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Procurement 'value' will be a gamechanger in 2019

Tom Fitzpatrick

How do you define value in the procurement process?

Too often we hear that lowest cost wins. It continues to be a scourge on public procurement today, despite Carillion’s collapse and the Grenfell Tower tragedy in the past 18 months.

Admittedly, it’s understandable why civil servants might choose to procure on the basis of picking whoever can (theoretically) do the job cheapest.

After all, the public consciousness dictates that goods will only be considered value for money if they can’t be bought cheaper elsewhere.

Retailers offer price comparisons with rivals in their marketing; politicians would rather make dramatic announcements about rail fares being frozen than services being improved at a greater cost to the passenger. People fly with budget airlines, knowing the experience will be worse.

Everywhere you look in society, people in power want to consider how your purse will be affected, rather than convincing you of the wider benefits of paying more in the long run. And the majority of people don’t get to choose between cheapest and best.

A possible exception is in the automotive sector. When you buy a car, yes you haggle on price, but you also want something that won’t break down, that won’t need expensive repairs.

The hope is that recent events, combined with younger generations being more environmentally and socially aware, will help turn the tide quicker. Issues such as Brexit, Trump and equal rights are polarising communities and households, but they’re also making people more politically conscious.

Similarly, in construction, there’s a recognition that those who charge more for a better service must be part of a better solution.

When the Cabinet Office announced in June it wanted to “explicitly evaluate” social value in procurement under an extension of the 2013 Social Value Act, it said the move would help level the playing field for SMEs.

This is unlikely to be the principal benefit of the move – demonstrating value can be an expensive process for companies without big corporate PR machines.

But the ultimate beneficiary, were this to be properly executed on central government contracts and then, hopefully, trickled down to local authorities, would be a recognition of those companies that are trying to do business better.

It would reward companies that really listened to local communities, rather than paying them lip service. It would ensure companies that cared for the wellbeing of their staff and tried to build more diverse, tech-savvy workforces would be rewarded for their investments.

And that would help improve both society and its recognition of construction’s contribution no end, which is my big wish for 2019.

Readers' comments (4)

  • Unfortunately Social Value in procurement isn’t used very effectively.

    Recent bids often ask for a company to state a monetary value as to how much social value they will create regardless of whether they will be awarded any work.

    It also fails to assess the value of better quality service or product being delivered with the core element, I.e. the delivery of the service you are bidding to deliver still being judged primarily on lowest price.

    Procurement simply needs to change the balance of quality vs costs so the primary assessment is based on quality. And why can’t benchmarking be used to discount abnormally low bids to stop people buying work?

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  • all good words Tom, whilst the majority of sub-contractors price main contractors the power of the pen is mightier than the sword,



    PM

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  • So we've won the battle to have social value explicitly included in procurement.

    Now we have the battle to define what that social value means.

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  • Value in procurement must mean quality of service and the product meeting the required standards. How this is to be delivered could be measured through the procurement process. But is it really a priority? When social value is discussed, frequently there are requirements as to local spend and local employment creation. This is an obvious benefit, particularly when dealing with local authorities. This however, could create conflict when central government promote “offsite”. How can social value be provided or created when a school is delivered to a location and assembled having been manufactured in another distant part of the country? It feels like industry wants something but asks for another. Until the industry is clear in what it requires, value and social value will be difficult to deliver.

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