Insight - Building trust in PPP.

(From Financial Director)

Byline: Anthony Harrington.

One of the biggest challenges posed for the construction industry by the Public Private Partnership (PPP) initiative is the need to break with its usual rush to litigation. In other words, instead of construction companies suing everyone else over everything, they have to develop the kind of mature relationships that can sustain the 25-to-30-year partnerships that are the bedrock of PPP.

Euan Wilson, a partner in the capital projects department of law firm Maclay Murray & Spens, says the construction industry has developed a reputation for bidding low, then talking the price up through the life of a contract by an adversarial treatment of every issue with possible cost implications. "Traditionally, this is a pretty litigious sector, and it is par for the course for a building contract to end up in adjudication or in the courts," he says.

So what is it about PPP that makes a different outcome likely? To give one instance, at present, one rumour is that Amey and the Miller Group, successful joint bidders, along with Bank of Scotland, on the Glasgow Schools project, and again on the Edinburgh Schools project, have fallen out, at least as far as cooperation on future projects is concerned. Certainly, they are not bidding jointly for the next slice of Scottish Schools PPP, which tends to suggest that the rumours have some foundation.

"Rubbish," says Miller Group finance director John Richards. "We're still working very well together on the Glasgow and Edinburgh projects. Besides, we don't play the litigation game. We got out of that four or five years ago and we've transformed the way we do business to a negotiated contract model."

Broadly, this model is one in which the construction company and the client work together from the project inception stage to create a true joint design and build. Traditionally, the construction company would get the contract late in the day, when the plans were set in concrete (so to speak). The contractor's estimators department would then get to work and, as each section of the work was completed and part payment became due, a battle between the client's professional cost experts and the contractor would ensue. Everything that could possibly be called a variation from plan would be charged for according to the contractor's view, and contested from the client's point of view.