PART 1
ITEM NO
___________________________________________________________
REPORT OF THE LEAD MEMBER FOR DEVELOPMENT SERVICES
___________________________________________________________
TO THE Cabinet Meeting
ON 11th June 2002
___________________________________________________________
TITLE:
Rethinking Construction – A Best Value Approach to Procurement
_____________________________________________________________________
RECOMMENDATIONS:
1. That the action recommended in paragraph 6.1 of the attached report be
approved.
_____________________________________________________________________
EXECUTIVE SUMMARY:
1.
The Government is making it clear that it sees the ‘Partnering’ approach to
the procuring of construction projects as representing Best Value for local
government. The Local Government Task Force has published a document
entitled ‘Rethinking Construction – Implementation Toolkit’ which is a
guide to that approach.
2.
This report outlines Government thinking, progress to date in Salford and
recommends a way forward to implement Re-thinking Construction.
___________________________________________________________
BACKGROUND DOCUMENTS (Available for Public Inspection):
The Local Government Task Force’s publication entitled ‘Rethinking
Construction – Implementation Toolkit’.
Report to Cabinet 11th September 2001
___________________________________________________________
CONTACT OFFICERS: Bill Taylor (Development Services) 0161 793 3601
_____________________________________________________________________
WARD(S) TO WHICH REPORT RELATE(S): All
___________________________________________________________
KEY COUNCIL POLICIES: Procurement Strategy, Capital Programme, Revenue
Maintenance Budgets, Best Value Programme
DETAILS - See attached report entitled Rethinking Construction Implementation
Strategy.
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RETHINKING CONSTRUCTION IMPLEMENTATION TEAM
REPORT TO CABINET BRIEFING 6TH JUNE 2002
RETHINKING CONSTRUCTION IMPLEMENTATION STRATEGY
1.0
INTRODUCTION
1.1
The Cabinet, at its meeting on 11th September 2001 approved the adoption of the
‘Rethinking Construction’ approach to the procurement of construction work by the City
Council. At the same time it established a corporate Implementation Team to prepare a
Strategy for the implementation of the approach in Salford.
1.2
Under the chairmanship of the Deputy Director of Development Services, the
‘Rethinking Construction Implementation Team has met, on a regular basis, with
representatives from the Housing Services Directorate, the Education and Leisure
Directorate, the Corporate Services Directorate, the Development Services Directorate
and Unison, since October 2001, and has produced the attached Strategy document.
2.0
BACKGROUND
2.1
Central Government has been sending increasingly clear messages about the way Local
Authorities should procure construction projects and deliver Best Value. The approach
being advocated is referred to as ‘Rethinking Construction’.
2.2
The term ‘Rethinking Construction’ comes from the title of a report produced by Sir John
Egan in 1998 and commissioned by the Deputy Prime Minister to assess the efficiency of
the UK Construction industry. The Report, whilst acknowledging that some parts (of the
construction industry) were world class, concluded that most of the industry was failing
to perform satisfactorily, particularly in terms of cost, quality and time.
2.3
Since Sir John Egan’s report, the Government has been advocating a move away from
competitive tendering to ‘Partnering’. The Local Government Task Force was set up to
take the initiative forward in Local Government. That Task Force is supported by the
DLTR, the Housing Corporation, The Local Government Association, and CIPFA and
issued a ‘Rethinking Construction Implementation Toolkit’ to all Local Authorities. This
‘Toolkit’ is essentially a manual to be used by Local Authorities in implementing
‘Rethinking Construction’.
2.4
‘Rethinking Construction’ is essentially about delivering construction projects by means
of a partnership between:



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The Client
The Designers
The Constructors

2.5
The Suppliers
In competitively tendered contracts these four players are selected separately and have
their own objectives that often conflict. The whole process is confrontational and the
Egan Report stressed that the industry should:



