“When was the last time you had to decide between buying the cheaper or the more expensive version of something you needed? If you chose the cheap option, I’m sure it wasn’t long before you wished you’d spent a little more on the one that would perform better or last longer.
Choosing price over quality is something we’ve all done; I certainly know I have. It could be as simple as a screwdriver, or something more significant like a computer or even a car. So, imagine when it’s something as complex, stressful and expensive as selecting a contractor to build or remediate your home, investment or commercial property? Surely this decision would be based on quality?
Unfortunately, that’s not always the case. It’s still all too common for people to select a solution based on price alone.
In the New Zealand construction industry, we often appoint a contractor through a competitive tender process. We believe the best way of determining ‘value for money’ is to ask a range of contractors whether they can deliver our scheme on time, on budget and to the highest standards. Unfortunately, more often than not, the strategy is simply to identify the lowest price. The risk is that you end up with a contractor whose work is of a poor standard, or who is too stretched to have the capacity to do a good job.
Selecting a good main contractor can take time. You want one who has already invested time and energy in selecting their sub contractors, who are skilful and capable of delivering a quality product. You want a team whose values align with your own; who understand your vision and work hard to deliver it. So how do you do this?
Let’s step back to the early 1990s, when the UK was just emerging from a period of economic downturn that had drastically affected the property and construction market. Many investors, professionals and contractors had exited, and the industry was left on life support – trying to find a new way to operate. Inflation and interest rates were up and investor confidence in construction projects was low. With limited market opportunity, contractors found themselves ‘buying work’ at cost just to keep operating, many were going out of business and cranes sat idly imprisoned by site hoardings.
As a response to the crisis, the UK Government engaged John Egan – the man who took ailing car manufacturer Jaguar from almost certain collapse to success, in a very short period of time, with little or no investment. They asked him to take his experiences at Jaguar and to write a report that might help turn the construction industry around.
Egan had taken Jaguar from a flailing company producing sub-standard motorcars, into a profitable business that recaptured the essence of what Jaguar started out as: a high quality, status symbol on wheels. He did this by following some key principles, which he wrote about in his subsequent paper ‘Constructing the Team’. It was a document that changed the UK construction industry, with procurement, relationships and client satisfaction all improving as a result. John became Sir John Egan and his name became synonymous with principles such as ‘supply chain management’, ‘partnering’ and ‘constructing a team’.
What was true of the UK construction industry in the mid to late 1990’s is reminiscent of the environment we’re currently facing in New Zealand. I believe there are some key lessons to be learned from Egan: working practices and concepts that could be considered, adapted and adopted here.
- Start at the end. Simplistically, Egan began by focusing on the end. In his mind, this was producing a quality car that people wanted to be seen in. He believed the market would be prepared to pay more for something that represented quality; and he was right. We need to do the same – focus on delivering a quality outcome and work back to how this can best be achieved.
- Supply chain management. By analysing the supply chain and working with them, Egan helped drive down cost of components. It wasn’t just about who could provide the cheapest parts – but working closely with good suppliers to bring costs down. If we do the same, we’ll naturally deliver savings and improve the quality of the end product.
- Engage the workforce. Egan developed a well trained workforce who were clear about the objective and took pride in their part of the overall vehicle. Ensuring your workforce understand the vision and are invested in it is a key part of success.
- Collaborate. Third party suppliers, sub contractors, specialists and staff were all aligned with the objective of delivering a quality product. By adopting a mindset of ‘one fails, we all fail’, they focused on collaboratively delivering the best possible outcome for their customer.
The spirit of what Jaguar achieved remains central to the partnering concept, and should be at the heart of today’s consultant-supplier-contractor relationship. Instead of working in competition and prioritising price over quality, we need to align to deliver the best product we can for the client – on time, on budget and to a high standard.
It’s about taking a leaf from Egan’s report and starting at the end. Focus on the outcome and how it can be achieved by working collaboratively. And, most importantly, stop thinking about price as the most important factor – because, quite simply, it’s not.”