Recently a colleague of mine asked me to take part in a “Procuring for Value” presentation.
As it was a little while away I agreed to do it. I was to share the stage with Ann Bentley who sits on the board of the Construction Leadership Council and who leads the Procuring for Value stream. Clearly she would know her stuff on Value and there was a risk I would be exposed…
As it got closer to the conference I thought I should have a look into the subject. This wasn’t an event where you could just dust off an old presentation.
When I looked at the topic I realised how little I knew about value! Over the years I have heard the word used many times in construction; added value, best value, value engineering etc. I have always been sceptical of these terms as I have never been convinced anybody really understands them in their truest sense.
It soon became apparent I needed to know my subject so I could talk in an informed way. I decided to research Value and how it impacted on the construction industry.
I decided that I wouldn’t claim to be an expert on value (which clearly wasn't) rather I would share my journey learning about value.
I always start with the dictionary definition:
Value: monetary or material worth, as a commerce of trade.
Then I needed to understand the meaning of worth.
I then needed to understand worth:
Worth: good or important enough to justify (what is specified)
What I noticed there was no mention of the word cost!
In relation to cost and value I thought I would start with cornflakes; you might say a strange place to start. Is a £2.59 box of Kellogg’s cornflakes better than Lidl own brand at 72p
Is a £4.50 Nescafé instant coffee better value than the £1.89 jar from Aldi.
One is definitely a lower cost than the other but not necessarily better value. If you like Kellogg’s
Cornflakes and have the £2.59 this is the best value to you. If you only have 72p, Lidl is the best value.
I then considered Costa Coffee drive through. I have a coffee machine in the house but still use the drive through. A coffee at home is cheaper but to save me time to allow me to do something else makes Costa better value. Therefore time also seems to impact in value.
Then I started to think about buildings…
Was the Millennium Dome good value, what about the Scottish Parliament or Portcullis House. All infamous buildings for their cost overruns.
The Millennium Dome cost £789m to build for a 1 year life span. This was a huge cost for a single year. On this basis it is difficult to justify value. However nearly 20 years later it is one of the best music venues in the world. I would argue it is becoming better value every year.
What about the Scottish Parliament. In 1197 it had a budget of between £10 and 40m. The final figure was £456m. When it opened it was seen as a huge waste of money. However this building now represents Scotland around the globe and will do so for decades to come. I wonder how many Scottish people still believe it’s a rate of money and would have been happy to spend £10m to house their devolved parliament.
When the Houses of Parliament was built it had a budget of £750,000. It eventually cost £2m. There was public outcry at the time. How many today would say the Houses of Parliament was a waste of money. Not only is this a global iconic building and the seat of government but it attracts millions of tourists every year bringing millions of pounds into the contrary. Is this added value?
Finally Portcullis House. The roof is infamous in that the story goes this at would have been cheaper to clad the roof with Rolls Royce’s. Firstly would the cars still be there in 100 years time and would the roof be leaking?
Also how would we feel if there was a low cost building next door to Big Ben.
What about more mainstream buildings such as schools or housing?
Take clasp schools for example. These buildings were built to address a baby boom and a surge in pupil numbers in the 1960s. Clasp was a lightweight system build, way ahead of its time.
Today these building are often criticized and unloved. They are single glazed and poorly insulated. However I would argue they were good value.
They had a design-life of 15 years intended to address a specific need of the time. However 60 years later later they are still standing and being used across the country.
Without investment the buildings go beyond value to being a liability suggesting a building has a maximum value which then diminishes without ongoing investment. Some of these schools have been modernized and improved stretching their value even further.
Taking housing as another example, Homes for Hero’s were built in large numbers for soldiers returning from the Second World War. The houses had to be built quickly so they could provided much needed housing.
Again these were provided to address a specific short term need. In solving the problem they proved to deliver great value. Today many are still standing and those which have been well maintained continue to deliver good value to their owners.
Value seems to be defined by time, capital cost and ongoing investment. Other aspects to consider include social and economic benefit
There are examples for other sectors which we can reference. For example, cars are often bought on a fully maintained lease or a PCP. This removes the capital payment and puts much of the maintenance responsibility onto the manufacturer.
Could we develop a similar model for building? I believe we did with PFI. The principal of the government reducing capital spend by agreeing an annual revenue payment could have delivered value however the contracts were poorly executed which gave the model a bad reputation. I suspect that on years to come, many of these deals will be considered best value.
From a housing perspective Space, as part of an R and D project delivered spacehus. This deleivered housing with with an all inclusive long term rental model. As the developer we found, for example, that we could justify and recover the capital investment in additions such as photovoltaics over an extended period of time.
So after my exploration and research into value what had I learnt:
So what does the future hold:
As we continue to progress into our digital future data will define value objectively. We can gather feedback over time through sensors which are continuously monitoring information, providing more detailed analysis.
Currently post occupancy evaluation is usually carried out on buildings after 12 months. In the future extended feedback will help define value as a building matures. For example we will be able to asses the investment in flexibility or investment in better quality materials over a number of years. The Houses of Parliament is a great example of how value has been demonstrated way beyond any construction project.
After my research I presented my finding to the audience. I don’t think I solved the question but I certainly gave everyone something to think about. Not least how can Lidl sell cornflakes for 72p.
Powered by Froala Editor