Address the needs and expectations of the end-user more closely
Move away from traditional ways of doing business which are restrictive and
confrontational
Aim to achieve targets for:
-
Reductions in costs, time, accidents and defects
Increases in predictability of cost and time, productivity and profitability.
2.6
The attached document sets out the proposed City Council’s Strategy for implementing
the ‘Rethinking Construction’ approach on the construction works that it procures.
3.0
THE STRATEGY
3.1
Most contracts are currently procured by means of competitive tendering, although there
have been some contracts procured by more innovative means during the last 2 years.
3.2
If the wishes of Cabinet and Central Government are to be fully embraced a major step
change is required in the way the City Council procures construction work. It is believed
that this step change needs to embrace all areas of construction activity.
3.3
Clearly a major step needs to be taken and the Implementation Team believes that there is
an imperative to: 
Subject the whole of the construction programme to the ‘Rethinking
Construction’ approach, except where that approach is unlikely to be attractive to
contractors (i.e. where there is insufficient work in a particular category to justify
partnering).
3.4
The attached Strategy proposes the more radical approach but the views of Cabinet is
sought.
3.5
The proposed Strategy is in accordance with the Council’s Procurement Strategy.
4.0
BEST VALUE
4.1
Rethinking Construction has direct links to many best value reviews. Whilst it is an
initiative in its own right, it clearly links to Strategic Procurement, Construction,
Housing, Property and Highways (Street Scene), all of which have been or are in the
process of commencing Best Value Reviews.
4.2
By adopting Rethinking Construction principles we are addressing two of the more
difficult areas of the 4 ‘C’s approach to Best Value. It fundamentally challenges the way
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the service is provided and ultimately addresses competition through a partnership
approach that involves the contractor at an early stage in the design process.
4.3
Rethinking Construction is also mentioned in the Comprehensive Performance
Assessment Consultation Draft in the Housing Section Repair and Maintenance Key
Aspect 3 Criteria.`
5.0
CONCLUSION
5.1
The implementation of the ‘Rethinking Construction’ approach to construction
procurement in Salford, if the experiences of those that have tried it are to be believed,
will bring significant benefits to the City and its Citizens in terms of higher standards of
service, greater cost and time predictability and cost savings / improved quality of
product. It will represent ‘Best Value’ in Construction Procurement.
6.0
RECOMMENDATION
6.1
That, Cabinet approve the whole Construction Programme being taken forward under
Re-thinking Construction Principles and that the attached Strategy and Background
Documents be approved.
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SALFORD CITY COUNCIL
RETHINKING CONSTRUCTION IMPLEMENTATION STRATEGY
The type of construction work currently procured by Salford City Council falls broadly under the
following headings:

Major new construction work (in excess of £1 Million)
(e.g. The Inner Relief Route, Eccles Bypass, The Quays Watersports Centre, Springwood
Primary School, The Albion High School)

Other new construction and major refurbishment work
(e.g. Highway Improvement Schemes, School Extensions, Environmental Improvement
Schemes, Other Landscape Schemes, Group Repair Schemes, Prior-to-Paint Repair
Schemes, Other Housing Refurbishment Schemes).

