The impact of recession on construction procurement routes

Robert Eadie, Clare Mahon, Ken Anderson

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

The UK entered recession in Q2 (2008) and exited in Q4 (2009) as a consequence of world recession, creating major repercussions for the construction sector. In response, the government introduced a £81 billion efficiency drive. Procurement is a substantial percentage of government budgets, therefore efficient public procurement can offer substantial savings. The private sector indicates efficiencies are introduced through effective procurement and strong competition. It was hypothesised that recession would result in procurement routes being chosen that ensured closer control of costs. Results indicate expected use of traditional procurement will rise 5% and design and build 6% but that procurement personnel do not expect a major shift in procurement route choice due to recession or post-recession. The paper suggests that government policy should ensure that potential efficiencies through choice of route should not be ignored. Further use of robust and innovative procurement techniques should be adopted to ensure value for money.
LanguageEnglish
Pages24-38
JournalInternational Journal of Procurement Management
Volume6
Issue number1
DOIs
Publication statusPublished - 1 Jan 2013

Fingerprint

Recession
Procurement
Government budget
Private sector
Public procurement
Government policy
Costs
Value for money
Government
Savings
Construction sector
Route choice
Personnel

Keywords

  • government policy
  • procurement routes
  • recession
  • construction procurement
  • public procurement
  • value for money
  • construction industry
  • procurement efficiency
  • UK
  • United Kingdom.

