Construction companies will be looking to the Government for further support and to offset the uncertainty created by the demise of what until recently was regarded as an industry giant. If under-bidding was a contributory factor to Carillion’s failure then it stands to reason that the industry should see this as a warning and recognise the need to renegotiate financial terms and disproportionately onerous contracts.
In an ever competitive market, clients have come to demand ‘more for less’. But price over value often leads to inherent problems in procurement; how we tackle this as an industry will shape the future of our built environments. It is high time that we examine the dangers associated with traditional procurement; could the corporate catastrophe, Carillion, be the motivator the industry needs to better manage the methodology of assessing good value for money as distinct from lowest price?
As surely as industry needs to heed the lessons of Carillion and Grenfell, so too must Government and other major buyers of construction services. These comments are as applicable to those parts of the industry trying to deliver the projects as they are to the clients procuring them. We should all totally support the vision Dame Judith goes on to develop:
‘‘… to ensure that we create, within a much more robust overall system, a process that ensures there is effective oversight of materials, people and installation’’.
Building Regulations must clearly be improved. However, there is a growing groundswell of opinion that there is also a need to alter the fundamental building blocks of the way construction projects are procured if we are to avoid repeating the mistakes of the past.
One of the challenges with the current procurement and contractual regime is that it simply doesn’t go far enough to support or encourage collaborative working practices. Many clients, consultants and contractors are now reflecting upon the journey of the last few years - questioning who the current system actually works for and whether there might be a different approach. And they are not alone in this; the recent article in The Times by Martin Davis put forward the suggestion that the market is in dire need of reform to change the culture of risk-dumping, adding “most damningly, since 2011 the Government construction strategy has included a new procurement system that might have prevented the current crisis”.
Integrated Project Insurance (IPI), developed exclusively by Griffiths & Armour, was designed specifically for the construction industry to improve risk management strategies through the promotion of a collaborative and shared benefits approach to all key parties involved in construction projects. IPI has recently seen its first demonstration project completed and the following links to articles from a number of commentators have set out a case in support of IPI in the context of today’s construction market:
With Brexit on the horizon, construction companies fear facing an uncertain future with much to contemplate from a risk management perspective but the power of public policy and institutions to strengthen the construction and procurement market cannot and should not be underestimated. Speaking recently about the Carillion liquidation, Liberal Democrat leader and former Minister for Business, Vince Cable, recognised the need for smarter procurement and suggested that the government could demand better standards of contractors and consider working directly with smaller providers.
Ultimately, the success of IPI in the £11.685M Dudley College Advance II project is described by the team as being less about insurance and more about fostering a trusting, collaborative culture - there can be no mistaking that the insurance policy which underpinned it provided the necessary support and incentive for the positive behaviours adopted. Whether the procurement market is ready to make, what increasingly appears to be a transformational and potentially critical step, is a timely question.
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