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One of the key policies in the Government’s Construction Playbook is ‘to harmonise, digitise and rationalise demand’ across the public sector. The Construction Innovation Hub’s ‘Defining the Need’ report – which came hot on the heels of the Construction Playbook at the end of 2020 – does exactly what the policy says. It sets about harmonising, digitising and rationalising demand by aggregating the next five years’ pipeline data from the major government departments (health, education, justice, defence and housing) to identify areas of commonality and difference.
When these documents were published, I commented that they would both be enablers of an ‘Amazon for construction’. Using ‘Amazon’ was meant as shorthand for some form of digital marketplace to advance construction procurement methods, not a suggestion of a perfect model to follow, but it prompted an interesting debate.
It is partly with that debate in mind that I think we should discuss what e-commerce may look like when applied to construction procurement. But it’s mainly because a digital marketplace for construction would be another massive leap forward.
In this article I will look at the reasons for a digital marketplace for construction, the benefits of one and the infrastructure that would facilitate one.
In the simplest terms, I’m talking about e-commerce: buying and selling online. I’ll develop this much further below, but a digital marketplace for construction would allow clients to publish their requirements for standard components or repeatable designs, for example, and allow a wide range of suppliers to bid to supply them.
This is obviously predicated on consistency of demand; when every construction project is bespoke, it’s impossible for manufacturers (other than material suppliers who make highly standardised, commoditised products like rebar) to develop products that are likely to be used repeatedly. But consistency of demand will come with other forms of progress, like widespread adoption of construction Platforms. We will come back to this as well.
When achieved, this will benefit construction in a range of ways.
Firstly: it would provide greater market transparency and diversify the supply chain, meaning that companies of all sizes could engage with large-scale programmes, in the private and public sectors.
Secondly: late payment (particularly between contractors and their supply chains) has been a well-recognised problem in construction for a few decades. It means smaller suppliers, to whom cashflow is critical, operate in a state of uncertainty and ‘financial distress’. Late payment is, unsurprisingly, one of the key triggers of insolvency.
Even way back in 2013, the Government’s ‘Construction 2025’ vision proposed that construction should no longer be characterised by ‘late delivery, cost overruns, commercial friction, late payment’. While this has been partly addressed through legislation such as the Small Business, Enterprise and Employment Act 2015 and the Prompt Payment Code, it is still a problem.
A digital marketplace would help make payments more timely – in some cases even instant. It would also make the construction procurement process more transparent and give suppliers greater certainty of cash flow.
Thirdly: procurement is another significant cause of ‘friction’ in projects, as noted in Construction 2025. The process of arranging and issuing tender documentation and requests for proposals, scoring them and awarding contracts, is very time-consuming and labour-intensive. Projects very often require a complex network of contracts to ensure that the main contract clauses are passed down through the supply chain, resulting in management overhead on overhead being passed back up to the client.
For these reasons, the Construction Playbook notes that:
To support the growth and inclusion of more SMEs in the delivery of public works projects, we need greater visibility of the public spending flowing down the supply chain. Suppliers should invest in automated, digital payment and contracting systems and processes. Digitisation will improve transparency, information exchange, payment performance and contract management across the supply chain. [page 52]
The underpinnings of a potential marketplace are set out in the Playbook, which states that Government:
will look to procure construction projects based on product platforms comprising of standardised and interoperable components and assemblies, the requirements for which will be part of a digital component catalogue.
Contracting authorities should collaborate to find […] ways in which cross-sector platform solutions can be applied […] that enable interoperability of components across different sectors.
Future procurements and frameworks should support this with the development of a market and supply chain that can develop and deliver designs based on these platform approaches, manufacture and supply components, and innovate to improve and develop these over time. [Page 20]
Construction Platforms will be familiar to anyone who has been following Bryden Wood’s work over the last few years. What is interesting here, though, is the strong link being made between standard components and digital libraries, and the need to create a market which supports the approach.
As we’ll see in the following examples, the combination of standard components and digital tools is exactly what we need to facilitate a digital marketplace and improve construction procurement methods.
