Paying more will not address all construction’s ills

In the BBC’s 2020 Reith Lectures, Mark Carney, the former Governor of the Bank of England, argued that we have subjugated too many values to the forces of finance, and that this has led to a number of crises – economic, social and environmental.

It is a noble thought, and one that should be taken seriously when it comes (even if somewhat surprisingly, in Damascene style) from someone who has presided over the central banks of two nations. It also chimes with much that is currently being said and written about public procurement, particularly given the need for a post- Brexit re-think.

The government’s new ‘Construction Playbook’ is a lead example of this, and echoes the constant cry that competitive pressure (and ‘lowest cost’ in particular, now regarded as a self-evident negative) is behind many of the ills of the industry, most recently in the Grenfell Inquiry for example.

It is, however, far from certain that simply paying more will address the issues of inattention, incompetence, negligence and (to say the least) misbehaviour that are being revealed in that Inquiry; and there is a reason why we tend to focus on capital cost, and why the obviously attractive destination of making judgements based on value (and values) seems to stay perpetually just over the horizon.

The fact is that money is objective, measurable and lends itself to transparency; whilst value is a shifting concept that means very different things to buyers and sellers, and equally different things to different buyers.

It is therefore not enough to regard value for money as a safe and certain alternative to lowest cost. Rather it is necessary to deal with the problems that have constantly drawn us back to lowest cost as a basis of choosing between alternative products and suppliers. These are problems of definition, data, and the dangers of discretion given to decision makers – and still, I would say, of process.

A frequent complaint that the Playbook picks up on is that procurement is too process driven. This follows the current fashion in management theory to claim that efficiency is a false god, and that we should be worshipping innovation instead. Like so many issues of current discourse, however, that is not a binary choice.

Of course, efficiency on its own is not enough, and process should not lead to the excessive bureaucracy that so often results from over-imaginative civil servants thinking about what might go wrong – of which we may get no better example than the oft-ridiculed topical requirement for vaccinators to have anti-radicalisation training (although the requirement for pathologists to include resuscitation in their CPD requirements comes close).

But in construction, one purpose of innovation should be to achieve a level of efficiency which the industry constantly fails to deliver; and whilst we might dream of 3D-printed buildings delivered to site by drones and assembled by robots, most clients would settle for people just doing what they say they will do.

Revised models of procurement therefore need to be assessed in the context of whether they will make reliable and predictable performance more likely – and that is more likely if they follow an established and well-considered process. We surely haven’t already abandoned one key message of the Egan Report, that stressed the importance of process in avoiding error and achieving consistent results, without even trying it.

Also, and old-fashioned though it may be, the keeping of promises is more likely if people are held accountable for doing what is asked, assuming that the question being asked is intelligent, clear and realistic. Procurement is not like a Joni Mitchell concert, where all will be well if we light a candle, sit in a circle and join hands.

Turning back to the text of the Playbook, it is certainly hard to quarrel with the ends, given the desire to deliver “better, faster, greener” and safer in both construction and operation; to drive innovation and higher levels of productivity; to address skills shortages and develop a well-trained workforce; and to “promote social value, helping communities recover from covid-19, tackling economic inequality, promoting equal opportunities and improving wellbeing”.

My word, though, that’s an awful lot to ask of an industry that struggles to deliver anything in accordance with its promises, and against the history of a public sector works programme that has more than its fair share of failures. Indeed, it is hard to read the objective of preparing “for the rare occasions when things go wrong” – what we might call “the Carillion clause” – with a straight face.

The question is therefore what specific propositions in the Playbook make it more likely these ends will be reached – as, for a long time, the question has been not so much about what might be a better way of doing things, but rather about what will make that better way come to pass.

So, attention turns to the means by which these lofty objectives are to be achieved.

Again the general principles are easy to endorse: clear, outcome-based specifications; more time invested upfront; early contractor/supplier involvement; longer term, collaborative contractual arrangements that extend down through the supply chain and incentivise better outcomes; due diligence in contractor selection; the adoption of digitalisation and the sharing of data; more standardisation, and a presumption in favour of modern methods of construction; improved risk management and equitable risk transfer; and “the promise of a fair return”.

There is not much to object to there – anymore then there was when almost all of it has been invoked in a host of reports in the past, and more recently in the Government Construction Strategy of 2010, Construction Strategy 2025, and various publications of the Infrastructure Planning Authority. But these grand claims are often made without any detail or clarity as to how they might be fulfilled.

Of course, it is almost impossible to keep politics out of government announcements. Too often, the less they have to show, the more they have to say, but saying it does not make it so.

For example, a claim made of the publication of forward pipelines (a 2010 proposition, by the way) is that this alone will “provide insight into a richer set of government priorities including the use of MMC, regional distribution of contracting opportunities, how we are delivering social value, and achieving our net zero GHG omissions commitment”. How exactly?

There are new declarations of intent here, but many of them are still dogged by the difficulties that have obstructed earlier adoption. For example, it is proposed to extend cross-government compliance to include arm’s length bodies – but then to enforce it through spending controls, which will not do a great deal for already strained relationships between departments and the Treasury, and which risks additional bureaucracy and delay.

Similarly, the imposition of a sanction for under-performance by suppliers is a lot easier to threaten than to implement.

Some of the objectives are also in tension. For another example, the obvious truth that continuous improvement is likely to depend upon long-term relationships is in tension with the desire to keep an open market and to prevent complacency within frameworks.

It is no surprise, therefore, to see that those wishing to work on a portfolio basis must “demonstrate that this does not come at the expense of an innovative and competitive market”. How?

And, of course, every time a framework is created, those who are lucky enough to be on it are massively outnumbered by those who are excluded – every one of whom therefore becomes a potential critic, ready to lobby their local MP. Maintaining a constructive relationship with the broader industry is therefore essential.

Similarly, many expectations are demanded of contracting authorities, some of which depend upon guidance and tools that are to follow. Indeed, the most important parts of the document may well be the ones that aren’t there yet.

Given these difficulties, it would be easy to say that the Playbook risks being performative more than transformative, becoming another example of hope triumphing over experience. Easy, but not helpful.

Instead, therefore, government and the industry need to agree between them what has to happen to increase the chances of success. This will be the subject of my next article, setting out the bones of a plan to escape the fate of so many New Year resolutions which fade and die, taking with them the hopes for real change.  

Paul Morrell is a former senior partner of Davis Langdon and was the UK’s first chief construction adviser between 2009 and 2012.