Embed innovation in construction contracts, industry research recommends

Out-Law News | 23 Sep 2016 | 11:16 am | 2 min. read

Making construction projects more innovative will require both industry-led initiatives and specific recognition in the contracts themselves, according to new government-funded research.

A team of experts and academics at the University of Cambridge, Costain and Pinsent Masons, the law firm behind Out-Law.com, have put together a number of recommendations for industry, government and research councils aimed at harnessing innovation more effectively, particularly as a project develops. The year-long research project received funding from Innovate UK, the UK government's innovation arm.

The report's authors have recommended closer alignment between specific research projects and major projects, citing Crossrail as an example of where this has been done well. The construction industry should also seek to develop collaborative innovation 'platforms' through which client firms would have the opportunity to work together on longer-term initiatives, and create specific tools to assess the capability and skills within different organisations and calculate the social benefits of projects.

As well as these recommendations, which have the broad aim of changing the "culture" within employer firms and the supply chain, the report also recommends putting contractual mechanisms in place to support innovation. These mechanisms should "confirm the client's commitment to innovation, while delivering the commercial certainty that is needed to create confidence", according to the report.

"Including an innovation clause, as opposed to simply looking at value engineering, would encourage innovation and provide the certainty that people want with regard to the way innovation proposals would be covered by the contract," said construction law expert Frances Jenkins of Pinsent Masons, in a blog post for PLC Construction.

"The recommendations will provide practical steps for anyone considering how to allow for innovation to be ingrained throughout the whole supply chain relationship," said one of the authors of the report, construction law expert Shy Jackson of Pinsent Masons.

Examples of contractual provisions put forward in the report ranged from a brief provision that "simply states that a party that wishes to propose an innovation shall provide details to the other party and they shall meet to agree whether and how such a proposal will be adopted", to more detailed provisions "set[ting] out in advance a process for proposing innovation and indentif[ying] how such a proposal will be dealt with in terms of sharing the costs of innovation and the impact on the works".

Alternatively, a non-binding 'innovation protocol' could be developed, giving parties more flexibility while also providing guidance on how best to deal with innovative proposals from either side, according to the report.

The report identified "legal hurdles" that were perceived by some in the industry as barriers to innovation, such as identifying the owners of any intellectual property generated or the effects of procurement regulation. However, by agreeing these issues in advance, these perceived barriers would not in fact prevent innovation, according to the report.

"Strong leadership" from employer firms was also needed to promote innovative practices in the supply chain, according to the report. Employers should make their willingness to share the costs and risks of innovation, and not just the benefits, more clear; both at an informal cultural level and as part of the contract, according to the report.

Support from employers would enable contractors to "act as the catalyst for bringing the changes which are required to enable not just innovation but open innovation", according to the report.