What are the implications of the trends in building procurement?
The ninth in a series of surveys dating back to 1985 looking at trends in building procurement and the use of standard forms has just been published. Prepared by Davis Langdon & Everest on behalf of the RICS, the survey has collected data from about 14 per cent of construction contracts placed in the UK in 2001, measured by value.
The survey is thought-provoking as to the contract structures most commonly used, the roles that are thereby created for architects to fulfil, and the implications for clients. Perhaps particularly pertinent for architects are the trends revealed in the use of the overwhelmingly popular JCT contracts. To summarise:
lthe value of contracts placed through the JCT design and build (D&B) form has almost doubled since 1995; and lfor the first time since the surveys started, the value of works procured by the JCT D&B form has overtaken the total value of works procured under all the JCT standard forms.
One key difference between the two types of procurement is the role of the independent certifier as opposed to the employer's representative. This marked shift underlines what has, in certain circles, been predicted for years - that the days of the independent certifier are numbered. Architects need to make sure they fully understand the role they fulfil under building contracts, as it seems it will now frequently not be the one they were traditionally trained for.
With reference to the more general themes on the procurement routes chosen, about 42 per cent of contracts, measured by value, in 2001 were D&B and about 40 per cent were lump sum defined either by bills or specification and drawings. Small numbers of contracts used other methods, such as management contracting and construction management. Comparison with earlier surveys suggests a retrenchment; use of these less familiar procurement routes having declined. Further emphasising that old habits die hard, 91 per cent of contracts, by number, used a JCT contract form - the highest use of JCT forms recorded in any of the surveys.
Less common standard forms, such as those under the New Engineering Contract umbrella, have struggled to make an impact. Why is there such a reluctance to embrace change? If it is based on informed decisions identifying appropriate contract strategies, all well and good.But if it is the result of a 'better the devil you know' approach, then it may be a cause for concern.
Two other themes raise questions about how well served clients are by the standard forms that are being chosen. First, it is interesting to ponder the reasons for discrepancies between the type of contract to be used for a certain value of works, and the value of contracts for which they are actually used. The JCT normally recommends the Intermediate Form (IFC) for works worth less than £375,000. But the survey found that in 27 per cent of cases where the standard form was used it was for projects of less than £250,000. At the other end of the scale, the JCT recommends the use of its Minor Works (MW ) contract for values up to £100,000. In 18 per cent of cases where minor works was used it was for projects above that value, and in five instances the MW form was pressed into service on projects worth over £500,000.
Second, the question of the end result for the client in terms of both cost and quality rears its head. While D&B seeks to ensure cost certainty, architects frequently criticise it as providing unsatisfactory end results for the client. If that is right, the increase in its use will be a source of concern for the profession.
The survey also shows changes in use of the JCT Standard Form, with and without quantities.
Measured in terms of contract value, the use of the 'with' form has more than halved since 1995, and the use of the 'without' form has more than doubled.The JCT regards the use of quantities as a good thing in providing relative certainty for tenderers. That suggests that the shift from 'with' to 'without' represents a decrease in certainty for tenderers, from which presumably follows a decrease in price certainty for the client, and an increase in the likelihood of claims being made.
What happened to the project that was comprehensively designed and billed up front, which gave cost certainty to the client while enabling them to retain control to get the end result they wanted?