Does procurement impact error reduction and productivity?

Moving from a transactional to a capability-based procurement model could hold the key to the transformation of the construction industry, suggested panellists at the GIRI members’ meeting procurement debate in November. 

Emer Murnaghan from Graham, and Jenny McLaughlin from Heathrow joined Mark Farmer, David Anderson, and Tom Collins to discuss the question of how procurement affects our ability to reduce errors and improve productivity. There was a real sense of frustration from participants that, as an industry, we already know the answers, but this is not translating into the required change.

“It feels like Groundhog Day,” said Emer. “Why does this industry fail to learn?”

Cliff Smith, moderating the panel, observed that lowest-cost procurement is rife and that it impacts all the good outcomes the industry is trying to achieve. Mark Farmer from Cast Consultancy agreed, saying poor procurement “is one of the reasons we keep spinning our gears as an industry”.

He added: “No one is breaking out of the cycle, no one is thinking differently about how we set the job up properly, about how we make procurement an integrated process beyond the transaction.

“We need to knock the lowest-cost idea out of everyone. We need better education, we need competence and skills, and education needs to start with the client, project manager and QS, because these are the influential roles. And it needs to happen at government level. The Construction Playbook will remain just another publication on the shelf unless government and the public sector generally leads from the front about procuring differently.”

Some major clients are moving away from a transactional model. Emer highlighted National Highways’ collaborative approach, working across the supply chain in regional teams with stringent metrics and monitoring. “However, it is what’s happening on the back of this that’s really driving change. National Highways has an initiative called Improving Behaviours, Improving Performance, and we are looking at how we deal with each other, how we communicate, how we innovate, to break down those barriers.”

David Anderson from BAM Nuttall added that project-by-project procurement is a problem. “Major clients like Network Rail and National Highways are starting to procure on a capability basis. When you do this you start giving people frameworks and long-term viability to invest, learn lessons and apply those lessons. Moving to a longer-term capability basis will help change the industry.”

Jenny McLaughlin said Heathrow is using a more collaborative approach for its next five-year tender. “We are looking at Project 13 principles to understand how we build these into a commercial framework. We are looking at the relationships we want to continue for the next five years and making sure all this is part of the questions we ask with the tender so it is not just based on success, or cost, but how suppliers are going to come to the table and work with us.”

It is important to be able to discuss risks and uncertainty with suppliers upfront, she added. “We have lots of concrete work in the next five years, but there is a shortage of concrete so how do we create resilience? Currently the biggest clients are using all the materials, and that isn’t collaboration in the wider sense. As an industry, we don’t improve unless we improve together to share the resources we have now and the resources we need in the future.”

A common approach to data is more likely to create a common approach to delivery, said Tom Collins from Hoare Lea, explaining that a joined-up approach to data management across a project can deliver benefits. Hoare Lea is using data to develop a sector-driven approach to deliver more as a cross-functional team rather than as smaller siloed units. “A common understanding of how we will deliver should reduce the likelihood of serious error.”

“Is procurement on a transactional basis the problem we have to solve?” Cliff asked. A delegate argued that this is not a problem when you are clear about what you are buying. David Anderson agreed, but added: “When it’s complex, transactional can make it hard to get the right solutions.”

Emer pointed out that we have known the answers for 20 years. “But the acceleration has not happened. What do we do? Are we not speaking to the right people? If this is driven by government, are they the people we need to influence?”

Could early contractor engagement be part of the solution? Jenny said Heathrow engages with contractors early and that the language used in those early conversations can make or break a project. “It’s all in the questions you ask. ‘Is it safe?’ will get you a yes or no answer. ‘How sure are you it will be safe?’ will get a different answer. We need to ask the right questions in the right way to enable feedback in a safe space so we can tweak the design or procurement before we commit to the spend.”

Finally, Emer highlighted the importance of diversity and inclusion in its broadest sense. “We have a tendency, when we hear something different, to shut that out. We need to encourage the voices we don’t normally listen to and bring them to the fore. If we don’t, young people are right to turn their backs on this industry.”

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