Maintenance work
(e.g. Responsive and Reactive Maintenance to Housing, Public Buildings and Highways).
In future the City Council intends to procure construction work in accordance with the following
Strategy:
1.0
The Type of Partnership
1.1
Major New Construction Work
This area of work does not tend to be frequent or repetitive enough to enable a
programme of work to be partnered, although there may be scope to explore the potential
for joint working with neighbouring local authorities. There may also be potential for
establishing a partnering arrangement with a contactor aimed at unknown future work.
These possibilities will require further research. In the meantime individually partnered
schemes would seem to be the sensible way forward.
This approach should bring significant ‘buildability’ benefits (with the involvement of
the contractor during the design process), and significantly improved time and cost
certainty. There should also be scope for cost savings, particularly linked to value
engineering exercises.
Proposal No. 1: to procure individual schemes on a ‘Partnering’ basis, at the earliest
practical stage in the development of the project.
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1.2
Other New Construction And Major Refurbishment Work
Although some parts of this area of work can be very unpredictable it should be possible
in most areas to package sufficient similar work together to enable a term partnering
arrangement to be entered into with partner contractor(s). For example it should be
possible to select 2 or 3 partners to deliver the Housing External Environmental
Improvement Programme, subject to key strategic decisions regarding the Housing
Capital Programme. In the case of Highway and Engineering Schemes the selection of 3
term partners would be a sensible way forward. A similar approach could be applied to
the Prior-to Paint Repair and Painting Programme and Housing Refurbishment rolling
programme work (such as kitchen and bathroom replacement and gas heating). Where
the nature of the work is such that an in-house contractor currently undertakes some of
the work, the in-house contractor would normally be one of the partners, with its
performance benchmarked against previous performance and / or that of the other
partner(s).
In terms of Group Repair work the main activity relates to specific Strategic Initiatives
such as the Single Regeneration Budget (Seedley Langworthy and New Deal for
Communities (Kersal). Each initiative has a long-term programme and it would be
logical to seek a partner for each programme.
With this size and type of project there should still be some benefits of ‘buildability’ in
some areas. Accurate programming and shortening of contract periods will be the main
advantages. As a longer-term arrangement will exist with the partner(s), there should
also be cost savings, particularly as partner(s) are no longer involved in costly tendering
processes. Longer-term arrangements should also present greater opportunities for
investment and training, the improvement of processes and continuous improvement in
performance. The success of this type of partnering arrangement will depend to a large
extent on the confidence that the partners have in the future programme. The City
Council will use its best endeavours to commit as substantial a forward programme of
work to the partnering arrangement as is practical under the financial circumstances that
prevail at the time
Proposal No. 2: to procure work by means of a series of term (5 year) partnering
arrangements involving up to three main contractors plus key sub-contractors / suppliers.
Proposal No. 3: to procure separate partners for the delivery of the Group Repair
Programme in each of the strategic initiatives being implemented in Seedley Langworthy
and Kersal.
1.3
Maintenance Work
Although the precise work undertaken in this area is not known from year to year, the
Council does spend a relatively consistent amount of money annually. In respect of
Housing Maintenance in particular it is normally possible to fairly accurately predict the
nature and value of work to be procured annually. Consequently a logical approach is
again to opt for a term partnership with up to 3 partner contractors. As with Proposal No
2, where the nature of the work is such that an in-house contractor currently undertakes
some of the work, the in-house contractor would normally be one of the partners, with its
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performance benchmarked against previous performance and / or that of the other
partner(s).
The main benefits of this type of ‘Partnering’ should be in terms of better, programming
and reduced costs, as partners will no longer be involved in expensive tendering
procedures. It should also result in improved customer care, processes and continuous
improvements in performance generally. As with ‘Other New Construction and Major
Refurbishment Work’ the success of this type of partnering arrangement will also depend
to a large extent on the confidence that the partners have in the future programme. The
City Council will use its best endeavours to commit as substantial a forward programme
of work to the partnering arrangement as is practical under the financial circumstances
that prevail at the time.
Proposal No. 4: to procure work by means of a series of term (5 year) partnering
arrangements involving up to three main contractors plus key sub-contractors / suppliers.
2.0
The Selection Process
2.1
Invitations to Tender
All ‘Partnering’ Contracts are likely to fall within the provisions of the European
Procurement Directive and will need to be advertised in the Official Journal of the
European Community (OJEC). In order to ensure that all the Council’s regularly used
contractors are aware of any advertisement it would be sensible to notify in writing all
contractors who have undertaken work for the City Council on at least 3 occasions in the
last 3 years. This would be a 2-stage process starting with an invitation for expressions
of interest, followed by the shortlisting of a number of contractors to be invited to submit
a formal proposal and attend for interview
Proposal No. 5: to advertise in the OJEC inviting expressions of interest in ‘Partnering’
with the City Council for all the various types of work, such expressions of interest to be
submitted separately for each category of work.
Proposal No 6: to notify all contractors that have undertaken work for the City Council,
on at least 3 occasions in the last 3 years, of the OJEC advertisement.
2.2
The Criteria for Selection
The criteria for the selection of ‘Partners’ should not be on the basis of lowest price but
take into account whole-life costs. The criteria used will vary from the major new
construction work where selection will be largely on the basis of the quality of the
proposal, together with a profit element and management fee, to a combination of quality,
priced schedules of rates and profit / management fee in respect of the maintenance work.
Proposal No 7: to select ‘Partners, not on the basis of lowest price, but on the basis of a
cost / quality evaluation.
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2.3
The Programme
The ‘Rethinking Construction’ approach to construction procurement should be
introduced as quickly as possible, without prejudicing the selection process. However, a
