Nobody wants to play with us

When a group of SME chief executives got together at the CIOB headquarters earlier in the year, one of their main gripes was frameworks. Frameworks took the jobs traditionally and successfully carried out by small, local players and handed it to the big boys, they said.

Well, some of the group said that. Others, who had been successful in bidding for frameworks, kept shtum.

The theory of frameworks is great. The client saves resources on bid preparation, assessing tenders and claims. Everyone’s on board earlier so the process is more efficient and the end user gets a better building for less cost. And each job is better than the last one.

Contractors are happier too. They’re not wasting time and money on competitive tendering and they’ve got a better handle on future workloads so they can plan better, train their people and invest in the business.

As the CIOB get-together proved, however, the reality is somewhat different. Anecdotal evidence suggests that the ‘Tesco effect’ is squeezing out the smaller contractors. CM had difficulty persuading some firms to go on the record because while everyone likes to grumble, they don’t want to queer their pitch with local authorities they may still want to work with. But we wanted to find out the truth: are frameworks really pushing out SMEs, or is it a case of sour grapes from those that have lost out?

Some contractors report that being part of a framework doesn’t count for much. Knowles & Son is still carrying out small projects for Oxfordshire and Berkshire county councils, despite failing to make it into frameworks.

‘When frameworks were first mooted we were all concerned it would cut us out,’ says Knowles & Son business development director Len Key. ‘But it’s proving in some ways better not to be in a framework because you might be relying on a certain amount of work coming in and then not necessarily getting the work.’

Others, such as Thomas Vale, have found frameworks to be a huge success.

Tony Hyde, chief executive of Thomas Vale, says: ‘I remember talking [in 1992] to many in the industry and being told “it will never change”. Tendering and lowest price competition would last forever.’

Well, those who gave that advice 15 years ago may want to reconsider. Thomas Vale, which turned over £7m back then, now makes 80% of its turnover (£120m) through formalised partnerships and frameworks, 15 of which are in the public sector.

Frameworks have been a long time coming. Sir Michael Latham started the ball rolling in 1994 with his report Constructing the Team. Back then the talk was of partnering, usually on individual projects. Which was very nice for that project, but didn’t provide continuity or industry-wide improvements.

Then came Sir John Egan and Rethinking Construction in 1999. He was into supply chain management. People started talking about ‘strategic partnering’. So, when did frameworks slip into the construction vocabulary? Construction Manager first mentioned them in 2001 – now they’re everywhere.

It’s difficult to get a handle on just how much public sector work today is being delivered through frameworks. We know about the national programmes: Building Schools for the Future, which the government says will involve £45bn spent on secondary schools over 15 years; ProCure 21; and the Ministry of Defence’s SLAM project, to name a few.

But at local authority level, it’s more difficult. The National Federation of Builders has estimated that £14bn of new build and maintenance work could have been lost to SMEs due to the growth of frameworks.

The federation recently carried out a survey, on behalf of the Strategic Forum’s SME Working Group, to try to determine the extent of frameworks and their impact on smaller contractors and was compiling the results as CM went to press. Early indications are that for many NFB members frameworks are not causing problems, but that could be because they are working outside the public sector.

Bob King, a board member of the Local Government Task Force, who wrote a report outlining best practice in local authority frameworks published last year, agrees that frameworks have not necessarily hurt smaller firms. ‘Anecdotally frameworks serve the interests of big contractors, but it ain’t and doesn’t have to be so,’ he says.

King identified some local authorities which had designed frameworks specifically for SMEs and is now working on a second report to showcase some of these examples. Where local authorities are making an effort to employ SMEs, King reports that, broadly speaking, the small players are winning the same amount of work as they were previously. However, the firms involved aren’t necessarily the same ones.

Manchester City Council is one of the pace-setters for frameworks. It has 16, four of which are major construction frameworks: education between £0.5m to £5m; education more than £5m (BSF); small works more than £0.5m; and housing market renewal.

In the small works framework, there’s seven firms signed up for an estimated £20m of jobs per year. Manchester’s procurement manager, John Finlay, explains that the council doesn’t want to give any firm more than 25% of its turnover. So for small works that means counting out any contractor turning over less than £12m.

However, that rule can be waived in some circumstances, says Finlay. ‘If they are too good to ignore in terms of quality, but they’re smaller, we would be cutting off our noses not to include them. But then we have to manage the amount of work we put their way.’

Small firms have an advantage over big ones when it comes to adapting to new ways of working, according to Finlay. ‘When you are dealing with a big company, getting the change of culture is harder. With the small works partners it’s a little bit easier, there are not as many layers to get through.’

Finlay was impressed with small firm Lord Group at the interview stage when it fielded an apprentice joiner as part of the team. ‘We got to speak to the joiner. He positively contributed to the Lords presentation to Manchester City Council,’ recalls Finlay. ‘That was a brilliant move from them.’

Manchester is conscious that SMEs could be missing out and is trying to encourage local contractors to reconsider how they work. For example, asking good specialist firms to work as subcontractors rather than contractors.

‘The work is still with the authority. The initiative is with the small company,’ says Finlay. ‘If they want to approach the main contractors there’s nothing to stop them.

‘If they come up to scratch and present themselves properly they have every chance to become partners in the supply chain. They have got somewhere to go.’

Manchester sends out score cards to the principal supply chain partners of its framework companies to monitor how they are being treated. Are they being consulted? Are they paid on time?

For every success story, there’s a horror story too. Attempting to radically change the way work is procured in a half-hearted way is a recipe for failure. Many local authorities are in the early stages of change and have not yet grasped what frameworks are all about.

One small contractor who didn’t want to be named, commented on a so-called framework in which his firm has been involved: ‘The client’s view of frameworks is that they have got six contractors in the framework, and each time a job comes up they put it out to the six for tender.’

But the bottom line appears to be that frameworks are here to stay. The next step will involve local authorities banding together. The most ambitious of these are being set up by the South East Centre of Excellence, centred on Hampshire.

When frameworks are used with conviction, the results can be impressive. Finlay reports that Manchester is building its primary schools 6% cheaper on average than traditionally procured schools and that there are no claims on any of the council’s framework jobs.

‘The landscape is changing, small firms cannot just stay as they were and expect the work to come to them,’ says Finlay. ‘They have got to move with the times if they want to keep part of their share. The onus and initiative is on them to try to get a slice of the action.’