Wisdom of the Crowds

June 15, 2015

 

Human beings are inherently social creatures, indeed it was this trait which fueled our evolution to becoming the dominant species on the planet.  As such we are so heavily influenced by peer groups; family, friends, work colleagues etc., that we find it very difficult to be the odd one out, to “swim against the tide” or to be the “black sheep” and stand out from the crowd.  This is especially hard when common knowledge says the crowd knows best.

 

 But the crowd is not always right.  Once the crowd believed the earth was flat – wrong - and the earth was the centre of the solar system – wrong again. Right up until the 1950’s it was believed that smoking was good for us and yet despite the new wisdom that it is anything but, many continue to smoke.  This introduces another feature of crowds which is just how hard it is to leave a crowd when there are still others who are willing to stay in it with you.

 

 And so it has been in construction.  Despite all the reports and recommendations to the contrary, the crowd retains attachment to a process in which design is separated from construction and risk and responsibility is [apparently] transferred across a tendering “chasm” to the supply side thus producing “certainty of outcome”.  The 2001 NAO report Modernising Construction tried to dispel this certainty myth.  It reported that after 5 years of surveying government project performance at completion, 2/3rds of projects were over budget and 3/4rds delivered late using this traditional process.  Not that this is new, in 1683 Louis XIV’s chief of fortifications, Marshal Vauban (1633 – 1707), famously wrote to Louis to advise that the reason his projects were failing was due to “prices being illusionary”.  

 

What is often missed is that it doesn’t matter how good the designs are, the mere fact that they are created in isolation from the supply side (who if they are lucky might be asked to take a look in advance for nil payment), means there is little supply side commitment to the solution produced. Consequently these is no real ownership when, as often happens, things change or go wrong during construction.

 

Of course it’s not all doom and gloom.  There are organisations who are attempting to break the mould, and are refusing to accept the lowest price (whilst struggling to ignore it once they have it) or who involve their main contractor early, but not the remainder of the supply side that accounts for 80% of the cost.  Not all of this is a failure to grasp that ‘early’ involvement needs to be replaced with ‘earliest’ involvement and that price based selection needs to move to ‘best for project’ appointments with transparent costing including profit and overheads.  But with the traditional process so well established all the contracts, procedures and insurances currently used reinforce the old methods making it even harder for people to move to a new method even if they want to.

 

However all is not lost!  A new model has evolved.  Building on the success of leading approaches such as FUSION and Building Down Barriers, the Integrated Project Insurance (IPI) Model of Procurement has been endorsed by the Cabinet Office as one of 3 new models ready for use on government projects.  Dudley College are applying the IPI Model to the development and delivery their new facility Advance2 - Advanced Building Technologies that will bring hands on training in emerging technologies including carbon-friendly, off site manufacturing & assembly and digital engineering/BIM.

 

IPI assembles an Alliance team right from the beginning to collectively focus on the client’s needs and decide what is possible.  Working top down from an affordability budget to an agreed solution that will meet both the needs and the affordability criteria, the team agrees who will do what and when, identifies opportunities and risks, and signs up to a gain/painshare incentive arrangement.  Facilitated by Integrated Project Initiatives Ltd the project is monitored by Technical and Financial Risk Assurers and the outcomes are insured, including cost overrun to achieve completion and latent defects arising for 12 years after. IPI provides a single encompassing policy with no requirement to establish fault, making redundant blame based professional indemnity insurances, along with collateral warranties.

 

Furthermore, with the IPI policy in place all parties know that their pre-agreed portion of painshare (policy excess) is their maximum liability and are released to perform in the knowledge that by applying their collective expertise, genuine win-win outcomes can be achieved - thus creating the environment in which the client’s needs can be met and all parties are able to make a profit through integrated collaborative working and not at the expense of each other.

 So there is just one question to ask yourself; “are you happy to stay in the comfort zone of the traditional crowd, or is it time you joined the small but growing crowd of the future?”

 5th June 2015

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