29/01/2019

How frameworks deliver best value

Procuring construction projects can fall into the trap of a push for a low-cost building with a pull for a value-add process; the common misconception being that lowest price competitive tendering provides value. 

Local authorities continue to face unprecedented pressures to implement ways of delivering public services with greater benefits relative to costs.

Single project competitive tendering is an option, but you have to question whether it delivers a building with the best whole-life cost, within the most efficient asset management programme that optimises community outcomes.

The responsibilities of local authorities must reach beyond the short-term pull of lowest project cost, to the push for a better, co-ordinated process that has a more positive impact.

John Simons, Head of Procurement & Audit

Locking in value with competitive tendering

Our OJEU compliant frameworks are competitively tendered for a direct award, to fix core staff and site set-up costs and the overheads and profits elements of every project.

Each construction project delivered through any of our frameworks is fully market-tested. This harnesses the buying power of the cumulative framework value, together with point-of-delivery market testing.

With overhead and profit rates fixed for the framework term, clients receive protection from rising market forces which mitigates risk and the damaging propensity to over-spend. The sum of these inputs typically accounts for up to ten per cent of project costs. 

The remaining 90 per cent of your project costs are sub-contracted work packages, that are tendered at the point of delivery, opening the market to local suppliers. The process is open book, to develop a managed supply chain. Our delivery partners are required to obtain three quotes for all works packages as standard, which our clients can expect to see.

This ensures that competitive tensions are maintained, through effective price benchmarking and cost targeting to achieve value for money.

Mitigating risk

Through our procurement approach, we remove the requirement for mini-competitions whilst at the same time delivering the most economically advantageous offering, which saves time and money for both clients and delivery partners – typically saving 20 weeks in procurement time.

This critical time saving can be the difference between successful project delivery, and failure to deliver scheme outcomes.

Another benefit of our single supplier frameworks is early contractor involvement; collaboration from the outset and support on brief development, budget costing, project programming and buildability is provided at no cost at feasibility stage.

In this way, our frameworks are designed to deliver a ‘no surprises’ journey – the resulting value of this early involvement is very significant and is critical to shaping the success of a project. Risk is identified early, options are considered and mitigation strategies can be jointly agreed.

Longer term benefits

The procurement of frameworks also provides a route for successful contractors to make significant contributions to community outcomes extending far beyond a short-term building completion.

This comes by virtue of the operating efficiencies afforded to framework contractors in long-term contracts (usually four+ years), enabling them not only to offer commercially advantageous rates, but as socially responsible businesses to make investments and positive impact within the communities in which they work.

Lessons learned

The collapse of Carillion highlighted all too clearly the vulnerability of supply chains in construction and maintenance contracts, in particular Small-Medium Enterprises (SMEs). This has brought into focus the need for local authorities as commissioning clients of construction and maintenance to make responsible choices in the way their contracts are shaped and operated. 

The sustainability of local supply chains is directly influenced by a local authority’s own adoption of outcome-led procurement, against a “race-to-the-bottom” approach which exposes both the client and the local supply chain to unnecessary project risk.

JohnS
Written by:

John Simons

Head of Procurement & Audit
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