As part of its strategy to build our way to a better economy, the government has committed to delivering construction and engineering projects and programmes including building new schools, hospitals, prisons, and major infrastructure works to support our economic recovery from the pandemic.
Delivering excellent public sector works will be a crucial part of the government’s plans which include bringing £37bn worth of public sector contracts to the market over the next year. To help meet this aim the Cabinet Office has produced The Construction Playbook (the Playbook), providing government guidance on sourcing, and contracting public works projects and programmes.
The Playbook supports the government’s ambitious plans to transform the public sector estate and infrastructure networks over the next decade and beyond, supporting aims to build back better, faster and greener. The focus is on ensuring projects and programmes are managed correctly, with the optimum contractual strategy from the outset. Whether the scope is delivery of a school, hospital or major infrastructure project, the principles in the Playbook are the same, detailing approach to assessing, procuring and managing public works projects and programmes.
Creating an effective contracting environment is one of the 14 key policies of the Playbook, aiming to ensure that contracts are structured to support an exchange of data, drive collaboration, improve value and manage risk with a drive for continuous improvement. Through the Playbook the government wants to focus on outcomes that create long-term value for all through successful project delivery. The way to do this is to create a contracting landscape that delivers a sustainable, resilient and effective relationship between contracting parties and the supply chain.
Below are five key takeaways from the Playbook for creating sustainable contracting arrangements.
1. Select the right strategy
Establishing a successful project initiation can mean greater investment of time, but when effectively implemented, clients, stakeholders and project teams realise the delivery benefits many times over. Careful selection of the right procurement and contractual strategy is an important part of a successful project set up, initiation and ultimately its subsequent delivery. Key to this is the team considering its aims and objectives, and the relative value to stakeholders of time, cost and quality drivers. Other considerations include the nature of the project, its value and complexity, any known risks and the expertise and experience of the team, etc. Thought also needs to be given to the legal structure of the project, the available procurement options, contracts and any statutory or regulatory requirements.
2. Prioritise commercial considerations
Commercialising the delivery model and deciding on the correct commercial approach is critical to achieving the intended benefits and wider value. The commercial approach should be linked to the delivery model, the desired outcomes and type of relationship required with the supply chain. Depending on the commercial approach and nature of the works, this will impact the procurement procedure and contracting strategy. Regardless of stage of going to market, the decision should be based on appetite for the level of delivery responsibility versus procurement.
3. Promote a common approach
The Playbook states that standardised contracts and terms should be used wherever possible to help simplify and speed up the procurement process, promoting a common approach across the public sector. Clients should consider using standard construction contracts with appropriate options, except where the project or programme justifies a bespoke or different approach.
It states that standard contracts should be chosen from the following suites: NEC 3 or NEC 4, JCT 2016 and PPC2000. Contract amendments are usually added into model contracts to deal with project client-specific requirements or risks, which are not covered by the main contract terms. In NEC contracts, these are known as Z-clauses, while for JCT contracts these are typically done through a Schedule of Amendments.
The Playbook also states that contracting authorities should use the standard ‘boilerplate clauses’ wherever possible (also known as model clauses) which have been produced by Infrastructure and Projects Authority (IPA) and Crown Commercial Service (CCS) to drive consistent, standard contract variations covering non-contentious amendments which could then be rolled out across public procurement.
4. Measure progress and performance
Key performance indicators (KPIs), appropriate specifications and performance measures are the foundation of a good contract. With the right KPIs in place, it should follow that contracts are designed to incentivise delivery of the things that matter to clients, minimise perverse or unintended incentives and promote good relationships. Contractual KPIs should be used to measure progress and performance of suppliers in the delivery phases, encompassing design, construction, and testing and commissioning.
KPIs must be relevant and proportionate to the size and complexity of the project or programme. Getting this wrong can create confusion and tension. For instance, too many KPIs lead to over-complicated contracts and ambiguity with suppliers. KPIs should drive both a focus on outcomes and continuous improvement, aligning with the project scorecard where appropriate, and the intended benefits to be realised during contract delivery.
The top three KPIs from government’s most important contracts should be made publicly available. These should be the three KPIs most relevant to demonstrating whether the contract is delivering its objectives. They should be measured regularly, and performance against them published quarterly.
5. Engage early to avoid conflict
The conflict avoidance pledge (CAP) should also be included within the contract requirements. It has been developed by a coalition of professional and industry bodies and demonstrates commitment to conflict avoidance and the use of amicable resolution procedures to deal with emerging disputes at an early stage. Contracting authorities should adopt the appropriate provisions as a standard clause in all public works contracts and use this mechanism to resolve problems before these escalate into disputes. The CAP captures the ethos of working collaboratively and the use of early interventions techniques, reducing costs and supporting projects and programmes to be delivered on time and in budget.
The Playbook states that procurement strategy key considerations should include the contract award method (for example, negotiation, direct award, frameworks, competitions); who is responsible for design (whether the design team such as an architect or engineer, contractor, or the client); and who is responsible for co-ordination and integration. It also states that contracting authorities should engage with the supply chain throughout the entire process, with the benefits of early engagement being particularly highlighted in the document.
What are your thoughts? Has the government’s Construction Playbook got it right? And has it considered all the points that you need to set up a project for success and create an effective and sustainable contracting environment?
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