According to a report published by the Audit Commission last month, only 17% of local authorities have an effective procurement strategy in place. And the draft of Sir John Egan's Accelerating Change, the follow-up to his 1998 report Rethinking Construction, concludes that the public sector in general, and local government in particular, is "riddled with short-termism that seeks to gain lowest initial cost at the expense of whole-life performance".
Best value procurement requires local authorities to take more than just price into account when they let tenders. Whereas compulsory competitive tendering (the system brought in by the Conservatives in 1980 that best value replaced) required councils to make progressive savings, best value requires them to make progressive improvements in the way their services are delivered to the local community – from rubbish collection to the £16bn spent each year on buildings and maintenance.
This means that when selecting a contractor or choosing a product, the council should consider factors such as the durability of a product, or the skills and experience offered by a company, in its selection criteria, rather than just the bottom line. The desired result is a procurement system that favours long-term value over short-term cost savings. Although the government has not demanded best value, the approach is consistent with its procurement guidelines of considering whole-life costs and adding value. Best value is also consistent with the Egan principles of partnering and integrating the supply chain. As Noel Foley, former leader of Hackney council and member of the Local Government Taskforce, explains: "Best value, applied properly, affects the very culture of a local authority and requires a team approach between the private and public sectors."
Many councils, such as Hackney, St Helens, North Tyneside and West Wiltshire, are committed to best value and have used it effectively. But a worrying majority of councils have so far failed to take hold of the challenge. "Many councils still haven't got rid of lowest cost procurement," says Rudi Klein, chief executive of the Specialist Engineering Contractors Group. "Some councils still don't understand the Egan agenda or how best value should affect the way local authorities deal with the construction industry." According to Klein, councils do not always make contractors aware of their formulae for assessing bids – or if they do, they are too vague to tell contractors how to pitch their bids.
Good reasons or poor excuses?
For Klein, councils are either reluctant to implement best value or have simply failed to understand it. Foley says a more radical approach is needed: "Local authorities need to rethink more fundamentally – best value isn't something that should be applied to the odd special project. Repairs and maintenance procurement needs special attention: this area stands to make the greatest benefits from best value but has seen the least radical reform."
Some councils respond that they cannot implement best-value procurement because their hands are tied by the standing orders with existing suppliers. But those close to the public sector dismiss these claims. Foley says: "It's up to councils to convince their members to change their standing orders policy. Councillors slated my first report that advocated best value for giving too much power to contractors. It took me a while to persuade them."
Best value isn’t something that should be applied to the odd special project
Noel Foley, Local Government Taskforce
Many point to the fact that there are 440 local authorities, so they are bound to be moving at differing speeds. But more worrying are suggestions that some councils think best value is just a fad that will pass, and are wrongly concerned about being held accountable to the Audit Commission if a project goes wrong. The Audit Commission and Noel Foley discount these reasons as excuses.
Foley and contractors such as Willmott Dixon, which works closely with the public sector, point to some officials' "natural resistance" to change. As Jim Marler, head of partnering at Willmott Dixon, says: "For some councils, the problem is getting real focus on where to start."
Foley believes that often it is a case of people not wanting to rock the boat: "Too often it is left to middle management to deal with – and these individuals might not want to take on board what they perceive as the risks of making big change." Consequently, for Foley, change will only come about if a council's executive team takes hold of the concept and creates a non-threatening environment for people at middle management level to embrace change. He believes the Local Government Association, which represents all local authorities in England and Wales, should target top managers.
Klein believes local authorities should receive more guidance and budgetary carrots and sticks from central government to install best value.
"I would like to see targets set for councils like the Egan-compliant targets used by the Housing Corporation," he says. But the Local Government Taskforce argues that local authorities need support rather than threats to help them change.
Willmott Dixon's Marler argues that councils need to better prepare their staff to deal with change. "Some people at councils have gone through their careers having to work in a regulatory environment and this can stifle creative best-value practice. Those councils that are struggling need to get good coaching and mentoring schemes in place to support individuals in this transition and consider at an organisational level where waste is happening. You need to look at which processes cross which individuals and take out the duplication – and the bureaucracy."
Councils that are struggling need to get good coaching and mentoring schemes in place
Jim Marler, Willmott Dixon
Marler also says some designers feel they might be missing out if they use best value. "Some in-house design teams want to design a school, for example, using architecture with a capital A. Later it becomes clear that the design isn't appropriate, which wastes time and money and means you can't deliver what you've promised. I've seen this happen a number of times, and it goes against the principles of best value."
Willmott Dixon says it is working to create an open relationship with the councils it works with so that decisions can be brought quickly to a head. "Making key decisions early helps enormously," says Marler.
Councils won't be able to duck the issue much longer. Under changes proposed by the last year's local government white paper, authorities will be categorised according to how effectively they provide their services. There are four categories: high-performing, striving, coasting, or poor-performing. Action plans will be drawn up for authorities needing help. Matthew Warburton, head of Futures, the strategic division of the LGA, says: "We'll know by the end of the year which councils are where. We are trying to address the question, and improvement is happening."
Others are confident that best value will eventually become second nature to councils.
Tim Byles, chief executive of Norfolk council and Local Government Taskforce member, says he is encouraged by the progress made so far. "It takes a while for significant change to be made. Incentives are not needed – best value brings with it a package of benefits. More and more councils are seeking advice about how to use it."