The Government published the Construction Playbook at the end of
2020 – its blueprint for working together with the construction
industry to ensure public works projects are delivered
“better, faster, safer, and greener”.
Building on the work of its Outsourcing Playbook, the new guidance
document for the construction sector brings together best practices
and specific sector reforms to speed up delivery, improve sector
productivity and hasten the progress of the socio-economic benefits
of the Government’s £100 billion “Build Back
Better” investment programme.

A few months on from the Construction Playbook’s release, we
take a closer look at the 14 “key policies” set out for
adoption on public works projects and some of the challenges posed.
We consider what steps could be taken to aid the public sector and
the construction industry in implementing the Construction
Playbook, and how individual contractors and suppliers can come
together to bring the policies to life in day-to-day projects.

From vision to reality

Ultimately the key to the success of the Construction Playbook
will be:

  • how effectively its principles are implemented throughout the
    lifecycle of public works projects by all parties involved;
  • whether the public and construction sectors have – either
    currently or through additional investment – the resources,
    knowledge and skills to effectively implement the key policies;
    and
  • to what extent the sector’s supply chain is engaged when
    applying the Construction Playbook’s principles, as,
    ultimately, it is at the subcontractor level and below that the
    technical skills and experience needed to facilitate progress
    predominately reside.

The collaboration evidenced during the pandemic, including the
overnight construction of Nightingale Hospitals, shows that the
sector has the skills and willingness to align itself with the
ethos of the Construction Playbook. It is now critical that the
Government takes the opportunity to build on this
collaboration.

There are also other positive signs of progress, including:

  • the Government announcing funding for construction skills boot
    camps via the National Skills Fund;
  • the release of the Common Assessment Standard by Build UK to
    speed up and lessen the cost involved in the pre-qualification
    phase of procurement;
  • the Construction Leadership Council’s (CLC) C02nstruct Zero
    programme; and
  • the March 2021 Budget announcement of a £10 million
    investment in the use of modern methods of construction via the
    creation of a MMC Taskforce.

A great deal of progress has clearly been made. The Government
now needs to draw together the key lessons from its collaboration
with the sector during the pandemic and proactively engage with the
industry to aid the implementation of the Construction
Playbook.

Laying the foundations

The appointment of Professor David Mosey to lead an independent
review of public sector construction frameworks will no doubt help
support the Construction Playbook’s implementation. It will be
important that this review tackles the adversarial nature of the UK
construction and engineering industry (which is characterised
by cost plus pricing models, and low profit margins) as well as new
methods of working – such as Artificial Intelligence (AI) and MMC –
to address historically stubborn productivity levels.

Another common feature of the sector is that, generally, the
contractual framework is made up of employers contracting directly
with main contractors at Tier 1, who then engage with a myriad of
sub-contractors at Tier 2, who then sub contract with Tier 3, and
so on. This complex multi-layered structure exposes the smallest,
and often the least financially resilient, contractors to a
disproportionate delivery risk. The Construction Playbook presents
an opportunity to reflect on whether employers in the public sector
could contract directly with Tier 2 and even Tier 3 – the entities
in the supply chain doing the design, works and manufacturing, and
where a large share of the technical skills reside, while still
drawing on the expertise and experience of Tier 1 main contractors.
It is clear from the list of contributors to the Construction
Playbook that the Government is engaging with the various levels of
the supply-chain to shape its blueprint and it may wish to
formalise this direct engagement when looking at delivery models
and relationships between the parties.

Getting the best value of the policies

Below, we consider the potential challenges proposed by turning
the key polices set out in the Construction Playbook into concrete,
constructive change for the construction sector.

The health of the construction and engineering market

Policy 2 provides as follows: “Projects and programmes will
conduct an assessment of the health and capability of the market
early on during the planning and preparation stage. This will
enable project and programme teams to identify potential
opportunities and limitations in the market and consider what
actions would increase competition and improve market
health.”

The key here is “actions would …improve market
health”
. What will these actions be? What can the
teams feasibly do? What “market” are we talking about?
The financial strength of the construction and engineering
sector in the UK has been precarious for a long time. As important
as it is for project teams to assess the market for specific
projects, the Government will ideally:

  • invest time, resources and finances to engage with the market
    as a whole to understand its strengths, weaknesses
    and needs in order to shape the actions that need to be taken to
    improve the sector’s health and resilience; and
  • take positive steps now to support the sector
    with its skills shortage in both traditional and new methods of
    construction.

