Author: Alastair Merrill, Director, Procurement & Commercial, Scottish Government
Since 2006 the Scottish government's reform programme has been forging ahead, transforming the way its $15 billion public procurement spend is used to attract investment, create jobs and support the economy as a whole. But one major area of public expenditure has been left behind - until now.
Public sector construction - previously on the periphery of reforms - is now firmly within their scope, following a major review that brings construction procurement into line with that for other goods and services. This last blank area of the “McClelland Map” will shape the Scottish procurement reform agenda for years to come.
$7bn construction spend 'outside the programme'
Some $7bn a year is spent on public sector construction and the 31,000 businesses that make up the construction industry in Scotland employ 170,000 people. But despite some pockets of excellence and innovation, the construction sector has so far been relatively untouched by Scotland's wider procurement reforms.
Scotland's ambitious procurement reform programme was triggered after the 2006 McClelland Report1 identified a series of flaws familiar to many critics of bureaucratic procurement processes. Minimal collaboration occurred among public bodies and little concept of cost-effectiveness. This year's Procurement Reform (Scotland) Act put a statutory framework around the Scottish Model of Procurement2 – an innovative and successful approach gaining increasing international recognition.
The approach places sustainability at the heart of the procurement process, recognising procurement's significance as a strategic enabler both of policy development and service delivery. This maximizes the economic benefit of public procurement spend.
Major review extends reforms to construction
Last autumn's review of public sector procurement in construction by senior business figures Robin Crawford and Ken Lewandowski3 followed an extensive consultation process involving hundreds of stakeholders. It envisaged applying and adapting to construction procurement the disciplines and common processes introduced for other goods and services under the Procurement Reform Programme.
Drawing on good practice in Scotland and elsewhere, including the UK government, reviewers' recommendations offer practical proposals to promote greater efficiency and collaboration including:
The report's recommendations marshalled several broad themes for promoting the following:
Prioritisation and co-ordination of spending
Approach to market
Promoting the interests of small businesses
The report made several recommendations to promote the interests of smaller businesses, including using regional lots appropriately, exploring the use of trust funds to hold cash retentions, and increasing focus on payment terms.
The Scottish government took early steps to implement - by May this year - the recommendation on trialling the use of project bank accounts to allow all members of the supply chain to be paid simultaneously from a trust account.4
Other recommendations designed to improve efficiency included a focus on…
All get access to skills and expertise
The report recognised two challenges:
The report recommended adapting the existing procurement capability assessments that all relevant public bodies undertake each year to include construction. This will baseline and improve skills across the public sector. The report also proposed developing guidance on the use of procurement tools.
Tools enable small firms to access lower value work
To increase standardisation and transparency, the report recommended the mandatory use of several tools:
Focus on environmental and social sustainability
The report recognised that economic, environmental and social sustainability are interlinked. It also…
Performance and efficiency
The reviewers stressed strongly that appropriate use of building information modelling can reap significant savings and efficiency in the construction and ongoing maintenance of facilities. They recommended the early introduction of BIM in central government with a view to encourage its adoption across the public sector.
Recognising better data is key to performance, the report called for installation of robust systems to track spend, development of sectoral records of construction costs to provide meaningful benchmark data, and making better systematic use of post-project evaluation.
Some problems of industry's own making …
The report did not confine itself to the public sector perspective. Instead it contended that some of the problems it identified were, at least in part, of the industry's own making, for example late payment of sub-contractors, retentions abuse, and suicide bidding. The report recommended that the Construction Scotland Industry Leadership Group ensure industry itself is at the forefront of addressing these issues.
Implementation a major task
Overall, the report provided a comprehensive analysis of the challenges and opportunities of reforming construction procurement. Scotland's Deputy First Minister, Nicola Sturgeon, after reviewing the report in detail, announced that the Procurement Reform Board was being tasked to oversee implementation of the report's recommendations.7
Ministers indicated that they did not intend for the time being to pursue the creation of the Chief Construction Advisor post, but they accepted the other recommendations in full. The Scottish Government's Procurement and Commercial Directorate working in partnership with the Scottish Futures Trust and other bodies such as Health Facilities Scotland, is now developing a programme for delivery.
Construction now fits into the mainstream of procurement reform
Many of Crawford and Lewandowski's recommendations either reinforce existing procurement policy, or are reflected in the Procurement Reform (Scotland) Act – such as the publication of procurement strategies, and the requirements to advertise contracts and use the proportionate standardised PQQ.
Many stakeholders will move the work forward
Public bodies such as Scottish Water, the Scottish Futures Trust, Health Facilities Scotland and Transport Scotland all have considerable experience and expertise in developing and delivering construction projects. Their active involvement will be essential as will be the involvement of local government, which collectively accounts for over 40% of construction spend and contains its own pockets of excellence. It will be critical to combine the diverse aspects of the construction industry to provide the supply-side perspectives.
The views expressed in this article are Alastair's personal views and do not necessarily reflect those of the Scottish Government.
About the author
Alastair Merrill, Fellow of the Chartered Institute of Purchasing and Supply (FCIPS), is Chief Procurement Officer and Commercial Director for the Scottish Government, leading public sector procurement reform in Scotland to deliver greater value for money through increased savings, improved quality of services and promoting sustainability in procurement.