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Fri October 23 2020

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Poor procurement by clients blamed for project overruns

15 Dec 10 Three in four construction professionals think that clients lack procurement knowledge, and half think this is to blame for projects coming in late and over budget.

Too many construction clients think that procuring construction is “the same as buying paperclips” and do not understand the damage they cause to their own projects when they accept suicide bids.

These are among the key findings of research by the Chartered Institute of Building (CIOB), which surveyed more than 500 professionals on their views of procurement in UK construction.

The results indicate that 87% regard selection of the right procurement method as crucial for the delivery of a project on time, on budget and to a high quality.

Some 77% of respondents believe clients are not sufficiently knowledgeable about procurement in the construction industry, which often leads to poor advice being taken and results in a project coming in over-budget, outside of time-frames, or to a poor standard.

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The CIOB report says that “the vast majority of comments from respondents highlighted that clients are often unaware that accepting an uncharacteristically low bid (or suicide bid) can have hugely detrimental effects on both projects and contractor, which filters down to affect sub-contractors and all involved in the construction process. In the words of one respondent, we must ‘educate the [clients] who believe that buying a building is the same as buying paperclips’ ”.

Almost all respondents (93%) had been involved in projects that overran their budget; 57% of those believed that the chosen procurement method directly contributed to the cost overruns. Similarly, 94% have been involved on projects that overran in terms of time. Of those, 49% believe the chosen procurement method directly led to the time overruns.
CIOB deputy chief executive Michael Brown said: “Getting clients more bang for their buck should always be at the forefront of the industry’s mind. But to make that work clients have to listen to the advice given by industry as well. There is clearly a need to look beyond any immediate gains and towards those longer term benefits that can be achieved from the right type of procurement. If the industry is squeezed to get the cheapest tender then you’ll end up getting what you pay for.
“These are testing times but at such moments it’s a good idea to step back from what’s gone before and find new ways to create greater efficiencies. If we knew what we know now about programmes like Building Schools for the Future (BSF) then we would have approached it differently. The challenge for the industry and clients is can they adapt quick enough to take advantage of the opportunities out there.”

The CIOB supports the government’s recent announcement to simplify the pre-qualification questionnaires (PQQs) via the voluntary PAS91 standard. However, much more can be done to promote the standard in the short-term, and simplify the PQQ process further in the long term. This is particularly prominent as 55% of respondents from this survey have indicated that simplified PQQs are vital to increasing competition levels for contracts. In addition, waste from the procurement process will be reduced through simpler pre-qualification. 
Respondents felt that standardisation should become a priority in public sector procurement. Not only would this decrease overall cost, but it could facilitate a more integrated supply chain and result in a decrease in waste. The BSF programme was criticised heavily for some of its bespoke designs that ultimately compromised the projects and increased cost. If standardisation was to be set out at tender stage and communicated effectively to contractors, projects could benefit immensely from set costs and less risk throughout the procurement process.
The report summary can be found by clicking here.

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