Analysis

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Griffiths and Armour risk round table

Cabinet Office head of construction David Hancock’s clarification of the developing new relationship Government has with the infrastructure industry was welcomed by participants at the round table event.

All were encouraged to know that Government was continuing on the path to deliver £100bn of infrastructure investment and that Government itself was going through a process of improvement as a client. And they were interested to understand that Government had moved from a process of consultation with industry to what was described as a dialogue whereby Government says what it wants and expects industry to respond. 

ACE’s Policy Manager Peter Campbell said the organisation had quickly understood that the relationship with Government had changed from one of partnership to dialogue “although it is worrying that it has been pushed through with a minimum of consultation. However, the Election result was a good one for industry in terms of continuity and stability,” he said. “The Conservatives ran on their reputation in Government and the promise of maintaining investment – in roads, energy and so on. We are moving into a different phase from policy development to delivery; Government has to get on and deliver and it is empowering industry to do it.”

Representing the views of the consultants around the table, Mott MacDonald director Ian Galbraith said: We are proudly apolitical at Mott MacDonald but we are pleased that there is clarity in terms of investment and that we have five years of stable government. 

"What you see is contractors trying to pass down strict obligations even though they are not appropriate for consultants. Contractors see that as us being collaborative with them, but it takes us beyond what we are obliged to perform in law and can reasonably get insurance for in law.”

“However, we are also aware of problems hanging over the construction industry from the recent recession. Consequently some companies might be more vulnerable than others and this might cause problems with, in particular the push for increased collaboration to increase efficiency.”

It was a point picked up by Buro Happold regional and divisional managing director Neil Squibbs who was keen to see how the push for efficiency would play out in a market that is growing rapidly. “We are already seeing overheating and capacity is fully absorbed,” he said. “We are seeing contractors wanting to be paid to tender in fact. People are licking their lips at the thought of a long pipeline of work, but how much work is too much work And when does a boom become a potential bust?”

Main contractors are seeking to protect themselves from future problems and recover old losses by imposing onerous terms on their supply chains, including consultants, said BLM partner Guy Lane. “There is concern about the onerous terms being imposed on suppliers in that these terms go beyond the reasonable skill and care obligations of consultants. There have been a number of judgments already where the court has been trying to disentangle those.”

So are main contractors really signed up to the idea of collaboration and change?

“Yes there is change but it is reluctant change and there is inertia,” said Tony Gee & Partners director Richard Prosser. “There is a little bit of filtering from the client through the contractor to us. But what you see is contractors trying to pass down strict obligations even though they are not appropriate for consultants. Contractors see that as us being collaborative with them, but it takes us beyond what we are obliged to perform in law and can reasonably get insurance for in law.”

RSA construction director Nick Newlove said that evidence from the water industry was that contractors are committed to fair collaboration. 

“We have recently gone through the insurance cycle for AMP 6 and whilst there are new alliances and jv’s it is interesting to see how many arrangements have perpetuated from AMP 5 and even before that. There is real recognition from contractors that how they collaborate affects their success at developing sustainable relationships with government and private sector clients that fund opportunities over the long term.”

“The industry is definitely moving to more collaborative behaviour and clients and contractors are engaging more with the whole supply chain but are the systems and processes in place to support this?"

Director of architect AHR Michael Walters had some sympathy for why contractors could be acting as they are at the moment. “There is still a cautionary feel among business at every level,” he said. “When you come to contractors they are picking and choosing jobs now. They have got to sort out their bottom line and put money back in the bank and that means prices going up and them picking and dictating terms. More granularity on what is coming up in the spending pipeline and when would help.”

News that Government was intent on improving its performance as a client was welcomed by Royal HaskoningDHV director Steven Trewhella. But he made a plea for the training to include an understanding of the difference between buying a design and procuring services. “The whole risk of delivering a service tends to be pushed down to the supply chain which means transaction costs go up because of the risk embedded in it.”

For Ramboll director Peter Curran the issue was not the willingness to embrace new procurement models like Integrated Project Insurance or to collaborate more but whether processes in place would allow such change.

“The collaboration aspiration encouraged by the mandatory use of BIM from next year will be frustrated unless there is structural change which requires a complementary contracting, risk and insurance strategy.”

“The industry is definitely moving to more collaborative behaviour and clients and contractors are engaging more with the whole supply chain but are the systems and processes in place to support this? It is clients that drive the systems and the capability of client organisations has decreased through successive Governments. This trend needs to be reversed.” 

Griffiths & Armour partner Paul Berg agreed with Curran on the point about processes. “People do want to work together but typical contracts mean that as soon as there is a hint of a problem, defensive behaviour is hard to change because the lawyers acting on behalf of insurers say to all the parties ‘consider your contractual position’ and everyone reverts to being adversarial. There is huge cost embedded in that, not just in the claim itself but the cost of resolving the project problems. Behaviour and approach are all driven by the contract which is why the Integrated Project Insurance procurement model which covers the whole project with no blame for any party involved is being promoted. Only by removing attritional confrontation will you unlock the potential of true collaboration.”

Curran is absolutely right, there needs to be structural change to achieve the behaviour change that will drive collaboration,” said Griffiths & Armour partner Carl Evans. “The narrative of collaboration has been with us for years but we are constantly defeated by the practicalities – the law and the insurance. The collaboration aspiration encouraged by the mandatory use of BIM from next year will be frustrated unless there is structural change which requires a complementary contracting, risk and insurance strategy.”