The Government has published guidance on the three new models of construction procurement they have been trialling, together with the latest associated case studies produced by Constructing Excellence at the Government Construction Summit on 2 July 2014.
The Cabinet Office said the purpose of the guidance documents is to assist clients, consultants, Tier 1 contractors and Tier 2/3 subcontractors and suppliers to understand and adopt a consistent approach to the procurement and delivery of the Cost Led Procurement, Integrated Project Insurance and Two Stage Open Book models.
The new procurement models are based around delivery by integrated project teams working collaboratively. Along with reducing costs, the models are expected to: contribute to improved programme certainty, reduce risk, encourage greater innovation, and improve relationships across clients and the supply chain. The Cabinet Office said the models do not deliver the cheapest construction project, but will deliver the most cost effective and value for money outcome.
The guidance, which is intended to help central and local government bodies to work with the construction industry more effectively, consists of the following three procurement models:
Two Stage Open Book
Using Two Stage Open Book a client invites prospective integrated teams to bid for a project based on their ability to deliver an outline brief and cost benchmark. Following the first stage competition, the appointed team works alongside the client to build up a proposal, the construction contract being awarded at the second stage. This differs from Cost Led Procurement in reducing industry bidding costs, enabling faster mobilisation and in providing the opportunity for clients to work earlier with a single integrated team.
Cost Led Procurement
Applying the Cost Led Procurement process, a client can use their knowledge of costs to set a challenging cost ceiling and output specification against which the supply chain can bring experience and innovation to bear in a competitive framework environment. On frameworks with a series of similar capital projects, CLP provides the opportunity to continually improve on the unit costs of the programme working collaboratively with the supply chain.
Integrated Project Insurance
The Integrated Project Insurance model offers clients the opportunity to create a holistic and integrated project team - an Alliance Board- to eliminate the “blame/claim” culture. The innovative “integrated project insurance” package limits the risk for the individual members of the team, fosters joint ownership of the project, and thereby reduces the likelihood of overrunning in terms of cost and time.
Introducing the Guidance, Peter Hansford, the Government’s Chief Construction Adviser, said the new models encompass principles of early supplier engagement, transparency of cost, integrated team working and collaborative working:
“In introducing these models, our aim is to provide cost certainty, which is an essential element of providing better long-term value from the delivery of construction projects. It is vital that clients enter the procurement process knowing what their projects should cost and that the procurement vehicle adopted provides them with confidence of what their projects will cost.”
The models bring together existing effective practices and behaviours that leading practitioners are already using to help generate savings reported by Government (£447m in financial year 2012/13 savings and £840m in financial year 2013/14).
The models are seeking to change the way public sector clients buy construction to a process where the supply chain responds to an outline client requirement and declared budget. This contrasts with the historical process of the supply chain building up a price against a detailed client requirement without understanding what the client can afford.
Click here to download the models:
New Models of Construction Procurement - Introduction
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