Prime contracting - breakthrough or initiative overload

Henry Sherman debates if there is real cause for optimism

Over the past few months the prime contracting initiative put forward by the Ministry of Defence has been widely reported in the technical press. At the same time the Movement for Innovation (dubbed M4I) is working on the implementation of last year’s Egan report through a number of working parties and fashionably - titled cluster groups, the Housing Forum and Central Government and Local Government Task Forces are all charged with improving productivity in their sectors along Egan lines and a range of other organisations are also actively promoting change.

At first sight the impression given by all this activity can be confusing. Sceptics may perhaps be forgiven in the circumstances for the view that prime contracting is simply one more initiative to add to a plethora of others which have come and gone put forward by a variety of bodies with bewildering names or acronyms, all claiming membership of what Contract Journal has dubbed the ‘Construction Culture Club’. What hard evidence is there that anything will really change?

Others level the charge that a common thread running through these initiatives - the need, in the words of Building magazine “to abandon selfish commercial interests for the greater good of the industry” - suggests that the real agenda is to drive down cost at the expense of the contractor and point in support of this view to the potential vulnerability of contractors under partnering schemes and framework agreements which are part of the new ethos.

It may help at this point to put these developments in context. The current industry ferment all stems in effect from the unprecedented ‘navel gazing’ forced on the industry by the toughest construction recession since the war and the seminal 1994 Latham Report which resulted from this process. Its aims were to tackle the wasteful vicious circle of boom and bust suffered by the industry over decades, compounded by low margins and high levels of disputes born of adversarial attitudes.

In addition, and this is perhaps (in the current jargon) the key driver for change, UK construction costs are too high. As a leading client representative has put it:

“It is widely accepted that buildings in the UK cost more and take longer to design and build than those in other major economies”1

and Egan confirms that this problem is still with us.

In his report Sir Michael Latham argued that one important way of improving the position was to integrate design and construction to a greater extent than under traditional forms of contract. There are in practice two main procurement routes which lend themselves best to this approach - first, the management route (these days usually construction management) under which specialist trade contractors often undertake extensive design and, second, design and build.

Construction management is, however, not for the fainthearted, both because of the level of informed client involvement required and the large number of direct contracts into which the client has to enter. For these reasons and others, recent industry initiatives have therefore tended to favour design and build as a key element in the new approaches which they are advocating.

Design and build, however, still has a PR problem. As Sir Norman Foster has put it:

“The image which “design-build” conjures up is that of the worst possible building, low in quality and of little or no architectural merit, the only priority being the bottom-line cost.”

For design build to achieve recognition as a procurement route capable of contributing to real progress in productivity, as well as meeting clients’ requirement, it clearly needs to lose this Cinderella status. There are signs that this is beginning to happen, with projects such as the technically complex and challenging new Wellcome wing at the Natural History Museum, London, which until recently would have been thought unsuitable for design and build, being let and executed highly successfully on this basis. This trend is being encouraged by the Design Build Foundation, an industry wide body with strong client representation and active involvement from design practices including Sir Norman’s own.

So where does prime contracting fit into all this? Essentially, it represents a means of combining the principles of design and build with requirements for life cycle costing and ease of operation and maintenance. As mentioned, prime contracting is being introduced by the Ministry of Defence. The prime mover is Defence Estates, which has a budget of about £1.5bn per year to spend on new build and maintenance on behalf of the Ministry. Defence Estates’ own definition of prime contracting is worth quoting, it is:

“a single company assuming responsibility for the delivery of the contracted requirement on time, within budget (defined over the lifetime of the project) and fit for the purpose of which it was intended: and that includes demonstrating that the contracted operating parameters can be met.”

This definition is obviously a little woolly at the edges and it remains to be seen how this new approach will develop. Will it turn out to be design and build with facilities management knobs on or something more? And, while improved design is clearly one of its aims how will quality and cost effectiveness be measured and assured? The leading contractors are however busily organising themselves to bid for prime contracting jobs and the benefits of long-term relationships with client and supply chain should improve margins and result in progress towards the reductions in cost and imaginative design solutions which clients are demanding. To help meet subcontractor concerns the MoD are also on record as saying that they will ensure that benefits accrue to all involved.

Provided that you are not punch-drunk and can hack your way through the dense jungle of hype and management speak surrounding these initiatives, there is therefore real cause for optimism.

Henry Sherman is a member of the board of the Design Build Foundation