Adopting a Value-Based Approach to Deliver Better Whole-Life Performance

Monday, March 1, 2021

The automotive industry, in particular, is evolving different relationships with its supply chains. This is driven by the realisation that traditional customer-supplier procurement models aren’t adaptable enough to keep pace with rapid changes in the industry such as the shift to electric powertrains.

The supplier model takes a more collaborative and long term approach. Rather than issuing a specification against which potential suppliers bid, the new relationships look at the desired outcomes. Procurement uses the combined innovative capacity of customers and suppliers to engineer better solutions.

Change in the Healthcare Sector

Healthcare construction is embroiled in a similar process of rapid change driven by higher expectations. The sector needs facilities that are more flexible, higher quality, easier to maintain, cheaper to heat and with minimum levels of embodied carbon. Price-focused procurement isn’t the best route to better whole life performance and value.

An outdated procurement regime leads inevitably to design, development and construction processes that are similarly constrained and unresponsive. In a price rather than value-based culture, many opportunities to identify better solutions can evaporate before the contract is awarded.

Procurement Can Drive Change

There is a well-documented link between procurement behaviour and many of the problems the industry faces. These include lack of innovation, stagnating productivity and poor quality. This puts procurement in a strong position to drive change and improve outcomes.

Traditionally, best price and best value were seen as synonymous. But construction has moved on – particularly in the area of healthcare. Hospitals, health centres and GP surgeries have to deliver more and perform better. Exploring the possibilities of better long-term value calls for specialist suppliers to be engaged early enough to make a meaningful difference.

The concept of value has acquired new dimensions. The process should provide the space to explore ways to take time and disruption out of the programme and to deliver economies over multiple projects. This calls for an urgent and corresponding change in the approach to procurement.