CECA has set out a list a programme of 10 recommendations in a briefing note Ten Steps To Smarter Procurement (see below).

The document is intended to both inform and support the government’s own moves toward procurement reform, which hopes to find 20% savings. An announcement on these reforms is expected in June.

CECA’s proposals follow a member survey that showed that 32% of civil engineering contractors rate problems with procurement as one of their most pressing concerns. This puts it ahead of problems with workload (23% of firms rating it a primary concern) and cost inflation (14%).

CECA’s 10 points for better procurement are:

1. Block ‘suicidal bidding’ by selecting contractors more on quality than price

2. Halt stop-start procurement

3. Improve the visibility of workload

4. Standardise pre-qualification

5. Standardise references

6. Establish a new deal for frameworks

7. Increase early contractor involvement

8. Limit tender list sizes

9. Improve the quality of tender documentation

10. Make inflation risk management more fair

CECA director of external affairs Alasdair Reisner said: “That procurement practice has emerged as our members’ main concern, at a time of relatively high inflation and worryingly low workloads, is a striking indicator of how serious the problems have become.

“In good times costly and inefficient procurement was an inconvenience, but in today’s market, with razor-thin margins and savage competition, it really does present a real threat to the survival of many firms, as well as adding costs to already tightly stretched procurement budgets.

“This is a rare opportunity to improve industry conditions for private contractors and save taxpayers’ money at the same time. The government should seize this chance to cut unnecessary costs out of procurement and create better conditions for clients and contractors alike.”

Ten Steps To Smarter Procurement: CECA's briefing note

Public sector procurement is often wasteful, inefficient and slow, a combination of problems that lead to unsustainable costs for the private sector, and poor value for taxpayers’ money. To tackle this problem, in June the government will announce its reforms to the way the public sector deals with the construction industry. The changes are designed to save as much as 20% from the costs of public sector procurement.

In response to the concerns of CECA members, 32% of whom rate procurement as their number one concern, and ahead of the government’s forthcoming reforms, CECA has set out its top ten priorities for procurement reform.

All of CECA’s proposals aim to cut costs, delays and ineffi ciencies, and offer the potential to save money for contractors and clients alike. If taken onboard by government they have the potential not only to make the savings the government is keen to see, but also create a system that can sustainably support the industry and deliver better value for all concerned for many years to come.

Blocking ‘suicidal bidding’ through move from price-based contracting

Below-cost tendering, known as suicidal bidding, is currently rife in the infrastructure sector as less scrupulous contractors bid at below sustainable levels in order to secure workload. This has obvious detrimental effects for all parts of the industry. Clients may find themselves with a contractor resorting to claims or corner cutting in order to make a margin on the project, or even an insolvent contractor if the ‘suicidal’ bidding acts as its name suggests. The consequences of this could be particularly wide-ranging as employees and suppliers will also go unpaid. Additionally, reputable companies may fi nd themselves forced out of the market.

Suicidal bidding is encouraged by a public sector procurement process which still in many cases awards work to the lowest bidder, rather than the supplier who will provide the best value solution.

CECA recommends that the government mandates a more integrated approach to construction, where delivery teams are chosen on the basis of quality, while being incentivised to make savings over the course of the contract. Future opportunities should be awarded to suppliers which have shown a track record of delivering quality while reducing costs.

Halting stop-start procurement

One of CECA’s members’ biggest frustrations was the fact that clients often instigate competition for projects, only to subsequently put the process on hold, or even start again afresh, with no recognition of the costs this has already imposed on the construction supply chain. This situation also means suppliers’ bid teams are tied up on a ‘phantom project’ when they could be bidding for genuine opportunities.

CECA recommends that the government puts in place a reporting mechanism to identify all cases where procurement is significantly delayed or cancelled. Lessons should be learned to avoid such delays in the future, and where this occurs regularly with a given client, sanctions should be available to discourage the problem continuing.

Visibility of workload

CECA has welcomed the government’s promise to improve the visibility of forthcoming public sector construction opportunities. CECA believes that by providing a system that identifies and tracks projects from their earliest inception right through to procurement and delivery, with relevant information made available to potential suppliers as the scheme develops, the industry will respond accordingly. Greater confidence about likely future opportunities allows suppliers to invest in the skills and equipment required with greater efficiency than if schemes are released to the market with little or no notice.

Standardise pre-qualification

The issue of pre-qualification bureaucracy is a long-standing problem. Contractors are continually asked to submit pre-qualification questionnaires that, while broadly similar to those used by other clients, still take time to fill out, a process that adds cost without adding value to the construction process. CECA estimates that the overall cost of pre-qualification to industry to be in the order of £250 million to £1 billion each year.