This is where we start to see how we get to an open and transparent marketplace.
The diagram below is one we often use to explain Platform construction. In the centre are the physical elements: superstructure, envelope, fit out and MEP (mechanical, electrical and plumbing). Surrounding these are the supporting activities and tools which inform and leverage the physical components: spatial analysis, digital tools, and delivery.
‘Spatial Analysis’ uses data from projects or programmes to create insight into what should be included in the physical ‘kit of parts’. This will help to ‘develop and adopt shared requirements and common standards’ as described in the ‘harmonise, digitise and rationalise’ policy.
Spatial Analysis considers the requirements of the spaces that make up assets (lighting, air change rates, thermal comfort, acoustics and so on). It also includes details of the technical performance of the physical components that make them.
This is a key step in defining a Platform but also in creating a digital marketplace. Specifications like these provide a precise and consistent brief for manufacturers to respond to. They provide an objective way to compare and choose between products.
As we move away from procuring for lowest cost and start to make more value-based judgements, this becomes even more important. One of the Construction Innovation Hub’s core themes is Value: ‘driving better social, environmental and economic outcomes through value-based decision making’.
Meeting the technical requirements would be the entry criteria for a vendor, evidenced through aspects such as CQP (Construction Quality Planning). Buyers can be assured that the products meet the specifications and will be reliable and consistent. The choice of vendor will then be dependent on what a client values more, which could be: cost; location (to limit travel miles); overall carbon footprint; or the number of apprentices they take on, for instance.
The ‘Defining the Need’ report is a fantastic first manifestation of the ‘harmonise, digitise and rationalise’ policy. But the use of cross-sector data hints at even more powerful opportunities in the future, such as:
Where better to publish this data than on a digital marketplace?
‘Digital Tools’ include the new workflows that a Platform construction approach will unlock, including automated and computational design. Digital tools and spatial analysis are strongly linked; it is through the spatial analysis work that we have derived the rules that underpin our configurators PRiSM and SEISMIC for housing and schools respectively, or computational design workflows such as Rapid Engineering Model (REM) for Highways England, or Rail: Automated Infrastructure Design (RAID) for Network Rail.
‘Delivery’ covers the new models and ways of working required to leverage the benefits of construction Platforms.
The link from ‘Spatial Analysis’ to ‘Delivery’ is through accredited supply chain partners. The common standards referred to earlier will enable a more stable, engaged supply chain. Rather than dealing with a huge volume of project-specific information and having to identify those parts which are ‘cut and paste’ requirements vs. those which are bespoke, supply chains could be working with a much smaller number of requirements, used at scale. This would enable partners to develop highly repeatable solutions and have them tested or certified or have themselves accredited and ‘pre-qualified’ to meet certain standards, making the entire procurement process more straightforward.
‘Delivery’ is also linked to ‘Digital Tools’ though a digital marketplace which is very much the missing piece of the puzzle. However, with the likes of the Hub’s Defining the Need workstream and with a number of digital configurators in use, we are starting to put the enablers in place to facilitate this.
There are plenty of examples from which we can learn; the combination of standard components, digital tools and e-commerce has numerous precedents. While none of them is a perfect fit for construction procurement, they all have certain synergies with a potential marketplace for Platforms and it is worth exploring them.
Amazon
Amazon is of course the most famous digital marketplace, and the one most people are familiar with (except Alibaba perhaps, depending on where you are reading this). But it is not necessarily the best example to learn from. For one thing, the product range is far bigger and more diverse than construction would need. More importantly, Amazon is not a neutral broker, a place where the price is set by the market. Amazon is itself a participant in the market and therefore sets or influences pricing. A digital marketplace for construction should be as neutral as possible, providing a space for buyers and sellers to find each other, without influencing the transaction.
This US-based ‘manufacturing on demand’ company links customers wanting components (including BMW, General Electric, NASA, Dell and Bosch), to a network of 5,000 suppliers across the USA, Europe and Asia. Typically, a client uploads a request for a proposal via 3D models or technical drawings and specifications. This is distributed to pre-qualified suppliers who have the capability and capacity to respond. A price is calculated within seconds (for straightforward processes such as CNC machining) to a day or so for more complex requests. Xometry has a huge amount of pricing data from which it can generate instant quotes which can be validated or refined with vendors. Once the price is agreed, the selected suppliers produce the components to set specifications and arrange delivery.
