Do we Have a Healthy Procurement Culture?
Do we Have a Healthy Procurement Culture?
Well publicised and sometimes tragic events experienced over the last 12 months inevitably lead to soul searching for all of us involved in contracts. The inescapable question is whether procurement processes really meet the needs of all stakeholders or whether the age of austerity has made us all too focused on price.
I’m sure that construction isn’t alone in asking whether procurement models are based around a big enough picture of what’s really needed, as opposed just to the cost.
The difficulty with price is that it’s a variable that doesn’t exist in isolation. It is highly interconnected with both value and risk. When risk doesn’t get equal weighting with the price the consequences can be catastrophic.
The Cost of ‘Low Cost’
Value is a longer-term consideration; the cheapest solution today may create the biggest headaches tomorrow for operating and maintaining the structure. The cheapest solution may miss opportunities to deliver social value and other benefits that meet the wider strategic aims of the procuring organisations and end users.
Maybe these questions don’t get asked often enough so procurement bodies don’t get to see the true costs and missed opportunities for the solutions they choose. Because tender processes are prescriptive it’s hard to answer questions that aren’t asked. And even if you find a way of including value and risk considerations the scoring system may mean they can’t count in the decision if it’s mainly about price.
Working Together
There are clearly issues to be addressed on both the supply and demand side. Some might say that you can’t sell reduced risk and higher value if nobody is buying it. But equally, if we as contractors haven’t cultivated the types of relationships with our customers where those conversations can happen with openness and integrity, we still have work to do on our side too.
Contractors need to make a reasonable return because a healthy modern society needs a vibrant construction sector. Too many people are depending on the things we need to build to take chances. But we also need to be more enlightened about what value would really look like for our customers and become better tuned into addressing those needs in the solutions we design.
A better procurement model can’t be seen as simply one that enables us to make more money with better decisions. That’s just the flip side of the same ‘lowest cost’ coin. We have to be more imaginative, more open and more collaborative if the right balance between need and cost is to be achieved.
