The Defence Infrastructure Organisation’s head of future procurement has insisted its contract pricing is “robust”, despite a lengthy procurement period and final contracts awarded at lower-than-advertised values.
Speaking to Construction News after the DIO appointed contractors to three of its delayed next generation estates contracts (see box), Matt Foley said the DIO had a “clear pricing strategy” that would not be affected by cost inflation in the market.
Procurement of the three contracts was launched as far back as 2010.
Final bids for the Scotland and Northern Ireland Prime contract were submitted in July 2012 and competitive dialogue for the Housing Prime and Training Estate Prime contracts took place in the summer of 2012.
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Despite the return to growth in the market and material and labour cost inflation since then, Mr Foley said: “The contract values we have published are firm, tendered prices. All of the prices in there were agreed and have been through evaluation and consultation and they are robust.
“I am confident we can hold contractors to the prices they bid and they will not be affected by the market,” he added.
The latest tranche of DIO contracts has been awarded to contractors at values lower than they were orignally estimated to be worth for the initial five-year contracts.
The Scotland and Northern Ireland Prime was expected to be worth £200m to £350m over an initial five-year period. However, it was awarded to CarillionAmey this week at a value of £152m over five years.
“When you have complex procurement like this, the scale of approvals and scrutiny is not insignificant. It is inevitable with ministers’ busy diaries that there is some delay”
Matt Foley, DIO
Mr Foley said the scope of the contracts had not changed, but “a positively-run competition” had “delivered better value for money” for the DIO and UK taxpayers.
He added that the contracts had been agreed with “a firm price element” but that the DIO retained the ability to put extra funding into the contracts for additional projects.
The Housing Prime was due to be worth up to £1.5bn over up to 10 years, but has been awarded to CarillionAmey at £626m over the first five years.
The National Training Estate Prime was estimated to be worth £450m to £900m over five to 10 years, but has been awarded to Landmarc Support Services at a value of £322m over five years.
“All of the prices in there were agreed and have been through evaluation and consultation and they are robust”
Matt Foley, DIO
Each of the contracts has the option to extend for a period of up to five years after the initial five-year contract duration.
Asked how the Scotland and Northern Ireland Prime contract would be affected if Scotland votes for independence in its referendum in September, Mr Foley said “it would take some time to play out what happens with defence in the UK”.
“We are committed to delivering a service [under the contract] for at least five years, and we will continue providing services until we are told not to by the Ministry of Defence or the government,” he added.
The three contracts were due to be awarded in the first quarter of 2014. However, they were delayed until this month due to the complexity of the procurement process, Mr Foley said.
“When you have complex procurement like this, the scale of approvals and scrutiny is not insignificant,” he said.
“It is inevitable with ministers’ busy diaries that there is some delay, but we have minimised delays with a proactive approach.”
He added that provision for delays was built into the timetable for the transition between existing contracts and the new next generation estates contracts, and he insisted there would be no break in service as a result of the delays.
The remaining three Regional Prime contracts covering the South-west, South-east and Central regions are due to be awarded on 1 June, and Mr Foley confirmed the Treasury had already signed off the contracts, meaning there should be no further delays to contract awards.
Construction projects valued at more than £3.93m will be procured through either Regional or National Capital Works Frameworks.
Regional Capital Works frameworks will be used to deliver construction projects valued up to £12m, which could include offices, messes and accommodation blocks.
DIO awards three contracts worth £1.1bn
A joint venture between Carillion and Amey beat Babcock Support Services and a joint venture between Kier and Turner Facilities Management to the £626m National Housing Prime contract covering repairs and maintenance across 49,000 military homes.
CarillionAmey also saw off competition from Babcock Support Services, Interserve and a joint venture between Turner Facilities Management and Henry Brothers to win the £152m Scotland and Northern Ireland Prime Contract.
The DIO awarded its £322m National Training Estate Prime Contract to Interserve subsidiary Landmarc Support Services, which beat Babcock Support Services and a joint venture between Kellogg Brown and Root and Balfour Beatty Workplace to the job.
Under the five-year deals, the contractors will provide planned and reactive maintenance to the defence estate and deliver additional professional services, low-value capital works and construction projects up to a value of £3.93m.