Valuing innovation in construction and infrastructure: Getting clients past a lowest price mentality

Abstract

Purpose

The purpose of this paper is to continue the discussion about the actual and potential role of clients in driving more innovation in the construction sector through interviews with some of the Australian construction industry’s leading clients, contractors and consultants.

Design/methodology/approach

This paper synthesises previously disconnected literature reports interviews with 46 of Australia’s leading clients, contractors and consultants.

Findings

The findings confirm the importance of client leadership, yet also shows that lowest price remains the dominant selection criterion in tenders. Many clients lack the insight and tools to play a leadership role and are unwilling and unable to employ strategies to foster better performance and more innovation because of internal governance constraints, a poor understanding of how built assets contribute to core business objectives and a narrow understanding of their central role in driving innovation. The authors conclude that in reality, the potential for investment in innovation is restricted to the relatively few large companies who are lucky enough to deal with sophisticated clients which procure buildings on a frequent basis. The vast majority of the industry are left to work with clients who procure buildings very rarely, who want the lowest possible price for their investment and who do not see them as a key long-term asset in the success of their core business.

Research limitations/implications

The research is based on 46 interviews. It represents and external perspective on client leadership. Further research is needed with clients to validate the results and provide a counterpoint.

Practical implications

The practical implications of this research are that clients need to be more wary of equating low price with good value. While the merits of competition are widely lauded, the research shows that clients can extract more value from the construction industry by an integrated project strategy that does not lock-in solutions too early, that provides scope and time for innovation to happen, which encourages collaboration, early involvement and which distributes risk and opportunity fairly and openly. According to the research, many clients are unwilling and unable to do this because of internal governance constraints, a lack of tools to value innovation in bids, a poor understanding of how built assets contribute to core business objectives and a narrow understanding of their central role in driving innovation.

Social implications

Given the planned infrastructure programme in Australia and many other countries, the potential productivity and efficiency benefits to be derived from this research are significant. These saved resources would then be available for further investments in social and economic infrastructure.

Originality/value

This paper’s originality lied in the synthesis of previously disconnected literature on construction innovation, efficiency and productivity.

Citation

Loosemore, M. and Richard, J. (2015), "Valuing innovation in construction and infrastructure: Getting clients past a lowest price mentality", Engineering, Construction and Architectural Management, Vol. 22 No. 1, pp. 38-53. https://doi.org/10.1108/ECAM-02-2014-0031