QUALITY
VS
PROCUREMENT AND THE MARKET
BY
JOHN WRIGHT BA Dipl Arch RIBA PPACArch
It is both a great honour and indeed a pleasure to be able to address you, my Estonian colleagues, today.
To briefly give you some of my background, I have been involved over many years in contributing to Government procurement policy in the UK in relation to the construction and allied services sector and I remain passionate about procurement as a subject because it can so severely effect the out-turn quality of architecture and construction in an emerging laissez-faire European free market with less and less regulation.
Even during the waning years of the last Conservative Government in the UK, there was a realisation that procurement on the basis of lowest price alone was resulting in fee dumping and consequential bankruptcies, poor quality architecture, poor environmental quality and poor construction quality resulting in high maintenance costs and an ever increasing level of litigation and the massive costs thereof. This was recognised by the UK Government as not being in the consumer’s best interests, many of whom being unable to achieve proper redress as they were unable to afford the high cost of litigation.
However, such rationale has been and is being threatened by the European Union Public Procurement Directive.
Regrettably, the phrase “economically most advantageous” as used in the Public Procurement Directive, is actually either deliberately or, perhaps charitably, even genuinely, misunderstood by the economic or law officers of many public authorities in the European Union Member States as meaning “cheapest price”. It could be said that such lack of clarity in the language of the Directive was intended by the European institutions in line with their ever emerging evangelical fundamentalist belief in a neo-liberal European free market in line with the economic theories of the recently deceased Milton Friedman and the Chicago school of economic rationalism.
Since the coming to power of the UK Labour Government in 1997 and the emergence of the report of their Construction Task Force, “Rethinking Construction” in 1998, the situation within construction procurement in the UK did begin to change for the better. The Government continually made it clear that they had a real “quality agenda” and that “best value” would emerge out of an integrated project process where the entire supply chain team was selected on a competitive quality basis. They made it equally clear that competitive selection on lowest price was not an option and that the only price to be considered was the whole lifetime or life cycle cost of the building and that outcomes must be measured against key performance indicators (KPIs), including Design Quality Indicators (DQIs) and that tools such as Value Management, Value Engineering, Risk Management and an “open book” transparent approach should be employed. I believe that this experience is useful for all the EU Member States.
At the earliest stage in the UK, the Construction Industry Council, representing all professional organisations in the construction industry, were instrumental in taking up the Government’s challenge to the industry by publishing guidance on Project Team Partnering (integrated supply chain team working), Selecting the Team (Quality Based Selection), Partnering Workshops and supporting the development of PPC2000, the first multi-party Partnering contract published by the Association of Consultant Architects, a founding member organisation of the Construction Industry Council.
This process has been strongly supported by architects, engineers and constructors in the UK and has resulted in high quality outcomes, delivering below budget, ahead of time and with greatly reduced defects.
The Japanese Government, the Federal Government in Germany, Belgium and most recently South Africa are now becoming interested in this approach because they see the real benefits.
However, there has been no intelligent encouragement from the UK Government in this direction when it comes to procurement through the Private Finance Initiative (PFI) or as you would say, PPP. Here, anything goes. This has resulted, often, in poor design, poor construction quality and poor value. Such outcomes have been heavily criticised by the Commission for Architecture and the Built Environment, an adjunct of the UK Government’s own Department of Culture. Estonia should take heed from this and do it better. The design for PPP projects should be taken out of the hands of the project financiers and should either be selected through an architectural design contest or through Quality Based Selection. The designer should then remain retained by the user. This will give design quality a chance.
Amanda Baillieu, a past editor of the RIBA Journal, once wrote, “….PFI rarely produces good design. The Royal Institute of British Architects (RIBA) began 2005 by looking at one of the offenders, the new University College Hospital in central London, a building that lacks either social or civic significance and is, frankly, hideous.”
PPP is already spreading like a cancer throughout the body of Europe, particularly in the old “Eastern Block” countries, without any thought of the high cost and time consumption of the tendering process, the attendant bureaucracy and the inflexibility in responding to inevitable change over time of this building stock, leased on 30 year contracts.
Politicians simply see this as a “quick fix” way of responding to a public sector “market”. It is in fact the philosophy of “live now, pay later”, and to hell with economic responsibility and the economic legacy that will be left to their heirs.
The real problem is the very concept of the ever emerging neo-liberal free market in Europe as it negatively affects the whole Construction Industry and the allied professions.
Blame for this must be laid at the door of the Member State’s competition authorities and the Competition Directorate of the European Commission in particular. They believe that there is just one “market” and that the “market” alone can regulate everything.
If they are allowed to pursue this deeply flawed theory then, at every level, the environment for the European citizen will decline qualitively. This can already be seen in the UK where privatised public services do less and less and do what they do badly. Of course, they have been selected on lowest price and, of course, they must and do make more and more profit for their shareholders. To hell with public service to the community!
The effects of privatisation of social housing and consequent under investment in many EU Member States is a catastrophe for our less privileged Citizens. Look what happened in many cities in France and the rioting of their Citizens over poor living conditions. Is this social justice?
There is, as all intelligent people know, not just one “market”, but many thousands of different ones each needing to be properly regulated in specific and particular ways. I say “properly regulated”. Not over regulated.
