Construction category update

Report: 10
Date: 22 September 2011
By: Director of Resources on behalf of the Commissioner

Summary

In support of the MPA/MPS corporate real estate programme a variety of procurement routes have been developed to facilitate the maintenance, repair, refurbishment and redevelopment of the MPA's real estate portfolio.

This paper updates the reports entitled Procurement Strategy for Construction and Associated Services presented to the MPA in September 2007 and September 2010.

The report recommends the reinstatement of the threshold for calling off works from the Facilities Management Contracts (FMS) to project value from £50,000 to £150,000.

The report notes the approval by Contracts Board of the extension of the two Multi-Disciplinary Consultancy Contracts with W S Atkins Consultants Limited and Mouchel Limited, as permitted in the contracts.

Where employer’s agent services are required, the report proposes to continue calling off from the Office of Government Commerce (OGC) Full Design Team and Project Management Services Framework. It is also proposed that the professional services supply chain is complemented by the use of the North London Strategic Alliance Construction Related Consultant Services which is currently being procured.

The Committee is also invited to note the progress made in the development of a second construction framework, and the considerations for the Construction Sourcing plan.

A. Recommendations

That members

1. Approve the re-instatement of the £150,000 minor works threshold, as allowed for within the scope of the Facility Management Contracts entered into with Balfour Beatty Workplace (BBW) and Interserve Facilities Management (IFM).
2. Note the developments against the existing procurement strategies:
   1. the implementation of call-off arrangements for Forward Works;
   2. the extension of the Technical Consultancy Services Agreements as approved by Contracts Board;
   3. continued use of the OGC Full Design Team and Project Management Services Framework; the proposed use of the North London Strategic Alliance (NLSA) Construction related Consultancy Service Framework;
   4. the developments to the second South East and London construction Framework for Major Projects; and
   5. the vision for a longer-term sourcing plan for works and professional services.

B. Supporting information

1. In support of the MPA/MPS corporate real estate programme a variety of procurement routes have been developed to support the maintenance, repair, refurbishment and redevelopment of the MPA's real estate portfolio.
These range from the Facilities Management Contracts placed in 2007 which have been the subject of separate discussions at earlier MPA Committee meetings, through to the use of framework arrangements - taking opportunities to benefit from collaborative approaches - in the procurement of more substantial redevelopment/refurbishment works. The need to provide flexible routes to market are key to support the delivery of the capital programme therefore supporting the corporate real estate approach.

Forward Works - Threshold for utilisation of Facilities Management Services (FMS) & call off arrangements

2. The delivery of the MPA capital and revenue programmes requires flexibility to enable response to unplanned projects in a timely fashion; availability of security cleared contractors; and resilience to respond to a naturally dynamic programme with anticipated peaks during the Olympics period.

3. Procurement Services is implementing a series of call off arrangements, for packages such as mechanical and electrical works and general building works. The governance for these contracts is through the MPS Scheme of Delegation.

4. The Facilities Management Suppliers contracts have been in place since April 2007 delivering facilities management services across the MPS estate through Balfour Beatty Workplace and Interserve Facilities Management. These contracts are supported through the Metropolitan Police Information Centre contract providing call centre, management information and process improvements to the facilities management of the estate.

5. The MPA has the contractual ability to place minor works through these contracts to an unlimited value, as provided for in the original procurement process. The original contracts enable the MPA to utilise the contractors for minor works as defined in the tender documentation, ‘The MPA intends to direct minor works under the value of £50,000 to the FM Suppliers. Where operational requirements dictate, the MPA may also direct works above £50,000 to the FM suppliers.’

6. In November 2007 the MPA set a project value threshold of £150,000 for placing works contracts with the Facilities Management Suppliers. In April 2009 the threshold was reduced to £50,000. It was reduced to ensure suitable competition and adequate control was in place through call off contracts for works in the £50,000 to £150,000 value band.

