Procurement strategy for stage 2 of the Safer Neighbourhoods property programme

Report: 10
Date: 20 September 2007
By: Director of Strategic Finance on behalf of the Commissioner

Summary

This report expands upon the report provided to Members in July 2007 regarding the 2nd Stage of the Safer Neighbourhoods Property Programme, providing the complete strategy for the procurement of this Stage. Of the 284 bases to be constructed, 160 are now complete; the remaining 124 bases (approximately) will be completed in Stage 2 of the programme, with a target completion of December 2010.

Finance Committee in July 2007 provided approval to Property Services to take initial steps to gain market acceptance of the preferred procurement route. This has been done with satisfactory response being received from the proposed frameworks (details below) and PSD are now recommending the commencement of formal tender action.

A. Recommendations

That

1. members approve the commencement of tender action for the appointment of Employers Agent / Cost Consultant from the OGC Project Management & Full Design Team Services Framework as detailed in option 3 ( paragraph 10);
2. approve the commencement of tender action for the appointment of Design, Develop & Construct Contractor from the SECE Major Contractors Framework using the procedure detailed below as detailed in option 3 (paragraph 10); and
3. approve the commencement of tender action for the appointment of Acquisition Specialist from the OGC Estates Professional Services as detailed in option 3 (paragraph 10)

B. Supporting information

1. As a result of the concerns raised by Auditors in connection with the procurement of Safer Neighbourhoods bases MPS and MPA officers have reviewed the way forward to complete the remainder of the programme. The District Auditor made the recommendation in their Annual Audit letter that the MPS should 'Regularise the procurement process for the provision of Safer Neighbourhoods' bases, including demonstrating value for money.'

2. The continued use of the building contractors selected for Stage 1 of the programme was considered, by independent Quantity Surveyors, to represent reasonable value for money provided that some modest adjustments could be agreed in relation to their schedules of rates. Leading counsel advised that continued use of those contractors would not breach the Public Contracts Regulations 2006. However, the position in relation to the technical support providers was more complicated, and no satisfactory means has been identified of securing procurement compliance alongside the continued use of the original building contractors.

3. In light of this, MPS propose to reconfigure the works programme for the remaining elements of the SN Programme, using new and compliant procurement processes for a defined second stage of the programme.

4. The 2nd Stage of the Safer Neighbourhoods (SN) Programme will consist of Bases for approximately 170 SN teams in approximately 124 Bases with a Capital Budget currently estimated at £40m.

5. The compliant procurement of this volume of Construction work can be handled in a number of ways and some of the alternatives are examined below, with the recommended solution having been chosen on the grounds that it enables the resumption of the programme in the shortest time period and will provide the MPA / MPS with a compliant and cost-effective route (value for money) for the 2nd Stage of the programme.

Procurement options

6. The SN Stage 2 programme (in common with Stage 1 and most other property projects) will require a broad range of consultant skills to deliver the required outcome, the main ones being:

• Employers Agent
• Cost Consultant
• Architect
• Structural Engineer
• Building Services Engineer
• Main Contractor
• Acquisition Specialist.

7. In addition solutions will be sought for other lower value contributors in the form of CDM Coordinator, Legal Advisors, and Building Control & Planning advisors. It will also be necessary to compliantly retain overall in house management “resource” to oversee the programme and this is well in hand. In broad terms we have 3 main options:

Option one

8. To procure the above services in a traditional fashion, individually, by open tender following the OJEU process (required because of OJEU value limits being exceeded).

• This traditional approach of serial tendering for individual and unique construction projects is slow and cumbersome and hence wasteful of resources for all parties. Further, under the existing traditional forms of construction procurement, the contractual arrangements have been found to drive a wedge between the MPS and its suppliers. This is widely accepted in the construction industry and is detailed within the Egan Report, 1998. Specialist sub-contractors and suppliers who possess the detailed knowledge of products and solutions are precluded from the design process as a result. This position is widely acknowledged in the public sector and the construction industry (i.e. it is no longer regarded as best practice).
• Further background information, demonstrating that pursuing a traditional procurement route is not appropriate, was given in the Property Procurement Paper which was approved by the MPA at the 3rd May 2007 Finance Committee.
• Recommendation:
  This option is not recommended.
• Reasoning:
  This option would prolong the period before the commencement of the remainder of the SN Property Programme by at least 6 months (taking into account the advertising period for OJEU and the selection process required to arrive at Tender Lists), would need greater procurement resource (which is not readily available) and does not represent current good practice. It would also not align to the property procurement strategy approved by the MPA.