Cite this

@article{92e2e5f05fbd4ef9a52c73e0ea58bd20,
title = "The impact of recession on construction procurement routes",
abstract = "The UK entered recession in Q2 (2008) and exited in Q4 (2009) as a consequence of world recession, creating major repercussions for the construction sector. In response, the government introduced a £81 billion efficiency drive. Procurement is a substantial percentage of government budgets, therefore efficient public procurement can offer substantial savings. The private sector indicates efficiencies are introduced through effective procurement and strong competition. It was hypothesised that recession would result in procurement routes being chosen that ensured closer control of costs. Results indicate expected use of traditional procurement will rise 5{\%} and design and build 6{\%} but that procurement personnel do not expect a major shift in procurement route choice due to recession or post-recession. The paper suggests that government policy should ensure that potential efficiencies through choice of route should not be ignored. Further use of robust and innovative procurement techniques should be adopted to ensure value for money.",
keywords = "government policy, procurement routes, recession, construction procurement, public procurement, value for money, construction industry, procurement efficiency, UK, United Kingdom.",
author = "Robert Eadie and Clare Mahon and Ken Anderson",
note = "Reference text: Akintoye, A. and Fitzgerald, E. (1995) ‘Design and build: a survey of architects’ views’, Engineering, Construction and Architectural Management, Vol. 2, No. 1, pp.27–44. Aritua, B., Smith, N. and Bower, D. (2011) ‘What risks are common to or amplified in programmes: evidence from UK public sector infrastructure schemes’, International Journal of Project Management, Vol. 29, No. 3, pp.303–312. Bartlett, J.E., Kotrlik, J.W. and Higgins, C.C. (2001) ‘Organisational research: determining appropriate sample size’, Survey Research. Information Technology, Learning, and Performance Journal, Vol. 19, No. 1, pp.43–50. Cabinet Office (2011) ‘Government construction strategy’, available at http://www.cabinetoffice.gov.uk/resource-library/government-construction-strategy (accessed on February 2012). Caldwell, N., Roehrich, J. and Davies, A. (2009) ‘Procuring complex performance in construction: London heathrow terminal 5 and a private finance initiative hospital’, Journal of Purchasing and Supply Management, Vol. 15, No. 3, pp.178–186. Cameron D (2010) ‘Tackling the deficit’, available at http://www.number10.gov.uk/news/latestnews/2010/06/tackling-the-deficit-51438 (accessed on February 2012). Campos, C., Dent, A., Fry, R. and Reid, A. (2011) ‘Impact of the recession regional trends 43’, Office of National Statistics, London, available at http://www.ons.gov.uk/ons/rel/regionaltrends/regional-trends/regional-trends--july-2011-edition/impact-of-the-recession.pdf (accessed on February 2012). Chan, D., Chan, A., Lam, P. and Wong, J. (2010) ‘Identifying the critical success factors for target cost contracts in the construction industry’, Journal of Facilities Management, Vol. 8, No. 3, pp.179–201. Chan, E., Chan, M. and Chan, A. (2001) ‘Disintegrating professional boundaries: a case with the building professions in Hong Kong’, International Journal of Project Management, Vol. 19, No. 2, pp.127–135. CIC (2009) ‘The impact of the recession on construction professional services’, Construction Industry Council, available at http://www.cic.org.uk/newsevents/ImpactRecessionResearchExecutiveSummary.pdf (accessed on February 2012). Clancey, G. (2009) The Impact of the Recession on the Labour Market, Office of National Statistics, London, available at http://www.ons.gov.uk/ons/rel/lmac/impact-of-the-recessionon- the-labour-market/impact-of-the-recession-on-the-labour-market/impact-of-the-recessionon- the-labour-market---impact-of-the-recession-on-the-labour-market.pdf (accessed on February 2012). CPD (2007) ‘Procurement strategy for construction works and services’, available at http://www.dfpni.gov.uk/content_-_cpd-procurement_strategy_for_construction_works_and_ services (accessed on February 2012). Darling, A. (2011) ‘International monetary fund: international monetary and finance committee: 16th meeting’, 20 October 2007, available at http://www.imf.org/External/AM/2007/imfc/statement/eng/gbr.pdf (accessed on February 2012). DETI (2008a) ‘Labour force survey: April–June 2008’, available at http://www.detini.gov.uk/labour_force_survey_quarterly_supplement_-_april_-_june_2008.pdf (accessed on February 2012). DETI (2008b) ‘Northern Ireland quarterly employment survey suppliment: December 2009’, available at http://www.detini.gov.uk/dec09-4.pdf (accessed on February 2012). DFPNI (2009) ‘Managing public money Northern Ireland, Department of Finance and Personnel’, available at http://www.ceforum.org/upload2/MPMNI_July08.pdf (accessed on February 2012). European Union (2008) ‘Proposed elements for taking account of the social considerations in public procurement’, available at http://ec.europa.eu/social/BlobServlet?docId=1475&langId=en (accessed on February 2012). Experian (2010) ‘The opportunities and costs of cutting