period of at least six months needs to be allowed for the selection of the ‘right’ partner
and this process cannot be hurried. Considerable resources will be required for this stage
(in both client Directorates and the Corporate Services and Development Services
Directorates), including the need to prepare the necessary documentation.
Proposal No. 8. to write to contractors and place an advertisement in the OJEC (in
accordance with Proposals No. 5 and No. 6) in respect of all but major new construction
work by 30th September 2002.
Proposal No. 9: to complete the entire ‘Partner’ selection process referred to in Proposal
No. 8 by 31st March 2003.
2.4
Performance Monitoring
The partners will jointly monitor the performance of the construction work that they
undertake, using the Construction Best Practice Programme Key Performance Indicators
(KPIs) of:
Client Satisfaction
Defects (and their effect on handover)
Predictability – cost
Predictability – time
Profitability
Productivity
Safety
Construction cost
Construction time
Period for settlement of final accounts
Disputes/claims
In addition the City Council will monitor its success in introducing the ‘Rethinking
Construction’ approach by measuring the percentage of construction services meeting
Rethinking Construction standard and will, with its partners, seek to introduce and
develop a further KPI for team performance.
Performance will be benchmarked against the performance of others, including that of the
best providers.
Proposal No 10: to monitor the performance of all construction work using the
Construction Best Practice Programme KPIs and to develop an indicator for team
performance.
Proposal No 11: to benchmark performance against that of others, including the best
providers.
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RETHINKING CONSTRUCTION IMPLEMENTATION STRATEGY
BACKGROUND DOCUMENTS
(A)
BUILDING AND LANDSCAPE WORKS
1.0
Issues
1.1
New Buildings.
1.1.1 New starts (i.e. The Albion High School) in 2001/02 had a value of £8,401,601.
1.1.2 Although there has been a steady flow of new building work commissioned in Salford
over the last few years (Ellenbrook Primary School, Salford Opportunity Centre, Salford
Quays Watersports Centre, Springwood Primary School, and The Albion High School),
the programme for new building construction in the future is very uncertain.
1.1.3 In the Education field, there is an increasing trend towards financing schemes through the
Private Finance Initiative (PFI), which involves Design and Build (far removed from
‘Partnering’). Central Government is being pressed by the ‘Movement for Innovation in
Construction’ (M4I) to introduce the ‘Rethinking Construction’ approach to PFI projects.
Until and unless that happens the scope for applying the ‘Partnering approach to new
school contracts is likely to be limited.
1.1.4 The procurement of new care homes will in future be undertaken by the Trust set up by
the Council to provide residential care.
1.1.5 Because of this uncertainty it would be impractical to seek a partner for future new
building work in advance of schemes being identified.
1.1.6 The Association of Greater Manchester Authorities has approved a Joint Service Delivery
Initiative to explore the opportunities for member authorities working together to deliver
certain services. One of the services included in the initiative is Construction Related
Professional Services. One potential area for joint working is in respect of the design and
implementation of new buildings on a Partnering basis.
1.2
Building extensions, refurbishment/external environmental improvement schemes
and other landscape schemes.
1.2.1 The main area of work here are External Environmental Improvement Schemes to Local
Authority Housing Areas (in 2001/02 new starts had a total value of £6,366,599) and the
Refurbishment / Group Repair of older private housing areas (in 2001/02 new starts had a
total value of £1,908,533).
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1.2.2 The programme of external environmental improvement work has been substantial over
recent years but its future is uncertain as government policy focuses more on internal
improvement to houses. Nevertheless there is potential for the adoption of a partnering
or team approach in this type of work if applied to an on-going programme of, say, 5
years.
1.2.3 The refurbishment and repair of older private housing is an expanding programme that
could benefit from a partnering approach in terms of improved customer care and quality
where the client / consultant / contractor team benefit from repeat work over, say, 5 years.
The existing tendering process works well, solutions are fairly standard and prices are
already very competitive with little or no problem of contractor claims. There is
therefore little scope for contractor input in terms of ‘buildability’ or reducing the cost
per unit. Similar issues apply to the Prior-to-Paint Repair and Painting work. The total
value of new starts in 2001/02 came to £7,330,207.
1.2.4 Other work under this heading is very unpredictable and is unlikely to attract partner
contractors unless it can be packaged with similar activities such as programmed
maintenance work or other similar building works. This may also be another area with
scope for joint service delivery with other local authorities. New starts came to a total of
£1,125,979 in 2001/02.
2.0
Proposed Strategy
2.1
New Buildings
2.1.1 Investigate the potential for joint service delivery as part of the AGMA Initiative.
2.1.2 In the meantime, as opportunities arise, procure on a one-off partnering basis, monitor
performance and review the success of the approach at the end of each project.
2.2
Building extensions, refurbishment / external environmental improvement schemes
and other landscape schemes.
2.2.1 Enter into a partnering contract on Spike Island Environmental Improvement (Phases 4,5,
&6), monitor performance and review success of the approach during and at the end of
the contract.
2.2.2 Seek a partner to deliver other external environmental improvement works to local
authority housing estates up to a value of £1Million per year over the next 5 years (with
no guarantee of the amount of work beyond the first year). Monitor performance over the
period of the partnership and review during and at the end of the 5 years.
2.2.3 Procure any further environmental improvement works by conventional competitive
tendering and compare performance with partnered projects.
2.2.4 Apply the partnering approach to the programme of Refurbishment Works in SeedleyLangworthy or Group Repairs Work in Kersal, for the life of the initiative. Monitor
performance and review during and at the end of the initiative.
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2.2.5 Procure all other Group Repair Work by competitive tender and compare performance
with partnered projects.
2.2.6 Monitor the performance of the existing Prior-to-Paint Repair and Painting Pilot
Partnering Projects, review at practical completion and compare with competitively
tendered projects.
2.2.7 Subject to any lessons learned from the current pilots procure the 2003 / 04 Prior-to-Paint
Repair and Painting Programme, packaged with the following 4 year programme on the
following basis (with no guarantee of the amount of work beyond the first year):



