Details of the seven construction projects and programmes that will be used as test cases to trial three new public sector procurement methods have been unveiled by the government.
The Ministry of Defence will lead on the most radical of the new procurement methods, known as integrated project insurance (see attached documents).
A £7.6 million contract for new build training rooms at the Royal Marines base in Lympstone will be procured using IPI for the first time, where cost overruns are covered up to an agreed cap.
The MoD will also take the lead on the new cost-led procurement model, where cost benchmarks are set that framework contractors must hit or risk seeing the work tendered outside the framework.
Three schemes including a £14.2m new-build hangar at RAF Waddington will, subject to funding approval, be among the first to trial the method.
The Environment Agency’s Upper Mole flood alleviation programme and Rye Harbour sea wall replacement project will also set cost benchmarks.
A £20m new-build project at Cookham Wood for the Ministry of Justice will go to tender this month and will be procured under the third model, revealed by CN in December, of a two-stage open book process.
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The government will also trial the use of mandated building information modelling on four MoJ projects, as revealed by CN, at different stages of procurement and construction, including the Cookham Wood scheme.
The procurement models have been proposed by the procurement and lean client task group, which sits under the Government Construction Board, to find up to 20 per cent savings in public procurement following the publication of the Government Construction Strategy in May 2011.
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Chief construction adviser Paul Morrell told CN the government wanted to find a balance between setting efficiency standards and transparency by asking supply chains to “use imagination” to find cost savings.
He said the government, rather than hoping to “get lucky” in the marketplace, wanted to be more mature as a client while keeping competitive tension within supply chains.
“We are trying to set loose within the industry their ability to use their imagination to deliver projects and going to the marketplace and correcting the fracture that exists between designers and contractors.”
Mr Morrell said the Highways Agency and Environment Agency were good examples of clients that are close to their supply chains, urging all departments and procuring bodies to replicate that relationship.
He insisted the government wants to work with better contractors, regardless of size, and said if SMEs or lower-tier contractors can prove they have the right practices in place they will be well-placed to win work by becoming preferred suppliers to tier one contractors and clients.
“I don’t think these reports tilt the balance in favour of bigger companies; I think it tilts the balance in favour of companies that are looking at innovation in their supply chains and are committed to continuous improvement,” he said.
Navigant Consulting chief operating officer and procurement task group chairman Nick Pollard said the trial models were the perfect way to hold both the public sector and contractors to account on new ways of working.
He said: “This is not only for the ‘big guys’. The two-stage model will allow mid-tier contractors to compete very effectively in local surroundings against the bigger multinationals.
“All the models are about making shorter bidding timescales, reducing costs and unnecessary overheads where competition will be much better balanced as a result.
“If people engage with these models then I have no doubt that they will outperform traditional models that have led industry time and again into conflict with clients.”
The government has also revealed cost benchmarking data, illustrating the “cost reduction trajectories” for Whitehall departments with major construction budgets.
The trajectories outline how each department intends to reach the targeted 15-20 per cent reduction in the cost of public sector construction.
The Department of Health/ProCure 21 has the smallest target, aiming for a 14 per cent saving by 2014/15. Others, including Partnerships for Schools, expect to save 20 per cent in the same period.
The government already claims to have saved £188m, or 3.8 per cent, on total expenditure of £4.97bn between May 2010 and September 2011.
Savings range from the £20m at the Ministry of Justice, on a £160m expenditure, to £30m at the DoH, on £1bn spent.
Each department has set out how it has and will continue to reduce costs. The MoD says its collaborative supply chain approach has led to a massive reduction in defaults and claims, adding that project times had improved by up to eight months.
The MoJ hailed value from the introduction of mini-competitions within frameworks and bundling of projects, while the Department for Transport/Highways Agency has forecast it will save £443m across 14 major projects worth £2.2bn until 2016.
The government will use cost benchmarking data from 2009/10 to act as a baseline.
Mr Morrell insisted he was satisfied the data was robust and had been consistently applied with help from Rider Levett Bucknall and the Royal Institution of Chartered Surveyors.
Constructing Excellence director Jon de Souza said that contractors will each react differently to the procurement models but that the industry now needed to work on a collaborative response to the findings of the trial models.