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Profession fears procurement overhaul
Architects Journal; 12 July, 2012

Architects divided over effect government plans to shave 15-20 per cent off construction costs will have on design quality, writes Mark Smulian

When a government report on construction procurement expresses with confidence that 'dramatic benefits and value for money' are at hand, and a cabinet minister tells the industry he wants 15-20 per cent cost savings by 2015, architects should start worrying about their fees.

The government is serious about driving down the cost of public construction projects and has now spelled out several ways to slash its outlay in a slew of new documents.

And while Cabinet Office minister Francis Maude told last week's Government Construction Summit that the anticipated 1.2 billion in savings would be re-invested in 'other government projects' (implying without actually specifying other construction schemes) some savings will undoubtedly come from shortcuts on design quality.

Commissioned by Maude, the report by the Procurement: Lean Client Task Group, sets out the development of three potential new procurement models that are being tested on a range of live projects.

Common to all three methods is early contractor involvement, high levels of supply chain integration and transparency.

Under each, clients must provide a clear definition of what outcome they want, set a 'considered yet challenging' cost ceiling that is 'somewhere below' current costs and expect to see this ceiling fall further with continuous improvements over a number of projects, aiming at a 20 per cent overall cut.

Maude called for 'a relentless focus on waste, greater transparency on costs, making smarter use of technology - and introducing new models of procurement designed to foster collaboration and innovation.'

He said the government needed both to better understand what it paid for buildings, and why, and be 'less prescriptive in what we ask for', allowing the industry to innovate 'rather than just pricing a single answer that has been developed without your input'.

Indeed, he admitted to faults in past government procurement practice, noting these were 'notoriously bureaucratic, time-consuming and at times eye-wateringly expensive', and had shut out small and medium-sized enterprises (SMEs), a sector where, he said, 'the potential for much of the innovation that we are seeking lies'.

There was also a promise of wider use of project bank accounts and a 'pay on time' policy stretching down the supply chain since 'no business can be at its best when it isn't being paid properly'.

Another of Maude's publications showed just how deep the savings sought are. There was an updated version of detailed Construction Cost Benchmarks, whose already steep reductions the industry was invited to 'beat'.

Meanwhile, the Cabinet Office's One Year On report on the government construction strategy identified 72 million of savings in its first year and a further 207 million of whole-project life savings on some 2.6 billion of schemes awarded in 2011/12.

The profession faces a mixed bag. Lower cost construction, but also more collaborative procurement, openness to innovation and the publication of a must-read 'pipeline' of imminent public projects.

However there is no explicit mention of how problems with the PPQ process will be tackled and there is the obvious danger of falling fees and the perhaps less obvious risk that high-quality design will be treated as a 'nice to have' addition that can be jettisoned to save money at the procurement stage - even if that increases lifetime costs.

HOK director Andrew Barraclough is concerned. He said: 'Early supply chain engagement, lean procurement, shorter procurement processes - all that is terrific and can be supported, especially as architects end up doing a lot of nugatory work for unsuccessful bids, which is just wasteful'.

'My concern is the focus on functionality and cost-led procurement, as it risks an emphasising cost to the detriment of design.'

He pointed out that the government rarely mentions design and put little emphasis on its quality.

Barraclough added: 'The way this is put forward, there will be this emphasis on 15-20 per cent savings, not on good quality design.'

Former RIBA president Jack Pringle was more optimistic: 'The downward pressure should be on the outturn cost of the product, not necessarily on architects' fees,' he says.

'If you look to how a more team-based and strategic approach using BIM, and off-site manufacturing might work, it may require more input at the design stage rather than less. You don't need a skinnier design team or pressure on fees, potentially the reverse.'

Pringle, managing director of Pringle Brandon Perkins + Will, said there has been 'a little bit too much of the profession thinking the world should fit round its skills rather than the other way round'.

He thinks an opportunity for architects in smaller practices can be found in the government's enthusiasm for SMEs.

'The question is how we arrange all that,' he said. 'The last thing people should do is start defending their turf. We are all going to have to change.'

Rab Bennetts, director of Bennetts Associates, thinks the strategy may lead to architects seeing 'less work, but of higher value' at least in the medium-term.

'It's only by increased use of BIM and standardisation that might you see a long-term decline in fees,' he says.

That may be where things ultimately head, as Bennetts says his discussions with government chief construction adviser Paul Morrell had revealed Whitehall's concerns about 'architects who do too much unique designing, too much reinventing the wheel'.

'Schools might be a model for standardised design. Though I'm not an expert on schools, it's clear we cannot afford a unique design for each one at the moment.'

Public sector clients tend to closely adhere to 'rulebooks', he notes, 'and if they say little about design it will not be treated as important'.

The RIBA shares these fears. A spokesperson said: 'We remain extremely concerned that the understandable desire to drive down procurement costs will not be met be a similar drive towards quality of outcomes and will risk eroding the economic advantages of lower up-front costs.

'Better application of whole-life costing to determine what is genuinely the most economically advantageous tender, remains key to delivering high design quality to the public.'

The government is serious about finding savings. The profession will have to marshal arguments that show good design can yield savings, not just costs.

The three procurement models promoted by the procurement: lean client task group

Cost-Led Procurement

The client selects integrated supply chain teams from an existing framework on their ability to work in a collaborative fashion to deliver below the cost ceiling on their first project, and to achieve cost reductions on subsequent projects while maintaining the required quality outcomes.

Integrated Project Insurance

The client holds a competition to appoint an integrated project team responsible for delivery with a single (third party assured) insurance policy to cover delivery risks, packaging up all insurances held by the client and supply chain members. The client and supply chain will share the cost of overruns below a certain threshold.

Two-Stage Open Book

At the first stage, the client invites suppliers on a framework to bid on the basis of an outline brief and cost benchmark. The winning team then works up a proposal on the basis of an open-book cost that meets the client's stated outcomes and cost benchmark as a second stage.