Research informs new British Standard for construction procurement, benefitting industry and clients
Submitting InstitutionUniversity of Reading
Unit of AssessmentArchitecture, Built Environment and Planning
Summary Impact TypeEconomic
Research Subject Area(s)
Built Environment and Design: Building
Commerce, Management, Tourism and Services: Business and Management
Summary of the impact
The innovative construction procurement framework developed from research
conducted at the University of Reading between 2001 and 2012, has been
adopted by industry in the UK and overseas and has informed the
development of a new British Standard for construction procurement.
Working closely with a range of industry participants, the School of
Construction Management and Engineering developed a new understanding of
the costs of construction tendering and procurement. By focusing the
enquiry on finance, project cash flow and the relationships between
markets and business models, the research departed from previous analyses
of tendering and procurement that have tended to rely on anecdote and
generally accepted practice. The results led to the development of a new
framework that sets procurement within a business context and explains how
unnecessary tendering and procurement costs can be avoided.
A succession of major reviews of the UK construction sector over the past
two decades have concluded that the ways in which construction work is
tendered and procured pose major barriers to improving efficiency and
performance within the industry (see National Audit Office, 2001). In
particular, contractors' costs of tendering, though largely unquantified,
were believed to be disproportionately high and little was known about the
impact of these high costs on construction businesses. Little was also
known about the circumstances in which different forms of procurement
might facilitate or inhibit more general attempts to introduce innovative
and effective working practices that shift the process from competitive
tendering to a more co-operative and collaborative process. In 2001, a
research programme, initiated by a strong consortium of construction
clients, contractors, consultants and industry bodies, and led by the
University of Reading, set out to explore the structure and magnitude of
tendering costs and to examine more effective ways of procuring and
assembling project teams, which would benefit both the industry and its
Fourteen leading construction and property businesses, including Amec,
Balfour Beatty, Kier Group, Land Securities, and Gardiner & Theobald,
actively participated in the EPSRC funded research (Section 3 ). The
Reading team, led by Will Hughes, Professor of Construction Management and
Economics (April 1989 to date), conducted in-depth interviews with the
industrial participants and analysed their supply chain processes and
relationships in a series of case studies. As the project progressed, the
team worked very closely with industry participants that already had a
specific focus on improving collaborative work and were collecting data on
tendering costs. As a result, an extensive data set was obtained by
integrating industry data into Reading's existing research. The Reading
team used Transaction Cost Economics to develop, for the first time, a
deep understanding of tendering costs through different stages of
construction projects and for different tendering/procurement processes
Quantifying tendering costs
The Reading team found that (a) construction companies did not monitor or
assess the costs of tendering; (b) tendering costs varied widely across
the construction sector, with contractors spending relatively little of
their turnover on tendering (0.5-3%) while consultants spent up to 20% of
their turnover on tendering ; and (c) there were instances where both
clients and construction businesses, each with their own objectives,
attempted to manipulate the market and tendering processes through power
These findings allowed participating construction companies to develop a
better understanding of the costs associated with the tendering process,
and how they could manage and reduce these costs. By focusing on
transaction costs in their supply chains, contractors could, for example
identify and remove non value-adding inputs. Contractors could also seek
earlier involvement in the procurement process to help improve their bid
success rates and the costs of unsuccessful and abortive bidding .
Additionally, the research provided valuable insights to the client
participants about the processes of construction tendering and
procurement. In particular, it showed how these processes could be
designed and managed to provide more effective outcomes while avoiding the
potential for manipulation by tenderers in ways contrary to clients'
interests. Key recommendations for clients included the need to provide
bidders with full information at the start of the tender period, and to
allow sufficient time for tender preparation ; to keep tender lists
short and manageable; to select contractors on the basis of the value they
can contribute; and to standardise and simplify pre-qualification
processes and documentation . By providing clear, empirically-based
evidence of tendering costs, the research benefits construction firms more
generally by helping them to assess how tendering costs vary by project
role and form of procurement.
The research was the first major attempt in the construction sector (and
likely in any other major industrial sector) to quantify and assess the
costs to industry of securing work through the tendering process. This
work provided the empirical basis for the development of improved
industry-wide guidance and standards on construction procurement.
