1

Summary

1.1

The purpose of this report is to assess the current position of procurement and project management processes for County Council building projects (`the Hampshire Model') against the principles of the Rethinking Construction agenda. Members will recall that the County Council applied for Beacon Status for its procurement activity and was rejected by the Office of the Deputy Prime Minister. The development of procurement initiatives in Hampshire was part of an earlier initiative approved by the Cabinet to expand our capacity to implement the capital programme. This report explains and highlights the differences in the approaches.

5.6

The results also indicate that both competitively tendered and Best Value projects are generally delivering a good standard of performance in comparison to the industry results. A comparison of industry results and the results for County Council projects procured through Best Value methods during 2003, presented in Table 1 below, shows that the Best Value projects exceeded the industry performance in all of the indicators measured except profitability, which was in line with the current industry performance.

5.7

The early data gathering for the Nursing Care projects suggests that the performance is currently within the top 30% of projects when benchmarked against the construction industry KPIs. Further data gathering will be undertaken as the project progresses towards completion and a very high level of attainment is anticipated.

Table 1

KPI

Measure

Industry 2003

County Council Performance

2003¹

Client Satisfaction - Product

% scoring 8/10 or better

80%

100%²

Client Satisfaction - Service

% scoring 8/10 or better³

74%

Defects

% scoring 8/10 or better⁴

68%

100%

Predictability Cost - Design

% on target or better

62%

67%

Predictability Cost - Construction

% on target or better

49%

56%

Predictability Time - Construction

% on target or better

60%

83%

Profitability

Median profit before interest & tax⁵

7.5%

7.1%

Safety

% with zero AIR⁶

78%

100%

Construction Cost

Change compared with one year ago

1%

-1.7%

6

Conclusions

6.1

The key Best Value procurement initiatives introduced by County Council in recent years are in line with the principles of the Rethinking Construction agenda.

6.2

The sample of projects analysed is insufficient to enable a complete assessment of performance against the Rethinking Construction improvement targets. However, when considered against results from the 2004 Construction Industry Progress Report, the performance of the Council's Best Value projects compares favourably with the performance of the construction industry as a whole, and in some instances suggests better performance.

6.3

The `Hampshire' model for construction related procurement does not fully align with the Rethinking Construction model. As such there are areas where further development may be appropriate, to improve the processes used by the Council, in line with the recent LGTF guidance, which would include:

· Extension of the Best Value selection process - following the recent report to Cabinet on 27 September a greater proportion of projects will be subject to this process.

· Greater involvement of contractors at an earlier stage in the project design process to encourage more innovation and efficiency.

· More emphasis on the whole life costs when taking procurement decisions.

· Investigating opportunities for sharing risks and potentially rewards for exceeding targets or expectations.

· Further development of performance management regimes to ensure that these reflect, and can be benchmarked against, the national construction industry KPIs and to deliver continuous improvement.

Recommendation(s)

That the Buildings, Land and Procurement Panel advises the Executive Member for Policy and Resources that:

1 The report is noted.

2 That the further development of the Hampshire Procurement Model is reported to future meetings of the Panel.

1

Best Value Selection

1.1

The County Council has introduced a methodology for selecting contractors for building projects on a Best Value basis using a weighted scoring matrix which can be adjusted to suit the particular requirements of each project. In addition to price, the matrix facilitates scoring of the contractors' approach to the project in terms of management arrangements, supply chain management, design, buildability, risk and sustainability. The selection process aligns with the model provided in the LGTF guidance and is now used on all non-traditionally procured projects where more than one contractor is being considered for selection.

2

Strategic Partnering and Framework Arrangements

2.1

To enable longer term relationships to be developed with key suppliers, the Council has set up a number of strategic partnering and framework arrangements including:

· Framework Agreement for Major Schemes and Programmes of Work.

· Term Engineering Maintenance Contracts for mechanical and electrical systems and plant across the whole of the County Council's estate.

· Flat Roofing Framework Agreement.

· Partnering Arrangements for Structural Engineering, Mechanical and Electrical Engineering and Quantity Surveying Consultants.

2.2

Framework arrangements for mechanical and electrical contractors are to be piloted in the next year and the consultant partnering arrangements are also to be extended to cover Building Surveyors. Other initiatives are being developed as a continuation of the strategy to develop strategic partnerships.

