The dictionary definition of procurement is ‘the management of obtaining goods and services’. For many years quantity surveyors took this to mean appointing a contractor who submitted the low- est, that is to say cheapest tender price, based upon a bill of quan- tities and drawings, in competition with several other contractors. For public sector works, a low priced tender was almost guaranteed to win the contract, as public entities had to be seen to be spend- ing public money prudently and would have had to develop a very strong case not to award a contract on the basis of the cheapest
price. It is now clear that assembling an ad hoc list of six or so contractors, selected primarily on their availability, to tender for building work, for which they have very little detailed information, is not the best way to obtain value for money. In fact it does little more than reinforce the system in which contractors submit low initial prices secure in the knowledge that the contract will bring many opportunities to increase profit margins in the form of vari- ation orders, claims for extensions of time/loss and expense or mis- management by the design team. Pre-Latham, the over-riding ethos for procuring building works was to treat the supply chain with great suspicion, it was almost as if a cold war existed between client, design team and contractor/subcontractors. The emphasis in construction procurement has now swung away from the system described above towards systems that encourage partnerships and inclusion of the supply chain at an early stage – in fact to a point where the definition of procurement could be restated as ‘obtain- ing value for money deals’. As discussed in Chapter 1, there can now be few individuals involved within the construction process who do not believe that the design, procurement and construction of new built assets has to become more efficient and client orien- tated. The evidence of wastage, in terms of materials, time and money not only in the short term, but also throughout the life cycle of a building, leaves the UK construction industry as well as its associated professions, including quantity surveyors, in an embarrassing position and open to criticism from all sides for par- ticipating in the production of such a low value product. Bernard Williams’ study ‘Building and Development Economics in the EC’ demonstrated that the British construction industry was the least productive in Europe and as discussed in Chapter 1, this state of affairs appears to exist still. For whatever reason, the quantity sur- veyor and the traditional brick counting image enthusiastically fos- tered by so many within the industry, including the trade press, has also been the focus for this ‘out of touch’ image. For many years the quantity surveyor has been seen as the accountant to the construction industry, a knight in shining armour, safeguarding the client to ensure that they receive a building as close as possible to the initial agreed target price, although in practice, this has been seldom achieved. Traditionally, a target cost has been set by the quantity surveyor, in discussion with the client at the outset and then the process has been worked backwards squeezing in turn the contractors, subcontractors and suppliers in order to keep
within this target cost. The squeezing increases in direct propor- tion to how far down the supply chain the organisation comes (see Figure 2.1).
The consequences of the supply chain squeeze illustrated in Figure 2.1 are low profit margins, lack of certainty and continuity for suppliers, delays in production, lack of consideration of through life costs, suboptimal functionality and rampant waste. In turn low profits ensure that few, if any, resources can be channelled into re- search, technological improvement, or quality assurance proce- dures. Construction productivity lags behind that of manufacturing and yet manufacturing has been a reference point and a source of innovation in construction for many decades, for example, indus- trialised building, currently undergoing a resurgence in interest in the UK, and the use of computer-aided design come directly from the manufacturing sector. However, while some innovations have crossed the divide from manufacturing to construction, there has
Feasibility stage Detailed design stage Tender stage
Construction stage Target cost for specialist roofing set by q.s at £30 000 Basis of cost – historical but unrelated data
Target cost revised by q.s. to £31 000 upon receipt of indicative details from architect but without input from roofing specialist
Contractor allows a price of £32 000 in overall bid − based on outline information, roofing specialists’ quotation based on indicative details and ‘what the market will bear’
Successful main contractor now receives working drawings from roofing specialist together with a price of £35 000. Main contractor has to squeeze roofing specialist to close the gap in price between accepted tender price, £32 000 and actual price
Roofing specialist squeezes suppliers of components/raw materials
Etc. Etc.
squeezeeee
been little enthusiasm for other production philosophies. However, new manufacturing industry based approaches to supply chain management are now being introduced into the construction in- dustry that enable the early involvement of suppliers and subcontractors in a project with devolved responsibility for design and production of a specific section of a building, with predicted and guaranteed through life costs, for periods of up to 35 years. The benefits of this new approach for clients include the delivery of in- creased functionality at reduced cost and, for the supply chain members, certainty, less waste and increased profits.