The publication of the Phase 2 report of the Grenfell Tower Inquiry last month laid bare the inadequacy of many construction industry practices. From product testing and certification, through to responsibility for safety at each stage of the design and build process, there is no shortage of blame to go around. While some of these practices have been improved in the seven years since the fire, the report makes wide-ranging recommendations for further changes, including the establishment of an independent Construction Regulator. Despite the current pressure on public finances in the UK, there are at least 72 good reasons to implement the recommendations. Many of the Inquiry’s recommendations are also relevant for other countries.

One area which is not dealt with in the recommendations, although it is covered in the report, is the role which procurement played in the disaster. There were serious flaws in the processes used by the Tenant Management Organisation (TMO) to appoint both the architect (Studio E) and main contractor (Rydon). The picture which emerges is of a process driven by time pressure and budget constraints, where fair competition was absent, and accountability obscured. These were all causal factors which lead to the decision to use highly combustible cladding in the refurbishment.

Volume 4 of the report catalogues a series of failings in the procurement process, including a lack of competition, excessive focus on costs, and failure to provide clear lines of contractual responsibility. Many of these practices remain widespread in the UK and elsewhere. It is worth asking what could and should be done differently from a procurement perspective, to avoid a repeat of Grenfell. I examine whether the UK’s new Procurement Act will provide more, or less, accountability in procedures – and whether any of the companies involved could be subject to debarment or exclusion. The Inquiry’s findings regarding product regulation and safety, which are of broader significance, are also considered here.

A Flawed Procurement Process

In 2012, the Royal Borough of Kensington and Chelsea (RBKC) allocated funds for the refurbishment of the Grenfell high-rise, built in 1974. A primary motivation for the refurbishment was to improve its appearance. A new leisure centre and academy were being built next to Grenfell, and emails from RBKC officials suggest that they didn’t want the tower to look like a ’poor cousin’ to the new development. The budget for the Grenfell refurbishment was apparently based not upon an assessment of the costs of providing a fit for purpose solution, but upon the availability of a sum of money (£6 million) gained from a property transaction elsewhere in the borough.

The ‘windfall’ amount would prove woefully inadequate to fund a safe refurbishment. In other cases, a windfall amount may exceed the reasonable costs of a project. The point is that budgeting based upon the availability of a sum of money, rather than the costs (and benefits) of a planned project, is silly. This practice was and is by no means confined to RBKC. But it is particularly inexplicable as RBKC had £241 million in reserves in 2013. Switching from non-combustible zinc panels to  aluminium composite material (ACM) represented a saving of just under £300,000 – but cost 72 lives, widespread devastation, and well over £1 billion in costs, including some £200 million for the public inquiry. How many budgeting decisions being made today are equally ill-informed?

The Inquiry heard evidence that RBKC placed pressure on the TMO to appoint the same architects, Studio E, who had worked on the neighbouring development. The following quotes from the Phase 2 Report succinctly summarise the flawed process:

“The appointment of Studio E as architect for the project involved no element of competitive procurement whatsoever. No member of the firm was interviewed as part of a competitive procurement and there was no design competition.” (Para 52.14)

“Grenfell Tower was Studio E’s first residential high-rise cladding project and yet… no steps had been taken before it was appointed to find out whether it had any experience of a project of that kind.” (Para 52.5)

“Studio E’s fees were always going to exceed the OJEU limit and the capping of its fees by the TMO was a way of avoiding a competitive procurement exercise for design services on the project.” (Para 52.13)

“By failing for purely financial reasons to follow the proper procurement process, the TMO deprived itself of the opportunity to appoint a firm of architects with relevant skills, knowledge and experience.”  (Para 52.19)

