Introduction
The construction industry all over the world has been under going a period of introspection. Changes in the production and procurement processes that have been witnessed in other sectors as a result of globalisation and technology advancement have not been adopted by the industry at the same pace and level as others like manufacturing. Production in the industry is still labour intensive and the procurement process continues to be adversarial and conflict ridden due to lack of cooperation (Egan 1998; Smith and Love, 2001). Demands for change and greater efficiency particularly in the UK started to appear as result of the numerous government reports on the construction industry (Latham, 1994; Egan 1998). These reports were hugely critical of the low levels of productivity and efficiency and stressed the need for change, greater efficiency and stronger client focus. Among changes suggested was the shift from the traditional methods of procurement were the design team led by the architect decided the design and construction process for the client. This recommendation came at a time when most institutions representing construction professionals were yielding to UK government pressure and removing the use of fee scale (Hoxley, 1998) Although there were suggestions in 1997, that the UK government would drop Compulsory Competitive Tendering in favour of ‘best value’, Hoxley (1998) observed that the appointment of construction professional by competitive fee tendering had taken root and was likely to remain the principal method for appointment of construction professionals.
The two-envelope method is one of the methods in which price is considered for consultant selection (competitive fee tendering). The two envelope method which is based on the evaluation of bids for both cost and quality, effectively ended the use of mandatory scale of fees as recommended by the professional bodies of most property and construction professionals. This method of procuring services is the most popular method of allocating work to quantity surveyors in the UK and Hong Kong (Drew et al, 2001). The two envelope method requires consultants to submit two envelopes; one containing the fee (usually a lump sum) also known as ‘the financial proposal’ and another about the capacity of the firm otherwise known as the ‘technical proposal.’ The quality envelope or technical proposal envelope normally includes the personnel proposed for the job, the methodology to be used and proposed duration for the assignment. The evaluation starts with opening the technical proposal and then the financial proposal for all those bidders who may have attained the required pass mark for the technical proposal. After evaluation of the financial proposal, the score for both is aggregated to decide the most suited bidder for the job. However, the quality and cost based approach of procuring services, has not been without critics who insist that it has led to deterioration in the quality of service offered. This paper seeks to critically analyse the shift to competitive fee tendering, especially the two-envelope method and why it is necessary for the Uganda Society of Architects to accept and adopt the new method.
“The good old days”
A little history will help us to understand why we are no longer in the ‘good old days’ and how we got here. The architect’s profession just like the engineer’s profession emerged in 19th century as result of an attempt to separate people who designed buildings from the craftsmen who built them legally, functionally and organizationally (Thomsen, 2006). Thomsen further observes that as architects and engineers acquired education and degrees, they sought professional status by lobbying for laws and forming professional bodies like those of lawyers, doctors and accountants. It is through these laws and institutions that the practice of architecture was regulated. Thomsen observes that in the following 100 years, architects became so famous in America that in 1950 the Fortune Magazine reported that architects were the most respected and best paid among all professions. In addition to improved designs, the mergence of the architecture and engineering profession meant that drawings showing how buildings could be put together and the materials that would be required could be quantified by a contractor who would name a price for carrying out the job before hand. According to Thomsen (2006), this was the emergency of the design-bid-build procurement method also known as the traditional method. Owing to this newly acquired status, architects were constantly the first point of contact for most contracts and in this position, architects invariably did not only decide the design of the building, but also decided who to work with and the procurement method to be used. The architect with the team he led were the experts of the construction industry and in addition to designing had the responsibility to represent the client’s interests and make sure that work was done right. In project organisation the architect clearly became dominant. Various architect’s professional bodies came up with what was called the mandatory scale of fees, which by virtue of their membership to these professional bodies (RIBA, AIA, USA etc) architects were bound by the code of conduct to adhere to. The scale of fees for most of the architects’ services were based on a percentage of the construction cost of the buildings designed and erected under the architects supervision, although sometimes the charge could be assessed on the basis of the time devoted to the work at a minimum hourly rate for those involved with the work (RIBA, 1967). Although this always raised question marks, architects through their professional bodies argued that the requirement to observe a fee scale was based on the principle that competition between architects should be restricted to the merits of the services offered. In 2006, while arguing against the abolition of scale of fees, nine professional bodies in the property industry in Malaysia argued that “professional services are intellectual and creative products, and not commodities and, therefore, the primary purpose of fee scales is to set a benchmark to establish a reasonable level of remuneration, commensurate with the provision of professional services of an acceptable and recognised standard”. The memorandum signed by all nine in part read:
“In a free market situation, it is often too tempting for consumers requiring professional services to seek out the cheapest, sidelining the issue of quality of service, in particular when such quality is not immediately or easily discernible. This “shopping around” or "marketing for cheaper fees" will lead to an unhealthy widespread undercutting of professional fees. When fees are uneconomic and do not commensurate with the level of the services that ought to be provided, it is not uncommon for the quality of professional services rendered to be compromised. Hence, scale fees will not only benefit, but will also protect, the consumers; since with scale fees professionals will then have to compete with one another on the quality of professional services, and not on pricing.
