Project 13: The ultimate lifecycle driven collaborative procurement model?
For many years now, various stakeholders of the construction industry and the built environment have been raising concerns that the current “go to” procurement models are broken. They say that these structures are resulting in projects being delivered late, over-budget and with degraded quality.
Several studies conducted also point to poor results of the current stable of widely used procurement models. Who can forget the McKinsey study done on megaprojects indicating that 98 per cent of megaprojects suffer cost overruns of more than 30 per cent, and that 77 per cent of these projects are at least 40 per cent late?
In addition to studies and research reports, you can look to the insurance sector to get a truly objective report card for the construction industry’s effectiveness. Over the past four years within the insurance sector, the insured losses on construction projects have continued to grow. As a result, the insurance sector has been aggressively increasing rates. Rates for property and casualty covers and professional liability covers have been rising at a rate of 20 per cent, or more, per year for the past three years.
Clearly, there are major issues with current procurement models, and it seems there is great opportunity for improvement if we can find the ideal stakeholder governance model and the ideal risk allocations amongst stakeholders within that model.
Add to that the growth of the Environmental, Social and Governance (ESG) movement, and there seems to be a window of opportunity for owners, design firms and contractors to truly collaborate around finding the ideal build and operate governance model to create a built environment for the future.
WHERE ARE THESE BUILT-ENVIRONMENT STAKEHOLDERS HEADING?
There is definitely a movement towards more collaboration within the procurement model, along with earlier involvement of all relevant stakeholders. It stands to reason that if you have all stakeholders involved at the birth of the built asset, and they are collaborating (thus communicating), you should have better results.
At a global level, more and more regions are experimenting with procurement models that are further up that green arrow: Progressive Design-Build, Design-Assist, Integrated Project Delivery (IPD) and Alliance procurement models.
In the European market, driven out of the U.K., there are experiments with what could be the ultimate lifecycle driven procurement model: Project 13. Several projects are being executed using this governance framework, and the overall owner community is paying close attention to the results of these projects. This Project 13 effort has even garnered attention from the World Economic Forum via their Collaborative Infrastructure Delivery Initiative.
WHAT IS PROJECT 13?
The Project 13 model takes an enterprise approach in that it brings together owners, design firms, contractors, advisors and suppliers. This group is placed into a governance model that provides an environment where they can work in a more integrated approach and more collaboratively. Further, it is a long-term relationship in that it incentivizes all stakeholders to deliver better post construction outcomes. It is a model that is endeavoring to influence the long-run operations and impacts of the built asset.
Project 13 has five pillars:
- Governance – Owners need to establish rules, processes and practices to guide their interactions with suppliers and their decision makers.
- Organization – Owners must engage the right suppliers, at the right time, and integrate them into the team.
- Integration – Owners must develop the culture, practices and systems appropriate to the program being delivered.
- Capable Owner – Owners must have the capability to define outcomes, articulate technical requirements, manage stakeholders, put infrastructure into operations, and to work collaboratively with the whole team.
- Digital Transformation – All stakeholders need to go beyond embracing technology. They must devise new business models that change the way they operate.
Whereas procurement models that encourage more collaboration, like IPD and Alliance contracting, are primarily focused on the construction phase of the built asset, Project 13 is looking to influence the whole lifecycle of the asset, ideally balancing performance, cost and risk to deliver the desired outcomes of the owner.
This model has great potential and, given the convergence of trends like ESG that bring more long-term thinking into the mix, as well as the digital transformation trend, it does appear to be a great time for such a model to take flight.
We are at a moment in time where it appears that built-environment stakeholders could move from the traditional total cost of construction procurement model and into a more thoughtful total cost of ownership model. Pay attention to this migration to more collaborative lifecycle procurement models as they appear to have perfect timing.
David Bowcott is Global Director – Growth, Innovation & Insight, Global Construction and Infrastructure Group at Aon Risk Solutions. Please send comments to firstname.lastname@example.org.