My Lords, having had the very last amendment debated in Committee, I now mount my retentions hobby-horse once again, but riding on a slightly different course and in the first group on Report. My Amendment 7 would give the building safety regulator a duty to keep possible safety risks arising from contractual arrangements, including payment conditions such as retentions, under review in fulfilling his or her role of improving building safety and standards.
Procurement and contractual arrangements are crucial in setting the tone for relationships between different-level contractors in a building or building maintenance project. They can determine whether those relationships are adversarial—seeking advantage for one side against the other and looking to minimise cost—or collaborative, mutually beneficial and focused on adding value and maximising safety.
Yesterday, I attended a webinar hosted by King’s College London to launch the Guidance on Collaborative Procurement for Design and Construction to Support Building Safety, produced by the Department for Levelling Up, Housing and Communities with the support of its procurement advisory group. To quote the invitation,
“preventing another Grenfell Tower disaster depends on a major overhaul of construction procurement practices, breaking away from the adversarial ‘race to the bottom’ through which low prices undermine safety and quality.”
The first speaker was none other than Dame Judith Hackitt, who gave her strong support to the guidance. She emphasised that culture change in construction has to start at the very beginning of projects, and that contractual arrangements are crucial in setting the tone for relationships between different-level contractors. She also restated her view that retention policies are totally inconsistent with collaborative procurement and do not encourage a focus on building safety. Contractors assume that they will not receive the funds withheld and look for other ways to reduce costs, through cutting investment in training and quality or using substandard materials. I only wish that Dame Judith could be speaking on my amendment.
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Professor David Mosey, who was one of the two authors of the guidance, gave an outline. It sets out how improved collaborative procurement practices should be linked to safety approvals for any in-scope new build or refurbishment, following four principles: first, selection of teams on value rather than cost criteria; secondly, early involvement of supply-chain participants; thirdly, collaborative relationships, including with residents; and, finally, ensuring the golden thread of digital information throughout the life of a project. The guidance is closely aligned with the gateway process created by the Bill, spelling out questions to be addressed at each gateway to ensure that these four principles are met. It also makes specific reference to retentions, echoing Dame Judith’s views in stating:
“Arguably, any collaborative relationship should exclude the use of cash retentions. If exceptional circumstances require a retention, then it should be held in an account ring-fenced by a trust arrangement.”
The one thing that concerns me about this excellent and highly practical guidance is whether it will actually be followed. I echo the comments of the noble Lord, Lord Foster, about guidance being not followed more often than followed. Professor Mosey mentioned what he described as
“the ‘Bermuda Triangle’ of idealistic debate”—
probably what we are having now—
“cynical criticism and unrealised good intentions”,
into which so many worthy previous initiatives have disappeared without trace. Lots of good advice is available, including the Construction Playbook developed by the Cabinet Office and the Prompt Payment Code, but it often seems to be honoured more in the breach than the observance. Meanwhile, after several years of work by BEIS, the Government still have not decided on a legislative approach to tackle retentions, claiming to be waiting for the emergence of an industry consensus, which seems even less likely to arrive than Godot.
My amendment seeks to ensure that this guidance fares better. By requiring the building safety regulator to look for safety risks arising from contractual arrangements, it would create a process for highlighting the safety impacts of inappropriate procurement arrangements and contract terms, including the use of retentions, and enabling intervention if necessary.
If the Minister cannot accept this modest but important improvement to the Bill, I hope that he may commit to finding another way to formally incorporate his department’s collaborative procurement guidance in the new regime, perhaps through secondary legislation. The guidance is clearly intended to be part of the regulatory framework, but I do not see how this will happen as it stands. Guidance is by its nature voluntary and past experience shows all too often that the construction sector does not do voluntary. Some sort of statutory underpinning is needed to ensure that the fundamental importance of procurement and contractual arrangements to the building safety regime embodied in this Bill is recognised and acted on. I look forward to the Minister’s response.