Constructing Excellence - Procurement - 27th May 2015

Constructing Excellence Summer Series Wednesday 27th May 2015 Addleshaw Goddard LLP

Tom Oulton Chair Constructing Excellence Yorkshire & Humber

Cliff Jones Senior Policy and Performance Manger ProCure21+ and Efficiency Team

Why do Clients Invest in Construction? How could this affect procurement?

Constructing Excellent in Yorkshire and Humber – Addleshaw Goddard, Leeds 27th May 2015

Cliff Jones, MRICS, MCIPS –Senior Financial and Commercial Manager, ProCure 21+, Dept of Health

Clients Core/Primary Business Objective(s) e.g. DH (and NHS) Core/Primary Business Objectives THE PRIMARY OBJECTIVE OF THE DH/NHS IS THE PROVISION OF HEALTHCARE TO PATIENTS.

Clients Core/Primary Business Objective(s):

• Other examples: – Retailers - provide services and goods to customers; – Schools - provide education to pupils; – Manufacturers – produce products for sale to “customers” – Etc. (Clients do not decide to undertake any Capital Investment unless it delivers improved business outcomes for them)

The provision of new facilities OR to support improvements in services to “customers”: • • • • • • • •

New technology/processes; New products/services; New opportunities/markets; Additional capacity; Address maintenance, safety or other issues; Improved efficiency; Environmental issues. etc.

“This list is not exhaustive”

What could this mean for those involved delivering Construction Work • Challenges could include: – Understanding Clients Business; – Engaging with Clients earlier; – Involving supply chain in earlier stages of projects; – Empowering supply chain, there is an untapped source of knowledge and expertise; – Delivering defects free at completion (“snagging lists are defects”); – Re-use design information; – Longer warranties, defects periods; – Improvements in defects correction after completion

– etc.

“This list is not exhaustive”

Engaging with Clients earlier and Involving supply chain in earlier stages of projects; Client

Designers

Supply Chain Partner

Those that can “add value” at the stage that the project has reached should be engaged.

Key SCMs

SCM Suppliers/Manufacturers

“Early Involvement of Supply Chain Partners and Supply Chain Members”

Engaging with Clients earlier and Involving supply chain in earlier stages of projects; Location of existing chillers, medical gas plant etc

Actual Location of Extension following proposal

by M/E Installer Proposed extension location as advised by Clients Design Team

Existing Accident and Emergency Unit

Examples of benefits delivered to Clients

1. Reducing Clients Capital Investment Required to deliver core business objectives.

•.

Construction Supply Chain advised a client that they only need to spend £25m instead of the £50m that the Client (and their professional advisors) had identified to achieve their core business objective(s);

Examples of benefits delivered to Clients 2. Reducing Clients “Operational” Costs e.g. : •. “Zero Re-infection rates” by introducing concept of Barn Theatres; •. Review of ward layouts to provide for required patient observation with one instead of two nurse stations where possible; •. Introduction of windows in Theatres – improved environment for Clinicians and Patients.

Examples of benefits delivered to Clients 2. Sharing information/re-using designs - e.g. P21+ ProjectShare

Examples of benefits delivered to Clients 3.Collaboration between Supply Chains and Supply Chain Members:

P21+ StandardShare (see later slide) Since last year over ÂŁ1.1m savings have resulted from the above.

Examples of benefits delivered to Clients 3. Collaboration between Supply Chains and Supply Chain Members: •. Development of P21+ “repeatable” rooms: – single bedrooms – en suite pods – mental health bedrooms

Can be utilised in Refurbishment Projects

(Involved supply chain leads in consulting with DH, NHS, Clinicians, Patients, Visitors and others)

(Awarded Building Better Healthcare Mental Health Award for Service user Experience Award 2105)

ProCure 21+ Framework Repeatable Rooms/Proven Designs: Single Bedrooms

En Suite Pod

ProCure 21+ Framework Standardisation/Repeatable Rooms/Proven Designs:

ProCure 21+ Framework Standardisation/Repeatable Rooms/Proven Designs: Parts of Facilities – Example Hospital Bathrooms Standardisation

• Mental Health Bathrooms use the same components…

• Same moulds used for 4 projects Continuous refinement & improvement • Increasing repeatability results in increasing savings e.g.

