Framework deals are supposed to be a relationship for life, but many firms find the rings on their fingers are just a reminder of empty promises.
Next week, regional contractor Pearce will be holding showdown talks with NHS Estates over the latter’s performance in delivering billions of pounds worth of healthcare schemes. Two years after the Bristol-based contractor won a place on the NHS framework and a year after the building programme was begun, both sides want to find out why Pearce has not won a single contract.
In theory, winning a place on a framework deal should be like a guarantee of wedded bliss: a relationship that provides a steady flow of high-value projects, with mutual opportunity for improving efficiencies and integrating supply chains.
And more and more large repeat clients in the public and private sectors are taking the view that signing long-term deals with contractors and consultants is the best way to procure their projects. For its part, the industry has hundreds of eligible firms competing for the limited number of places available and the promise of steady long-term profit.
For some firms, the wedding vows are being kept. However for many others, including Pearce, the reality of frameworks has been a dysfunctional marriage, constantly teetering on the edge of crisis and dissolution. Companies complain of ever-increasing demands from clients, time consuming and expensive selection processes and over-complicated business systems that erode their stamina and their balance sheets. Worse, some clients set up big frameworks deals, only to walk out and go back to their ex-suppliers.
Building looks at the emerging problems with Procure21, and assesses what the future holds for two ostensibly happy marriages: the Prison Service, which is in its honeymoon period, and BAA, the framework that started it all.
Procure21: Left feeling rejected
Procure21 is intended to be used on any publicly funded healthcare scheme worth more than £1m, and is estimated to cover between £1.2bn and £1.4bn worth of construction work a year. The framework consists of 12 consortiums, each led by contractors. The members of those consortiums have all been through lengthy courtship and selection procedures to get on the approved list. Each has to demonstrate that it possesses – and can manage – a suitable supply chain.
But as one leading contractor points out, there are two tiers within the Procure21 system. “There are the firms that are winning work and there are the ones that are not,” he says. “It all comes down to the level of commitment, investment and innovation that the bid teams are putting into the process.” Only a few firms have won a substantial amount of work – the most successful being Laing O’Rourke with £604m. The frustrations among the others have reached boiling point.
Carillion is one firm that has yet to win contracts under the system, and is under pressure from client NHS Estates to innovate. Zara Lamont, head of Carillion’s Procure21 team, says it is only a matter of time before the firm wins work. “We’re not happy with Procure21, and are talking to NHS Estates about the system,” she says. “We don’t seem to be getting the recipe right yet, but I don’t think it’s a conspiracy theory.”
Lamont’s criticism of the system centres on the client’s lack of forewarning about when contracts will be released, and uncertainty over what will become of Procure21 in the future. It was under the control of NHS Estates, but since it was announced in July that the latter was to be abolished, the Department of Health is still trying to decide what to do with it.
Other NHS Estates contractors are more scathing, albeit off the record. They say there are fundamental problems with the system, and criticise the number of barriers they have to hurdle before a scheme gets approved.
You go through a hell of a selection process, then it all pretty much depends on a 20 minute interview.
Procure21 framework contractor
Despite completing numerous prequalification selection criteria forms and interviews when bidding for schemes, one told Building that the decision still hinged on a single face-to-face interview. “Ultimately you go through a hell of a selection process, you then get shortlisted down to three or four contractors and then it all pretty much depends on a 20 minute interview with the individual hospital trust before a decision is actually made. It becomes pot luck.”
Stephen Parsk, a director of Balfour Beatty, has seen only a limited amount of work from Procure21, but is upbeat about his company’s future with the health service. “We’re in it for the long term; we’ve met with NHS Estates and we’re confident that there is a lot of work coming through to compete for.”
But Parsk adds that he understands the frustrations of contractors who are not winning work, and he points out that about 100 NHS Trusts have signed up to the process, leaving 400 outside it. “You’ve got to look at the bigger picture here. There’s still about £1bn worth of work out there and a few years left to run on the scheme, so workload will increase and there will be more to go around, “ he says.
Peter Woolliscroft, head of construction at NHS Estates, agrees. “Some contractors whinge that they are not being given work on a plate and they will have to make a decision about whether they stay or go. They need to be innovative and they need to come to terms with it.”
When Woolliscroft meets with Pearce next week, his main argument will be that Procure21 creates an exclusive path of access to the trusts taking part in the scheme. His assertion is that it is then up to contractors to convince the trusts that they are the best and are continuously improving.