Option two

9. Developing our own compliant frameworks for each of these services and utilising this for SN Stage 2.

• Developing our own compliant frameworks for each of the disciplines required would take a considerable amount of time and resource, and whilst ultimately compliant and effective, this is not seen as a valid option when trying to deliver the SN Stage 2 programme in the shortest available time.
• The resource required, to action, is not readily available and can not be expeditiously procured. To divert in house resource would have serious adverse effects / impacts on other MPS / MPA programmes with a similar, or higher, degree of policing priority.
• Recommendation:
  This option is not recommended.
• Reasoning:
  This option would prolong the period before the commencement of the remainder of the SN Property Programme by up to 6 months or longer (taking into account the advertising period for OJEU and the selection process required to arrive at Tender Lists) and whilst ultimately PSD will wish to develop Frameworks for most of these disciplines the current resource within Property Procurement would require a prolonged period to develop this number of frameworks.

Option three

10. Utilise existing compliant frameworks to provide us with the services we require

• The Property Procurement Paper which was approved by the MPA on the 3rd May 2007, explained in detail the benefit of utilising the SECE Framework for Major Construction Works and this approach is proposed for Stage 2 of the SN Programme, in combination with the use of OGC Frameworks for the provision of Professional Services.

The proposed Procurement routes for the main areas are as follows:

• Employers Agent / Cost Consultant – OGC Project Management & Full Design Team Services Framework.
  • There are 5 pre-qualified suppliers on this framework, all of who have been invited to bid for the services required in line with approvals given by the MPA at Finance Committee in July 2007.
  • 3 of these providers have expressed an interest in providing this service, and this is viewed as sufficient to ensure competitive pricing.
  • Tenders will be based on a description of the services required for the programme and will be dependant on the number of bases actually constructed.
  • Tenders will be requested on a fixed price basis, with variations dependant on the number/ size of bases actually constructed.
• Design (Architect & Engineers), Develop & Construct Contractor – SECE Major Contractors Framework
  • There are currently 8 contractors on this Framework (with 2 in reserve) and all have been invited to express interest in this package of works in line with approvals given by the MPA at Finance Committee in July 2007.
  • 4 of these providers have expressed an interest in providing this service and this is viewed as sufficient to ensure competitive pricing.
  • 1st Stage Tenders will be based on the Design and Construction of a number of ‘model’ bases of differing sizes and we will select 1 Contractor for the delivery of the whole programme.
  • Final costs for each base will be calculated on an ‘open book basis’ during the 2nd Stage tender for each base.
  • Each group of bases (or individual base if warranted) will be let as individual construction contracts at the completion of the 2nd Stage of the Tender Process. It is envisaged that because of the relatively low value of each contract that this will be managed through officers delegated powers.
• Acquisition Specialist – OGC Estates Professional Services
  • As advised in our paper to Finance Committee in July we have re-assessed the availability of resource from the OGC Interim Management Framework, and have chosen instead to proceed with this more specialist category of the OGC offering.
  • There are 7 pre-qualified suppliers on this framework, all of which have been invited to bid for the services required.
  • 7 of these providers have expressed an interest in providing this service, and this is viewed as sufficient to ensure competitive pricing.
  • We will seek proposals from the appointed organisation for relevantly qualified professionals to be responsible for the negotiation and acquisition of properties, with interviews held and references sought, prior to appointment.
  • There is still a risk that the OGC suppliers may not be able to deliver the skills or numbers of people required for the programme and we may need to re-consider our approach to this element of the works, although the initial level of interest is encouraging.
• Recommendation:
  It is recommended that this option for the procurement of the main elements of the SN Stage 2 Property Programme be adopted.
• Reasoning:
  Using readily available resources, compliantly procured either from OGC or SECE represents the most straightforward route to achieving an early restart to the SN programme. We have established, through pre-enquiry, that resources are available and in sufficient numbers to provide adequate competition to achieve a successful procurement exercise based on provider returns to date.