One third to be procured on a partnering basis with an external contractor;
One third to be procured on a partnering basis with the Housing Services
Maintenance Division (DLO);
One third to be procured by means of competitive tendering.
The performance of all three methods of procurement to be monitored and reviewed
during and at the end of the 5-year period.
2.2.8 Continue to monitor the programme in respect of building extensions and other landscape
work to identify future potential for partnering.
B)
ENGINEERING AND HIGHWAY WORKS
1.0
Major Highway Schemes (>£2m)
1.1
FREQUENCY – one every three years.
1.2
ISSUE – Liable to exceed budget and to be contractually confrontational.
traditional form of contract and method of procurement is not an option.
1.3
PROPOSED STRATEGY
Using
1.3.1 Revised forms of contract and procurement which are currently being used by the
Council are as follows:





Engineering Construction Contract (ECC) suite of contracts (MSIRR).
Develop and Construct Contract (Albion).
Target Price Contract (MSIRR).
Fixed Price Contract (Eccles By Pass).
Partnering Contract (MSIRR).
Award contract on mixture of price and quality (MEAT) (Albion, MSIRR).
1.3.2 All above at present appear to be giving satisfactory outcomes.
1.3.3 Other aspects which should come under consideration are as follows:
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Appoint contractor on purely quality grounds