Pearce and other contractors must then decide whether they are up to the challenge or not. Andrew Dale Harris, Pearce’s business development director, does not want to pre-empt the outcome of next week’s meeting with Wooliscroft, but says he is “reviewing” his firm’s position on the Procure21 framework.
Prison Service: A demanding partner
The Prison Service has recently created a framework to oversee a £3bn construction programme to upgrade more than 100 of the country’s decrepit Victorian prisons. Paul Swinburn, head of property services at the Prison Service, told Building last year that long-term partnering contracts in the system would result in lower costs for both the Prison Service and contractors. The Prison Service started by signing up teams of QSs, project managers, and architects and has recently taken a team of contractors onto its framework for new-build prisons. Interviews for refurbishment contractors have been held over the past few weeks.
Since Swinburn made his comments, however, pressure has increased on the Prison Service to accommodate the country’s ever-increasing stock of detainees. In 1992, the number of prisoners in England and Wales was 40,600; today, it is about 77,000, which is close to capacity. Recent press headlines over the scandal of the HMP Weare prison ship in Devon again demonstrated the Prison Service’s capacity problem.
Contractors are staying optimistic, pointing out that the service is speeding up its build programme, and that the selection of refurbishment contractors has been accelerated.
On the other hand, contractors know that commercial arrangements that appear to be cast in stone can always be overridden by other factors, particularly when politicians are involved. “The Prison Service is a classic example,” says one consultant specialising in prison work. “A few stories hit the press about the terrible conditions in prisons and suddenly the fear is that refurbishment deadlines could be changed or the goalposts for works altered.” He also refers to plans to build units for paedophiles. “It is a good example of a high-profile scheme that could be built and then is suddenly not being built due to the decision of a twitchy minister.”
Being over-familiar and trying to influence the client too much can sometimes cause problems
Mark Reynolds, infrastructure director, Mace
Swinburn has said that longer-term contracts enable firms to become familiar with the demands of working in prisons and able to take their vetted workforce from one job to the next. But he simultaneously demands that contractors increase their efficiency by continually innovating.
One consultant sums up the pressure that this creates: “They’re always looking for you to improve and innovate, because they’ve got you where they want you. Because if you don’t [innovate] they could boot you off the list, or just give the work to somebody better on the list if they don’t believe you’re committed enough.”
Airports: How it all began
The industry’s best-known framework deals are with BAA, which cover all of the airport operator’s work apart from T5. This seminal deal, which covers everything from architects to QSs, construction managers and small works contractors, is now more than eight years old. It is currently undergoing one of its regular bouts of change, under technical director Richard Petrie.
Times are getting tougher for framework suppliers. At the start of the year, BAA reduced the number of architects from six to five, and in the summer it dropped Davis Langdon and Cyril Sweett from its QS framework “for the immediate future”. As one supplier put it: “The pendulum certainly swings with BAA. There was the blame culture pre-1996, the soft client in the late 1990s, and now we have a more realistic and commercial client.”
Suppliers are bracing themselves for even more changes. Building understands that BAA could drop some of its framework deals, such as the one for construction managers. Instead, there will be first-tier suppliers responsible for the overall delivery of schemes rather than individual packages. “It’s more of a PFI approach,” a source says. “BAA wants more accountability, which that kind of framework would bring.”
Suppliers say that the changes in the BAA framework reflects the pressure it is coming under from its clients. Last week, Ryanair and Easyjet, said the £3bn it planned to spend extending Stansted airport was too much. This pressure inevitably gets passed down the supply chain.
Martin Plimmer, BAA’s supply-chain director, acknowledges some problems, but adds that the agreements were always subject to change. “There are very clearly some positive results on T5 in terms of programme and cost stability for us to learn from. Nothing is going to stand still.”
On the whole, firms view the BAA framework positively. “As a company we would not be where we are without it,” says Mark Reynolds, infrastructure director at Mace. He says that the key to a good framework is not getting overfamiliar. “People call it a partnership but it’s still a supplier–buyer relationship. Framework suppliers are often accused of being over-familiar and trying to influence clients too much, which sometimes can cause problems.”
says the client it totally committed to the procurment method. "In some areas we might have done it differently but we maintain absolute faith with that strategy and thinking," he says. Plimmer