Why Contracts Must be About Value, Not Just Price

In all sorts of sectors, from leisure to law, there is a growing focus on value and customer experience, rather than just price. In our industry, it could be argued that we are behind the times and we need to catch up fast.

Our industry is still defined by project delivery and price. Yet projects can bring so much value to communities and society. Only when we start thinking about value rather than price (and the minuscule margins that come with that approach), can we start to solve the major problems our industry faces

The sector needs more innovation and to make better use of technology (including BIM). We have a growing skills shortage. These issues will not be resolved unless contractors are recognised and rewarded for the value they bring, above and beyond the delivery of a physical building or asset.

The Government has a huge part to play. Collectively, it is the biggest construction client. It also has the influence to set the agenda for the rest of the industry. Construction makes up between 7 and 10% of GDP, yet none of the top 10 contractors makes any money. This is clearly not sustainable.

We are talking about investing in the organisations charged with creating homes, schools, hospitals and essential infrastructure – hardly things we can manage without.  We’re changing people’s lives – hopefully in a really positive way – and our construction contractors, subcontractors and workers are all part of this.

Undervaluing contractors often means the finger of blame is pointed at them when a problem arises on a project – even if the error wasn’t theirs. Responsibility, accountability and consequences that arise from actions do not rest with the same parties. A contractor can pass on the risk, but not the accountability.

When serious issues happen, either during or after a project, there is never one, single, simple cause. A series of small decisions, events and miscalculations usually contribute to a larger event. But without collective responsibility and accountability fingers inevitably point towards the main contractor. This attitude leads us nowhere. It just makes us all more defensive, risk averse and less able to learn from experience.

It’s all part of an unhealthy culture that needs to change. In a healthy culture valued contractors are engaged earlier so that they can enhance the project design and outcomes. Their input is valued and they share the risks and rewards of innovating to improve quality and deliver better outcomes. That is the culture we need to work towards.