Another vital ingredient in the heady brew of change was the emer- gence of a new type of construction client. Building and civil engineering works have traditionally been commissioned by either public or private sector clients. The public sector has been a large and important client for the UK construction industry and its professions. Most government bodies and public authorities would compile lists or ‘panels’ of approved quantity surveyors and con- tractors for the construction of hospitals, roads and bridges, social housing, etc., and inclusion on these panels ensured that they re- ceived a constant and reliable stream of work. However, during the 1980s the divide between public and private sectors was to blur. The Conservative Government of 1979 embarked upon an energetic and extensive campaign of the privatisation of the public sector that cul- minated in the introduction of the Private Finance Initiative in 1992 (see Chapter 4). Within a comparatively short period there was a shift from a system dominated by the public sector to one where the private sector was growing in importance. Despite this shift to the private sector the public sector still remains influential; in 2005, for example, it accounted for 37 per cent or £25 billion of the UK civil engineering and construction industry’s business, with a gov- ernment pledge to maintain this level of expenditure. Nevertheless, the privatisation of the traditional public sector resulted in the emergence of major private sector clients such as the British Airports Authority, privatised in 1987, with an appetite for change and innovation. This new breed of client was, as the RICS had pre- dicted in its 1971 report on the future of quantity surveying, be- coming more knowledgeable about the construction process, and
such clients were not prepared to sit on their hands while the UK construction industry continued to under perform. Clients such as Sir John Egan, who in July 2001 was appointed Chairman of the Strategic Forum for Construction, became major players in the drive for value for money. The poor performance of the construction industry in the private sector has already been examined, however, if anything, performance in the public sector paints an even more depressing picture. This performance was scrutinised by the National Audit Office (NAO) in 2001 in its report Modernising Construction (Auditor General, 2000), which found that the vast majority of projects were over budget and delivered late. So dire has been the experience of some public sector clients – for example, the Ministry of Defence – that new client-driven initiatives for procure- ment, have been introduced. In particular there were a number of high-profile public projects disasters such as the new Scottish Parliament in Edinburgh, let on a management contracting basis which rose in cost from approximately £100 million to £450 million and was delivered in 2004 – 2 years late and with a total disregard for life cycle costs.
If supply chain communications were polarised and fragmented in the private sector, then those in the public sector were even more so. A series of high-profile cases in the 1970s, in which in- fluential public officials were found to have been guilty of award- ing construction contracts to a favoured few in return for bribes, instilled paranoia in the public sector, which led to it distancing itself from contractors, subcontractors and suppliers – in effect from the whole supply chain. At the extreme end of the spectrum this manifested itself in public sector professionals refusing to ac- cept even a diary, calendar or a modest drink from a contractor in case it was interpreted as an inducement to show bias. In the cause of appearing to be fair, impartial and prudent with public funds, most public contracts were awarded as a result of competi- tion between a long list of contractors on the basis of the lowest price. The 2001 National Audit Office report suggests that the emphasis on selecting the lowest price is a significant contribu- tory factor to the tendency towards adversarial relationships. Attempting to win contracts under the ‘lowest price wins’ men- tality leads firms to price work unrealistically low and then seek to recoup their profit margins through contract variations arising from, for example design changes and other claims leading to dis- putes and litigation. In an attempt to eradicate inefficiencies, the public sector commissioned a number of studies such as The
Levene Efficiency Scrutiny in 1995, which recommended that departments in the public sector should:
● Communicate better with contractors to reduce conflict and
disputes
● Increase the training that their staff receive in procurement
and risk management
● Establish a single point for the construction industry to resolve
problems common to a number of departments. The lack of such a management tool was identified as one of the primary contributors to problems with the British Library project. In June 1997 it was announced that Compulsory Competitive Tendering would be replaced with a system of Best Value in order to introduce, in the words of the local government minister Hilary Armstrong, ‘an efficient, imaginative and realistic system of public sector procurement’. Legislation was passed in 1999, and from 1 April 2000 it became the statutory duty of the public sector to ob- tain best value. Best value will be discussed in more detail in Chapter 4.
In 2002 the Office of Government Commerce announced that the preferred methods of procurement for the UK public sector are to be:
● Public private partnerships ● Prime contracting
● Design and build.