The current buoyant construction climate is putting contractors back in the driving seat when it comes to procurement. Gone are the days where an abundance of contractors were willing to price single stage, competitively tendered design and build projects, and were happy to take substantial risk for less profit. The balance of power has shifted and procurement professionals are finding it difficult to accommodate the changing appetite of contractors while also meeting the requirements of clients, many of whom still favour design and build procurement.
This dilemma led us to come up with a creative procurement process on the pioneering £10.4 million BIFoR project for the University of Birmingham. The BIFoR project was unique, the first of its kind in the UK, with only a handful of similar projects around the world. Extensive environmental restrictions impacted greatly on the design and construction methodologies, resulting in a challenging project with a high degree of risk.
Our attempt to competitively tender the project resulted in only one tender return, which was 60 percent over budget, and not enough time within the programme to switch to an alternative procurement method. We identified the key drivers in the project overspend: a lack of understanding of the project, concern over perceived and actual risks, and a lack of competition in the supply chain.
We subsequently led an adapted single stage design and build procurement process, suited to market conditions and to the project's unique requirements. We identified a single specialist main contractor with the technical ability to deliver a project of this complexity, and we sought a price from this contractor only. We provided the contractor with transparency around our client's budget.
The BIFoR project was unique, the first of its kind in the UK, with only a handful of similar projects around the world.
We then assisted the contractor with the procurement of sub-contract pricing from the supply chain, sharing details of the contacts we used and our pricing information, and reviewing the contractor's alternative proposals. The client's team became a key member of the contractor's estimating team, participating in interviewing and reviewing sub-contractors and sub-contract tender returns.
Finally, all risk was identified and stripped out of the sub-contract tender packages and a risk register was developed, providing transparency on perceived risks. This approach also ensured that each risk was declared, allocated and managed by the most appropriate party. Our approach was contrary to the typical procedure of procuring a design, sending it to several contractors and waiting several weeks for a price that's hopefully within budget.
Close collaboration with the contractor and the client enabled a successful solution for all. We achieved this by engaging one contractor all the way through, providing transparency and allowing decisions to be made during the tender period to ensure the tender price remained consistent with the budget. This resulted in construction works starting on time and the project being delivered within budget, and with a £6 million saving on the original tender process.