Wednesday, 17 August 2016

Pre-Modern Building Procurement

 A Short History of Building Procurement: Part 1

This short history describes the evolution of procurement in the building and construction industry, from the early modern system of production in the 17th and 18th centuries to the emergence of the general contractor and the professions with modern methods of procurement in the 19th century. Procurement here is the commissioning or purchasing of buildings and structures, and any associated supplies and services required, by a client that pays for the work. A historical overview is useful because there is a surprising, and often not well-recognized, continuity in the methods used and problems found.

The process of designing and delivering buildings is as old as civilization. However, the procurement of projects has not attracted as much attention as the buildings and structures themselves, or the organisation of the work, because in the distant past this was done by imperial edict for essential granaries, armories, pyramids or temples. Procurement itself dates back to a red clay tablet found in Syria, dated from between 2400 and 2800 B.C. This earliest procurement order was for “50 jars of fragrant smooth oil for 600 small weight in grain” (Coe 1989: 87).

The earliest records on construction procurement are from Rome in the middle of the first millennium before the present era (around 500 BC). What is significant about the history of procurement is the continuity they show, in how the basic characteristics of the methods used have been around since then. Straub (1952) quotes Plutarch on construction where ‘artists’ submit estimates and drawings and “they select the one who, at the lowest price, promises the best and quickest execution”. It appears to have been common to divide large projects into work packages, with the Long Walls of Athens broken into 10 and the Roman Coliseum into four separate contracts (Morris 2013: 14, again based on Plutarch).

Along with continuity of procurement methods, issues around client and contractor performance are also familiar. The stereotypes of capricious and poorly informed clients and duplicitous contractors have a long history. For example, Marshall Vauban was a military engineer and builder of fortifications for the French monarchy who insisted suppliers should be selected on quality, not just on price. In a letter from 1685 (cited by Callender 2003) to his Minister he complained of delays due to budget cuts and argued:
Breaking of contracts, failures to honour verbal agreements and new adjudications, only serve to attract those firms which do not know which way to turn, rogues and ignoramuses, and to make those with the knowledge and capability of directing firms, beat hasty retreats.

I would add that they delay and inflate considerably the cost of these works, which are the worst since these cuts and the cheapness sought are imaginary. For the contractor is ruined … He does not pay the merchants who supply the materials, pays badly his employees, cheats on those he can, has only the worst, and since he is cheaper than the others, uses the poorest materials, quibbles about everything and is always crying for mercy … go back to plain dealing; pay the price for the works and do not deny an honest salary to a constructor who fulfils his duties; that will always be the best deal you can find.

This history of procurement is about its development in England, and in particular in London where capital (often made through the expansion of trade) was concentrated and many of the major projects of the time were built. These developments are relevant to many countries today because, more than any other nation, England has shaped our modern language, laws, institutions, and governance over the past half-millennium. While ideas like competitive tendering, enforceable contracts, subcontracting and measurement of costs with a bill of quantities are now widespread and common, this was not the case 200 years ago. In other countries, especially the US and elsewhere in Europe, the details of their history of procurement are different, but the modern system established in England and the UK at the turn of the 18th century is the foundation on which they are built.

Early Procurement Methods

Through the Early Modern period in Europe, until the end of the 17th century, the usual way of getting building work done was to employ craftsmen directly. If the client did not supervise the work himself, an agent would be appointed, and craftsmen were employed at daily wage rates set by medieval craft guilds that guaranteed quality. The trades and guilds were based on the materials used, such as wood and stone, and had an apprentice-journeyman-master structure that set standards of fairness enforced by the courts run by their Companies (Knoop and Jones 1933). This had been the normal way of building for centuries, although even then there were different methods of employment and payment.

While the common system was direct employment at day rates, sometimes work was done under a system known as ‘measure and value’, where work done in the different trades was valued based on an agreed set of prices and wages rates. Master craftsmen would make an agreement (in effect but not in form a contract) for building, and employ other craftsmen and labourers to do the work, called task work. The payment was still usually on a measure and value basis not for an agreed price, although there was some lump sum work. As use of this method of ‘contracting’ increased the direct labour system declined, with wages and prices still regulated by the guilds. Measuring was usually done on completion and had its own issues, mainly with delay, disputed work and associated litigation.

