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.
