Executive Summary

Contracting has evolved significantly since its origins in the 19th century with pioneers like Thomas Cubitt. The adoption of Design & Build (D&B) contracts in the 1980s aimed to streamline construction by assigning full responsibility to a single contractor. While this approach improved efficiency and risk mitigation for project owners, challenges such as low margins, high risks, and frequent insolvencies continue to plague the UK construction industry.

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This article explores these challenges through the lens of Time, Cost, and Quality (T.C.Q), comparing the two predominant procurement methods: traditional and Design & Build. Traditional procurement often results in delays and cost overruns due to its sequential nature, while Design & Build integrates design and construction phases to improve efficiency. However, both methods present significant risks that require new approaches to ensure long-term sustainability.

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The Origins of Contracting

Modern contracting traces back to the 1st Industrial Revolution, with Thomas Cubitt pioneering the management of all trades under a single company. His work left a lasting legacy, visible in landmarks like Buckingham Palace and Belgrave Square.

The 20th century introduced Design & Build contracts, gaining popularity in the 1980s as a way to consolidate responsibility under a single contractor. While this approach streamlined decision-making and improved efficiency, it also introduced new financial and operational risks.

Despite these changes, the fundamentals of main contracting have remained largely unchanged since WWII. Increasing project complexity, more restrictive contracts, and unfair risk distribution continue to challenge contractors, necessitating a re-evaluation of procurement strategies.

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The Challenges of Modern Contracting

The construction industry faces significant risks, with insolvency rates among UK firms reaching record highs—5,124 UK construction companies went under in 2023, an 18% increase from 2022. The root causes include:

• Low Margins: Competitive bidding and aggressive pricing models reduce profitability.
• High Risk Exposure: Contractors often bear disproportionate risk, leading to financial instability.
• Complex Contracts: Onerous clauses create administrative burdens and potential legal disputes.
• Project Complexity: Increasing regulatory and technical requirements add to project challenges.

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Understanding Time, Cost, and Quality (T.C.Q)

T.C.Q dictates procurement decisions, yet most projects struggle to balance these priorities.

• Time: Delays impact profitability and disrupt project schedules.
• Cost: Budget overruns often occur due to poor risk management and unforeseen issues.
• Quality: Contractors under cost pressure may cut corners, leading to long-term issues.

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Under Design & Build, the main contractor assumes full responsibility, managing subcontractors and suppliers. However, this can lead to conflicts, particularly when cost constraints pressure contractors to use lower-quality materials or undervalue specialist input.

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Comparing Procurement Routes: Traditional vs Design & Build

The construction industry has seen a shift in procurement preferences. In 2018, traditional procurement accounted for 46% of contracts, while Design & Build made up 41%. By 2022, Design & Build had overtaken traditional methods, comprising 54% of procurement strategies.

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Traditional Procurement

In traditional projects:

• The employer hires a design team to develop detailed plans before tendering to contractors.
• The contractor has little to no design responsibility, except for elements under a Contractor’s Design Portion (CDP).
• Fully developed designs provide cost certainty but often extend project timelines.
• The lack of early contractor involvement limits opportunities for value engineering and practical design improvements.

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Design & Build Procurement

Design & Build contracts aim to improve efficiency by overlapping design and construction.

• The contractor is appointed earlier and assumes responsibility for both design and construction.
• Design and cost certainty depend on the clarity of the Employer’s Requirements (ERs).
• Contractors may prioritise cost savings over quality, leading to potential compliance and safety issues.
• Novation of the original design team can create conflicts of interest and compromise design integrity.

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Complex Contracts and High-Risk Projects

Construction contracts are increasingly complex, often placing excessive administrative burdens on contractors. The industry’s shortage of Quantity Surveyors and Commercial Managers exacerbates these issues, making contract management inefficient.

Additionally, evolving regulations demand higher standards for safety and sustainability, increasing project complexity. The lack of integration in traditional procurement and the cost-cutting pressures in Design & Build highlight the need for a more balanced approach.

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A New Approach: Collaboration and Risk Management

The future of procurement requires greater collaboration, transparency, and balanced risk distribution. Key improvements include:

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Bill of Quantities (BoQs)

BoQs provide a clear, quantifiable pricing structure, improving cost transparency and reducing disputes. Despite their benefits, nearly 60% of projects lack a BoQ, missing an opportunity to enhance project certainty and trust.

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Early Contractor Involvement (ECI)

ECI allows contractors to provide input during design development, improving buildability and reducing delays. While it may increase early costs, it ultimately leads to:

• Fewer design revisions and construction delays.
• Better cost control and risk mitigation.
• Stronger collaboration between stakeholders.

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Reforming Contract Structures

Contracts should promote collaboration rather than create commercial obstacles. A shift towards incentive-based contracts can encourage better project outcomes. Shared gains models, similar to NEC contracts, could motivate contractors to identify cost-saving opportunities while maintaining quality.