7. However, following an approach to package up works into mini-programmes, the number of projects in this value band has proven to be low and Procurement Services have to establish separate call off frameworks for projects valued between £50,000 and £150,000. In 2009/2010 only nine projects were required between the values of £50,000 and £150,000 and only eleven affected projects are identified in the current Forward Works programme.

8. It is the intention that the majority of projects will be sourced through existing call off arrangements. However, this route may not always cater for projects with an unusual scope or reactive projects with short delivery times. In such cases approval is sought to use the Facilities Management Services contracts.

9. The delivery of these projects should ensure the refurbishment of the estate in a timely fashion to support police operations, and to effectively deliver the Capital, Revenue and Corporate Real Estate programmes.

10. To meet this need, MPA approval is sought to reinstate the £150,000 threshold open to the MPS to procure minor works from the FMS contracts until the expiry of the contracts in April 2014. It will be made clear to contractors that there is no guarantee of work under these arrangements.

11. Cost is controlled through final account analysis to ensure the rates established through the contract are applied. These rates are based on industry standard indices and are reflective of the current market rates. The contractors performance will be monitored in accordance with contracted performance indicators.

12. The Facilities Management Supplier contracts provide a compliant supply route in accordance with the Public Contract Regulations 2006 (“the Regulations”) and MPA Standing Orders. Furthermore, the increased threshold does not pose any governance risk in that it does not reflect a change to the MPA/MPS Scheme of Delegation and control measures are in place.

13. If agreed the MPS will monitor and report, on the volume of projects ultimately delivered through the FMS, through the Routine Contracts Planner report Part B.

Update on the second construction Framework - Improvement Efficiency South East (IESE)

14. In September 2010 the MPS made a commitment to work with Hampshire County Council to become a key stakeholder within the core team to the new framework; to support the development of the commercial model to closely fit to MPA/MPS organisational needs and to hold a seat on the IESE Steering Group to enhance MPS influence, leverage and impact on decision-making. This is an important aspect of the Service’s collaboration activity.

15. Two MPS Procurement Officers are now named voting members on the South East and London Framework for Major Construction Projects Steering Group. The Steering Group has the objective of providing scrutiny and direction; monitoring the effectiveness of the frameworks in delivering to the framework objectives.
16. Procurement Services have influenced the shape of the new framework to ensure that it meets MPA/MPS needs in terms of compliance and value for money.

17. In addition, targets have been set with the contractors on the number of apprentices, engagement with Small and Medium Enterprises (SMEs) and waste diverted from landfill. Specific targets in this respect will be set and agreed with individual suppliers and monitored on an ongoing basis.

18. Contractors have committed to overhead and profit rates of 1.45% to 3.29%. This is an improvement against the first framework rates which ranged from 2.8% to 5% at an average of 4%. Based on the current project pipeline this could deliver a saving of between £1m and £1.4m.

Extension to Technical Consultancy Framework (TCF)

19. The Technical Consultancy Framework has been in place since 7 May 2008 and it is anticipated that the MPS will have secured professional services to construction and small works projects valued at £11.3m by the end of the four year initial period. The services include design, project management and quantity surveying.

20. The Technical Consultancy Framework was let across two regions north (to Mouchel) and south (to Atkins), to align to the FMS regions and to provide resilience.

21. Both Atkins and Mouchel are important delivery partners to the MPS providing a good level of service and are responding effectively to a dynamic programme. Both organisations have worked closely with Procurement Services in identifying ways of continuous improvement and performance improvements through the contracts.

22. As part of the original scope of the contracts and within the OJEU notice, the opportunity to extend the contracts for two further twelve month periods was established in ‘exceptional circumstances’ required under Regulation 19(10) of the Public Contract Regulations 2006.

23. The MPS must provide resilience during the Olympic period. This is particularly the case in light of recent public order events, where the risk profile to operability and responsiveness of the MPS was heightened. The MPS needs to be prepared to provide efficient response to making good any property damaged as a result of such events.