A third way of contracting was known as in grosso (by the great), meaning for an agreed, fixed sum. Harvey found examplnes from the 15th century where what today would be called a lump sum contract was used to deliver projects. An important difference was that they involved separate agreements with the various tradesmen, however in this case the price was agreed in advance instead of work getting valued when done. This form of contracting was strongly opposed by many clients and craftsmen, who felt that the in grosso formula would produce poor quality and high prices, and sureties were often demanded to guarantee completion if the contractor did not complete the work as agreed. The method of contracting ‘by the great’ led to the end of regulated prices and undermined guilds.

There are also early examples of fixed-price contracts, typically with the separate tradesmen involved on a particular project. These were quite rare. It was not unknown, however, for a single person to carry out a complete project through subcontracts or direct employment, and this led eventually to the modern contracting system. Harvey (1975) describes the building of the jail in York in 1377 using a fixed price and a contractor with agreed stage payments.

Christopher Wren, in a 1681 letter to the Bishop of Oxford, explained that there were three ways of getting a job done and the problems with each one: working by the day, by measure, and by the great. His preference was to work by measure, although good measurers were hard to find, and he argued that contractors employed by the great who were not familiar with the tasks “doe often injure themselves, and … shuffle and sligh the worke to save themselves” (McKellar 1999: 86). In the building of St Paul’s after the Great Fire of London during the 1670s, responsible for both supervision of the work as well as the design, Wren employed different sets of craftsmen under these three different types of contracts to do the work, but most of the work used the method of separate contracts with different trades, a form of contracting by the great. This spread the risk and became the most common form used in the late 1700s.

By the end of the 17th century some procurement was being done through a building agreement, usually for speculative property developments, between the client or developer and the builder. These were legally binding documents that specified the structure or structures, their size and materials, payments and any financial penalties incurred after the agreed time. McKellar (1999: 83) describes these as “fairly comprehensive and sophisticated”. They contained arbitration clauses, and resort to the courts only happened when arbitration failed. The main problem was quality control, and common phrases like ‘well made’ or ‘good work’ made disputes over quality common.

The role of property developers and speculative builders at this time is an important element in the development of the building industry. Some of these were lords (Bedford, Southampton, St.Albans) but many were not (Babon, Cubitt, Bond). Literate and, essential for estimating, numerate master craftsmen became master builders. Usually bricklayers or carpenters, these men would build for the speculative market and employ or contract with tradesmen. They used surveyors to mark out building sites and measure completed work to settle contracts. There was a wave of house building in the mid-seventeenth century, documented by Summerson, led by ambitious craftsmen and opportunistic developers who were not deterred or prevented from building by royal decrees or church interests, unlike the other European capitals:
London is above all a metropolis of merchandise. The basis of its building industry is the trade cycle rather than the ambitions and policies of rulers and administrators. The land speculator and adventuring builder have contributed more to the character of the Georgian city than the minister of the Crown … or the monarch (Summerson 2003: 9)

At this time the industry was clearly undergoing changes. For many years, even centuries before, building had been done by independent craftsmen belonging to guilds, or Companies, who usually worked directly for a client. The end of the 1700s, however, was the time of transition from these old, established ways to what eventually became known as the ‘modern system’ of contract labour and measuring to determine costs. This was not some linear, steady progress, but an overlapping of the old procurement methods with the new system, as both continued to be widely used. As McKellar observed:
The guild system had broken down well before the late seventeenth century and certainly in London any remaining vestiges of power that the Companies had were annihilated by the legislation following the Fire which allowed ‘foreigners’ from outside the city to work within its boundaries. The building industry might still be organized around separate trades, however the relationships between these different crafts and the methods of contracting were undergoing a profound transformation. (1999: 71).

Importantly, as part of this transition to an industry with more of the characteristics seen today, the different construction professions began to form, as experienced tradesmen started to specialize in various aspects of building and construction and professional architects appeared. Morris (2013: 15) describes the emergence of the roles of architect, engineer, surveyor and contractor during the rebuilding of London after the Great Fire of 1666 under Christopher Wren and Robert Hooke. A hundred years later, toward the end of the 18th century, the general contractor had arrived as a new type of firm, responsible for organising the building process and employing craftsmen to undertake work directly or as subcontractors. 

This is part 1 of a three part series, the following parts are on The Great Transition and The Modern System. A pdf of the full document is here.