What next for procurement:

Are collaborative frameworks the way forward?

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Time to look at long accepted practices…

QualityCost

Honesty and

transparency…Improving

understanding…

Integrated

service…

#PELCPD

Speakers

Kate Stansfield, Chief Operating Officer, Gen2

@Gen2Property

Professor David Mosey, Director of Construction Law

and Dispute Resolution, King’s College

@KingsCollegeLon

Nick Sterling, Managing Director, Osborne Communities

@OsborneNews

#PELCPD

Pellings

What next for procurement?

28 September 2017, London.

Overview• KCC Commissioning Framework

• Gen² as a new service delivery model

• Do hybrid suppliers offer a better way and where do they sit in the marketplace?

• Appraisal of service (Client/supplier perspectives)

• Lessons learned and simple changes

• The future for the KCC/Gen² service model

Background

Kent County Council Commissioning Framework established to:

• Focus on a thin yet informed Client

• Joined up and efficient use of resources

• Making tough decisions if evidence shows things aren’t working

• Listening to customers and suppliers

• Supporting KCC’s Strategic Outcomes

• Based on 10 Key Principles

02 October 2017802 October 2017

Kent County Council

Commissioning principles

1. Focus on outcomes for residents

2. A consistent commissioning approach to planning, designing & evaluation

3. The right people involved at the right stage

02 October 2017

4. Open minded about to best achieve outcomes

5. High quality robust evidence supporting

decisions

Commissioning principles continued

6. Hold all services to accounts for the deliver of KCC Strategic Outcomes

7. Customers at the heart of the Commissioning process

8. A commitment to building capacity

9. Maximising social value

10.Sustainable and effective supply chains

02 October 201711

Gen2 Property

• Established in May 2016

• KCC Shareholder

• Teckal company

• No procurement requirement

• 80% work for KCC

• Opportunity for additional income from new customers

02 October 201712

Gen2 Property continued

• Return to KCC in form of dividend, goes back to the people of Kent

• Supports Commissioning Framework and allows services to be maintained in face of budget pressures

• KCC have (or in the process of establishing) total of 5 trading companies

• Property staff base TUPE transferred across to new entity

• Gen² are KCC’s managing agent – KCC retains procurement and contracts with other suppliers (Gen2 have a limited supply chain but manage an extensive KCC supplier base and pipeline)

• GEN2 manage 1800 assets for KCC, £22m revenue budget and approx. £200m p/a capital spend

Facilities Management

Asset Management

Appraisal & Analysis

Project Delivery

Estates Management

Smarter property services

Acquisitions & Disposals

• A commercial focus with a public sector soul

• Ambitious growth projections

KCC owned trading companies

Education CoBusiness

Services Co

Shareholder

Commissioner

Service Level Agreements

Dividends Returned to KCC

Total FM Supplier Contract

Principal Contractor Framework

Asbestos Services

Framework

Professional Services

Framework

KCC Has Direct Contract Control

Frameworks

Largely SE focused supply chainEffective route to market

Full commitment of pipelineBetter soft market testingInforms future optionsEvidence of performance

√

X

CONDITIONS FOR CHANGE

TRUST

RELATIONSHIPS DATA

Client Perspective

Dividend returnFuture growth

Service delivery“Brain drain”Reduced visibility

√

X

New Client Perspective

Interest in benefits of model

Is Gen2 KCC in different clothes?

√

X

Gen2 Perspective

Business plan & new clients

Permanent & committed board & Exec

Recruitment, systems & commercialisation

√

X

√

Lessons learned

Trust• Keep talking

• Touchpoints to identify & mitigate frustrations

• Reality check/ don’t overpromise & under deliver

Relationships• Understand your partners drivers

• Align your outcomes

• Collaborate & share resource

Lessons learned continued

Data• Investment for new systems

• New delivery models require independent systems for new clients

• Quality management information to underpin decision-making

Conditions for change• Make it look and feel different

• Branding, website, service offer, differentiators, location

• Change leaders

• Mitigate against change fatigue

02 October 201718

• Decoupling of KCC as shareholder & KCC as client

• Maintained focus on KCC service delivery

• Increased focus of growth & new client base

• In-house provision (currently QS/EA, future – disposals agency, some FM soft services?)

• Financial performance

• Further synergies & efficiencies across

KCC group of Trading Services

The future

Smarter property

Pellings - What Next for Procurement?Improving Value under FAC-1

Professor David Mosey

Director, Centre of Construction Law and Dispute Resolution, King’s College London

©David Mosey 2017

The essentials of an FAC-1 framework alliance

➢ Why is the framework alliance created, what are the shared objectives/success measures and what happens if they are not achieved? (FAC-1 Objectives/ Success Measures/ Targets)

➢ How will work be awarded (FAC-1 Direct/ Competitive Award Procedures, agreed Project Contract forms and other Template Project Documents)

➢ How will members work together to improve value? (FAC-1Alliance Activities, Risk Register, Timetable)

➢ How will the members’ work be integrated (FAC-1 Alliance Manager , agreement of shared data, intellectual property and BIM, Core Group governance)

➢ What are the members’ rewards? (FAC-1 Incentives and payment provisions)

21

What can an effective framework achieve?