References to the research
A total of 20 academic and policy papers have been published from this
research. In addition, the work has been incorporated into a new national
(British) standard for construction procurement. Academic papers in the
selection below have been published in peer-reviewed high quality journals
and have also been internally assessed as of 2* quality of above.
 Lingard, H., Hughes, W.P. and Chinyio, E. (1998) The impact of
contractor selection method on transaction costs: a review. Journal of
Construction Procurement. 4(2), 89-102.
 Laryea, S. and Hughes, W. (2008) How contractors price risk in bids:
theory and practice. Construction Management and Economics, 26
(9): 911-924. DOI: 10.1080/01446190802317718
 Hughes, W.P., Hillebrandt, P., Greenwood, D.G. and Kwawu, W.E.K.
(2006) Procurement in the construction industry: the impact and cost
of alternative market and supply processes. London: Taylor &
Francis. xiii + 208pp (ISBN 0-415-39560-7). Will be made available upon
 Hughes, W.P., Kwawu, W.E.K. and Hillig, J.-B. (2010) Contracts and
incentives in the construction sector. In Caldwell, N. and Howard, M
(eds.) Procuring complex performance: studies of innovation in
product-service management. London: Routledge. pp 59-77. (ISBN
978-0-415-80005-1). Will be made available upon request.
 Gruneberg, S.L. and Hughes, W.P. (2011) Performance-based
contracting. RICS Research Report. January 2011. ISBN 9781842196236. 82pp
 Gruneberg, S.L., Hughes, W. and Ancell, D.J. (2007) Risk under
performance-based contracting in the UK construction sector. Construction
Management and Economics,. 25 (7): 691-699.DOI:
 Laryea, S. and Hughes, W. (2011) Risk and price in the bidding
process of contractors. Journal of Construction and Engineering
Management, 137 (4): 248-258. DOI:
 EPSRC GR/R20168/01 and GR/R20151/01 — The impact of market and supply
configurations on the costs of tendering in the construction industry (PI:
Will Hughes) (2001-03). £123k.
Details of the impact
Construction industry bases procurement approaches on research
The research has led to companies taking a new approach to procurement.
Examples of this are the cases of Provelio and Balfour Beatty. Since 2008
Provelio, a Project Management provider in Property and Construction, has
incorporated procurement decision models into their business practice,
which allow clients to "rigorously understand what their best procurement
solution would be rather than rely on traditional advice. [Provelio's]
approach is based on Will Hughes' procurement framework that is reported
in " (section 5 [a]). Balfour Beatty has used the Reading research to
explore "such issues as... transactional costs in the supply chain and the
need to take non value adding tiers out of the supply chain" [b]
Research informs new British Standard for construction procurement
In 2006 the development of a new British Standard (BS) for construction
procurement was seen by policy makers as key to developing better
construction business practice. The idea of a new BS was supported by the
Constructing Excellence Procurement Task Group — a panel of practitioners,
including Hughes, concerned with the development of procurement practice
guidance. By 2008 the British Standards Institute (BSI) had established a
technical drafting committee for a new British Standard (BS) in
Construction Procurement; Hughes was an invited member of the committee
and other members were drawn from Constructing Excellence as well as the
major construction professional institutions, including the Royal
Institution of British Architects, Chartered Institute of Building and the
Royal Institution of Chartered Surveyors. The research conducted at
Reading fed directly into the drafting of the new standards through
Hughes' involvement in the drafting committee [c].
Following a period of consultation with industry, the new BS on
construction procurement (BS 8534:2011, Construction procurement
policies, strategies and procedures — Code of practice) was
published in August 2011. It is designed to complement a number of
important international procurement standards (in particular ISO 10845,
Parts 1 and 2) that have been adopted into British Standards and deal with
procurement processes and documentation.
Unlike other procurement guidance which concentrates on procurement
processes and selection criteria, this code is novel in the way that it
concentrates on the development of procurement policies and strategies to
frame the selection and appointment of the design/construction team.
Additionally, it sets the procurement process within the overall project
business case, and draws together and distils much of the available
construction procurement guidance into a usable and practical framework.
