The
MISSING middle A central procurement body could speed up the UK’s infrastructure delivery, provided it is managed carefully, writes Paul Jarvis
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peeding up the procurement of UK infrastructure has hit the top of the agenda for the public and private sectors alike. With money tight, the focus is on improving the speed of procurement to reduce bid costs and the amount clients spend on advice during the tendering process. But stating the case and making it happen are two very different things. “PFI has been around for 20 years this autumn and inefficiency in procurement has been the overriding concern for politicians for 75% of that time,” says academic Mark Hellowell. “Despite everything that’s been done, nothing has improved the cost of it.” There is hope, though, that this time might be different. In particular, the idea of a central procurement body at the heart of government is being seen as a potential game-changer. According to research from KPMG, average procurement time for social infrastructure projects is 34 months. That compares poorly to similarly mature markets such as Australia (17 months) and Canada (16 months). Infrastructure UK chief executive Geoffrey Spence appears to be increasingly of the view that a central body could bring the UK into line with other countries. “The government needs to tackle [inefficiency] and that probably means having a centre of excellence providing a pipeline and direction,” adds Hellowell. In a narrow sense, the partnerships industry already has experience of central procurement bodies. In waste, for example, the Waste Infrastructure Delivery Programme (WIDP) body within the environment department is recognised as an organisation that invariably helped progress some of the country’s largest and most complex procurements. “It had good and respected people from
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the industry and provided resource to the projects,” says Russell Dallas at consultancy Mott MacDonald. “Everyone had a ‘go-to’ person on each project.” Fellow technical consultant Chris Wilson at LeighFisher agrees. He worked closely with WIDP while at advisory 4ps and describes the arrangement as “an enabling partnership”. Despite delivering some of the most technically challenging and complex infrastructure that the PFI model has been asked to do, those in the industry believe the WIDP model allowed the procedure to be far more straightforward than some other sectors. Schools, in particular, spring to mind. “A central body would speed up procurement – as long as it doesn’t become another Partnerships for Schools,” warns Jim Crossman, at technical consultancy Currie and Brown. “That became a much bigger animal than it needed to be.” Stephen Beechey, at contractor Wates, shares the concern that any new procurement body could follow a similar path. “It could be a very bureaucratic machine that just causes delays. When Partnerships for Schools (PfS) was established, they started to create a huge procurement machine that was incredibly costly and time-consuming.”
Slaves to process Part of the problem,
some suggest, is the approach taken by UK options might be limited for creating a wellinstitutions to the process, rather than what staffed organisation. bodies exist. Jonathan Cripps, at law firm Stephenson Liz Jenkins, at lawyers Clyde & Co, Harwood, disagrees. “Today, a public suggests the public sector’s authority will go out and buy an experienced determination to follow procedures project director. It’s regarded as a more so closely is partly to blame. “We commoditised product.” seem to live by the letter of the Wilson suggests the Treasury could follow law in terms of procurement its previous route of bringing in private sector rules, which some other specialists on secondments. “That brings a countries don’t,” she says. “So real flow of knowledge and expertise to both maybe we need more clarity sides,” he says. on that rather than [simply] Still, a core group of public sector a new body.” workers may be needed, and that could A source on the cause some tensions with existing PPP units financing side agrees. “It’s around the country. David Outram, at the not about who controls Leeds unit, is wary of seeing his top staff the procurement, it is the poached by Whitehall. “There is no denying procedures.” more expertise would be useful, but where is C o m p e t i t i v e it going to come from? It would come from dialogue often comes people already in the market, so it would be up in discussions here. simply taking people from one place to Critics argue that another.” reducing the frequency Indeed, Outram doubts whether a with which this central organisation can offer anything more procedure is used would than an extra layer of bureaucracy. “If the have the biggest effect on project is tied to London, then you need procurement timetables. close connections to make sure it’s scoped “Competitive dialogue is appropriately, for example. But after that, it fine in complex new cases,” is often more important to be where the says Ray Powell, at consultancy bidders are. Mouchel. “But I would query “Does it mean we in Leeds aren’t to be whether it is working on standard trusted to deliver procurement across the PFI/PPP deals. Streetlighting public sector?” deals are fairly commoditised, for As Outram and others point out, the idea example.” of a centralised body also cuts across the But a properly staffed and government’s localism agenda. “In five years’ adequately resourced procurement body time, city regions and local enterprise could help to improve the procedures – partnerships may be procuring all their own although that begs the question as to who infrastructure,” suggests one financial adviser. might be included. Critics have often “So how would that fit with a central complained of the lack of public procurement body?” sector expertise, meaning All the investment being offered by
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government over recent months has pointed “If there is no central funding, then unless have been good at providing guidance and towards this move, with grants from the there are significant efficiency savings to be extensive information on their projects, that Regional Growth Fund, for example, targeted made, why would you go down that route? can be accessed by other authorities but also at helping enterprise partnerships and similar Most local bodies would say the central referred back to when developing future organisations kickstart growth through agency was a hindrance.” schemes. investment in infrastructure. In February, MPs at a Commons public “It does follow that Canada has been But not everyone thinks the government accounts committee hearing asked remarkably successful by organising something is as wedded to localism as it likes to make Infrastructure UK’s Geoffrey Spence why at the provincial level,” points out one contractor. out. “I don’t see any genuine zeal for localism other countries are faster at procuring major “You could argue the Canadian provinces in terms of more power for local authorities. infrastructure than in this country. are not much different to the component The free schools movement, for example, is “In many cases one of the difficulties, if countries of the UK,” he continues. all about eroding local authority control in you look at the PFI programme here in the “Northern Ireland and Scotland both have favour of central control,” says Hellowell. centralised procurement vehicles, and Wales “I doubt a spanner will be thrown into the does