How can collaborative procurement benefit construction project delivery?

Edd Burton (pictured above-left) is Aecom's head of advisory services for infrastructure and Tom Douglas (above-right) is partner at Eversheds Sutherland

To say the delivery of construction projects has become more complex in recent years is somewhat of an understatement. The conflict in Ukraine, Brexit and the Covid pandemic have all caused disruption to labour markets and supply chains, contributing to soaring inflation. It's therefore 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, their supply chain and other stakeholders to support the delivery of project outcomes, including important environmental, social and governance targets.

In the current climate, we are increasingly seeing clients looking for support on CP models, as they strive for solutions to successfully deliver their required outcomes.

Put simply, because it can deliver significant benefits for a project or programme of works. At its heart, CP aligns the outputs and incentives for the parties involved.

Clients and supply chains may lack an understanding of each other's businesses and their drivers for success; CP seeks to improve the trust and understanding between the parties, so they drive in the same direction to achieve mutually beneficial outcomes.

Some of the more significant benefits of CP models include:

Many in the industry will have heard of CP but won't be sure what it means or whether it's right for their projects. It can be a complex area, but for most projects even a light-touch approach to collaboration delivers benefits.

At the most basic level are models such as framework agreements and two-stage tendering/early supply chain involvement. At the other end of the scale are alliancing and enterprise arrangements, often used by transportation and utilities companies with longer-term capital programmes that allow the benefits of such arrangements to aggregate. In the middle sit hybrid and partnering models.

Determining which model is right for you will depend on a range of factors, including the scope and scale of the project/programme, the parties’ experience in delivering under collaborative models, and the desired outcomes.

To achieve the biggest benefits you will need a project/programme of relative complexity and sufficient scale to justify the upfront investment. An organisation may need to allocate a greater level of resource to collaboratively procured projects than they are used to.

"Trust is required throughout the supply chain if aims are to be achieved and expected behaviours demonstrated"

A clear vision or mission statement is required, which the project team can use as a focal point. Setting the right behaviours and mindset at the outset is crucial to success.

It is important to be comfortable with integrating the project team and empowering the supply chain to find solutions. Empowerment can be supported by joint project/programme boards with representation from both client and supply chain partners, which helps create the right culture for collaboration and allows team members to adopt a ‘one team’ mentality, leading to quicker, more joined-up decision-making.

CP relies on all parties agreeing on measurable outcomes and moving away from assessing supplier performance based on inputs. Trust is required throughout the supply chain if aims are to be achieved and expected behaviours demonstrated; in return, suppliers will expect to make a fair profit and maintain cashflow.

A contract that supports and facilitates collaboration is required. This would need to include equitable risk allocation/sharing, and include a commercial model that balances supplier risk and reward. There are now a number of standard form contracts that support CP across the range of collaboration models. In all cases, proper support in developing and drafting your contract strategy and documents is crucial.

In conclusion, collaboration may bring benefits to any project or programme of works. CP models are a way to ensure that the industry manages headwinds and has a long-term, sustainable future in which all parties thrive.