Undercutting is over

In 1980 a great big ball and chain was clamped around the throat of local authority people when trying to place building works contracts – compulsory competitive tendering. Its scope was expanded in 1988, and again in 1992 to include professional services.

Bid invitations to a host of bidders had to be identical, and it was the lowest bid that grabbed the work (usually the one containing an error). Innovation, bright ideas, lateral thinking were out. Instead of urging bidders to come up with a bright idea about the job, the authority had to sling out anyone who did not bid precisely for the work defined. It was dumbing down at its best.

Now let’s party. On 1 April, all that CCT stuff went. In its place is a new idea (or, rather, a very old idea). The ball and chain have gone. Contractors, consultants, county councils, district councils, parish councils, police authorities, fire authorities, even those who run the Norfolk Broads, can work together to seek best value. And best value isn’t the lowest price, is it?

I have been talking to Ronan Champion of Currie & Brown Consulting because he has been tracking CCT and best value. He puts CCT into context: prior to its introduction, there was tendering for local authorities to place professional consultancy and building contracts with little or no regard to competition. So, along came compulsory competitive tendering.

Now best value, he reckons, will have a significant impact. The idea is to free up those with brains and commercial gumption in local authorities to think value by testing for the three Es: economy, efficiency, effectiveness. There is a fourth E – exciting – but not if you are fixed in your ways, or tired, or coasting in your local authority job. In these cases, best value is a duty.

The new approach is all described in the Local Government Act 1999 (Why, oh why, did someone give it that name? Why not the Best Value Act 1999?). The act explains that the idea is to make arrangements to secure continuous improvements in an authority’s activities. As far as building and construction is concerned, the best way is to consult with the industry and the users of building works.

The idea is to free up those with brains and commercial gumption to think value by the three Es: economy, efficiency, effectiveness

All of us look for bright ideas and performance indicators. Champion says you can forget the idea of winning work on lowest price. A fire authority, for example, is free to decide whether to buy a building or to get you to build it and lease it. What is best value to the authority? Under the new system, the fire authority is empowered to invite you to come up with value proposals. These could range from the type of contract to whether to bundle projects, with the new building just one of a package.

Champion reminds us that the legislation frees up the authority to weigh up options seriously, but doesn’t seek to persuade it to buy in one way or another – it just thinks three Es.

All this isn’t just exciting for local authority folk. It is exciting for consultants and contractors selling services to the authority. For example, a lively contractor could put in a higher bid but include all maintenance in the completed building for X years; another bidder might offer a guaranteed maximum price; another might offer a building with a set operating cost.

All sorts of ideas can be suggested. Gone is the stuffy idea of pricing a bill of quantities and choosing the lowest bidder. Champion reminds me that this has been the core business of quantity surveyors for the past 100 years and that this approach is about to be seriously tested. He suggests, and so do I, that some professionals will need to dust down their college notes to recall what value is about and learn to evaluate on bases other than price. He warns that firms producing tender reports for local authorities will have to watch their Ps and Qs as well as the three Es. Report on value not just price.

My suggestion goes one further; when thinking of building, first go out for consultation. In other words, look for bright ideas. Then, when inviting bids, remind tenderers that the culture of best value means economy, efficiency, effectiveness.