In 2010 the government worked with industry to produce PAS 91, a single standard for those questions that are repeatedly asked by clients in pre-qualification questionnaires across the industry. CECA welcomes the support given to PAS 91 by central government, for whom it also promises greater simplicity and continuity of procurement across central departments. We hope that the government announcement in June will seek to strengthen the mandate to implement PAS 91 across the public sector, and that this is supported by developments in the devolved administrations. In Scotland, progress has been made towards a single ‘Public Contracts Scotland sPQQ’ (Standard Pre-Qualification Questionnaire), thanks to CECA Scotland’s campaigning efforts, while in Wales efforts to standardise pre-qualification have centred on the ‘Supplier Qualification Information Database’ (SQuID).

Standardise references

While PAS 91 represents a significant move forward in improving the way that pre-qualification of contractors is carried out, we believe that there are still further opportunities to introduce standardisation in relation to the way suppliers provide details of their business to potential clients.

Currently clients request that suppliers provide past project references in order to build up an understanding of their experience when delivering specific types of work. Currently there is little standardisation to the way this is carried out, with contractors having to seek new references each time they are requested. CECA would like to see the government work with industry to develop a standard reference form that could be prepared following a project completion, identifying details of the contractor’s performance that can then be used as evidence of capability for multiple future opportunities.

A new deal for frameworks

Over many years the construction industry has seen frameworks develop as a tool aimed at streamlining the delivery of a series of projects for a client. Such frameworks offer benefits in terms of reduced procurement costs and the ability for continuous improvement by suppliers who have the benefit of consistent workloads over a number of years.

But while frameworks offer a number of positive points, they are also a source of concern, particularly for SME and regional contractors. Such firms have often reported being left out in the cold by frameworks, with work awarded to a major supplier or suppliers. Under such circumstances these firms are left either to work as a sub-tier supplier to the lead organisation, or to exit that market for the duration of the framework.

This leads to concerns about reduced competition when the framework comes up for renewal, as potential bidders have been shut out of the market for a long period.

CECA seeks a new deal for frameworks, where the benefits of a streamlined framework are combined with a more flexible approach that allows SMEs and regional contractors to compete on a level playing field.

Early contractor involvement

Over the last decade, the concept of Early Contractor Involvement has gained increasing support from across the construction industry. By bringing contractors on board early in the life of projects, clients can work with them to identify issues that may improve the delivery of the project once on site.

We would welcome a strong message of support from government for the principles of Early Contractor Involvement, along with the introduction of clear models for how this can be implemented across the public sector in a way that provides contractors with suitable payment for this early input, while allowing clients to benefit from the improvements that this approach will offer.

Limit tender list sizes

As public sector finances have become tighter in recent years and the need to strike a better deal has become more pressing, the number of contractors admitted onto tender lists has grown. While the idea of more competition leading to lower prices is easy to understand, these large tender lists mean that more contractors are having to spend money on their bids, with a reduced chance of winning the resulting tender. This leads to reduced investment in individual bids, poorer quality solutions, and increasing costs for contactors, which can only lead to greater costs for clients in the long term.

We believe that the public sector has a duty to curb excessive tender lists, and would be keen to see the government take steps to formally mandate this.

Improved quality of tender documentation

One of the chief concerns raised by CECA in relation to all procurement, be it public or private sector, is that often contractors are expected to provide bids on the basis of inaccurate or incomplete tender documents. In the case of incomplete tender documents, this puts contractors in a position where they have to manage the risk associated with any areas lacking information, leading to rising costs. Where information is inaccurate, costs may also rise due to claims associated with delivery to the correct specification.

The solution to this issue, at least in the public sector, centres on a commitment from government that it will expect public clients not to put work out for competition until there is sufficient correct information available to form the basis of a valid tender. In situations where this is not feasible, this should be recognised by the client, who should be prepared to pay for the development of project information in collaboration with its supplier(s).

Inflation risk management

Contractors on long-term contracts are often left shouldering the costs of inflation, the risk of which is often entirely unmanaged, or managed by indices that are inappropriate to the types of goods used by civil engineering contractors. In an attempt to combat rising prices, contractors have tended to build a margin into their bids in order to mitigate the risk of product inflation during construction. This only leads to higher prices for the public sector.

In order to tackle this problem, the public sector must work with the industry, using appropriate indices to capture the risks of inflation within the bid process, to ensure a fair and consistent approach going forward. 

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