• Manufacture – Further 5% to 10% • Materials – Further 2% to 5%

Insitu > Offsite Refined original layout

20% Saving

Optimised material and component selection

13% Cost Reduction Same principles can be applied to other parts of facilities

ProCure 21+ Framework 3.Collaboration between Supply Chains and Supply Chain Members: Standardised components example of effects of over specification: M&E Installations/Components (Sanitary Ware, Lighting, AHUs etc:e.g. Air Handling Units for hospitals – key drivers: • HTM 03-01 • Choice of components • Choice of materials • Life cycle costing • System Design “The choice of components can have an effect on the capital cost of the unit, the capital cost of the system and the whole life cost of the system/hospital .“ Typical Hospital Layout

ProCure 21+ Framework Standardised components example of effects of over specification: M&E Installations/Components (Sanitary Ware, Lighting, AHUs etc):e.g. AHU’s for hospitals :

Typical Hospital Layout

ProCure 21+ Framework Access to information for those using P21+ Framework

“P21+ Club - StandardShare”

P21+ Component Catalogue launched recently

Wave 1: – Hard Flooring; – Suspended Ceiling; – Doors; – Lighting; – Sanitary Ware; – Partitions.

Wave 2: – AHUs; – Pipework; – Boilers/CHP; – Chillers; – Clinical WHB Stations; – Nurse Call; – Bed Head Trunking; – Fire Alarms; – BMS.

Thank you Any Questions ?

My contact details: Cliff Jones MRICS MCIPS Senior Financial and Commercial Manager ProCure21+ & Efficiency Team NHS Estates and Policy Division Commercial Directorate Department of Health 1N13 Quarry House Quarry Hill Leeds LS2 7UE Tel 0113 2546355 Mob 07770 278519 E-mail Cliff.Jones@dh.gsi.gov.uk

Steve Baker Group Manager Construction Management Services East Riding of Yorkshire Council

Steve Baker Construction Services Group Manager East Riding of Yorkshire Council Influencing Factors on Public Procurement and their effects on the Evolution of Construction Frameworks

Why does the public sector procure the way it does?

Why does the public sector appear to make applying to work for them so difficult?

Sir Michael Latham Constructing the Team 1994 Sir Petermyriad Levene Efficiency Scrutiny into Construction Procurement The of guidance can be baffling 1995 Sir John Egan Rethinking Construction 1998 Modernising Construction Projects in the Public Sector NAO 2001 Improving Public Services through Better Construction NAO 2005 OGC Common Minimum standards 2006 Achieving Excellence in Construction 2007 Guide to best ‘Fair Payments’ 2007 PAS 91:2010 BSI Government Construction Strategy 2011 Infrastructure Cost Review: Implementation Plan 2011 Social Value Act 2012 Effectiveness of Frameworks 2012 Project Bank Accounts 2012

Sir Michael Latham Constructing the Team 1994 Sir Peter Levene Efficiency Scrutiny into Construction Procurement 1995 Sir John Egan Rethinking Construction 1998 Modernising Construction Projects in the Public Sector NAO 2001 Improving Public Services through Better Construction NAO 2005 OGC Common Minimum standards 2006 Achieving Excellence in Construction 2007 Guide to best ‘Fair Payments’ 2007 PAS 91:2010 BSI Government Construction Strategy 2011 Infrastructure Cost Review: Implementation Plan 2011 Social Value Act 2012 Effectiveness of Frameworks 2012 Project Bank Accounts 2012 Construction 25 2013 PAS 91:2013 Infrastructure Procurement Routemap 2013 New Models of Construction Procurement 2014

