Scotland’s Procurement Reform (Scotland) Act 2014 is an important element of the Public Procurement Reform Programme, which places procurement, as the Scottish Government says, “at the heart of Scotland’s economic recovery”.

The Procurement Reform (Scotland) Act 2014 requires commissioners to think about their stakeholders before they begin a procurement process, the impact of the services they intend to buy and how they intend to buy them.
Value Based Construction Procurement & Delivery puts PROCUREMENT at the heart of Scotland’s economic recovery. It sees procurement as an integral part of Policy Development and Service Delivery, looks at OUTPUTS and OUTCOMES, it uses the power of public spend to deliver genuine PUBLIC VALUE beyond simply the COST and/or QUALITY in purchasing.

There is a legal obligation that all Public Bodies must think about how Procurement will improve the Economy, Society and the Environment, in accordance with the above Act together with Scotland’s National Performance Framework, and that due consideration has to be given to the Life Cycle Cost of any Project.

To achieve the national outcomes contained within the National Performance Framework, all parts of the Industry in Scotland need to work together. This includes National and Local Government, Businesses, Voluntary Organisations, People living in Scotland.

Part of this can be done by encouraging better Procurement Practices.

There is much good work that has been pioneered in Scotland, with Community Benefits within the Build Phase of asset development. Our vision for the Industry is that by improving the way we do business together we become better equipped to respond to future demands efficiently and effectively. To achieve this transformation will require a major shift in Procurement Approaches, towards LONG TERM and COLLABORATIVE Relations at all levels of the supply chain and ENDING THE DRIVE TO LOWEST TENDER PRICE.

War and periods of economic austerity require that innovation is used to create more with less. Historically, when money is tight the prevalent mind-set is to cut costs rather than to maximise value.

Siloed procurement, based on the lowest price is an example of a cost cutting approach which has been the prevailing construction procurement strategy for decades. This is made worse by a common practice, which has now almost become normalised, of asking the supply chain to arbitrarily cut their original cost estimate by a percentage figure which has not been thought through any sound engineering principles. In austerity the disciplines of value management for both public and private sectors are even more important so that client value requirements are met or exceeded in a way which enhances industry Return on Investment and societal/environmental objectives.

A Value Based Procurement Strategy which uses Lowest Price at the build stage as a Primary Driver would not fulfil the above obligation under the National Performance Framework, unless the Lowest Price included an assessment across the whole life cycle of the asset and used this as the basis of appointing the Contractor. This would obviously require significantly more detail to be provided at the Tender Evaluation Stage, than just establishing a price for the build. This would be difficult initially for many Contractors and Clients, but this is an area where capabilities need to be developed. You could also rate the Price as the least important criteria in the scoring process and give the items which deal with project delivery, quality, improving the economy, society and environment, greater emphasis if these were considered the best measure of value.

Value has to be judged by client requirements divided by the life cycle costs of providing these requirements. Siloed contracting rarely integrates build/construct with use and recycle. The lowest price at the bid stage, in adversarial contracting, is more often not the same price at the construct phase completion. Equally, by focusing on lowest price at one point of the silo, ie the build, without considering the use and recycle phases, gives a false picture of the price of the project as a whole. A badly designed but well-built asset which does not meet stakeholder needs and is expensive to recycle through the facilities management and end use phase is clearly not providing value for money.

We need to reset the Industry by getting the Policy relating to the project sufficiently developed to allow the Design Phase to commence and convert the Policy into Technical Design involving the whole supply chain.
Achieving this will require a change in Client Behaviour which recognises that progress on a Project is not just seen as being made when the first shovel is put in the ground, but that the shovel should only be put in the ground when Policy and Design is sufficiently advanced.

This is critical to the successful delivery of the Project and the Client needs to invest both time and money at this stage of the delivery process as this is where the greatest impact on value will be achieved.
The move to the Build Phase should only be taken when the Design has been completed sufficiently and that all factors including Project Outcomes have been considered and the Client is satisfied with the proposals arrived at.