Contracts need to change to help construction go digital

Construction professionals gathered in numbers last Friday to discuss whether contracts needed to change to help the industry deliver digital transformation. Rob O’Connor reports on The Big Contracts Debate, Infrastructure Intelligence’s latest online event. 

Rob O’Connor
24 May 2021

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When Infrastructure Intelligence and Atkins teamed up to organise a special online debate on the key issue of contracting models in the construction industry and whether they need to change to facilitate the industry’s digital transformation, they probably didn’t realise how popular the event would be. However, popular it certainly was, with more people registering to attend the event than anything Infrastructure Intelligence has ever organised before.

The event, Is construction’s digital transformation dependent on the introduction of new contracting models?, on Friday 21 May 2021 was chaired by KPMG’s partner for major projects delivery Lisa Kelvey and featured a panel of four leading industry experts who debated the issue before a live online audience.

Arguing in favour of contracts changing were Dev Amratia, CEO and co-founder of nPlan and Richard Robinson, CEO of Atkins UK & Europe. Meanwhile in the ‘No’ corner were Keith Waller, programme director at the Construction Innovation Hub and commercial programme director at Highways England, Martin Perks.

Special guest chair Lisa Kelvey set out a clear picture for the debate: “The last year has been really challenging for the whole country – but the industry has shown we can change and adapt quickly when we need to, even though historically we’ve still been slow to adopt new technology,” she said. “The government has set out ambitious plans to build back better and greener and to level up across the UK. So, more of the same just isn’t good enough. It’s time to make digital the backbone of the industry if future infrastructure is to be delivered efficiently.

“Are our current contracting models really outdated and a barrier to collaboration and innovation, or is it just the way we use them? Is it actually the behaviours and the working culture that we need to change? This debate is really timely and a subject that a lot of my clients are grappling with as they push forward with their digitalisation plans,” said Kelvey.

Arguing firmly in favour of a resounding ‘Yes’, Richard Robinson said that the industry couldn’t go on doing what it had always done and expect things to change – and highlighted three key strategic areas where change was vital in moving the industry forward. Firstly, pointing to history, he said: “Several well-respected studies have found that the industry’s productivity has flatlined for over 25 years, while the wider economy has seen an improvement of over 30%. Specifically, another study in 2017 ranked construction only above hunting and fishing in terms of digital transformation – and the industry had fallen even further behind since then.”

"It doesn't seem credible to continue what we have been doing - we need to start contracting based on value and innovators need to capture the value that is created."

Richard Robinson, CEO, Atkins UK and Europe.

Secondly, he said: “A shift to contracting on value has to happen. Operating on just the current 3-5% profit margins – compared to 20-30% by Google for example – does not enable the industry to capture the value it creates and is a major barrier to investment in research and development.” Thirdly, Robinson said: “Digital and data is changing the game of traditional project boundaries, and current contracting approaches are simply not keeping up with this.” 

Summing up, Robinson said: “It doesn’t seem credible to continue what we have been doing - we need to start contracting based on value and innovators need to capture the value that is created. Contracts don’t support capturing data either and that needs to change. Why would we expect anything different if we don’t change?”

Agreeing with Robinson, Dev Amratia highlighted the years and years of industry improvement reports that had led the sector to a place where change was still being talked about and not implemented. “All the reports into the future of construction said that we need to collaborate more, but we are not getting any better. So, we have to change. The Latham report made this clear back in 1994 and we are still talking about it. This a tremendous opportunity to change – to capture better value and deliver better outcomes.”

Changing tack and arguing in the ‘No’ corner, Keith Waller used a road traffic accident analogy to highlight that behavioural change and human error were more important factors than relying solely on new technology or new contracting models. He said: “Only 1% of accidents were down to the car. We don’t need to reinvent the wheel. Before we rush to blame the contracts let’s look at the drivers – ourselves who use the contracts. We need to operate our contracts properly – we need the right behaviours and skills. If you keep crashing the car – you need help to drive. The clear truth is that it’s the behaviours that counts and not the contract. Let’s focus on changing those.

"We need to operate our contracts properly - we need the right behaviours and skills.The clear truth is that it's the behaviours that counts and not the contract. Let's focus on changing those."

Keith Waller, Programme Director, Construction Innovation Hub.

“Contracts have evolved over time but what has lagged behind is people’s capabilities of working together. The form of contract should support changing behaviour, not force it. But this is not happening everywhere. We need new forms of contract to make things better but changing behaviour is not dependent on changing the contract. We will see change and disrupters coming in and shaking things up. There will be value that we can unlock and getting the right behaviours is key.”

Also arguing for ‘No’, Martin Perks agreed with Waller, saying it was all about human behaviours and that existing contract models were still fit for purpose. “All modern contracts recognise the need for digital,” said Perks. “The real dependency is on the integrated project team’s behaviour. The dependency is how we work with these forms of contract. It’s behavioural. The dependency is the choices we make and what influences those choices. For me it’s the construction sector’s elephant in the room. We need better training and collaboration. 

“Complicating the landscape with more forms of contracts is not needed. In simple terms, dependency is related to the behaviour of people from the top to the bottom of the industry, not the form of contract. So, is digitalisation dependent on a new form of contract? From me and Keith, it’s a ‘No!’” 

The opening salvos in the debate led to a very wide-ranging discussion on the merits of change and many questions and comments were posted by attendees in the chat, showing how engaged and interested the audience was in a subject that is clearly seen as crucial for the construction industry. There were so many points raised by the audience that it was impossible to address them all and it’s likely that another event will need to be organised in the future to do justice to all the issues raised.

At the end of the event, the audience had its chance to have a say on the question up for debate – “Is construction’s digital transformation dependent on the introduction of new contracting models?” They voted in favour of change by a margin of 58% to 35%, with the rest undecided.

Commenting on the debate, Infrastructure Intelligence editor Andy Walker said: “We had more people registering to attend this event than anything we have ever organised and the number of questions that we had in the chat box was an indication of the massive interest around the key issue of digital transformation, contracts and industry change.

“Many of those attending the debate have commented about how much they valued the opportunity to ask questions and make points in a debate-style format and they really appreciated our speakers contributing so openly and constructively. I would like to thank all our debaters for their contributions and for engaging with the audience. A big thank you also to our great chair Lisa Kelvey from KPMG for doing an excellent job in keeping everyone in order!”

Click here to watch a recording of The Big Contracts Debate. 

The Big Contracts Debate was organised in association with Atkins.