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Mon November 19 2018

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Leadership Council sets out procurement reform strategy

11 Jul The Construction Leadership Council has set out its recommendations for procurement reform, including a new form of contract and single pan-industry prequalification questionnaire.

The report was written by RLB director Ann Bentley
The report was written by RLB director Ann Bentley

The report provides recommendations on how government, clients and the construction industry can develop a new approach to procurement. It has been produced by the Construction Leadership Council (CLC)’s business models and supply chains workstream.

Its publication ties in with the recent construction industry sector deal, published by government last week but largely written by the CLC.

The 56-page report, Procuring for Value, also builds on the Farmer Review, published by the CLC in October 2016 and proposes steps to implement the construction sector deal by extending existing government policy and industry best practice.

To get away from clients simply accepting lowest bids regardless of quality, it recommends the development of an industry-wide definition of value that takes into account more than capital cost.

It also advocates further reform and standardisation of the prequalification process for bidding for contracts to reduce builders' bureaucracy.

Most compellingly, it advocates the production of new forms of contracts that reduce the role of lawyers in the construction industry

It says: “The choice and administration of contracts is something which many clients appear to abdicate, relying heavily on the advice of legal advisors with an enormous focus on the theoretical transfer of risk downwards, rather than the placement of risk. Poor contract administration and a failure of both clients and suppliers to fully understand their obligations under the contract, coupled with commercial pressures exerted to ignore the contract (payment terms being the best example of this) create a very uncertain landscape in which some construction activity takes place.

“The lack of contractual recognition of the whole-life value and the failure to incorporate whole-life risks mean that there is a growing view that current industry forms of contract will not meet future requirements. Contractual models need to be versatile enough to accommodate pre-construction, modularisation, offsite manufacturing, BIM, wearable tech, drones, 5D cloud based modelling and other evolutionary changes within the sector.”

It continues: “The theme of 'contracting for success' as opposed to contracting for possible failure is at the heart of the issue. While contracts continue to be structured to allow blame and risk to be passed down the supply chain, rather than evaluated and placed, and whilst parties are still not incentivised to work together to achieve the ultimate outcomes identified at the outset of the project, it will be difficult to change the blame culture that still dominates the industry.

“The current forms – based on how the industry has always delivered – will not facilitate innovations, but a new form supported by technology solutions may be a way forward for SMART connected contracts. There is a real opportunity to make the next generation of contracts wholly cloud based - a contract that creates a living set of priced risks where every bilateral relationship has transparency. Industry should investigate how contractual forms within the built environment can become digitally enabled and SMART-cloud based to introduce transparency and whole-life project focus.”

The report was written by Rider Levett Bucknall director Ann Bentley. She said: “The Procuring for Value report is a fundamental strand of our policy, outlining the best practice for the industry delivered through standardisation and digital technologies. Construction needs to change.  Every rung of the supply chain needs to take responsibility and understand their impact on the industry and the larger financial picture that is at play. The report highlights as an industry how we can do just this.”

Procuring for Value is available to download from the CLC website here.

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