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Drivers for Change in Procurement Practice

A succession of major studies during the 1990s highlighted the inefficiencies of traditional methods of procuring and managing major projects. In particular the problems created by awarding contracts solely on the basis of lowest price. Experience has shown that this does not provide value for money in either the final cost of construction or the through life and operational costs. Relations over this period between the construction industry and government departments were also often typically characterised by conflict and distrust which contributed to poor performance particularly in the control of costs.

The most significant reviews have been:

• Constructing the Team -Sir Michael Latham (1994)
• The Levene Efficiency Scrutiny into Construction Procurement by Government (1995)
• Rethinking Construction -Sir John Egan (1998)
• Efficiency in Civil Government Procurement - the Gershon Report (1999)
• Modernising Construction -the National Audit Office (2001)

In the Constructing the Team report Sir Michael Latham concluded that the industry's traditional methods of procurement and contract management and its adversarial culture caused inefficiency and ineffectiveness. He concluded that addressing these issues had the potential for saving 30% over five years.

The Levene Efficiency Scrutiny made a number of recommendations to improve the procurement and management of construction projects. These included better communication with the construction industry to reduce conflict; adoption of a more commercial approach; negotiation of deals justified on value for money grounds; and increased training of civil servants on procurement and risk management.

Progress in achieving improvement following the Latham report was perceived to be slow and as a result the Construction Task Force was established, led by Sir John Egan. The task force's report, "Rethinking Construction", saw a need for a change of style, culture and process. To this end, it identified five "drivers" which needed to be in place to secure improvement in construction industry; four key processes which had to be significantly enhanced; and set seven quantified targets for the level of improvements to be achieved.

In January 2001 the National Audit Office published its report "Modernising Construction" about how the procurement and delivery of construction projects in the UK can be modernised with benefits for all involved in the industry. The report highlighted best practice being adopted by government departments and industry, including initiatives implemented by the HA, which if applied more widely could achieve sustainable improvements in construction performance achieving better value for money for taxpayers. Recommendations were made to four key groups in the industry including the need for government departments to develop more sophisticated performance measures and to actively measure improvements in construction performance.

It is clear that change needs to be led by clients and they must demand better value and improved performance from suppliers. In return, clients must demonstrate that they will act as good employers and will procure work in a way that allows best value to be delivered and provides fair rewards for good performance. The Clients' Charter scheme operated by the Confederation of Construction Clients will be an important tool for clients to demonstrate their commitment to best practice.