Involve contractor in design and build up agreed Guaranteed Maximum Price
Use guaranteed maximum price in target contract with open book accounting.
Savings below the target (Guaranteed Maximum Price) to be shared between the
Council and the Contractor.
1.3.4 The next major highway scheme is likely to be Cadishead Way Stage 2 which it is hoped
will commence on site in Autumn 2003. It is proposed that a decision as to the precise
form of contract and method of procurement is made when it is clearer that funding is
available.
2.0
Medium Size Highway And Engineering Schemes (>£250k <£2m)
2.1
FREQUENCY – 8 No. per year (contracts prepared by engineers – excludes contracts
prepared by QS). Average yearly value approximately £1.5M.
2.2
ISSUE – Current arrangements work largely satisfactorily. It is proposed that
procurement decisions are taken on a scheme by scheme basis based on the range of
options set out below.
2.3
OPTIONS

Use current system of tendering each scheme on an individual basis but with a
substantially reduced standing select list (say six to nine firms).

Use term contractor with schedule of rates for the smaller schemes.

Negotiate with term contractor or with contractor who has recently won similar
work competitively.

Use options proposed for major highway schemes for larger projects (say > £1M).

Use forms of contract other than ICE 5.
2.4
PROPOSED STRATEGY

Award less complicated schemes to partner contractors appointed to deal with
projects costing less than £250k.

Use partner appointed to deliver external environmental improvements to housing
estates where appropriate for similar schemes managed by the Engineering Design
Section.

Consider awarding schemes approaching £2M in value or schemes of a
complicated nature using processes detailed for major schemes.

Tender other schemes using a substantially reduced standing select list from that
in current use.
3.0
Minor Highway Improvements And Other Small Engineering Schemes (<£250k)
3.1
FREQUENCY – 20 No per year (contracts prepared by engineers – excludes contracts
prepared by QS). Average yearly value approximately £1.2M.
3.2
OPTIONS

Current system - <£75k DLO - >£75k tendered to firms drawn from 30 strong
standing select list.

Tender each scheme but reduce number of firms on standing select list.

Share work between three term contractors.
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
Use single firm to do all work.
3.3
GENERAL ISSUES

Is £250k the right upper limit for the definition of the value of a small scheme?

Any arrangement will have to accommodate specialist work such as surfacing,
bridge repairs, etc.

Outcome of the current Street Scene Best Value Review with regard to the
arrangements for the Highway Maintenance Contractor will influence the chosen
solution for this work.

All options realistically require a reduction in the standing select list. How should
this be done? Firms that have worked well for SCC in the past? Based on quality
of submission which may not be accurate guide to future performance?

Discussion with the Council’s current contractors has indicated that they do not
wish to have significant involvement in the design of these types of schemes.
3.4
OPTIONS
(A)
Use current arrangements (<£75k DLO - >£75k tendered)
Advantages

Works satisfactorily.

Supports DLO.

Gives balance as lowest schemes are carried out on schedule of rates and slightly
larger schemes which are individually tendered are undertaken at lowest cost.

DLO is aware of potential workload and can plan accordingly.
Disadvantages

Standing list is too large as many firms on standing select list never submit a
competitive tender.

Schedule of rates for <£75k schemes does not give lowest cost.

Difficult to compare performance of firms.
(B)
Potential Improvements


Reduce number of firms on standing select list to say six or nine.
Provide copies of standard drawings and standard parts of contract documents at
start of each financial year (or at longer intervals if appropriate) and only provide
information specific to the project at time of tender.
Abandon current Highways Management Tender with DLO which is more suited
to minor maintenance and replace it with a document more suited to highway
improvement schemes.
Advise firms on reduced standing list of schemes likely to be tendered during
coming financial year.


