Could UK procurement initiatives benefit the UAE?
Could the UAE benefit from the implementation of construction procurement initiatives that have been tried and tested in the UK market?
The UK has long been a leader in the development of construction procurement and contractual arrangement initiatives, a fact that was highlighted in Sir Michael Latham’s influential government-sponsored report, Constructing the Team (1994).
Within the context of construction, procurement relates to the process of selecting and entering into contractual arrangements with a contractor.
The principal drivers of a typical construction project can be said to be time, cost, and quality. The employer’s particular requirements in relation to these criteria will, or at least should, drive the procurement choices made for the project. If the nature of the project is such that the client’s priorities tend more towards time and cost rather than quality, design and build (D&B) may be the optimum choice. Of course, quality must always be present to a minimum accepted standard.
The core procurement route options in the UK substantially comprise traditional lump-sum management contracting, construction management, D&B, and prime contracting. Option selection will determine the subsequent route to be followed. For example, if the traditional approach is adopted, it will be necessary to appoint a designer, whereas if D&B is adopted, design will be conducted by the contractor, post contract. Value engineering is advisable under any of the procurement routes.
Each of these procurement routes has its own unique features, benefits, and drawbacks, and these options are available here in the UAE. However, the traditional lump-sum model generally prevails in this market, usually with onerous employer-biased terms introduced to standard forms of contract, such as the FIDIC Red Book.
Conversely, in the UK, contractual risks tend to be more balanced between contractors and employers. Pay-when-paid clauses are often applied in the UAE, for instance, whereas they were outlawed in the UK in 1996. Similarly, unconditional performance bonds are commonplace in the UAE, but not in the UK.
Indeed, there are numerous best practice initiatives employed in the UK that represent a broad spectrum of options. Here are just a few.
According to the UK government’s Construction 2025 (2013), all government construction projects in the UK, irrespective of project size, must use building information modelling (BIM) level two from 2016. This is highly innovative, and will lead to efficiencies across the whole project management spectrum. It should also reduce scope for dispute. Although a principle and commitment rather than a formal process, collaboration also forms a key theme within Construction 2025.
Cost benchmarking was advocated in the Cabinet Office’s Government Construction Strategy (2011). This approach is suitable for repeat projects, and could realise significant benefits as the scheme progresses. Although not wholly applicable to D&B, where costs and programmes already tend to be optimised, this strategy also encourages cost incentives, such as early-completion bonuses, target costs, and pain/gain sharing. Such measures help to ensure that value for money and competitive tension are maintained, and that the focus is not purely the lowest price. Moreover, the UK’s Government Construction Strategy advocates integrated project insurance, whereby parties form an alliance, and project outcome is insured to cap liability.
The EU Public Contracts Directive (2014) highlights that, although not essential for a scheme involving a finite number of projects, electronic procurement is nevertheless beneficial. The same directive also states that full lifecycle costing should be given some consideration.
In addition, UK legislation promotes the use of integrated teams, project bank accounts (PBAs), key performance indicators (KPIs), partnering, sustainability, two-stage open book tendering, and more.
A number of the initiatives set out above have been adopted to varying degrees in the UAE, such as BIM and KPIs. It is hoped – at least by this writer – that there will be a shift to more collaborative practices and greater uptake of such UK initiatives in the UAE over the coming years.