Hampshire County Council

Executive Member, Policy & Resources Item 6

11 April 2002

Procurement Initiatives

Report by the Director of Property, Business and Regulatory Services

1.

Introduction

1.1

The former Policy and Resources Committee at its meeting in April 2001 considered and approved a range of procurement initiatives for use by the Director of Property, Business and Regulatory Services in order to implement the capital and revenue programmes. This report provides a review of these initiatives and recommends their extension over the next two years.

1.2

To meet the significant expansion in the capital programme which was projected last year, it was agreed that one of the key strategies was to build more capacity for implementation of projects involving:

· further deployment of consultants

· the recruitment of additional staff

· the development of `partnering arrangements' for professional services with external agencies

· packaging similar elements of work to specific contractors

· developing new procurement initiatives

In the last 12 months over £40m of capital projects have been started - almost double what was traditionally achieved throughout the 1990's.

1.3

The results in the last twelve months suggest that these initiatives have all had a significant and positive benefit. The majority bring new professional capacity on board more quickly for design and contract management, but that is nullified if (traditional) procurement routes do not add similar advantages.

2.0

Procurement Initiatives

2.1

The County Council had a long tradition of procuring its building work on the basis of the lowest initial cost tender. This had for many years significant advantages, particularly when public and private construction activity was declining and contractors had capacity. However, it also produced significant disadvantages, particularly in markets where capacity was fixed and tender opportunities were expanding: the lowest initial cost was not usually the final cost; contractual claims flourished in a polarised contract situation; and often there was little commitment, other than cost incentives, to produce high quality workmanship.

2.2

In 1988 Sir John Egan produced his report for central government on the construction industry that was repackaged as "Rethinking Construction' and widely adopted by CIPFA, Audit Commission, the LGA and the DETR (now DTi and DTLR). `Rethinking Construction' is also being developed to act as a template for Best Value reviews of property services. Much of what the County Council is promoting is in line with "Rethinking Construction" with a degree of practical knowledge from implementation, feeding into further suggestions.

2.3

The recommended approach in `Rethinking Construction' was broadly to consider:

· team working and whole life costs to be considered alongside tenders evaluated on a value for money basis

· the development of partnering frameworks

· improvement and outcome based objectives as opposed to confrontational contracts

· longer term and repeat contracts based on quality, price and performance

· other significant issues such as Safety Management, cost and time predictability with the user in mind.

2.4

So far the County Council has adopted elements of the above into the following approaches:

· selection and utilisation of preferred contractors, who
continually perform well against a basket of criteria

· negotiation of contracts using broad framework agreements for similar schemes

· aggregation of similar works into larger packages to gain continuity of resource and economy of scale

· two stage (partnering) arrangements to secure contractors on best value criteria

· the development of term contracts covering several years and establishing joint objectives and outcomes

2.5

The new Secondary School at John Hanson in Andover and the recently awarded term contracts for five years of engineering and safety works at schools have been endorsed by central governments agency (the Movement for Innovation) and the Local Government Task Force as models of best practice. The department also continues to use lowest cost competitive tendering to stimulate competition and create a benchmark for comparison.

3.

Analysis and Review

3.1

So far some 33 individual and some 14 packages of multiple projects with a value of £43m have been developed using a combination of the above methodologies.

The benefits so far can be gauged by:

· greater ownership and control over project programmes

· the avoidance of post contract contractual claims

· a greater commitment on the part of contractors to engineering down cost problems on projects and work as a team

· better quality end products with fewer defects

· generally cost compare favourably with competitive tendering

Appendix 1 indicates the project, contractor, value and selection methods, together with the particular reasons for the procurement method. By January this year, some £43m of work was being designed, implemented on site or had been completed using new procurement initiatives.

4.

Costs Comparison

4.1

On major new-build projects the analysis so far suggests that proposals implemented under these new initiatives compare favourably with those processed using lowest competitive tenders but provide other benefits such as those mentioned above. The early and more constructive involvement of contractors is helpful in these situations given the tight programmes to which much of the work is being done.

4.2

On classroom extension work, negotiated contracts provide greater value - mainly because the individual projects are being packaged into larger contracts. These packages have also benefited from early contractor involvement.

4.3

On recladding work there has been no significant difference between negotiation and tendered packages. A report elsewhere on the agenda recommends further negotiation involving specific supplier and partnering. On this and similar types of work the development of a standard repeat solution will provide significant benefits.

4.4

Overall there is sufficient evidence to suggest that the initiatives are providing:

· good value

· improved collaboration and fewer contractual claims

· greater co-operation over solution and cost control

It is however important to note that the evaluation is still quite early in the life of many projects and that traditional lowest cost tendering still has a part to play, albeit that other performance criteria will be part of the tender evaluation process.

