Contractual arrangements and models of procurement set the foundation for the way a project is delivered, and are therefore crucial to overall success. unfortunately, traditional approaches can lead to a misalignment of incentives and suboptimal outcomes, especially for specialist contractors and other parties operating down the contracting chain. A shift in approach is required to ensure that project risks and profitability are more appropriately shared, which would also catalyse increased innovation and productivity improvements.
The AMCA believes the following principles are vital for a more sustainable and productive building and construction industry:
- Tender processes should include selection criteria that recognises value, collaboration and past performance, rather than cost alone.
- Procurement models and contractual arrangements should incentivise collaboration and innovation through the more equitable allocation of risk and profitability.
- Project risk should be allocated to the party most capable of managing it.
- More collaborative procurement models require increased transparency with respect to contracting terms. This would improve contract pricing, eliminate reasons for disputes and provide increased certainty.
- Innovative procurement models must be supported by improved procurement processes such as the digitisation and standardisation of design and procurement workflows.