The way that the construction industry builds major infrastructure is broken, says Atkins CEO Richard Robinson. Below he outlines his ideas on how to fix it.
Covid-19 and advances in digital technology have come together to create a once-in-a-lifetime opportunity for construction to shift dramatically closer to outcome-based delivery models. “The transactional model for delivering major infrastructure projects and programmes is broken. It prevents efficient delivery, prohibits innovation and therefore fails to provide the high-performing infrastructure networks that businesses and the public require,” says the Project 13 industry improvement community of civil engineers.
These are strong words, yet important ones. The sheer scale of the projects we realise – and the way we ensure their value to people and society – makes infrastructure an extremely rewarding, yet increasingly complex place to work. It is often difficult for our public and private sector clients to know, properly articulate, or even measure, the values they want to manifest through their projects. And at times, our industry has hidden behind that to maintain the status quo and evade change. But those times are now over because we have a once in a lifetime opportunity to drive transformative change, the benefits of which will be felt for generations to come.
A new mandate
In September last year, the UK government announced new measures to deliver value to society through public procurement. Any business seeking to win government contracts will now be tested on how well it also delivers on social value priorities. These could range from supporting Covid-19 recovery and helping local communities, to tackling economic inequality and fighting climate change.
These efforts must be applauded and embraced, but if we as an industry are to truly deliver on them, then we must embrace an outcome-based service model. One that promotes a shared responsibility for achieving longer-term, specific results that runs right the way through our projects and includes the risks, as well as the rewards.
This thinking isn’t new, but there is a greater willingness than ever before to experiment with new ways of working. Furthermore, the Covid-19 crisis has proved to the public and private sector that systemic change is possible, at a pace and at a scale we’ve never before seen. Yes, necessity is the mother of invention. And, of course, there is now an additional, urgent impetus to drive economic recovery, with UK government debt hitting £2.1 trillion after record borrowing in response to the series of national lockdowns. In 2021, it has become more of a risk not to try and do things differently.
Technology as a facilitator
Added to this, we have also made remarkable strides with digital technology that, applied to our industry, are enabling next-generation business information modelling and project management. Digital twins are increasingly helping us to model physical assets virtually, so that we can predict potential responses to change, and probable future states, through the analysis of real-time data.
Being able to simulate these physical and operational characteristics of an asset is a game changer because it allows us to predict outcomes more accurately from the start. And it’s not just our predictive capabilities that are starting to mature. Our measurement and monitoring abilities have also progressed, thanks to the data-driven, analytics-enabled, systems-integrated approach of modern construction programme management.
"We have a once-in-a-lifetime opportunity to drive transformative change, the benefits of which will be felt for generations to come."
Combined, this means we can more precisely predict and apportion risk during the procurement process, while also tracking and reporting on numerous environmental, social and governance (ESG) outcomes – both during and after construction – in ways that have never before been possible. These outcomes can be selected to measure project performance in a whole range of areas, from social activism, health and wellbeing to inequality and carbon zero or carbon negative environmental impact.
In short, bids are more likely to meet the new government criteria and our ability to tangibly measure if we’re on track to achieve our shared objectives improves, even while we’re designing and building infrastructure in real-time.
To further this aim, Atkins has formed a partnership with Artificial Intelligence company nPlan, to explore new data-driven contracting models for major project delivery. The partnership is working to identify and assess a new approach to contracting that focuses on collaboration and changes the way risk is measured, shared and managed across major infrastructure programmes. Our team is working alongside asset owners to analyse current contracting models before developing and piloting data and technology-driven alternatives over the next year.
However, for all this talk of adoption of new digital technologies, the fact is that we still work in a low margin sector that discourages risk taking. Because we’re designing and building critical national infrastructure, often funded by the public purse, there’s a need for margins to be kept low – with the result being that current procurement models don’t allow much wiggle room for innovation and the element of risk that brings.
That’s why going forward, contracts need to focus on the outcomes, not the outputs and reward the value that we give to our clients, not the effort taken to achieve it. Contracts also are still very much geared around the labour theory of pricing, rather than value-based pricing, which is why we need to incentivise taking a new type of risk to deliver more.
It’s only natural that as we embrace more digital ways of working, we bring an element of short-term risk and uncertainty to delivery teams. After all, until digital is adopted in the real world, it is all hypothetical value. So, in order for contractors and supply chains to want to make it real, they need to be incentivised to take that risk, with the aim of delivering a better outcome for the client.
"Going forward, contracts need to focus on the outcomes, not the outputs and reward the value that we give to our clients, not the effort taken to achieve it. We need to incentivise taking a new type of risk to deliver more."
While you could argue that market forces will drive innovation regardless of how contracts are written up, I don’t subscribe to this. An appetite to innovate isn’t enough in a sector that bleeds away margin so readily. That’s why we need a step change in how work is procured, as well as contracts that recognise – and reward – innovation, to bring added value and better outcomes.
Nobody said it would be easy
This moment in time, and the opportunities it brings with it, are as exciting as anything I’ve experienced in my career so far, but there is still a long way to go. Our clients, for example, may not know what outcomes they want, so it’s our responsibility to advise and guide them, to work this out together. We must also work to see clearly and resolve any conflict between the values a project – and a company – aspires to, and the established hierarchy of priorities they are bound by in reality, to ensure that outcomes are truly achievable.
What we are talking about here is a huge cultural shift in how our industry approaches risk transfer, fair return, and shared responsibilities. It’s not going to be easy and it’s going to take time. But a good place to start is to collaborate closely with our partners in procurement, to help them move away from over indexing on costs alone and towards more of a product mindset. Which is to say to adopt a more holistic approach to assessing value – one that prioritises continuous evolution, customer satisfaction and data-driven decisions, based on outcome and risk modelling.
Clearly, integrity and transparency are essential here. We can no longer afford to be constrained by a culture of fear or allow ourselves to be prevented from attempting brave new things because they might not work out. Instead, we must make the most of the new tools we have, to better analyse risk, determine real value, and commit to new ways of working together.
It’s only natural for people to have differing views on uncertainty. Change can be seen as a threat, yet it also holds immense opportunity. The time has come for us to embrace disruption, as so many other industries have done already or are doing right now. It’s the only way we’re going to be able to build the society we need for the future and the one that people deserve.
Richard Robinson is the CEO, UK and Europe at Atkins.