Edd Burton (pictured above left) is Head of Infrastructure Advisory Services at Aecom and Tom Douglas (above right) is a partner at Eversheds Sutherland
To say that the delivery of construction projects has become more complex in recent years is a bit of an understatement. The conflict in Ukraine, Brexit and the Covid pandemic have led to disruptions in labor markets and supply chains, contributing to higher inflation. So it’s no surprise that the construction industry is increasingly looking to do things differently. Many are turning to collaborative procurement (CP) models to align objectives between the client, its supply chain and other stakeholders to support the delivery of project outcomes, including environmental, social and important governance.
In today’s climate, we see more and more customers looking to CP models for support as they struggle to find solutions to successfully deliver the required results.
Why should I consider CP for my project?
Simply put, because it can bring significant benefits to a project or works programme. At its core, CP aligns outcomes and incentives for the parties involved.
Customers and supply chains may not understand each other’s businesses and their drivers for success; CP seeks to improve trust and understanding between the parties, so that they are headed in the same direction to achieve mutually beneficial results.
Some of the most significant advantages of CP models include:
- Flexibility to innovate
- Improved productivity, which leads to a reduction in costs and time
- Improving the quality and performance of assets
- Reduction and avoidance of conflicts
- It moves away from a zero-sum transactional approach
What is CP and which approach is right for your project?
Many in the industry will have heard of CP, but may not be sure what it means or if it is right for their projects. It can be a complex area, but for most projects, even a light collaborative approach offers benefits.
At the most basic level there are models such as framework agreements and two-stage tendering/initial supply chain involvement. At the other end of the scale are alliances and enterprise agreements, often used by transportation and utility companies with long-term capital programs that allow the benefits of these agreements to pool. In the middle sit hybrid and partnership models.
Determining which model is right for you will depend on a number of factors, including the scope and scale of the project/program, the parties’ experience in running collaborative models, and the desired outcomes.
What does CP involve?
To achieve the greatest benefits, you will need a project/program of relative complexity and scale sufficient to justify the initial investment. An organization may need to allocate a greater level of resources to collaboratively contracted projects than it is used to.
“Trust is required throughout the supply chain if objectives are to be met and expected behaviors are to be demonstrated”
A clear vision or mission statement is required, which the project team can use as a focal point. Establishing the right behaviors and mindset early on is crucial to success.
It is important to feel comfortable integrating the project team and empowering the supply chain to find solutions. Empowerment can be supported by joint project/program tables with representation from both the customer and supply chain partners, which helps create the right culture for collaboration and enables team members to adopt a “one team” mentality, which leads to faster and joint decision-making. -do.
CP is based on all parties agreeing on measurable outcomes and moving away from evaluating supplier performance based on inputs. Trust is necessary throughout the supply chain if objectives are to be achieved and expected behaviors are to be demonstrated; in return, suppliers will expect to make a fair profit and maintain cash flow.
A contract is needed that supports and facilitates collaboration. This should include equitable allocation/sharing of risk and include a business model that balances provider risk and reward. There are now a number of standard form contracts that support CP across the range of collaboration models. In all cases, the right support in developing and drafting your contract strategy and documents is crucial.
In conclusion, collaboration can bring benefits to any project or works programme. CP models are a way to ensure that the industry manages the headwinds and has a long-term sustainable future in which all parties thrive.
do
- Establish clear expected outcomes of your project/program.
- You have the right leadership that is committed to the model you select and exhibits the right behaviors.
- Give due consideration to the multiple elements needed to make a collaborative model successful (behaviors, appropriate partners, form of contract, business model, etc.).
Do not do it
- Tolerate bad behavior. Make sure they are addressed early to help reinforce the necessary culture.
- Stifles innovation and creativity. It allows the delivery team to invest time in ideas that can best deliver the stated results.
- Forget assessing and learning. Keep iterating the model to ensure continuous improvement.
