Every so often, the debate about “value in construction” rears its head once more across the industry.
And it normally happens at the beginning, or middle stages of a period of growth when demand exceeds supply.
And when this happens, clients’ procurement routes often ends up competing for limited capacity, in order to deliver their projects.
Last week the Construction Industry Council (CIC) published Procuring for Value. The report recommends ways for government, clients and the industry to deliver more value – primarily by altering procurement methods.
The report also supports the UK construction sector deal, published as part of the UK Industrial Strategy.
Key takeaways from the report
The sensible recommendations that caught my eye were that industry bodies, institutions and companies should:
- Develop an industry-wide definition of value that takes into account more than capital cost
- Produce a universal methodology for procurement and promote common and consistent standards across industry
- Work on the development of cost and performance benchmarks for assets and suppliers.
- Create end-user rating system for built assets
These are themes which echo the recommendations in many earlier works, such as Constructing Excellences (CE) 2005 report Be Valuable and their 2016 report Delivering built asset operational excellence. I must declare an interest here, I chair the CE asset management group that wrote the 2016 report and have always believed that real estate assets procured for whole life value, outperform those procured for least cost, over their life. I also believe that those organisations that get this approach right dramatically outperform others, as they get improved outcomes from what happens in their buildings as well as a reduced lifetime cost for running their buildings.
I think there is a structural challenge inherent in the UK construction industry that means clients do not automatically get given value when they procure built assets in traditional ways. And, based on the regular nature of the value conversation over the last ten to fifteen years, I suspect it will take some significant time for wholescale change across the sector.
The bottom line – don’t buy based on cost
I always remember two quotes when thinking about value in the context of construction projects. The first is:
“If you were going into space would you want your vessel’s components only built by the least cost provider, so why is it ever appropriate to fully apply this approach elsewhere?”
And the second and most important, was shared with me by a serial client, who stated:
“clients deserve their contractors”.
What they meant by this is that your project outcome will always be a function of your approach.
Guiding principles of procuring construction services
So, in short, if you’re procuring construction projects, to get the best value, I recommend you:
- take charge of your design and procurement process
- work hard to define the value you want from the real estate
- hands on manage its delivery, as the industry will not typically deliver what you want by default.
And on an upbeat note, I’d like to think the CIC report is signalling the beginning of a period of expansion for the UK economy.