Construction Procurement Strategy Steering Group

Construction Procurement Strategy - Executive Summary and Action Plan Construction Procurement Strategy Steering Group

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Foreword

I have great pleasure in my role as Chair of the Steering Group in endorsing the new Construction Procurement Strategy which is intended to address the recommendations outlined in the previous Constructing Excellence in Wales “No Turning Back” report published in 2010.

This Strategy guides clients as to how public construction projects should be procured, and clarifies where possible some of the concepts involved in order to give consistent, cohesive direction to the public sector in Wales.

The Strategy is a product of the Steering Group and is a statement of intent to work with public clients and industry and compliments other work carried out including the Finance Minister’s procurement policy statement and local government compact. I would also like to say that in addition to the Steering Group, the industry and public sector has also been responding to the required changes albeit not necessarily consistently. However the strength of the Steering Group is that it can draw together these respective initiatives and views into a single place and try and reach a consensus as to the most appropriate way forward and the input and challenge from all areas will I am sure assist us in making a step change in our procurement arrangements

The strategy is intended to be a living document outlining a range of activities that have been completed and new actions that it is believed will improve the future of construction procurement within the public sector in Wales over the years to come. To that end this Strategy is underpinned by critical success factors that will ensure it remains fit for purpose in both achieving best value for taxpayers’ money in the widest sense, and in supporting a robust, competitive and sustainable supply chain and maximising the wider community benefits derived from construction projects in Wales.

A cornerstone of the strategy is the development of a new Charter which is intended to give a clear statement of intend from all stakeholders in the industry as to how the strategy principles or consistency, visibility and proportionality will be delivered going forward and I would urge all those involved in the construction industry to sign up to its principles as soon as possible

Finally I would like to thank the steering group members for their time and commitment and also thank all of those who have been involved within the development of the strategy and trust that this continued support and challenge will allow us deliver on the forward action plan and continue the improvements that have been set in place

Martin Nicholls

Chair Construction Strategy Steering Group

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Executive Summary

In October 2010 the Minister for Finance and Leader of the house formally launched the Constructing Excellence in Wales “No Turning Back” report and created a cross sector construction industry steering group to respond to the recommendations. Consequently, the Construction Procurement Strategy Steering Group (Steering Group) has progressed this emerging Strategy which sets out to thematically address the specific recommendations of No Turning Back, summarised below:

 Clarity must be provided over public sector capital programme spend

 Standardisation of procurement in the public sector across Wales

 Commit to and implement a new Procurement Strategy for Construction

 Adopt a best practice approach to payment

 Undertake a review of capacity and capability in public sector procurement in Wales

 Strengthen the link between capital investment and sustainable benefits for Wales’ local communities

A full copy of the No Turning Back report is available at the link below: http://www.cewales.org.uk/about-us/publications/

The Strategy is not a Welsh Government document, but is the product of the Steering Group (membership contained within Annex 1) and is a statement of intent to work with public clients and industry to incorporate agreed Welsh procurement policy into construction projects in Wales.

Specific tools and policies are referred to in the Strategy; in accordance with the Finance Minister’s Procurement Policy Statement, it is expected that these be used wherever possible in order to embed the recommendations via best practice and consistency in the way that the public sector deals with construction projects and the construction industry.

To that end this Strategy is underpinned by critical success factors that will ensure it remains fit for purpose in both achieving best value for taxpayers’ money in the widest sense, and in supporting a robust, competitive and sustainable supply chain within construction in Wales. These will enable the Construction Procurement Strategy Steering Group to monitor the progress being made across the public sector and report this to the Minister for Finance and Leader of the House.

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It should be stated that in addition to the Steering Group, the industry and public sector has also been responding to the required changes albeit not necessarily consistently. However the strength of the Steering Group is that it can draw together these respective initiatives and views into a single place and try and reach a consensus as to the most appropriate way forward. It is not however being suggested that all of the progress is as a result of the Steering Group itself and great credit has to go to those who are developing innovative solutions and are continuing to progress best practice outside of the group as part of their day to day activities. In addition to those members of the Steering group and organisations listed at Annex 1 who have committed their time and energy to developing this Strategy, the overall progress would not have been achieved without the dedication and support of a range of organisations including ConstructionSkills Wales, Constructing Excellence in Wales, WLGA and the Regional Construction Fora.