things through the National Assembly. works here because of a commitment to So it’s only England that is left.” ‘localism’.” “The provinces [in Canada] are the As the government focuses more on powerhouses,” adds Wilson. “I think in this economic infrastructure such as roads and country we should establish three or four rail, there may be a case for keeping these procurement centres of expertise at a city procurements away from the localism brief, region as well as national level.” on the basis that they are projects of national Developing central units at a regional importance. level – like the ones that already exist in “I can see it working more readily for big UK compared to France or Canada…is that Leeds and Manchester, for example – would pieces of infrastructure,” says Cripps. He there’s been far more central involvement in certainly be more in tune with the localism suggests a central approach may make sense the direct procurement of a major facility agenda. “If all the expertise is based centrally, for national infrastructure schemes such as than here,” he responded. While he did not you will get a remote solution and people High Speed Two, which cuts across several say this was the only reason, his reply will become disenfranchised,” adds Outram. local areas. “But anything where local choice suggested it was the one he felt had the “Local work could be steered by wise is relevant is more difficult,” he adds. biggest impact. counsel from the centre,” says Dallas. But even on the social infrastructure side, Many in the industry agree that Canada’s Hellowell agrees, suggesting the government the government has already made strides success, in particular, has been driven by the could take a pragmatic approach of ‘as local as towards a more centralised approach. public sector’s strong leadership. State possible but centralised where necessary’. In education, for example, the Priority organisations such as Partnerships BC in But a regional approach will also have School Building Programme (PSBP) that British Columbia, or Infrastructure Ontario, difficulties. “At the moment, there is still a replaced BSF gives locals far less scope to meddle with the procurement. Designs are expected to be standardised, while batching projects together – potentially regardless of geography – will need a firm hand from the centre to coordinate delivery. And PfS is developing a survey of England’s school estate, which again hints at the desire to tackle problems from the centre. The creation of a new property company to look after the residual primary care trust estate also points to a more centralised approach in health. The new organisation could become the delivery body for future primary care assets. One lawyer suggests the centralised, standardised straitjacket of PFI was always accepted by local bodies because there was funding attached to it.
“I doubt a spanner will be thrown into the works because of a commitment to localism”
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lot to do to put in place the administrative infrastructure to ensure that local enterprise partnerships deliver on the aspirations they have,” says Wilson. If these bodies are meant to be the new procurers, the concern is they are nowhere near being resourced sufficiently to improve the process. And even those that do have such capabilities will still need “some central coordination”, he adds. Dave Carty, at Manchester’s PPP unit, suggests that a central procurement body and regional organisations need not be mutually exclusive. “If there was just one national centre of excellence, it would struggle with local issues,” he explains. “In regional frameworks, for example, you can make sure that local small businesses in the supply chain get a fair share of the work.” But critics warn such a tiered approach will simply create new layers of bureaucracy, adding to the timeline instead of speeding it up. “[Ministers] are trying to reduce costs, so they don’t want duplication by doing the work at both the local and central levels,” says Jenkins. Carty’s colleague, John Lorimer, believes finding the right balance here is achievable. He points to the retail sector, where large supermarkets can deliver standard buildings through one central procurement, but still sell some locally sourced goods. “It’s no different for a school or hospital,” adds Carty. “A school built ‘off
the shelf’ has to be tempered by having enough local flavour.” Clearly, the make-up of the central body, and where it sits in Whitehall, will be crucial. “Undoubtedly there are the skills within government, but they’re spread across departments,” says Tim Care, at lawyers Dickinson Dees. “A central body should in theory give total consistency in the process.” In some ways, an organisation akin to Partnerships UK (PUK), which sat outside
“There are still a lot of people with the right skills, but they need direction” any specific department, might sound appealing. Wilson, though, warns against creating another privately funded agency. “PUK as a public-private partnership was able to take equity stakes in projects, but we need a body that doesn’t have the perceived conflict of interest that can create.” Telling the public that the government is going to solve the problem of costly PFI programmes by creating a new private organisation would also be a hard sell for the government in the current climate.
“It should be a vehicle that is purely public sector-owned. But it has to have a broad remit across all infrastructure sectors.” “You could have something like the Cabinet Office working with Infrastructure UK to deliver big infrastructure,” suggests Hellowell. “But that would be a hard sell to the various departments.” The direction of travel from the government so far – whether it be the PSBP or the health property company – has tended towards giving each department some central control. “Sponsoring departments tend to know what they want and have the technical, specialist knowledge,” says Powell. Wresting back that control now, and creating one body that cuts across them all, could be difficult. One thing that will preclude any central body being formed, however, is the current lack of a pipeline. “If you don’t have a big raft of similar projects, it’s difficult to have a ‘onesize-fits-all’ approach,” says one financial adviser. Beechey agrees. “If you have not got a defined pipeline, it’s not going to be effective. The pipeline is not in evidence at the moment.” While the Treasury will point to the long list of projects set out in its 2011 National Infrastructure Plan (NIP), most experts argue that does not provide sufficient detail. “There’s still quite a bit of work to be done on what the NIP means at a granular level and to turn it into a defined pipeline,” Beechey continues. “It would be pointless to set up a central procurement body without it being focused around a defined pipeline.” A clear stream of work would also attract the right calibre of person to staff the organisation. “We had the skills but there has been something of a cull in these skills recently,” says Outram. “There are still a lot of people with the right skills, but they need direction. “The Olympics attracted a very talented pool, for example, but it is only there for that period and then it disappears again.” A central procurement organisation could clearly offer some benefits to the Treasury’s record on project delivery. But officials need to do an awful lot of work beforehand to make sure such a body provides just the right level of support.
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