By having strengthened the market as a whole, the sector will
have the confidence and freedom to focus even more on innovation,
collaboration and long-term investment in, for example, modern
methods of construction.

The lessons learnt from market assessment should then inform,
for example, the implementation of policy 2, portfolios and longer
term contracting and policy 4, harmonise, digitise and rationalise
demand. In particular, ensuring implementation of these policies
allows for bringing on board new entrants into the market
post-procurement, for example, by including and enforcing KPIs tied
to investing in the sector, appointing SMEs, innovation and
collaborating with supply chain.

The Government should also ensure that any actions identified to
improve market health are not fettered by public procurement
legislation. Its Green Paper “Transforming Public
Procurement” appears to recognise the flexibility needed to
drive innovation and participation by SMEs, such as the
“competitive flexible procedure” and DPS+.

The post-Brexit procurement regulations should be flexible
enough to allow: (1) new entrants to be brought on board throughout
the life of long-term projects and programmes; and (2) updating of
underlying contract terms to reflect changing standards in
technology and environmental factors around how people use their
‘space’. As we have seen over the past year, the use of
property assets can quickly change due to unanticipated events and
external forces. This will also require the underlying contract
terms to deal with relief for ‘change’ in a way that
rewards suppliers when they innovate and remain committed to best
practice (which ties in with policy 11, risk allocation).

Data is key?

Policy 5 states that: “Contracting authorities should use
the UK BIM Framework to standardise the approach to generating and
classifying data, data security and data exchange…”

The perennial issues here are: agreement on what the
“standard” is; enabling participants to meet such
standards; and creating a culture of collaboration where, across
the supply chain, the stakeholders are willing to share data, while
still availing themselves of the rights and remedies provided by
intellectual property law to protect their data. We encourage the
Government to continue its investment and support for the Centre
for Digital Built Britain (CDBB) and to seek to ensure that the
CDBB engages with the whole sector so that its outputs take account
of the challenges suppliers and employers have faced to-date in
properly implementing the UK BIM Framework. This no doubt will
require liaison with, for example, relevant experts in the
insurance and legal sector. Once the outputs of the CDBB are
delivered, training and learning resources should be provided to
enable employers and suppliers to understand how the outputs can be
applied.

Much is discussed when reviewing BIM about its value for the
ongoing operation and maintenance of an asset, but it is also of
great value when dealing with resolution planning (Policy 14).
Legal expertise and input is also key to ensuring that the contract
terms enable access to relevant data in a distress scenario.

Relationship of the parties

Policy 10 states that: “We will ensure that contracts are
structured to support an exchange of data, drive collaboration,
improve value and manage risk. They will set clear expectations for
continuous improvement and be consistent with the principles in the
Construction Playbook… and adopt a new ‘gold standard’…
This will enable contracting authorities to easily identify
frameworks that meet best practices and embody policies set out in
this Playbook.”

For contracting to be effective, it is key that the chosen
delivery model (as covered by policy 9) supports and drives the
other 13 policies. To achieve this, the Government will need to
invest in making more resources available to the public sector,
through increased recruitment and training and engaging private
sector expertise, to enable decisions to be made about delivery
models that take on-board all of the policies and guidance set out
in the Construction Playbook. Only when the best delivery model is
chosen, is it the time to consider the contract.

There are plenty of contracts that seek to encapsulate policy 10
and the aim of continuous improvement. The challenge is
implementing the contract terms in a meaningful way. This involves
investment of time and resource by the public sector and the supply
chain so that contracts are not “left in the drawer” but
are understood and proactively project managed. Government actions
will hopefully include taking steps to (1) improve the health of
the market as a whole so that suppliers can invest in resource
effective contract implementation and (2) invest in the public
sector to make sure it has sufficient skilled resource to implement
contracts and drive improved performance.

