Analysis: Current procurement practice is driving wrong behaviours

10/07/2018

The FiTZ INDEX findings reveal emphatic agreement that current practice is driving the wrong behaviours, and achieving the wrong results, Brian Fitzpatrick writes. 

New initiatives like Project 13 still have some way to go before driving the sort of change the industry needs. It might even be potentially reinforcing the status quo that favours the bigger suppliers to the industry.

There was a sentiment, quite vocally expressed by a significant number, that bigger companies are deliberately favoured by procurers, and perhaps those suppliers in return are understandably keen to maintain the status quo, driving risk averse behaviours and constraining innovation.

The continued use of frameworks, which means the same companies are able to utilise financial muscle and track record, exacerbates the problems for new entrants and smaller organisations trying to bring new skills into the sector, and perpetuates the self-fulfilling cycle.

There is no doubt that procurement is not meeting the needs of the sector in highways, and worryingly there is no sign of it changing soon.

Project 13 could improve the situation and the positive news is that 46% of respondents think their own organisation is willing to embrace such change.

Its ambition is to create a community of infrastructure owners and suppliers committed to change, moving away from transactional, cost driven procurement.

A current supply chain delivery model, which is locked into a cycle of low margins, low investment and dysfunctional relationships, is cited as a key failing.

The irony is that a key member of the Project 13 steering group was Carillion; many of the suppliers and clients who contributed to the development of Project 13 are arguably the players who are part of the problem and not the solution. As a number of commentators have identified, and the 2018 FITZ INDEX confirms, the Government now needs to lead serious reform in procurement – two thirds of respondents said the public sector should be responsible for driving change.

Regional and local government bodies also need to rise to the leadership challenge in procurement.

10 points identified for more effective procurement in highways:

  1. More, and less onerous, pre-qualification exercises for smaller companies
  2. Identify price (not cost), and service value over traditional tick box bureaucracy in tenders
  3. Constrain the number of contracts the bigger companies are allowed to bid for and/or win
  4. Retain the commercial and technical involvement of the client. Collaboration does not mean giving up accountability
  5. Bring the customer and end user more to life in tender documents and the way success and satisfaction is measured
  6. Fewer frameworks, more diverse and alternative procurement models, and more variation in remuneration
  7. Don’t reward failure, if a company bids low and cannot keep its promises, no matter who they are, punish them
  8. More standardisation of design and construction solutions to avoid re-inventing the wheel for every scheme
  9. Procurement professionals need to be accountable too. Less management of tenders and more professional capability working together with their technical management colleagues.
  10. A better understanding of the outcomes of the tenders, and incorporating that knowledge into the next set of documents.

The FiTZ INDEX 2018 was produced by Fitzpatrick Advisory Ltd, in association with Highways. For a fuller discussion on the findings of the survey please go to www.fitzpatrickadvisory.co.uk

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