On 20 September the Constructing Excellence Client Forum held a webinar on the topic of New Models of Procurement. The session chaired by Phil Wilbraham had 2 excellent presentations from Prof David Mosey, Kings College London on Two Stage Open Book and Supply Chain Collaboration and Martin Davis from IP Initiatives on Insurance Backed Alliancing.
The Cabinet Office Trial Projects Group have been working on New Models of Procurement for some time and there are now some tangible examples where value is being created. Indeed there is a consensus that better procurement is key to delivering long term value for clients and delivering a more sustainable construction industry. Projects like these are enabling clients to manage risks around changing procurement.
Procurement innovation is not restricted to larger projects, indeed the work of frameworks is allowing smaller projects to aggregate demand and build supply chain confidence.
David Mosey’s presentation detailed how 2 Stage Open Book had delivered 20% cost savings and improved programme certainty on Cookham Wood Young Offenders Institute and 26% savings on a £157 million North Wales Prison project. Supply chain collaboration with Surrey County Council and Kier delivered improved whole life value, improved warranties, better quality control, time savings and less waste.
Martin Davis’ presentation provides a great overview of much of the evidence base for delivering better procurement and an excellent precis of many of the flaws that are destabilising the industry including:
- Lowest cost tendering – with extras, claims and contra-charges against the supply chain to turn the outcome into profit
- Fragmentation and dumping risk down to those least capable of handling it
- Superficial collaboration that disappears when issues arise
- Insufficient regard for quality
- Payment abuse – with imposition of the longest payment terms on those who actually do the work, and with retentions withheld for years
- Disputes, where the legal and forensic costs debilitate the winner as well as the loser
Martin describes the key differentiators of Insurance Backed Alliancing, and successes and challenges on the Dudley College project as well as some of the key success factors for successfully delivering projects. The testimonials from key project participants perfectly incapsulate some of the advantages of the approach:
We were never trying to save money, we were trying to get the best value for the money we were spending and not be presented with a post project bill – to close down the risk of cost overrun, cost dispute…The quality of the building for what we spent is super, brilliant…It’s probably the best quality building we’ve got per pound, per square metre.”
I would definitely say from an Architectural perspective that IPI provides benefits for both the business and its people. The opportunity to collaborate directly with the sub-contractors and suppliers with a clean sheet of paper is both refreshing and optimal. We don’t have to deal with the soul destroying grind (and associated erosion of our fees) with designing things over and over again. We get to design something once that is fit for purpose, of good quality and affordable. Not to mention the specialist knowledge we get to absorb from the suppliers. My personal development as a result of this project was huge, as I was exposed to lots of areas that I usually wouldn’t have been, and it has, without doubt, made me a better design professional as a result. It solves so many problems we currently face in the industry and really enables the BIM methodology to deliver its full potential!
Overall the project has demonstrated the potential attractiveness of the IPI approach for all participants – client, suppliers and insurers – and the potential benefits possible when key participants work together in an Alliance supported by insurance, including the provision of cost overrun cover.
The team are now looking at a number of projects with 2 projects underway and many projects under discussion.
If you weren’t able to join us. You can view a copy of the recording from the GoToWebinar website.