Designers must be persuaded to put their fees on the line should projects run over budget or hit delays if the industry is to remain competitive, procurement experts warned last week.
Constructing Excellence chief executive Don Ward said that designers must begin putting “skin in the game” if the British construction industry is to beat off increasing competition from abroad.
“There is a disconnect between clients and designers”, he said. “There is no “skin in the game.”
“Skin in the game” is a business term used to describe a situation in which suppliers put their own money into the project as if they were outside investors in the client organisation.
There is a disconnect between clients and designers
Don Ward, Constructing Excellence
Constructing Excellence is working with programme management consultant Turner & Townsend on a blueprint for the UK construction industry in 2025. Their vision is centred on an intelligent client that procures on outcomes and value not outputs and cost.
Turner & Townsend outlined the initial conclusions of its research at an NCE-organised forum on infrastructure last week. It said the industry could be as much as 50% more efficient if it truly transforms its performance, particularly around the way it awards work.
“The industry has moved itself on, and in good places the best practice line is peaking around 25% [in time and cost savings], but we can’t get to 50% because of competition and funding,” said Turner & Townsend infrastructure managing director Murray Rowden, who is leading the research project.
“A systemic approach needs to be taken. Anglian Water is looking at moving towards making its suppliers stakeholders in the business so they get paid on performance. Transport for London, the Highways Agency and Network Rail are all looking at this. It’s about putting skin in the game.”
Contractors are increasingly encouraged to adopt this way of doing business, usually through alliances, but consultants are reluctant to take such risks, preferring to operate on a traditional fee-based model.
Contractor Dragados pushed for this approach with its suppliers when it put together its successful bid for London Underground’s complex Bank Station Upgrade. But it was unable to get its designers on board.
Contracting suppliers were offered the chance to take on the work exclusively if the bid was successful, but the “skin” was the expectation that they carried their own costs through the £2M tender process.
Design consultants were still paid on a fee basis.
Dragados project director Danny Duggan told NCE that this was a situation that it wanted to change. “We’re not quite that evolved with our design partners,” said Duggan. “But we want to go there.”
High Speed 2 is consulting on its procurement model, and incoming chairman Sir David Higgins is understood to be keen on one where all suppliers - including designers - take some financial risk regarding cost and programme estimates while working together to ensure delivery.