The contract structures outlined in policy 10 can be difficult
to push down to sub-contractors and beyond, and as a result the
true benefit of such provisions, such as collaborative working, can
easily be lost. This is because margins in the construction sector
do not typically leave room for investment by suppliers in the
resources, skills and time needed to manage their supply-chain in a
way that is aligned with the terms set up at main contract level.
Also, main contracts often do not take on board the risk and issues
from the perspective of the lower end of the supply chain, for
example, the impact of the hardening insurance market, the
uncertainties created by Brexit and COVID-19 and less protection
for suppliers under the Corporate Governance and Insolvency Act
2020. Hopefully policy 6, early supply chain involvement; policy
11, risk allocation; and policy 12, payment mechanism and pricing,
will (if applied properly to inform the choice of delivery model
and the contract structure) facilitate the flow-down of the
‘gold standard’ to sub-contractors and below.

In particular, policy 6, early supply chain involvement (ESCI)
has a key role to play in sub-contractor and below engagement. To
provide the most benefit to this level of the supply chain, there
needs to be:

  • early engagement with the right parties to facilitate
    collaboration;
  • an understanding of all stakeholders/suppliers’ needs and
    interests; and
  • enough flexibility to facilitate innovation and allow for
    changes to the delivery model and contract structure.

ESCI can also enable greater trust and sharing of information,
facilitating better risk allocation (policy 11).

All of this engagement, preparation and planning comes at a
cost, which may not be fully recoverable by suppliers via the
contract price. Public sector procurers should consider how they
might fund and best support this upfront work to reduce the burden
placed on suppliers. Such costs should decrease overtime as the
public sector comes to understand the market (policy 2); invests in
portfolios and longer term contracting (policy 3); harmonises,
digitalises and rationalises demand (policy 4); and, in particular,
uses data (policy 5) and benchmarking (policy 8) to assess the
value of such upfront investment to achieve best value.

Keeping the cash flowing

Cash-flow through the supply chain has always been a challenge
for the construction and engineering sector; no more clearly
evidenced than by the introduction of the Housing, Construction and
Regeneration Act 1996 and the frequency of insolvencies in the
sector. Those working in the sector will be aware that the
Construction Act has not necessarily been the panacea for the ills
identified in the Latham Report. This was recognised by BEIS in
2017/18 when it consulted on retentions, payment and adjudication
in the construction industry.

In this context, it is comforting to see the inclusion of policy
12, payment mechanism and pricing approach – “The payment
mechanism and pricing approach goes hand in hand with risk
allocation and will be subject to greater consideration and
scrutiny to ensure it incentivises the desired behaviours or
outcomes”.

Thought needs to go into whether those agreeing with, and
operating within, the contract have the skills and knowledge to
operate the payment mechanism; particularly when utilising new
methods of procurement such as MMC, which requires more thought
around advanced payments and appropriate securities for the
same.

While the Construction Playbook supports prompt and fair payment
regimes, along with project bank accounts, it would be a logical
step forward to look at the results of the BEIS consultations and
actively consider implementing solutions that would enable further
improvements in the flow-down of payments through the construction
sector supply chain.

Public bodies should also be encouraged to consider assessing,
when implementing policy 13, the economic and financial standing of
suppliers, how its delivery model and contract terms protect the
supply chain in the event of main contractor insolvency (given that
the Corporate Governance and Insolvency Act 2020 limits
suppliers’ rights in such circumstances). For example, could
public bodies contract directly with sub-contractors via contract
management? Could project bank accounts be mandated for public
sector projects?

An industry worth investing in

The Construction Playbook’s principles are reflective of the
change needed in the procurement of works in the public sector. It
will create a platform that has the potential to drive efficiency,
improve productivity and strengthen the UK’s construction
and engineering market, at all levels.

So what can the construction industry and public sector do to
support this change?

Bringing the aims and vision of the Construction
Playbook
into practice will mean overcoming the challenges
presented by the status quo. To implement the Construction
Playbook’s aims and values effectively, all stakeholders with
an interest in public works projects should consider and discuss,
in collaboration:

  • what aspects of the industry’s culture and economic
    structure could fetter the Construction Playbook’s
    application?
  • does the industry and the public sector have the resources,
    knowledge and skills to properly implement the policies set out in
    the Construction Playbook?
  • how can the needs and views of all levels of the sector’s
    supply chain be addressed and taken on board?

Whilst it is early days, it is clear that there is a strong
appetite and willingness from the sector to change, and The
Construction Playbook is a clear commitment from the Government
that it wants to work with the sector to enable the transformation
of the UK’s infrastructure.

Read the original article on GowlingWLG.com

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