(The Malaysian Bar, 20 Jan 2006)
In his presentation to the Uganda Society of Architects, Kamya (2008, pp7) says that ‘the practice of negotiating fees or tendering for jobs on a fee basis undermines the morale of professionals and eventually has a negative impact on the standard of projects conceived’ because he goes on ‘consultants are not motivated to excel due to low financial rewards’.
Despite these arguments, scale of fees as recommended and enforced by many professional member bodies are not short of critics. Most critics argue that professional bodies are acting like potential cartels operating only in the interests of their members. Although the scale of fees worked admirably well, the increasing changes in market driven economies and the continuing scrutiny of the construction industry, made their justification increasingly futile and by the end of the 20th century, they had all but gone from most of the developed economies.
Changes in Construction Industry
As earlier stated, there has been a continuous call for change in the construction industry over the last 10-15 years and the procurement process is one of those areas that were identified for change. For instance, part of recommendation No. 13.5 of the Latham report (1994, pp47) was “to choose and then endorse a specific quality and price assessment mechanism for the engagement of professional consultants”. In addition to these recommendations, changes in legislation caused by being part of bigger market unions have made the use of a scale of fees untenable. Smith and Love (2001) observe that procurement processes in the construction industry are changing as a result of the economic, social, financial and political/legislative environments. In a European Commission press release of 2004, the Commission ruled that recommended minimum fees by the Belgian Architects Association were in breach of European Union competition rules. The commission further ruled that like fixed prices, recommended prices reduce competition because they can facilitate price coordination. In the UK, abolition of the mandatory scale of fees was first mooted in 1982 as a result of the report of the Monopoly and Mergers Commission of 1977. Although the fears then were that the quality of service may deteriorate as a result of this move, Hoxley (2007) argues that the quality and standard of service did not fall as result of competitive tendering. In a subtle way that dispels the concerns about quality, Hoxley (2007) says “that while there was no envidence to prove that there was a deterioration in service since the abolition of mandatory fee scales, it is evident that fee levels have fallen, an indicator that surveyors, architects, engineers have become more efficient in order to survive in these competitive times”. In his report (Latham, 1994 pp 43), Sir Michael Latham points out that ‘it is now widely – if in some quarters reluctantly – accepted among consultants that competitive fees are a permanent feature of their work. Paradoxically, there are some who believe that fee scales did not even serve the profession well in the first place and that they are no longer relevant in the new environment were clients demand a lot more than before:
“I do not believe fee scales served the profession well in the past. Fee scales can only reflect averages for typical projects. The design demands of a project, the procurement routes and the services required by clients are becoming increasingly varied. Therefore the average fee scale for that mythical “typical” job is far less relevant and useful”. Richard Brindley, RIBA Director of Practice, 2007)
Facing reality
Over the past few months there has been a campaign by leading and reputable members of the Uganda Society of Architects to fight against competitive fee tendering especially the two-envelope bidding (Kamya, 2008). While this is expected and not only peculiar to Ugandan architects – a similar war is still being fought in Malaysia (Malaysian Bar, 2006) – it is obvious that the war is bound to be lost. The primary reason for the changes in construction was the need to be more efficient and bring about greater competition (Smith and Love, 2001), there is envidence that clients are achieving this without necessarily compromising the quality of service offered (Hoxley, 2007). It is highly unlikely that there will be a U- turn on competitive fee tendering. It should be noted these changes are geared towards a stronger focus on the client and as Smith and Love (2001) assert, it is important that the industry professionals recognise the supremacy of the client. In Uganda, like many other countries, the public sector is the single largest client that the construction industry has. Because of this, the government is introducing measures (mainly through best practices and benchmarking) and setting rules for procurement. The introduction of PPDA in 2003 and its guidelines on procurement for services is one of those measures. The PPDA is as a result of an act of Parliament and all government departments are obliged to follow the law. If by