Construction industry and clients benefit from new Code of Practice
The Code of Practice published in 2011 is used by those responsible for
construction procurement in both the public and private sectors and
provides a benchmark of best practice that will help in the avoidance of
procurement disputes. Construction clients, in both the public and private
sector, and all sectors within the construction industry have benefitted
from this guidance as a result of more streamlined and effective
procurement processes leading to reduced costs borne by the supply chain
and improved procurement outcomes.
The reach of this project goes beyond UK construction. As a result of the
research, and the publication and profile of the BS 8534, Hughes has been
invited to participate in a number of influential industry and policy
- Member of drafting committee for the BS Publicly Available
Specification (PAS) 98: Formation of consortia, 2009-10, which covers
consortia in the IT domain
- Member of the Department for Business, Innovation and Skills (BIS)
Construction Industry Innovation and Growth Team (Major Projects),
2009-10 [d, Pg 218].
The work has also had international impact. The Senior General Manager
for Japan Post Holdings noted "specific examples where we have been
able to apply the lessons from this research [on] our major construction
projects are JP Tower (new Tokyo Post Office), Nagoya high-rise building
project, etc." [e].
Reading expertise shapes conclusions of major government enquiry
Hughes' findings on the potential for bid manipulation  led to his
involvement as a key member of the consultant team in a major government
enquiry by the Office of Fair Trading (OFT). The OFT issued a Statement of
Objections against 112 firms in the construction sector in England in
April 2008 following one of the largest ever Competition Act
investigations, which revealed illegal anti-competitive bid rigging
activities on 199 tenders between 2000 and 2006. Hughes' research was
cited multiple times in the OFT's Final Decision, which was published in
September 2009 [f] and affected building projects across England worth
more than £200 million [g]. The Director of Europe Economics, also the
OFT's lead consultant on the enquiry, stated that Hughes "provided
valuable insights into construction industry business models and helped
shape our conclusions". This inquiry further strengthened the case
for best practice guidance in construction procurement [h].
Additional routes to impact
Hughes and his colleagues have disseminated their research findings
through numerous channels:
- Publication of results in the peer reviewed journals and in
textbooks/collective volumes [1-6].
- Raising awareness in the construction sector `trade' literature (e.g.
`Survey slams huge cost of tendering', Contract Journal, 21
- Raising public awareness more generally (e.g. Hughes was involved in a
discussion on a BBC Radio 4 `File on Four' programme on construction, 10
and 15 July 2007)
- Direct involvement in policy discussions and crafting guidance (e.g.
British Standards drafting committee)
- Presentation of results as keynote for international conferences,
including the West Africa Built Environment Research Conference in
Nigeria (24-26 July 2012).
Sources to corroborate the impact
[a] Letter from Managing Director, Provelio (†) corroborating overall
impact of the Reading research on Provelio's work as construction project
[b] Letter from Business Development Manager, Balfour Beatty (†)
corroborating impact on the company's approach to tendering and on the
need to emphasise value rather than price.
[c] Chair of Technical Drafting Committee, CB/500, British Standards
Institution (*) for corroboration of Reading's research impact on guidance
[d] HM Government (2010) Low Carbon Construction Innovation &
Growth Team Final Report < https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31773/10-1266-low-carbon-construction-IGT-final-report.pdf>.
Evidence of Hughes' participation in this influential policy body.
[e] Letter from Senior General Manager, Japan Post Holding Co. Ltd. (†)
corroborating Influence of the Reading research on the procurement
practices of Japan Post Holdings.
[f] Bid rigging in the construction industry in England,
Competition Act 1998, Decision of the Office of Fair Trading, No.
CA98/02/2009 (21 September 2009), Case CE/4327-04.
Cites  on pages 292 and 318.
[g] `Bid rigging in the construction industry in England', OFT,
summary of the infringement [website] <http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/ca98/decisions/bid_rigging_construction#.UlXRPFAqiSp>
accessed 9 Oct 2013. Gives figures that give perspective to the importance
and impact of the OFT enquiry.
[h] Europe Economics (*) corroborating impact of the Reading research on,
and Professor Hughes's input to the Office of Fair Trading enquiry in 2008
into bid rigging and anti-competition practices in UK construction.
(†) Letters available upon request
(*) Contact details submitted separately as per guidance