Recommendations

That:

1.

Approval be given to the procurement initiatives highlighted in the report and to a subsequent review on an annual basis.

2.

The `Rethinking Construction' framework be developed as an element of the best value review of property services in 2002/3.

3.

The Director of Property, Business and Regulatory be authorised to seek maximum value for supply chain arrangements and enters into specific procurement initiatives where it is economical and practical to do so, in line with those outlined in the report and Appendix 1..

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR PROCUREMENT STRATEGY

Partnering Projects (Major Schemes)

John Hanson Secondary

HBG

10,757,425

_ Four Firms considered following initial interview

_ Submission of detailed proposals and competitive interview

_ M4I demonstration project

_ Collaboration with contractor to resolve design and buildability issues

_ Obtain price certainty and Best Value

_ Joint financial and risk management

_ Agreement of programme

Lankhills Special School

Llewellyn

4,537,000

(est)

_ Five firms considered following initial interview

_ Submission of detailed proposals and competitive interview

_ Collaborate with contractor to resolve design and buildability issues

_ Obtain price certainty and Best Value

_ Agreement of programme

_ Joint financial and risk management

Hilliers Arboretum - New Visitors Centre

Brazier

3,250,000

(est)

_ Five firms considered following initial interview

_ Submission of detailed proposals and competitive interview

_ Collaborate with contractor to resolve design and buildability issues

_ Obtain price certainty and Best Value

_ Agreement of programme

_ Joint financial and risk management

Shepherds Down Special School

Llewellyn

1,607,000

(est)

_ Submission of detailed proposals and interview with successful contractor for Lankhills Special School

_ Scheme suits a common approach with Lankhills

_ Single point of responsibility for both schemes

_ Economy of scale in combining tender packages for both schemes

_ Agreement of programme

_ Joint financial and risk management

Thornden Secondary

New 400 Seat Auditorium

Brazier

1,158,128

_ Submission of detailed proposals and competitive interview with two firms

_ Spend profile re special school status money

_ Collaborate with contractor to resolve design and buildability issues

_ Obtain price certainty and Best Value

_ Agreement of programme

_ Joint financial and risk management

St Bede Primary School

Extension and Refurbishment

Benson

1,800,000

(est)

_ Interview following submission of detailed proposals

_ Essential to engage early with preferred contractor to agree phasing and programme

_ Collaborate with contractor to resolve design and buildability issues

_ Contractor's proposed team have recently performed to a high standard on another scheme for the Department

_ Joint financial and risk management

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR PROCUREMENT STRATEGY

School Science Labs

(Science Labs 21^st Century and

NDS Phase 4)

Package 1

_ Brighton Hill Community

(includes replacement of temporary classrooms)

_ John Hunt of Everest Community

_ Oak Farm Community

_ The Wavell

Mansell

1,461,000

_ Interviews and then negotiation with preferred contractor

_ Collaboration over required solution / buildability issues

_ Early appointment needed to resolve complex phasing issues

_ DfEE spending profile

_ Familiar with package procurement

_ Ability to respond quickly and resolve a number of scheme enabling issues

_ Achieve economy of scale by grouping works with a single contractor

Package 2

_ The Clere

_ Harrow Way Community

_ Park Community

_ Fort Hill Community

Bensons

846,900

Package 3

_ Romsey Community

_ Cranbourne Secondary

_ Alderman Quilley

_ Neville Lovatt Community

Richardsons

818,400

Schemes with SEED Challenge Funding Deadlines and Associated Works

Chawton Primary

Classroom and Hall Extension

Richardsons

489,600

_ Negotiation with preferred contractor

_ Need to commit project in 2000/2001 in order to secure SEED Challenge funding

_ Resolution of complex phasing issues with contractor

Cliddesden Primary

Three Classroom Extension

John Hobden

306,300

_ Negotiation with preferred contractor

_ DfEE spending target to meet SEED Challenge

_ Successful with similar projects under negotiated terms

Stoke Park Infants

New Classroom/IT Suite

Mansell

166,500

_ Negotiation with preferred contractor

_ Need to commit project in 2000/2001 in order to secure SEED Challenge funding

_ Successful with similar projects under negotiated terms

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR PROCUREMENT STRATEGY

Mainly Key Stage 1 Phase III classrooms

Package Schemes

_ Lee-on-the-Solent Infant

_ Newtown Primary

_ Western Primary *

(* includes SEED Challenge funding and Ballard replacement work)

Mansell

764,352

_ Negotiation with preferred contractor

_ DfEE require spend complete in 2000/2001

_ Similar experience of many school extensions under previous government KSI phases

_ Packaging with a single contractor to achieve economy of scale

_ Parsonage Farm Infant

(includes Ballard replacement)

C H Beavis & Partners

265,034

_ Negotiation with preferred contractor

_ DfEE require spend complete in 2000/2001

_ Similar experience of this type of building extensions (Scola)

Key Stage 2 Classrooms

Western Primary

Mansell

158,071

_ Negotiation with preferred contractor

_ Combine works with existing contract on site under KSI initiatives.

