Can you imagine a council presenting a builder with a blank cheque and asking it to put up a school? Victoria Madine meets one that did, and finds out what happened next …
Three years ago, St Helens council became the first local authority to award a partnering contract for a building purely on the basis of quality. The Merseyside council selected Willmott Dixon as main contractor for Bleak Hill Primary School without any mention of price – it simply gave the company a ballpark figure for the project. The school was completed on time at a final cost of £2.3m, which was a £500,000 saving on the project's cost plan.

This outcome was a vindication of Mike Foy's belief that partnering means savings and that small clients as well as large ones can benefit from Egan's principles.

Why did you decide to select the contractor for the Bleak Hill school project without discussing price?
I'm very conscious that Sir John Egan said we should not just aim to improve construction but to change completely the way we work. So if we can find a contractor that is a genuine member of the team, then let's talk about price later.

We chose Willmott Dixon on the strength of its submission and presentation. We wanted to send a message out to the contracting world that we were committed to change. But you should also realise that a Department for Education and Skills project never has an open cheque book – there are very strict cost guidelines, and benchmarking against similar projects has indicated that the school would have cost more if it had been procured by the traditional tendering route.

How did you convince councillors to support the scheme?
It wasn't too difficult to get the support of council members as they were intent on getting the best deal for the people of the town. The construction industry is renowned for not delivering on time and price, so councillors thought this way would be well worth trying.

How have you tackled projects since?
We have moved from selection based on quality only, to quality with an element of price. We now talk about profit margin and overheads with our contractors before selecting our partner. We want to know what they expect to get out of the project. I think that local authorities generally have a more mature view of the private sector, and understand that profit is not a dirty word.

So on the next big project we dealt with, following Bleak Hill, we again appointed Willmott Dixon. But this time we wanted to know their level of overheads and profit together with the cost of preliminaries. We also applied the same principles on a major housing refurbishment project, for which Mansell was our partner.

The involvement of contractors at an early stage also meant that we had to recognise the costs they incur and agree a pre-commencement fee, which they would be entitled to be paid in the event of the project not going ahead.

Would you use the without-price partnership system again?
I wouldn't rule the system out. But I wouldn't want to overplay the significance of the contract without price – the great thing about Bleak Hill was that it was completed on cost and on time.

Our next big project, which is dependent on funding approval, will be evaluated on the basis of quality and the contractor's core management costs. This approach enables all team members to be aware of these costs at the outset. Quality will remain the main factor; the evaluation and selection process will be 80% quality and 20% price, which is still pretty radical.

I don't think that the price elements I've already mentioned will affect the partnering philosophy. In fact, if the contractor knows that overheads and profit have an element of protection they will be encouraged to make savings throughout the supply chain.

Do you think partnering is understood among local authorities?
Sometimes people use words like partnering, when actually they mean they're merely seeking to negotiate a contract. But Egan principles can be applied to smaller schemes. While a one-off partnering project can be beneficial, to realise all the benefits you need a long-term relationship with contractors – which can be difficult for us to establish. We have done several large projects with Willmott Dixon using the same teams, but these have been dismantled because we might not have another large project in the pipeline. It's all a matter of funding.

We now talk about profit margin. We want to know what contractors expect to get out of the project

The key for all local authorities is to realise that the improvements envisaged by Egan align with the continuous improvement duty of best value.

Housing associations must be Egan-compliant by 2004. Should local authorities also be set Egan targets?
The housing associations' target will be tough to achieve, but I think serious consideration needs to be given to some form of targeting for local authorities as well. I recognise the tensions and dangers where compulsion may not bring all the benefits that a voluntary approach can. The audits and inspections of local authorities by the government have an important role here.

St Helens is considered by many to be a champion of best value. Why have other local authorities struggled to use this form of procurement?
"Initiative overload", "standing orders won't let us", "the auditors won't like it" and "it's too risky" are the cries heard from some councils. I don't want to oversimplify the hurdles that need to be overcome, but my message is that where there's a will, there's a way. There isn't a quick fix, but given local political support there are real, measurable gains to be made.

The local government taskforce, Movement for Innovation and the Housing Forum continue to do a lot of good work and the influence of the Confederation of Construction Clients is growing. I am optimistic that the message is getting through, but some councils, particularly the smaller ones, will need help and guidance.

Local authorities are a fragmented market, there being nearly 400 of us, so spreading the word can be challenging.

Does PFI have a future in St Helens?
We will continue to have an open mind when carrying out option appraisals on schemes at St Helens, and PFI will form part of that, but for small, one-off schemes, it can be an expensive way of funding projects unless there is a critical mass. A number of school PFI projects are bundled, achieving the critical mass and so justify the considerable cost of setting up the project.

What is St Helens' construction spend?
This year we have allocated £6m. It varies from one year to the next. There are a number of financing sources available, such as grants from central government and the lottery.

Last year, we spend about £15m, and the year before, £14m.

What are your projects for next year?
Because of the current rules, which limit our ability to borrow for housing investment, the housing stock will be transferred in June to a newly formed local housing company. This will allow in excess of £225m to be borrowed and spent on upgrading properties in the first seven years.

We have just put in a proposal for a school for special needs pupils and hope to hear the outcome in March. Also, the lottery funding of £5m is being targeted to assist in a leisure facility redevelopment within the town.