Developing a new procurement model, using behavioural economics, to enable continuous improvement of productivity and better value in large UK infrastructure projects

Perks, Martin (2024) Developing a new procurement model, using behavioural economics, to enable continuous improvement of productivity and better value in large UK infrastructure projects. Doctoral thesis, Birmingham City University.

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Abstract

Global construction has been blighted by productivity inertia caused by behavioural bias for decades. While other industry sector productivity has grown more than fifteen-fold since 1960, construction has stagnated with no more than a seven to ten percent overall growth. McKinsey Global Institute’s report Reinventing Construction: A Route to Higher Productivity, reported infrastructure construction amongst a small group of outperforming market sub-sectors at 15 to 20 percent. This research, which results in a unique procurement model designed for high productivity, builds on that performance using behavioural insights to counter damaging biases. The new model changes trading relationships from traditional ‘opt-in’ to a nudged ‘opt-out’ contract structure creating a different responsibility dynamic between client and supplier.

This research builds known behavioural economic and insights theories into the recognisable but different infrastructure construction procurement model to improve productivity. Highways England, set up to run England’s strategic road network, recognised a need to accelerate productivity change. The procurement model that resulted, Regional Delivery Partnerships can be refined for any infrastructure sector and supplies a key step forward in contracting based on integrated project delivery.

Using a combination of counter bias strategies built from loss aversion and nudge theory a new procurement model focuses on ‘opt-out’ to drive higher productivity. By setting up an integrator, to create an integrated project team, Regional Delivery Partnerships uses loss aversion as the key to better innovation. It empowers the integrator to counter uniqueness bias and find and eradicate waste (time and money) to enhance productivity. Reward is aligned to both optimised efficient design and high productivity working. As 100% of budget underspend can be kept rewarding the integrator, the potential of not achieving this triggers loss aversion and motivates change using the principles of escalation of commitment in favour of the client. Performance data is also used to motivate by allocating future work to reduce acquisition costs from secondary competition, long held as a wasteful market inefficiency.

Using wideband Delphi workshops, facilitated model-building, thought trials, and constructionism; choice architectures were remodelled into a new outcome and value focused procurement model. This applied research charts the process and techniques used to develop, build, test, and deploy the model in open market competition. It can be used by any infrastructure sector client to replicate a sector specific version of Regional Delivery Partnerships that changes trading choice architecture towards higher productivity.

Change is hard to do. Practitioners sponsoring such change must manage the expectations of business and investment decision makers. This is evolution and not revolution and requires patients, tenacity, relentless education for participants, and dogged determination that, with time, the change and associated benefits will emerge. National Highways in deploying Regional Delivery Partnerships planned this timeline as 15 – 20 years.

Item Type: Thesis (Doctoral)
Dates:
Date
Event
October 2023
Submitted
10 January 2024
Accepted
Uncontrolled Keywords: Productivity, infrastructure, highways, procurement, behavioural economics, nudging, choice architecture, change.
Subjects: CAH13 - architecture, building and planning > CAH13-01 - architecture, building and planning > CAH13-01-01 - architecture
CAH13 - architecture, building and planning > CAH13-01 - architecture, building and planning > CAH13-01-02 - building
Divisions: Doctoral Research College > Doctoral Theses Collection
Faculty of Computing, Engineering and the Built Environment > College of Built Environment
Depositing User: Jaycie Carter
Date Deposited: 11 Sep 2024 08:03
Last Modified: 11 Sep 2024 08:03
URI: https://www.open-access.bcu.ac.uk/id/eprint/15824

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