Why we need new contracting models to support digital transformation

Lesley Waud
12 May 2021

Topics

New contracting models are needed to support construction’s digital transformation and to change behaviours in the industry, says Lesley Waud of Atkins.

We have a construction industry that has done things a certain way for many, many years and it’s not easy for people to change, so there’s a real cultural and behavioural change needed to adopt digital approaches.

These approaches require us to move away from the very traditional ‘waterfall’ approach where we do a piece of design, they pass it to the client, they pass it onto the contractor and at various stages it gets passed back with comments. We all need to be in a room together looking at it in a 3D digital model as the model is being developed and we are not going to do that unless the contract is constructed in a way that encourages that participation and, more importantly, proactively enables it.

Procurement approaches are fundamentally enabled by the contract, so how it brings the parties together needs to be different. The way that people are familiar with administering contracts - and in some cases making money out of contracts - will continue to drive ‘old world’ behaviours unless the contracts incentivise differently how we are rewarded.

Contracts need to focus on the outcomes not the outputs and need to reward the value that we give to our clients, not the input effort taken in achieving that. Contracts are still very much geared around the labour theory of pricing, rather than value-based pricing, because that is what everyone is comfortable with.

To measure success in a world where we use digital tools and approaches, we need to know the products that are going to be used in construction as we build the model. Generally, we don’t know that because a contractor is going to go through a pricing process that has to comply, for public sector contracts, with Treasury Green Book rules and quite often they won’t go to the market until they have got a complete design to go out and get it priced and then to agree who they are going to place the contract with.

As a result, we are completely missing the opportunity to build those products into our model from the outset to properly understand the impact on health and safety, carbon, cost, time etc. We are able to do all of that using digital and then feed directly into manufacturers from our model, but the industry is not comfortable and not used to making early informed decisions like that.

Unless the contracts recognise that they are a critical enabler in what is a big behavioural change in the industry and if our success is continually measured by what is written in the contract in a traditional way, everyone is going to keep reverting to those traditional approaches because that is how our success is measured.

In theory, contracts wouldn’t need to change if the behavioural change wasn’t such a big challenge. However, because it is such a big challenge - and we are changing the way we have been doing things for 30 years or more – that is a huge transformation and therefore we have to pull all of the levers that we can to enable that transformation. That is why it’s so important that we can use the contract as one of those enablers, because it would be too easy to default to what the contract says in a world where people don’t want to change.

Lesley Waud is global head of design transformation at Atkins.

Find out more by attending "The Big Contracts Debate - is construction’s digital transformation dependent on the introduction of new contracting models?" This online debate takes place on Friday 21 May 2021 at 11am and is organised by Infrastructure Intelligence in association with Atkins.

Click here to book a free place at The Big Contracts Debate.