Industry must change its view of value, says procurement expert

Industry attitudes toward value remains the biggest hurdle to tackling issues surrounding procurement, according to a leading member of the Construction Leadership Council.

Ann Bentley, a CLC member and global director at Rider Levett Bucknall, said the industry’s view that value was defined as the lowest price needed to be changed.

In Procuring for Value, her report written for the government, Bentley said an overhaul of procurement practices could save the construction sector £15bn a year.

Bentley told Building: “As long as value is perceived as lowest price there is no incentive to be best only cheapest. Industry does what it is asked to do, so the race to the bottom will continue while that is the case.

“We need to change the attitude toward from value from lowest tender price to tender price plus performance."

Bentley highlighted the divergence between the current approach to procurement in the construction industry and most other major financial decisions.

“If you compare it with going to buy a mobile phone you see how broken procurement is. When you go in and buy a phone very few people walk in and say just give me the cheapest phone.

“People are concerned about the end use, the functionality of the phone and are prepared to pay for it. Why is that not the case in construction?"

Bentley said non-financial factors, such as the number of apprentices who would work on a scheme, need to be given a standardised monetary value in order to enable different bids to be compared properly.

Published last week, Procuring for Value provides a series recommendations on how government, clients and the industry can maximise the impact of the sector deal - which established a £420m partnership between the government and the construction industry to transform the sector - by a change in approach to procurement.

The change in approach to procurement would also develop an industry-wide definition of value and a universal methodology for procurement by 2019 and implement a standardised industry pre-qualification process by the following year. Retentions would be outlawed by 2025 under the sector deal.

“I think ring-fencing retentions is the wrong approach," Bentley said. “Why are we happy to accept a building for handover if it's not perfect? I think there needs to be more care taken at handover then there is no need for retentions."

The report laid out several tasks that would need to be undertaken by both the government and industry to achieve the sector deal’s goals.

It said that aside from developing an industry-wide definition of value, the sector would need to produce a methodology for procurement that promotes consistent standards across industry.

Industry would also need to work with the Infrastructure and Projects Authority on the development of cost and performance benchmarks for assets, contractors and suppliers.

The government would be required to embed the new approach in the procurement of public projects and support the development of a standardised pre-qualification questionnaire that can be adopted across the public and private sectors.