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(i)
Tender Every Scheme To Small Standing Select List
Advantages





Likely to give lowest cost solution as all schemes will be competitively
won.
Firms can be advised of workload for coming year.
Close working relationships can be built with firms on small standing
select list.
Allows comparison of performance between firms.
Standard details can easily be provided to all firms at start of each financial
year (or at longer intervals if appropriate).
Disadvantages




(ii)
No firm has a guarantee of work.
Does not support DLO.
Contract documents have to be prepared for all schemes.
Less likely to lead to partnering.
Share Work Between Three Term Contractors
Advantages











Firms can be advised of workload for coming year.
Very close working relationship will be built with three term contractors.
Strong partnering ethos.
Allows some comparison of performance between firms.
Standard details can easily be provided to each firm at start of contract.
Should assist programme as there will be no tender process prior to the
commencement of every scheme although standing orders will require
amendment to avoid the need of approval of Lead Member for all schemes
over £20,000.
Supports DLO as they would presumably be one of the three term
contractors.
Would suit local/regional contractors.
Avoids the Council being tied to a single contractor.
May be able to undertake some specialist works e.g. surfacing by
employing specialist sub-contractors.
Bridge repairs likely to be
undertaken by firms from a separate list.
Avoids abortive tendering on every scheme.
Disadvantages

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Unlikely to be the cheapest option as schedule of rates is normally more
costly than rates for an individual contract.
(iii)
Single Term Contractor
Advantages







3.5
Programme of work for the year can be planned with the contractor.
Strongest partnering arrangement.
Standard details can easily be provided at start of contract.
Will assist programme as there will be no tender process prior to the
commencement of every scheme although standing orders will require
amendment to avoid the need of approval of lead member for all schemes
over £20,000.
Simpler having to manage only a single firm.
Could employ specialist firms as sub-contractors.
Avoids abortive tendering on every scheme
PROPOSED STRATEGY







