Construction associations seek adoption of ‘intelligent procurement’

26 April 2023

Construction industry bodies have warned the sector is suffering from “unhealthy procurement practices”, and that more intelligent systems are needed.

Concerns have been raised that not enough consideration is being given to emerging factors such as social value in construction procurement by local authorities, industry bodies discussed in a meeting on the resilience of the North East construction sector. 

The Construction Alliance North East (CAN) and the Construction Industry Council (CIC) said there is the need for improvement in knowledge in construction procurement and there needs to be “more intelligent” procurement practices. 

CIC North East regional chair Chandra Vemury called on local authorities to adopt an “intelligent procurement policy” to better understand the specific issues in construction.

He said an “intelligent approach” incorporates social value and having a wider awareness of the issues facing the sector. 

Vemury told Supply Management: “We would like the procurement process to be more intelligent in the sense that we want the decision makers, and the mechanism of procurement itself, to be better informed. There is definitely a need for education, and making processes more transparent.”

He said procurement decisions should be more focussed on social value rather than lowest costs. 

“The idea that the lowest price always wins is unhelpful. Contractors are usually entering projects with a limited amount of technical detail. They are having to make a lot of design assumptions when agreeing to any piece of work, and any risks are borne by contractors. They have to absorb not just the financial risk, but the practical risk of being able to deliver the project.

“If professionals and contractors are appointed on the basis of least cost, then there’s a high likelihood the end product is not going to be of good quality.”

There is a culture of risk-aversion in construction procurement, and Vemury said: “There seems to be a widespread lack of competence, and the endemic nature of unhealthy practices in procurement directly hurt the whole construction chain.”

CAN board member Tony Kay argued many of the local authority procurement bodies were “hiding behind the computer screens and red tape”, preventing contractors from being able to “engage with them sufficiently”.

Kay told SM: “Since lockdown, the wheels have come off. There’s a definite disconnect in procurement of construction services with local authorities. 

“We are detecting a reduction in the skills and experience of procurement teams within local authorities with regards to construction.”

Kay said procuring bodies have an overreliance on external consultants for projects, who tended to advise them to award bids to larger, national companies. However, he warned these companies are less likely to provide social value.

“If you get a national contractor, they will not employ local tradesmen,” Kay said. “We’re all after virtuous circles, and this idea of social value – it’s only the small and medium-sized companies who do that.”

The construction industry has seen growing lead times and soaring inflation has put pressure on businesses, leading to a number of insolvencies in recent months which left their supply chains in debt.

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