Spec Finish

Feature Procurement practices and the contractual mechanisms that underpin the fit-out and finishing sector were given a damming report at the FIS AGM and Regional Conference in October. PROCUREMENT 8 www.thefis.org I NITIAL findings of research conducted by FIS, Barbour ABI, AMA Research and the University of Reading were presented by Professor Stuart Green. In his appraisal, Stuart, who has been leading the research, raised serious questions about time allocation in procurement and tendering processes. Of particular concern is the way that risks are routinely pushed down the supply chain. He concluded that procurement currently sets the wrong tone to support positive transformation and described the contractual nature of the sector as a “disaster zone”. The research was commissioned to gain a better understanding of how the fit-out, finishes and interiors sector can deliver better value and improve supply chain relationships through a focus on procurement. Whilst previous research has been published on mainstream construction procurement, such studies often fail to address the experienced realities of the £10 billion specialist finishes and interiors sector. FIS recognises that more needs to be done to understand how procurement practices are affecting the fast-moving and seemingly ever accelerating fit-out sector. A history of talking about procurement To set the scene Stuart drew a number of assertions from previous reports and initiatives that have focused on transformation in construction: • Improving the procurement process will play a large part in setting the tone for any construction project. This is where the drive for quality and good outcomes, rather than the lowest cost, must start (Hackitt Report, 2018). • Whatever procurement route is chosen by clients, there is a need to integrate and clarify design responsibilities (Latham, 1994). • Standardised contract terms can simplify and speed up procurement processes and improve the transparency of expectations (Construction Playbook, 2022). • Crucial factors which determine the successful delivery of a construction project: equitable financial arrangements and certainty of payment (Industrial Strategy, 2013). The research was designed to test how the sector is performing against these widely accepted recommendations. It began with a questionnaire conducted online during July and August 2022 that returned 269 responses with 100% quality rating on results. This was supplemented with 20 in-depth interviews with selected practitioners representing contractors operating at all tiers of the supply chain. Key findings It was identified that the vast majority of companies operating in the finishes and interiors sector are contracted on JCT contracts using single stage competitive tendering. Amendments to these contracts remain routine, with only 11% of main contractors indicating that their contracts were consistently unamended. Professor Green commented that such practices are only implemented to distort the risk apportionment within the “so-called” standard contracts. Another concerning trend is that in the perennial rush to commence work on site. Only 17% of specialists report that they consistently start on site on the basis of a formal signed contract. Another practice that raised an eyebrow was evidence that price remained the key and often seemingly only determining factor in contract awards, with only 2% of specialists believing that factors other than price were always considered in the awarding of contracts. Of particular note is the tendency towards retrospective price reduction, with 65% of specialists reporting that they were always/most of the time asked to “sharpen their pencil” again following tender submission (see Figure 1). Stuart isolated concerns in the time taken to award the tender following initial client contact (see Figure 2). 70% of specialists reported lead times of more than 6 weeks. In contrast the lead time from contract award to mobilisation was significantly shorter, typically between 1-3 weeks (see Figure 3). When looking at this in the context of design liability Stuart noted that only 22% of specialists are never expected to pick up specific responsibilities for design development yet only 1% routinely receive approval decisions within the specified contractual limits (see Figure 4). The presentation also indicated that payment practices are still a concern with only 6% of specialist subcontractors and 10% of main contractors getting paid in less than 30 days (see Figure 5). There was also a general consensus that practices were not getting any better with 21% of specialists concerned that things were actually getting worse. There was also little evidence that retention practices were improving with no main contractors and only 2% of specialists routinely getting retention money automatically released at the contractually agreed time (see Figure 6). Iain McIlwee, FIS Chief Executive NOTMAKING THE GRADE AND CONTRACTS A DISASTER ZONE