24. Technical consultants, of the nature supplied in the Technical Consultancy Framework agreement, offer a level of expertise in services such as building surveying, structural engineering and project management that is critical to the expediency of such a response.

25. Continuity of service and resilience, spanning the period preceding and throughout the Olympics, is material to the services delivered through this contract.

26. The incumbent consultants have an in-depth awareness of the MPS estate, its specific needs, design requirements and internal processes. Experience and track record in this sector and circumstances indicate that any new supplier in this field would require a bedding-in period of at least six months.

27. The existing arrangements come to an end in May 2012. Switching suppliers in the run up to the Olympics would bring significant risk to sustainable service delivery and therefore to the resilience of the estate. This would constitute an exceptional circumstance, defined under Regulation 19(10), and provides justification to extend the existing contract for a single period of twelve months and not the full two periods available in the agreements. The approval for this extension sits within the MPS Scheme of Delegation and as such has been presented and approved at Contracts Board on 6 September 2011. The MPS will not seek to extend the contracts upon the expiry of the proposed extension.

28. Based on the agreements being extended both organisations have identified opportunities for cost savings and improvements valued at some £110,000 a year. Even without these efficiencies the contract rates compare well to benchmark rates on recent projects competed for through a recognised national framework and against Royal Institute of British Architects guideline rates.

29. Both consultants are keen to support MPS collaboration with the GLA and other public sector bodies through their knowledge and people network to share good practices and innovations. Both consultants are supporting the MPS in developing standard and simplified documentation, and sharing ideas for process improvements.

30. The demand for Technical Consultancy Framework services over 2012/13 is anticipated to be in the order of £0.7m revenue spend and £0.7m capital spend for each supplier. It is unlikely to exceed £3m in aggregate across the two agreements. This would result in a total contract value of £15m over the five years (original 4 year term with 1 year proposed extension).

Professional Services - Other short term measures

31. The MPS will continue to utilise the Office of Government Commerce Full Design Team and Project Management Services Framework for design, project management, cost management and employers agent services for projects of works value over £1m.

32. As a collaborative measure, it is proposed that the North London Strategic Alliance Construction Related Consultant Services Framework (NLSA) is utilised to complement the TCF. The NLSA comprises Barnet, Camden, Hackney, Islington and Waltham Forest Councils with Haringey being the lead borough.

33. Working closely with Haringey Borough Council, Procurement Services have contributed to the development of the framework, ensuring it reflects the needs of the MPA/MPS as far as is practical.

Construction Sourcing Plan - Future considerations

34. Procurement Services are developing the future sourcing plan for Construction activity. This will consider sourcing options for both Professional Services and Works.

35. In developing the sourcing plan, consideration will be given to the following:

• lessons learned from existing call off arrangements.
• the early stages of development of the second generation IESE Framework
• simplifying the supply chain and processes
• optimising the Service’s purchasing power
• collaboration opportunities with other organisations.

36. The proposed sourcing plan will be the subject of a future report to the Authority.

C. Other organisational & community implications

Equality and Diversity Impact

1. Facilities Management contractors have supported Responsible Procurement objectives in achieving payment of London Living Wage to all typically low paid employees and both contracts provide apprenticeship placements for existing members of staff which is an area we are working to expand. Balfour Beatty Workplace specifically is currently working towards the Diversity Works for London gold standard to assess their internal Equality and Diversity practices across the whole organisation.

2. The second IESE Framework has an objective of identifying and managing risk effectively, and providing wider value for money benefits in terms of developing opportunities for apprentices, SMEs and greening the public sector estate.

3. The second IESE framework supports the principles of Responsible Procurement and includes: Early contractor involvement; OGC Fair Payment Charter; Commitments for introduction of apprentices; Engaging SMEs for package procurement; Sustainability targets. Tenderers were evaluated on their commitment to these principles.

4. TCF Consultants have offered to lend knowledge and support to initiatives such as Smart metering, energy management and CO2 footprint reduction initiatives.

5. Atkins are beginning to engage with the MPS on Responsible Procurement priorities including the skills and employment agenda.