Finally the strategy seeks to outline the progress to date whilst also recognising that such a complicated task will require actions in the medium and long term to ensure that true change is embedded and the temptation to “Turn Back” is avoided. The following actions have therefore been completed:

 Collation and publication of the first all encompassing local authority works capital programme for 2012/13 with further recommendations for 2013/14 and beyond;

 Adoption and increased use of standardised pre-qualification qualification via SQuID with sign up from all 22 local authority’s via the Local Government compact, NHS Wales and a range of education institutions;

 Agreement of Welsh Fair payment clauses to embed suitable payment provisions throughout the supply chain to improve reliability and timeliness of contractor and sub-contractor payments;

 Completion and agreement to adopt the Welsh Government Community Benefits approach and measurement tool for all projects over £2m;

 Agreement to reintroduce programme of procurement capability assessments across public sector organisations;

 Development of a Commitment Charter covering both “client side” and “industry” commitments to set out clearly what each respective party (Appendix 1). Cardiff Metropolitan University have agreed to adopt the Charter as the pilot organisation;

 Improved consistency of approach through application of regional frameworks;

 Embedding the use of SQuID, Community Benefits and Fair Payment clauses as part of future major projects delivered through Welsh Government grant funding; and  Completion of the CEW best practice club’s “How2” guide, aimed at getting added value form construction via a live interactive website and database developed by the Welsh best practice clubs and accessible via http://h2guide.co.uk/wp/.

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These actions complement delivery of the Procurement Policy Statement published by the Finance Minister on 6 December 2012.

In addition to the progress to date there is a clear need to an ongoing action plan to maintain the momentum of the Steering Group and the industry. This is included in Appendix 2 with a brief summary of the key objectives and milestones as follows:

Simplification and consistency  Publish guidance on the recommended appropriate use of forms of contract by end March 2013.  Produce on-line guidance to support clients to procure construction and services requirements, with first content being made available by March 2013.  Develop guidance that supports clients’ decision making in selecting the most appropriate procurement route (national, regional or local) by September 2013;  Pilot the electronic use of SQuID on 10-12 projects through xchangewales’ e-sourcing suite of tools by September 2013.  Increase the use of xchangewales e-tendering tools, running 12 further procurements via this approach by March 2014.  Secure adoption of the Construction Commitment Charter from the Welsh Government, NHS Wales, local authorities in Wales and key industry stakeholders, by September 2013.  Modernise approaches to take account of opportunities presented by the new EU Procurement Directives – ongoing from 2013.  Alignment with the UK Government Building Information Modelling (BIM) strategy, with all Welsh Government funded projects at level 2 by 2016 and all Welsh Government Department projects to lead at level 2 by 2015.  Develop a culture of simplicity, consistency and proportionality in the procurement process

SMEs in Wales  Ongoing data collection and analysis of contract awards in Wales to be produced on a quarterly basis, illustrating a breakdown of awards to both indigenous and Wales-based contractors.  Pilot use of SQuID with north Wales based contractors by March 2013.  Analyse outcomes from adoption of Community Benefits approach and measurement tool to determine proportion of supply-chain business secured by indigenous contractors and SMEs.  Increase the value of construction sub-contracts advertised via www.sell2wales.co.uk by 50% by March 2014, and a further 50% by March 2015.  Ensure that procurement policy adoption covers all aspects of the construction sector, including contactors, suppliers and consultants

Visibility of construction projects  Further refine the data collection for capital spend across the public sector by building on the pilot work carried out for 12/13 and embed information in the Wales Infrastructure Investment Plan (WIIP) for projects and programmes and provide an annual update.  The Sub-group to take responsibility for collating and publishing data relating to projects that fall below the £15m WIIP threshold and consider opportunities for feeding into the WIIP.

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 Identify planned and current projects using the Community Benefits pipeline on a quarterly basis.  Benchmark total value of Welsh construction work available.  Work with all public bodies and Welsh Local Government Association to make more data available in a suitable format.  Require that all construction contracts requiring competition are advertised on sell2wales – produce guidance to support by September 2013.