VAT: the effects of selected reductions in the rate of VAT on the labour element of housing repair, maintenance and improvement’, available at http://www.architecture.com/Files/RIBAHoldings/PolicyAndInternationalRelations/Policy/PublicAffairs/CuttheVATexperianreport.pdf (accessed on February 2012). Hamilton, J. (1989) ‘A new approach to the economic analysis of nonstationary time series and the business cycle’, Econometrica, Vol. 57, No. 2, pp.357–384. Hellowell, M., Price, D. and Pollock, A. (2008) ‘The use of private finance initiative (PFI) public private partnerships (PPPs) in Northern Ireland’, available at http://www.sps.ed.ac.uk/__data/ assets/pdf_file/0008/64358/AAA_PFI-PPP_Booklet_12-08.pdf (accessed on February 2012). HM-Treasury (2010) ‘Spending review HM treasury’, available at http://www.hm-treasury. gov.uk/spend_index.htm (accessed on February 2012). Hofer, C. (1975) ‘Toward a contingency theory of business strategy’, The Academy of Management Journal, Vol. 18, No. 4, pp.784–810. Kumaraswamy, M. and Dissanayaka, S. (1998) ‘Linking procurement systems to project priorities’, Building Research & Information, Vol. 26, No. 4, pp.223–238. Lahdenpera, P. (1999) ‘Impact of economic cycles on the use of alternative procurement methods in construction’, available at http://lta.hse.fi/2000/4/lta_2000_04_a1.pdf (accessed on February 2012). Latham, S. and Braun, M. (2010) ‘Jilted? The manager’s little book for keeping customers in a recession’, Journal of Business Strategy, Vol. 31, No. 1, pp.1–4. Lewis, M. and Roehrich, J. (2009) ‘Contracts, relationships and integration: towards a model of the procurement of complex performance’, International Journal of Procurement Management, Vol. 2, No. 2, pp.125–142. Masterman, J. (2002) Introduction to Building Procurement Systems, 2nd ed., Spon Press, London. McQuaid, R., Hollywood, E. and Canduela, J. (2010) ‘Employment research institute: employment inequalities in an economic downturn’, available at http://www.equalityni.org/archive/ pdf/EconDownturnFinalFullReport260910.pdf (accessed on February 2012). OGC (2003) Achieving Excellence Guide 6: Procurement and Contract Strategies, H.M.S.O., London, UK. OGC (2011) ‘OGC’s six key goals’, available at http://webarchive.nationalarchives.gov.uk/ 20110601212617/http:/www.ogc.gov.uk/index.asp (accessed on February 2012). Oyegoke, A., McDermott, P. and Abbott, C. (2009) ‘Achieving sustainability in construction through the specialist task organisation procurement approach’, International Journal of Procurement Management, Vol. 2, No. 3, pp.288–313. Oyegoke, A., McDermott, P. and Dickinson, M. (2010) ‘The myth behind integration in the UK construction industry’, International Journal of Procurement Management, Vol. 3, No. 2, pp.247–264. Pollock, A., Prince, D. and Player, S. (2007) ‘An examination of the UK treasury’s evidence base for cost and time overrun data in UK value-for-money policy and appraisal’, Public Money & Management, Vol. 27, No. 2, pp.127–134. Ratnasabapathy, S. and Rameezdeen, R. (2007) ‘A decision support system for the selection of best procurement system in construction’, Built-Environment Sri-Lanka, Vol. 7, No. 2, pp.43–53. Shiyamini, R., Rameezdeen, R. and Amaratunga, D. (2005) ‘Macro analysis of construction procurement trends in Sri-Lanka’, in 5th International Postgraduate Conference in Built and Human Environment, 2005, The Lowry, Salford Quays, UK, available at http://usir.salford. ac.uk/9936/ (accessed on February 2012). Smith, A. (2011a) ‘Orientation and adaptation case studies toward chaotic systems in an economic downturn’, International Journal of Procurement Management, Vol. 4, No. 1, pp.72–86. Smith, A. (2011b) ‘Domestic automobile industry supply chain and operational effectiveness in recessionary environments’, International Journal of Procurement Management, Vol. 4, No. 6, pp.661–684. Sullivan, M. (2007) RICS Contracts in Use Survey A Survey of Building Contracts in Use 2007, Royal Institution of Chartered Surveyors, London, available at http://www.rics.org/site/ download_feed.aspx?fileID=5853&fileExtension=PDF (accessed on February 2012). Tookey, J., Murray, M., Hardcastle, C. and Langford, D. (2001) ‘Construction procurement routes: re-defining the contours of construction procurement’, Engineering Construction and Architectural Management, Vol. 8, No. 1 pp.20–30. Vaitilingam, R. (2009) ‘Recession Britain’, Economic Social and Research Council, available at http://www.esrc.ac.uk/_images/Recession_Britain_tcm8-4598.pdf (accessed on February 2012). VTFlagship (2007) ‘Prime contracting’, available at http://www.flagshiptraining.co.uk/ site/flagship/our-capabilities/construction/prime-contracting&xpm18= (accessed on February 2012). Walling, A. and Clancy, G. (2010) ‘Underemployment in the UK labour market’, Economic and Labour Market Review, February 2010, Vol. 4, No. 2, available at http://www.ons.gov.uk/ ons/rel/elmr/economic-and-labour-market-review/no--2--february-2010/underemployment-inthe- uk-labour-market.pdf (accessed on February 2012).",
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The impact of recession on construction procurement routes. / Eadie, Robert; Mahon, Clare; Anderson, Ken.