enforcing this law, the PPDA is contravening another law like the Architect’s statute of 1996, it was an oversight that should be corrected by the relevant people. Additionally, it is worth noting that infrastructure development projects in Uganda are mainly funded by loans and grants obtained from the bigger economies, which loans and grants inevitably include these conditions on procurement. The fact that most construction projects are funded by European countries whose union already espouses competitive bidding and frowns upon the notion of fee scales leaves the fight for the maintenance of a fee scale in a parlous state. Despite the fact that the fee tendering appears to be on the decline in the UK (Hoxley, 2007), it is highly unlikely that the newly espoused methods of procurement like partnering will be accepted or even perceived to be fair because of the huge potential for corruption, bribery and favoritism in developing economies like Uganda.
Way forward
In today’s competitive environment fuelled by globalisation and free trade, it is hard to fathom how the Uganda Society of Architects or the Ugandan construction industry in general will insulate itself from these changes. It can be safely argued that rather than fight against the tide, the society and its membership should come up with ways that make our selves more relevant and secure. In its ruling against the Belgian Architects in 2004, the European Communication added that it ‘encourages the national legislators and professional bodies to revise and amend their restrictive rules and practices to enable the professions to better contribute to growth and economic welfare in the EU’. There is need for the Society to recognise that there is a strong wind of change and the earlier we revise our rules the better for all of us. Due to client pressures there is already a change in the way professional consultancy services are offered in the construction industry. We need to be aware of these changes and be prepared to adapt in this volatile and demanding environment short of which our very own survival is threatened. The rise of project management, the increasing use of design and build and increased use of information technology are big changes that we must be aware of and be prepared to adapt to. In his conclusion, Hoxley (2007) attributes the enhanced efficiency in professional firms to the shift to multi-professional organisations. It is not uncommon these days to see architectural firms working as sub-consultants for engineering firms in a job that would typically be awarded to an architectural firm in the past. We need to re-assert our positions as the leaders of the professional team in-charge of constructing buildings by retraining and refocusing the training of architecture. As we re-orient ourselves, we should also take the government and its departments to task to play the game by the rules. While it is well known that successful 2-envelope bidding depends on adequate specification of the service required, careful pre-selection of tenderers and an open, fair and adequate evaluation process, rarely do we get to know the evaluation criteria before hand. Statements like ‘Technical evaluation will carry 80% and financial evaluation 20%’ should be dismissed with the contempt they deserve. Details of what will be evaluated technically should be availed to all tenderers to dispel rumours of some tenderers having had inside information of what exactly was required. There is no reason why one tenderer should be given more marks for having an architect with a post graduate degree on their team when this was not explicitly stated as a requirement in the first place.
Conclusion
The author is aware that much of the envidence provided in this paper is from Europe and it may as well be that the standard and quality of service offered by professionals in the construction industry in Uganda was compromised as a result of the introduction of the 2-envelope bidding. However, in the absence of a research we can only draw on the similarities of the industry and what has been experienced elsewhere. It is recommended that in future the USA should fund research into such areas so that some statements can be made with absolute certainty about the Ugandan construction industry. That not withstanding, the author considers it a useful exercise to think about the changes in the construction industry internationally and what that they mean for us locally. This paper if anything emphasises the fact that the industry the world over is changing into a market driven one responding to the demands being imposed by the clients. While this paper has restricted itself to the changes in the procurement of professional services, changes in project delivery methods especially from design-bid-build to design and build are also worth investigating.
The RIBA’s mandatory fee scales were abolished in 1982 and replaced by recommended fee scales. These were withdrawn in 1992 and then indicative Fee Scales which were withdrawn in 2003.
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