Government agencies are encouraging local authorities to adopt strategic procurement arrangements but the courts are taking a dim view of them
Errr, ah, hmmm … framework contracts. Comfy? Well, it all depends. The shout from the government is “strategic procurement”. That shout puts local authorities under pressure and their answering shout puts contractors under pressure. And there is a shout from an unexpected quarter: the people. There is a feeling that all is not entirely tickety-boo. Tethering yourself to a five-year deal for hundreds of millions of pounds worth of building work is tricky.
So there you are, a contractor, gazing at a five-year deal. You ask Beryl the fortune-teller to help you guess what the price of fish will be next year and more besides. She shrugs. So you do like we used to do on term contracts – put a lump into the rates and prices and shrug and pray. And the councils shrug, too; after all, these boys and girls are under the cosh from the government to pretend it’s all a good idea. And then come the people, like they did just recently when they scuppered a five-year deal with the London Borough of Camden. It was unfair, they said –¤ and the court agreed with them.
Here’s the story. In its wisdom, Camden decided that a £55m-a-year programme of external refurbishment and electrical works on its housing stock would be procured through framework and partnering agreements. The idea was to hold a competition to coax some contractors to agree to carry out this work for agreed unit costs over five years. It’s all very attractive – if you keep to the surface selling points.
From the council’s point of view it corrals a group of contractors on a guaranteed call-up basis. It saves all that expense on procuring contracts on a one-off basis, especially when contractors become mardy with certain customers. It brings, argues Camden, benefits of reduced capital costs and whole-life costs. And it reduces supply and construction time, it reduces the level of defects (eventually leading to zero defects), it reduces accidents, increases the predictability of time and costs, improves quality, increases productivity and finally it improved sustainability. Ah, errr, hmmm, yes, yes, of course. All that applies, apparently, to partnering agreements. Then there is the framework agreement with another eight to 12 contractors. Whereas the partnering folk would be guaranteed work, the framework folk would not.
Well now, said the judge in the case of Davis Auger & Association of Camden Council Leaseholders vs London Borough of Camden, I’m not interested or concerned with the general wisdom of whether or not to enter into partnering or framework agreements. That is for Camden to decide.
What this court was concerned about was the duty owed by Camden to its tenants and who would have to pay for all this work. Now we are into landlord and tenant law. The big bugbear for Camden was that its leaseholders said all this fancy framework and partnering contract stuff clashed with Camden’s duty to consult for building works with their leaseholders. So These folk came to court demanding that the duty to consult is preserved. Camden sought “dispensation” from that duty.
The tenants said ousting the duty to consult boiled down to an application to enter into any kind of agreement with contractors for any kind of work at any rate that Camden chose
It was contended by Camden that bearing in mind the nature of the partnering agreements “it would not be practical or perhaps not even possible to meet some of the consultation requirements and that it would be reasonable to dispense with these requirements bearing in mind, among other matters, the benefits that such partnering agreements would bring to Camden tenants.”
The tenants said Camden’s idea of ousting the duty to consult boiled down to an application to enter carte blanche into any kind of agreement with contractors for any kind of work at any rate that Camden chose. When the case came to the leasehold valuation tribunal, Camden won the right to go ahead and dispense with consultation. Then on appeal this was reversed; it lost.
Look, the tenants in a block of flats want to know all about any proposed works in advance and scrutinise need. Then they want to see the estimates obtained by the landlord and put up their own contractors for the bids. The judge was not at all convinced that all this partnering/framework stuff had afforded the tenants protection against being asked to pay more than a reasonable amount for works carried out. So, it’s back to the drawing board.
It may just be that the intuitive sniff of the people detects an error in the procurement strategy. In short there is a sense that long-term unit rates are a shortcut not worth paying for. Beryl said she would have a word with one or two politicians but didn’t say which ones.
Tony Bingham is a barrister and arbitrator