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Two-Stage Design & Build

A single-stage Design & Build contract often forces contractors to accept excessive risk early in a project, leading to adversarial relationships and quality compromises. A two-stage approach allows:

• Contractors and subcontractors to refine designs before committing to costs.
• More accurate pricing, reducing disputes and financial instability.
• Stronger engagement between project stakeholders, leading to better quality outcomes.

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Technology and Procurement Efficiency

Managing procurement and contract execution is an enormous challenge, especially on complex projects with frequent design changes. Embracing digital tools can streamline processes, improve procurement efficiency, and enhance collaboration.

Platforms like Saint Global’s business intelligence solutions provide:

• Automated procurement workflows.
• Centralised project tracking and reporting.
• Enhanced risk management and cost control.

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The Future of Construction Procurement

The construction industry must prioritise collaboration, risk management, and technology adoption to achieve long-term sustainability. By refining procurement strategies, simplifying contracts, and leveraging digital solutions, the industry can create a more stable, efficient, and high-performing landscape for contractors, clients, and project teams.

The future of construction procurement demands smarter strategies, better risk management, and enhanced efficiency. At Saint Global, we help contractors and businesses navigate complex procurement challenges, optimise workflows, and implement sustainable solutions that drive long-term success. Whether you need to refine your risk management approach, improve cost control, or integrate digital tools for streamlined operations, our expert team is here to support you.

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Get in touch today to explore how Saint Global can help transform your procurement strategy and set your business up for sustained growth.

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1. What are the main challenges facing the UK construction industry today?

The UK construction industry faces several challenges, including low profit margins, high insolvency rates, disproportionate risk allocation, complex contracts, and increasing regulatory requirements. These issues contribute to financial instability and project inefficiencies.

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2. What is the difference between Traditional Procurement and Design & Build (D&B)?

• Traditional Procurement follows a sequential approach where the employer hires a design team before engaging a contractor. This method ensures cost certainty but often results in extended timelines and missed opportunities for early contractor input.
• Design & Build (D&B) integrates design and construction under one contractor, streamlining the process. While this approach improves efficiency, it can lead to conflicts over quality, cost-cutting, and risk allocation.

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3. Why are insolvency rates so high in the UK construction sector?

In 2023, over 5,124 UK construction companies became insolvent, an 18% increase from 2022. The primary causes include:

• Low Margins: Competitive tendering and cost-cutting pressures reduce profitability.
• High Risk Exposure: Contractors bear significant financial and operational risks.
• Complex Contracts: Onerous contract terms increase administrative burdens and legal disputes.
• Regulatory Challenges: Stricter safety and environmental regulations add costs and project complexity.

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4. How do Time, Cost, and Quality (T.C.Q) impact construction projects?

T.C.Q forms the foundation of procurement decisions:

• Time: Delays can lead to financial losses and project disruptions.
• Cost: Budget overruns are common due to unforeseen risks and poor cost control.
• Quality: Cost pressures often lead to compromised materials and workmanship, affecting long-term project success.

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5. Why has Design & Build overtaken Traditional Procurement in recent years?

In 2018, Traditional Procurement accounted for 46% of contracts, while Design & Build made up 41%. By 2022, Design & Build grew to 54%, surpassing Traditional Procurement. The shift is driven by its potential to reduce project timelines and improve coordination between design and construction teams.

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6. What are the risks associated with Design & Build contracts?

While D&B can enhance efficiency, it also presents risks such as:

• Quality concerns: Contractors may prioritise cost savings over quality.
• Conflict of interest: Novation of design teams can compromise design integrity.
• Risk transfer: Contractors assume significant financial and operational risks.

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7. How can the industry improve procurement strategies?

To enhance procurement efficiency, the industry must adopt:

• Bill of Quantities (BoQs): Increases pricing transparency and reduces disputes.
• Early Contractor Involvement (ECI): Improves design input, risk management, and cost control.
• Reformed contract structures: Incentive-based models encourage better project outcomes.
• Two-Stage Design & Build: Reduces financial risk by allowing cost refinement before full commitment.

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8. How does technology improve construction procurement?

Digital solutions streamline procurement, contract execution, and project tracking. Platforms like Saint Global’s business intelligence tools offer:

• Automated procurement workflows.
• Centralised project tracking and reporting.
• Enhanced risk management and cost control.

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9. What is the future of construction procurement?

The future lies in collaboration, risk management, and digital transformation. Simplifying contracts, adopting incentive-based models, and integrating digital procurement tools will create a more efficient and resilient industry.

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10. How can Saint Global help improve procurement strategies?

Saint Global supports construction businesses with:

• Procurement strategy development.
• Risk management frameworks.
• Digital transformation solutions.

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