3

Collaborative Working Arrangements

3.1

Collaborative working is key to the success of the strategic framework and partnering arrangements. The two stage partnering process used on the Framework Agreement for Major Schemes allows the Framework Contractor to be appointed early on the basis of a design development fee, to work with the design team to develop the detailed design and to agree the procurement of the subcontract packages, to secure the overall contract sum prior to final award of the construction contract.

3.2

This process not only allows the design team to draw on the contractor's expertise in terms of value engineering and buildability, it also encourages joint ownership of the design, cost plan and project risks and provides increased certainty of cost and programme at contract award.

3.3

A collaborative approach is being encouraged throughout the department even where projects are traditionally procured. Success is demonstrated by improved health and safety performance, a reduction in adversarial disputes and claims and the amount of professional time required to agree final accounts following completion and handover.

4

Integrated Project Teams

4.1

The collaborative working arrangements facilitated through the strategic framework and partnering agreements has also allowed increased integration of the design team and earlier involvement of the main contractor and key supply chain members.

4.2

This has most notably been achieved on the Nursing Care schemes where a dedicated project team comprising Council in house staff and external consultants, together with contractors have developed the design and managed the procurement of the key subcontract packages. Key supply chain members have been appointed early so that their specialist knowledge can be captured during design development.

5

Performance Measurement and Continuous Improvement

5.1

Key performance indicators (KPIs) are incorporated into all the framework and partnering arrangements to support performance management and drive continuous improvement.

5.2

To date a simple arrangement has been used, which utilises existing management information supplemented by additional scoring undertaken through a workshop. This is now being updated to enable measurement against the national Construction Industry KPIs, with the Nursing Care schemes acting as the pilot for the new arrangements. The information collected is used to manage performance within the partnering and framework arrangements and to support recommendations for selection of contractors and consultants for new projects.

5.3

KPIs are also used to measure performance on non-framework schemes, whether procured using traditional or best value procedures. This enables internal benchmarking of the different procurement arrangements to support future decisions on procurement within the Council.

6

Standardisation and Modern Construction Methods

6.1

The Council has taken some initial steps towards exploring the opportunities offered by increased standardisation of design and components and use of modern construction methods such as off-site manufacture.

6.2

A common design approach has been adopted across all the Nursing Care schemes. In addition to reducing the total design resource and time required, this approach has provided the opportunity to secure the benefits of supply chain management from the common elements of the schemes, with tender enquiry documents including a provision for sub-contractors to propose savings and efficiencies and offer discounts for future schemes.

6.3

A common design approach has also been used for the NOF Sports Hall projects, allowing lessons learned from the design and construction of the early projects to be applied to the later schemes.

6.4

Through the Term Engineering contract, the Council is seeking to reduce the number of different components used on the mechanical and electrical services within County Council maintained buildings. This allows better control of stock and provides opportunities for negotiating discounted prices with key supply chain members.

6.5

The use of off-site manufacture has so far been limited, however the Council's building services engineers are keen to explore the use of pre-fabricated services installations which offer potential benefits in terms of reduced on-site installation time and improved quality.

6.6

Other examples include development of the Scola re-cladding system and standardised design under the Class of 30 initiative.

70% Best Value

30% Traditional

Framework for Major Schemes

Term Arrangements

Packaging

SME Framework

Future Strategic Developments

Six national firms appointed four years extendable by a further two

Appointments lasting between two and five years for responsive maintenance and minor works

Direct procurement of specialist supply chains for:

· Re-cladding

· Re-roofing

· Projects of a repetitive nature

· Mechanical and Electrical Services

Development of Framework with up to ten medium size firms for a four year term

Templates being developed for:

· Supply Chain Management

· Building Schools for the Future

· Response to other national funding strategies etc.

Competitive tendering processes with selection based upon lowest price only, including single stage/two stage/ develop and construct etc.

Responsible for major projects over £1 million including:

· Major schools

· Nursing Care

· Large redevelopments

· Programmes

· Engineering

· General building

· Decorating

· External paving repairs

· Asbestos removal

Term appointments up to four years:

· Re-cladding

· Roofing

· Standardised projects

· M&E

Responsible for intermediate size projects up to

£1 million:

· Extensions

· Refurbishment/

Maintenance

· Smaller re-developments

Performance Measurement: benchmarking performance and aligning to national indicators to establish targets for improvement

Benchmarked for comparison