Following the design process, the TMO (after some delays) sought tenders from contractors to complete the refurbishment. This process was also flawed – notably by the decision to engage in off-the-record negotiations with one of the bidders, Rydon, in order to put pressure on them to reduce costs.[1] The Inquiry heard evidence that the TMO knew this was illegal. Here a question arises as to whether the new flexible competitive procedure under the 2023 Procurement Act also clearly prohibits such practices. Under the competitive flexible procedure, contracting authorities may engage in negotiations provided they have indicated this in the tender notice. While this is to be welcomed, the Act is silent on the process to be followed in negotiations, meaning different approaches will be taken. Aside from its illegality and unfairness, negotiating with only one bidder for the Grenfell contract deprived the TMO of the possibility that other bidders might question the strategy of cutting costs by substituting a cheaper cladding material – a question which could have saved lives.

The initial cost estimates for the project exceeded the £6m budget significantly. A protracted period of attempted ‘value engineering’ ensued. While the term receives scorn in the Inquiry report, there is nothing in principle wrong with public servants seeking better value from contractors. The key question is how value is defined – and too often this is mainly or exclusively in terms of costs. Costs are something apparently concrete in a complex and multi-faceted project, although they are seldom as firm as we think. Why then do we focus on them to the exclusion of quality and sustainability? Naturally budgets are finite, but do we really save money by obsessing about it at the early stages of a contract? Are there perhaps better models for keeping control of costs during contract performance? Answers on a postcard (or in the comments) please.

The purpose of competition in procurement is not only to drive down costs, but also to improve quality. In this case, the unsafe cladding products and insulation should not have been permitted for use on high-rise buildings. But there are many more borderline situations, for example a product which might be fit for purpose initially, but which degrades over time, requiring replacement or remedial work. While procurement officers cannot be technical experts on every product or service they buy, they do need to act as sceptics, and be prepared to ask difficult questions. They also need to know who to trust on technical matters. This might legitimately be a contractor, subcontractor, testing or certification body, regulatory agency, or an independent advisor. The client needs to know who is answerable for product safety. As the Grenfell report vividly illustrates, if they all are, then none of them are. 

A Fatal Product

Following a 2009 fire at Lakanal House high rise in South London which resulted in six deaths, the coroner made a number of recommendations to improve fire safety in high rise buildings. These were never acted upon by the Department for Communities and Local Government. One of the reasons for this was the reluctance to adopt any new regulation in this period, as it ran counter to the then government’s ‘War on Red Tape’. The Inquiry found that ‘the government’s deregulatory agenda … dominated the Department’s thinking to such an extent that even matters affecting the safety of life were ignored, delayed or disregarded’. The sections of the report detailing the way in which the cladding came to be marketed for use on high-rise buildings are shocking, and reflect a culture of complicity between product manufacturers, testing and certification bodies, and building control authorities.

One issue which has broader significance is the conflicts of interest which arise where a company pays for the testing and certification of its product. This is normal practice, and the rules which apply to conformity assessment bodies are intended to ensure independence. However ultimately if these bodies are commercial, they run the risk of sacrificing rigour to the need to attract and retain clients. This is what happened at the Building Research Establishment (BRE), which carried out tests of the Celotex insulation used in the Grenfell refurbishment – turning a blind eye to the manufacturer’s blatant interference with the test. Even if testing and certification bodies are reliable, there are various ways manufacturers can mislead buyers, including:

• Failing to report the results of tests;

• Presenting test results which only cover use of the product in a particular context or system, while marketing it for another purpose;

• Preparing or doctoring products to perform a certain way in the test (cf Volkswagen defeat devices);

• Not disclosing that other jurisdictions have revoked authorisation for a product, or reclassified it (as had been done in France in relation to the use of ACM panels)

Procurement officers, or the technical experts acting on their behalf, must be vigilant to such distortions – all of which applied to the products used in the Grenfell refurbishment. The Inquiry found that Celotex and Kingspan ‘engaged in deliberate and sustained strategies to manipulate the testing processes, misrepresent test data and mislead the market’. But even without this level of deceit, the numerous gaps and conflicts which arise as part of product testing and certification remain open for exploitation.

