Since the start of the year NCE’s news pages have been filled with accounts of a succession of procurement problems. Mark Hansford learns how box ticking has replaced engineering judgement.
First it was the Environment Agency, suspending at the 11th hour procurement of its £2.5bn design and construction framework (NCE 17 January). Then there was news that the Highways Agency’s much vaunted new-look Asset Support Contracts (ASCs) were running into trouble, with suppliers ditching planned maintenance regimes (NCE 24 January).
Last week it was Suffolk County Council, back to square one on its £400M highways maintenance deal after preferred bidder Balfour Beatty backed out in a row over staff transfers (News last week). Oh, and in the meantime the Highways Agency has quietly written to its suppliers warning them that it has “paused” procurement of its next two ASCs while it deals with the problems swirling around the first two.
So what on earth has gone wrong? For those in the know, it’s simple. “A lot of this is around relationships; people and trust,” said one senior industry source close to the Highways Agency’s ASC process.
“If you don’t get the right people on board you won’t get the right answer. Procurement is being seen as a tick box exercise at the moment; there is a lack of [engineering] judgement being applied,” he said.
The implication is that procurement teams are being run by inexperienced administrators rather than by sage professionals who can and will make an engineering judgement. The fiasco that saw the Balfour Beatty/Mott MacDonald joint venture stripped of the ASC for Area 2 in a row over zero rates but then win Area 10 using the same approach typifies the problem.
“A hard-nosed commerciality has come in, with people who think they know how it works,” said one contracting source.
“The improvement agenda we have seen over the last decade has gone backwards. The classic one is the Environment Agency. But the Highways Agency is the same.”
The problem is rooted in government cuts leading to the de-skilling of procurement teams. Then there has been the near paralysis inflicted on now junior procurement departments by the West Coast Main Line (WCML) franchising debacle where the Department for Transport found itself forced to suspend the bidding process.
“First, clients have massively downsized,” said the contracting source.
“Then there has been a chilling effect from the West Coast Main Line franchise; everyone has gone scurrying back to check their procedures. Everyone has just gone slightly potty.”
Even Infrastructure UK (IUK), the Treasury body charged with dragging efficiency savings of at least 15% out of the industry by 2015, recognises that often clients are at fault.
Speaking at the launch last week of its new guide to infrastructure delivery, The Infrastructure Procurement Route map: a Guide to Improving Delivery Capability, cost review programme leader Alan Couzens was careful not to lay blame on the government agencies embroiled in the current procurement fiasco. But the heavy implication was that, had the route map been around when these programmes were being procured, they would not be where they are now.
The route map itself is aimed primarily at the sponsor and client organisations that deliver majorprojects and programmes, and is a rather complex document based around a suite of assessment tools to enable sponsors, clients and the supply chain to align behaviours and identify capability gaps. But at its heart is a refreshingly frank admission: that the importance of sponsor and delivery client capability is “frequently overlooked” when establishing the causes of poor performance.
“Client capability is critical to achieving success in procurement, particularly when using more sophisticated procurement models,” it says.
Clearly, such sophistication is involved when bundling up all your design and construction activities into one super £2.5bn framework.
The same applies when rewriting highways maintenance contracts that are worth billions over many years. “Choosing a procurement strategy with little or no understanding of capability requirements will rarely result in an efficient outcome,” the report adds, before coincidentally citing as an example previously identified shortcomings with the Highways Agency’s cost estimating capability.
“Clients, as exemplified through the Highways Agency’s experience, must recognise their own strengths and limitations: identify skills gaps and, more importantly, implement an improvement programme before considering the adoption of alternative procurement and supply chain models,” says the report.
The Civil Engineering Contractors Association (Ceca), is convinced there is much within it for clients to take on board. It is supporting IUK’s cost review programme through the Infrastructure Alliance that also includes the ICE, the Construction Products Association and the Association for Consulting & Engineering, and contributed to the route map.
“We are absolute supporters of the route map,” says Ceca external affairs director Alasdair Reisner.
“It is a good thing. There is some enlightened thinking in there, and the implementation of it by a broad range of clients would set us on the road to recovery.”
For Ceca, that cannot happen too soon, according to Reisner. “We are increasingly concerned that the good procurement initiatives developed over the last few years are being eroded by the impact of the WCML decision and reductions in head count at clients,” he says.
“Contractors see procurement bureaucracy as one of the biggest blockers to delivering the efficiencies government wants. They can only play their part if they are supported by procurement regimes that are open and fair and deliver on time.”
Above all else, says Reisner, “what we don’t want is people sitting on bids”.