Procurement in transition: The impact of the Building Safety Act 2022

Despite recent headwinds, the property industry has shown remarkable resilience, continuing to drive forward the UK’s development output with determination and adaptability writes Russell Wright‑Turner of Walker Sime.

The UK construction industry has faced a series of unprecedented challenges in recent years, ranging from the COVID-19 pandemic and the UK energy crisis to the economic shock of Liz Truss’s mini budget and an evolving regulatory environment.

The UK’s Building Safety Act (BSA) received Royal Assent in 2022 as a legislative response to the Grenfell Tower tragedy, aimed specifically at improving the safety and accountability associated with the design and construction of high rise buildings. The Act introduces a rigorous three stage gateway process:

• Gateway 1 – Planning
• Gateway 2 – Detailed Design
• Gateway 3 – Completion

This regulatory change has fundamentally altered not only how buildings are procured, funded, and delivered, but also the mindset of an industry that must adapt to a partnering approach where stronger collaboration and transparency around risk is key.

Procurement challenges under the BSA

Traditionally, most private sector construction in the UK has been delivered utilising the JCT Design & Build Contract, where design responsibilities are transferred to the main contractor for a fixed cost and programme. These contracts were often entered into at RIBA Stage 3 or midway through RIBA Stage 4 with work commencing concurrently with final design completion. Main contractors were also able to commit to full sub-contract orders backed off by the main contract.

Under the Gateway 2 process, this approach is no longer viable. Works cannot begin until the entire design (including sub-contractor design portion) has been completed and subsequently approved by the regulator. This has significantly altered the traditional design and build procurement approach.

McLarens 737-bed student scheme on Upper Brook Street received BSA approval after 27 weeks. Walker Sime provided project management services.

Impacts on traditional D&B procurement

Funder Commitment

Simply, most debt funders are unwilling to commit until a BSR Gateway 2 approval certificate is issued. This means that unless a scheme is being self funded, most developers will be unable to commit to a full contract order, mitigating inflationary and programme risk, unless it is capped by stages or milestone trigger notices.

The inability to get a funder on board for stage 4 results in developers cash flowing significant upfront costs, including design team fees, early sub-contractor specialist design, and main contractor preliminaries without guaranteed funding in place.

Programme

Gateway 2 demands a fully developed stage 4 design. Compounding this, regulatory approval times in some cases are stretching beyond 40 weeks, leading to substantial programme durations and uncertainty. Due to the uncertainty around regulator sign off times, it is very difficult for main contractors to accept programme risk on the Gateway 2 period, which leads to cost uncertainty and difficulties around resource planning throughout the whole procurement supply chain.

Tender Inflation

Whilst inflation is influenced by market conditions (domestic and geopolitical), the extended timescales between RIBA Stage 4 design finalisation, Gateway 2 sign off, and starting works on site increase exposure to inflationary pressures. Contractors and sub-contractors are pricing risk over longer periods, and it is key that all parties continuously review inflationary risk throughout the design period, with key sub-contractors consulted.

Sub-contractor commitment

To incorporate sub-contractor design portions, developers are going to have to engage and commit to sub-contractors earlier, whilst this may reduce commercial flexibility and limit competition, the offset will be that their input will be invaluable to the design team, with anticipated efficiencies being captured earlier.

Value engineering

Any value engineering will have to generally be agreed during stage 3 to avoid potential Stage 4 abortive costs and delays to design programmes.

Under Gateway 3, nobody can  legally occupy the building until a final completion certificate has been issued by the regulator. Current guidance suggests 12+ weeks, which will lead to increased finance and interest costs, additional main contractor preliminaries, and prolonged insurance and security obligations. This needs to be factored into early development appraisals.

Conclusion

The cumulative effect of these changes is a dramatically altered risk landscape. Responsibility is front loaded, and cashflow pressure on developers has intensified. In response, collaboration across all parties, including developers, consultants, funders, contractors, and the supply chain, has never been more critical.

Transparency around risk sharing is key, and it is likely that most developers will move towards a partnering approach with both trusted main contractors and key subcontractors.

It could be argued that construction risk profiles have been reduced significantly, as contractors have sight of better design information with all key investigations and surveys carried out during the design stage.

As Winston Churchill once said, “Attitude is a little thing that makes a big difference.” The construction industry’s ability to embrace a collaborative mindset will define how successfully it adapts to these new demands.

Walker Sime, part of Hanmi Global, is a leading multi-disciplinary consultancy operating across the United Kingdom. The firm delivers expert cost management, project management, and infrastructure services, with specialist expertise in regeneration and carbon reduction. An integrated approach ensures innovative, sustainable, and value driven outcomes across a wide range of sectors.

• Russell Wright‑Turner is director at Walker Sime