What next for the Government ConstruCtion strateGy? - Aecom

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What next for the Government Construction Strategy? Cost reduction trajectories One thing that will remain central to the GCS is the use of cost reduction trajectories as a key performance indicator. They apply across two main areas: –– Buildings: Cost benchmarks for the buildings environment were published in April 2012, along with cost reduction trajectories that committed departments to savings of between 12 and 20 per cent before the next General Election. The savings reported in the ‘One Year On’ report are encouraging, but may be the result of “easy wins”, or “lowhanging fruit.” Achieving savings of up to 20 per cent over the next three years may well prove more of a challenge. –– Infrastructure: Davis Langdon, an AECOM company, is part of the working party that is currently establishing cost reduction trajectories for infrastructure. Other members come from HM Treasury, the Royal Institution of Chartered Surveyors (RICS) and other private sector suppliers. These trajectories provide a helpful way of predicting future expenditure on infrastructure, but they are harder to benchmark than buildings costs, because of the impact of method-related costs in this sector. In addition to the cost reduction trajectories outlined above, the RICS is calling for benchmarks to be established for professional fees and other owner costs. As yet, however, no such trajectories have been established. The RICS has contributed to the management of cost through its New Rules of Measurement (NRM). The first part of NRM was launched in 2009, with an update and launch of the second part coming in April 2012. NRM will replace the Standard Methods of Measurement used for costing construction jobs, and has been embraced by HM Treasury. NRM is not referenced in the GCS, but could help public sector bodies adhere to the targets set, by providing common standards against which to judge costs. The savings reported in the ‘One Year On’ report are encouraging, but may be the result of “easy wins”, or “low-hanging fruit.” Achieving savings of up to 20 per cent over the next three years may well prove more of a challenge 6
What next for the Government Construction Strategy? Procurement models In a previous whitepaper by Davis Langdon (Procurement in Focus, February 2012), we set out some of the innovations in procurement that could help the government achieve its cost reduction targets in construction projects. The adoption of new models of procurement is still largely to come, but there are some useful areas of learning as departments pursue the GCS: –– MoD infrastructure procurement: The Ministry of Defence is piloting a GoCo (Government-Owned Contractor-Operated) procurement model for infrastructure, whereby a private contractor is paid to run its procurement operation. The MoD procurement GoCo contract is expected to be awarded in mid- 2013, and operational from 2014. It will initially take the form of the contractor holding a few key posts in the GoCo entity, but will eventually move to a more developed model, where the contractor operates the procurement function on behalf of the MoD. The MoD has not committed to adopting such an approach beyond the initial procurement, and it could well be challenged if its effectiveness is contested by the government as the procurement phase concludes. By way of comparison, questions have started to be raised about the value secured by the delivery partner model used for the London 2012 Olympic Games, despite the success of the programme overall. –– Water industry: the water industry is highly regulated, and frequently held out as a model of best practice in procurement. It uses framework agreements to secure best value through aggregated buying. In addition, these framework contracts establish long-term relationships with the supplier community, encouraging contractors to innovate, and deliver the highest levels of service. –– Professional Services: The Government Procurement Service has begun operating “lean” procurement models through regional professional services frameworks. These models reduce procurement periods, with the Pre- Qualification Questionnaire (PQQ) and Invitation to Negotiate (ITN)/ Request For Proposal (RFP) stages operating simultaneously. Although this puts unsuccessful bidders in the position of incurring a higher cost to tender, it encourages all applicants to think seriously about their chances of being successful. This reduces time spent on weak tenders, as well as tightening the procurement process. Once such frameworks are awarded, expect to see more commercial management of awarded frameworks than has been customary in the past – as the likes of the government’s new chief procurement officer Bill Crothers drive commercial and contract issues together in the GPS. –– NEC Option C: This cost-led procurement method has been widely adopted across the public sector, and enables the client to predict and manage costs from the outset of a project. A common element of the procurement strategies described above is that bidders are involved at an early stage in the process. This partnership working is seen in other areas of government procurement – for example, in the design and development of the Public Services Network (PSN). It enables the government, as customer, and the supplier community to establish a realistic cost base for projects, as well as agreeing the key measures of value against which a project will be judged. A further feature of the current procurement landscape, and one that I expect to become more common as the GCS is pursued, is a move towards centralised procurement. This facilitates group purchasing, keeping prices competitive and making the procurement process more efficient. A further feature of the current procurement landscape, and one that I expect to become more common as the GCS is pursued, is a move towards centralised procurement. This facilitates group purchasing, keeping prices competitive and making the procurement process more efficient 7
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What next for the Government ConstruCtion strateGy? - Aecom

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