Digesting the Construction Frameworks Conference Posted on: December 26th, 2018 Posted by: Nathan Spencer Categories: East East Midlands London North East North West Northern Ireland Republic of Ireland Scotland South East South West Wales West Midlands Yorkshire Construction frameworks were under the spotlight at a conference held in Sheffield on December 13th in Sheffield by Built Environment Network. Maria Claude Hemming, Director of External Affairs at the Civil Engineering Contractors Association (CECA), used a keynote presentation at the Construction Frameworks Conference to outline the results of its recent research on frameworks. This study, which was published earlier this month. had been prompted by a broader piece of work by CECA in 2016 on the industry’s procurement challenges. At times, she said, the report had found frameworks can work ‘exceptionally well’, she said. The benefits identified during the research included the ability to achieve enhanced value for money by better planning and having a more consistent pipeline of future work, Hemming said: “There has been substantial improvements in terms of pipeline visibility in some sectors.” Another plus point the report uncovered was a reduction in administration by avoiding the need for constant bidding, although more than half of framework members reported unnecessary secondary mini-competitions, And frameworks provided greater security for the supply chain, she said: “Customers know they have people when they need them: from the contractors point of view they know work is coming so they can invest. It gives the supply chain confidence that work is coming so they can skill up for innovation.” And frameworks tend to be good for delivering health and safety improvements, However the report identified downsides to participating in frameworks, including some contractors feeling that they can’t leave. Decreased transparency of pipeline is an issue for those shut out of the framework, said Hemming: “Some will think the framework is sewn up and it’s difficult to get on.” And a survey show that the majority of framework members said the amount of work delivered was often lower than anticipated with a fifth saying this is ‘always the case’. Hemming said the number of companies selected for a framework should be proportional to the amount of the work that it is likely to generate, she said: “Let’s not have relatively small framework with only 20 companies on it, customers should not have multiple frameworks. Decide whether frameworks is the most appropriate vehicle for the work you are trying to procure.” She said it was ‘unfair’ not to ensure that companies reaped the benefits in terms of securing sufficient work from frameworks, given the ‘huge amounts’ of money spent to secure places on them. COST VS QUALITY Meanwhile feedback from the industry showed that the cash strapped public sector is prioritising achieving lowest cost over quality, Hemming said: “They appreciate the need to show best value from the public sector money but sometimes too focused on cheapest rather than whole life cost. Karen Davenport, Frameworks Director at BAM Construct, called for greater investment in projects. She said: “The industry has been struggling since 2008 and whilst we have passed recent financial checks with flying colours getting innovation doesn’t come with the low percentages you get in the contractor market.” Referring to her own company’s R&D department, she said: “With the profit levels these days it’s not sustainable. But Kevin Murray, Deputy Director & Head of Property & Construction at the Crown Commercial Services (CCS), accepted that cash-strapped public sector clients will often prioritise price over other considerations: “Clients may see range of quality and price offers and struggle to justify anything other than lowest price. Funding for the wider public sector is even more difficult than central government but we have very good pipeline for central government.” But he accepted the report’s finding that there should be sufficient rewards on offer for those investing time and money in bidding for places on frameworks: “We have to make sure that cost of bidding for frameworks reflects opportunity in terms of risk. It’s a lot of work for bidders looking through a multitude of frameworks.” INNOVATION And ensuring firms have a solid pipeline of work will help to stimulate innovation, such as modern methods of construction, Murray said: “Unless there is a pipeline value for money is going to be an issue because at the moment off site is a bit more expensive.” Offsite manufacturing could deliver social benefits, such as shifting work to more depressed parts of the UK. Other ideas being looked at include using blockchain as a mechanism to avoid the need for retention payments, he said. COLLABORATION One way of spreading innovation is to use frameworks to encourage the sharing of best practice between contractors. Murray doubted that companies would be willing to give up their secrets: “Contractors will only collaborate if there is a tangible benefit.” Steve Tyree, Managing Director of the Eastern Procurement Consortium, agreed: “The biggest block to natural collaboration is competitive advantage for each organisation: if you have a really good idea do you want to gift it to your competitors?” “When it gets round to the best way of doing a job, it tends to turn siloed very quickly. We need to find way of designing those benefits into the process.” But he said there could be benefits in collaborating in those instances where contractors will