Capability and capacity of procurement in Wales  Public bodies to commit to undertaking Procurement Capability Assessments to include construction activity taking account of the Construction Procurement Strategy; to commence during 2013/14.  Develop a training plan for construction procurement professionals for 2013/14 onward.

Payment of contractors  Promote the Fair Payment policy via the Commitment Charter and through adoption of the Community Benefits approach with immediate effect.  Contractors will be encouraged to report examples of non-adherence to the Steering Group.  Develop in conjunction with the supply chain via construction fora appropriate mechanisms to ascertain practices ‘on the ground’.  Ensure fair payment is adopted as a core criterion in SQuID – with immediate effect.  Ensure build up to the longer term aspiration of using Project Bank Accounts, and introduce the use of PBA s as a pilot by September 2013.  Pilot the use of Integrated Project Insurance on 2 projects by March 2014.

Use of clear guidelines on quality/value in practice  Benchmark data on weighting quality / cost criteria on major projects.  Survey to determine how cost and quality are currently weighted, what decision making processes drove this, what support is available to clients internally.  Establish level of support available across public sector, and what the drivers are in each area for decisions on price/quality, with particular emphasis on whole life costing.  Commission discrete work on the guidance available with a view to augmenting this by mid 2013.  Develop policy guidance to determine the approach to setting quality/value ratios for construction and professional services contracts.

Community Benefits  Embed Community Benefits clauses within all projects where such benefits may be realised by December 2013.  Extend the work being done by Value Wales in monitoring the use of Community Benefits approach with all public bodies in Wales using the policy where possible and using the measurement tool for all projects over £2m.  Benchmark data by Quarter, geographical areas, works type, approach, return on investment produced by March 2013 and quarterly thereafter.  Deliver 10 CB training courses to construction project teams by the end of December 2013.

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Monitoring of Action Plan These actions will be subject of ongoing bi-monthly monitoring and review via the Steering Group with national members invited or seconded where necessary to deal with each activity.

Annex 1

Construction Procurement Strategy Steering Group Membership

Martin Nicholls, City and County of Swansea Council (Chair) David Benson, Cardiff Metropolitan University Chris Chapman, WLGA Delyth Davies, R L Davies Dawn Davies, Anthony A Davies Mike Edmonds, Constructing Excellence in Wales Donna Griffiths, ConstructionSkills Wales Vince Hanly, Rhondda Cynon Taf Council David Harries, Cowlin Construction Jeanette Hawrot, Leadbitter Jenny Hudson, G M Jones Dafydd Hughes, Welsh Government Rhodri-Gwynn Jones, CECA Wales Milica Kitson, Constructing Excellence in Wales Stephen Lawrence, Mott MacDonald Ian Mowatt, Gwynedd Council Ann-Marie Smale, Powell Dobson Nick Sullivan, Welsh Government Malcolm Thomas, Hale Construction Mark Thomson, HM Building Services Sean Tristham, Rhondda Housing Association Andrew Waddington, NHS Wales Huw Williams, Gwynedd Council

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Appendix 1

The Construction Commitment Charter for Wales

Introduction In 2010 the Construction Procurement Strategy Steering Group was established to implement the recommendations of No Turning Back, a report on public construction in Wales, produced by Constructing Excellence in Wales.

The Group commissioned a specific Construction Commitment Charter for Wales, along the lines of the UK-wide charter produced by the Strategic Forum for Construction.

The purpose of this charter is to establish a set of commitments that both public sector clients and the construction industry will adopt to support delivery of construction projects.

The individual commitments fall within six broad areas:

. Procurement & Integration . Commitment to People . Client Leadership . Sustainability . Design Quality . Health & Safety

These areas encompass principles that will ensure continuous improvement for the industry and integrate best practice into public clients’ approach to procuring projects.

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1. Procurement & Integration Clients will form a procurement policy that uses ethical sourcing, enables best value to be achieved and encourages the early involvement of the supply chain. Integrated project teams will be used to work together to achieve the best possible solution in terms of design, buildability, environmental performance and sustainable development

Client side commitments • Procurement decisions will be transparent, made on best value rather than lowest cost, use evaluation criteria and where appropriate, specialist advisors.

• Clients will adopt common processes as endorsed and developed by the Construction Procurement Strategy Steering Group.

• All members of the construction team will be identified and involved at an early stage, particularly during the design process and will be encouraged to work collaboratively.

