Procurement Lessons Unlearned: Grenfell Tower and the Risks of the Procurement Act 2023

September 2024

Paul Henty and Kayleigh Rhodes

Introduction

One of the lesser explored lessons from the Grenfell Tower tragedy of 14 June 2017 is how failures in the procurement process contributed to the inadequate construction standards, poor regulatory oversight, and ultimately unacceptable shortcomings in safety standards.

The disaster resulted in 72 deaths and brought to light numerous safety violations, particularly regarding the use of flammable cladding materials that had been installed during a recent refurbishment. The cladding’s role in accelerating the fire led to a wide-scale public inquiry, highlighting glaring procurement and specification failures that contributed to this tragedy. These failings, and the associated recommendations recently made by the Inquiry Panel, are critical to understanding risks in public sector procurement post-Grenfell.

This article looks at the introduction of the Procurement Act 2023 (“Act”) and asks whether the lessons of Grenfell have been learned, particularly around the proposed approach to standards in the specifications of public works under Section 56 of the Act. The Act has not yet entered into force, the Government having recently announced its intention to defer the statutory “go-live” date to 24 February 2025.

Grenfell: Procurement and Regulatory Failures

The Kensington and Chelsea Tenant Management Organisation (“TMO”) was the body responsible for overseeing the refurbishment of Grenfell Tower, a project valued at £10 million which was completed in 2016. The scope included the installation of new external cladding. The appointment of the principal contractor, Rydon, was controversial for a number of reasons. First, Rydon bid £212,000 less than the initial contractor. Secondly, Rydon implemented cost-cutting measures in its choice of materials, thereby compromising safety. This included the use of aluminium composite material (ACM) with a flammable polyethylene core, subsequently identified as a key factor in the rapid spreading of the fire.

The inquiry into the disaster revealed a series of procurement-related issues, particularly around the TMO’s approach to fire safety generally, technical specifications, risk management, and compliance with safety standards. Specifications were not properly enforced or monitored, leading to the use of unsafe materials that did not meet fire safety regulations. The responsibility for ensuring conformity with specifications and standards was inadequately managed by those involved in the procurement process. The ACM cladding used in Grenfell had passed outdated regulatory frameworks, but its highly combustible properties were well known in the UK and abroad and not addressed due to lax specification enforcement and regulatory oversight in the procurement process.

Two particular aspects about public procurement processes came under the spotlight as a result of the Grenfell tragedy. The first was in relation to the rules on specifications in procurement. Specifications set out the requirements and parameters for the works, materials, and services which a public sector client wishes to buy and the standards which eligible suppliers will be required to meet in order to be considered.

The second is in relation to the process for the appointment of suppliers. As set out in more detail below, the TMO manipulated the appointment process to select its preferred supplier and then put the supplier under pressure to reduce its overall budget for the refurbishment.

The Procurement Act 2023: A New Approach, But Are the Lessons Learned?

The Act introduces important changes in how technical specifications are handled in public sector projects. It emphasises performance-based and functional specifications over design-specific requirements and stresses the importance of using international standards rather than UK-specific standards. However, this shift, while promoting competition and innovation, raises several concerns about whether the lessons from Grenfell have truly been incorporated.

It is important to emphasise that under the new rules (as under the current ones) contracting authorities will be at liberty to issue one of two types of specification: they may decide to use an output based specification which sets out the specific outputs to be achieved (e.g. in relation to fire resistance properties). They may alternatively set specifications with regard to compliance with standards. As a further alternative, they may prefer some hybrid specification encompassing aspects of both and we anticipate that authorities will take that route in most cases. We anticipate a continued important role for standards because it is simply impossible for an authority to verify compliance itself with every aspect of a myriad of benchmarks for a particular product as efficiently as certification with a pre-defined standard.

Preference for International Standards

One of the most notable changes in the new Act is the preference for internationally recognised standards over British ones. Section 56(3) of the Act mandates that contracting authorities prioritise “international standards” where available, only resorting to UK-specific standards if no international equivalent exists.

