and produce a methodology for procurement that promotes consistent standards across industry.
Industry would also need to work with the Infrastructure and Projects Authority on the development of cost and performance benchmarks for assets, contractors and suppliers.
The government would be required to embed the new approach in the procurement of public projects and support the development of a standardised pre-qualification questionnaire that can be adopted across the public and private sectors
It would also be required to promote the use of un-amended forms of contract on publicly funded projects.
Industry bodies, institutions and companies will:
1. Develop an industry-wide definition of value that takes into account more than capital cost
2. Produce a universal methodology for procurement and promote common and consistent standards across industry
3. Work with the Infrastructure and Projects Authority (IPA) on the development of cost and performance benchmarks for assets and suppliers. Create an industry dashboard which is routinely updated as part of an on-going process and demonstrates we have increased capacity, productivity and Pre-Manufactured Value (PMV) and reduced embedded and operational carbon
4. Create end-user rating system for built assets
5. Remove bureaucracy from the procurement process by developing a cross-industry pre-qualification process
6. Consider with government how to increase the capability of the i3P consortium to support innovation and best practice in the construction sector.
IPA and other government departments will:
1. Work to embed the Procuring for Value approach in public procurement and build capability to do this
2. Work with the industry on a set of cost and performance benchmarks for assets and contractors
3. Support the development of a standardised Pre-Qualification Questionnaire (PQQ) that can be adopted across the public and private sectors
4. Undertake consultations on the practice of retention payments in the construction sector and the 2011 Amendments to the Construction Act, and work with construction clients and firms in the construction sector to build a consensus position on fair payment practices. Ensure there are good payment practices throughout the construction supply chain on publicly funded projects
5. Promote the use of un-amended forms of contract on publicly funded projects.
The objectives of Procuring for Value are:
- 2018: Conclude consultations on payment practices and develop an approach to payment practices and retentions
- 2019: Develop an industry-wide definition of value and a universal methodology for procurement
- 2020: Implement a standardised industry pre-qualification process
- By 2025: End the practice of retention payments within the construction sector.