• The duties of each project team member will be identified and shared at the outset of the project and appropriate insurance policies, such as project insurance, put in place.

• Risks will be clearly identified, financially quantified and allocated in line with each party’s ownership and ability to manage the risk.

• All contracts will have an informal and non-confrontational mechanism to manage-out disputes.

• Clients will make use of the Planned Construction Project Database to provide advance notice of projects over £750,000.

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• Clients will use the Supplier Qualification Information Database (SQuID) for the prequalification stage of their projects.

• Clients will reduce the amount of administration needed to tender – simplifying documents, producing clear briefs identifying, their requirements and use plain language.

Clients will above all follow the core principles of consistency and proportionality wherever possible within all aspects of the procurement process.

Supplier side commitments • Supply chain partners will be required to demonstrate their competency and commitment to integrated working, innovation, and to a culture of trust and transparency.

• Suppliers and contractors will support integrated working by contributing to project risk registers.

• Suppliers will actively seek tender opportunities, including registering on the National Procurement Website - www.sell2wales.co.uk.

• Suppliers will ensure that they know what is required of them to meet their requirements, and be realistic in assessing their capability to deliver each contract.

Shared commitments • To ensure effective and equitable cash flow for all those involved in the supply chain, all contracts will incorporate fair payment practices (as set out in the Welsh Fair Payment Policy), no unfair withholding of retentions, project bank accounts where practicable and cost effective, and will include mechanisms to encourage defects-free construction.

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• Both clients and supply chain partners will actively mitigate against abnormally low tenders by discouraging and investigating them.

• Prime contractors will be required to use the Tier 1 sub-contract portal on the National Procurement Website and work with the Supplier Development Service to open up opportunities for Wales-based suppliers.

• The employment practices of all organisations, including sub-contractors and the self-employed, may be scrutinised by the client and the supply chain to avoid abuses.

2. Commitment to People All parties will use an approach that values people, which will lead to a more productive and engaged workforce, facilitate recruitment and retention of staff and engage local communities positively in construction projects

Client side commitments • Clients will adopt a Community Benefits approach wherever possible and practical and in any event on all projects over £2m.

• Clients will encourage and support their supply chain partners’ membership of the Considerate Constructors Scheme.

Supplier side commitments • Where possible, project specific agreements will be established between unions and employers to encourage better employment practices, including training, as well as health and safety and occupational health.

• Construction sites will be clean, tidy and provide good quality facilities, including catering, appropriate to the diverse needs of the workforce.

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• Sites will be run considerately without causing nuisance to local communities, and in a way that will mitigate the effect that their projects have on the environment. At a minimum, contractors will adhere to the principles of the Considerate Constructors Scheme, and wherever possible will register with the Scheme.

Shared commitments • Clients and contractors will ensure their projects are utilised as a lever for recruitment and training of economically inactive people.

• Projects will contribute to local community in terms of education, regeneration and community engagement.

• Clients and contractors will give consideration to opening up opportunities to enable small businesses and disadvantaged groups to be represented through the supply chain.

• Training and development will be offered to all staff, including the client, to meet individual, project and company needs.

• A policy of equal opportunities will be adopted to encourage a diverse workforce.

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3. Client Leadership Clients will provide the leadership that is vital to the success of any project and enables the construction industry to perform at its best

Client side commitments • The client structure and responsibilities will be clearly identified and adequately resourced to ensure continuity in leadership for the duration of the project.

• There will be client commitment to best practice guidelines and engendering cooperation with all organisations involved in the project.

• A clearly expressed and well researched vision and business case for the construction project will be developed by the client.

• A detailed brief with clear financial objectives, programme and definition of what is meant by success will be developed by the client before the design stage for all projects and this will be shared at the outset with all those involved.

• The client will champion best practice in design, team working, innovation, health and safety and sustainability and demand an appropriately trained and qualified workforce.

• A clear, collaborative and flexible procurement policy will be developed by the client, together with a clearly expressed industrial relations’ framework.

• The client will work within the project team from the outset of the project to identify and manage risks.

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• Projects will be properly commissioned before handover.

• Clients will provide constructive feedback on performance and behaviour and encourage dialogue between all parties.