The Grenfell Inquiry highlighted critical failures in the use of materials that met outdated or inadequate safety standards. The preference for international standards may expose UK authorities to a new set of risks. Many international standards may not have been updated to reflect the safety lessons learned from Grenfell or other fires globally, particularly those related to fire safety in cladding materials. If an authority were to specify an international standard that is less stringent than updated British safety requirements, it could inadvertently allow unsafe materials to be used again, potentially endangering lives.

The Government’s Guidance on the Act and writing technical specifications notes that standards from multinational organisations should not be assumed to be internationally recognised without proper verification. This suggests that not all globally used standards are necessarily reliable or meet UK standards. This ambiguity could place a considerable burden on contracting authorities to ensure they are using appropriate standards and to reject those that are not truly equivalent, adding a layer of complexity to the procurement process. It could also increase the burden on the supply chain in having to navigate or manage conflicting standards or processes.

Given the history of Grenfell, where inappropriate materials were used, this ambiguity could potentially result in unsafe products or materials being procured, as authorities might struggle to distinguish between reliable international standards and those that fall short of UK safety requirements.

European standards: the post-Brexit irony

One of the more ironic aspects of the Act lies in the tension between the UK’s legislative flexibility post-Brexit and the mandated preference for international standards, including those from the European Union (EU). On the one hand, leaving the EU granted the UK greater control over its regulations, allowing the introduction of more stringent fire safety standards in response to the Grenfell Tower disaster. Yet, under the new Act, international standards, such as those from the EU, must be prioritised over UK-specific ones unless the local authority can demonstrate that these standards are deficient.

Many experts would argue this is problematic because they regard existing European regulations as inadequate. Many consider these standards fail to simulate real-life conditions, which may differ drastically from controlled tests. For instance, real-world scenarios involving high-rise buildings, schools, and hospitals require stringent non-combustibility standards that some Member States, like Germany and Denmark, have already adopted independently. The EU is being urged to adopt a unified testing framework that incorporates large-scale testing, particularly for high-risk buildings, to prevent a repeat of such tragedies.

Another crucial area identified is the classification of smoke toxicity from construction materials. Despite the very serious danger posed by toxic smoke—often the leading cause of fatalities in fires—EU regulations do not currently mandate standardised testing for smoke toxicity. Survivors of the Grenfell fire reported being overwhelmed by smoke, further emphasising the need for stronger smoke toxicity controls. Firefighters, in particular, are at heightened risk from exposure to toxic smoke, which can lead to various health issues, including cancer. The inclusion of such standards in the EU framework is critical for public safety, especially in buildings where evacuation is challenging.

While there has been progress at the national level, with some countries adjusting their fire safety regulations, the overarching EU policy changes have been slower, partly due to divergent national interests and industry pressures. This slow evolution of EU standards means that even if the UK can legislate more effectively on its own, the preference for international standards under the Act could lead to a paradoxical situation where UK authorities are forced to accept inferior EU standards unless they can prove otherwise.

This is ironic because, while the UK now has the freedom to legislate independently, it may have inadvertently tied its hands. Had the UK remained within the EU, it could have wielded significant influence over the evolution of EU safety standards, steering them towards stricter fire safety measures post-Grenfell. As a key member state, the UK could have argued for higher safety benchmarks to be adopted across Europe, ensuring a consistent and elevated level of protection.

Instead, by placing a preference on international standards, UK authorities now face the risk of having to accept substandard safety measures under the guise of equivalence. For instance, suppliers from EU member states could claim that their products, which comply with EU standards, are “equivalent” to stricter UK standards introduced after Grenfell. The burden would then fall on UK contracting authorities to disprove such equivalence—a challenge that requires reliable product/technical information, technical expertise and significant resources.

While Brexit was intended to allow the UK greater control over its own regulatory frameworks, the reality is that prioritising international standards—many of which remain less rigorous than UK-specific safety requirements—has paradoxically constrained the flexibility intended by Brexit. More recently, the UK Government announced an extension to the period of recognition of CE marking for construction products[1]. The CE mark will therefore continue to be available when placing construction products on the market across the UK for now.

Separately, it is surprising that the term “international standards” remains undefined in the Act. That has the potential to spawn legal challenges or at least confusion for both suppliers and contracting authorities.

