Victoria Brambini, Managing Director at Scape Procure, discusses the benefits of procurement and frameworks for public sector organisations facing increasing budgetary pressures.
In the current geopolitical climate, with perpetuating budgetary constraints, local government continues to face unprecedented pressures to implement ways of delivering public services that generate greater benefits relative to costs. According to the Local Government Association, local authorities have seen their central government funding fall by around 40% since 2010, including a £1.4bn reduction in the past year alone. Whilst capital resources may be accessible, revenue budgets continue to be tested, and with the uncertainty of Brexit casting an ever-present shadow over the British economy, achieving better value with stronger outcomes is high on the agenda for the optioneering officers and the decision-making members.
By taking an outcome led approach to procurement, which follows a pathway to achieving long-term benefits rather than short-term cheapest cost solutions, local authorities will be fulfilling their community-focused obligations. Procuring construction projects can fall deep into the trap of a push for a low-cost building with a pull for a value-add process; the common misconception being lowest price competitive tendering gives value. Single project competitive tendering is an easy option but you have to question whether it delivers a building with the best whole-life cost, within the most efficient asset management programme that optimises community outcomes.
Longer term partnering can allow objectives to be better understood with desired outcomes prioritised and maximised over a period of time. The procurement of frameworks provides a route for successful contractors to make significant contributions to community outcomes that extend deep beyond a short-term building completion. This comes by virtue of the operating efficiencies afforded to framework contractors in long-term contracts (usually four plus years), enabling them not only to offer commercially advantageous rates but as socially responsible businesses to make investments and positive impact in the communities they work. Frameworks that drive a partnering approach are now providing the much sought after additional social value for local authorities, beyond the obvious initial benefits of frameworks.
Efficient procurement route
The use of frameworks is undoubtedly an efficient procurement route for works and services, they provide a valuable platform through which public sector organisations can make significant efficiencies; reducing the cost of undertaking in-house procurement, saving tendering time and more substantially up to six months in time and cost-benefit when using direct awards where frameworks have single providers. Clearly defined processes and standard forms of contract reduce project management and legal requirements, use clear risk management approaches and provide greater time and cost certainty, supported by robust framework management regimes that assure quality.
The collapse of Carillion highlighted all too clearly the vulnerability of supply chains in construction and maintenance contracts, in particular, SMEs. This has brought into high relief the need for local authorities as commissioning clients of construction and maintenance to make responsible choices in the way in which their contracts are shaped and operated. Their responsibilities must reach beyond the short-term pull of lowest project cost, to the push for a better joined-up process that has a more positive impact leaving a lasting legacy of community benefits, or social value.
Opting to use frameworks that require minimum standards in the use of local labour and SMEs, that require fair payment terms and zero retentions, using rigorous performance management measures to secure quality and measured outcomes, will protect and benefit local economies. The sustainability of local supply chains is directly influenced by a local authority’s own adoption of outcome led procurement.
The measurement of social value attributable to projects is now an essential element for local authorities in assessing procurement routes. Quantifying the full impact and added value that a project has on the local economy is shaping into standardised approaches, and when expectations are clearly articulated can be substantially multiplied with long-term partnering through frameworks.
The National Themes, Outcomes and Measures (TOMs) developed by Social Value Portal, a leading social enterprise in social value, allow consistent reporting against five principal areas of activity identified through public sector surveys to be of highest importance; promoting local skills and employment; supporting growth of responsible regional business; healthier, safer and more resilient communities; protecting and improving our environment; promoting social innovation.
As an early adopter of the National TOMs, Scape has been able to innovate within frameworks to provide continuous improvement in project and programme outcomes. There is a transparent element within tender evaluation and award that offers the most socially responsible contractors to partner with local authorities to achieve true value, where every component of the project, including local SME engagement, training schemes, apprenticeships created, environmental efficiencies and community initiatives can be translated into a meaningful metric.
Warrington Borough Council’s Birchwood Pinchpoint project is a good example of the added value that frameworks can provide. Using the Scape National Civil Engineering and Infrastructure framework, the Council and Scape delivery partner Balfour Beatty have been able to improve access to Birchwood Park, a thriving business park, while also making a significant contribution to the local community and economy. As well as delivering a vital piece of local infrastructure, a £5m junction improvement which has already reduced congestion by 19%, by using the framework the project has ensured £2.4m of local spend within 20 miles, with 86% of subcontractors being SMEs, generating a measurement of £50,000 in social value.
Social value must become a core element of best value, where the greatest benefit is achieved relative to cost. Capturing social value within public sector procurement at the scale possible through frameworks should be the preferred option for local authorities seeking to evidence the long-term impact they have on their local economies amidst their own budgetary pressures.