• Clients will make use of Value Wales’ Construction Quality Assurance Template wherever possible, in order to ensure that the principles of the Achieving Excellence in Construction are embedded into their projects.

Shared commitments • Contractors and suppliers will engage with the leadership shown by clients by participating and contributing to their initiatives and actions.

• Contractors and suppliers will commit to continuing this ethos by taking the same approach with their supply chains.

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4. Sustainability Sustainability lies at the heart of design and construction. All parties will take a sustainable approach that will bring full and lasting environmental, social and economic benefits

Client side commitments • Clients will, where possible, use construction as a lever for delivering sustainable benefits, covering all three strands of sustainability.

• Development plans will seek to enhance, create and protect the local natural environment.

• Targets, including the business case, will be set within all contracts and performance will be monitored and appraised regularly.

• Clients will use the Sustainability Risk Assessment for all projects.

• Clients will use the Community Benefits approach on all possible projects, and will use the Community Benefits Measurement Tool on all projects over £2m.

• Clients will wherever possible consider reserving some of their contracts, or providing that part of them be carried out by, supported businesses.

Supplier side commitments • Suppliers and contractors will seek to ensure that design, component and process solutions align with or enhance aesthetics and performance but improve sustainability in terms of availability, life cycle costs, whilst supporting the sustainability of industry, commerce and the environment.

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Shared commitments • The overarching government and industry outputs produced by the Construction Procurement Strategy Steering Group provide the framework for future construction projects.

• Each project will develop a specific Sustainability Action Plan which will address environmental, social and economic aspects and aim to exceed the highest levels within relevant standards and include all aspects of the supply chain.

• Projects will incorporate best practice approaches to resource use, waste minimisation, low-carbon performance, employment, training and community engagement.

• Projects will actively aim to enhance the vitality and viability of local communities.

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5. Design Quality The design will be creative, imaginative, sustainable and capable of meeting delivery objectives, and take the whole life of projects into account. Quality in design and construction utilising the best of modern methods will ensure that the project meets the needs of all stakeholders, both functionally and architecturally

Client side commitments • The client will produce a clear brief before design commences.

• Designers will be selected according to ability and quality, together with other criteria appropriate to the scale and complexity of the project.

• Project briefs will specify performance criteria to encourage innovation in order to deliver cost-effective solutions, taking advantage of opportunities for standardisation, prefabrication, off-site manufacture and adopting modern logistics principles.

Supplier side commitments • The design will be tested using third party design reviews and other tools for assessing design quality.

• Design risk assessments will be carried out throughout the life cycle of the project.

• Suppliers and contractors will ensure that the design meets the sustainability objectives of the client are met, including an approach toward a carbon neutral goal.

• Architects and designers will be encouraged to give consideration to the use of indigenous materials and products where appropriate to the project.

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Shared commitments • Every opportunity will be taken to encourage visionary designs, including art sculpture and to provide opportunities for emerging designers and artists.

• The design must suit the practical, functional and operational requirements of the project and meet both the client’s and users’ needs, to ensure that whole-life value is delivered by addressing buildability, maintainability and usability, whilst driving health and safety throughout.

• IT-based collaborative tools and communication technologies will be exploited.

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6. Health & Safety Health and safety is integral to the success of any project, from design and construction to subsequent operation and maintenance. All parties will ensure that they integrate clear, robust, best practice into their projects

Client side commitments • All clients will ensure that site safety is communicated as a high priority for their construction projects and that all their projects adhere to CDM legislation.

Supplier side commitments •Health and safety must be of the highest priority for suppliers and contractors.

• Construction projects will aspire to be injury and incident-free.

• Every project will have a strategy to deal with occupational health and provide medically trained staff on site.

• All professional and site staff will hold Construction Skills Certification Scheme (CSCS) cards or equivalent.

Shared commitments • All designs will address health and safety issues and all projects will maintain a health and safety risk register.

• All health and safety risks, including those relating to occupational health, will be assessed, managed, action taken and communicated from inception to design.

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The Construction Procurement Strategy Steering Group

The Construction Procurement Strategy Steering Group represents both industry and client side in public construction matters in Wales.