The Issue of Equivalence and Challenges from Suppliers:

As above, a significant concern under the new Act is the provision that contracting authorities must accept equivalent standards from treaty state suppliers. This is outlined in Section 56(4), which requires authorities to treat a foreign standard as equivalent if it achieves the same objectives as the specified UK standard. However, the ambiguity surrounding what constitutes equivalence could invite challenges from suppliers in treaty states who claim their products meet UK safety standards.

Given the complexity of international standards and the potential for variations in safety regulations, it may be difficult for contracting authorities to disprove claims of equivalence. This uncertainty opens the door to legal challenges from suppliers whose products may technically meet lower safety thresholds but not the same rigorous standards required in the UK post-Grenfell.

Assessing whether a foreign standard equals a British one is not straightforward. Fire resistance or smoke toxicity testing varies widely between jurisdictions, and there is no guarantee that foreign standards offer the same level of safety assurance. For example, smoke toxicity regulations in the EU remain unstandardised, potentially leading to the procurement of materials that are technically compliant but functionally unsafe.

If contracting authorities are unable to effectively disprove equivalence, it could lead to the procurement of products that pose similar risks to those identified in Grenfell, such as cladding that fails to meet fire safety regulations.

It also raises the question as to how well placed authorities are to make assessments around equivalence of standards. Standards may encompass literally hundreds of different complex and technical elements (e.g. wind resistance, fire resistance, density, corrosion resistance). Are public officials well placed to adjudicate situations where say a foreign standard meets certain aspects of a British standard, exceeds others but falls short in yet others? If they cannot confidently undertake this exercise, who can they turn to for assistance? Will external expertise be required to provide the authority with the necessary guidance? What additional cost could this entail?

Procurement and Specifications: What’s Missing?

Despite the new emphasis on flexibility and innovation, the Act does not appear to address one of the key lessons from Grenfell: the need for robust regulatory oversight and a comprehensive framework for verifying the safety and compliance of materials. The Act introduces greater flexibility in how specifications are drafted, which can foster innovation, but it risks leaving gaps in enforcement that could allow unsafe products to slip through.

Furthermore, the Act’s reliance on certification bodies to verify compliance with standards may not be sufficient to address the deeper regulatory failures revealed by Grenfell. While certification provides a level of assurance, the Grenfell disaster highlighted how regulatory bodies failed to enforce standards and ensure compliance with technical specifications. Without stronger mechanisms for oversight and enforcement, the changes introduced by the Act may not prevent future tragedies like Grenfell. The Phase 2 Inquiry Report into the fire at the Grenfell Tower also made several recommendations regarding the future regulation and marketing/use of construction products and aimed at addressing the tensions between building safety and commercial interests of certain industry organisations.

The Controversial Appointment of Rydon

One of the most striking findings of the Phase 2 report relates to how Rydon was appointed as the principal contractor for the Grenfell refurbishment. Despite receiving legal advice that it would be improper, the TMO manipulated the public contracts process to ensure that Rydon would win the contract. They also informed Rydon that they could secure the deal if they agreed to reduce their bid price to a specific figure, which Rydon accepted. The Phase 2 report notes conversations between TMO and Rydon sitting outside the procurement process and allowing amendments to cost budgets.

This manipulation not only undermined the fairness and transparency that are supposed to govern public procurement, but it also set the stage for substandard safety measures. Rydon’s ability to meet the TMO’s desired price was largely dependent on the use of cheaper, highly combustible materials, such as the ACM cladding. The report highlights that combustible materials were chosen to cut costs despite known fire risks, which were responsible for the rapid spread of the fire.

This raises serious questions about how public procurement should manage cost-efficiency versus safety, particularly when appointing contractors. It also points to a broader need for accountability in public contracts when such decisions directly affect public safety.

This also provides important lessons about the multiple roles of a competitive procurement process and consultation with different suppliers. The TMO ought to have concluded that if multiple bidders were unable to provide the works within their desired budget, there was probably a good reason for that and that maybe the budget was unrealistically low for the works to be provided safely. The TMO should have reconsidered its approach as a result of the inputs from bidders.

