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Why procurement is going to get worse

The government’s new drive for cheap public sector buildings is designed to drive down fees, says Christine Murray

Early this week, the Cabinet Office released a ream of publications, hot off the press, about the future of public sector projects and they make for a worrying read.

One Year On delineates the government’s progress on procurement reform and construction cost-cutting. It contains both hopeful and disparaging notes for architects from the industry’s biggest client – the public sector accounts for 40 per cent of UK construction.

The report outlines plans to save £279 million worth of construction costs by delivering projects for 15 to 20 per cent less over the next three years, saving up to £1.2 billion per year. The cost-saving proposals include the widespread use of BIM by 2016, along with new procurement approaches being piloted across 32 trial projects, from prisons to housing.

A final report by Paul Morrell’s task group, the Government Construction Board, accompanies the release of One Year On, recommending three procurement models to replace the current system:

Cost-Led ProcurementTeams on an existing framework are invited to compete for work and selected on their ability to deliver under budget. If they can’t come in under the cost ceiling, teams outside the framework are invited to bid

Integrated Project Insurance A competition is held to appoint a team based on cost and skill, which is then insured by a single third-party assured policy that covers all associated risks, including cost overruns above a ‘pain share’ threshold. Costs under the threshold are split between the client, contracted party and supply chain

Two-Stage Open Book Suppliers on a framework are invited to compete for a project on the basis of an outline brief and cost, the winning team works up a proposal as a second stage

As you can see, all of these models preference cost over quality, and some look aggressively placed to put further pressure on fees.

A separate accompanying report, Construction Cost Benchmarks, has also been updated this week. This includes benchmarking data designed to drive down fees by setting the total construction costs for different building types, so that ‘the public sector willbe able to negotiate better prices’ and challenge firms to ‘beat the benchmark’.

So what can you expect as a budget, according to the report? For a new-build local authority house or flat for rent in England (outside London), the DCLG and HCA say their average total construction cost has fallen by 14 per cent from £1,419m2 in 2009-10 to £1,227m2 for 2011-12, with 20 per cent of projects coming in at £1,018m2. As for the Department of Health, data from the P21 framework reveal the average total construction cost of all health schemes over the same period has fallen by 11 per cent from £2,680m2 to £2,390m2.

Where are the cost savings coming from? A note accompanying cost data from the Department of Health’s P21 framework is said to have identified £22 million of savings derived from a ‘confirmed fee rate reduction of 3 per cent’ from a combination of ‘reduced overheads, profit and staff design rates’. Where are the architect fee scales when you need them.

The most hopeful reading for architects is the updated government Pipeline report, which every six months provides a detailed list of planned and proposed projects across all public sectors through to 2015, such as the proposed £484 million hospital rebuild and reconfiguration of Sandwell and West Birmingham Acute NHS Trust, including client contact details.

More next week, in the meantime visit

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