_ Existing rates and prices form sound basis to negotiate

_ Economy of scale and least disruption to the School

Learning Support Units

John Hunt of Everest and

Oak Farm Community

Mansell

127,741

_ Negotiation with an existing contractor

_ Works needed to be completed over the Summer 2001 break

_ Existing contractor already carrying out works on the site

_ Contractor with detailed knowledge of site issues

_ Economy of scale

Staunton Park Community

J M Habens

80,998

_ Negotiation with an existing contractor

Other Capital Schemes

Swanmore Secondary

New classrooms and ancillary space

(incorporating a major refurbishment package for the Sports Hall funded by P&R)

Richardsons

1,513,900

(est)

_ Negotiation with preferred contractor

_ Need to appoint a reliable contractor to co-ordinate a complex planning strategy.

_ Important to develop a good working relationship with the school during the development stage

_ Preferable to select Contractor who can provide a highly competent Site Agent to manage the works

_ Need to respond quickly

_ Contractor with significant in-house specialist resource in a time of major industry skills shortages

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR PROCUREMENT STRATEGY

Hounsdown Secondary School

Specialist Teaching Accommodation

TAB Projects

853,000

(est)

_ Interview following submission of detailed proposals on a Develop and Construct basis

_ Established design and build contractor with previous site experience

_ Essential to appoint a preferred contractor to both take on the development of the scheme and advise on phasing issues

_ Likely to require to undertake advance works to maintain programme

Romsey Secondary School

New General Teaching Block with Aspergers Unit

TSL/Benson

507,000

(est)

_ Interview and submission of detailed proposals on a Develop and Construct basis

_ Preferred Design and Build firms who have successfully delivered similar projects

_ Earlier start on site and maintain target completion of August 2002

_ Straightforward scheme which lends itself to a contractor design develop approach

Perins Community

Drama and Science Extensions

Richardsons

907,926

_ Negotiation with preferred contractor on a sequential tender basis

_ Need to appoint a contractor to maintain programme

_ Sound basis to negotiate based on recent competitive tender

(Brune Park)

Noadswood Community

IT Suite and Toilet Block Conversion.

R V Dart

374,229

_ Negotiation with preferred contractor

_ Similar work previously successfully undertaken by same Contractor

_ Firm basis to negotiate using recent tender as basis for pricing

_ Knowledge of site issues

Halterworth Primary

2 Classrooms/IT Suite and Special Needs Room

Mansell

351,000

(est)

_ Initiative to negotiate based on the KSI pricing framework

_ Collaborate with contractor over planning procurement and access.

_ Contractor with previous experience of the site

_ Contractor selected who has successfully completed many similar schemes

_ School's preference for contractor used before on site

South Farnborough PRU

John Stacey

338,000

(est)

_ Invitation to negotiate

_ To meet programme and resolve complex phasing issues

_ Sound basis to negotiate based on 2 similar projects in same area

_ Economy of scale by combining resources with the 2 schemes already in progress as noted above

Blackwater Valley Visitor Centre

Gregory Havant

287,747

_ Negotiation with preferred contractor

_ Firm with specialist knowledge of preferred form of construction

_ Successful delivery of similar schemes

_ Collaboration over design solution

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR PROCUREMENT STRATEGY

Sherborne St John Primary

Extension and Alterations

Either: Benson

Laishley

Mansell

280,000

(est)

_ Interviews followed by Negotiation

_ Need to commit project delayed over land ownership issues

_ Collaborate over design/phasing and resolving site constraints

_ Reliable contractor required

Overton Primary

Replacement of Temporary Classrooms (NDS4)

C H Beavis

231,500

_ Negotiation with preferred contractor

_ DfEE spending target to meet.

_ Recently successfully completed an identical extension on same site.

Barncroft Infant

Playgroup Facilities

Mansell PLC

158,071

_ Negotiation with preferred contractor

_ Previously successful with similar schemes under KSI initiatives

_ Collaboration over design solution and phasing of works

Stubbington Study Centre

Gregory Havant

145,228

_ Negotiation with preferred contractor

_ Specialist knowledge of chosen form of construction

_ Collaboration over design solution

_ Successful delivery of similar schemes

Totton Hounsdown

TAB Projects Ltd

126,525

_ Negotiation with preferred contractor

_ Need to collaborate with a contractor over scheme solution

_ Contractor with previous experience of the site

_ Need to complete works over Summer holiday period.