Never Again?

In responding to the report in Parliament, Keir Starmer stated that “this Government will write to all companies found by the inquiry to have been part of these horrific failings, as the first step to stopping them being awarded government contracts.” The Procurement Act introduces new rules on exclusion and debarment, including the establishment of a list of contractors barred from bidding for public contracts. However, even in respect of the most serious offences, there is a maximum ‘look back’ period of five years.[2] Over seven years have now passed since the Grenfell fire, and over ten in respect of most of the acts described above. If a relevant judgment were to be secured against any of the companies, this would start the clock again. But this may not be straightforward, especially in the case of corporate manslaughter or homicide.

In the absence of a judgment against any the firms involved, there is a question of whether the discretionary exclusion based on professional misconduct could apply. This seems to fit well with some of the conduct described above, however a shorter look-back period of three years from the relevant event applies. In applying the exclusion for professional misconduct, the decision-maker must ignore any event of which they were aware, or of which a reasonably well-informed decision maker in their position would have been aware, more than three years ago (Schedule 7, 15(2)). The question of ‘who knew what when’ introduces a new procedural layer which doesn’t exist under the PCR 2015 or Directive 2014/24/EU. Perhaps the delayed entry into force of the Procurement Act provides an opportunity in this regard.

It is worth considering whether the UK’s new rules on debarment are fit for purpose when it comes to cases of serious misconduct such as those uncovered by the Grenfell inquiry. While the list of exclusion grounds has been expanded,[3] there has also been a shift in the burden of responsibility in applying them. Under Directive 2014/24/EU and the 2015 Public Contracts Regulations, application of the exclusion grounds was automatic in the sense that the contracting authority did not have to establish a risk that the behaviour leading to the exclusion would be repeated. A contractor could seek to ‘self-clean’ by providing evidence that it had changed its ways and compensated for damage caused, but if it failed to discharge that burden, the exclusion stood. Under Regulation 57(1) and (2) of the Procurement Act, in order to apply any exclusion, the contracting authority must consider that ‘the circumstances giving rise to the application of the exclusion ground are continuing or likely to occur again’ – unless the contractor is on the debarment list.

Some may argue that the change is marginal, but in practice it may be much more difficult for a contracting authority to establish the risk of repeat offending, rather than simply establishing that one of the factual situations leading to debarment applies. One of the (unintended?) consequences of having a debarment list may be that contracting authorities become even more reluctant to apply the exclusion grounds to firms not (yet) on the debarment list. This might be fine if the debarment list is able to function efficiently, but the inevitably of firms challenging their inclusion on the list will make this difficult.

It is right that procedural safeguards apply to debarment to prevent unfair blacklisting. However, it is also worth considering whether the Procurement Act needs to be amended to clarify that where a civil or criminal judgment against a firm specifies that they should be excluded from procurement, the full procedure for entering a firm on the debarment list (and allowing it to challenge that entry) need not be followed. Such an amendment could also introduce the ability for a longer exclusion period to be applied where this has been specified in a judgment against a firm.

This article was edited on 9 October to reflect comments received on the debarment question.

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[1] Rydon’s bid was already significantly lower than its nearest rival – raising questions as to whether it was abnormally low.

[2] Schedule 6, 44(1) of the Procurement Act specifies that in applying the mandatory exclusion grounds “the decision-maker must ignore any event that occurred before the five-year period ending with the date on which the determination is made” – but ‘event’ is defined to include a judgment or conviction. Notably, under Directive 2014/24/EU there is an exception to this maximum period if a final judgment has been made against a company which specifies a longer period of exclusion (Article 57.7) – but no similar provision was incorporated in either the PCR 2015 or 2023 Procurement Act.

[3] Despite the expansion of grounds, some of them, such as the discretionary exclusion based on violation of environmental law, are now narrower than the equivalent grounds which apply under the PCR.