Ron Lang of the Construction Innovation Hub says the sector’s recovery from the Covid-19 pandemic must herald a permanent shift in construction’s approach to value
The approach to value is one of those curiously ambiguous subjects which can often prove a rather contentious one to explore. I am, however, going to attempt to describe the journey that I believe we as a construction sector need to take towards a deeper understanding of value; a journey that could have a transformative impact not only for our sector but for society at large.
What is value?
If you were to bring together a group of people and ask them to define Value, you would likely witness a sequence of confidently announced responses, followed by a long, reflective silence (and perhaps even a few raised eyebrows). Why, though, is such a seemingly self-explanatory concept so frustratingly difficult to define?
Let’s firstly consider the role of the pound in our assessment of value. For many of us, the only practical way to consider value is to consider what can be achieved or gained for a given sum of money – or “bang for buck” if you like. Even if we accept the principle that everything comes back to the budget, there are, of course, points of view on “value for money”.
For example, should all categories of value be converted back to pounds or should a points-based system be applied? The former is probably easier for many to understand and is particularly useful where we need to consider trade-offs between one type of value and another. However, putting a monetary value against many categories of value is contentious.
Then there is the question of whether a “value for money” type assessment considers the budget to be fixed or flexible. For example, is the aim to maximise the value that can be generated for a given budget or to maximise value per pound? The latter approach to value assumes some flexibility in the capital cost where additional value can be demonstrated. This is particularly useful where the whole life of the asset is considered. Of course, for the purist, the idea that value should be viewed through a financial lens at all is simply abhorrent. This first argument is not easily settled but is perhaps best resolved by accepting that the “right” approach to value is likely to be dictated by the context in which value is being considered.
What do we value?
Let’s now dwell for a moment on what we include in the value equation. The optimist in me believes that this is primarily an issue of bandwidth. If we accept that the categories of value we measure are vast and varied, you could appreciate that any one person or organisation’s bandwidth is likely to be limited to those categories they can relate to and which they have a sufficient understanding of.
As private citizens, we increasingly face this question in our day-to-day lives. Take the weekly grocery shop, for instance: does your value judgement around the selection of groceries end at ensuring the products in your trolley are of high quality, or does it extend to ensuring the products are free of disposable packaging? Would you even go so far as to extend your definition of value to include where and how those products were sourced?
If extending our understanding of value is a matter of bandwidth, I believe the key to progress is through collaboration. We must transcend our personal and organisational lenses to form a collective and unblinkered view of value.
This is not to suggest we cannot prioritise those elements of value that matter most to us and our clients, simply that we must ensure we are doing so in a consistent, transparent and informed manner, acknowledging those bigger issues that require our collective attention (carbon, economic rebalancing, skills to name just a few).
Sector recovery: Embedding new value-based decision-making
As the lockdown lifts and Britain starts building again, there will be a natural temptation to return to “business as usual” and, with it, a perhaps even narrower, cost-centred view of value. I think we all know, deep down, that this would be a serious mistake. We must see our recovery from the Covid-19 crisis as a once-in-a-lifetime opportunity to fundamentally change how we do things in construction. As such, the development of a consistent approach to value-based decision-making has never been more critical.
The Construction Innovation Hub, of which I’m privileged to be a part, is a government-backed transformation programme that was launched in 2018. Earlier this year, as we began to shift into a more mature phase, we restructured our programme around four core themes: Value, Assurance, Digital and Manufacturing. Each of these themes is led by an impact director and, in January, I was delighted to take up the role of Impact Director for Value, an area of both professional and personal interest to me.
Working alongside some of the leading minds of our industry, I have the honour of helping to shape the development of a new Value Framework which sets out to tackle, head-on, the challenges I have set out above. While I’m under no illusions about the scale of the task, I’ve no doubt whatsoever that it will be worth the reward.
What’s reassuring, of course, is that we are not starting with a blank slate. Some solid foundations have already been laid, which in turn shows us that the appetite for change is there. In autumn of last year, the Hub announced that we would be partnering with the Construction Leadership Council (CLC) to develop the “industry-wide definition of value” called for in the Construction Sector Deal. Led by Ann Bentley of Rider Levett Bucknall, the CLC’s Procuring for Value working group has made great progress over the last few years in building the case for value-based procurement over the predominant lowest-cost-wins practice.
In fact, I would argue this case has now become a movement, and one I, along with all my colleagues in the Hub, am extremely proud to be a part of. While the original title of Procuring for Value suggests a focus on the procurement phase, this work will yield a common approach to value – underpinned by Forum for the Future’s five-capitals model – that can be used to support decision-making throughout the asset lifecycle.
To ensure this work delivers maximum impact, however, we must ensure it is as accessible as possible. To this end, we’ve begun working on a new web-based tool, which will help clients to articulate their value expectations, set performance criteria and compare scheme options from the outset and in a way that can be designed, procured, measured and optimised through life. As with everything else in the Construction Innovation Hub, we are determined to make transformation as seamless as possible for clients and for industry.
It probably goes without saying that there is little point in helping clients to clearly articulate their value expectations if we do not equally help them to select or develop delivery models and commercial strategies that are focused on realising that value. Moreover, if clients are to start to place different demands on the supply chain, we must ensure they are equally ready to respond. In the coming weeks, we will be announcing further work packages aimed at tackling these elements of our Value Framework which will see us working closely with clients and industry to drive genuine change.
The weeks and months ahead will be crucial as we collaborate to build a new consensus around value. Just as construction firms played a critical role in the national response to Covid-19 by creating life-saving Nightingale Hospitals, the sector will have a key role in laying the foundations – quite literally – of our economic recovery and return to prosperity. We must resist the temptation to return to the ways of old and instead forge a new modus operandi for our sector; one built upon a common understanding of value and a resolute belief in what it stands for.
Ron Lang is Impact Director for Value at the Construction Innovation Hub, a £72m programme backed by UK Research & Innovation. The Hub’s mission is to be a catalyst for transforming the UK construction sector through manufacturing technologies and digital ways of working that are trusted and secure.
Impact director for value