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Balancing the economies of scale

Paul Finch
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The world of construction cost, fees and value needs far more illumination, says Paul Finch

After a cheery summer and visits to Switzerland, Venice, Oman, Brighton, Cambridge and the Norfolk coast, familiar tales greeted me back in what is supposed to be the world’s greatest city, if you discount its third-world roadworks and traffic management. Chatting to an architect about the difficulty of building small projects cheaply, he told me of a recent experience where a modest project would, according to the client’s in-house quantity surveyor (sorry, cost consultant), come in at about £600k. The architect thought it would be less than half that. It was tendered and awarded at £230k.

How could the QS have got it so wrong? Quite easily, if your working method is to cover your arse (excuse my French), make the architect an object of suspicion, and emphasise your own importance to the efficient ‘management’ of all those who contribute to the construction process.

By chance I found myself talking about this question of cost to Ian Ritchie, who has a well-deserved reputation for producing fine architecture extremely economically. It is fair to say Ian is not a lover of project management ideology, nor of the virtues of main contractors (with one or two honourable exceptions). Famously, he delivered temporary and brilliant facilities for the Royal Shakespeare Company, which according to the QS would cost £20 million. Ian’s response was it would cost £6 million, which is what he brought it in for.

What is his formula for getting excellent prices? In essence it involves the architect taking construction drawings to four or five trade contractors and getting prices from them. Armed with real information from real builders, he then approaches main contractors and asks them what fee they will charge to co-ordinate the work of the people who really make the building.

This approach relies on builders whose interest is construction

The economy of this approach, which is based on designing things once rather than three times, relies on builders whose interest is construction, not ancillary financial benefits based on changing things.  This is an approach designers confident about their own knowledge of construction should surely be pursuing.  Trade contractors and specialist subcontractors are fearless about technical challenges because they know what they are doing. They are the exact opposite of the risk-averse guardians of frightened clients.

Needless to say, the idea of getting prices from people with a known track record, and negotiating deals with them and then the main contractor, is completely at odds with the Sargasso Sea processes of public project procurement, especially of the OJEU variety, which guarantee that the people running the process are those with a vested interest in making it as expensive as possible.

A comparison of per square metre costs on private contracts, as opposed to public, shows us that the faux competition promoted by Eurocrats results not in the economic benefits of competition, but exploitation of the public purse by a supply-side industry. This should not be too surprising, even if it is shocking. Discretionary pricing and the cartel arrangements periodically but infrequently exposed by the audit community (you wonder why!) have become part and parcel of too-cosy relationships between public clients, public regulators and the marketeers and lawyers who do sterling work in the construction industry without ever building anything.

Hey-ho. It may always have been thus, but things seem to be getting worse, rather than better.  We need more Ian Ritchies working with real builders, and less corporate nonsense about achieving risk-free innovation by only employing designers who have done the same thing 50 times before. People without imagination rarely trust those who have it.

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