Social Services Reinvestment Strategy

Hot Surface Protection

Social Services Older Persons Homes

Coverad Ltd

390,000

(est)

_ Invitation to negotiate based on sample prices from 3 firms

_ Early appointment of contractor needed for H&S reasons. Other 2 Firms were later used as work proved too much for one specialist to cope with

Mechanical, Electrical Term Maintenance Contracts

Churches,

Drake and Scull,

Planned Maintenance,

Johnson Controls

(est)

5-7 years, £4.9m per year

_ Submission of detailed costed framework proposals, selection against model, final package negotiated

_ Partnership approach

_ Best value

_ Minimisation of risk of contract failure

_ Increased customer service

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR APPOINTMENT

Ballard Heater Replacement Programme

Bishopswood Infants & Junior

Pinewood Infants

Anton Junior

Kingsclere Primary

Hurst Community

Gardner

260,000

170,000

170,000

140,000

17,000

_ Negotiation based on performance on previous work

_ Good experience with contractor

_ Contractor has project knowledge

_ Less HCC cost

_ More continuity for contractor

_ Achieve best value

Crofton Hammond Infants & Junior

Worting/Austen PRU

Romsey Junior

Perins (Elliott Block)

Netley Abbey Junior

Kings Copse Primary

Old Basing

Perins (Health & Safety Suite)

Dixons

260,000

232,000

160,000

156,000

140,000

136,000

134,000

20,000

Portchester Community

Mill Hill EYC

Liss Infants

Amery Hill

BA Corry

211,000

195,000

137,000

132,000

External Decorations Programme

Package A - 12 Premises

(B & C currently on hold)

Brymor

450,000

_ Interview and negotiation

_ Past performance and partnering approach

_ Achieve best value

Package D - 8 Premises

Mitie

272,000

Package E - 8 Premises

Ferris

123,000

Package F - 8 Premises

Tew Bros

483,000

Package G - 17 Premises

Poole and Sons

327,000

Package H - 9 premises

Atkins Painting

221,000

Package I - 6 Premises

Warwick

118,000

WORKS

CONTRACTOR

VALUE

SELECTION METHOD

REASON FOR APPOINTMENT

Scola Cladding Programme

Siskin Infant & Junior

Mansell

680,300

_ Main contract tendered

_ Preferred sub-contractor (Wessex)

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

Orchard Junior

TBA

444,000.

_ Main contract tendered

_ Preferred sub-contractor (Wessex)

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

The Clere Phase I

Habens

437,500

_ Main contract tendered

_ Preferred sub-contractor (Wessex)

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

Bordon Junior

R V Dart & Sons

387,300

_ Main contract tendered

_ Preferred sub-contractor (Wessex)

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

Harrow Way Phase III

Habens

382,100

_ Main contract negotiated

_ Preferred sub-contractor (Wessex)

_ Negotiated with contractor who completed Phase II the previous year

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

The Clere Phase II

Habens

344,700

_ Main contract negotiated

_ Preferred sub-contractor (Wessex)

_ Negotiated with contractor who completed Phase I the previous year

_ Only sub-contractor with an approved system for Scola 1 buildings which mimics the existing timber system

Pennington Infant

TBA

337,400

_ Main contract tendered

_ Preferred sub-contractor (Comar)

_ New sub-contractor to introduce competition and choice into re-cladding schemes

Orchard Infant

TBA

305,000

_ Negotiation with contractor winning Orchard Junior tender

_ Similar work and shared site so considered to be best way to proceed

_ Could not tender at same time as Junior School as not all the design work was complete

The Holme

TBA

303,000

_ Main contract tendered

_ Preferred sub-contractor (Comar)

_ New sub-contractor to introduce competition and choice into re-cladding schemes

Pre Contract

(£K)

On Site

(£K)

Complete

(£K)

TOTAL

(£K)

Main Partnering Schemes

11,194

11,916

-

23,110

Science Labs

470

578

2,078

3,126

SEED Challenge and Associated

-

796

167

963

Key Stage 1 & 2 and Associated

-

611

576

1,187

Learning Support Units

-

-

209

209

Other Capital Funded

4,132

1,286

656

6,074

Hot Surfaces Protection (Social Services Reinvestment Strategy)

-

350

40

390

* Ballard Heater Replacement Programme

1,177

543

950

2,670

External Decorations Programme

-

1,871

123

1,994

* External Recladding Programme

2,553

1,068

-

3,621

Total Value under New Arrangements

19,526

19,019

4,799

43,344