Private Finance Initiative - Treasury Contents

Written evidence submitted by the Royal Institute of British Architects


The Royal Institute of British Architects (RIBA) champions better buildings, communities and the environment through architecture and our members. It has been promoting architecture and architects since being awarded its Royal Charter in 1837. The 40,000-strong professional institute is committed to serving the public interest through good design, and represents 85% of registered architects in the UK as well as a significant number of international members.


The RIBA has long argued for changes to the current process of procuring public buildings, particularly schools and health buildings, under both Private Finance Initiative (PFI) and its recent derivatives such as the Building Schools for the Future (BSF) programme.

Our concerns initially stemmed purely from the perceived lack of design quality in buildings procured under traditional forms of PFI procurement processes. There was evidence that even after 15 years of PFI experience, although buildings are more often delivered on-time and on-budget, the quality of the buildings delivered through PFI schemes remained poor in many cases.

The poor quality of the buildings' design lead to a number of issues, such as rising maintenance costs over the lifetime of the building, public and professional scepticism regarding the value of public procurement programmes, and poor buildings actively constraining health and education service delivery.

Furthermore, the process was also felt to take an unnecessarily long time, further impacting on the costs of procurement, and delaying both the start of construction and project delivery when compared to similar projects delivered via alternative procurement routes used in other sectors.


There is no one preferred model of procurement and different methods would be appropriate for different projects. In our view, the core principles to achieving good outcomes through public procurement are:

1.  There should be close engagement between designer and user-client in the development of a brief

Meaningful consultation should take place between those designing a building and those who will use it, in order to create the right brief, based on the information that the demand side brings but the supply side doesn't possess. This engagement needs to be structured properly, so that it does not become unnecessarily onerous. This does not mean that an entirely bespoke design will be the end product but just that the brief fits the needs of the user.

2.  There should be a strong, expert client

It is imperative that the public client has access to the right expertise in managing major construction projects and a good understanding of the procurement process. It is essential that clients are able to produce well researched and developed project briefs at an early stage, prior to being put out to tender in order to avoid unnecessary delays and rising costs further along the line.

3.  There should be a genuinely integrated construction team

As highlighted in the Government's recent Innovation Growth Team (IGT) Report led by the Chief Construction Adviser Paul Morrell, there is a need for properly integrated, cross-professional teams in public procurement projects. Government should seek the procurement of properly integrated teams, of designers and contractors, in order to encourage joined up thinking both in definition and execution of a project, through continuous positive engagement through the duration of the project. This would ensure that construction team have shared goals leading to better outcomes.

4.  There should be clarity of budget from the outset

Many of the buildings procured under PFI to date have not had a clear and designated budget from the outset. It is our view that the most effective means of procurement would be the target-cost method, which results in designs to fit a budget rather than a budget to fit the design. We believe that the public client would gain greater value-for-money if contractors competed on quality rather than price. This encourages competition on the quality of a design for that designated budget and promotes innovation. The specification of a building will therefore be arrived to through the process of design, rather than it being pre-determined at the outset.

5.  The process and costs should be transparent

The Government could and should insist on open-book transparency for public procurement projects across all levels of the supply chain. The public should be able to see where money is being spent and the spurious contractor confidentiality clauses in previous PFI contacts should be removed.

6.  Public procurement should encourage competition and innovation and avoid monopoly capture

Procurement processes dominated by a few large firms inhibit innovation and the incentive for those working on public projects to improve practices and compete on both cost and quality. . This reduces the pool of talent working on projects reduces innovation imported from other sectors, limits the application of local knowledge from locally-operating firms, and circulates work around a small and decreasing number of firms


What causes the problems?

The quality of the design of a building directly affects its long term operating and maintenance costs, the standards of service provision, and the building's sustainability. The main causes of substandard design quality are:

—  Under-prepared clients—Often "first-time" clients, with too little experience or professional resource available "in-house", and too little financial support at the very early stages, preventing them from buying in sufficient professional advice, and little requirement to do so.

—  Insufficiently tested and under-detailed design briefs—Due to a lack of professional advice and resources in the preparatory stages (the Strategic and Outline Business Case stages), and no requirement for the client to undertake early conceptual design work or a sufficiently detailed design scheme before putting the project out to tender, poorly detailed and unresearched project briefs cause uncertainty, delay and make re-interpretation of the original brief unavoidable during the procurement process.