11. In respect of the additional services required we will utilise pre-existing MPS/MPA Frameworks for a number of ancillary services, as we have during SN Stage 1:

• CDM Coordinator, & Party Wall Specialists – Capita
• Planning Advisers – Atkins / Arup. The current contract is available until August 2008; upon expiry a new contract will be in place.
• Legal Services – the new DLS Framework (not used in Stage 1 but available late in 2008) may be used later in the programme but we will need to tender this element of work initially. This will be carried out in association with Procurement Services and timed to be available by the commencement of the Stage works in February 2008.
• The client management of the overall programme will be procured via an interim manager / team by use of MPS / MPA wider (in place) arrangements. Should that not prove possible compliant OGC routes exist that would be utilised.

12. The Governance Structure that will be required for the administration of this project will be developed jointly by Directors of Construction and Commercial Operations in Property Services, with input from Central Procurement and Finance Services before being offered for MPA approval. MPS Governance will be conducted via the TPHQ existing arrangements.

13. The anticipated programme for these appointments is shown below in general terms:

• Invite Tenders – October 2007
• Seek MPA approval to award contracts November/ December2007
• Appoint Contractors / Advisers – December 2007
• Mobilise first 2nd Stage Projects (Already designed under Stage 1) – February 2008
• Mobilise “new” 2nd Stage projects – August 2008 and on.

14. Stage 1 of the programme delivered an average of 4 bases per month, but actually took 2 years to reach peak productivity, and it is envisaged that Stage 2 will take a similar timescale to gain momentum, as the new project pipeline is developed (dependant on property acquisition), this will probably represent a delay of some 18 to 24 months to the completion of the programme, initially anticipated as being in July 2009 and now not anticipated until December 2010.

15. Stage 2 of the programme will be split into 3 sub-sets:

• Initial Projects, locations already procured, designs already complete and forming the detailed part of the Stage 2 tender (approx 15 in total).
• Projects for which locations have been identified but procurement and design is yet to be completed (approx. 40 in total)
• The remainder of the programme where sites have yet to be identified. The identification and procurement of sites is subject to market availability and may prove more challenging as we get to the end of the programme, hence the view that Stage 2 in overall terms will take as long as Stage 1 despite having a relatively quick start.

Abbreviations

BOCU

Borough Operational Command Unit

CDM

Construction Design Management

DLS

Department of Legal Services

MPA

Metropolitan Police Authority

MPS

Metropolitan Police Service

OGC

Office of Government Commerce

PSD

Property Services Department

SECE

South East Centre of Excellence

SN

Safer Neighbourhood

TP

Territorial Police

TPHQ

Territorial Police Headquarters

OJEU

Official Journal of European Union

C. Race and equality impact

1. Property Services will promote equal opportunities, amongst diverse communities and across its supply chain and will undertake procurement in line with the MPA’s Equal Opportunities Policies.

2. Design and related issues will take in to account both property related issues and locations (via the local BOCU (TP) established liaison and partnerships in place).

D. Financial implications

1. There are no specific financial implications to this paper. Subsequent refinement to the treatment of costs as either Revenue or Capital may require Stage 2 items to be revenue funded to a greater degree. The impact of this will be reported at the committal stage for individual Contracts as appropriate / required by the MPA Finance & Contract Regulations.

2. Stage One of the Safer Neighbourhood property programme is nearing completion at an estimated total capital cost of £46m (within budget, time and quality).

3. Capital provision for Stage Two is budgeted at £40m and under the current proposals is expected to be completed in 2010/11. Specific proposals within Stage Two of the programme will be subject to the MPS/MPA normal governance and approval processes. There is urrently some concern that once the work is taken to the market on a competitive basis that the final costs may exceed the current forecast cost of Stage 2. It is therefore recommended that the unallocated budget of £13m, being the difference between the Stage 1 and 2 estimated costs of £86m and the original budget of £99m, is retained. These issues will be reported to the Authority as appropriate at which time decisions will be taken on how best to fund any emerging shortfall on the Stage 2 contract.

4. The process recommended will impact on the phasing of expenditure in capital programmes as approved by the MPA and Mayor. This will be reflected in future monitoring reports and the capital / revenue budget submissions for the planning period 2008/09 – 2011/12.

E. Background papers

• Property Procurement Paper - May 2007
• Safer Neighbourhoods Property Procurement Paper - July 2007

F. Contact details

Report author: Alan Croney, Director of Property Services, MPS

For more information contact:

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

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