Consideration of Met Forward

6. The recommendations of this document support the delivery of the Policing London Business Plan corporate objective of delivering improvement. It aligns with the MET Forward mission statement in that it delivers to MET Support ‘we will continue to improve our infrastructure’ and MET Standards ‘excellent performance and efficiency should be recognised and rewarded’. The supply chain recommendations for the short and longer term provide routes to continuing to build infrastructure and to provide value for money asset solutions to delivering public safety.

Financial Implications

7. As all the arrangements described within this paper are framework or call off in nature, all expenditure will be approved by relevant budget holders as and when any contracts are entered into from the FMS, IESE or TCF arrangements.

8. The Facilities Management suppliers are measured in the value for money delivered through the relevant contract, and by referencing an industry standard schedule of rates.

9. The new construction framework (IESE) has produced cost savings in terms of overheads, profits and fees. Specific project costs and savings will be measured on a project by project basis with each specific works and pre-construction agreement as entered into through the mini-competition process.

10. Expenditure through the Atkins and Mouchel agreements is projected to be within expectations set at the OJEU stage for both the initial four year term and the full five year term.

11. Benefits have been identified by Atkins and Mouchel which Procurement Services will work with the TCF consultants in ensuring they are delivered as a result of any extension.

12. By working with NLSA, the MPA will gain access to a more recent set of competitively tendered rates which will prove useful for benchmarking purposes internally.

13. The total potential capital and revenue savings that could be achieved through the delivery of the proposed frameworks within this document are estimated at between £1.1m and £1.5m over the coming 18 months. This includes the savings through extending the TCF agreements, and the revised overhead and profit rates committed through the implementation of the IESE framework. Further savings are anticipated through individual project tenders using IESE, the use of the NLSA framework, and the implementation of call off arrangements and further frameworks as the construction sourcing strategy develops.

14. The proposals in this report will assist Property Services in delivering against a £12.5m savings target associated with contract reviews, which has been built into the Medium Term Financial Plan from 2011/12 onwards.

Legal Implications

15. On the basis of the information contained at paragraph 6 of Section B the MPA has the discretion to reinstate the £150,000 minor works threshold.

16. No further legal implications arise.

Environmental Implications

17. Given the targets and aspirations set through the second IESE framework, and the advice and knowledge share the Technical Consultancy Framework suppliers are willing to provide, overall the environmental implication of the report is positive.

Environmental Implications

Risk (including Health and Safety) Implications

18. The purpose of this report is to mitigate the risk of poor supply chain capacity, failure to deliver value for money in support of the Property Services capital and revenue programmes.

19. Nevertheless, there are risks that may present themselves through the implementation of the short term measures. The principle risk is poor performance by the FMS contractors and the Technical Consultancy Framework consultants given both arrangements are moving towards the end of their life-cycle.

20. The FMS contractors and the Technical Consultancy Framework consultants are identified as Strategic Suppliers.

21. Procurement Services and Property Services are working closely with the Technical Consultancy Framework suppliers in raising the expectations regarding performance. Both Atkins and Mouchel have responded positively, by bringing ideas and implementing them, and providing a different mix of account management to refresh the team.

22. Performance metrics specific to any delivery of minor works contracts in the value range £50,000 to £150,000 will be managed through implementation discussions with the FMS and should be kept simple to encourage the expediency of project delivery.

D. Background papers

• Procurement strategy for the delivery of construction projects and associated services’ considered by the Finance Committee in May 2007
• Procurement Strategy for the Delivery of Construction Projects and Associated Services’, presented to Finance & Resources Committee in September 2010
• ‘FM Contract Changes’ presented to Resources and Productivity Committee in June 2011
• ‘Request for Authority of Tender Facilities Management Contracts’ to Finance & Resources 20 October 2011
  

E. Contact details

Report authors: Tamzin Rooker, Head of Category - Property, Procurement Services. Malcolm Rae, Category Director - Property, Procurement Services, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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