In: International Journal of Procurement Management, Vol. 6, No. 1, 01.01.2013, p. 24-38.

Research output: Contribution to journalArticle

TY - JOUR

T1 - The impact of recession on construction procurement routes

AU - Eadie, Robert

AU - Mahon, Clare

AU - Anderson, Ken

N1 - Reference text: Akintoye, A. and Fitzgerald, E. (1995) ‘Design and build: a survey of architects’ views’, Engineering, Construction and Architectural Management, Vol. 2, No. 1, pp.27–44. Aritua, B., Smith, N. and Bower, D. (2011) ‘What risks are common to or amplified in programmes: evidence from UK public sector infrastructure schemes’, International Journal of Project Management, Vol. 29, No. 3, pp.303–312. Bartlett, J.E., Kotrlik, J.W. and Higgins, C.C. (2001) ‘Organisational research: determining appropriate sample size’, Survey Research. Information Technology, Learning, and Performance Journal, Vol. 19, No. 1, pp.43–50. Cabinet Office (2011) ‘Government construction strategy’, available at http://www.cabinetoffice.gov.uk/resource-library/government-construction-strategy (accessed on February 2012). Caldwell, N., Roehrich, J. and Davies, A. (2009) ‘Procuring complex performance in construction: London heathrow terminal 5 and a private finance initiative hospital’, Journal of Purchasing and Supply Management, Vol. 15, No. 3, pp.178–186. Cameron D (2010) ‘Tackling the deficit’, available at http://www.number10.gov.uk/news/latestnews/2010/06/tackling-the-deficit-51438 (accessed on February 2012). Campos, C., Dent, A., Fry, R. and Reid, A. (2011) ‘Impact of the recession regional trends 43’, Office of National Statistics, London, available at http://www.ons.gov.uk/ons/rel/regionaltrends/regional-trends/regional-trends--july-2011-edition/impact-of-the-recession.pdf (accessed on February 2012). Chan, D., Chan, A., Lam, P. and Wong, J. (2010) ‘Identifying the critical success factors for target cost contracts in the construction industry’, Journal of Facilities Management, Vol. 8, No. 3, pp.179–201. Chan, E., Chan, M. and Chan, A. (2001) ‘Disintegrating professional boundaries: a case with the building professions in Hong Kong’, International Journal of Project Management, Vol. 19, No. 2, pp.127–135. CIC (2009) ‘The impact of the recession on construction professional services’, Construction Industry Council, available at http://www.cic.org.uk/newsevents/ImpactRecessionResearchExecutiveSummary.pdf (accessed on February 2012). Clancey, G. (2009) The Impact of the Recession on the Labour Market, Office of National Statistics, London, available at http://www.ons.gov.uk/ons/rel/lmac/impact-of-the-recessionon- the-labour-market/impact-of-the-recession-on-the-labour-market/impact-of-the-recessionon- the-labour-market---impact-of-the-recession-on-the-labour-market.pdf (accessed on February 2012). CPD (2007) ‘Procurement strategy for construction works and services’, available at http://www.dfpni.gov.uk/content_-_cpd-procurement_strategy_for_construction_works_and_ services (accessed on February 2012). Darling, A. (2011) ‘International monetary fund: international monetary and finance committee: 16th meeting’, 20 October 2007, available at http://www.imf.org/External/AM/2007/imfc/statement/eng/gbr.pdf (accessed on February 2012). DETI (2008a) ‘Labour force survey: April–June 2008’, available at http://www.detini.gov.uk/labour_force_survey_quarterly_supplement_-_april_-_june_2008.pdf (accessed on February 2012). DETI (2008b) ‘Northern Ireland quarterly employment survey suppliment: December 2009’, available at http://www.detini.gov.uk/dec09-4.pdf (accessed on February 2012). DFPNI (2009) ‘Managing public money Northern Ireland, Department of Finance and Personnel’, available at http://www.ceforum.org/upload2/MPMNI_July08.pdf (accessed on February 2012). European Union (2008) ‘Proposed elements for taking account of the social considerations in public procurement’, available at http://ec.europa.eu/social/BlobServlet?docId=1475&langId=en (accessed on February 2012). Experian (2010) ‘The opportunities and costs of cutting VAT: the effects of selected reductions in the rate of VAT on the labour element of housing repair, maintenance and improvement’, available at http://www.architecture.com/Files/RIBAHoldings/PolicyAndInternationalRelations/Policy/PublicAffairs/CuttheVATexperianreport.pdf (accessed on February 2012). Hamilton, J. (1989) ‘A new approach to the economic analysis of nonstationary time series and the business cycle’, Econometrica, Vol. 57, No. 2, pp.357–384. Hellowell, M., Price, D. and Pollock, A. (2008) ‘The