Construction Industry Reform Requires a Shift Beyond Lowest Price

The construction industry cannot improve quality, productivity and safety while procurement continues to focus mainly on the lowest price. Industry leaders say current commercial models often push risk down the supply chain and encourage short-term decisions.

The issue was discussed in the latest episode of Behind the Built Environment. David Frise, Chief Executive of BESA, spoke with Paul Beeston, Partner and Head of Industry and Service Insight at RLB.

Rethinking Construction Procurement

Beeston argues that the construction industry’s commercial model is not fundamentally broken. However, decades-old procurement practices are struggling to meet today’s market demands.

Clients now expect stronger performance from their supply chains. At the same time, construction businesses face greater risk, cost pressure and market uncertainty.

Better governance could help address these challenges. In addition, smarter procurement and fairer risk allocation could strengthen businesses and improve project outcomes.

Moving Beyond Lowest-Price Bids

One major concern is the continued use of lowest-price procurement. RLB research shows that 40% of procurement activity still relies solely on price.

According to Beeston, this approach can encourage the wrong behaviours from the beginning. Instead, clients should consider whole-life value, building performance and long-term project outcomes.

Earlier engagement with contractors and specialist subcontractors could also improve decision-making. Furthermore, stronger collaboration could help identify risks before they become costly problems.

Improving Quality and Accountability

The Building Safety Act is also changing attitudes toward quality, competence and accountability. As a result, the industry is placing greater emphasis on delivering work correctly the first time.

The discussion also examines the future of retention payments. Beeston supports abolishing retention but warns that replacing them with bonds could create unintended consequences.

Meanwhile, measuring construction productivity remains a challenge. Industry leaders must consider quality, social value and workforce outcomes alongside traditional productivity measures.

Technology Could Support Reform

Data and artificial intelligence could help reshape construction over the next five years. In addition, stronger partnerships and new commercial models could create more effective ways of delivering projects.

Ultimately, the discussion calls for a broader definition of value. Construction stakeholders need to look beyond initial capital cost and consider the long-term results they are buying.

By improving governance, procurement and risk allocation, the industry could create a stronger commercial environment. This approach would benefit clients, businesses, supply chains and society as a whole.