Take Your Partners

Partnering has revolutionised the way that construction projects are managed, with particular success in the public sector. But, says Brian Oxley*, there are cracks appearing... Local government has made significant advances in procuring and delivering construction projects since the principles set out in Sir John Egan's landmark report, 'Rethinking Construction', have been successfully employed in hundreds of projects throughout Britain.

Partnering has become a way of life for many local authorities and their contractors, bringing with it an extraordinary harmony between client and supplier that would have brought much hilarity had it been suggested just a decade earlier. With the core principle of mutual trust, Partnering has literally changed the face of construction in this country.

Sash UK Ltd, as one of the UK's leading manufacturers and installers of windows and doors, has a long history of supply and fit in the social housing sector that precedes Egan by a couple of decades. It has operated successfully under the old way but was quick to realise the advantages offered by Partnering and thus, became an early pioneer of the concept, its first project carried out with Chester District Housing Trust in 2000. An impressive list of clients now includes many Housing Associations, Local Authorities and major construction companies forming a long list of who's who in the housing market. The company has played its own part in pioneering the concept, including a highly successful series of Partnering seminars in 2004 hosted by Sir Michael Latham that delivered the concept to an audience many of whom travelled long distances to attend.

As Commercial Director Brian Oxley has been instrumental in driving Sash UK sales to the social housing sector to £15 million annually, more than half of the company’s turnover. He is a staunch supporter of Partnering: "Even in contracts that are not actually formally based upon Partnering we have adopted the procedures and principles as our model. Overall Partnering has been very successful and we fully adopt it whenever we can as it brings efficiencies throughout the process for all sides. In full Partnering agreements there is real balance and you work together with your client as true partners. It has ensured that both sides understand just what the other wants – but perhaps more importantly needs - from the agreement, and the longer term nature of the agreement ensures that we get a good margin and that we and our clients can plan further ahead with confidence. It also allows us to develop far better relationships with our client whilst clear KPIs [Key Performance Indicators] ensure that complacency never creeps in. The systems work very well indeed."

However, Oxley says that cracks are appearing in the system as a result of local authority officers coming under increasing pressure to make further cuts, and suppliers who are wiling to resort to slashing prices to gain turnover at any cost: "Partnering relies on mutual trust and confidence but just as slashing the price on anything is the easiest way to sell, then so it is also the easiest way to buy. For the hard pressed buyer to say 'Hey, just look how much I saved on this job' in the short term he or she will look good. But when the contractor fails to deliver during an eighteen month contract to re-fit thousands of houses, that initial price quickly starts to look very poor value. There are plenty of examples around of this happening despite the fact that in recent years so many highly successful Partnering projects have proved their value." Even against a number of recent high profile contract failures, many local authority and housing association specifiers are drifting back to what amounts to competitive tendering, even if, says Oxley, the specifier believes they are acting true to the principles of Partnering. "Margins have reduced dramatically," he says. "This was something that Partnering was supposed to address by setting an acceptable margin in exchange for the additional commitment and planning by suppliers. Achieving profit for the contractor and savings for the client is acceptable to most RSLs [Registered Social Landlords] under Partnering. However the most a contractor could expect with direct tendering is a margin in the region of 5% with many desperate contractors even going in below cost, hoping to get something back under penalties. We are creeping back to those days and it is not a welcome trend."

Oxley believes that the British instinct for 'Price Price Price' is as much to blame for the trend back towards direct tendering as budgetary pressures; buyers simply enjoy the deal of achieving the lowest price: "What many specifiers forget is that the contract price is never the final price because the cheapest supplier/contractor will always try to claw something back to build on the inadequate margin. It is a very worrying trend."

In true Yorkshire style (Sash UK is located near Barnsley) Oxley believes firmly that "you get nowt for nowt" and something must always give: "There is a situation now in which a sort of 'hybrid' Partnering system has evolved with some local authorities and housing association specifiers. The benefits of detailed contract documentation, forward planning, strict KPIs and reporting are all required by the specifier, but at a direct tendering level, lowest price wins.

"We can compete against this when we want to because of our experience and efficiency. Our systems are well tried, we take ownership of a project and our factory is one of the most advanced in Britain. We get it right, first time, every time. But for less well-founded suppliers, every problem that occurs on a contract costs money and this is when the problems really creep in and contracts fail." Oxley's warning is stark: "Partnering in its truest form has been proven to work because it benefits all involved – the landlord, the contractor and most importantly, the tenants. It has been proven time and again that accepting the lowest price for the sake of it will inevitably bring additional and unwelcome costs and disruption. The system is in danger of being corrupted and no-one, surely, wants to go back to the cut-throat days of direct tendering – no-one benefits and, with the market more competitive than ever it's a recipe for disaster. Well run Partnering works for everyone – stay with it!"

*Brian Oxley is Commercial Director of Sash UK Ltd, responsible for Social Housing and New Build sectors for the company. He has been with Sash UK for more than 20 years, having previously worked for Wakefield Metropolitan District Council as a surveying and contracts manager.