Set up partnership with three term contractors – one contractor to be DLO
and its partner (see Street Scene Best Value Review)
Contractors to be chosen through a combination of quality and price.
Price to be determined through a schedule of rates - note that the work is
not overly complicated and therefore able to be realistically priced.
Items of work not in the schedule of rates to either be negotiated or paid
on a cost plus basis.
Performance to be monitored through Key Performance Indicators.
Part of the payment could be dependent on performance measured via the
KPIs.
Suggest three year contract (with potential two year extension) but with
allowance for returning to tendering of individual schemes if proposed
solution proves unsatisfactory to either party.
Decision would be required as to how the Council choose the shortlisted
contractors – open advert or choice from contractors who have previously
performed well for the Council.
Separate arrangements would have to set in place for bridge improvements and
repairs due to the specialist nature of the work.
Appointment of partners would take six months – documentation, advert,
shortlist, submissions, analysis.
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A)
MAINTENANCE WORKS
1.0
Responsive Works
1.1
TYPE OF WORK:
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1.2
Building and services responsive repairs to houses (Annual value approx £10
million).
Building and services responsive repairs to public buildings (Annual value approx
£0.75 million).
Responsive repairs to roads, sewers, pavements, street lighting (Annual value £1.8
million).
Building and services responsive repairs to schools (Annual value approx. £0.23
million). Amounts in excess of £0.3M are handled directly by schools.
CURRENT ARRANGEMENTS:
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1.3
ISSUES TO CONSIDER:
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Competitive tendering under term contracts.
It is essential to have continuity of work both during the year and from year to
year. If we require guaranteed performance we have to guarantee levels of
expenditure.
As the tendering for responsive repairs involves risk to the contractor due to the
uncertainty of work that he will receive, a cost plus basis could reduce the risk
and consequently the cost.
Due to long contract duration, and increasing skills shortage, if rates are too tight
contractor may find it difficult to attain quality operatives.
The establishment of large, long-term responsive contracts with demanding
performance measures may exclude many competent local contractors.
There are a lack of competent contractors available in the market. By setting up
longer-term arrangements we may be able to attract the right contractors.
Partnering should be a tool to improve quality through longer-term relationships
and closer working and objective setting between client and contractor.
In a limited market it may be possible to secure a more competitive cost through a
negotiated partnering arrangement rather than through competitive tendering.
Once the tendering climate moves solely to partnering, costs will generally
increase.
A cost plus payment system is difficult to administer for responsive repairs due to
volume of individual orders. Would be more appropriate to use a schedule of
prices.
Responsive contracts are generally in place to satisfy a statutory requirement so
will always be first call on funding. There needs to be a commitment however to
attempt to shift spend to programmed works.
Longer term partnering arrangements can give the “partnering team” greater
leverage to negotiate favorable supply agreements.
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1.4
Rethinking construction needs to be used to increase the image of contractors and
in turn the service.
There needs to be a greater use of computers for tendering, contract
administration, monitoring, payments etc.
Responsive repairs is a front line service with a large effect on the public. The
service would benefit from a closer working relationship between the
contractor/client and customers.
Contract arrangements must be flexible so that new initiatives and ways of
working can be developed.
OPTIONS:
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Give the contractor the responsibility to deliver the service for a set budget to
meet government best value performance indicators.
Systems need changing to pay the contractor quicker. As the contractor has to
fund the period between the work being undertaken and payment, quicker
payments should represent savings to the contractor, suppliers and subcontractors.
Faster payments will also assist accurate financial monitoring of spend by the
client.
Partnering for responsive repair work will in effect be term contracting over a
number of years with performance milestones i.e. improved response times, better
completion rates, improved satisfaction, innovation etc all to support best value.
Get together with adjoining local authorities as common client or service
provider.
As responsive repairs is a highly customer and service orientated activity is is
essential that evaluation is through a price/quality basis.
For long duration term contracts there needs to be a mechanism to ensure that
prices paid to contractor reflect the market so he can secure adequate levels of
skilled labour.
Rethinking construction represents an opportunity to invest in the service computer systems, training etc.
Continue as before with competitive tendering. Many of the requirements outlined
above will not be achieved using this approach.
Partnering the whole of the service. Risky. May lose potential for flexibility and
lack of internal benchmark.
Partnering with 2 or more partners. This could provide a benchmark of cost and
performance. Mechanisms to allow flexibility will support best value and allow
introduction of service improvements.
2.0
Reactive Works
2.1
TYPE OF WORK:
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Building and services reactive works to houses (Jobs £500 - £10,000 e.g. failed
heating system, re-roof or structural repair to a property. Total annual value
£300,000).
Building and services reactive works to public buildings (Jobs £20 to £5,000).
Building and services reactive works to schools (Jobs £20 to £5,000).
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2.2
Reactive works to roads, sewers, pavements, street lighting (Jobs £20 to £5,000).
CURRENT ARRANGEMENTS:
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2.3
Where suitable, work is packaged together into larger contracts. Otherwise
individual contracts are let. All work is procured by competitive tendering (with
survey, specification and tender) in accordance with standing orders.
ISSUES TO CONSIDER:
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2.4
The nature of this type of work means that it is difficult to set up along term
arrangement i.e. continuity cannot be guaranteed.
As more and more work is partnered there may be only the less reputable
contractors remaining for small competitive tendering exercises.
Due to the diverse nature of the work it is doubtful whether a single contractor
could handle all types, other that a management contractor, which would add extra
cost.
There are a number of preferred contractors available who become specialized in
this type of work.
Contracts tend to be very specific in their requirements so evaluation tends to be
on price.
Could be a risk of this area of the industry becoming the “poor relation” with low
profit margins and lack of investment.
OPTIONS:
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As this type of work cannot support a single contract in its own right, could be
merged into an existing, larger responsive contract. Doubtful whether this would
achieve quality or value for money.
Could pool the work together between Directorates.
Continue competitive tendering but introduce e-tendering to speed up process and
save tendering costs.