This ‘manufacturing as a service’ could have significant benefits for a Platform approach to construction. What can we learn?
Brick Link Studio
Lego® is an interesting ‘Platforms’ case study in itself and a great example of how standard components do not limit individuality of design. There are also multiple manufacturers of the components. Since the last patent underlying the brick design expired in 1978 there are numerous legitimate systems such as Megaconstrux and Kre-O which are dimensionally identical to, and therefore compatible with, Lego bricks.
For the purposes of this article, however, I am even more interested in a company called Brick Link. It was set up in 2000, initially called BrickBay, as a marketplace to allow fans of Lego to buy and sell vintage Lego sets and retired pieces. It has since grown into the world’s largest community of Lego fans, where people can also share ideas and designs. It was acquired by the Lego Group in 2019.
Brick Link is now an extensive marketplace hosting over 10,000 vendors in 70 countries. Users can search for pieces or sets then select vendors based on region, rating, price etc.
While Lego have their own ‘Digital Designer’ configurator, Brick Link developed ‘Brick Link Studio’, a free configurator that allows users to generate their own designs from a database of every piece of Lego ever manufactured.
The software has some superb features, including a ‘stability check’ to ensure the proposed design is suitably robust, a photorealistic rendering engine and an instruction-making tool to create assembly manuals in the same style as for the sets manufactured by Lego.
The tool is also integrated into the Brick Link marketplace, so once a design is complete (and even as it is being developed) the price is constantly displayed, parts can be interrogated, and the bricks can be ordered direct from the marketplace.
What can we learn?
IKEA enhancement
Ikea is another excellent example of a Platform that most people are familiar with. As well as the physical components, Ikea have also created their own ecosystem.
So, while there is a ‘kit of parts’ that includes components common to lots of different pieces of furniture (fittings, hinges, drawer bases and sides, dimensional grids etc.), the process has also been highly standardised: the format of the instruction book is always the same, and you only ever need a limited selection of common tools.
Ikea also have their own configurator for kitchens, ‘3D Kitchen Planner’, which allows users to create a 3D model which generates a list of components and a price. Or you can book an appointment with an Ikea specialist who will help you decide on the right kitchen and layout and create the model for you.
There are now a number of companies such as Hølte, Husk and Plykea, who will provide a bespoke kitchen using Ikea base units. These take the output from the Ikea kitchen configurator as a starting point, to which they add doors in a range of material finishes, handles and worktops. So new businesses can be built on top of Platform approaches; in this case, addressing a gap in the market for customers who don’t want the expense of a fully bespoke kitchen, but do want some individuality.
What can we learn?
Other sectors have grasped the opportunities and challenges faced by e-commerce in different ways and with different levels of success, but it’s now an unavoidable feature of daily life for most businesses and individuals. It is something that construction should – and can – also be heading towards. There is no question that a digital marketplace for Platforms is achievable; the policy context is in place and there is a growing body of work that would support this. It’s up to the industry to decide what it looks like. We should shape this now, proactively, rather than wait for external forces or commercial imperatives to impose something on us.
Considering the examples above, here are the key aspects I believe a digital marketplace for construction Platforms should include:
Obviously, this is a complex challenge. It raises a whole range of issues that would need resolving regarding insurances, warranties, IP, etc. And there is the big question of who would own the marketplace? Ideally, this would be a neutral broker, such as Government. And there is even a partial precedent here in the UK in the form of G-Cloud, the UK Government’s Digital Marketplace for cloud technology and specialist digital services.
Creating a digital marketplace for construction procurement would have benefits that far outweigh the challenges. Even the steps on the journey, as focus on interoperability, data standards and consistent specifications, would help accelerate the digital shift that is already underway. There is plenty to think about, but I hope we can continue the debate and, together, create the common vision that will add a whole new dimension to our journey of transformation.
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