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Infrastructure projects: why is "profit" a dirty word?

 

By Mark Greatholder

A great post from Osborne reminding us that whilst value for money is important to all clients, price is not the only measure of value.

On infrastructure projects, "profit" can sometimes be viewed as a dirty word, but why shouldn't contractors be allowed the same opportunity to make a reasonable financial gain from using their skills, experience and expertise as organisations in other industries are?

Granted, there comes a point when a "fair margin" becomes "too much margin" but if the balance isn't quite right then it does seem like a recipe for disaster.

At a time where there is also an increasing expectation that contractors do "more for less" at the same time as investing more heavily in innovation (with the aim that this ultimately improves quality and reduces cost to the client), there needs to be a greater recognition that this investment itself comes at a cost. And if contractors are making that investment, shouldn’t they be entitled to share in (at least some of) the benefits that it brings?

Delivering value for public money matters to all of us. But collectively the sector has to acknowledge that price is not the only measure of value and where a relentless focus on price leads us: contractors that are unable to invest, enduring quality issues and a delivery system loaded with risk. So we do need a realistic conversation about margins. And this must include how contractors can be given a greater incentive to innovate and improve quality, perhaps through shared risk and reward.
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