use of private finance initiative (PFI) public private partnerships (PPPs) in Northern Ireland’, available at http://www.sps.ed.ac.uk/__data/ assets/pdf_file/0008/64358/AAA_PFI-PPP_Booklet_12-08.pdf (accessed on February 2012). HM-Treasury (2010) ‘Spending review HM treasury’, available at http://www.hm-treasury. gov.uk/spend_index.htm (accessed on February 2012). Hofer, C. (1975) ‘Toward a contingency theory of business strategy’, The Academy of Management Journal, Vol. 18, No. 4, pp.784–810. Kumaraswamy, M. and Dissanayaka, S. (1998) ‘Linking procurement systems to project priorities’, Building Research & Information, Vol. 26, No. 4, pp.223–238. Lahdenpera, P. (1999) ‘Impact of economic cycles on the use of alternative procurement methods in construction’, available at http://lta.hse.fi/2000/4/lta_2000_04_a1.pdf (accessed on February 2012). Latham, S. and Braun, M. (2010) ‘Jilted? The manager’s little book for keeping customers in a recession’, Journal of Business Strategy, Vol. 31, No. 1, pp.1–4. Lewis, M. and Roehrich, J. (2009) ‘Contracts, relationships and integration: towards a model of the procurement of complex performance’, International Journal of Procurement Management, Vol. 2, No. 2, pp.125–142. Masterman, J. (2002) Introduction to Building Procurement Systems, 2nd ed., Spon Press, London. McQuaid, R., Hollywood, E. and Canduela, J. (2010) ‘Employment research institute: employment inequalities in an economic downturn’, available at http://www.equalityni.org/archive/ pdf/EconDownturnFinalFullReport260910.pdf (accessed on February 2012). OGC (2003) Achieving Excellence Guide 6: Procurement and Contract Strategies, H.M.S.O., London, UK. OGC (2011) ‘OGC’s six key goals’, available at http://webarchive.nationalarchives.gov.uk/ 20110601212617/http:/www.ogc.gov.uk/index.asp (accessed on February 2012). Oyegoke, A., McDermott, P. and Abbott, C. (2009) ‘Achieving sustainability in construction through the specialist task organisation procurement approach’, International Journal of Procurement Management, Vol. 2, No. 3, pp.288–313. Oyegoke, A., McDermott, P. and Dickinson, M. (2010) ‘The myth behind integration in the UK construction industry’, International Journal of Procurement Management, Vol. 3, No. 2, pp.247–264. Pollock, A., Prince, D. and Player, S. (2007) ‘An examination of the UK treasury’s evidence base for cost and time overrun data in UK value-for-money policy and appraisal’, Public Money & Management, Vol. 27, No. 2, pp.127–134. Ratnasabapathy, S. and Rameezdeen, R. (2007) ‘A decision support system for the selection of best procurement system in construction’, Built-Environment Sri-Lanka, Vol. 7, No. 2, pp.43–53. Shiyamini, R., Rameezdeen, R. and Amaratunga, D. (2005) ‘Macro analysis of construction procurement trends in Sri-Lanka’, in 5th International Postgraduate Conference in Built and Human Environment, 2005, The Lowry, Salford Quays, UK, available at http://usir.salford. ac.uk/9936/ (accessed on February 2012). Smith, A. (2011a) ‘Orientation and adaptation case studies toward chaotic systems in an economic downturn’, International Journal of Procurement Management, Vol. 4, No. 1, pp.72–86. Smith, A. (2011b) ‘Domestic automobile industry supply chain and operational effectiveness in recessionary environments’, International Journal of Procurement Management, Vol. 4, No. 6, pp.661–684. Sullivan, M. (2007) RICS Contracts in Use Survey A Survey of Building Contracts in Use 2007, Royal Institution of Chartered Surveyors, London, available at http://www.rics.org/site/ download_feed.aspx?fileID=5853&fileExtension=PDF (accessed on February 2012). Tookey, J., Murray, M., Hardcastle, C. and Langford, D. (2001) ‘Construction procurement routes: re-defining the contours of construction procurement’, Engineering Construction and Architectural Management, Vol. 8, No. 1 pp.20–30. Vaitilingam, R. (2009) ‘Recession Britain’, Economic Social and Research Council, available at http://www.esrc.ac.uk/_images/Recession_Britain_tcm8-4598.pdf (accessed on February 2012). VTFlagship (2007) ‘Prime contracting’, available at http://www.flagshiptraining.co.uk/ site/flagship/our-capabilities/construction/prime-contracting&xpm18= (accessed on February 2012). Walling, A. and Clancy, G. (2010) ‘Underemployment in the UK labour market’, Economic and Labour Market Review, February 2010, Vol. 4, No. 2, available at http://www.ons.gov.uk/ ons/rel/elmr/economic-and-labour-market-review/no--2--february-2010/underemployment-inthe- uk-labour-market.pdf (accessed on February 2012).