Other issues

The Phase 2 report notes other failings by the TMO, including:

Insufficient interest in the fire safety risks and management of the same. For example, the TMO’s only fire assessor appears to have effectively drifted into the role without completion of a formal selection or procurement process. The TMO’s risk assessor misrepresented its experience and qualifications and was subsequently seen as ill-qualified to carry out fire risk assessments on buildings of the size and complexity of Grenfell Tower, let alone on the whole TMO portfolio.
A live Academy and Leisure Centre project influenced the appointment of the architect. The TMO appears to have manipulated the procurement process to avoid having to put a contract for architectural services out to a public tender. For instance, there is reference to Studio E’s fees being capped to keep within the applicable OJEU limits, with fees deliberately delayed to post-novation to avoid triggering a competitive procurement exercise. Importantly, it was later recognised during the inquiry that by failing to follow the proper procurement process for purely financial reasons, the TMO deprived itself of the opportunity to appoint a firm of architects with relevant skills, knowledge and experience on a project of this nature/type. Studio E’s witnesses also accepted that they would not have been awarded the project if a proper procurement exercise was completed.
The specialist fire engineer, Exova, were also used because they were involved on the Academy and Leisure Centre project.
There are observations around the lack of resident involvement in the overall procurement process, to the point that their involvement was considered largely symbolic, arranged hastily and not properly documented.
Volume 4, Chapter 53 of the report commented on value engineering: “in theory, value engineering involves making changes to the design or specification that reduce cost without sacrificing performance, but in our view it is in practice little more than a euphemism for reducing cost, because substituting a cheaper product for a more expensive one or altering a design or scope of the work in a way that reduces cost almost invariably involves a compromise of some kind, whether in content, performance or appearance.”
The procurement of certain materials by the supply chain was based upon existing relationships and discounts.

Conclusion: Have the Lessons Been Learned?

While the Act introduces positive changes in how technical specifications are handled, there are significant risks associated with the new framework. The preference for international standards, while promoting competition, may potentially leave the door open to unsafe products. The issue of equivalence and the potential for legal challenges from foreign suppliers further complicates the procurement landscape. It is unclear whether the proposed recommendations and measures to construction products and regulation within the construction industry will help to address such risks.

Ultimately, the success of the Act will depend on how effectively contracting authorities can navigate these challenges. Without stronger oversight mechanisms and a clearer framework for ensuring compliance with safety standards, the risk remains that the lessons of Grenfell may not be fully learned, potentially leading to future tragedies.

There are a number of steps that can be taken to assist contracting authorities and encourage public safety in procurement procedures:

Expanding the current guidelines on technical specifications to deal with questions of public safety.
Making equivalence expertise available: for example, the Cabinet Office should make it easy for authorities to have access to independent expertise when required, either when structuring tenders or facing specific questions about equivalence (e.g. in the context of a bidder challenge). This can be achieved either through a framework agreement concluded with technical experts which authorities can join to request specific advice or by having the advice available in-house.
Giving a greater weighting to safety related selection or award criteria. Contracting authorities could, for example, ask more questions about safety related procedures or monitoring procedures and require bidders to achieve a minimum threshold score in order to be considered.
Procuring stocks of approved, safety compliant materials separately from works tenders and requiring successful works contractors to use those materials. This will avoid the risk of compromising safety standards in materials or diluting their importance which occurs when they are included as part of the scope of what is essentially a works procurement, where these aspects will be considered alongside a myriad of works related factors;
Continuing to advocate for the EU to raise its safety standards for building materials in light of the Grenfell experience.

For the new regime to truly protect public safety, it must not only emphasise flexibility but also institute far stronger regulatory enforcement and a more comprehensive framework for evaluating international standards. Without these safeguards, the risks of another Grenfell remain dangerously and unacceptably high.

As mentioned at the outset, the Government has put back the Act’s entry into force to 24 February 2025. The reason is to allow the formulation of a new National Procurement Policy Statement (NPSS), this being the document which lays down the national policy objectives for public procurement, as determined by the new, recently elected Government. The administration has said that these objectives might include, for example, supporting economic growth and opening up public contracts to small businesses. We hope that the NPSS will also encourage public purchasers to take heed of the lessons of Grenfell and to act carefully and responsibly when setting procurement specifications, never losing site of the imperative of public safety in construction.

[1] Written statements – Written questions, answers and statements – UK Parliament

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