“Evidence suggests that benefits can accrue from the use of effective frameworks in procuring construction and they include:➢ -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 work undertaken by small and medium-sized

enterprises➢ -high proportion of local labour and sub-contractors➢ -high take-up of government in initiatives such as fair payment,

apprenticeships ➢ -high proportion of waste diverted from landfill➢ -good health and safety performance against national average➢ -acting as a key enabler to integration of the supply team”UK Government Effectiveness of Frameworks Report, 2012

FAC-1 prototype: Ministry of Justice new build framework alliances

➢ “Solid governance structure through a Strategic Core Group comprising representatives from the MoJ and the Alliance suppliers”

➢ KPI information and cost analysis “made available to all schemes”

➢ “Individual project appointments made via mini-competitions or by direct appointment” under a “standard two stage selection process”

➢ “Standardised suite of processes and contract templates are used to ensure consistency and ease of use” plus “Early engagement of the supply chain is encouraged by the two stage approach”

➢ Major benefits “include reduced operating costs estimated at £10m, reduced burden on industry tendering of around £30m and procurement risk mitigation of about £2m”

➢ Total cost savings of £42m23

Agreed Alliance Activities

Alliance Activities under FAC-1 clause 6 govern:

➢ joint planning and risk management

➢ improved, consistent working practices

➢ learning from Project to Project

➢ collaborative working to achieve Improved Value

Supply Chain Collaboration under FAC-1 clause 6 enables Alliance Members to:

➢ revisit proposals obtained when Alliance Members are selected

➢ seek improvements through new ways to engage with tier 1/2/3 Supply Chain members under systems monitored by the Client

➢ Alliance Activities include agreed timelines set out in the FAC-1 Timetable

Supply Chain Collaboration

➢ Under FAC-1 clause 6 the tier 2/3 Supply Chain members (suppliers, sub-contractors and sub-consultants) may be offered longer-term, larger-scale Supply Chain Contracts or other improved commitments and working practices

➢ This enables offers from tier 2/3 Supply Chain members of improved prices, improved warranties and other efficiencies captured in Project Contracts and in tier 2/3 Supply Chain Contracts

➢ Supply Chain Collaboration has also enabled:

o greater engagement of local and regional businesses

o new local and regional employment and skills initiatives

o recycling and other Sustainability initiatives

o positive feedback from Users and Stakeholders

Supply Chain Collaboration case study

Infrastructure Client Group Alliancing Code of Practice 2015 and

https://www.gov.uk/government/publications/procurement-trial-case-study-report-highways-maintenance

Surrey County Council four-way highways alliance enabled 15% agreed post-tender cost savings including:

➢ “Visibility and continuity of pipeline of work through larger scale, longer term work offered to Kier by Surrey and in turn to Marshall Surfacing and Aggregate Industries (5%)

➢ Advance planning of work on each annual cycle (2%)

➢ Prompt payment of Marshall Surfacing and Aggregate Industries by Kier (1%)

➢ Closer involvement in the design and planning of individual tasks within the programme (2%)

➢ Availability of storage facilities in depots (2%)”

FAC prototype case study http://www.gov.uk/government/publications/two-stage-open-book

➢ Early appointment of range of tier 1

contractors and SME tier 2 and tier 3

sub-contractors and suppliers

➢ Substantial savings achieved firstly at

main contractor procurement (16%),

and secondly through joint working

with tier 1 and tier 2/tier 3 supply

chain members (14%)

➢ Reduced waste through lean programming and

rationalised specifications

➢ Sustainability proposals from tier 2/3 supply

chain members

➢ Substantial time savings on mobilisation

➢ New opportunities for SME subcontractors and

suppliers

➢ Employment and skills initiatives

➢ Improved maintenance

FAC-1 procurements➢ Futures Housing Group - £30m. planned and responsive repairs,

5 clients and 23 SMEs (with TPC) :over 9% savings on previous frameworks plus agreed community benefits

➢ Football Foundation, Football Association, Sport England £150m. modular changing rooms (with JCT)

➢ Southern Housing £7.5m. small works (with TPC), North Devon Homes £40m. new build and modular (with JCT), Your Homes £44.5m. planned investment (with TPC)

➢ L.B.Greenwich £20m. mechanical and electrical works (with TPC) and Graven Hill custom build substructures and superstructures (with JCT/NEC)

➢ LHC £5.5bn. and £800m. schools and community buildings CPBs (with JCT/NEC/PPC)

➢ Crown Commercial Service £2.8bn. project management/design consultant CPB (with NEC)

➢ Kier £54m. contractor-led highways supply chain alliance

(with TPC)

Nick Sterling

Osborne

Communities

28th September 2017

Self Repairing Concrete Robot Build

3D Printing

Satisfaction

or

Experience?

Av. Length of Disputes in the UK

2010 2011 2012 2013 2014 2015

Months

6.8

8.7

12.9

7.9

1010.7

Main Cause

Failure to properly administer the contract

Av. Value of Disputes in the UK

2010 2011 2012 2013 2014 2015

£Millions

5.5

7.5

19.9

20.5

19.918.4

Main Cause

Employer, contractor or subcontractor failing to understand

and comply with its contractual obligations

600,000potentially leaving

Our People

17,000

14,000

1,400 suicides

43 killed

mental

health

physical

injury

Customer trends

60.0

65.0

70.0

75.0

80.0

85.0

Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Retail

UK all sector average

Utilities

Housing Provider

UKCSI: a national barometer of customer satisfaction

Index out of 100

82.2

78.2

75.1

70.7

Why customer experience matters

Business improvement

• Reduced problems

• Fewer complaints

• Lower cost to serve

• Improved margins

Customer experiences

Sustainable business performance

Customer behaviour

Reputation

and Trust • Recommendation

• Repurchase

• Advocacy

Cookham Wood

Creating a

collaborative culture

Change

our

Behaviours

Working

together for

better outcomesACT

today

Thank you

Any questions?

#PELCPD