—  Barriers to entering the market—Many architectural practices are prevented from even bidding for work, due to the limited entry routes to the market—the lack of design frameworks, or open competitions—as well as the fact that contractors are required to have a design team on-board before bidding for the work, meaning they frequently use their own in-house design teams, and a small number of practices that they have worked with previously. This reduces the pool of talent working on school design, reduces innovation imported from other sectors, limits the application of local knowledge from locally-operating practices, and circulates work around a small and decreasing number of practices.

—  In addition, European procurement regulation, due both directly to the rules governing the OJEU procedure, and their interpretation and application in the UK, severely restricts access to the market for a huge number of professional practices.

—  Too much control of the design process by contractorsCurrently, the contractual client of the architect is usually the main project contractor or constructor, not the public body responsible for procuring overall project (eg the Local Education Authority). As a result, we find that direct communication between designer and user-client is limited, and constrained by the contractor. It is this direct relationship between architect and true client that enables an understanding by both parties of the requirements, aspirations and philosophy for the project. In most sectors, particularly in private sector projects, best practice requires that the architect team has the end-user or commissioner of the project as their client, creating a direct and open relationship. This enables the architect to work in the direct interest of the commissioner/user.

—  Insufficient weighting for Design Quality—The relatively low scoring given to design quality in the evaluation of bids and the lack of relevant skills and experience on the part of many evaluation teams has a direct impact on the quality of building design.

—  Value-engineering by contractors—There is strong anecdotal evidence of contractors limiting the amount of information, provided by their architects working to the specified brief, made available to clients. This information typically concerns quality specifications, finishes, and materials, thereby enabling the contractor to "value engineer" the project, essentially reducing the intended quality and cost of the project compared to that specified by the architect, to the detriment of the finished building, without the knowledge of an unaware client. This is done in order to maintain the contractor's preferred levels of profitability, but can be to the detriment of the finish of the building, and its functionality, and can add considerably to its long term maintenance costs over the period of its lifetime.

—  Simultaneously developing the design and choosing the contractor—Undertaking the selection of the major contractor at the same time as the design being developed almost from scratch to a fully developed design proposal is detrimental to the design quality. It means that multiple competing contractors and their design teams are seeking equal access to the end users, public client and other technical and public individuals/groups involved in the consultation process, at the same time, during what is a constrained period in the procurement process. This duplication of effort limits the availability of the consultees, and the quality of their engagement with the process, and this detrimentally impacts on the design quality.

—  High bidding costs deter competition and add to the overall cost of procurement, while delays further increase project costs while delaying public service improvements. The main causes of unnecessarily high costs and delays are:

—  Duplication of effort—Made worse by the requirement of the Competitive Dialogue Procedure, many public sector procurement routes require that up to three bidders work up fully detailed design proposals simultaneously. We feel that much of this work—particularly the early and crucial conceptual design work—should be carried out by the client before going to the market. Instead, the current requirements mean that efforts are wasted by bidders duplicating the design and consultation process. The requirements result in three separate, highly expensive and detailed plans being developed. The considerable cost of providing access to consultees and providing cover for staff, etc. are borne by the procuring public authority. The associated design costs are initially borne by the bidders, but eventually the huge cost of failed bids (the cost of a failed bid is on average upward of over £2.5 million per school, and over £12 million per PFI hospital—2005, Major Contractors' Group) are returned to the tax payer through future successful bids.

—  Delays to procurement—Procurement takes too long, and often suffers from unexpected and unplanned for delays during vital stages of the process. This is due to a number of reasons, including unnecessary duplication of effort by bidders, inadequate or poorly tested specifications for projects in the briefing documents, failures to address policy issues at the outset, and a lack of negotiating and professional project management skills within the procuring authority.

—  Bureaucracy and the amount of information required from bidders—The information required of applicants under the OJEU process is excessive and acts as a deterrent to small practices, which may not even have the necessary information. The frequent requirement for management and human resource strategies are a boost for larger firms, which have both the resources and need to put such policies into place. Small practices have neither the resources required nor the practical need to have such policies in place. The bureaucracy and cost of the European route to procurement also discourages clients from seeking separate specialist contractors or consultants through a number of OJEU notices, instead finding it easier, cheaper and quicker to select one large multi-disciplinary provider, or, as is the case in most public building procurement, a single main contractor.

April 2011

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© Parliamentary copyright 2011
Prepared 10 August 2011