Kitchen sink drama

The government’s efficiency drive is proving costly. Last year I wrote a tirade in QS News about the number of hoops bidders were having to jump through to win work. I argued this was adding to costs and hindering innovation in procurement.

I hadn’t reckoned on the number of QS News readers I knew. But after the response to my last piece, I’m now going to look at one particular innovation buying consortia.

To give a flavour of my thoughts consider this hypothetical example. A local authority joins a buying consortium to provide kitchen units as part of its investment programme over a five-year period, worth around £3.5m per year. It couples this with three tender packages for installation only, as opposed to the traditional regime of supply and fit packages. This innovative approach also includes replacements as part of the day to day repairs service and is set to save 20% on existing costs.

However, six months later two of the installers and the supplier are fighting over whose fault certain defects are and who will fix them. One of them also has an issue over who should pay the damages for late completion on certain installations. The installer maintains the units were late while the supplier claims no one was there to receive their delivery. The LA meanwhile has had to set up a team to manage the central contracts and is processing twice as many invoices as before.

Our job is to ensure that our clients or employers get the best value however they procure services and materials, whether through traditional routes or something else

So who gets the blame?

I’m sure we are all in the habit of considering many aspects around the procurement of construction services and not simply cost, but buying consortia take a more holistic approach than many of you may be used to.

I don’t want to paint a negative picture because the situation I have described can be easily avoided with the right advice at the start. Indeed, several organisations across the country are beginning to get a lot of value out of these innovative approaches. But many of you will recognise my hypothetical scenario nonetheless.

The key to the consortium buying approach is to take a second look at contractual arrangements. If you have one supplier and two installers, for example, do you need a central contract for the supply and two separate contracts for the installation? This would be messy, so are the only real options something like PPC or TPC contracts where everybody signs up to the partnership without apportioning blame or a bespoke contract?

Those of us involved in procurement within the public sector are very likely to be faced with questions relating to consortium buying

All public bodies are required to review their procurement options to identify cost benefits externally, so this could be something you will get involved in, if you aren’t already. As professional advisers, those of us involved in procurement within the public sector are very likely to be faced with questions relating to consortium buying and it is something you should approach carefully. You will have consider a wide number of issues that you may not have had to face in the past.

Our job is to ensure that our clients or employers get the best value however they procure services and materials, whether through traditional routes or something else. So along with driving down material and labour costs, we must ensure they have the right contractual relationship in place, the management structure to deliver services efficiently and the right skills to manage a potentially complex set of relationships.