PY - 2013/1/1

Y1 - 2013/1/1

N2 - The UK entered recession in Q2 (2008) and exited in Q4 (2009) as a consequence of world recession, creating major repercussions for the construction sector. In response, the government introduced a £81 billion efficiency drive. Procurement is a substantial percentage of government budgets, therefore efficient public procurement can offer substantial savings. The private sector indicates efficiencies are introduced through effective procurement and strong competition. It was hypothesised that recession would result in procurement routes being chosen that ensured closer control of costs. Results indicate expected use of traditional procurement will rise 5% and design and build 6% but that procurement personnel do not expect a major shift in procurement route choice due to recession or post-recession. The paper suggests that government policy should ensure that potential efficiencies through choice of route should not be ignored. Further use of robust and innovative procurement techniques should be adopted to ensure value for money.

AB - The UK entered recession in Q2 (2008) and exited in Q4 (2009) as a consequence of world recession, creating major repercussions for the construction sector. In response, the government introduced a £81 billion efficiency drive. Procurement is a substantial percentage of government budgets, therefore efficient public procurement can offer substantial savings. The private sector indicates efficiencies are introduced through effective procurement and strong competition. It was hypothesised that recession would result in procurement routes being chosen that ensured closer control of costs. Results indicate expected use of traditional procurement will rise 5% and design and build 6% but that procurement personnel do not expect a major shift in procurement route choice due to recession or post-recession. The paper suggests that government policy should ensure that potential efficiencies through choice of route should not be ignored. Further use of robust and innovative procurement techniques should be adopted to ensure value for money.

KW - government policy

KW - procurement routes

KW - recession

KW - construction procurement

KW - public procurement

KW - value for money

KW - construction industry

KW - procurement efficiency

KW - UK

KW - United Kingdom.

U2 - 10.1504/IJPM.2013.050608

DO - 10.1504/IJPM.2013.050608

M3 - Article

VL - 6

SP - 24

EP - 38

JO - International Journal of Procurement Management

T2 - International Journal of Procurement Management

JF - International Journal of Procurement Management

SN - 1753-8432

IS - 1

ER -