South East construction and property management consultant Rider Levett Bucknall (RLB) has published its sixth annual Procurement Trends report and says now is the time for outcome-based procurement. However RLB questions whether the industry can transform.

The South East region is bucking the national trend in terms of trades with the least capacity, with mechanical, electrical and plumbing – along with façade contractors – featuring more prominently.  

There is also a wider use of single-stage routes to market in the South East than elsewhere in the UK at 36 per cent, against the national average of 28 per cent.

In the sixth annual Procurement Trends report, Creating a Value Chain, RLB explores how industry volatility has shifted behaviours and working practices.  At the same time, clients are asking more of their supply chains, which is leading beyond the traditional focus on cost to value selection and on to outcome-based procurement, where clients procure an outcome, not the constituent parts of a building’s bricks and mortar.

The report’s data shows that 61 per cent of tenders make clear the value selection criteria to be used and 35 per cent of contractors believe that better outcomes will result from the recently implemented Procurement Act.

However, the report also reveals that, while the industry is keen to embrace outcome-based procurement, it might not be ready for the transformation of procurement as it struggles to define the ‘how’ and ‘why’ of outcome-based procurement.

The market has changed and so have behaviours 

More than 40 per cent of contractors are seeing an uptick in collaborative procurement practices, and a 25 per cent increased appetite for sharing risks.  While both are increasing, the rate of increase has slowed since last year, which suggests that the market is maturing and embedding these new-found behaviours.

Contractors’ biggest procurement concerns for the next 12 months are with the impacts around the Spending Review allocations and Autumn Budget, with concerns over supply chain robustness greater amongst larger contractors.

Large contracts are also shunning fixed price risk, whilst smaller projects have remained broadly static. Projects of more than £100 million are now offering clients shorter fixed price durations (down by nine months since last year), with a reported 14 per cent increase in the use of fluctuation clauses.

The report reveals positive signs of change. Early contractor involvement – a vital element for achieving better outcomes – is becoming mainstream.

Two-stage tenders, now used on 28 per cent of projects, are matching single-stage routes, and that increases to 65 per cent with larger projects (those up to £60m).  Whilst design and build contracts remain popular at 65 per cent, bespoke contracts have grown to six per cent, the highest since RLB began to track trends.

Clients are demanding more of their supply chains, but failing in outcomes 

The drive for greener, more sustainable construction is increasingly evident in tenders.  Nearly a third (31 per cent) now set clear sustainable targets, up from 23 per cent last year. But translating targets into delivered results is patchy, with one in three projects that define targets missing them, – that proportion is largely unchanged year on year.

Moving to measuring performance, when it comes to sustainability, 22 per cent of contractors are now being asked to measure at the end of the defects period, but that leaves the majority of projects either not defining targets, not having coherent data to measure them, or not involving the supply chain in measuring them. 

Modern Methods of Construction (MMC) is finally seeing increased adoption rates after many years of inertia, with the average project realising 24 per cent, a two per cent rise from last year’s survey.  Barriers to adoption have switched to be more economically focused rather than client or design team resistance.

And, if the increased requirement is not from clients, then it is from legislation.  Here, contractors are feeling unable to accept risk, with 63 per cent of them shunning the risk of regulator timescales for Gateway 3 approvals for higher risk buildings. 

Data: the industry’s untapped asset

Delivering outcomes requires good data, and yet the report’s findings suggest that procurement may actually be killing valuable data.

Firstly, information requirements are not being captured adequately at the tender stage with 28 per cent of tenders not defining any requirements and only 22 per cent defining them well.

RLB South East partner Michael Righton said: “Nationally, the shift to a focus on value-based outcomes has been a direction of travel of procurement for some time.

“However, in the South East, we are seeing more use of single-stage routes to market, which we attribute to a desire to proceed through procurement more quickly, rather than committing pre-construction teams for prolonged periods.”

RLB’s full Creating a Value Chain Procurement Trends report, can be seen here.

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