Intellectual, creative, innovative and artistic services such as architecture and, indeed, all other creative design services, cannot be treated as being in the same “market” as, for example, the procurement of street cleaning services. As far as I am aware, providers of street cleaning services do not have a strong deontological code that they must abide by in the same way that architects have to, and we architects have such codes in the greater general public interest.
The deontological codes of the European Liberal professions will be paramount in the context of the Directive on Services in the Internal Market and the Architects Council of Europe has pioneered such a pan European Deontological Code in this context.
Such Codes are now ever more essential because of this manic political environment where politicians believe that everything in the world will be better with less and less regulation. No account is taken by them of base human greed on the one hand and the needs of social justice on the other.
Codes must now impose much more. For example architects, in my opinion, must include an ethical commitment to consider Life Cycle Cost within the context of sustainability. We must lead. We cannot be seen to be in league with the philosophy of “build now, pay later”.
The ACE Code also counters the possibility, under the Qualifications Directive, of the potential of the “market” being open to unqualified professionals.
The absurd philosophy of no regulation was manifest in a speech by the European Commissioner for Internal Market and Services, Charlie McCreevy, where he said, “We should not attempt to control globalisation through regulation”.
In fact, Mr McCreevy, we need the very best regulation founded on quality and strong deontological principles, to control not only “globalisation” but every moment of our service to society. Society does not want deregulation.
The massive downward pressure on fees because of price only tendering is pushing some European Architects to contract out their own work to low price sweat shops in India, China and Eastern Europe with all the consequences on training, employment and tax systems. To do this is not permitted in the US NCARB Code and Estonian Architects and indeed all European Architects should prohibit it in their codes also. Once again I say the place of the deontological code is becoming, and will become paramount.
The great economist, Professor J K Galbraith is, unfortunately, now no longer with us just when we need him the most. His economic wisdom is now more essential than ever before, not only in the European Union but also in the rest of the world. He warned, prophetically, of the dangers of the deregulated market and of corporate greed, but politicians, even the Social Democrat and Socialist ones within the EU, have failed to take heed and spinelessly follow Friedman’s economic neo-liberalism.
We can all see that the poorly drafted World Trade Organisation (WTO) Domestic Regulation for Accountancy Services based on the most minimalist regulation, did not prevent the global accountancy firm, Arthur Anderson, from being involved in alleged fraud and corruption as part of the Enron catastrophe in the USA.
It is paramount, therefore, that the European architectural profession exerts pressure on their politicians and the European political institutions to press hard in the WTO for Domestic Regulation for Architecture that embodies a strong deontological code.
As my ACE colleagues know, I am not a great fan of American society or of their politics. However, the Americans sometimes do get things right and do them well, but the European political institutions rarely learn from successful policies in the USA, such as Federal Law P.L. 92-582 commonly known as the “Brooks Act”.
For over fifty years in the USA, starting with the US Army, public procurement of architectural and engineering services has been based successfully on Quality Based Selection (QBS). In their system, only when the best scored consultant (or consultancy firm) has been competitively selected, is price then negotiated. This system of procurement has produced high quality, low cost solutions resulting in very low levels of litigation.
Other than through two stage, remunerated, architectural design contests, which most architects would prefer in the EU, there is clear evidence that QBS is the best alternative method of procurement. QBS is supported unanimously by the world organisation of architects, the UIA, and by the world organisation of engineers, FIDIC. The European Commission have confirmed that an intelligent “interpretation” of the Public Procurement Directive allows for competitive Quality Based Selection. Architects need to get this message across to their public sector clients.
Comparative research carried out in the USA between Maryland, who procure on a “two envelope” combination of lowest price and technical competence and Florida who procure solely on QBS, shows that QBS is quicker and more cost effective with better outcomes.
It is so frustrating that the European political institutions seem to be simply unwilling to lower their fundamentalist neo liberal economic blinkers from their eyes and learn from the experience of the USA, the supposed “land of free enterprise”. QBS is, after all, operated in the USA as a truly competitive process.
For the creative intellectual design professions of a truly innovative Europe, the European political institutions, by clear language in the Procurement Directive when it is reviewed, must move towards the proper resourcing of both design and construction based on QBS and this must apply to the entire supply chain. The only price that is of any relevance must be the most favourable whole life or life cycle cost of a building or structure. Only when this becomes the normal regime can we produce the quality outcomes that the European citizen deserves.
The free market and selection on lowest price sometimes results in the bankruptcy of not only architects but of others with the outcome that the architect is the only one left to pick up a financial claim which ends up against his indemnity insurance. This increases the cost of insurance for all architects.
That is why the Architects Council of Europe (ACE), by unanimous vote of the General Assembly of 16th November 2005, adopted a resolution against price (fee) dumping within the Internal Market of the European Union.
It is now the belief of ACE that there is no longer any point in arguing with the European political institutions on purely technical grounds as has been the case until recently. The quality of the built environment, Kyoto, global warming and consequential climate change, health and safety, security against criminality, security against fire and, now, even protection against terrorism, are all far too important issues for the European citizen for architectural services to be based on lowest price and inevitable inadequate resources.