For more information about these Commitments, the Group, or any of its work, please contact:

Construction Procurement Strategy Steering Group Policy Team Value Wales, Welsh Government 1st floor, North Core Rhydycar Business Park Merthyr Tydfil CF48 1UZ Email: [email protected]

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Agreement to Adopt the Construction Commitment Charter

We, the undersigned, agree to adopt and seek to apply the principles and individual commitments in this Charter in the delivery of construction projects in Wales.

We acknowledge that the Construction Procurement Strategy Steering Group will be responsible for receiving and responding to client and industry feedback regarding the application of the principles and commitments of the Charter.

------Name Date

------Organisation Date

Appendix 2

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Action Plan

Action What? By When? By whom? Number 1 Publish guidance on the March 2013 Value Wales recommended appropriate use of forms of contract. 2a Produce on-line guidance First content Value Wales to support clients to available by procure construction and March 2013 services requirements 2b Develop guidance that September Value Wales supports clients’ decision 2013 making in selecting the most appropriate procurement route (national, regional or local). 3a Pilot the electronic use of September Steering Group public SQuID on 10-12 projects 2013 sector representatives and through xchangewales e- local government sourcing suite of tools. Collaborative Works Group to nominate candidate projects, with Value Wales’ xchangewales e- procurement programme facilitating training and use of the tools. 3b Increase the use of March 2014 Steering Group public xchangewales e-tendering sector representatives and tools, running 12 further local government procurements via this Collaborative Works approach. Group to nominate candidate projects, with Value Wales xchangewales e- procurement programme facilitating training and use of the tools. 3c Pilot use of SQuID with March 2013 Welsh Government BETS north Wales based department and North contractors. Wales Construction Forum Steering Group representatives.

4 Secure adoption of the September Value Wales and Steering Construction Commitment 2013 Group industry Charter from the Welsh representatives. Government, NHS Wales, local authorities in Wales and key industry stakeholders. 5 Modernise approaches to September Value Wales in take account of 2013 ongoing. collaboration with Steering

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opportunities presented by Group. the new EU Procurement Directives in line with emerging strategy – ongoing from 2013. 6 Alignment with the UK 2015 Wales BIM Hub, BIM Task Government Building Group (Task Group to be Information Modelling (BIM) established by CEW) and strategy, with all Welsh CLAW. Government funded projects at level 2 by 2016 and all Welsh Government Department projects to lead at level 2 by 2015. 7 Increase the value of March 2014 Public sector Steering construction sub-contracts and March Group representatives and advertised via 2015 local government www.sell2wales.co.uk by Collaborative Works 50% by March 2014, and a Group. further 50% by March 2015. 8 Further refine the data December Sub-Group led by collection for capital spend 2013 Constructing Excellence in across the public sector by Wales building on the pilot work carried out for 12/13 and embed information in the Wales Infrastructure Investment Plan (WIIP) for projects and programmes and provide an annual update. 9 Require that all September Value Wales to produce construction contracts 2013 guidance to cover both (goods, services and below and above OJEU works) requiring threshold contracts. Public competition are advertised sector Steering Group on sell2wales – produce representatives and guidance to support. Collaborative Works Group to lead on embedding this approach within their sectors. Industry representatives and Welsh Government BETS department to promote registration on sell2wales. 10 Public bodies to commit to Commencing Value Wales to develop undertaking Procurement 2013/14 procurement maturity Capability Assessments to model and associated include construction activity taking account of the Construction Procurement Strategy; to commence

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during 2013/14. 11 Develop a procurement March 2014 Constructing Excellence in training plan for Wales to lead sub-group construction professionals to establish training for 2014/15 onward. programme. 12 Ensure build up to the September Public sector Steering longer term aspiration of 2013 Group representatives to using Project Bank nominate candidate Accounts, and introduce project, with Welsh the use of PBA s as a pilot Government Heads of the by September 2013. Valleys identified as a potential early adaptor. 13 Pilot the use of Integrated March 2014 Public sector Steering Project Insurance by March Group representatives to 2014. nominate candidate project. 14 Commission discrete work December Collaborative Wrks Group on the quality/price 2013 to undertake survey to guidance available with a determine current practice view to augmenting this by in local government December 2013. sector. Value Wales to commission work package to produce guidance. 15 Deliver 10 CB training December Value Wales and Steering courses to construction 2013 group public sector project teams by the end of representatives. December 2013.