Strategy Elements Partnership working to improve capacity and effectiveness

New Models of Construction Procurement 2014

Better contract management

Collaborative procurements

Supply Chain Integration

PAS 91:2013

Whole life cost reductions

BIM

Reduction of waste (WRAP)

Soft Landings

Support to SMEs incl. Fair Payments

Lean procurement

Typical Legislation

Procurement Legislation

Evolution of Construction YORbuild 2 Frameworks More benefits added with each new framework generation

YORbuild

Fourth Generation: BIM; PAS91; choice of contracts eg JCT/ NEC/ PPC2000; range of selection methods; social value act compliant; new procurement methods; “new housing� lots; supplier minimum ternover reduced

What will the fifth Third Generation: Guarantee improved project delivery and social benefits; managed user service; more collaboration; Fair Payments/ PBAs; Employment and Skills Plans; Supply Chain Engagement generation include? and innovation; sustainability strategy; community benefits; lots by value

Increased collaboration and

Second Generation: Have improved project delivery; some framework user innovation down the supply support; KPIs to show continual improvements for time, cost and innovation chain? More engagement with First Generation: Avoid OJEUs, long term partnering/ schools to attract new people to workload continuity; collaborative contracts; less the industry? New technology? disputes/ better relationships; reduce project overruns in time and cost Greater supplier incentivisation?

East Riding of Yorkshire Council Framework Evolution In order to achieve the ‘Principles of Partnering’ ERYC moved towards frameworks for Civil engineering contractors - two such frameworks created

Pre 2000

ERYC pursued a partnering approach on individual and then multiple projects

2000

YORbuild Framework launched securing over £150m of demand in its first year

YORbuild begins its final extension year and the YORbuild 2 frameworks procurement begins

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Following a capacity study by the Centre of Excellence the concept of the YORbuild Framework is shared with the region’s Local Authorities

The YOR family for frameworks grows to add civils and consultancy

Why Frameworks • • • • • • • • • • •

Delivering sustainable efficiency savings Reduction in consultancy and construction costs Delivery of projects closer to target cost and time Reduction of disputes, claims and litigation High client satisfaction rates High proportion of value of work undertaken by SMEs High proportion of local labour and sub-contractors Ensures Fair Payment, Apprenticeships High proportion of construction, demolition and excavation waste diverted from landfill Good Health and Safety performance against national average Acting as a key enabler to integration of the supply team

Development 1. Sub Regional frameworks (Second generation) for Civil Engineering Contractors, Building Contractors and Professional / Consultancy 2. Regional Frameworks (Third generation) for Civil Engineering Contractors (YORcivil), Building Contractors (YORbuild) and Professional / Consultancy Services (YORconsult) 3. YORhub – Yorkshire and Humber Construction Hub

Where are we now?

• YORbuild2 • YORcivil2 • Fourth generation frameworks – – – – – –

PAS 91, Choice of contracts, Range of selection methods, Social Value Act compliant, ‘New housing’ lots, Supplier minimum turnover reduced

Key Themes

Public Contracts Regulations 2015 – Significant Changes • No longer part B services – replaced with new ‘light touch’ regimes for health, social and other services in schedule 3 • Mandatory use of Contracts Finder • Selection criteria to encourage inclusion of SMEs • Sub threshold requirements (exclusion of PQQ docs) • New mandatory and discretionary exclusions including ‘self cleaning’ process • New timescales – generally shorter • e-Certis scheme • New requirements on financial limits • New requirements on contract modification (codifying Pressetext)

Any questions?

Questions?

#CEYHAWARDS http://ckegroup.org/cexcellenceyh/?page_id=457 Key Dates Shortlist Announcement– Monday 8th June 2015 Gala Awards Ceremony – Friday 17th July 2015

Thank you Our next breakfast seminar 24th June 2015