Partner pyramid

We are exhorted by government to adopt the ‘Partnering approach’. But it’s all very well Accelerating change, unless you’re going in the wrong direction, in which case there’s no point going there faster.

Building Services Journal went in search of a definition of partnering. We found that the Construction Industry Board (CIB) website offered clearest and most straightforward explanation: ‘Partnering is a structured management approach to facilitate teamworking across contractual boundaries. Its fundamental components are formalised mutual objectives, agreed problem resolution methods and an active search for continuous measurable improvements.’

The CIB goes on to point out that partnering shouldn’t be confused with other good project management practice, or with long-standing relationships, negotiated contracts or preferred supplier arrangements. These, it says, lack the structure and objective measures that must support a partnering relationship.

One of the most crucial factors in partnering is the commitment of all partners ‘at all levels’ to make the project a success. The CIB says that the partnering agreement could be written on as little as one sheet of paper – and that this drives the relationship between the parties, not a contract. This definition is presented in more detail in the CIB guide Partnering in the team written in 1996. That makes the definition seven years old. And the CIB itself wound up in 2001. So how close is the industry to working in partnerships of this kind? Is it getting close, or is this definition unrealistic in its expectations of how construction works?

Talking to a cross section of the services industry – consultant, manufacturer, contractor, and client – we found that there are certainly some common practices being adopted by companies that lead to a more efficient way of working. Property developer Stanhope doesn’t go in for formal partnering – there aren’t any charters or written agreements. However, since the company’s inception it has developed a particular way of doing things that relies on strong long-term relationships within the project team. Martin Long, project director of Stanhope, says: “What we have is probably a mixture of both strategic partnering and project partnering.”

For each of the major disciplines, Stanhope has a list of two trade contractors it works with. “We don’t tender anything, we negotiate the work with them, we know their rates and overheads so we can agree up front the profit. Equally, they can drive out the complexity of the jobs and actually come up with new ideas, better products, and ways of doing things that we benefit from.”

Peter Knight, head of procurement at Haden Young doesn’t refer to partnering either, on the grounds that it doesn’t really have a definition. He talks instead about managing the supply chain. Haden Young works in a similar way to Stanhope. “Together with our suppliers we identify where costs can be removed,” explains Knight.

As part of this process, Haden Young holds regular one day seminars with its preferred suppliers. The aim is to encourage sharing of information and business objectives. “We have created a dialogue with our suppliers,” adds Knight. One of the ultimate aims of this dialogue for Haden Young is to achieve open book pricing. The objective is to get to ‘best price first’, without the usual negotiations. Knight points out that these not only take up valuable time, they almost always lead to higher prices at the end of the project anyway. Knight believes that the best price is one which reflects the true value of a product, taking into account the suppliers’ production costs.

Ian Sams, marketing and UK hvac sales manager of Armstrong Pumps, agrees that as a manufacturer working closer with contractors has advantages all round. “The current trend is for m&e contractors to ‘package’ equipment and eliminate site labour time which is very worthwhile, and removes inefficient processes from the site. If a manufacturer is involved in the design of the package, as well as the supply of individual components, it is usually possible to make considerable savings in cost and space. Entering into discussion early in the project will also open up doors for value engineering.”

However, all are aware that the ideal way of working can be difficult to achieve. Peter Knight says: “This kind of dialogue and way of working needs to be all the way along the supply chain. For example, the best price may not always look like the lowest at the start of the project – though it will probably be at the end of the project. But it is difficult to say to clients ‘this price is not the lowest’. There has to be a process of client education.”

One of the most crucial factors in Partnering is the commitment of all partners “at all levels” to make the project a success.

Martin Long agrees that there will always be people out in the market who think they can get a better price by looking around several suppliers, but Stanhope prefers to compare final price, not bid costs: “Too many jobs end up having a massive claim at the end. Our jobs generally finish with a clean end, not litigation. We create a non-adversarial environment. We want contractors to make money because we want them to be there for the next job.”

Ian Sams agrees that there are those in the supply chain who haven’t adopted the more forward thinking approach: “The stumbling block in the project manager/equipment manufacturer relationship appears to be historic and can stem from holding on to outdated methods of dealing with suppliers. Often the way to negotiate a good deal in the past was to battle the manufacturer down on price and buy the cheapest product. This has the effect of focusing the supplier on delivering immediate price benefits rather than investing in more advanced research and development which would ultimately offer a far more cost-effective long-term performance.”

Crispin Matson, managing director of consultant Rybka says that one client in particular has a commitment to working in with a team. However, he emphasises that this is not formal partnering; that there are no written contracts or agreements. “We work with developer Akela and a team of about six others including the m&e contractor, main contractor, and the architect. It has really evolved as we have done more work together – six projects so far. We have got to know each other and the way of working so that we can produce better and cheaper buildings much faster for the client.”

But Matson says that the main benefits are more than simply good project working. “The client holds regular workshops with the team in which we discuss how we could approach the work more effectively and come up with ideas which we put to use on the next project.” One of the main benefits from this is that research can be carried out off site and the results used later. The client therefore benefits from innovation which would otherwise be very difficult, and certainly more expensive, to achieve on an individual project.

“This client is very forward thinking,” says Matson. “But the agreement isn’t formal and they are not committed to giving us work. But then I think that keeps us on our toes.”

One of the thorniest issues arising from partnering is the idea that it leads to vested interests and jobs for the boys – rather than better prices for clients. Stanhope’s Martin Long comments: “We would soon find out if we were paying significantly over the odds. The people we work with are all out in the marketplace.”

Sams says that sometimes the problem of finding the best product at the best price can come from the other direction: “Consultants don’t like to design around one manufacturer as they feel they need to be seen to be impartial in the interests of the the client. The danger arises if a consultant is putting forward a proposal based on an average, interchangeable offering, based on standard products from a range of manufacturers rather than specifying the very best solution – which may only be offered by one of these manufacturers.”

The ideas expressed by our small cross section of the industry seem to be common. The industry is not quite at the stage of partnering according to the strict definition, but ways of working are changing. Yet the old methods of procurement and working still largely dominate construction. One of the main barriers to true partnering is that it does require a change of mind set from the whole industry. Knight believes that the process of effective supply chain management begins with trust, and that: “The entire supply chain needs to think in the same way.”

Martin Long says that there will always be those who are of the old school of construction. “I would be naive if I thought that partnering was going to dominate the future, but I think it is the only way to really do jobs successfully. Professional clients have learned this.”