UK construction companies are wasting about £32 million every year because they are tackling supplier pre-qualification and audits ‘in silos’ – but they are still nervous about working collaboratively on the task, new research shows.
In a survey, 80% of UK construction companies said their domestic and international ‘arms’ require the same standards for suppliers in terms of health and safety, quality, sustainability, ethics and environmental issues.
Yet only a third (34%) of construction firms said they work with other businesses in the same industry to manage supplier risk. Two-thirds (63%) do not collaborate with other businesses to share the administrative burden of carrying out due diligence such as prequalification, verification and audits.
The research follows the UK Government identifying, in Construction 2025: Industrial Strategy: government and industry in partnership, that a lack of collaboration and limited knowledge sharing was a key weakness which could stall growth in the UK sector.
The survey was commissioned by Achilles which operates independent pre-qualification and accreditation programmes across 11 sectors – including construction. It was carried out by independent research company IFF, which conducted telephone interviews with 35 supply chain professionals from the UK construction firms with no links to Achilles and more than 250 employees.
Steve Marshall is Community Manager of Achilles BuildingConfidence the pre-qualification scheme which allows 19 buyers and almost 2,000 suppliers share business critical information. He said: “In the UK alone, construction firms are spending about £65.26 million each year managing information about their suppliers – half of which is being wasted through duplication and failure to work collaboratively.
“UK construction supply chains are becoming increasingly complex and according to UK Government figures £124 billion is spent each year on the supply chain. Smart construction companies will ensure they are getting the most out of any money spent or investment made with their suppliers.
“We estimate that it is up to 10 times more efficient for construction firms to agree common requirements of suppliers in business critical areas such as health and safety, ethics and compliance and then share the burden of collecting, checking and auditing information provided by suppliers. By making information available on a central portal, suppliers need only provide their information once to be eligible to work for all the buyers in the group.”
The common standards required by buyers in BuildingConfidence are set by the steering group which includes a representative from each of the 19 buyer members, including industry heavyweights such as Skanska, Balfour Beatty, Lend Lease, Mace and Laing O’Rourke.
Dale Turner, chairman of the BuildingConfidence steering group and director of procurement and supply chain at Skanska said: “The construction industry is highly competitive and often there is a reluctance to collaborate and share information with their peers. If we really are going to meet the Construction 2025 strategy targets this needs to change. The starting point is how we accredit our supply chain, there is little or no commercial advantage to be gained through collecting mandatory compliance and regulatory information.
“The benefits far outweigh any potential downsides. Since joining a collaborative pre-qualification and accreditation community, about eight years ago, Skanska has attained greater visibility and transparency in potential risks associated with maintaining an ethical and responsible supply chain. It provides a common set of pre-qualification and auditing that our supply chain complete once a year, shared across other likeminded organisations.
“Working collaboratively to pre-qualify our supply chain has reduced the amount of time required to assess the capabilities of our suppliers and sub-contractors. This has allowed our procurement community to focus most of their effort on the formal tendering process and procuring to best value. As the construction industry moves into a period of significant growth there is also more time available to spend on advanced supply chain management, developing long-term relationships, sharing risk and opportunity, and unlocking innovation to provide the best solutions for our clients.”