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Reversal of fortune


Reverse auctions have no place in 21 century construction procurement. Any company asked by a client to take part in one should simply walk away and fi nd someone more enlightened to do business with.

We must stand firmly and unambiguously on this important issue. It is just unacceptable for clients to ask professionals to bid down the value of their services on the pretext of boosting competition.

It is ludicrous to see a major government client such as Transport for London (TfL) returning to such a heavy-handed process.

Especially when so much effort been made in the industry to emphasise the importance of proper relationships and procurement strategies that involve the whole supply chain.

The Association for Consultancy and Engineering (ACE) chairman Desmond Scott highlighted the need to outlaw the practice at the NCE/ACE Consultants Awards last week. He was absolutely spot-on.

At best reverse auctions are penny-pinching. At worst they show a complete lack of respect for the talent and creativity the construction profession has to offer - skills that simply cannot be commoditised and flogged to the highest bidder.

Yet every few months we seem to hear about another high-profi e client prepared to go down this highly destructive route. This week it is TfL, a few months ago it was Network Rail and before that it was the water industry. Once again, no doubt, we will hear the process justifi ed as being vital to bring reality to the prices being charged.

There is no doubt that the construction industry has to get more competitive. As this week's NCE Consultants File shows, total fee income did not grow as sharply as it has in previous years. There are clear signs that, while growth will continue, boosting efficiency and giving clients more value is going to be the biggest challenge from now on.

Companies are responding.

All of the fi nalists in the Major and Medium Consultant Awards this year reported double digit growth in their businesses last year and all saw the key measure of earnings per employee rise.

thout question this improvement will show up as long-awaited growth in profit margin. But there will also be huge advantages for clients in terms of competition - the best fi rms will be able to supply greater quality service for the same price.

There is also clear evidence that the most successful firms are now more discerning about the work they choose to get involved with. Growth may be down but there is still plenty of opportunity in traditional markets.

And if we factor in new markets, the picture looks even rosier. April, for example, sees the arrival of a new £48bn, 20plus year market in nuclear decommissioning. Regional development is pulling billions into the UK industry. Outside the UK we see a near exponential growth in industrial, commercial and residential development in the Gulf.

So there should be absolutely no reason why any successful construction industry consultant, contractor or supplier cannot walk away from a client that insists on using reverse auctions.

And that is what they must do.

We cannot collectively sit back and let the spectre of reverse auctions eat into this industry's ability to deliver quality products. We must not allow our clients to dictate terms and perpetuate a procurement practice that will ultimately destroy our own value.

Antony Oliver is NCE's editor

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