be fighting over the same limited supply chain resource. SCALE And too often, the conference heard, larger companies use their greater bidding muscle to win places on frameworks but don’t end up using them to get work. Tyree said that larger contractors often shunned work on frameworks in a rural area like East Anglia in favour of more lucrative urban projects. There is too often a ‘disconnect’ between organisations’ ‘awesome bid teams’, and the ‘poor construction manager trying to make his four per cent margin at the end of the month’, he said: “They often become a silent partner because there is always better opportunities to tender on. “We are looking for active participants: if not, it’s better not to be on it in the first place.” He said that the framework, which caters for primarily hosing association clients ranging from a group with more than 50,000 properties to others with a few hundred homes, had put in new arrangements which are due to go live at the beginning of next year. Dividing framework up into lots can make frameworks ‘more attractive to SMEs’ and give them the opportunity to showcase their specialisms, said CECA’s Hemming. Companies should commit to deliver work when they had set up a framework, noting that there are instances where this had not happened, she said: “If you are going to set up a framework use it.” Aaron Lacey, Senior Frameworks Manager of Scape Procure, said that it is splitting out its SME framework next year into medium and smaller contracts with the latter going down the dynamic purchasing route. “This framework discourages major organisations from fishing in the SME pond,” he said. SUPPLY CHAIN Rod Brasington, chief executive of Prosper, told the conference frameworks offer a mechanism for smoothing out the ‘very, very volatile’ workflows that bedevil the industry. “You get to this time of the year and you are spending budgets is fond and plethora of short-term projects.” The CCS’ Murray agreed with the CECA’s finding that frameworks could be a good tool for engaging the supply chain. Pointing to a fit-out framework that the CCS has been running for the last 18 months, he said they have had meetings every two months with suppliers, which covered areas like work pipelines, health and safety and approaches to BIM. And while this framework had originally been set up for fit out work in the government’s hubs, it had generated work in other departments, he said. SOCIAL VALUE Securing greater social value from the procurement process, such as creating apprenticeships for unemployed youngsters, was one of the big talking points at the CFC. Gaining greater social value through framework is increasingly on the agenda for public sector clients, said Lacey: “Councillors want to know how their money is being spent and whether it is being spent locally and ensuring they are using SMEs and micro businesses to strengthen the supply chain.” But delivering social value benefits could be a headache, said Mark Chadwick, Director of Business Services at Fusion21: “Often social value gets to a point where it gets more difficult than it needs to be to get to the right outcomes.” He said there is often a debate about whether social value should be delivered as part of the contractual core requirement: “We will typically create core requirements, and then social landlords will procure add-ons.” Brasington said that his framework used to offer apprentices but it had proved ‘very difficult’ to deliver. Simon Toplass, Chief Executive Officer of Pagabo, said that the industry must plan for the introduction of community benefit clauses, which would make securing social value a requirement. And it is important for framework providers to be transparent with contractors about their expectations in terms of social value, said Tyree: “The best answer is to set out value expectations at the outset of the process and demand them so the contractor knows he has to provide things that people are looking for.” Brasington agreed: “It’s very, very important to spend time at the front end defining the requirements of the project and establishing how and what needs to be delivered, and clearly defining in all the documentation so that we have clear path to deliver.” Social landlords and councils are often best placed to evaluate the add-ons in terms of social value, he said: “They can do what is right for their communities because they are the right people to determine that.” BREXIT There was widespread agreement amongst speakers that Brexit is unlikely to lead to a shake-up of the UK’s public procurement regime which has operated under the umbrella of the EU’s OJEU framework for many years. Pointing out that the public contracting regulations are already enshrined in UK law, Murray suspected that the government ‘probably won’t be looking at procurement regulations after Brexit.” Hemming agreed “I don’t think reforming procurement was at front of people’s minds when they voted to leave the EU: Down the line people may want to reform the procurement process but not sure much can be done within UK law.” Chadwick said his organisation is working on the assumption that OJEU will still exist. But Brexit poses a wider risk to securing construction resources, said BAM’s Davenport: “We are starting earlier and having to go deeper into the supply chain.” NEXT STEPS Following the study’s publication, Hemming said CECA had held a number of round table discussions with law firm Burgess Salmon on how its recommendations could work, which will form the basis of a guide that is due to be published next year.